document stringlengths 8.64k 13.4k | summary stringlengths 179 2.97k | __index_level_0__ int64 0 16.8k |
|---|---|---|
as a result of the reverse stock split , the per share exercise price of , and the number of shares of company common stock underlying , our stock options and warrants outstanding immediately prior to the reverse stock split were automatically proportionally adjusted based on the 1-for-4 split ratio in accordance with the terms of such options and warrants , as the case may be . share and per-share amounts of common stock , options and warrants included herein have been adjusted to give effect to the reverse stock split . the reverse stock split did not alter the par value of the common stock , $ 0.01 per share , or modify any voting rights or other terms of the common stock . unless otherwise noted , the accompanying financial statements and notes thereto , including the exchange ratio applied to historical jay pharma common stock and stock options , give retroactive effect to the reverse stock split for all periods presented . upon completion of the offer , ( i ) holders of outstanding common shares of jay pharma ( referred to herein as the jay pharma equity holders ) other than alpha capital anstalt ( “ alpha ” ) and bezalel partners , llc ( “ bezalel ” ) received the number of shares of common stock in accordance with the exchange ratio of 0.8849 , as calculated in accordance with the tender agreement , ( ii ) each of alpha and bezalel , as an investor who would have beneficially owned more than 10.0 % of the company if it received common stock , received shares of series b preferred stock , which are convertible into shares of common stock subject to a 9.99 % beneficial ownership blocker , pursuant to the terms of the respective exchange agreement entered into by and between ameri and such stockholder . each outstanding jay pharma option , whether vested or unvested , and warrant that had not previously been exercised was exchanged for company stock options and company warrants , in each case convertible into the number of shares of common stock equal to the exchange ratio . each share of series b preferred stock is non-voting and is convertible into one share of common stock ( subject to adjustment ) at any time at the option of the holder , provided that each holder would be prohibited from converting series b preferred stock into shares of common stock if , as a result of such conversion , any such holder , together with its affiliates , would own more than 9.99 % of the total number of shares of common stock then issued and outstanding . this limitation may be waived with respect to a holder upon such holder 's provision of not less than 61 days ' prior written notice to the company . shares of series b preferred stock are not entitled to receive any dividends , unless and until specifically declared by the board . however , holders of series b preferred stock are entitled to receive dividends on shares of series b preferred stock equal ( on an as-if-converted-to-common stock basis ) to and in the same form as dividends actually paid on shares of the common stock when such dividends are specifically declared by the board . the company will have no right to require a holder to surrender its series b preferred stock for redemption . shares of series b preferred stock will not otherwise be entitled to any redemption rights , or mandatory sinking fund or analogous fund provisions . upon completion of the offer and the transactions contemplated in the tender agreement , but without giving effect to the issuance of the series b warrants to purchase 1,791,923 shares of common stock at an exercise price of $ 0.01 per share to alpha following the completion of the offer , ( i ) jay pharma equity holders , including those who received series b preferred stock in the offer , own approximately 82.3 % of the outstanding equity of the company , assuming conversion of the series b preferred stock , ( ii ) the ameri equity holders at the time of the completion of the offer own approximately 14.5 % of the outstanding equity of the company , and ( iii ) the financial advisor to jay pharma and ameri owns approximately 3.2 % of the outstanding equity of the company . as a significant investor in jay pharma , alpha received series b preferred stock in the offer instead of common stock , as well as series b warrants with a nominal exercise price , which were issued to alpha following the completion of the offer to account for an adjustment in pricing of the transactions in light of global economic conditions . because the series b preferred stock is convertible into common stock at any time for no consideration , such shares have been included in basic earnings per share . the series b warrants are accounted for as a cost of equity as part of the capital issuance . the estimated fair value implied for shares of the company based on the series of transactions with alpha is $ 1.62 per share , which is equal to the $ 5,300,000 investment made by alpha divided by 3,262,907 , or the number of post-reverse stock split shares of series b preferred stock ( convertible into common stock ) that alpha received in the offer . simultaneously with the execution of the original amalgamation agreement , jay pharma issued a secured promissory note , dated january 10 , 2020 ( the “ original note ” ) , to alpha , pursuant to which , on january 10 , 2020 , jay pharma received a $ 1,500,000 loan from alpha . story_separator_special_tag the original note was amended to reflect an additional investment of $ 500,000 , resulting in a total principal amount of $ 2,000,000. the original note was further amended on august 12 , 2020 , to account for the termination of the original amalgamation agreement and the change in the structure of the transaction from an amalgamation to a stock-for-stock exchange offer ( as amended , the “ note ” ) . upon the closing of the offer , the note was converted into the right to receive 2,473,848 common shares of jay pharma and warrants to purchase 2,333,970 common shares of jay pharma at an exercise price of $ 1.03 per share immediately prior to the offer . in connection with the offer , such common shares and warrants of jay pharma acquired by alpha upon conversion of the note were converted into the right to receive ( i ) 547,278 shares of series b preferred stock that are convertible into up to 547,278 shares of common stock , after giving effect to the reverse stock split , and ( ii ) warrants to purchase up to 516,333 shares of common stock at an exercise price of $ 4.64 per share , after giving effect to the reverse stock split . 41 alpha also acquired 3,500,954 common shares of jay pharma and warrants to purchase 3,500,954 common shares of jay pharma at an exercise price of $ 1.03 per share , immediately prior to the offer , in connection with the $ 3 million private placement completed prior to the completion of the offer ( the “ alpha investment ” ) . in connection with the offer , such common shares and warrants of jay pharma acquired by alpha in the alpha investment were converted into , as applicable , the right to receive ( i ) 774,499 shares of series b preferred stock that are convertible into up to 774,499 shares of common stock , after giving effect to the reverse stock split , and ( ii ) warrants to purchase up to 774,499 shares of common stock at an exercise price of $ 4.64 per share , after giving effect to the reverse stock split . on december 4 , 2020 , jay pharma and alpha executed a securities purchase agreement whereby alpha purchased an additional 1,000,000 common shares of jay pharma and warrants to purchase 500,000 common shares of jay pharma at an exercise price of $ 0.30 per share for an aggregate purchase price of $ 300,000 ( the “ alpha december investment ” ) . in connection with the offer , such shares were exchanged for 221,225 shares of common stock , and such warrants were exchanged for warrants to purchase 110,613 shares of common stock at $ 1.36 per share . additionally , at the effective time of the offer , the company issued five-year warrants ( the “ series b warrants ” ) to purchase 1,791,923 shares of common stock at an exercise price of $ 0.01 to alpha , after giving effect to the reverse stock split . the number of shares of common stock issuable upon the exercise of the series b warrants is equal to the product of ( i ) 8,100,000 and ( ii ) the exchange ratio of 0.8849 , post-reverse stock split . after giving effect to the conversion of its series b preferred stock , the warrants issued to alpha in connection with the alpha investment and the alpha bridge loan and the series b warrants , alpha 's total ownership interest in the company will be 5,008,078 common shares , or 33.9 % , without giving effect to the beneficial ownership limitations in its series b preferred stock . however , under the terms of each of such securities , alpha may not convert such security to the extent such conversion would cause alpha , together with its affiliates , to beneficially own a number of shares of common stock which would exceed 9.99 % of the common stock then issued and outstanding following such exercise . intellectual property acquisition in connection with the offer , jay pharma entered into a series of assignment and assumption agreements with affiliates of a third party , tikkun pharma , inc. ( “ tikkun ” ) , pursuant to which , on october 2 , 2020 , tikkun assigned to jay pharma all of tikkun 's ( i ) rights to certain skin care treatment assets and ( ii ) intellectual property rights to certain formulations for the development of therapeutic candidates for the prevention , management and treatment of graft versus host disease ( gvhd ) in exchange for an aggregate of 10,360,007 common shares of jay pharma . because alpha required additional shares of the company , at no or a nominal cost , for alpha to consummate the alpha bridge loan and the alpha investment at the planned valuation , alpha entered into an agreement with tikkun pursuant to which , immediately following such assignment , tikkun sold 7,774,463 of these common shares of jay pharma to alpha for the nominal aggregate purchase price of $ 10.00 ( the “ alpha nominal shares ” ) , leaving tikkun with 2,585,544 common shares of jay pharma ( the “ tikkun shares ” ) . in connection with the offer , the tikkun shares were exchanged for 571,987 shares of common stock , after giving effect to the reverse stock split , and the alpha nominal shares were exchanged for 1,719,906 shares of series b preferred stock that are convertible into up to 1,719,906 shares of common stock , after giving effect to the reverse stock split .
| u.s. dollar weakening against the canadian dollar and the conversion of the canadian dollars into united states dollars for payment of united states dollar denominated expenses . liquidity and capital resources the company has incurred continuing losses from its operations . as of december 31 , 2020 , the company has had an accumulated deficit of $ 11,759,557 and working capital of $ 1,597,920. since inception , the company 's operations have been funded principally through the issuance of debt and equity . february 2019 note on february 7 , 2019 , jay pharma received $ 60,000 in exchange for a promissory note to david stefansky with an aggregate face value of $ 66,000 , including an original issue discount of $ 6,000 ( the “ february 2019 note ” ) . the february 2019 note bore no stated interest rate . on july 21 , 2020 , jay pharma converted the february 2019 note into common shares . march 2019 note on february 1 , 2019 , jay pharma entered into a consulting agreement with david stefansky . in connection with the consulting agreement , on march 5 , 2019 , jay pharma issued a note payable to its executive director for $ 150,000 ( the “ march 2019 note ” ) . the note bore no interest . on july 21 , 2020 , jay pharma converted the march 2019 note into common shares . april 2019 note during april 2019 , jay pharma received $ 300,000 in exchange for convertible notes in an aggregate principal amount of $ 300,000 ( the “ april 2019 convertible notes ” ) and warrants to purchase 250,000 common shares of jay pharma . the april 2019 convertible notes bore interest at a rate of 6 % per annum . on december 30 , 2020 , the april 2019 notes were converted into common shares . july 2019 note on july 8 , 2019 , jay pharma entered into a note agreement ( the “ july 2019 note ” ) to a limited
| 14,280 |
any subsequent recoveries are credited to the allowance account . net loans charged-off decreased $ 20 thousand to $ 1,781 thousand in 2018 from $ 1,801 thousand in 2017. net charge-offs , as a percentage of average loans outstanding , equaled 0.10 percent in 2018 and 0.11 percent in 2017. the allocated element of the allowance for loan losses account increased $ 2.4 million to $ 21.4 million at december 31 , 2018 , compared to $ 19.0 million at december 31 , 2017. the specific portion of the allowance for impairment of loans individually evaluated under fasb asc 310 increased $ 413 thousand to $ 1.2 million at december 31 , 2018 , from $ 0.8 million at december 31 , 2017 and the formula portion of the allowance for loans collectively evaluated for impairment under fasb asc 450 , increased $ 2.0 million to $ 20.2 million at december 31 , 2018 , from $ 18.2 million at december 31 , 2017. the increase in the specific portion of the allowance was a result of an increase in loans with collateral impairment . the increase in the formula portion was due to a significant increase in volume , as the overall loss factor remained relatively unchanged . -56- there was no unallocated element of the total allowance for loan losses at december 31 , 2018. as is inherent with all estimates , the allowance for loan losses methodology is subject to a certain level of imprecision as it provides reasonable , but not absolute , assurance that the allowance will be able to absorb probable losses , in their entirety , as of the financial statement date . factors , among others , including judgments made in identifying those loans considered impaired , appraisals of collateral values and measurements of certain qualitative factors , all cause this imprecision and support the establishment of the unallocated element . the coverage ratio , the allowance for loan losses account , as a percentage of nonperforming loans , is an industry ratio used to test the ability of the allowance account to absorb potential losses arising from nonperforming loans . the coverage ratio was 222.9 percent at december 31 , 2018 and 167.9 percent at december 31 , 2017. we believe that our allowance was adequate to absorb probable credit losses at december 31 , 2018. deposits : our deposit base is the primary source of funds to support our operations . we offer a variety of deposit products to meet the needs of our individual and commercial customers . total deposits grew $ 156.0 million or 9.1 percent to $ 1.9 billion at the end of 2018. the growth in deposits included the addition of $ 50.0 million in callable brokered certificates of deposit . noninterest-bearing deposits grew $ 29.5 million or 7.8 % while interest-bearing deposits increased $ 126.5 million or 9.5 % in 2018. noninterest-bearing deposits represented 21.9 percent of total deposits while interest-bearing deposits accounted for 78.1 percent of total deposits at december 31 , 2018. comparatively , noninterest-bearing deposits and interest-bearing deposits represented 22.1 percent and 77.9 percent of total deposits at year end 2017. with regard to noninterest-bearing deposits , personal checking accounts increased $ 13.2 million or 7.0 percent , while commercial checking accounts increased $ 16.3 million or 8.5 percent . the increase in noninterest-bearing deposits is essential in attempting to keep our overall cost of funds low given the pressure on our net interest margin from the increase in short-term market rates due to the fomc increasing the targeted federal funds rate four times during 2018. with regard to interest-bearing deposits , interest-bearing transaction accounts , which include money market accounts and now accounts , and savings accounts , increased $ 72.5 million in 2018. commercial interest-bearing transaction accounts increased $ 71.5 million , while personal interest-bearing transaction accounts increased $ 10.6 million . savings accounts decreased $ 9.7 million during 2018 as price sensitive depositors shifted balances to more attractive premium rates being offered by our competitors . the strong growth in the commercial account types was due to continuing our strategic initiative to grow our public fund deposits , our continued penetration in our expansion markets and an increase in iolta accounts at year end . total time deposits increased $ 54.0 million to $ 336.3 million at december 31 , 2018 from $ 282.3 million at december 31 , 2017. the increase was primarily due to the addition of $ 50.0 million of callable brokered certificates of deposit . total deposits averaged $ 1.8 billion in 2018 and $ 1.6 billion in 2017 , increasing $ 111.2 million or 6.7 percent comparing 2018 to 2017. average noninterest-bearing deposits increased $ 33.9 million , while average interest-bearing accounts grew $ 77.3 million . average interest-bearing transaction deposits , including money market and now , and savings accounts , increased $ 68.4 million while average total time deposits increased $ 8.9 million when comparing 2018 and 2017. our cost of interest-bearing deposits increased 18 basis points to 0.68 percent in 2018 from 0.50 percent in 2017. specifically , the cost of interest-bearing transaction and savings accounts increased 15 basis points to 0.50 percent while the cost of time deposits increased 31 basis points to 1.36 percent comparing 2018 and 2017. the increases to the cost of interest-bearing transaction deposits and to the cost of time deposits was the result of the increase in short-term market rates resulting from the fomc 's action to raise the targeted federal funds rate four times during 2018 ending at a range of 2.25 percent to 2.50 percent . we increased rates to retain our core deposit relationships in reaction to premium rates being offered by our competitors . additionally and to a lesser extent , the increase in costs was due to the introduction of premium rate deposit specials at our newest branch office in kingston and our new branch offices in the lehigh valley . story_separator_special_tag volatile deposits , time deposits $ 100 thousand or more , averaged $ 147.1 million in 2018 , an increase of $ 21.8 million or 17.4 percent from $ 125.2 million in 2017. our average cost of these funds increased 52 basis points to 1.53 percent in 2018 , from 1.01 percent in 2017. this type of funding is susceptible to withdrawal by the depositor as they are particularly price sensitive and are therefore not considered to be a strong source of liquidity . -57- market risk sensitivity : with respect to evaluating our exposure to irr on earnings , we utilize a gap analysis model that considers repricing frequencies of rsa and rsl . gap analysis attempts to measure our interest rate exposure by calculating the net amount of rsa and rsl that reprice within specific time intervals . a positive gap occurs when the amount of rsa repricing in a specific period is greater than the amount of rsl repricing within that same time frame and is indicated by a rsa/rsl ratio greater than 1.0. a negative gap occurs when the amount of rsl repricing is greater than the amount of rsa and is indicated by a rsa/rsl ratio less than 1.0. a positive gap implies that earnings will be impacted favorably if interest rates rise and adversely if interest rates fall during the period . a negative gap tends to indicate that earnings will be affected inversely to interest rate changes . at december 31 , 2018 and 2017 , we had cumulative one-year rsa/rsl ratios of 1.07. as previously mentioned , this indicated that if interest rates increased , our earnings would likely be favorably impacted . given the economic conditions and the actions of the fomc to raise short-term rates and their consideration to raise short-term rates in 2019 , the focus of alco had been to maintain the positive gap position in order to safeguard future earnings from the potential risk of rising interest rates . during 2018 alco took steps to reduce the magnitude of our positive gap position and guard against rates unchanged or down through the origination of five year fixed rate loans and purchase of an interest rate floor . the change in our cumulative one-year ratio from the previous year-end resulted from a $ 18.2 million or 2.4 percent increase in rsl coupled with a $ 23.6 million or 2.9 percent increase in rsa maturing or repricing within one year . the increase in rsl resulted primarily from a $ 71.9 million increase in interest-bearing transaction accounts offset by a $ 16.5 million decrease in time deposits and $ 37.2 million decrease in short-term borrowings . the majority of the growth in money market and now accounts resulted from an increase in the deposit balances of local school districts and commercial customers . due to the somewhat cyclical nature associated with these deposits , we classified money market and now accounts in the “ due within twelve months ” category . with respect to the increase in rsa maturing or repricing within a twelve month time horizon , loans , net increased $ 0.6 million while investment securities increased $ 24.1 million . short-term interest rates increased faster than longer-term rates during 2018 causing the yield curve to flatten . in an effort to mitigate irr in the investment portfolio and provide a source of liquidity , we chose to invest in fixed-rate , short-term and intermediate-term u.s. treasury securities and u.s. government-sponsored mortgage-backed securities and , to a lesser extent , longer-term municipal securities . the increase in loans , net of unearned income , resulted from an increase in commercial lending , which primarily involves loans with adjustable-rate terms that reprice in the near term . liquidity : we employ a number of analytical techniques in assessing the adequacy of our liquidity position . one such technique is the use of ratio analysis to illustrate our reliance on noncore funds to fund our investments and loans . at december 31 , 2018 , our noncore funds consisted of time deposits in denominations of $ 100 thousand or more , repurchase agreements , short-term borrowings and long-term debt . large denomination time deposits are particularly not considered to be a strong source of liquidity since they are very interest rate sensitive and are considered to be highly volatile . at december 31 , 2018 , our net noncore funding dependence ratio , the difference between noncore funds and short-term investments to long-term assets , was 15.0 percent . our net short-term noncore funding dependence ratio , noncore funds maturing within one year , less short-term investments to long-term assets equaled 6.3 percent . comparatively , our ratios equaled 16.1 percent and 11.1 percent at the end of 2017 , which indicated a decrease in our reliance on noncore funds . moreover , our basic liquidity surplus ratio , defined as liquid assets less short-term potentially volatile liabilities as a percentage of total assets , increased to 4.1 percent at december 31 , 2018 , from 3.7 percent at december 31 , 2017. we believe that by supplying adequate volumes of short-term investments and implementing competitive pricing strategies on deposits , we can ensure adequate liquidity to support future growth . the consolidated statements of cash flows present the change in cash and cash equivalents from operating , investing and financing activities . cash and cash equivalents consist of cash on hand , cash items in the process of collection , noninterest-bearing and interest-bearing deposits with other banks and federal funds sold . cash and cash equivalents decreased $ 4.9 million for the year ended december 31 , 2018. for the year ended december 31 , 2017 , cash and cash -58- equivalents decreased $ 2.5 million . during 2018 , cash provided by operating and financing activities were more than offset by cash used in investing activities .
| nonperforming assets equaled $ 10.0 million or 0.55 percent of loans , net and foreclosed assets at december 31 , 2018 , down from $ 11.6 million or 0.68 percent at december 31 , 2017. the allowance for loan losses equaled $ 21.4 million or 1.17 percent of loans , net , at december 31 , 2018 , compared to $ 19.0 million or 1.12 percent at year-end 2017. loans charged-off , net of recoveries equaled $ 1.8 million or 0.10 percent of average loans in 2018 , compared to $ 1.8 million or 0.11 percent of average loans in 2017. investment portfolio : primarily , our investment portfolio provides a source of liquidity needed to meet expected loan demand and generates a reasonable return in order to increase our profitability . additionally , we utilize the investment portfolio to meet pledging requirements and reduce income taxes . at december 31 , 2018 , our portfolio consisted primarily of short-term u.s. treasury and government agency securities , which provide a source of liquidity and intermediate-term , tax-exempt state and municipal obligations , which mitigate our tax burden . investment securities decreased $ 3.5 million , to $ 278.3 million at december 31 , 2018 , from $ 281.8 million at december 31 , 2017. at december 31 , 2018 , the investment portfolio consisted of $ 269.7 million of investment securities classified as available-for-sale and $ 8.4 million classified as held-to-maturity . strong loan demand during 2018 resulted in using a portion of the investment cash flow to fund higher yielding loans . excess cash flow from investment repayments was directed back into the investment portfolio primarily during the second and third quarters of 2018. security purchases totaled $ 33.0 million in 2018 , with purchases consisting of short-term u.s. treasury securities , longer term tax-exempt securities and mortgage-backed securities . investment purchases in 2017 amounted to $ 73.5 million . repayments of investment securities totaled $ 32.0 million in 2018 and $ 57.0 million in 2017. there were no sales of investment securities during 2018 or 2017. investment securities averaged $ 281.7 million and equaled 13.8 percent of average earning assets in 2018 , compared to $ 272.4 million and equaled 14.6 percent of average earning assets in 2017. the tax-equivalent yield on the investment portfolio decreased twenty-four basis points to 2.60 percent in 2018 from 2.84 percent in 2017. the decrease in the tax-equivalent yield was due primarily to the reduction in the statutory federal corporate tax rate in 2018 to 21 % from 35 % in 2017. loan portfolio : loans , net increased $ 130.2 million or 7.7 percent in 2018 to $ 1.8
| 14,281 |
also related to these restructuring activities , we recorded $ 13.1 million of non-cash income tax expense to increase valuation allowances on deferred income tax assets associated with our equity investment in a foreign joint venture and certain state net operating loss carryforwards . growth in the industrial segment was driven by the july 1 , 2016 acquisition of spig s.p.a. ( `` spig '' ) a global provider of custom-engineered cooling systems and services , for 152.4 million ( or approximately $ 169 million ) in cash , net of working capital adjustments . spig provides comprehensive dry and wet cooling solutions and aftermarket services to the power generation industry including natural gas-fired and renewable energy power plants , as well as downstream oil and gas , petrochemical and other industrial end markets . the acquisition of spig is consistent with our goal to grow and diversify our technology-based offerings with new products and services in the industrial markets that are complementary to our core businesses . in 2016 , spig contributed $ 96.3 million of revenue and $ 7.8 million of gross profit to the industrial segment . in 2017 , we expect to realize revenue synergies from our newly combined resources . industrial segment results were also impacted by lower spending activity in the united states market , which primarily affected our megtec business where we have seen customers delaying investment in their manufacturing facilities . improved bookings in the fourth quarter combined with a strengthening of industrial production indices suggest that united states industrial markets are showing signs of stabilizing . on january 11 , 2017 , we acquired universal acoustic and emission technologies , inc. ( `` universal '' ) , for approximately $ 55 million in cash . the acquisition will include post-closing adjustments related to differences in actual net indebtedness and transaction expenses compared to estimates . universal provides custom-engineered acoustic , emission and filtration solutions to the natural gas power generation , mid-stream natural gas pipeline , locomotive and general industrial end-markets . universal 's product offering includes gas turbine inlet and exhaust systems , silencers , filters and enclosures . the acquisition of universal is expected to add approximately $ 80 million of annual revenue to our industrial segment and be complementary to the products offered in each of our business segments , but particularly to our core businesses in the industrial markets . year-over-year comparisons are also affected by the following items : mark to market ( `` mtm '' ) losses for our pension and other postretirement benefit plans were $ 24.1 million , $ 40.2 million and $ 101.3 million in 2016 , 2015 and 2014 , respectively . these losses are based on actual plan asset returns and changes in assumptions in the measurement of the related benefit plan liabilities , which are more fully described in note 18 to the consolidated and combined financial statements included in item 8 . we sold our interest in our australian joint venture , halley & mellowes pty . ltd. ( `` hma '' ) , on december 22 , 2016 for $ 18.0 million , resulting in a gain of $ 8.3 million . the gain on sale is classified in equity in income of investees in 2016. restructuring costs totaled $ 37.0 million , $ 11.7 million and $ 20.2 million in 2016 , 2015 and 2014 , respectively , for a number of both completed and ongoing initiatives designed to phase in savings and make our products more competitive . restructuring costs include accelerated depreciation and other activities related to manufacturing 30 facility consolidation and outsourcing as well as reductions in force , consulting and other costs . in addition to savings already realized , we expect to realize savings of approximately $ 15 million in 2017. the $ 11 million of expected costs to achieve these savings are primarily related to office reconfiguration , consulting and facility demolition and consolidation activities . asset impairments in 2016 were $ 14.9 million , which were associated with impairment of the long-lived assets at b & w 's one coal-fired power plant . the non-cash impairment charge is classified in restructuring costs in 2016. asset impairments totaling $ 14.6 million were recognized in 2015 primarily related to research and development facilities and equipment dedicated to activities that were determined not to be commercially viable . the non-cash impairment charge is classified in loss on disposal of assets in 2015. the outcome of the arkansas river power authority litigation in december 2016 resulted in a net $ 3.2 million reduction in the 2016 results of operations in our power segment , which included a $ 4.2 million revenue reversal , a $ 2.3 million decrease in cost of operations and $ 1.3 million of legal costs ( included in selling , general and administrative expenses ( `` sg & a '' ) ) . litigation settlement charges of $ 9.6 million were incurred in 2015 , including $ 1.8 million of legal costs and a $ 7.8 million reversal of power segment revenue associated with the release of an accrued claims receivable as part of the legal settlement related to the berlin station project . spin-off transaction costs were $ 3.8 million and $ 3.3 million 2016 and 2015 , respectively , primarily related to retention stock awards that had a one-year vesting period . sg & a includes the incremental costs of being a separate stand-alone public company , such as costs to create separate accounting , legal , senior management and tax teams . we incurred approximately $ 13.5 million and $ 8.5 million in 2016 and in the second half of 2015 , respectively . due to the scope and complexity of these activities , the amount and timing of these incremental expenses could vary and initial run rates could be slightly higher than the expected annual amounts incurred in 2016 and 2015. prior to the spin-off , we received allocations from bwc that were included in our sg & a . story_separator_special_tag these pre-spin allocations also included $ 2.7 million , and $ 5.3 million in 2015 and 2014 , related to the nuclear energy segment that was transferred to bwc at the time of the spin-off . the nuclear energy segment is treated as discontinued operations in our financial statements , but these related cost allocations remain in the sg & a expenses of our continuing operations . sg & a in 2016 included $ 2.4 million of acquisition and integration related costs associated with the acquisition and integration of spig during 2016 and the acquisition of universal in early 2017. intangible asset amortization expense from the spig acquisition in 2016 was $ 13.3 million , and we expect amortization of the spig intangible assets to result in approximately $ 8.9 million of expense in 2017. intangible amortization is not allocated to the segment results . spin-off transaction on june 8 , 2015 , the board of directors of the babcock & wilcox company ( now known as bwx technologies , inc. ) ( `` bwc '' or the `` former parent '' ) approved the spin-off of b & w through the distribution of shares of b & w common stock to holders of bwc common stock . the distribution of b & w common stock was made on june 30 , 2015 , and consisted of one share of b & w common stock for every two shares of bwc common stock to holders of bwc common stock as of 5:00 p.m. new york city time on the record date , june 18 , 2015. cash was paid in lieu of any fractional shares of b & w common stock . on june 30 , 2015 , b & w became a separate publicly traded company , and bwc did not retain any ownership interest in b & w . we filed our form 10 describing the spin-off with the securities and exchange commission , which was declared effective on june 16 , 2015. the spin-off is further described in note 1 to the consolidated and combined financial statements included in item 8 of this annual report . our segment and other operating results are described in more detail below . 31 results of operations – years ended december 31 , 2016 , 2015 and 2014 consolidated and combined results of operations replace_table_token_7_th the presentation of the components of our revenues and gross profit in the table above is consistent with the way our chief operating decision maker reviews the results of our operations and makes strategic decisions about our business . 2016 vs 2015 consolidated and combined results revenues decreased 10.2 % , or $ 179 million , to $ 1.58 billion in 2016 compared to $ 1.76 billion in 2015 due to a $ 259.5 million decrease in power segment revenues , partially offset by increases in revenues of $ 10.6 million and $ 69.9 million in our renewable and industrial segments , respectively . the spig acquisition , which was completed on july 1 , 2016 , contributed revenues of $ 96.3 million in 2016 . gross profit decreased $ 129.0 million to $ 179.1 million in 2016 from $ 308.2 million in 2015 . excluding the mtm charges shown above , gross profit decreased $ 152.1 million to $ 200.3 million in 2016 from $ 352.5 million in 2015 primarily due to the decline in our renewable segment 's project performance during 2016. operating income decreased $ 124.6 million to an operating loss of $ 102.8 million in 2016 compared to operating income of $ 21.9 million in 2015 . in addition to the gross profit decrease discussed above , the primary drivers of the decrease in our operating income in 2016 were a $ 25.9 million increase in restructuring charges primarily related to our power segment restructuring in june 2016 , partially offset by a $ 14.6 million decrease in loss on asset disposals and impairments compared to 2015 , $ 16.1 million lower mark to market charges compared to 2015 and a $ 8.3 million gain from the sale of all of our interest in our australian joint venture in 2016 . the performance drivers of each segment as well as other operating costs are discussed in more detail below . 32 2015 vs 2014 consolidated and combined results revenues increased 18.3 % , or $ 271.3 million , to $ 1.76 billion in 2015 compared to $ 1.49 billion in 2014 due primarily to increases in revenues from our power , renewable and industrial segments of $ 78.4 million , $ 114.6 million and $ 78.3 million , respectively . the megtec acquisition which was completed on june 20 , 2014 , contributed $ 183.7 million of revenues in 2015 compared to $ 105.4 million in 2014 . gross profit increased $ 89.1 million to $ 308.2 million in the year ended december 31 , 2015 from $ 219.0 million in 2014 . excluding the mtm charges shown above , gross profit increased $ 38.6 million to $ 352.5 million in 2015 from $ 313.8 million in 2014 primarily due to the inclusion of our megtec business for a full year and increases in the volume of utility , industrial and renewable energy boiler projects in our power and renewable segments . operating income increased $ 59.8 million to $ 21.9 million in 2015 from an operating loss of $ 38.0 million in 2014 . operating income includes significant charges for mtm , restructuring and spin-off transaction costs and asset impairments that are each illustrated above and described in more detail below . excluding these items , 2015 operating income would have increased $ 5.6 million from 2014 primarily from the gross margin improvements described above partially offset by increases in selling , general and administrative increases from inclusion of a full year of our megtec business and the incremental stand-alone costs to operate our business as an independent public entity since the spin-off .
| selling , general and administrative expenses sg & a increased $ 7.2 million to $ 247.1 million in 2016 from $ 240.0 million in 2015 due primarily to $ 5.1 million of acquisition and integration related costs related to the acquisitions of spig and universal , $ 1.3 million of litigation expenses associated with the arpa trial and the addition of $ 8.2 million of sg & a associated with spig . these increases in sg & a were partially offset by savings from our 2016 restructuring actions and reduced incentive compensation accruals . sg & a increased $ 14.7 million to $ 240.0 million in 2015 from $ 225.3 million in 2014 . the increase in sg & a in 2015 is primarily attributable to $ 17.5 million of sg & a associated with megtec compared to $ 8.8 million in 2014 ( megtec was acquired on june 20 , 2014 ) , and an $ 8.5 million increase in stand-alone operating costs , discussed further below . in 2015 , corporate allocations from our former parent were $ 2.6 million lower than they were in 2014 , which is discussed further below . the additional stand-alone operating costs to operate our business as an independent public company exceeded the pre-spin allocations of expenses from bwc related to areas that include , but are not limited to , litigation and other legal matters , insurance , compliance with the sarbanes-oxley act and other corporate governance matters . we estimated that we would incur annual incremental expenses of $ 14 million to $ 16 million , of which we incurred approximately $ 13.5 million and $ 8.5 million in 2016 and in the second half of 2015 , respectively , to replace both the services previously provided by bwc as well as other stand-alone costs , such as costs to create separate accounting , legal , senior management and tax functions . we incurred significantly less than our estimate in 2016 due to the reversal
| 14,282 |
non-interest expense increased by $ 922 thousand to $ 23.7 million during the twelve months ended december 31 , 2020. the provision for income taxes decreased by $ 391 thousand from $ 5.9 million in 2019 to $ 5.5 million during the year ended december 31 , 2020. total assets at december 31 , 2020 were $ 1.1 billion , an increase of $ 246 million from $ 865 million at december 31 , 2019. this increase included increases of $ 138 million in cash and due from banks , $ 85 million in net loans , $ 20 million in investment securities , and $ 3 million in all other assets . gross loans increased by $ 90.2 million , or 15 % , from $ 620 million at december 31 , 2019 to $ 710 million at december 31 , 2020. the three largest areas of growth in the company 's loan portfolio were $ 69.5 million in commercial loans , $ 35.6 million in commercial real estate loans and $ 770 thousand in auto loans . these items were partially offset by declines in other loan categories of $ 15.7 million , the largest of which were declines in construction loans of $ 5.9 million and agricultural loans of $ 5.9 million .. total deposits increased by $ 227 million from $ 747 million at december 31 , 2019 to $ 974 million at december 31 , 2020. the increase in deposits includes increases of $ 185 million in demand deposits , $ 60 million in savings accounts , $ 83 million in money market accounts , and $ 2 million in time deposits . these increases were partially offset by a decrease of $ 103 million in interest-bearing demand deposits . during november 2020 we eliminated our interest-bearing demand deposit products transferring these accounts to either money market accounts or non-interest bearing demand accounts based on product type . the company has no brokered deposits . total shareholders ' equity increased by $ 15.6 million from $ 84.5 million at december 31 , 2019 to $ 100.1 million at december 31 , 2020. the largest component of the $ 15.6 million increase was earnings during the twelve-month period totaling $ 14.5 million . in addition , we recorded an increase in accumulated other comprehensive income of $ 2.7 million from $ 2.0 million at december 31 , 2019 to $ 4.7 million at december 31 , 2020. during 2020 the company paid three 12 cents per share quarterly cash dividends which had the effect of reducing shareholders ' equity by $ 1.9 million . the return on average assets was 1.43 % for 2020 , down from 1.82 % for 2019. the return on average equity was 15.5 % for 2020 , down from 20.2 % for 2019 . 23 covid-19 on march 11 , 2020 , the world health organization declared the outbreak of a novel coronavirus ( “ covid-19 ” ) as a global pandemic , which continues to spread throughout the united states and around the world . the declaration of a global pandemic indicates that almost all public commerce and related business activities must be , to varying degrees , curtailed with the goal of decreasing the rate of new infections . the outbreak of covid-19 could adversely impact a broad range of industries in which the company 's customers operate and impair their ability to fulfill their financial obligations to the company . on march 3 , 2020 , the federal open market committee reduced the target federal funds rate by 50 basis points to 1.00 % to 1.25 % . this rate was further reduced to a target range of 0 % to 0.25 % on march 16 , 2020. these reductions in interest rates and other effects of the covid-19 outbreak may adversely affect the company 's financial condition and results of operations . as a result of the spread of the covid-19 coronavirus , economic uncertainties have arisen which are likely to negatively impact net interest income , the provision for loan losses and non-interest income . other financial impact could occur though such potential impact is unknown at this time . covid-19 loan forbearance programs section 4013 of the coronavirus aid , relief and economic security act ( cares act ) provides that a qualified loan modification is exempt by law from classification as a troubled debt restructuring pursuant to u.s. generally accepted accounting principles ( gaap ) . in addition , fil -36-2020 issued by the fdic on april 7 , 2020 encourages financial institutions to work constructively with borrowers affected by covid-19; states that the fdic will not criticize institutions for prudent loan modifications; and views prudent loan modification programs to financial institution customers affected by covid-19 as positive actions that can effectively manage or mitigate adverse impacts on borrowers due to covid-19 , and lead to improved loan performance and reduced credit risk . pursuant to this new guidance , we have instituted loan forbearance programs to assist borrowers with managing cash flows disrupted due to covid-19 . as of december 31 , 2020 , there were 113 loan forbearance agreements outstanding which allow for the deferral of up to 6 months in payments representing approximately $ 37.4 million in loan balances . the following table presents loans under forbearance programs by loan type as of december 31 , 2020 with the expected month that payments are to resume , dollars in thousands . replace_table_token_4_th u.s. small business administration paycheck protection program the cares act also provided for the paycheck protection program ( ppp ) and we are actively participating in this program . as of december 31 , 2020 we funded 1,223 ppp loans totaling $ 119.5 million .. during the fourth quarter of 2020 a total of 493 loans were forgiven by the sba totaling $ 48 million and at december 31 , 2020 the balance of ppp loans outstanding totaled $ 70.7 million . story_separator_special_tag 24 story_separator_special_tag december 31 , 2019 money market accounts housed at our carson city branch averaged $ 14.9 million and time deposits at this branch averaged $ 11.2 million . interest expense on money market accounts increased by $ 277 thousand to $ 411 thousand related to an increase in average rate paid of 28 basis points and an increase in average balances of $ 17.3 million from $ 69.4 million during 2018 to $ 86.7 million during 2019. interest on time deposits increased by $ 197 thousand from $ 192 thousand during the twelve months ended december 31 , 2018 to $ 389 thousand during 2019. during this same period average time deposits increased by $ 4.1 million and the average rate paid on time deposit increased by 37 basis points . interest expense on other interest-bearing liabilities increased by $ 26 thousand from $ 520 thousand during 2018 to $ 546 thousand during the current period mostly related to an increase in rate paid on junior subordinated debentures . interest on the debentures totaled $ 531 thousand during 2019 and $ 510 thousand during 2018. as a result of the changes noted above , the net interest margin for 2019 increased to 4.75 % , from 4.70 % during 2018. provision for loan losses during the year ended december 31 , 2020 we recorded a provision for loan losses of $ 3.2 million up $ 1.7 million from $ 1.5 million during the year ended december 31 , 2019. see “ analysis of asset quality and allowance for loan losses ” for further discussion of loan quality trends and the provision for loan losses . the allowance for loan losses is maintained at a level that management believes will be appropriate to absorb inherent losses on existing loans based on an evaluation of the collectability of the loans and prior loan loss experience . the evaluations take into consideration such factors as changes in the nature and volume of the portfolio , overall portfolio quality , review of specific problem loans , and current economic conditions that may affect the borrower 's ability to repay their loan . the allowance for loan losses is based on estimates , and ultimate losses may vary from the current estimates . these estimates are reviewed periodically and , as adjustments become necessary , they are reported in earnings in the periods in which they become known . based on information currently available , management believes that the allowance for loan losses is appropriate to absorb potential risks in the portfolio . however , no assurance can be given that the company may not sustain charge-offs which are in excess of the allowance in any given period . 28 non-interest income the following table sets forth the components of non-interest income for the years ended december 31 , 2020 , 2019 and 2018. replace_table_token_8_th 2020 compared to 2019. during the twelve months ended december 31 , 2020 , non-interest income totaled $ 8.5 million , an increase of $ 328 thousand from $ 8.1 million during 2019. this increase included a one-time gain totaling $ 218 thousand on sale of one of the company 's administrative buildings . a portion of this building was used as record storage for plumas bank while the rest of the building was available for rental to third parties . plumas bank has entered into a five-year lease at a cost of $ 1,600 per month on that portion of the property used for its record storage . other significant increases in non-interest income were $ 194 thousand in interchange fees and $ 477 thousand in gain on sale of sba loans . the largest declines in non-interest income were $ 372 thousand in service charges on deposit accounts , $ 114 thousand in gain on sale of investments and $ 79 thousand in federal home loan bank of san francisco ( “ fhlb ” ) dividends . the increase interchange income is mostly related to an increase in the size of the bank . proceeds from sba loan sales totaled $ 29.0 million during 2020 and $ 19.5 million during 2019. see the 2019/2018 discussion below for additional information on 2019 sba loan sales . the largest component of the decline in service charges on deposit accounts was a decline in nsf fees . we attribute the decline in nsf fees primarily to a more cautious consumer , an increase in business deposits which includes the effect of ppp lending and a temporary wavier of nsf fees for those customers adversely affected by the pandemic . beginning in the third quarter of 2020 we returned to our standard policies for the waiving of nsf fees . no investment securities were sold during 2020 ; during 2019 we sold fifty-five available for sale securities for total proceeds of $ 19.7 million recording a $ 114 thousand gain on sale . the reduction in fhlb dividends relates to a special dividend recorded during the first quarter of 2019 and a reduction in the dividend rate paid by the fhlb . 2019 compared to 2018. during the year ended december 31 , 2019 , non-interest income totaled $ 8.1 million , a decrease of $ 746 thousand from the twelve months ended december 31 , 2018. the largest component of this decrease was a decline of $ 1.0 million in gains on sale of sba loans from $ 1.9 million during the twelve months ended december 31 , 2018 to $ 867 thousand during 2019. proceeds from sba loan sales totaled $ 19.5 million during 2019 and $ 41.7 million during 2018 loans originated for sale totaled $ 20.4 million during 2019 compared to $ 38.9 million during the twelve months ended december 31 , 2018 we attribute some of the decline in originations to the government shutdown during the first quarter of 2019. during the shutdown we were unable to provide sba guaranteed loans .
| 25 the following table sets forth changes in interest income and interest expense , for the years indicated and the amount of change attributable to variances in volume , rates and the combination of volume and rates based on the relative changes of volume and rates : replace_table_token_6_th ( 1 ) the volume change in net interest income represents the change in average balance multiplied by the previous year 's rate . ( 2 ) the rate change in net interest income represents the change in rate multiplied by the previous year 's average balance . ( 3 ) the mix change in net interest income represents the change in average balance multiplied by the change in rate . 2020 c ompared to 2019. net interest income is the difference between interest income and interest expense . net interest income was $ 38.4 million for the year ended december 31 , 2020 , up $ 841 thousand , or 2 % , from $ 37.6 million during 2019. the $ 841 thousand included an increase of $ 322 thousand in interest income , from $ 39.3 million during 2019 to $ 39.6 million during the current year and a decrease of $ 519 thousand in interest expense . interest and fees on loans increased by $ 1.7 million , interest on investment securities decreased by $ 961 thousand and interest on interest-earning bank deposits decreased by $ 422 thousand . interest and fees on loans was $ 36.0 million during 2020. the average loan balances were $ 699.3 million for 2020 , up $ 110.5 million from $ 588.8 million during 2019. the following table compares loan balances by type at december 31 , 2020 and 2019. replace_table_token_7_th 26 the increase in interest and fees on loans was related to the amortization of loan fees/costs on ppp loans and growth in the company 's loan portfolio . during the 2020 we recorded amortization of loan fees , net of loan costs , on ppp loans totaling $ 2.2 million . this includes normal amortization on our ppp portfolio and the effect of $ 48 million in ppp loan forgiveness . the average yield on loans was 5.15 % for 2020 down 67 basis points from 5.82 % for 2019. we attribute much of the decrease in yield to a decease in market interest rates including a 174 basis decrease in the average
| 14,283 |
a provision for loan losses is charged to operations based on management 's periodic evaluation of the necessary allowance balance . evaluations are conducted at least quarterly and more often if deemed necessary . the ultimate recovery of all loans is susceptible to future market factors beyond the company 's control . the company has an established process to determine the adequacy of the allowance for loan losses . the determination of the allowance is inherently subjective , as it requires significant estimates , including the amounts and timing of expected future cash flows on impaired loans , estimated losses on other classified loans and pools of homogeneous loans , and consideration of past loan loss experience , the nature and volume of the portfolio , information about specific borrower situations and estimated collateral values , economic conditions , and other factors , all of which may be susceptible to significant change . the allowance consists of two components of allocations , specific and general . these two components represent the total allowance for loan losses deemed adequate to cover losses inherent in the loan portfolio . commercial and agricultural loans are subject to a standardized grading process administered by an internal loan review function . the need for specific reserves is considered for credits when graded substandard or when : ( a ) the customer 's cash flow or net worth appears insufficient to repay the loan ; ( b ) the loan has been criticized in a regulatory examination ; ( c ) the loan is on non-accrual ; or , ( d ) other reasons where the ultimate collectibility of the loan is in question , or the loan characteristics require special monitoring . specific allowances are established in cases where management has identified significant conditions or circumstances related to an individual credit that we believe indicates the loan is impaired . specific allocations on impaired loans are determined by comparing the loan balance to the present value of expected cash flows or expected collateral proceeds . allocations are also applied to categories of loans not considered individually impaired but for which the rate of loss is expected to be greater than historical averages , including those graded substandard and non-performing consumer or residential real estate loans . such allocations are based on past loss experience and information about specific borrower situations and estimated collateral values . general allocations are made for other pools of loans , including non-classified loans , homogeneous portfolios of consumer and residential real estate loans , and loans within certain industry categories believed to present unique risk of loss . general allocations of the allowance are primarily made based on a three-year historical average for loan losses for these portfolios , judgmentally adjusted for economic factors and portfolio trends . due to the imprecise nature of estimating the allowance for loan losses , the company 's allowance for loan losses includes a minor unallocated component . the unallocated component of the allowance for loan losses incorporates the company 's judgmental determination of inherent losses that may not be fully reflected in other allocations , including factors such as economic uncertainties , lending staff quality , industry trends impacting specific portfolio segments , and broad portfolio quality trends . therefore , the ratio of allocated to unallocated components within the total allowance may fluctuate from period to period . securities valuation securities available-for-sale are carried at fair value , with unrealized holding gains and losses reported separately in accumulated other comprehensive income ( loss ) , net of tax . the company obtains market values from a third party on a monthly basis in order to adjust the securities to fair value . equity securities that do not have readily determinable fair values are carried at cost . additionally , when securities are deemed to be other than temporarily impaired , a charge will be recorded through earnings ; therefore , future changes in the fair value of securities could have a significant impact on the company 's operating results . in determining whether a market value decline is other than temporary , management considers the reason for the decline , the extent of the decline , the duration of the decline and whether the company intends to sell or believes it will be required to sell the securities prior to recovery . as of december 31 , 2013 , gross unrealized losses on the securities available-for-sale portfolio totaled approximately $ 13,938,000 and gross unrealized gains totaled approximately $ 5,885,000. as of december 31 , 2013 , held-to-maturity securities had a gross unrecognized gain of approximately $ 3,000 . 21 income tax expense income tax expense involves estimates related to the valuation allowance on deferred tax assets and loss contingencies related to exposure from tax examinations . a valuation allowance reduces deferred tax assets to the amount management believes is more likely than not to be realized . in evaluating the realization of deferred tax assets , management considers the likelihood that sufficient taxable income of appropriate character will be generated within carryback and carryforward periods , including consideration of available tax planning strategies . tax related loss contingencies , including assessments arising from tax examinations and tax strategies , are recorded as liabilities when the likelihood of loss is probable and an amount or range of loss can be reasonably estimated . in considering the likelihood of loss , management considers the nature of the contingency , the progress of any examination or related protest or appeal , the views of legal counsel and other advisors , experience of the company or other enterprises in similar matters , if any , and management 's intended response to any assessment . story_separator_special_tag serif ; margin : 0pt 0 '' > average balance sheet ( tax-equivalent basis , dollars in thousands ) replace_table_token_3_th ( 1 ) effective tax rates were determined as though interest earned on the company 's investments in municipal bonds and loans was fully taxable . ( 2 ) loans held-for-sale and non-accruing loans have been included in average loans . story_separator_special_tag interest income on loans includes loan fees of $ 2,055 , $ 3,164 and $ 3,335 for 2013 , 2012 and 2011 , respectively . 24 the following table sets forth for the periods indicated a summary of the changes in interest income and interest expense resulting from changes in volume and changes in rates : net interest income – rate / volume analysis ( tax-equivalent basis , dollars in thousands ) replace_table_token_4_th ( 1 ) the change in interest due to both rate and volume has been allocated to volume and rate changes in proportion to the relationship of the absolute dollar amounts of the change in each . see the company 's average balance sheet and the discussions headed uses of funds , sources of funds , and “ risk management – liquidity and interest rate risk management ” for further information on the company 's net interest income , net interest margin , and interest rate sensitivity position . provision for loan losses the company provides for loan losses through regular provisions to the allowance for loan losses . the provision is affected by net charge-offs on loans and changes in specific and general allocations required on the allowance for loan losses . provisions for loan losses totaled $ 350,000 , $ 2,412,000 , and $ 6,800,000 in 2013 , 2012 , and 2011 , respectively . the provision for loan loss declined $ 2,062,000 , or 85 % , during 2013 compared to 2012. the decline in the provision for loan losses during 2013 compared with 2012 was attributable to a reduced level of net charge-offs , lower levels of non-performing loans , and a lower level of adversely classified loans . during 2013 , the provision for loan loss represented approximately 3 basis points of average outstanding loans while net charge-offs represented approximately 10 basis points of average outstanding loans . the company 's allowance for loan losses represented 1.05 % of total loans at year-end 2013 compared with 1.29 % at year-end 2012. the decline in the allowance compared with total loans at year-end 2013 compared with year-end 2012 was in part attributable to the improvement in the company 's asset quality and also in part attributable to the acquisition of united commerce bank . under acquisition accounting , loans are recorded at fair value which includes a credit risk component , and therefore the allowance on loans acquired is not carried over from the seller . the provision for loan loss declined $ 4,388,000 , or 65 % , during 2012 compared to 2011. during 2012 , the provision for loan loss represented approximately 21 basis points of average outstanding loans while net charge-offs represented approximately 19 basis points of average outstanding loans . the significant decline in the company 's provision for loan loss during 2012 compared with 2011 was largely attributable to a lower level of net charge-offs and overall improvement in the level of adversely classified and non-performing loans . the company 's allowance for loan losses represented 1.29 % of total loans at year-end 2012 compared with 1.37 % at year-end 2011. provisions for loan losses in all periods were made at a level deemed necessary by management to absorb estimated , probable incurred losses in the loan portfolio . a detailed evaluation of the adequacy of the allowance for loan losses is completed quarterly by management , the results of which are used to determine provisions for loan losses . management estimates the allowance balance required using past loan loss experience , the nature and volume of the portfolio , information about specific borrower situations and estimated collateral values , economic conditions , and other qualitative factors . refer also to the sections entitled critical accounting policies and estimates and “ risk management – lending and loan administration ” for further discussion of the provision and allowance for loan losses . 25 non-interest income during 2013 , non-interest income increased $ 1,804,000 or 8 % compared with 2012 and during 2012 increased $ 235,000 or 1 % compared with 2011. replace_table_token_5_th trust and investment product fees increased $ 701,000 , or 26 % , during 2013 compared with 2012 following an increase of $ 512,000 , or 24 % , during 2012 compared with 2011. the increase during 2013 compared to 2012 was attributable to a 35 % increase in trust revenues and a 19 % increase in brokerage revenues . the increase during 2012 compared to 2011 was primarily attributable to a 50 % increase in trust revenues supplemented by a 7 % increase in retail brokerage revenues . insurance revenues increased $ 693,000 , or 13 % , during 2013 as compared to 2012 primarily as a result of increased commercial insurance revenue and to a lesser extent increased contingency revenue . contingency revenue totaled $ 246,000 during 2013 compared to $ 88,000 in 2012. insurance revenues decreased approximately $ 295,000 or 5 % during 2012 as compared to 2011 as a result of lower contingency revenue . contingency revenue totaled $ 88,000 during 2012 compared to $ 872,000 in 2011. the decline in contingency revenue was partially offset by an increased level of commercial insurance revenues during 2012 compared with 2011. net gain on sales of residential loans decreased $ 589,000 , or 18 % , during 2013 compared with 2012. during 2012 , the net gain on sales of residential loans increased $ 853,000 , or 36 % , compared with 2011. loan sales for 2013 , 2012 , and 2011 totaled $ 166.6 million , $ 186.8 million , and $ 134.2 million , respectively . during 2013 , the company realized net gains on the sale of securities of $ 2,429,000 related to the sale of $ 90.5 million of securities . included in the gain during 2013 was a $ 343,000 gain the company realized related to the acquisition accounting treatment of the existing equity ownership position the company held in united commerce at the time of acquisition .
| net interest income increased $ 2,269,000 or 3 % ( an increase of $ 2,500,000 or 4 % on a tax-equivalent basis ) during the year ended december 31 , 2013 compared with 2012. the increased net interest income during 2013 compared with 2012 was largely driven by an increased level of earning assets primarily attributable to average loan growth and an overall decline in the company 's cost of funds partially mitigated by a decline in the accretion of loan discounts on acquired loans and a lower net interest margin ( expressed as a percentage of average earning assets ) . the tax equivalent net interest margin was 3.67 % for 2013 compared to 3.74 % during 2012. the yield on earning assets totaled 4.04 % during 2013 compared to 4.34 % in 2012 while the cost of funds ( expressed as a percentage of average earning assets ) totaled 0.37 % during 2013 compared to 0.60 % in 2012. the decline in the net interest margin in 2013 compared with 2012 was largely attributable to the continued downward pressure on earning asset yields being driven by a historically low market interest rate environment and a competitive marketplace for lending opportunities . also contributing to the lower net interest margin was a decline in the accretion of loan discounts on certain acquired loans . accretion contributed approximately 8 basis points on an annualized basis to the net interest margin during 2013 compared to approximately 12 basis points during 2012. the decline in the company 's cost of funds by approximately 23 basis points during 2013 compared to 2012 was largely driven by a continued decline in deposit rates and also attributable to the repayment of $ 19.3 million of subordinated debentures with an interest rate of 8 % that occurred in the second quarter of 2013 . 22 average earning assets increased by approximately $ 103.7 million , or 6 % , during 2013 compared with 2012. average loans outstanding increased $ 124.2 million , or 11 % , during 2013 compared with
| 14,284 |
rice energy has also granted us , until december 31 , 2025 , ( i ) the exclusive right to develop water treatment facilities in the areas of dedication defined in the water services agreements and ( ii ) an option to purchase any water treatment facilities acquired by rice energy in such areas at rice energy 's acquisition cost ( the “ option ” ) . in connection with the closing of the acquisition of the water assets on november 4 , 2015 , we entered into the water services agreements with rice energy , whereby we have agreed to provide certain fluid handling services to rice energy , including the exclusive right to provide fresh water for well completions operations in the marcellus and utica shales and to collect and recycle or dispose of flowback and produced water for rice energy within areas of dedication in defined service areas in pennsylvania and ohio . the initial term of the water services agreements is until december 22 , 2029 and from month to month thereafter . under the agreements , rice energy will pay us ( i ) a variable fee , based on volumes of water supplied , for freshwater deliveries by pipeline directly to the well site , subject to annual cpi adjustments and ( ii ) a produced water hauling fee of actual out-of-pocket cost incurred by us , plus a 2 % margin . our predecessor in january 2010 , rice energy began constructing its natural gas gathering systems in southwestern pennsylvania in conjunction with commencing horizontal development of its marcellus shale acreage . rice poseidon was formed in july 2013 to hold all of rice energy 's wholly-owned natural gas gathering , compression and fresh water distribution assets in pennsylvania . at the time of rice poseidon 's formation , the only natural gas gathering , compression and fresh water distribution assets in pennsylvania in which rice energy owned any interest that were not held directly by rice poseidon were the alpha assets , which are treated as having been acquired by our predecessor upon rice energy 's acquisition of the 48 remaining 50 % interest in alpha shale resources , lp ( “ alpha shale ” ) from a third party in january 2014. prior to the formation of rice poseidon , the assets of rice poseidon were owned by various subsidiaries of rice energy . as it relates to our predecessor , when discussing periods : prior to the formation of rice poseidon in july 2013 , refers to the pennsylvania natural gas gathering , compression and water distribution assets and operations held in various subsidiaries of rice energy ; subsequent to the formation of rice poseidon in july 2013 through january 29 , 2014 , refers to the natural gas gathering , compression and water distribution assets and operations of rice poseidon ; subsequent to january 29 , 2014 through april 17 , 2014 , refers collectively to the natural gas gathering , compression and water distribution assets and operations of rice poseidon taken together with the alpha assets ; and subsequent to april 17 , 2014 up to december 22 , 2014 , refers collectively to the natural gas gathering , compression and water distribution assets and operations of rice poseidon , the alpha assets and the momentum assets ( described below ) from their respective dates of acquisition . subsequent to january 29 , 2014 , our predecessor includes the alpha assets , which consist of certain natural gas gathering and compression assets held in alpha shale , a wholly-owned subsidiary of rice energy . prior to january 29 , 2014 , each of rice energy and a third party owned a 50 % interest in alpha shale , a joint venture formed to develop natural gas acreage in the marcellus shale . on january 29 , 2014 , in connection with the completion of its initial public offering , rice energy acquired the remaining 50 % interest in alpha shale . in addition , on april 17 , 2014 , rice poseidon acquired , from m3 appalachia gathering llc , the momentum assets , which consist of a 28-mile , 6- to 16-inch gathering system in eastern washington county , pennsylvania , and permits and rights of way in washington and greene counties , pennsylvania , necessary to construct an 18-mile , 30-inch gathering system connecting the washington county system to tetco . on november 4 , 2015 , we entered into the purchase agreement with rice energy , pursuant to which we acquired the water assets and the option . the acquisition of the water assets was accounted for as a combination of entities under common control , and as such , our consolidated financial statements have been retrospectively recast for all periods presented to include the historical results of the water assets . our predecessor included certain fresh water distribution assets and operations in pennsylvania that were distributed to rice midstream holdings concurrently with the closing of our initial public offering . these fresh water distribution assets are part of the water assets that were acquired on november 4 , 2015 , and as such , the historical results related to those operations are included for all periods presented . factors that significantly affect comparability of our financial condition and results of operations our future results of operations may not be comparable to the historical results of operations of our predecessor presented below for the following reasons : revenues . there are differences in the way our predecessor recorded revenues and the way we record revenues . as our assets have historically been a part of the integrated operations of rice energy , our predecessor generally recognized only the costs and did not record revenue associated with the gathering , compression and water services provided to rice energy on an intercompany basis . accordingly , the revenues in our historical consolidated financial statements for periods prior to december 22 , 2014 relate generally only to amounts received from third parties for these services . story_separator_special_tag following our initial public offering , our revenues are generated by existing third-party gas gathering , compression and water services contracts , the gas gathering and compression agreement with rice energy and the water services agreements that we entered into with rice energy in connection with the closing of our initial public offering . in connection with the acquisition of the water assets , we amended and restated our water services agreements , which altered the fee structure for the water assets . for additional information regarding our amended and restated water services agreements , please refer to “ item 7. management 's discussion and analysis of financial condition and results of operations — our operations. ” midstream build-out . all of the natural gas gathering , compression and water assets of our predecessor have been constructed in the last five years . as a result of this build out , the aggregate capacity on our natural gas gathering systems increased to 4.1 mmdth/d as of december 31 , 2015 from 3.2 mmdth/d as of december 31 , 2014 , a 28 % increase . average daily throughput on our natural gas gathering systems increased from 378 mdth/d for the year ended december 31 , 2014 to 647 mdth/d for the year ended december 31 , 2015 , a 71 % increase . similarly , our fresh water distribution capacity increased to 19.4 mmgal/d as of december 31 , 2015 from 8.4 mmgal/d as of december 31 , 2014 , a 131 % increase . cash capital expenditures with respect to our assets for the year ended december 31 , 2014 and the year ended december 31 , 2015 were 49 $ 169.8 million and $ 248.5 million , respectively , and we expect incurring total capital expenditures of approximately $ 150.0 million for the year ending december 31 , 2016. rice energy 's development focus . with its operational focus on development , rice energy , our anchor customer , has focused almost exclusively on pad drilling , in which rice energy drills multiple wells on a single well pad ( and a single receipt point for our gathering systems ) as opposed to one or two wells per pad . as such , within our dedicated area , rice energy turned 42 horizontal marcellus wells and one upper devonian well into sales in the year ended december 31 , 2015 as compared to 81 horizontal marcellus and upper devonian wells over the preceding five years . furthermore , rice energy has continued to increase the average lateral length of wells drilled , resulting in increased initial throughput volumes per receipt point for our gathering systems . system acquisition . as described under “ —our predecessor , ” our predecessor is treated as having acquired two businesses in the first half of 2014. collectively , the acquired businesses represent approximately 36 % of the natural gas volumes on our natural gas gathering systems for the year ended december 31 , 2015 . similar to the balance of our assets , the assets and operations acquired were early stage assets , in particular with respect to the momentum assets . general and administrative expenses . our predecessor 's general and administrative expenses included direct and indirect charges for the management of our assets and certain expenses allocated by rice energy for general corporate services , such as treasury , accounting and legal services . these expenses were charged or allocated to our predecessor based on the nature of the expenses and rice energy 's estimate of the expense attributable to our predecessor 's operations . under our omnibus agreement with rice energy , rice energy charges us a combination of direct and allocated charges for general and administrative services . we also incur incremental general and administrative expenses attributable to operating as a publicly traded partnership , such as costs associated with : annual and quarterly reporting ; tax return and schedule k-1 preparation and distribution expenses ; sarbanes-oxley compliance expenses ; expenses associated with listing on the nyse ; independent auditor fees ; legal fees ; investor relations expenses ; registrar and transfer agent fees ; director and officer liability insurance expenses ; and director compensation . financing . there are differences in the way we will finance our operations as compared to the way our predecessor financed its operations . historically , our predecessor 's operations were financed as part of rice energy 's integrated operations and our predecessor did not record any separate costs associated with financing its operations . additionally , our predecessor 's largely relied on capital contributions from rice energy to satisfy its capital expenditure requirements . for purposes of our predecessor 's historical financial statements , we have recorded our proportionate share of rice energy 's interest based upon rice energy 's estimate of the expense attributable to our operations . based on the terms of our cash distribution policy , we expect that we will distribute most of the cash generated by our operations to our unitholders . as a result , we expect to fund future growth capital expenditures primarily from a combination of borrowings under our revolving credit facility and the issuance of additional equity or debt securities . how we evaluate our operations we evaluate our business on the basis of the following key measures : our gathering throughput and fresh water services volumes ; our operating expenses ; and our adjusted ebitda . gathering throughput and fresh water services volumes our management analyzes our performance based on the aggregate amount of throughput volumes on our gathering systems and volumes of fresh water distributed on our fresh water distribution systems . we must connect additional wells or well pads within our dedicated areas in order to maintain or increase volumes on our systems as a whole .
| included in general and administrative expense is equity compensation expense of $ 4.5 million and $ 0.8 million for the years ended december 31 , 2015 and december 31 , 2014 , respectively . incentive unit expense . incentive unit expense for the year ended december 31 , 2014 was $ 13.5 million . these costs were allocated to us and to the water assets based on our estimate of the expense attributable to our operations . the payment obligation as it relates to the incentive units is with rice energy irrevocable trust and ngp rice holdings llc ( “ ngp holdings ” ) and will not be borne by rice energy or by us . incentive unit expense for the year ended december 31 , 2015 of $ 1.0 million was allocated to the water assets by rice energy prior to their acquisition . depreciation expense . depreciation expense increased from $ 4.2 million for the year ended december 31 , 2014 to $ 16.4 million for the year ended december 31 , 2015 , an increase of $ 12.2 million . the increase year-over-year was primarily due to additional assets placed into service in 2015 , including assets related to the water services segment . acquisition costs . acquisition costs for the year ended december 31 , 2014 were $ 1.5 million . these costs were incurred in connection with the momentum acquisition . amortization of intangible assets . amortization of intangible assets increased from $ 1.2 million for the year ended december 31 , 2014 to $ 1.6 million for the year ended december 31 , 2015 . intangible assets were acquired in connection with the momentum acquisition and are amortized over 30 years . interest expense . interest expense decreased from $ 13.6 million for the year ended december 31 , 2014 to $ 3.2 million for the year ended december 31 , 2015 , a decrease of $ 10.4 million . interest expense for the year ended december
| 14,285 |
canada net sales were $ 1,076 million for 2014 , a decrease of $ 38 million , or 3 % , when compared with $ 1,114 million for 2013 . in local currency , sales increased 4 % for 2014. the 3 % decrease for the year consisted of the following contributors : percent increase/ ( decrease ) business acquisition 2 volume 1 price 1 foreign exchange ( 7 ) total ( 3 ) % sales performance in canada was driven by double-digit growth in the utilities market , followed by high single-digit growth in the forestry market and mid-single digit growth to commercial services and heavy manufacturing customers . net sales in the construction , agriculture and mining end markets were down in the high single digits . the segment gross profit margin decreased 1.7 percentage points in 2014 versus 2013 , primarily driven by product cost inflation exceeding price inflation driven by unfavorable foreign exchange , higher freight costs and lower supplier rebates as well as negative mix from the wfs acquisition . operating expenses increased 3 % in 2014 . in local currency , operating expenses increased 10 % , primarily due to the wfs acquisition , higher payroll and information technology expenses , as well as costs associated with opening a new dc . operating earnings of $ 88 million for 2014 decreased $ 41 million , or 32 % , versus 2013 . in local currency , operating earnings decreased 27 % . the decrease in earnings was due to operating expenses increasing at a faster rate than sales and lower gross profit margins . other businesses net sales were $ 1,182 million for 2014 , an increase of $ 142 million , or 14 % , when compared with $ 1,040 million for 2013 . the net sales increase was primarily due to incremental sales from zoro and the businesses in japan and mexico . the 14 % increase for the year consisted of the following contributors : percent increase/ ( decrease ) volume/price 18 foreign exchange ( 4 ) total 14 % operating earnings for other businesses were a loss of $ 38 million for 2014 compared to earnings of $ 8 million for 2013 . the year 2014 included a $ 29 million charge related to closing the business in brazil , a $ 14 million charge related to the transition of the employee retirement plan in europe , a $ 12 million impairment charge for the business in colombia and $ 10 million in restructuring costs for the business in europe . the year 2013 included $ 13 million of expense related to impairment charges for the business in brazil and $ 10 million of expense in structural changes to the businesses in europe and china . excluding these charges in both years , operating earnings decreased $ 3 million , or 10 % , primarily driven by incremental expenses associated with the start-up of the single channel online business model in europe . 17 other income and expense other income and expense was $ 13 million of expense in 2014 compared with $ 9 million of expense in 2013. the following table summarizes the components of other income and expense ( in thousands of dollars ) : replace_table_token_9_th other non-operating expense increased in 2014 due to higher foreign exchange transaction losses . income taxes income taxes of $ 522 million in 2014 increased 9 % as compared with $ 480 million in 2013 . grainger 's reported tax rates were 39.1 % and 37.3 % in 2014 and 2013 , respectively . excluding the effect of the separately identified charges reported in both 2014 and 2013 , grainger 's reported tax rate was 38.2 % and 37.3 % in 2014 and 2013 , respectively . the increase in the reported tax rate in 2014 was primarily due to a higher proportion of earnings in the united states versus geographies with lower tax rates and losses with no tax benefit . 2013 compared to 2012 grainger 's net sales of $ 9,438 million for 2013 increased 5 % when compared with net sales of $ 8,950 million for 2012. the 5 % increase for the year consisted of the following contributors : percent increase/ ( decrease ) volume 3 business acquisitions 2 price 1 foreign exchange ( 1 ) total 5 % net sales to most customer end markets increased for 2013. the increase in net sales was led by growth in sales to heavy and light manufacturing customers , followed by diversified commercial services customers . refer to the segment analysis below for further details . gross profit of $ 4,136 million for 2013 increased 6 % . the gross profit margin for 2013 was 43.8 % , flat versus 2012 , primarily driven by price increases exceeding product cost increases , offset by lower margins from the acquired businesses and faster growth with lower margin customers . operating expenses of $ 2,840 million for 2013 increased 2 % from $ 2,785 million for 2012. operating expenses in 2013 included a $ 26 million expense related to the impairment charges for the business in brazil and grainger lighting services in the united states . also included was $ 10 million of expense related to restructuring charges for improving the long-term performance of the businesses in europe and china . operating expenses in 2012 included a $ 76 million expense related to the settlement of disputes involving the gsa and usps contracts . also included in 2012 was $ 24 million of expense related to branch closure costs , restructuring charges related to improving the long-term performance of the businesses in europe , india and china and an impairment charge for grainger lighting services . excluding these expenses from both years , operating expenses increased 4 % , primarily driven by the acquisitions and an incremental $ 132 million in growth-related spending on new sales representatives , ecommerce and inventory management solutions , primarily in the united states . story_separator_special_tag operating earnings of $ 1,297 million for 2013 increased 15 % from $ 1,131 million for 2012. excluding the expenses mentioned above for both years , operating earnings increased 8 % , primarily due to higher sales and operating expenses increasing at a slower rate than sales . 18 net earnings attributable to grainger for 2013 increased by 16 % to $ 797 million from $ 690 million in 2012. the increase in net earnings primarily resulted from an increase in operating earnings . diluted earnings per share of $ 11.13 in 2013 were 17 % higher than $ 9.52 for 2012 , due to increased net earnings and lower average shares outstanding . the table below reconciles reported diluted earnings per share determined in accordance with gaap in the united states to adjusted diluted earnings per share , a non-gaap measure . management believes adjusted diluted earnings per share is an important indicator of operations because it excludes items that may not be indicative of core operating results . because non-gaap financial measures are not standardized , it may not be possible to compare this financial measure with other companies ' non-gaap financial measures having the same or similar names . replace_table_token_10_th segment analysis the following comments at the reportable segment and other business unit level include external and intersegment net sales and operating earnings . see note 16 to the consolidated financial statements . united states net sales were $ 7,414 million for 2013 , an increase of $ 488 million , or 7 % , when compared with net sales of $ 6,926 million for 2012. the 7 % increase for the year consisted of the following contributors : percent increase volume 4 business acquisitions 2 price 1 total 7 % net sales to most customer end markets increased for 2013. the increase was led by high single-digit growth to light manufacturing customers , followed by mid-single digit growth to heavy manufacturing , commercial services , contractors and natural resources customers . government was up in the low single digits and net sales to resellers were down in the low single digits . the segment gross profit margin decreased 0.3 percentage point in 2013 compared to 2012 , primarily driven by lower margins from the acquired businesses and faster growth with lower margin customers , partially offset by price increases exceeding product cost increases . operating expenses were up 1 % for 2013 versus 2012. operating expenses in 2013 included a $ 13 million expense related to goodwill impairment charges for grainger lighting services . the 2012 year included a $ 76 million expense related to the settlement of disputes involving the gsa and usps contracts . also included in 2012 was $ 10 million of expense primarily related to branch closure costs and a goodwill impairment charge for grainger lighting services . excluding these expenses from both years , operating expenses increased 5 % , primarily driven by an incremental $ 118 million in growth-related spending on new sales representatives , ecommerce and inventory management solutions . for the segment , operating earnings of $ 1,304 million for 2013 increased 15 % over $ 1,133 million in 2012. excluding the expenses mentioned above in both years , operating earnings were up 8 % . the improvement in operating earnings for 2013 was due to an increase in net sales and operating expenses increasing at a slower rate than sales . 19 canada net sales were $ 1,114 million for 2013 , an increase of $ 8 million , or 1 % , when compared with $ 1,106 million for 2012. in local currency , sales increased 4 % for 2013. the 1 % increase for the year consisted of the following contributors : percent increase/ ( decrease ) volume 4 foreign exchange ( 3 ) total 1 % sales performance in canada was driven by double-digit growth in the forestry market , followed by high single-digit growth to the light manufacturing , commercial services and oil and gas end markets . net sales to heavy manufacturing customers were down in the mid-single digits and the government end market was down in the low single digits . the segment gross profit margin increased 0.4 percentage point in 2013 over 2012 , primarily driven by price increases exceeding product cost increases and favorable freight rates , partially offset by the unfavorable effect of foreign exchange on purchases . operating expenses increased 2 % in 2013. in local currency , operating expenses increased 5 % , primarily due to higher volume-related payroll , occupancy and technology investments , partially offset by lower warehouse expenses . operating earnings of $ 129 million for 2013 were up $ 1 million , or 1 % , versus 2012. in local currency , operating earnings increased 4 % . the increase in earnings was due to sales growth and improved gross profit margins , partially offset by operating expenses increasing at a faster rate than sales . other businesses net sales were $ 1,040 million for 2013 , an increase of $ 33 million , or 3 % , when compared with $ 1,007 million for 2012. the net sales increase was primarily due to incremental sales from zoro , brazil and mexico , partially offset by lower sales in india due to a change in its business model . higher sales in japan were offset by unfavorable foreign exchange . the 3 % increase for the year consisted of the following contributors : percent increase/ ( decrease ) volume/price 10 foreign exchange ( 7 ) total 3 % operating earnings for other businesses were $ 8 million for 2013 compared to $ 20 million for 2012. the year 2013 included $ 13 million of expense related to impairment charges for the business in brazil and $ 10 million of expense in structural changes to the businesses in europe and china . the year 2012 included $ 14 million of charges related to restructuring the businesses in europe , india and china .
| operating earnings in 2014 included a $ 29 million charge related to closing the business in brazil , a $ 14 million charge related to the transition of the employee retirement plan in europe , a $ 12 million impairment charge for the business in colombia and $ 10 million in restructuring costs for the business in europe . operating earnings in 2013 included a $ 26 million expense related to impairment charges for the business in brazil and grainger lighting services , as well as $ 10 million of restructuring costs for the businesses in europe and china . excluding these charges from both years , operating earnings increased 6 % , primarily due to higher sales and operating expenses increasing at a slower rate than sales . net earnings attributable to grainger for 2014 increased by 1 % to $ 802 million from $ 797 million in 2013 . the increase in net earnings primarily resulted from an increase in operating earnings . diluted earnings per share of $ 11.45 in 2014 were 3 % higher than $ 11.13 for 2013 , due to increased net earnings and lower average shares outstanding . the table below reconciles reported diluted earnings per share determined in accordance with generally accepted accounting principles ( gaap ) in the united states to adjusted diluted earnings per share , a non-gaap measure . management believes adjusted diluted earnings per share is an important indicator of operations because it excludes items that may not be indicative of core operating results . because non-gaap financial measures are not standardized , it may not be possible to compare this financial measure with other companies ' non-gaap financial measures having the same or similar names . replace_table_token_8_th segment analysis the following comments at the reportable segment and other business unit level include external and intersegment net sales and operating earnings . see note 16 to the consolidated financial statements . united states net sales were $ 7,926 million for 2014 , an increase of $ 512 million , or 7 % , when compared
| 14,286 |
story_separator_special_tag justify '' > capital resources and liquidity cash and cash equivalents were $ 13,171 at december 31 , 2020. as shown in the accompanying consolidated financial statements , we recorded a loss of $ 2,666,798 and $ 1,596,086 for the years ended december 31 , 2020 and 2019 , respectively . our working capital deficit at december 31 , 2020 was $ 3,075,331 and net cash flows used in operating activities for the year ended december 31 , 2020 were $ 709,754. these factors and our limited ability to raise additional capital to accomplish our objectives , raise substantial doubt about our ability to continue as a going concern . we expect our expenses will continue to increase during the foreseeable future as a result of increased operations and the development of our current business operations . we anticipate generating continued revenues over the next twelve months as we continue to market the sale of lots held for sale , now having assumed title of our oasis park resort property ; however , we there can be no assurance that such revenue will be sufficient to cover our expenses . consequently , we expect to be dependent on the proceeds from future debt or equity investments to sustain our operations and implement our business plan . if we are unable to raise sufficient capital , we will be required to delay or forego some portion of our business plan , which would have a material adverse effect on our anticipated results from operations and financial condition . there is no assurance that we will be able to obtain necessary amounts of capital or that our estimates of our capital requirements will prove to be accurate . we presently do not have any significant credit available , bank financing or other external sources of liquidity . due to our operating losses , our operations have not been a significant source of liquidity . we will need to acquire other profitable properties or obtain additional capital in order to expand operations and become profitable . in order to obtain capital , we may need to sell additional shares of our common stock or borrow funds from private lenders . there can be no assurance that we will be successful in obtaining additional funding . 18 to the extent that we raise additional capital through the sale of equity or convertible debt securities , the issuance of such securities may result in dilution to existing stockholders . if additional funds are raised through the issuance of debt securities , these securities may have rights , preferences and privileges senior to holders of common stock and the terms of such debt could impose restrictions on our operations . regardless of whether our cash assets prove to be inadequate to meet our operational needs , we may seek to continue to compensate providers of services by issuance of stock in lieu of cash , which may also result in dilution to existing shareholders . even if we are able to raise the funds required , it is possible that we could incur unexpected costs and expenses , fail to collect significant amounts owed to us , or experience unexpected cash requirements that would force us to seek alternative financing . no assurance can be given that sources of financing will be available to us and or that demand for our equity/debt instruments will be sufficient to meet our capital needs , or that financing will be available on terms favorable to us . if funding is insufficient at any time in the future , we may not be able to take advantage of business opportunities or respond to competitive pressures or may be required to reduce the scope of our planned development , any of which could have a negative impact on our business and operating results . in addition , insufficient funding may have a material adverse effect on our financial condition , which could require us to : ● curtail our operations significantly , or ● seek arrangements with strategic partners or other parties that may require us to relinquish significant rights to our development of resorts and correlated services , or ● explore other strategic alternatives including a merger or sale of our company . operating activities net cash flows used in operating activities for the year ended december 31 , 2020 was $ 709,754 , which resulted primarily due to the loss of $ 2,666,798 offset by debt discount amortization expense of $ 202,148 , depreciation and amortization of $ 45,874 , and stock-based compensation of $ 956,447. net cash flows used in operating activities for the year ended december 31 , 2019 was $ 1,214,693 which resulted primarily due to the loss of $ 1,596,086 offset by debt discount amortization expense of $ 110,983 , depreciation and amortization of $ 36,707 , and stock-based compensation of $ 482,584. investing activities net cash flows used in investing activities was $ 103,000 for the year ended december 31 , 2020. the funds were used for the acquisition and development of the emerald grove property and costa bajamar property . net cash flows used in investing activities was $ 1,398,195 for the year ended december 31 , 2019. the funds were used for the acquisition of an investment property . financing activities net cash flows provided by financing activities for the year ended december 31 , 2020 was $ 653,399 primarily from cash proceeds from sale of common stocks and warrants of $ 125,000 , and cash proceeds from sale of common stock , warrants and plots of land promised to investors , net of expenses of $ 228,395 , cash proceeds from warrant and option exercise of $ 81,308 and cash proceeds from note payable of $ 406,317. net cash flows provided by financing activities for the year ended december 31 , 2019 was $ 2,784,443 primarily from cash proceeds from sale of common stocks and warrants of $ 733,675 , story_separator_special_tag story_separator_special_tag justify '' > capital resources and liquidity cash and cash equivalents were $ 13,171 at december 31 , 2020. as shown in the accompanying consolidated financial statements , we recorded a loss of $ 2,666,798 and $ 1,596,086 for the years ended december 31 , 2020 and 2019 , respectively . our working capital deficit at december 31 , 2020 was $ 3,075,331 and net cash flows used in operating activities for the year ended december 31 , 2020 were $ 709,754. these factors and our limited ability to raise additional capital to accomplish our objectives , raise substantial doubt about our ability to continue as a going concern . we expect our expenses will continue to increase during the foreseeable future as a result of increased operations and the development of our current business operations . we anticipate generating continued revenues over the next twelve months as we continue to market the sale of lots held for sale , now having assumed title of our oasis park resort property ; however , we there can be no assurance that such revenue will be sufficient to cover our expenses . consequently , we expect to be dependent on the proceeds from future debt or equity investments to sustain our operations and implement our business plan . if we are unable to raise sufficient capital , we will be required to delay or forego some portion of our business plan , which would have a material adverse effect on our anticipated results from operations and financial condition . there is no assurance that we will be able to obtain necessary amounts of capital or that our estimates of our capital requirements will prove to be accurate . we presently do not have any significant credit available , bank financing or other external sources of liquidity . due to our operating losses , our operations have not been a significant source of liquidity . we will need to acquire other profitable properties or obtain additional capital in order to expand operations and become profitable . in order to obtain capital , we may need to sell additional shares of our common stock or borrow funds from private lenders . there can be no assurance that we will be successful in obtaining additional funding . 18 to the extent that we raise additional capital through the sale of equity or convertible debt securities , the issuance of such securities may result in dilution to existing stockholders . if additional funds are raised through the issuance of debt securities , these securities may have rights , preferences and privileges senior to holders of common stock and the terms of such debt could impose restrictions on our operations . regardless of whether our cash assets prove to be inadequate to meet our operational needs , we may seek to continue to compensate providers of services by issuance of stock in lieu of cash , which may also result in dilution to existing shareholders . even if we are able to raise the funds required , it is possible that we could incur unexpected costs and expenses , fail to collect significant amounts owed to us , or experience unexpected cash requirements that would force us to seek alternative financing . no assurance can be given that sources of financing will be available to us and or that demand for our equity/debt instruments will be sufficient to meet our capital needs , or that financing will be available on terms favorable to us . if funding is insufficient at any time in the future , we may not be able to take advantage of business opportunities or respond to competitive pressures or may be required to reduce the scope of our planned development , any of which could have a negative impact on our business and operating results . in addition , insufficient funding may have a material adverse effect on our financial condition , which could require us to : ● curtail our operations significantly , or ● seek arrangements with strategic partners or other parties that may require us to relinquish significant rights to our development of resorts and correlated services , or ● explore other strategic alternatives including a merger or sale of our company . operating activities net cash flows used in operating activities for the year ended december 31 , 2020 was $ 709,754 , which resulted primarily due to the loss of $ 2,666,798 offset by debt discount amortization expense of $ 202,148 , depreciation and amortization of $ 45,874 , and stock-based compensation of $ 956,447. net cash flows used in operating activities for the year ended december 31 , 2019 was $ 1,214,693 which resulted primarily due to the loss of $ 1,596,086 offset by debt discount amortization expense of $ 110,983 , depreciation and amortization of $ 36,707 , and stock-based compensation of $ 482,584. investing activities net cash flows used in investing activities was $ 103,000 for the year ended december 31 , 2020. the funds were used for the acquisition and development of the emerald grove property and costa bajamar property . net cash flows used in investing activities was $ 1,398,195 for the year ended december 31 , 2019. the funds were used for the acquisition of an investment property . financing activities net cash flows provided by financing activities for the year ended december 31 , 2020 was $ 653,399 primarily from cash proceeds from sale of common stocks and warrants of $ 125,000 , and cash proceeds from sale of common stock , warrants and plots of land promised to investors , net of expenses of $ 228,395 , cash proceeds from warrant and option exercise of $ 81,308 and cash proceeds from note payable of $ 406,317. net cash flows provided by financing activities for the year ended december 31 , 2019 was $ 2,784,443 primarily from cash proceeds from sale of common stocks and warrants of $ 733,675 ,
| the unrecognized revenue is recorded under contract liability as the company has not performed all of its performance obligations . the company has a balance of $ 111,684 and $ 50,000 in contract liability as of december 31 , 2020 and 2019 , respectively . cost of revenues our total cost of revenues for the year ended december 31 , 2020 was $ 0 compared with $ 21,042 for the year ended december 31 , 2019. the change is a result of the cost of associated with the sale of lots at oasis park resort . operating expenses operating expenses increased to $ 2,146,047 for the year ended december 31 , 2020 from to $ 1,825,369 for the year ended december 31 , 2019. the detail by major category is reflected in the table below . replace_table_token_2_th sales and marketing costs decreased by $ 66,461 for the year ended december 31 , 2020 , primarily due to the decreased operations of the company resulting from the impact of covid-19 and the resulting border restrictions . the company anticipates sales and marketing to increase into 2021 as our target market is currently experiencing pre covid-19 record real estate sales . general and administrative costs increased by $ 387,139 for the year ended december 31 , 2020 , primarily due to compensation expense resulting from new employment contracts for our officers , stock-based consulting , and professional fees . net loss we finished the year ended december 31 , 2020 with a net loss of $ 2,666,798 , as compared to a loss of $ 1,596,086 for the year ended december 31 , 2019 , which is primarily the result of increased professional , marketing , and stock-based consulting fees incurred during the 2020 as well as increased interest expense associated with the additional financing during 2020. the factors that will most significantly affect future operating results will be : ● the acquisition of land with lots for sale . ● the sale price of future lots , compared to the sale price of lots
| 14,287 |
we are paid contingency fees by cms based on a percentage of the dollar amount of claims recovered by cms as a result of our efforts . we recognize revenue when the provider pays cms or incurs an offset against future medicare claims . the revenues we recognize are net of our estimate of claims that will be overturned by appeal following payment by the provider . we are currently subject to a competitive rebidding process for the next rac contract with cms . to accelerate our ability to provide medicare audit and recovery services across our region following our award of our initial rac contract , we outsourced certain aspects of our healthcare recovery process to three different subcontractors . two of these subcontractors provide a specific service to us in connection with our claims recovery process , and one subcontractor is engaged to provide all of the audit and recovery services for claims within a portion of our region . we recognize all of the revenues generated by the claims recovered through these subcontractor relationships , and we recognize the fees that we pay to these subcontractors in our expenses . we have also recently begun utilizing our technology-enabled services platform to provide audit , recovery and analytical services for private healthcare providers . other we also derive revenues from the recovery of delinquent state taxes , and federal treasury and other receivables , default aversion services for certain clients including financial institutions and the licensing of hosted technology solutions to certain clients . for our hosted technology services , we license our system and integrate our technology into our clients ' operations , for which we are paid a licensing fee . our revenues for these services include contingency fees , fees based on dedicated headcount to our clients and hosted technology licensing fees . operating metrics we monitor a number of operating metrics in order to evaluate our business and make decisions regarding our corporate strategy . these key metrics include placement volume , placement revenue as a percentage of placement volume , net claim recovery volume and claim recovery fee rate . 28 replace_table_token_6_th placement volume . our placement volume represents the dollar volume of defaulted student loans first placed with us during the specified period by public and private clients for recovery . placement volume allows us to measure and track trends in the amount of inventory our clients in the student lending market are placing with us during any period . the revenues associated with the recovery of a portion of these loans may be recognized in subsequent accounting periods , which assists management in estimating future revenues and in allocating resources necessary to address current placement volumes . placement revenue as a percentage of placement volume . placement revenue as a percentage of placement volume is calculated by dividing revenues recognized during the specified period by placement volume first placed with us during that same period . this metric is subject to some level of variation from period to period based upon certain timing differences including , but not limited to , the timing of placements received by us within a period and the fact that a significant portion of revenues recognized in a current period is often generated from the placement volume received in prior periods . however , we believe that this metric provides a useful indication of the revenues we are generating from placement volumes on an ongoing basis and provides management with an indication of the relative efficiency of our recovery operations from period to period . net claim recovery volume . our net claim recovery volume measures the dollar volume of improper medicare claims that we have recovered for cms during the applicable period net of any amount that we have reserved to cover appeals by healthcare providers . we are paid recovery fees as a percentage of this recovered claim volume . we calculate this metric by dividing our claim recovery revenues by our claim recovery fee rate . this metric shows trends in the volume of improper payments within our region and allows management to measure our success in finding these improper payments , over time . claim recovery fee rate . our claim recovery fee rate represents the weighted-average percentage of our fees compared to amounts recovered by cms . this percentage primarily depends on the method of recovery and , in some cases , the type of improper payment that we identify . this metric helps management measure the amount of revenues we generate from net claim recovery volume . costs and expenses we generally report two categories of operating expenses : salaries and benefits and other operating expense . salaries and benefits expenses consist primarily of salaries and performance incentives paid and benefits provided to our employees . other operating expense includes expenses related to our use of subcontractors , other production related expenses , including costs associated with data processing , retrieval of medical records , printing and mailing services , amortization and other outside services , as well as general corporate and administrative expenses . in addition to our main components of operating expenses , in 2011 we incurred a $ 13.4 million impairment expense to write off the carrying amount of the trade name intangible asset due to our plan to retire our diversified collection services , inc. trade name , which we report as impairment of trade name . we expect a significant portion of our expenses to increase as we grow our business . however , we expect certain expenses , including our corporate and general administrative expenses , to grow at a slower rate than our revenues . as a result , and over the long term , we expect our overall expenses to modestly decline as a percentage of revenues . story_separator_special_tag factors affecting our operating results our results of operations are influenced by a number of factors , including allocation of placement volume , claim recovery volume , contingency fees , regulatory matters , effects of client concentration and macroeconomic factors . allocation of placement volume our clients have the right to unilaterally set and increase or reduce the volume of defaulted student loans or other receivables that we service at any given time . in addition , many of our recovery contracts for student loans and other receivables are not exclusive , with our clients retaining multiple service providers to service portions of their portfolios . accordingly , the number of delinquent student loans or other receivables that are placed with us may vary from time to time , 29 which may have a significant effect on the amount and timing of our revenues . we believe the major factors that influence the number of placements we receive from our clients in the student loan market include our performance under our existing contracts and our ability to perform well against competitors for a particular client . to the extent that we perform well under our existing contracts and differentiate our services from those of our competitors , we may receive a relatively greater number of placements under these existing contracts and may improve our ability to obtain future contracts from these clients and other potential clients . further , delays in placement volume , as well as acceleration of placement volume , from any of our large clients may cause our revenues and operating results to vary from quarter to quarter . typically we are able to anticipate with reasonable accuracy the timing and volume of placements of defaulted student loans and other receivables based on historical patterns and regular communication with our clients . occasionally , however , placements are delayed due to factors outside of our control . for example , a technology system upgrade at the department of education significantly decreased the volume of student loan placements by the department of education to all recovery vendors , including us . while we and the other recovery vendors have recently received substantially larger placement volume in the fourth quarter of 2012 as a result of the completion of this technology system upgrade , the majority of the revenues from these placements were not recognized until the third quarter of 2013 because we do not begin to earn rehabilitation revenues from a given placement until at least nine months after receipt of a placement . in addition , for approximately twelve months beginning in september 2011 , the department of education was not able to process a portion of rehabilitated student loans and accordingly we were not able to recognize certain revenues associated with rehabilitation of loans for this client . however , the department of education continued to pay us based on invoices submitted and we recorded these cash receipts as deferred revenues on our balance sheet . claim recovery volume while we are entitled to review medicare records for all part a and part b claims in our region , we are not permitted to identify an improper claim unless that particular type of claim has been pre-approved by cms to ensure compliance with applicable medicare payment policies , as well as national and local coverage determinations . the growth of our revenues is determined primarily by the aggregate volume of medicare claims in our region and our ability to identify improper payments within these claims . however , the long-term growth of these revenues will also be affected by the scope of the issues pre-approved by cms . our claim recovery volume related to pip providers in our region has been limited and we estimate that pip providers in our region account for approximately 20 % of medicare claims . pip providers are reimbursed for medicare claims through different processes than other healthcare providers , and technology adjustments were necessary to permit automated processing of claims involving pip providers . prior to april 2012 , we were not permitted to audit medicare claims for these pip providers and the improper payments to pip providers that we identified beginning in april 2012 were not processed by cms until january 2013 , when a small portion of such payments began to be processed manually . in june 2013 , cms implemented the system adjustment necessary for automated processing of claims , which allowed us to recognize approximately $ 12 million in revenues for 2013. our audit activities under the rac contract are currently set to expire in june 2014. in planning for the award of the next rac contracts , cms has been developing transition procedures that will affect our operations during the transition period . in this regard , cms permitted us to submit medical records requests until february 21 , 2014. in addition , cms has placed restrictions on the types of claims and the amount of certain medical records requests that we may make during the transition period , and cms has maintained a long-running prohibition on requesting medical records from pip providers other than for a three week period that began in late october 2013. we expect that these transition rules will have an adverse effect on our revenues during 2014. in addition , cms has implemented rules that , during the period october 1 through december 31 , 2013 , we and the other rac contractors will not be able to review and audit ( i ) whether inpatient care delivered to patients with hospital stays lasting less than two midnights was medically necessary and therefore deserving of the higher reimbursement levels under medicare part a or ( ii ) whether inpatient treatment was medically necessary for admissions spanning more than two midnights . in connection with these restrictions , hospitals can not bill cms for outpatient services on hospital stays lasting less than two midnights during such period .
| million , or 20 % , compared to other operating expense of $ 71.3 million for the year ended december 31 , 2012. this increase is primarily due to increased costs related to our use of subcontractors and consultants , production related expenses associated with data processing , retrieval of medical records , printing and mailing services , and higher spending on professional services related to operating as a public company . income from operations as a result of the factors described above , income from operations was $ 72.9 million for the year ended december 31 , 2013 , compared to $ 55.8 million for the year ended december 31 , 2012 , representing an increase of $ 17.1 million , or 31 % . debt extinguishment costs we did not incur any debt extinguishment costs for the year ended december 31 , 2013. in march 2012 , we incurred debt extinguishment costs of $ 3.7 million in connection with a new credit facility . interest expense interest expense was $ 11.6 million for the year ended december 31 , 2013 compared to $ 12.4 million for the year ended december 31 , 2012 , representing a decrease of 7 % . interest expense decreased due to repayments of principal under our credit agreement , resulting in a lower outstanding balance during 2013. income taxes income tax expense was $ 25.0 million for the year ended december 31 , 2013 compared to $ 16.8 million for the year ended december 31 , 2012 , representing an increase of 48.7 % consistent with the increase in income before provision for income taxes . our effective income tax rate decreased to 40.7 % for the year ended december 31 , 2013 from 42.2 % for the year ended december 31 , 2012. the decrease in the effective tax rate is the result of approximately 0.7 % decrease due to changes in the state tax rate , and approximately 1 % decrease due to income tax benefits associated with
| 14,288 |
in cases when the grant money is not received until expenses for the program are incurred , we accrue the revenue based on the costs incurred for the programs associated with the grant . in the future , we may generate revenue from a combination of product sales , government or other third-party grants , marketing and distribution arrangements and other collaborations , strategic alliances and licensing arrangements or a combination of these approaches . we expect that any revenue we generate will fluctuate as a result of the timing and amount of license fees , milestone and other payments , and the amount and timing of payments that we receive upon the sale of our products , to the extent any are successfully commercialized . if we fail to complete the development of our product candidates in a timely manner or obtain regulatory approval of them , our ability to generate future revenue , and our results of operations and financial position , would be materially adversely affected . our policy is to recognize revenue in accordance with asc 605. see the discussion of “ collaboration agreements ” contained within note 2 to the audited financial statements contained within item 8 of this annual report . cancer research institute of texas ( cprit ) during 2011 , we entered into a grant agreement with cprit for approximately $ 5.7 million covering a three-year period from july 1 , 2011 through june 30 , 2014. the grant initially allowed us to receive funds in advance of costs and allowable expenses being incurred . on a quarterly basis , we were required to submit a financial reporting package outlining the nature and extent of reimbursed costs under the grant . at the end of each period , any excess funds received in advance , or paid prior to reimbursement resulted in a deferred liability or grant receivable . the cprit grant expired as of june 30 , 2014. as discussed above , we have received notice of an additional $ 16.9 million grant from cprit , the terms of which are in negotiation , to support additional studies of bpx-501 . nih grant during 2013 , we entered into a grant agreement with the nih . the grant is a modular five year grant with funds being awarded each year based on the progress of the program being funded . grant money is not received until expenses for the program are incurred . we have been awarded approximately $ 1.4 million to date , of which $ 1.2 million has been received . we accrue the revenue based on the costs incurred for the programs associated with the grant . research and development expenses to date , our research and development expenses have related primarily to the development of our cid platform and the identification and development of our product candidates . research and development expenses consist of expenses incurred in performing research and development activities , including compensation , share-based compensation expense and benefits for research and development employees and consultants , facilities expenses , overhead expenses , cost of laboratory supplies , manufacturing expenses , fees paid to third parties and other outside expenses . research and development costs are expensed as incurred . clinical trial and other development costs incurred by third parties are expensed as the contracted work is performed . we accrue for costs incurred as the services are being provided by monitoring the status of the clinical trial or project and the invoices received from our external service providers . we adjust our accrual as actual costs become known . where contingent milestone payments are due to third parties under research and development arrangements , the milestone payment obligations are expensed when the milestone events are achieved . see the discussion of “ research and development ” expenses contained within note 2 to the audited financial statements contained within item 8 of this annual report . 61 we utilize our research and development personnel and infrastructure resources across several programs , and many of our costs are not specifically attributable to a single program . accordingly , we can not state precisely our total costs incurred on a program-by-program basis . research and development activities are central to our business model . product candidates in later stages of clinical development generally have higher development costs than those in earlier stages of clinical development , primarily due to the increased size and duration of later-stage clinical trials . however , it is difficult to determine with certainty the duration and completion costs of our current or future preclinical programs and clinical trials of our product candidates . the duration , costs and timing of clinical trials and development of our product candidates will depend on a variety of factors that include , but are not limited to , the following : per patient clinical trial costs ; the number of patients that participate in the clinical trials ; the number of sites included in the clinical trials ; the process of collection , differentiation , selection and expansion of immune cells for our cellular immuno-therapies ; the countries in which the clinical trials are conducted ; the outcomes of our clinical trials ; the length of time required to enroll eligible patients ; the number of doses that patients receive ; the drop-out or discontinuation rates of patients ; potential additional safety monitoring or other studies requested by regulatory agencies ; the duration of patient follow-up ; and the efficacy and safety profile of the product candidates . in addition , the probability of success for each product candidate will depend on numerous factors , including competition , manufacturing capability and commercial viability . we will determine which programs to pursue and how much to fund each program in response to the ongoing scientific and clinical success of each product candidate , as well as an assessment of each product candidate 's commercial potential . story_separator_special_tag we expect our research and development expenses to increase over the next several years as we progress our business plan which includes conducting ongoing and new clinical trials for bpx-501 , bpx-601 and bpx-701 and advancing additional product candidates into clinical development , manufacturing clinical trial and preclinical study materials , expanding our research and development and process development and optimization efforts , seeking regulatory approvals for our product candidates that successfully complete clinical trials , and hiring additional personnel to support our research and development efforts . the following table indicates our research and development expense by project/category for the periods indicated : replace_table_token_4_th 62 general and administrative expenses general and administrative expenses consist primarily of salaries and other related costs , including share-based compensation , for personnel in executive , finance , accounting , business development , legal and human resources functions . other significant costs include facility costs not otherwise included in research and development expenses , legal fees relating to patent and corporate matters , insurance costs and professional fees for consultancy , accounting , audit and investor relations . we anticipate that our general and administrative expenses will increase in the future to support our continued research and development activities , and the potential commercialization of our product candidates . additionally , if and when we believe a regulatory approval for the first product candidate appears likely , we anticipate an increase in payroll and related expenses as a result of our preparation for commercial operations , especially as it relates to the sales and marketing of our product candidates . income taxes we did not recognize any income tax expense for the years ended december 31 , 2016 , 2015 and 2014. other income ( expense ) other income ( expense ) , net consists of interest income , interest expense , loss on the disposition of fixed assets and the change in the fair value of a warrant liability . story_separator_special_tag style= '' font-family : inherit ; font-size:10pt ; '' > and $ 12.1 million for the years ended december 31 , 2015 and 2014 , respectively . the $ 21.5 million increase in research and development expenses for the twelve months ended december 31 , 2015 , was due to an increase in costs related to bpx-501 of $ 7.6 million , primarily due to the increase in clinical and manufacturing costs as a result of increased patient enrollment in our clinical trials . the increase in research and development expenses was also due to an increase of $ 2.0 million in costs related to our product candidates , bpx-701 and bpx-601 , primarily related to ind enabling activities ; and an increase of $ 11.9 million in general research and development costs comprised of $ 6.3 million in personnel costs , $ 2.7 million in allocated overhead costs and $ 2.9 million in other costs . reclassifications certain research and development indirect costs , including facilities and overhead , were previously included in general and administrative costs . these research and development indirect costs are included in research and development expense in the year ended december 31 , 2015. the amounts for the year ended december 31 , 2014 have been reclassified to conform to the current year presentation . the effect of the reclassification of the results for the twelve months ended december 31 , 2014 was to increase research and development expense and reduce general and administrative expense by $ 1.1 million with no change in total operating expense or net loss . license fees license fees were $ 3.2 million for the year ended december 31 , 2015 , compared to no license fees in 2014. the increase in license fees was primarily due to our new license agreement with agensys , as consideration for the rights granted to us under the agreement , whereby we paid agensys a non-refundable upfront fee of $ 3.0 million . for more information , see note 12 to the financial statements included herein . ariad license restructuring on october 3 , 2014 , we entered into an omnibus amendment agreement with ariad , under which we agreed to make payments of $ 50.0 million in exchange for an expansion of the license field , the termination of all obligations to make milestone and royalty payments to ariad in the future and the return of 677,463 shares of our common stock that ariad held . in connection with the amendment , we made an initial payment of $ 15.0 million and issued a promissory note to ariad for a principal amount of $ 35.0 million . in december 2014 following our ipo , we paid the remaining $ 35.0 million and ariad returned all 677,463 shares of our common stock that ariad held . the license transaction was valued on the date of the transaction and the note was discounted to fair market value at a 10 % rate . this resulted in license expense of $ 43.2 million , repurchase of our common stock for $ 5.1 million , and interest expense of $ 1.7 million . we have recorded the returned shares of common stock as treasury stock . for more information , see note 11 to the financial statements included herein . general and administrative expenses general and administrative expenses were $ 12.7 million and $ 4.3 million for the years ended december 31 , 2015 and 2014 , respectively . the increase of $ 8.4 million in 2015 was due to our overall growth and public company related costs , including an increase in personnel , legal and accounting expenses and costs related to facilities , insurance and travel . other income ( expense ) other income ( expense ) was $ 0.6 million and $ ( 26.1 ) million for the years ended december 31 , 2015 and 2014 , respectively .
| license fees license fees were $ 0.6 million and $ 3.2 million for the years ended december 31 , 2016 and 2015 , respectively . the 2015 license fees included the license agreement with agensys , as consideration for the rights granted to us under the agreement , whereby we paid agensys a non-refundable upfront fee of $ 3.0 million . for more information , see notes 11 and 12 to the financial statements included herein for additional information about ariad and our license fees . if we are successful in our development activities under our existing and future licenses , we expect that our license fee expenses will increase in future years . general and administrative expenses general and administrative expenses were $ 16.9 million and $ 12.7 million for the years ended december 31 , 2016 and 2015 , respectively . the increase of $ 4.2 million in 2016 was due to our overall growth and public company related costs . share-based compensation expense increased approximately $ 1.8 million , and other personnel-related expenses increased approximately $ 1.0 million due to increases in personnel . other costs , including legal and accounting expenses and costs related to facilities , insurance and travel increased approximately $ 1.4 million . other income ( expense ) other income ( expense ) was $ ( 0.9 ) million and $ 0.6 million for the years ended december 31 , 2016 and 2015 , respectively . the $ 1.5 million of additional expense in 2016 was primarily due to $ 1.8 million of interest expense related to the debt financing . comparison of the years ended december 31 , 2015 and 2014 the following table sets forth our results of operations for the years ended december 31 , 2015 and 2014 : replace_table_token_6_th grant revenues grant revenues were $ 0.3 million and $ 1.8 million for the years ended december 31 , 2015 and 2014 , respectively . the decrease in grant revenues in 2014
| 14,289 |
depending on our effective tax rate and our future dividend rate , if any , our future cash flows and financial condition could be positively or adversely affected compared to our historical cash flows and financial condition . furthermore , deferred tax assets and liabilities will be recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of our existing assets and liabilities and their respective tax bases . deferred tax assets and liabilities are measured using tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled . the effect on deferred tax assets and liabilities of the change in tax rates resulting from becoming a c corporation were recognized in income in the quarter the change took place . this difference between the financial statement carrying amounts of assets and liabilities and their respective tax bases was recorded as a net deferred tax asset of $ 1.1 million ( net of $ 13,000 uncertain tax liability ) on our consolidated balance sheet as of december 31 , 2019 . 35 pro forma income tax expense and net income as a result of our status as an s corporation , we had no u.s. federal income tax expense for the year ended december 31 , 2017. further , we do not have u.s. federal income tax expense for the full year ended december 31 , 2018 , but rather only for the short year after conversion to c corporation status ( as discussed earlier ) . the pro forma impact of being taxed as a c corporation is illustrated in the following table : replace_table_token_7_th ( 1 ) a portion of our net income in each of these periods was derived from nontaxable investment income and other nondeductible expenses . ( 2 ) based on a statutory federal income tax rate of 21 % , 21 % , and 35 % for the years ended december 31 , 2019 , 2018 and 2017 , respectively , plus the applicable statutory state income tax rate for each of the respective periods . state income tax expense would have been approximately : - $ 1.2 million for the year ended december 31 , 2019 with an effective state tax rate of 4.4 % - $ 1.3 million for the year ended december 31 , 2018 with an effective state tax rate of 4.9 % - $ 1.3 million for the year ended december 31 , 2017 with an effective state tax rate of 5.4 % story_separator_special_tag the major components of our noninterest income for the years ended december 31 , 2019 , 2018 and 2017 : replace_table_token_10_th 39 noninterest expense noninterest expense for the year ended december 31 , 2019 was $ 28.4 compared to $ 15.0 million for the year ended december 31 , 2018 , an increase of $ 13.5 million or 90.0 % . noninterest expense for the year ended december 31 , 2018 was $ 15.0 compared to $ 14.5 million for the year ended december 31 , 2017 , an increase of $ 434,000 , or 3.0 % . the following table sets forth the major components of our noninterest expense for the years ended december 31 , 2019 , 2018 and 2017 : replace_table_token_11_th for the year ended december 31 , 2019 compared to the year ended december 31 , 2018 : - salaries and employee benefits expense was $ 21.3 million compared to $ 8.1 million , an increase of $ 13.2 million , or 162.1 % . the increase in 2019 was attributable to our one-time non-cash executive stock transaction . - occupancy expense was $ 1.7 million compared to $ 1.1 million , an increase of $ 572,000 , or 51.8 % . the increase in 2019 was primarily due to the renovation of our headquarters and the expansion into two new markets . - accounting , legal and professional fees were $ 757,000 compared to $ 305,000 , an increase of $ 452,000 , or 148.2 % . the increase was primarily due to 2019 being our first full year as a public company . for the year ended december 31 , 2018 compared to the year ended december 31 , 2017 : - salaries and employee benefits expense was $ 8.1 million compared to $ 7.6 million , an increase of $ 502,000 , or 6.6 % . the increase in 2018 was attributable to higher salaries and incentive compensation expense . - furniture and equipment expense was $ 684,000 compared to $ 831,000 , a decrease of $ 147,000 , or 17.7 % . the decrease in 2018 was primarily due to lower bank vehicle expenses compared to 2017 . - regulatory assessments totaled $ 542,000 compared to $ 450,000 , an increase of $ 92,000 , or 20.4 % . the change came primarily from fdic assessments that totaled $ 440,000 in 2018 compared to $ 394,000 in 2017 , an increase of $ 46,000 , or 11.7 % . the increase is due to a higher assessment associated with an increase in deposits accounts due to organic growth and expansion into the texas market . - travel , lodging and entertainment expense was $ 699,000 compared to $ 1.0 million , a decrease of $ 342,000 , or 32.9 % . the decrease in 2018 was primarily due to lower aircraft expenses as the aircraft was sold at the end of the third quarter of 2018 . story_separator_special_tag 40 financial condition the following discussion of our financial condition compares december 31 , 2019 , 2018 , and 2017. total assets total assets increased $ 95.9 million , or 12.4 % , to $ 886.4 million as of december 31 , 2019 , as compared to $ 770.5 million as of december 31 , 2018 and $ 703.6 million as of december 31 , 2017. the increasing trend in total assets is primarily attributable to strong organic loan and retail deposit growth within the oklahoma city market and expansion into the dallas/fort worth metropolitan area . loan portfolio our loans represent the largest portion of our earning assets . the quality and diversification of the loan portfolio is an important consideration when reviewing our financial condition . as of december 31 , 2019 , 2018 and 2017 , our gross loans were $ 708.7 million , $ 601.9 million and $ 564.6 million , respectively . the following table presents the balance and associated percentage of each major category in our loan portfolio as of december 31 , 2019 , december 31 , 2018 and december 31 , 2017 : replace_table_token_12_th we have established internal concentration limits in the loan portfolio for cre loans , hospitality loans , energy loans , and construction loans , among others . all loan types are within our established limits . we use underwriting guidelines to assess each borrower 's historical cash flow to determine debt service , and we further stress test the debt service under higher interest rate scenarios . financial and performance covenants are used in commercial lending to allow us to react to a borrower 's deteriorating financial condition , should that occur . 41 the following tables show the contractual maturities of our gross loans as of the periods below : replace_table_token_13_th replace_table_token_14_th 42 replace_table_token_15_th allowance for loan and lease losses the allowance is based on management 's estimate of probable losses inherent in the loan portfolio . in the opinion of management , the allowance is adequate to absorb estimated losses in the portfolio as of each balance sheet date . while management uses available information to analyze losses on loans , future additions to the allowance may be necessary based on changes in economic conditions . in addition , various regulatory agencies , as an integral part of their examination process , periodically review the company 's allowance . in analyzing the adequacy of the allowance , a comprehensive loan grading system to determine risk potential in loans is utilized together with the results of internal credit reviews . to determine the adequacy of the allowance , the loan portfolio is broken into segments based on loan type . historical loss experience factors by segment , adjusted for changes in trends and conditions , are used to determine an indicated allowance for each portfolio segment . these factors are evaluated and updated based on the composition of the specific loan segment . other considerations include volumes and trends of delinquencies , nonaccrual loans , levels of bankruptcies , criticized and classified loan trends , expected losses on real estate secured loans , new credit products and policies , economic conditions , concentrations of credit risk and the experience and abilities of our lending personnel . in addition to the segment evaluations , impaired loans with a balance of $ 250,000 or more are individually evaluated based on facts and circumstances of the loan to determine if a specific allowance amount may be necessary . specific allowances may also be established for loans whose outstanding balances are below the $ 250,000 threshold when it is determined that the risk associated with the loan differs significantly from the risk factor amounts established for its loan segment . the allowance was $ 7.8 million at december 31 , 2019 , $ 7.8 million at december 31 , 2018 and $ 7.7 million at december 31 , 2017. the increasing trend was related to , and in conjunction with , loan growth . 43 the following table provides an analysis of the activity in our allowance for the periods indicated : replace_table_token_16_th while the entire allowance is available to absorb losses from any and all loans , the following table represents management 's allocation of the allowance by loan category , and the percentage of allowance in each category , for the periods indicated : replace_table_token_17_th nonperforming assets loans are considered delinquent when principal or interest payments are past due 30 days or more . delinquent loans may remain on accrual status between 30 days and 90 days past due . loans on which the accrual of interest has been discontinued are designated as nonaccrual loans . typically , the accrual of interest on loans is discontinued when principal or interest payments are past due 90 days or when , in the opinion of management , there is a reasonable doubt as to collectability of the obligation . when loans are placed on nonaccrual status , all interest previously accrued but not collected is reversed against current period interest income . income on a nonaccrual loan is subsequently recognized only to the extent that cash is received and the loan 's principal balance is deemed collectible . loans are restored to accrual status when loans become well-secured and management believes full collectability of principal and interest is probable . 44 a loan is considered impaired when it is probable that we will be unable to collect all amounts due according to the contractual terms of the loan agreement . impaired loans include loans on nonaccrual status and loans modified in a troubled debt restructuring , or tdr . income from a loan on nonaccrual status is recognized to the extent cash is received and when the loan 's principal balance is deemed collectible .
| 36 results of operations years ended december 31 , 2019 , december 31 , 2018 , and december 31 , 2017 net interest income and net interest margin the following table presents , for the periods indicated , information about : ( i ) weighted average balances , the total dollar amount of interest income from interest-earning assets , and the resultant average yields ; ( ii ) average balances , the total dollar amount of interest expense on interest-bearing liabilities , and the resultant average rates ; ( iii ) net interest income ; and ( iv ) the net interest margin . replace_table_token_8_th ( 1 ) includes income and weighted average balances for fed funds sold , interest-earning deposits in banks and other miscellaneous interest-earning assets . ( 2 ) includes income and weighted average balances for fhlb and frb stock . ( 3 ) average loan balances include monthly average nonaccrual loans of $ 2.1 million , $ 991,000 and $ 2.6 million for the years ended december 31 , 2019 , 2018 and 2017 , respectively . ( 4 ) net interest spread is the average yield on interest-earning assets minus the average rate on interest-bearing liabilities . 37 we continued to experience strong asset growth for the year ended december 31 , 2019 compared to the year ended december 31 , 2018 : - total interest income on loans increased $ 3.9 million , or 8.9 % , to $ 48.2 million which was attributable to a $ 52.5 million increase in the average balance of loans to $ 636.3 million during the year ended 2019 as compared with the average balance of $ 583.8 million for the year ended 2018 ; - loan fees totaled $ 4.4 million , a decrease of $ 678,000 or 13.2 % which was attributable to nonrecurring loan fee income earned during the year ended 2018 as compared to 2019 ; - yields on our interest-earning assets totaled 6.55 % , an increase of 7 basis points ; and - net interest margin for the year ended 2019 and 2018 was 5.35 % and 5.49 % , respectively . for the year ended december 31 , 2018 compared to the year ended december 31 , 2017 : - total interest income on loans increased
| 14,290 |
general and administrative replace_table_token_17_th general and administrative expenses include compensation , benefits , and other headcount-related expenses associated with finance , legal , corporate governance , and other administrative headcount . they also include accounting , legal , and other professional consulting and administrative fees . the general and administrative headcount includes employees in human resources , information technology , and corporate services departments whose costs are allocated to our other functional departments . 32 2017 compared to 2016 the increase was primarily due to a $ 5.1 million increase in compensation and benefits due to higher stock-based compensation expense primarily from the increased value of our annual periodic equity awards and increased facilities costs due to our expansion in poland and india . 2016 compared to 2015 the increase was primarily due to a $ 4.9 million increase in compensation and benefits expenses associated with higher headcount , of which $ 2.2 million was due to higher stock-based compensation expense primarily from the increased value of our annual periodic equity awards . the increase was also due to the fact that 2016 did not include a $ 1.8 million benefit from the settlement of our indemnification claims against the former antenna , inc. shareholders and a $ 1.6 million benefit from the settlement of certain indirect tax liabilities , which reduced our general and administrative expense in 2015. stock-based compensation we recognize stock-based compensation expense associated with equity awards in our consolidated statements of operations based on the fair value of these awards at the date of grant using the accelerated recognition method , while treating each vesting tranche as if it were an individual grant . replace_table_token_18_th the increases were primarily due to the increased value of our annual periodic equity awards granted in march 2017 and 2016. these awards generally have a five-year vesting schedule . see note 14 stock-based compensation in item 8 of this annual report for further information . amortization of intangibles replace_table_token_19_th 2017 compared to 2016 the decrease was primarily due to the full amortization of certain intangibles acquired through past acquisitions . 33 2016 compared to 2015 the increase was primarily due to the amortization associated with the $ 24.3 million of intangible assets acquired from openspan in april 2016. non-operating income and expenses , net replace_table_token_20_th in may 2017 , we discontinued our forward contracts program ; however , we continue to periodically evaluate our foreign exchange exposures and may re-initiate this program if deemed necessary . we have historically used foreign currency forward contracts ( forward contracts ) to hedge our exposure to fluctuations in foreign currency exchange rates associated with our foreign currency denominated cash , accounts receivable , and intercompany receivables and payables held primarily by our u.s. parent company and its united kingdom ( u.k. ) subsidiary . the total change in the fair value of our foreign currency forward contracts recorded in other expense , net , during 2017 , 2016 , and 2015 was a gain of $ 0.3 million , a loss of $ 5.6 million , and a loss of $ 1 million , respectively . the gain on forward contracts in 2017 was offset by $ 1.7 million in professional fees for capital advisory services . provision for income taxes replace_table_token_21_th the provision for income taxes represents current and future amounts owed for federal , state , and foreign taxes . 2017 compared to 2016 the decrease in our effective income tax rate was primarily due to a $ 24.5 million increase in excess tax benefits on share-based payments recognized in the provision for income taxes , partially offset by an additional expense of $ 20.4 million recorded in 2017 to re-measure our deferred income taxes to the new u.s. statutory tax rate as a result of the tax reform act . we have estimated the impact of the tax reform act as part of our 2017 income tax provision ; however , the ultimate impact may differ from these provisional amounts , possibly materially , due to , among other things , additional analysis , changes in interpretations and assumptions the we have made , additional regulatory guidance that may be issued , and actions we may undertake as a result of the tax reform act . the accounting is expected to be complete during 2018. see note 15 income taxes in item 8 of this annual report for more information . as of december 31 , 2017 , we had approximately $ 19.2 million of total unrecognized tax benefits , which would decrease our effective tax rate if recognized . due to the expiration of the applicable statute of limitations , we expect that the change in the unrecognized benefits in the next twelve months will be approximately $ 0.5 million , which will reduce our effective tax rate if recognized . 34 2016 compared to 2015 the decrease in the effective income tax rate for 2016 compared to 2015 was primarily due to the impact of the adoption of asu 2016-09 , which decreased income tax expense by $ 6.7 million . the adoption of asu 2016-09 significantly impacts both the timing and method of how the tax effects of share-based awards are recognized . asu 2016-09 requires the income tax effects to be recognized in the provision for income taxes when the awards vest or are settled whereas previously such income tax benefits were recognized as part of additional paid-in capital and could not be recognized until they were realized through a reduction in income taxes payable . as of december 31 , 2016 and 2015 , we had $ 22.7 million and $ 24 million , respectively , of total unrecognized tax benefits , which would decrease our effective tax rate if recognized . liquidity and capital resources replace_table_token_22_th replace_table_token_23_th we believe that our current cash , cash equivalents , and cash flow from operations will be sufficient to fund our operations and our share repurchase program for at least the next 12 months . story_separator_special_tag if it became necessary to repatriate foreign funds , we may be required to pay u.s. state and local taxes as well as foreign taxes upon repatriation . due to the complexity of the income tax laws and the effects of the tax reform act , it is impracticable to estimate the amount of u.s state , u.s. local , and foreign tax we would have to pay . see risk factorsif it became necessary to repatriate any of our foreign cash balances to the united states , we may be subject to increased income taxes , other restrictions , and limitations in item 1a of this annual report . cash provided by operating activities the primary drivers during 2017 were net income of $ 32.9 million and $ 23.8 million from trade accounts receivable , largely due to increased cash collections and the timing of billings . the primary driver during 2016 was net income of $ 27.0 million . the primary drivers during 2015 were net income of $ 36.3 million and a $ 17.7 million increase in deferred revenue primarily resulting from the difference in timing of billings and revenue recognition . 35 future cash receipts from committed license and cloud arrangements as of december 31 , 2017 , none of the amounts shown in the table below had been billed and no revenue had been recognized . the below amounts for 2018 and subsequent periods may not be recognized in the periods shown below as a result of the adoption of the new revenue recognition standard , asc 606. see note 2 . significant accounting polices in item 8 of this annual report for additional information . replace_table_token_24_th ( 1 ) these amounts are for perpetual licenses with extended payment terms and or additional rights of use . total contractual future cash receipts due from our existing license agreements was approximately $ 466 million as of december 31 , 2016 and $ 356.4 million as of december 31 , 2015. cash used in investing activities during 2017 , we purchased $ 27.7 million of investments , primarily marketable debt securities , and made investments of $ 13.7 million in property and equipment , partially offset by proceeds received from maturities of investments , including called investment securities of $ 27 million . during 2016 , we acquired openspan for $ 48.8 million , net of cash acquired , and invested $ 19.1 million primarily in internally developed software and leasehold improvements at our corporate headquarters and our office in hyderabad , india , partially offset by proceeds received from the sales of investments of $ 62.2 million . during 2015 , we purchased investments for $ 75.7 million , partially offset by the proceeds received from sales , maturities and called investments of $ 43.9 million . in 2015 , we paid additional cash consideration of $ 1.6 million to the selling shareholders of companies acquired in 2014 based on the achievement of certain performance milestones . we also invested $ 11 million primarily in leasehold improvements for the build-out of our office in hyderabad , india and purchases of computer equipment for our u.s. and india offices . cash used in financing activities net cash used in financing activities during 2017 , 2016 , and 2015 was primarily for repurchases of our common stock and the payment of our quarterly dividend . since 2004 , our board of directors has approved annual stock repurchase programs that have authorized the repurchase of up to $ 195 million of our common stock . on may 30 , 2017 , we announced that our board of directors extended the expiration date of the current stock repurchase program to june 30 , 2018 ( the current program ) . as of december 31 , 2017 , $ 153.5 million had been repurchased , $ 34.9 million remained available for repurchase , and $ 6.4 million had expired . purchases under these programs have been made on the open market . 36 common stock repurchases the following table is a summary of our repurchase activity : replace_table_token_25_th ( 1 ) represents activity under our publicly announced share repurchase program . during 2017 , 2016 , and 2015 , instead of receiving cash from the equity holders , we withheld shares with a value of $ 28.1 million , $ 18.1 million , and $ 11.9 million , respectively , for the exercise price of options . these amounts have been excluded from the table above . dividends replace_table_token_26_th for 2017 , 2016 , and 2015 , we paid cash dividends of $ 9.3 million , $ 9.2 million , and $ 9.2 million , respectively . it is our current intention to pay a quarterly cash dividend of $ 0.03 per share , however , the board of directors may terminate or modify this dividend program at any time without prior notice . contractual obligations as of december 31 , 2017 , we had purchase obligations for client support and sales and marketing programs , and payments under operating leases . our lease arrangement for our office headquarters expires in 2023 , subject to our option to extend for two additional five-year periods . we also lease space for our other offices under noncancellable operating leases that expire at various dates through 2022. replace_table_token_27_th ( 1 ) represents the fixed or minimum amounts due under purchase obligations for client support and sales and marketing programs . ( 2 ) represents the maximum funding that would be required under existing investment agreements with privately-held companies . ( 3 ) as of december 31 , 2017 , our recorded liability for uncertain tax positions was approximately $ 4.7 million . we are unable to reasonably estimate the timing of the cash outflow due to uncertainties in the timing of the effective settlement of tax positions .
| 2016 compared to 2015 the decrease in perpetual license revenue was primarily due to the lower average value of perpetual license arrangements executed during 2016 compared to 2015 and the acceleration of the recognition of $ 4.6 million in revenue in the fourth quarter of 2015 from an existing license arrangement which was being recognized ratably . the increase in term license revenue was primarily due to a term license arrangement greater than $ 10 million for which the license fee for the three year license term was paid and recognized in full in the first quarter of 2016 as well as the increase in term license arrangements executed during 2016 and 2015 , reflecting the shift towards recurring revenue streams . maintenance replace_table_token_12_th the increases in maintenance revenue were primarily due to the growth in the aggregate value of the installed base of our software and continued renewal rates in excess of 90 % . services replace_table_token_13_th consulting revenue represents revenue primarily from new license implementations . our consulting revenue may fluctuate in future periods depending on the mix of new implementation projects we perform as compared to those performed by our enabled clients or led by our partners . 2017 compared to 2016 the increase in consulting revenue was primarily due to increased billable hours driven by a large project which began in the second half of 2016. the increase in cloud revenue was primarily due to growth of our cloud client base . 2016 compared to 2015 the increase in consulting revenue was due to higher realization rates and increased billable hours primarily related to two large projects in 2016 , compared to unusually low demand in europe in the first half of 2015. the increase in cloud revenue was primarily due to growth of our cloud client base . 30 gross profit replace_table_token_14_th 2017 compared to 2016 the increase in total gross profit was primarily due to increases in maintenance and services revenue . the increase in services gross profit percent
| 14,291 |
for example , virtually all our u.s. inventory , excluding our imaging products , is now stored at this facility and related fulfillment logistics are managed there . cca segment products manufactured at this facility are transferred at cost and are not recorded as revenue for our ovp segment . we view ovp reported revenue as revenue primarily to cover the overhead costs of the facility and to generate incremental cash flow to fund our cca segment . our ovp segment includes private label vaccine and pharmaceutical production , primarily for cattle but also for other animals such as small mammals . all ovp products are sold by third parties under third-party labels . historically , a significant portion of our ovp segment 's revenue has been generated from the sale of certain bovine vaccines , which have been sold primarily under the titanium® and masterguard® brands . we have an agreement with eli lilly and its affiliates operating through elanco for the production of these vaccines . our ovp segment also produces vaccines and pharmaceuticals for other third parties . critical accounting policies and estimates our discussion and analysis of our financial condition and results of operations is based upon the consolidated financial statements , which have been prepared in accordance with u.s. generally accepted accounting principles ( `` gaap '' ) . the preparation of financial statements in conformity with gaap requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities , the - 32 - disclosure of contingent assets and liabilities as of the date of the financial statements , and the reported amounts of revenue and expense during the periods . these estimates are based on historical experience and various other assumptions that we believe to be reasonable under the circumstances . we have identified those critical accounting policies used in reporting our financial position and results of operations based upon a consideration of those accounting policies that involve the most complex or subjective decisions or assessment . we consider the following to be our critical accounting policies . revenue recognition we generate our revenue through the sale of products , as well as through licensing of technology product rights , royalties and sponsored research and development . our policy is to recognize revenue when the applicable revenue recognition criteria have been met , which generally include the following : persuasive evidence of an arrangement exists ; delivery has occurred or services rendered ; price is fixed or determinable ; and collectability is reasonably assured . revenue from the sale of products is recognized after both the goods are shipped to the customer and acceptance has been received , if required , with an appropriate provision for estimated returns and allowances . we do not permit general returns of products sold . certain of our products have expiration dates . our policy is to exchange certain outdated , expired product with the same product . we record an accrual for the estimated cost of replacing the expired product expected to be returned in the future , based on our historical experience , adjusted for any known factors that reasonably could be expected to change historical patterns , such as regulatory actions which allow us to extend the shelf lives of our products . revenue from both direct sales to veterinarians and sales to independent third-party distributors are generally recognized when goods are shipped . our products are shipped complete and ready to use by the customer . the terms of the customer arrangements generally pass title and risk of ownership to the customer at the time of shipment . certain customer arrangements provide for acceptance provisions . revenue for these arrangements is not recognized until the acceptance has been received or the acceptance period has lapsed . we reduce our revenue by the estimated cost of any rebates , allowances or similar programs , which are used as promotional programs . recording revenue from the sale of products involves the use of estimates and management judgment . we must make a determination at the time of sale whether the customer has the ability to make payments in accordance with arrangements . while we do utilize past payment history , and , to the extent available for new customers , public credit information in making our assessment , the determination of whether collectability is reasonably assured is ultimately a judgment decision that must be made by management . we must also make estimates regarding our future obligation relating to returns , rebates , allowances and similar other programs . license revenue under arrangements to sell or license product rights or technology rights is recognized as obligations under the agreement are satisfied , which generally occurs over a period of time . generally , licensing revenue is deferred and recognized over the estimated life of the related agreements , products , patents or technology . nonrefundable licensing fees , marketing rights and milestone payments received under contractual arrangements are deferred and recognized over the remaining contractual term using the straight-line method . recording revenue from license arrangements involves the use of estimates . the primary estimate made by management is determining the useful life of the related agreement , product , patent or technology . - 33 - we evaluate all of our licensing arrangements by estimating the useful life of either the product or the technology , the length of the agreement or the legal patent life and defer the revenue for recognition over the appropriate period . we may enter into arrangements that include multiple elements . such arrangements may include agreements allowing for the usage of an instrument and a given level of consumables for one monthly payment . in these situations we must determine whether the various elements meet the criteria to be accounted for as separate elements . story_separator_special_tag if the elements can not be separated , revenue is recognized once revenue recognition criteria for the entire arrangement have been met or over the period that the company 's obligations to the customer are fulfilled , as appropriate . if the elements are determined to be separable , the revenue is allocated to the separate elements based on relative fair value and recognized separately for each element when the applicable revenue recognition criteria have been met . in accounting for these multiple element arrangements , we must make determinations about whether elements can be accounted for separately and make estimates regarding their relative fair values . allowance for doubtful accounts we maintain an allowance for doubtful accounts receivable based on client-specific allowances , as well as a general allowance . specific allowances are maintained for clients which are determined to have a high degree of collectability risk based on such factors , among others , as : ( i ) the aging of the accounts receivable balance ; ( ii ) the client 's past payment history ; ( iii ) a deterioration in the client 's financial condition , evidenced by weak financial condition and or continued poor operating results , reduced credit ratings , and or a bankruptcy filing . in addition to the specific allowance , the company maintains a general allowance for credit risk in its accounts receivable which is not covered by a specific allowance . the general allowance is established based on such factors , among others , as : ( i ) the total balance of the outstanding accounts receivable , including considerations of the aging categories of those accounts receivable ; ( ii ) past history of uncollectable accounts receivable write-offs ; and ( iii ) the overall creditworthiness of the client base . a considerable amount of judgment is required in assessing the realizability of accounts receivable . should any of the factors considered in determining the adequacy of the overall allowance change , an adjustment to the provision for doubtful accounts receivable may be necessary . inventories inventories are stated at the lower of cost or market value , cost being determined on the first-in , first-out method . inventories are written down if the estimated net realizable value of an inventory item is less than its recorded value . we review the carrying cost of our inventories by product each quarter to determine the adequacy of our reserves for excess/obsolete inventory . in accounting for inventories we must make estimates regarding the estimated net realizable value of our inventory . this estimate is based , in part , on our forecasts of future sales and shelf life of products . - 34 - deferred tax assets – valuation allowance our deferred tax assets , such as a domestic net operating loss ( `` nol '' ) , are reduced by an offsetting valuation allowance based on an assessment of available evidence if we are unable to conclude that it is more likely than not that some or all of the related deferred tax assets will be realized . if we are able to conclude it is more likely than not that we will realize a future benefit from a deferred tax asset , we will reduce the related valuation allowance by an amount equal to the estimated quantity of income taxes we would pay in cash if we were not to utilize the deferred tax asset in the future . the first time this occurs in a given jurisdiction , it will result in a net deferred tax asset on our consolidated balance sheets and an income tax benefit of equal magnitude in our statement of operations in the period we make the determination . in future periods , we will then recognize as income tax expense the estimated quantity of income taxes we would have paid in cash had we not utilized the related deferred tax asset . the corresponding journal entry will be a reduction of our deferred tax asset . if there is a change regarding our tax position in the future , we will make a corresponding adjustment to the related valuation allowance . story_separator_special_tag thousand in 2014 and $ 37 thousand in 2013 . this line item can be broken into two components : net interest income or expense and net foreign currency gains and losses . net interest was an expense of $ 28 thousand in 2015 , as compared to an expense of $ 16 thousand in 2014 and income of $ 53 thousand in 2013 . we recognized lower interest income in 2015 as compared to 2014 and higher interest expense unrelated to our credit facility in 2014 as compared to 2013. net foreign currency loss was $ 103 thousand in 2015 , as compared to a net foreign currency gain of $ 55 thousand in 2014 and net foreign currency losses of $ 16 thousand in 2013 . income tax expense ( benefit ) in 2015 , we had total income tax expense of $ 2.9 million , including $ 1.3 million in domestic deferred income tax expense , a non-cash item primarily related to our domestic nol position , and $ 1.6 million in current income tax expense . in 2014 , we had total income tax expense of $ 1.4 million , including $ 1.3 million in domestic deferred income tax expense , a non-cash item primarily related to our domestic nol position , and $ 47 thousand in current income tax expense . in 2013 , we had total income tax benefit of $ 0.5 million , including $ 0.6 million in domestic deferred income tax benefit , and $ 0.2 million in current income tax - 37 - expense . greater income before income taxes was a key factor in our higher income tax expense in 2015 as compared to 2014. we had a deferred income tax benefit in 2013 as we had a loss before income taxes in 2013 .
| increased revenue from a new product for one of our customers was a key factor in the increase . ovp segment revenue increased 46 % to $ 17.5 million in 2014 compared to $ 11.9 million in 2013 . the largest factor in the increase was greater revenue from the contract elanco assumed from agrilabs in 2013. gross profit gross profit increased 24 % to $ 44.2 million in 2015 compared to $ 35.7 million in 2014 . gross margin , i.e . gross profit divided by total revenue , increased to 42.3 % in 2015 compared to 39.8 % in 2014 . higher gross margin in our ovp segment due to product mix as well as higher gross margin recognized on our imaging products in 2015 as compared to 2014 were factors in the improvement . gross profit increased 17 % to $ 35.7 million in 2014 compared to $ 30.6 million in 2013 . gross margin increased to 39.8 % in 2014 compared to 39.1 % in 2013 . reserves recognized in 2013 were a factor in the change , as follows . in june 2013 , we recognized a reserve , the ( `` roche reserve '' ) , related to the roche agreement with roche related to our blood gas analyzers under which we would be relieved of any minimum purchase obligations other than the roche agreement and roche would be obligated to supply us with consumables and spare parts for a shortened period of time . the roche reserve was $ 1.1 million , as follows : $ 600 thousand recognized in cost of revenue related to required purchase of new instruments under the roche agreement , $ 168 thousand recognized in cost of revenue related to instruments already in inventory and accelerated depreciation on service units , $ 13 thousand recognized in sales and marketing expenses related to - 36 - accelerated depreciation on demonstration units , $ 99 thousand recognized in research and development expenses related to the purchase of research and development
| 14,292 |
we conduct substantially all of our operations , and make substantially all of our investments , through our operating partnership and its subsidiaries . one of our subsidiaries is the sole general partner , and we are the sole limited partner , of our operating partnership . we believe that we qualify to be taxed as a reit . we believe that we will not be subject to federal income tax on that portion of our income that is distributed to shareholders as long as we meet certain asset , income and share ownership tests . if we fail to qualify as a reit , and do not qualify for certain statutory relief provisions , our profits will be subject to income taxes and we may be precluded from qualifying as a reit for the four tax years following the year we lose our reit qualification . a portion of our activities are conducted in a trs , which is subject to corporate federal and state income taxes . accordingly , we have made a provision for income taxes with respect to the operations of our trs . we expect that the effective rate for the provision for income taxes will be volatile in future periods . our goal is to manage the business to take full advantage of the tax benefits afforded to us as a reit . observations on current market opportunities our business is affected by macroeconomic conditions in the united states , including economic growth , unemployment rates , the residential housing market and interest rate levels and expectations . during 2012 , the u.s. economy continued its pattern of modest growth as reflected in recent economic data . real u.s. gross domestic product , as reported by the bureau of economic analysis , expanded at an annual rate of 2.2 % for 2012 as compared to a revised 1.8 % annual rate for 2011. the seasonally adjusted national unemployment rate , as reported by the bureau of labor statistics , was 7.8 % at december 31 , 2012 , the fourth consecutive month the rate was below 8 % and equaling the previous lowest rate for the year , and compares to an unemployment rate of 8.5 % at december 31 , 2011. declining unemployment may , however , be partially reflective of a declining workforce labor participation rate . before declining below 8 % as of september , 2012 , the persistently high monthly unemployment rate above 8 % since february 2009 continues to be reflected in high delinquency rates 52 on single family residential mortgage loans . as reported by the federal reserve , during the first three quarters of 2012 charge-off and delinquency rates on loans and leases at commercial banks ranged from a low of 10.28 % for the first quarter to a high of 10.77 % for the third quarter , a modest reduction from the recent high of 11.25 % during the first quarter of 2010. residential real estate activity appears to be modestly improving . the seasonally adjusted annual rate of existing home sales for december 2012 , as reported by the national association of realtors ® ( nar ) , was 12.8 % higher than for december 2011. the national median existing home price for all housing types in december 2012 , as reported by the nar , was $ 180,800 , an 11.5 % increase from december 2011 , and represents the 10 th consecutive month of year-over-year price gains as well as the largest year-over-year price increase reported in any one month since november 2005. foreclosure filings , as reported by realtytrac , on a national level decreased 3 % during 2012 as compared to 2011 and 36 % from the foreclosure filings peak in 2010 with december 2012 filings representing a 68 month low . however , foreclosure activity in 2012 increased from 2011 in 25 states , primarily those states with longer judicial foreclosure processes as lenders began catching up with their foreclosure backlogs . nationwide , the average time to foreclose increased to 414 days during the fourth quarter of 2012 from 348 days in the fourth quarter of 2011. as of january , 2013 , 26 % of all homes with outstanding mortgages had a balance owed that was at least 25 % more than the value of the homes collateralizing such loans , down from 28 % of all homes with outstanding mortgages in january , 2012 as reported by realtytrac . thirty-year fixed rate mortgage interest rates ranged from a high of 4.08 % to a low of 3.31 % during 2012 with the low of 3.31 % representing an all-time record low for the thirty-year fixed rate mortgage ( source : freddie mac 's weekly primary mortgage market survey ) . the average annual interest rate for the thirty-year fixed rate mortgages in 2012 was 3.66 % compared to 4.45 % in 2011. our manager continues to see substantial volumes of distressed residential mortgage loan sales ( sales of loan pools that consist of either nonperforming loans , troubled but performing loans or a combination thereof ) offered for sale by a limited number of sellers . during 2012 , our manager reviewed 96 mortgage loan pools with unpaid principal balances totaling approximately $ 19.7 billion and one pool of real estate acquired in settlement of loans totaling approximately $ 30.1 million . this compares to our manager 's review of 88 mortgage loan pools with unpaid principal balances totaling approximately $ 13.6 billion during 2011. we acquired distressed mortgage loans with fair values totaling $ 542.8 million and $ 647.6 million during the years ended december 31 , 2012 and 2011 , respectively . we believe that the shifting investment and operational priorities of banks and other traditional mortgage lenders have created additional opportunities for our business . under current market conditions , these opportunities include the purchase from mortgage lenders of newly originated mortgage loans that are eligible for sale to an agency . story_separator_special_tag these opportunities also include the purchase of newly originated mortgage loans that can be resold in the non-agency whole loan market or securitized in the private label market as well as providing inventory financing to originators of such loans . residential mortgage originations increased in 2012 due to , among other things , government quantitative easing programs that have helped drive primary mortgage interest rates to historic lows , government refinance programs such as harp , and a recovering housing market . however , despite this recent growth , origination volumes remain well below pre-recession levels ( high of $ 3.8 trillion in 2003 ) . according to the mortgage bankers association , total residential mortgage originations in the united states were expected to reach $ 1.8 trillion in 2012 , 71 % of which were expected to be refinancings . this represents an increase of 22 % over the originations in 2011. the refinance-driven origination growth is expected to change in the next two years as refinance volume drops and purchase volume gradually recovers . during the years ended december 31 , 2012 and 2011 , we acquired approximately $ 22.4 billion and $ 1.3 billion , respectively , in fair value of newly originated mortgage loans and received proceeds of approximately $ 21.7 billion and $ 1.1 billion , respectively , on the sale of loans . 53 reporting metrics and prospective trends we expect our results of operations to be affected by various factors , many of which are beyond our control . our primary sources of income are from : gains on mortgage loans acquired for sale , including commitments to purchase or originate mortgage loans and the related hedging instruments net gains on investments interest income loan origination fees net servicing income gain on mortgage loans acquired for sale when we sell our mortgage loans , we record a gain or loss which is determined by the nature and terms of the transaction . the gain or loss that we realize on the sale of loans acquired through our mortgage lending activities is primarily determined by the price paid for purchased loans or the terms of originated loans , the effect of any hedging and other risk management activities that we undertake , the sales price of the loan and the value of any msrs received in the transaction . gain on mortgage loans acquired for sale is significantly influenced by mortgage loan prepayment activity which is , in turn , significantly influenced by the level and direction of mortgage interest rates . certain of these factors are beyond our control . our gain on mortgage loans acquired for sale includes both cash and non-cash elements . we receive proceeds on sale that include both cash and our estimate of the value of msrs . we also provide an estimate of the losses we expect to incur relating to representations and warranties that we make to the investors . we recognize the fair value of loan commitments we make to correspondent lenders to purchase loans . we refer to these commitments as irlcs . we recognize the value of these commitments upon their issuance , which is generally before we purchase the mortgage loans subject to the commitment . we presently issue irlcs with commitment periods ranging to sixty days . the value that we assign to an irlc is estimated based on our estimated gain on sale of a mortgage loan funded under the commitment , adjusted for the probability that the loan will be purchased within the terms of the irlc . the irlc is subject to changes in fair value as the loan approaches funding , as market interest rates for similar loans change and as our assessment of the probability of the funding of mortgage loans at similar points in the origination process changes . the value of an irlc can be either positive or negative , depending on the relationship of the mortgage loan 's interest rates to current market rates for similar mortgage loans . the primary factor influencing the probability that the loan will fund within the terms of the irlc is the change , if any , in mortgage interest rates subsequent to the commitment date . in general , the probability of funding increases if current rates rise and decreases if current rates fall . this is due primarily to the relative attractiveness of current mortgage interest rates compared to the correspondent lender 's committed rate . the probability that a loan will fund within the terms of the irlc is also influenced by the source of the application , age of the application , purpose of the loan ( purchase or refinance ) and the application approval rate . we have developed closing ratio estimates using empirical data that take into account all of these variables , as well as renegotiations of rate and point commitments that tend to occur when mortgage interest rates fall . these closing ratio estimates are used to calculate the aggregate balance of loans that we expect to fund within the terms of the irlcs . we manage the risk created by irlcs relating to mortgage loans and by our inventory of mortgage loans acquired for sale by entering into forward sale agreements to sell the mortgage loans and by the purchase and sale of interest rate options and futures . such agreements are accounted for as derivative financial instruments . 54 we account for our derivative financial instruments as free-standing derivatives . we do not designate our forward sale agreements or options and futures for hedge accounting . we recognize all of our derivative financial instruments on the balance sheet at fair value with changes in the fair value being reported in current period income as a component of net gain on mortgage loans acquired for sale .
| the servicing functions typically performed include , among other responsibilities , collecting and remitting loan payments ; responding to borrower inquiries ; accounting for principal and interest , holding custodial ( impound ) funds for payment of property taxes and insurance premiums ; counseling delinquent mortgagors ; and supervising foreclosures and property dispositions . through our operating partnership , we also have a loan servicing agreement with pls by which pls subcontracts to perform the servicing obligations on our behalf . under the servicing agreement , pls is entitled to base subservicing fees and other customary market-based fees and charges . such fees are included in the loan servicing expenses on our consolidated statements of income . 78 net loan servicing fees are summarized below : replace_table_token_22_th ( 1 ) includes contractually specified servicing fees . the value of msrs is derived from the net positive cash flows associated with the servicing contracts . we receive a servicing fee ranging generally from 0.250 % to 0.375 % annually on the remaining outstanding principal balances of the loans . amortization , impairment and changes in fair value of msrs have a significant effect on net loan servicing fees . the effect of msrs on net loan servicing fees is driven primarily by our monthly re-estimation of the fair value of msrs . as our investment in msrs grows , we expect that the effect of amortization , impairment and changes in fair value will have an increasing influence on our net income . the precise fair value of msrs can not be readily determined because msrs are not actively traded in standalone markets . considerable judgment is required to estimate the fair values of these assets and the exercise of such judgment can significantly affect our earnings . our msr valuation process combines the use of a discounted cash flow model and analysis of current market data to arrive at an estimate of fair value at each balance sheet date . the cash flow and prepayment assumptions used in our manager 's discounted cash flow model are based on market factors and include the historical performance of our msrs ,
| 14,293 |
2014 developments closing of underwriting public offering of common stock on july 28 , 2014 , we closed our registered underwritten public offering of 8,000,000 shares at a price to public of $ 1.50 per share , which included all 1,043,478 shares subject to the underwriter 's over-allotment option . our estimated net proceeds from the offering were approximately $ 10.8 million , after deducting underwriting discounts and estimated offering expenses . we used the net proceeds of the offering to fund a portion of the purchase price our acquisition of the operations of provital . craig-hallum capital group llc acted as sole managing underwriter of the offering . on the july 29 , 2014 , the company , through its subsidiary , liqtech int . dk , completed the acquisition of all of the issued and outstanding capital stock ( the “ provital shares ” ) of provital solutions a/s , a danish company ( “ provital ” ) from masu a/s , a danish company ( “ masu ” ) . in consideration for the provital shares , masu received cash consideration in the sum of dkk12,600,000 , that is , approximately usd $ 2,300,000 ( at july 28 , 2014 ) , and 4,044,782 shares of the company 's common stock ( the “ payment shares ” ) . one-third ( 1/3 ) of the payment shares shall be subject to a lock-up period of six ( 6 ) months . the remaining two-thirds ( 2/3 ) of the payment shares shall be held in escrow and one-third of the payment shares will be released from escrow contingent upon provital , for the year ending december 31 , 2014 , achieving ( i ) gross revenues of not less than dkk65,000,000 , that is , approximately $ 10,618,486 ( at december 31 , 2014 ) and ebitda of dkk6,500,000 that is , approximately $ 1,061849 ( at december 31 , 2014 ) or ( ii ) ebitda of not less than dkk10,000,000 ( at december 31 , 2014 ) , that is , approximately $ 1,633,613 and gross revenues of not less than dkk50,000,000 , that is , approximately $ 8,168,066 ( at december 31 , 2014 ) . another one-third ( 1/3 ) of the payment shares will be released from escrow contingent upon provital , for the year ending december 31 , 2015 , achieving ( i ) gross revenues of not less than dkk120,000,000 , that is , approximately $ 19,603,358 ( at december 31 , 2014 ) and ebitda of dkk12,000,000 , that is , approximately $ 1,960,335 ( at december 31 , 2014 ) or ( ii ) ebitda of not less than dkk16,000,000 , that is , approximately $ 2,613,781 ( at december 31 , 2014 ) and gross revenues of not less than dkk80,000,000 , that is , approximately $ 13,068,906 ( at december 31 , 2014 ) . 19 additional 2014 developments on march 3 , 2014 , we announced that the company received a purchase order of approximately usd 300,000 for a prototype system based upon the liqtech sic membranes . the algae system will be based on a new development in the membrane technology from liqtech . the prototype system will be used to concentrate an algae stream as a part of the harvesting process . preliminary tests have shown that the liqtech sic membranes offer a higher throughput , high algae concentration and require less energy compared to other membrane products . on march 18 , 2014 , we announced that it has received a new order for diesel particulate filters ( “ dpf ” ) for $ 450,000 from emigreen b.v. netherland , a firm that is expert in the emission control of industrial combustion engines . environmental regulations are expected to get tougher with more rigorous enforcement in the future and the luxury boat market segment has recognized that it needs to operate in an environmentally friendly way if they wish to call on any port in the world . generators on luxury-class super-yachts or mega-yachts are driven by efficient diesel engines but they still create an appreciable amount of soot and nox gasses that are both a pollutant in harbors as well as dangerous to people 's health . by integrating liqtech 's dpf products with the generator/engine set , 99.98 % of soot particulates can be removed . on may 14 , 2014 , we announced the appointment of michael barish , a highly regarded investment professional , to our board of directors effective may 19 , 2014. mr. barish has over 40 years experience in many aspects of the investment industry , including having worked as a security analyst , portfolio manager and investment advisor . mike brings a wealth of investment , corporate governance and operations expertise to the board of liqtech . mr. barish founded cambiar investors , an investment advisory firm , and served as president and chief investment officer until 2001. mike then co-founded lazarus investment partners , a private investment partnership , serving as a portfolio manager until 2009. mr. barish currently pursues personal investments in both public and private companies . mr. barish currently serves as a director of aerogrow international inc. and zero e technologies , llc . previously , he served as a director of guaranty national insurance company , a publicly held property and casualty insurance company . on may 22 , 2014 , we announced the development of a small and compact flat sheet membrane filtration unit for pre-reverse osmosis and drinking water purposes , in cooperation with time solution . the unit combines liqtech 's advanced silicon carbide ultra filtration technology with a robust and simple design enabling it to run without the use of power and requiring minimal operations skills . the first prototypes were finalized in december 2013 and have been operating successfully cleaning rain and tap water prior to reverse osmosis ever since . on june 16 , 2014 , we announced that the company received a $ 275,000 order from a middle east customer to be delivered this year . story_separator_special_tag the end-user placed the order to confirm the benefits of the liqtech sic membrane technology for various upstream produced water applications . on july 9 , 2014 , we announced that the company received a $ 200,000 sic membrane order from a european customer to be delivered in 2014. the membranes will be installed at a german power plant to remove heavy metals from a flue gas cleaning process . liqtech and the end-user have developed a solution around the sic membranes that reduces the environmental impact from coal and biomass fired power plants . on july 29 , 2014 , we announced that effective that date , mr. finn helmer stepped down as chief executive officer of liqtech . the board announced that mr. sune mathiesen , then chief executive officer of provital solutions a/s ( “ provital ” ) , was appointed chief executive officer and a director of liqtech . mr. mathiesen assumed these positions on july 30 , 2014. mr. mathiesen came to the company through liqtech 's recent acquisition of provital ; his long experience in executive management , technical sales and turnarounds will greatly benefit liqtech . the board seeks to shift the emphasis of the company towards strategically marketing its products and filtration solutions in order to accelerate revenue growth of the combined liqtech/provital business . mr. mathiesen acquired the provital business several years ago , taking it from the product development stage to a profitable and fast growing business . sune 's leadership helped provital develop and successfully market a unique range of small footprint , cost-effective filtration solutions to the swimming pool and large water park markets . prior to provital , mr. mathiesen worked as a country manager for broen a/s , a danish industrial flow control business . 20 on july 31 , 2014 , we announced that the company received a $ 350,000 silicon carbide ( sic ) membrane system order from a danish customer to be delivered in 2014. the system will be installed at a danish fish farm to filter sea water for its recirculated aquaculture system . the danish fish farm will apply liqtech 's sic based membrane system to create a bio-secure facility and to prevent disease to spread from the sea water to the closed aquaculture system . liqtech 's system together with provital 's uv system will provide water quality ideal for the aquaculture plant . on october 14 , 2014 , we announced that the company received a $ 200,000 sic membrane system order from a danish customer to be delivered in 2014. the membrane system will be installed at a danish power plant to remove heavy metals from a heat recovery process . this sale represents liqtech 's first commercial system sold to the energy industry as a joint supply effort by liqtech and provital , our recently acquired subsidiary . on november 6 , 2014 , we announced that our recently acquired subsidiary , provital solutions a/s , has developed a new led-based deep uv water disinfection system . we believe our system is the first large scale led-based uv water disinfection system in the market . the uv system features long lifetime , instant on-off , application targeted wavelengths and low power consumption . the uv system will be available from q1 2015 in sizes from 2 ” to 6 ” . larger diameters will be available from q2 2015 . 2015 developments on january 6th , 2015 , we announced that the company has received a usd $ 2.4 million purchase order for a system based on the company 's sic membranes which is expected to be delivered in the second quarter 2015. this order is part of an enhanced oil recovery ( eor ) project and was received from liqtech´s preferred partner , nakasawa mining and energy limited . this order represents liqtech 's largest order in the company 's history . in addition , we announced that the company received a usd $ 350,000 sic membrane system order from yara marine technologies to be delivered in 2015. the product solution is based on liqtech know-how acquired in the on-shore power industry for the treatment of wet scrubber wastewater containing heavy metals . new marine regulations related to reducing sulphur oxide emissions became effective january 2015. in order to comply with these new regulations , ship owners have to either burn a more expensive low sulphur fuel oil or to clean the exhaust from heavy fuel oil combustion engines . yara marine technologies ( previously green tech marine ) has many years of experience offering high performance exhaust treatment technologies for the marine industry . on february 3 , 2015 , we announced that the company received a $ 130,000 sic membrane order from a european customer to be delivered in the 2 nd quarter of 2015 . 21 this is a follow-on order from a customer that first installed a system in the fall of 2014. the installation is for a german power plant for the removal of heavy metals from a flue gas cleaning process . this new order will be installed at another german power plant . on march 2 , 2015 , we announced that we have received the first pilot order for a newly developed in-well situated ground water treatment system from the leading pump producer , grundfos . the pilot unit will be installed at taarnby forsyning in denmark .
| expenses total operating expenses for the year ended december 31 , 2014 were $ 7,288,755 , representing a decrease of $ 242,653 , or 3.2 % , compared to $ 7,531,408 for the same period in 2013. this decrease in operating expenses is attributable to an increase in selling and marketing expenses of $ 710,566 or 26.8 % , a decrease in general and administrative expenses of $ 45,529 or 1.5 % , a decrease in non-cash compensation expenses of $ 743,784 or 56.5 % and an decrease in research and development expenses of $ 163,906 or 32.8 % compared to the same period in 2013 . 22 selling expenses for the year ended december 31 , 2014 were $ 3,360,566 compared to $ 2,650,000 for the same period in 2013 , representing an increase of $ 710,566 or 26.8 % . this increase is attributable to an increase in costs in general , the increase in investment in our sales resources , investments in new market opportunities and the acquisition of provital solutions a/s . while we believe that increased investment in sales may produce attractive returns for the company , profitability from such investments will likely take several fiscal quarters to be realized . general and administrative expenses for the year ended december 31 , 2014 were $ 3,019,094 compared to $ 3,064,610 for the same period in 2013 , representing a decrease of $ 45,516 , or 1.5 % . this decrease is mainly attributable to the fact that during the year ended december 31 , 2013 , the company had a one-time expense of approx . $ 675,000 related to being a u.s. public company . this decrease is partly offset against an increase in expenses related to the acquisition of provital solutions a/s . non-cash compensation expenses for the year ended december 31 , 2014 were $ 573,029 compared to $ 1,316,826 for the same period in 2013 , representing a decrease of $ 743,797 or 56.5 % . this decrease is attributable to decreased non-cash compensation expense for options , shares and warrants for services performed granted
| 14,294 |
the main factors that affect fuel surcharge revenue are the price of diesel fuel and the number of loaded miles . although our surcharge programs vary by customer , we endeavor to negotiate an additional penny per mile charge for every five cent increase in the united states department of energy , or doe , national average diesel fuel index over an agreed baseline price . in some instances , customers choose to incorporate the additional charge by splitting the impact between the basic rate per mile and the surcharge fee . in addition , we have moved much of our west coast customer activity to a surcharge program that is indexed to the doe 's west coast average diesel fuel index as diesel fuel prices in the western united states generally are higher than the national average index . our fuel surcharges are billed on a lagging basis , meaning we typically bill customers in the current week based on a previous week 's applicable index . 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 . our other businesses revenue is generated by our non-asset based freight brokerage and logistics management service , tractor leasing revenue from our financing subsidiaries , premium revenue generated by our captive insurance companies , and other revenue generated by our repair and maintenance shops . the main factors that affect other businesses revenue are demand for brokerage and logistics services and the number of owner-operators leasing equipment from our financing subsidiaries . expenses the most significant expenses in our business vary with miles traveled and include fuel , driver-related expenses ( such as wages and benefits ) , and services purchased from owner-operators and other transportation providers , such as the railroads , drayage providers , and other trucking companies ( which are recorded on the “ purchased transportation ” line of our consolidated statements of operations ) . expenses that have both fixed and variable components include maintenance and tire expense and our total cost of insurance and claims . these expenses generally vary with the miles we travel , but also have a controllable component based on safety improvements , fleet age , efficiency , and other factors . our main fixed costs are depreciation of long-term assets , such as tractors , trailers , containers , and terminals , interest expense , and the compensation of non-driver personnel . because a significant portion of our expenses are either fully or partially variable based on the number of miles traveled , changes in weekly trucking revenue per tractor caused by increases or decreases in deadhead miles percentage , rate per mile , and loaded miles have varying effects on our profitability . in general , changes in deadhead miles percentage have the largest proportionate effect on profitability because we still bear all of the expenses for each deadhead mile but do not earn any revenue to offset those expenses . changes in rate per mile have the next largest proportionate effect on profitability because incremental improvements in rate per mile are not offset by any additional expenses . changes in loaded miles generally have a smaller effect on profitability because variable expenses increase or decrease with changes in miles . however , items such as driver and owner-operator satisfaction and network efficiency are affected by changes in mileage and have significant indirect effects on expenses . in general , our miles per tractor per week , rate per mile , and deadhead miles percentage are affected by industry-wide freight volumes , industry-wide trucking capacity , and the competitive environment , which factors are beyond our control , as well as by our service levels , planning , and discipline of our operations , over which we have significant control . 34 items affecting comparability 2013 story_separator_special_tag special or non-cash items in the calculation of our adjusted operating ratio because we believe this enhances the comparability of our performance between periods . accordingly , we believe adjusted operating ratio is a better indicator of our core operating profitability than operating ratio and provides a better basis for comparing our results between periods and against others in our industry . within our intermodal reportable segment , we monitor our load count and average container count . these metrics allow us to measure our utilization of our container fleet . we monitor weekly trucking revenue xfsr per tractor , deadhead miles percentage , average tractors available for dispatch , load count and average container count on a daily basis , and we measure adjusted operating ratio on a monthly basis . truckload replace_table_token_10_th a reconciliation of our adjusted operating ratio for each of the periods indicated is as follows : replace_table_token_11_th revenue for the year ended december 31 , 2013 , our truckload segment revenue increased by $ 30.7 million , or 1.3 % , compared to the same period in 2012. during 2013 , our truckload revenue xfsr increased 2.3 % . despite a slight decrease in our average operational fleet , this increase in truckload revenue xfsr was primarily the result of a 2.9 % increase in our truckload weekly trucking revenue xfsr per tractor , which was driven by a 2.1 % increase in our revenue xfsr per loaded mile and a 0.8 % improvement in our loaded miles per truck per week ( loaded utilization ) in 2013 as compared to 2012. during 2012 , our truckload revenue decreased by $ 53.7 million , or 2.3 % , compared to 2011. truckload revenues xfsr decreased 2.5 % due primarily to an 8.8 % reduction in the size of our average operational fleet and a 5.3 % decrease in loaded trucking miles . story_separator_special_tag although we had 1,046 fewer average trucks during 2012 when compared to 2011 , we were able to generate relatively consistent revenue figures by improving the weekly trucking revenue xfsr per tractor , which is a combination of revenue xfsr per loaded mile and loaded miles per truck per week ( loaded utilization ) . our loaded utilization in 2012 improved 64 miles per truck per week during 2012 , when compared to 2011. for 2012 , growth in truckload revenue xfsr per loaded mile was 3.0 % when compared to 2011. operating income truckload operating income decreased $ 20.0 million for the year ended december 31 , 2013 , compared to 2012. this decrease in operating income resulted in our adjusted operating ratio increasing 140 basis points to 87.7 % in 2013 , compared with 86.3 % in 2012. the increase in the adjusted operating ratio was primarily the result of a 30.7 % increase in insurance expenses , a 8.6 % 37 increase in equipment expenses , higher deadhead expenses and a $ 5.2 million favorable contract resolution with the port of los angeles in the first quarter of 2012 , partially offset by an 2.1 % increase in our revenue xfsr per loaded mile truckload operating income increased $ 23.1 million from december 31 , 2011 to december 31 , 2012 , which resulted in our adjusted operating ratio improving 160 basis points to 86.3 % in 2012 , compared with 87.9 % in 2011. the 2012 adjusted operating ratio improvement was driven by increased of revenue xfsr per loaded mile , fuel efficiency , fuel surcharge recovery and loaded utilization , partially offset by driver pay increases , owner-operator rate increases and higher equipment costs . dedicated replace_table_token_12_th a reconciliation of our adjusted operating ratio for each of the periods indicated is as follows : replace_table_token_13_th revenue during 2013 , our dedicated segment operating revenue increased by $ 14.5 million , or 2.0 % , compared to 2012 and our dedicated revenue xfsr increased 1.9 % , compared with the corresponding period in 2012. the increase in revenue was primarily driven by growth with our existing customers and the addition of several new customers . our dedicated segment experienced a 2.7 % increase in our average operational truck count which is attributable to the addition of new customer accounts during 2013. for 2012 , our dedicated segment operating revenue increased by $ 99.1 million , or 15.9 % , compared with 2011. dedicated revenue xfsr increased 14.9 % due primarily to the addition of new business with several large customers late in 2011 and throughout 2012. additionally , our weekly trucking revenue xfsr per truck increased 1.6 % as we continue to focus on the efficient utilization of our assets . operating income our dedicated operating income increased to $ 83.5 million in 2013 from $ 74.0 million in 2012. the adjusted operating ratio decreased to 86.1 % in 2013 from 87.5 % in 2012. the improvement in adjusted operating ratio for year ended december 31 , 2013 resulted from a decision to terminate a few underperforming contracts in the latter half of 2012 , growth in customer contracts in 2013 , and improved fuel efficiency . in many cases , we have been growing dedicated business with customers who provide their own trailing equipment which reduces our capital investment , and therefore furthers our efforts to improve our return on net assets . during 2012 , our dedicated operating income increased to $ 74.0 million in 2012 from $ 69.8 million in 2011. the adjusted operating ratio increased to 87.5 % in 2012 from 86.4 % in 2011. this increase was primarily due to an increase in insurance and workers compensation claims in 2012 partially offset by an increase in dedicated revenue xfsr per total mile , improved fuel efficiency and improved fuel surcharge recovery . 38 central refrigerated replace_table_token_14_th a reconciliation of our adjusted operating ratio for each of the periods indicated is as follows : replace_table_token_15_th ( 1 ) in the third quarter of 2013 , central incurred a $ 0.9 million one-time non-cash equity compensation charge for certain stock options that accelerated upon the closing of the acquisition . revenue for year ended december 31 , 2013 , our central refrigerated revenue increased by $ 49.3 million , or 10.2 % , compared to the same period in 2012. during 2013 , central refrigerated revenue xfsr increased 13.1 % . this increase in revenue xfsr was primarily due to growth in volume and pricing with our existing customers and the addition of several new customers including a significant new dedicated customer added during the second quarter of 2013. this dedicated business has a much lower average length of haul , higher deadhead and much higher revenue xfsr per loaded mile . this new business combined with the other revenue growth resulted in our weekly trucking revenue xfsr per tractor improving 2.9 % . during 2012 , our central refrigerated operating revenue increased by $ 37.5 million , or 8.4 % , compared to 2011. central refrigerated revenue xfsr increased 8.3 % . this increase was comprised of a 2.5 % increase in weekly trucking revenue xfsr per tractor and a 4.1 % growth in loaded trucking miles , compared with 2011. operating income central refrigerated operating income decreased $ 3.9 million from december 31 , 2012 to december 31 , 2013 , which resulted in our adjusted operating ratio increasing 160 basis points to 93.8 % in 2013 , compared with 92.2 % in 2012. the year over year increase in our adjusted operating ratio was driven primarily by a 50 basis point increase in our deadhead percentage , increases in start up costs for new dedicated customers as well as a a 35.1 % increase in insurance and claims expense , partially offset by an 8.5 % increase in revenue xfsr per loaded mile .
| items impacting comparability between 2012 and other periods include the following : $ 27.9 million reduction in interest expense in 2012 as compared to 2011 resulting from the amendment of the senior credit facility in march 2012 and our voluntary debt prepayments made throughout 2012 ; $ 22.2 million loss on debt extinguishment resulting from the call of our remaining $ 15.2 million face value 12.50 % fixed rate notes due may 15 , 2017 and the replacement of the first lien term loan ; $ 6.0 million pre-tax impairment of a note receivable that was recorded in impairments of non-operating assets in the fourth quarter of 2012 related to sps , an entity in which we own a minority interest ; $ 5.2 million gain relating to a contractual settlement with the city of los angeles recorded in operating supplies and expenses ; $ 4.6 million benefit reflecting the deferred state tax benefit related to an internal corporate restructuring of our subsidiaries ; and $ 3.4 million in pre-tax impairment charges comprised of a $ 2.3 million impairment charge for a deposit related to certain fuel technology equipment and a related asset and a $ 1.1 million impairment of real property . 2011 results of operations our net income for the year ended december 31 , 2011 was $ 102.7 million . items impacting comparability between 2011 and other periods include the following : $ 103.6 million reduction in interest expense in the 2011 period resulting from our ipo and refinancing transactions that occurred in december 2010 ; and $ 55.3 million reduction in derivative interest expense in the 2011 period resulting from our termination of our previous interest rate swaps in december 2010 in conjunction with our ipo and refinancing transactions . results of operations-segment review subsequent to the acquisition , our chief decision makers separately evaluated the performance of central from our three reportable segments that predated the acquisition . during 2013 , we operated four reportable segments : truckload , dedicated , central refrigerated and intermodal . the descriptions of the operations of these reportable segments are described in note 29 in our consolidated financial statements . the following tables reconcile our operating revenues and operating income by reportable segment to our consolidated operating revenue and operating income for the years ended december 31 , 2013 , 2012 and 2011 . 35 replace_table_token_9_th ( 1 ) during 2012 , our intermodal segment
| 14,295 |
selling , general administrative , and other expenses ( sg & a ) . sg & a expenses were $ 604 , or 4.3 % of sales , in 2018 compared with $ 715 , or 5.5 % of sales , in 2017 . the decrease in sg & a was the result of proxy , advisory and governance-related costs of $ 58 , costs related to the separation of alcoa inc. of $ 18 , and costs associated with the company 's delaware reincorporation of $ 3 in 2017 , none of which recurred in 2018. additionally , lower expenses driven by lower annual incentive compensation accruals and overhead cost reductions were somewhat offset by an increase in legal and other advisory costs related to grenfell tower of $ 4 as well as strategy and portfolio review costs of $ 7 in 2018. sg & a expenses were $ 715 , or 5.5 % of sales , in 2017 compared with $ 924 , or 7.5 % of sales , in 2016 . the decrease in sg & a was the result of expenses related to the separation transaction of $ 193 in 2016 compared to $ 18 in 2017 , as well as ongoing overhead cost reduction efforts , partially offset by proxy , advisory and governance-related costs of $ 58 , external legal and other advisory costs related to grenfell tower of $ 14 , and costs associated with the company 's delaware reincorporation of $ 3 in 2017. research and development expenses ( r & d ) . r & d expenses were $ 103 in 2018 compared with $ 109 in 2017 and $ 130 in 2016 . the decrease in both periods was the result of lower spending . provision for depreciation and amortization ( d & a ) . the provision for d & a was $ 576 in 2018 compared with $ 551 in 2017 and $ 535 in 2016 . the increase in both periods was primarily due to capital projects placed into service . impairment of goodwill . in 2017 , the company recognized an impairment of goodwill of $ 719 related to the annual impairment review of the arconic forgings and extrusions business ( see goodwill under critical accounting policies and estimates below ) . restructuring and other charges . restructuring and other charges were $ 9 in 2018 compared with $ 165 in 2017 . the decrease of $ 156 was primarily due to the gain on the sale of the texarkana rolling mill of $ 154 , lower layoff costs , and a postretirement curtailment benefit of $ 28 , partially offset by pension plan settlement charges of $ 96 associated with significant lump sum payments made to participants , a loss on the sale of the eger , hungary forgings business of $ 43 , and pension curtailment charges of $ 23. in 2017 , the company recorded a loss on the sale of the fusina , italy rolling mill of $ 60 and a charge for the impairment of assets associated with the sale of the latin america extrusions business of $ 41. see note t to the 37 to the consolidated financial statements in part ii , item 8 . ( financial statements and supplementary data ) of this form 10-k. restructuring and other charges were $ 165 in 2017 compared with $ 155 in 2016 . the increase of $ 10 was primarily due to a loss of $ 60 on the sale of the fusina , italy rolling mill and a charge of $ 41 for the impairment of assets associated with the sale of the latin america extrusions business ( divested in 2018 ) in 2017 , partially offset by $ 57 for costs related to the exit of certain legacy firth rixson operations in the u.k. and $ 37 for exit costs related to the decision in 2016 to permanently shut down a can sheet facility . see note t to the to the consolidated financial statements in part ii , item 8 . ( financial statements and supplementary data ) of this form 10-k. interest expense . interest expense was $ 378 in 2018 compared with $ 496 in 2017 . the decrease of $ 118 , or 24 % , was the result of higher costs incurred in 2017 related to the early redemption of the company 's outstanding debt than were incurred during 2018 , as well as lower debt outstanding . interest expense was $ 496 in 2017 compared with $ 499 in 2016 . the decrease of $ 3 , or 1 % , was primarily due to lower interest expense resulting from lower outstanding debt , mostly offset by $ 73 primarily in higher premiums paid in 2017 related to the early redemption of $ 1,250 in debt . in the second quarter of 2017 , arconic redeemed all of the company 's 6.50 % bonds due 2018 and 6.75 % notes due 2018 , and a portion of the company 's 5.72 % notes due 2019 in advance of the respective maturity dates . other expense ( income ) , net . other expense , net was $ 79 in 2018 compared with other income , net of $ 486 in 2017 . the decrease in other income , net of $ 565 was the result of gains recorded during 2017 related to the sale of a portion of arconic 's investment in alcoa corporation common stock of $ 351 , the debt-for-equity exchange ( in april and may 2017 , the company acquired a portion of its outstanding notes held by two investment banks ( the “ investment banks ” ) in exchange for cash and the company 's remaining 12,958,767 shares ( valued at $ 35.91 per share ) in alcoa corporation stock and recorded a gain of $ 167 ) , income of $ 81 associated with an adjustment to the contingent earn-out liability related to the firth rixson acquisition ( see note t to the consolidated financial statements in part ii , item 8 . story_separator_special_tag ( financial statements and supplementary data ) of this form 10-k ) , and income of $ 25 due to the reversal of a liability associated with a separation-related guarantee , none of which recurred in 2018 , and unfavorable foreign currency movements , somewhat offset by lower non-service related net periodic benefit cost and the benefit of $ 29 from establishing a tax indemnification receivable reflecting alcoa corporation 's 49 % share of a spanish tax reserve ( see note u to the consolidated financial statements in part ii , item 8 . ( financial statements and supplementary data ) of this form 10-k ) . other income , net was $ 486 in 2017 compared with other expense , net of $ 41 in 2016 . the increase in other income , net of $ 527 was primarily due to the gain on the sale of a portion of arconic 's investment in alcoa corporation common stock of $ 351 ( in february 2017 , the company sold 23,353,000 shares of alcoa corporation stock at $ 38.03 per share , which resulted in cash proceeds of $ 888 and a gain of $ 351 ) and the gain of $ 167 on the debt-for-equity exchange , income of $ 25 associated with a higher reversal of a contingent earn-out liability related to the firth rixson acquisition ( see note t to the consolidated financial statements in part ii , item 8 . ( financial statements and supplementary data ) of this form 10-k ) , and income of $ 25 due to the reversal of a liability associated with a separation-related guarantee . the company was required to provide a guarantee for an alcoa corporation electricity contract in the event of an alcoa corporation payment default . in the fourth quarter of 2017 , alcoa corporation announced that it had terminated the electricity contract at its rockdale operations and , as a result , arconic reversed its associated guarantee liability . income taxes . arconic 's effective tax rate was 26.0 % in 2018 compared with the u.s. federal statutory rate of 21 % . the effective tax rate differs from the u.s. federal statutory rate primarily as a result of a $ 60 charge to establish a tax reserve in spain , a $ 59 net charge resulting from the company 's finalized analysis of the u.s. tax cuts and jobs acts of 2017 ( `` the 2017 act '' ) , a $ 13 charge for u.s. state taxes , foreign income taxed in higher rate jurisdictions , and foreign losses with no tax benefit , partially offset by a $ 74 benefit related to the reversal of a foreign recapture obligation , a $ 38 benefit to reverse a foreign tax reserve that is effectively settled , and a $ 10 benefit for the release of u.s. valuation allowances . arconic 's effective tax rate was 115.7 % in 2017 compared with the u.s. federal statutory rate of 35 % . the effective tax rate differs from the u.s. federal statutory rate primarily as a result of a $ 719 impairment of goodwill , a $ 41 impairment of assets in the latin america extrusions business , and a $ 60 charge related to the sale of a rolling mill in italy that are nondeductible for income tax purposes , a $ 272 tax charge as a provisional impact of the 2017 act , and a $ 23 tax charge for an increase in an uncertain tax position in germany , partially offset by a $ 73 tax benefit related to the sale and debt-for-equity exchange of the alcoa corporation stock , a $ 69 tax benefit for the release of u.s. state valuation allowances net of the federal tax benefit , a $ 27 favorable tax impact associated with a non-taxable earn-out liability adjustment in connection with the firth rixson acquisition , and by foreign income taxed in lower rate jurisdictions . arconic 's effective tax rate was 356.5 % in 2016 compared with the u.s. federal statutory rate of 35 % . the effective tax rate differs from the u.s. federal statutory rate primarily due to a $ 1,267 discrete income tax charge for valuation allowances related to the separation transaction ( see note h to the consolidated financial statements in part ii , item 8 . ( financial statements and supplementary data ) of this form 10-k ) , a $ 95 tax charge associated with the redemption of company-owned life insurance 38 policies whose tax basis was less than the redemption amount resulting in a taxable gain , a $ 51 net charge for the remeasurement of certain deferred tax assets and liabilities due to tax rate and tax law changes , and a $ 34 unfavorable tax impact related to certain separation costs which are nondeductible for income tax purposes , somewhat offset by a $ 39 discrete income tax benefit for the release of valuation allowances in canada and russia , a $ 38 tax benefit related to currency impacts of a distribution of previously taxed income , and a $ 26 favorable tax impact associated with non-taxable settlement proceeds and earn-out liability adjustments in connection with the firth rixson acquisition . management anticipates that the effective tax rate in 2019 will be between 26.5 % and 28.5 % . however , business portfolio actions , changes in the current economic environment , tax legislation or rate changes , currency fluctuations , ability to realize deferred tax assets , movements in stock price impacting tax benefits or deficiencies on stock-based payment awards , and the results of operations in certain taxing jurisdictions may cause this estimated rate to fluctuate . income ( loss ) from continuing operations after income taxes . income from continuing operations after income taxes was $ 642 for 2018 , or $ 1.30 per diluted share , compared to a loss from continuing operations after income taxes of $ 74 for 2017 , or $ 0.28 per share .
| the company has announced the following key initiatives as part of its ongoing 35 strategy and portfolio review : commenced plans to reduce operating costs by approximately $ 200 on an annual run-rate basis , designed to maximize the impact in 2019 ; announced the planned separation of its portfolio into engineered products and forgings and global rolled products , with a spin-off of one of the businesses ; considering the potential sale of businesses that do not best fit into one of the two segments above ; intends to execute its previously authorized $ 500 share repurchase program in the first half of 2019 ; the board also authorized an additional $ 500 of share repurchases , effective through the end of 2020 ; and expects to reduce its quarterly common stock dividend from $ 0.06 to $ 0.02 per share . on february 6 , 2019 , the company announced that the board appointed john c. plant , current chairman of the board , as chairman and chief executive officer of the company , effective february 6 , 2019 , to succeed chip blankenship , who ceased to serve as chief executive officer of the company and resigned as a member of the board , in each case as of that date . in addition , the company announced that the board appointed elmer l. doty , current member of the board , as president and chief operating officer , a newly created position , effective february 6 , 2019. mr. doty will remain a member of the board . the company also announced that arthur d. collins , jr. , current member of the board , has been appointed interim lead independent director of the company , effective february 6 , 2019. on february 19 , 2019 , the company entered into an accelerated share repurchase ( “ asr ” ) agreement with jpmorgan chase bank to repurchase $ 700 of its common stock , pursuant to the share repurchase program previously authorized by the board . under the asr agreement , arconic will receive initial delivery of approximately 32 million shares on february 21 , 2019. the final number of shares to be repurchased
| 14,296 |
on may 31 , 2012 , abrh entered into a credit agreement ( the “ abrh credit facility ” ) with wells fargo capital finance , llc as administrative agent and swing lender ( the “ abrh administrative lender ” ) and the other financial institutions party thereto . the abrh credit facility provides for a maximum revolving loan of $ 80.0 million with a maturity date of may 31 , 2017. additionally , the abrh credit facility provides for a maximum term loan ( `` restaurant group term loan '' ) of $ 85.0 million with quarterly installment repayments through december 25 , 2016 and a maturity date of may 31 , 2017 for the outstanding unpaid principal balance and all accrued and unpaid interest . see note j of the notes to consolidated financial statements . on may 1 , 2012 , we completed the sale of an 85 % interest in our remaining subsidiaries that write personal lines insurance to wt holdings , inc. for $ 119.0 million . accordingly , the results of this business through the date of sale ( which we refer to as our `` at-risk '' insurance business ) for all periods presented are reflected in the consolidated statements of earnings as discontinued operations . the at-risk insurance business sale resulted in a pre-tax loss of $ 15.1 million , which was recorded in the fourth quarter of 2011. see note a of the notes to consolidated financial statements for further details on this transaction . on april 16 , 2012 , we entered into an agreement to amend and extend our credit agreement dated september 12 , 2006 , as amended and restated as of march 5 , 2010 ( the “ revolving credit facility ” ) with bank of america , n.a . as administrative agent and swing line lender ( the “ administrative agent ” ) , and the other financial institutions party thereto , and an agreement to change the aggregate size of the credit facility under the revolving credit facility . these agreements reduced the total size of the credit facility from $ 925.0 million to $ 800.0 million , with an option to increase the size of the credit facility to $ 900.0 million , and established an extended maturity date of april 16 , 2016. pricing for the new agreement is based on an applicable margin between 132.5 basis points to 160.0 basis points over libor , depending on the senior debt ratings of fnf . see note j of the notes to consolidated financial statements . on april 9 , 2012 , we successfully closed a tender offer for the outstanding common stock of o'charley 's inc. ( `` o'charley 's '' ) . we have consolidated the results of o'charley 's as of april 9 , 2012. on may 11 , 2012 , we merged o'charley 's with our investment in abrh in exchange for an increase in our ownership position in abrh from 45 % to 55 % . as of december 31 , 2012 , there were 322 company-owned restaurants in the o'charley 's group of companies and 218 company-owned restaurants in the abrh group of companies . total consideration paid was $ 122.2 million in cash , net of cash acquired of $ 35.0 million . our investment in abrh prior to the merger , was $ 37.0 million and was included in investments in unconsolidated affiliates on the consolidated balance sheet . our investment in o'charley 's prior to the tender offer of $ 13.8 million was included in equity securities available for sale on the consolidated balance sheet . we have consolidated the operations of abrh with the o'charley 's group of companies , beginning on may 11 , 2012. see note b of the notes to consolidated financial statements for further details on this transaction . related party transactions our financial statements reflect transactions with fidelity national information services ( `` fis '' ) , which is a related party . see note a of the notes to consolidated financial statements . business trends and conditions title insurance revenue is closely related to the level of real estate activity which includes sales , mortgage financing and mortgage refinancing . the levels of real estate activity are primarily affected by the average price of real estate sales , the availability of funds to finance purchases and mortgage interest rates . declines in the level of real estate activity or the average price of real estate sales will adversely affect our title insurance revenues . we have found that residential real estate activity is generally dependent on the following : mortgage interest rates ; the mortgage funding supply ; and the strength of the united states economy , including employment levels . in 2007 , as interest rates on adjustable rate mortgages reset to higher rates , foreclosures on subprime mortgage loans increased to record levels . this resulted in a significant decrease in levels of available mortgage funding as investors became wary of the risks associated with investing in subprime mortgage loans . in addition , tighter lending standards and a bearish outlook on the real estate environment caused potential home buyers to become reluctant to purchase homes . in 2008 , the increase in foreclosure activity , which had previously been limited to the subprime mortgage market , became more widespread as borrowers encountered 26 difficulties in attempting to refinance their adjustable rate mortgages . in the last three years , the elevated mortgage delinquency and default rates caused negative operating results at a number of banks and financial institutions and , as a result , significantly reduced the level of lending activity . multiple banks have failed over the past three years and others may fail in the future , further reducing the capacity of the mortgage industry to make loans . story_separator_special_tag since december 2008 , the federal reserve has held the federal funds rate at 0.0 % -0.25 % , and has indicated that rates will stay at this level at least through 2014. mortgage interest rates remained at historically low levels throughout 2011 and continued to decrease throughout 2012. according to the mba , u.s. mortgage originations ( including refinancings ) were approximately $ 1.8 trillion , $ 1.3 trillion and $ 1.6 trillion in 2012 , 2011 and 2010 , respectively . the mba 's mortgage finance forecast currently estimates an approximately $ 1.4 trillion mortgage origination market for 2013 , which would be a decrease of 22.2 % from 2012 . the mba forecasts that the 22.2 % decrease will result almost entirely from decreased refinance activity . several pieces of legislation were enacted to address the struggling mortgage market and the current economic and financial environment . on october 24 , 2011 , the federal housing finance agency announced a series of changes to the home affordable refinance program ( `` harp '' ) that would make it easier for certain borrowers who owe more than their home is worth and who are current on their mortgage payments to refinance their mortgages at lower interest rates . the new program reduces or eliminates the risk-based fees fannie mae and freddie mac charge on many loans , raises the loan-to-home value ratio requirement for refinancing , and streamlines the underwriting process . according to the federal housing authority ( `` fha '' ) , lenders began taking refinancing applications on december 1 , 2011 under the modified harp . we believe that the modified harp program has had a positive impact on the volume of our refinance orders during 2012. we are uncertain to what degree the modified harp program may affect our results in the future . on february 1 , 2012 , the obama administration announced new initiatives designed to increase refinancing of mortgages , reduce foreclosures and improve the housing market . under these initiatives , among other things : ( i ) certain borrowers with loans insured by fannie mae or freddie mac ( `` gses '' and such loans , `` gse loans '' ) and certain borrowers with non-gse loans , through a new fha program , would be able to refinance their mortgages and take advantage of the currently low interest rates ; ( ii ) the fha will begin transitioning foreclosed properties in the nation 's hardest-hit cities into rental housing units ; ( iii ) gses and major banks have begun offering one year of forbearance ( up from three months ) to certain unemployed borrowers ; and ( iv ) the home affordable modification program ( `` hamp '' ) was extended through 2013 , including easing the eligibility requirements and increasing the financial incentives for banks to participate . as indicated , the obama administration has already begun implementing these initiatives , except for the refinancing initiatives . the gses have not started the refinancing program . the obama administration is looking to congress to pass legislation to implement a refinancing program for non-gse loans . we are uncertain to what degree these initiatives may affect our results in the future . during 2010 , a number of lenders imposed freezes on foreclosures in some or all states as they reviewed their foreclosure practices . in response to these freezes , the office of the comptroller of the currency ( `` occ '' ) is concurrently reviewing the foreclosure practices in the residential mortgage loan servicing industry . on april 13 , 2011 , the occ and other federal regulators announced formal consent orders against several national bank mortgage servicers and third-party servicer providers for inappropriate practices related to residential mortgage loan servicing and foreclosure processing . the consent orders require the servicers to promptly correct deficiencies and make improvements in practices for residential mortgage loan servicing and foreclosure processing , including improvements to future communications with borrowers and a comprehensive `` look back '' to assess whether foreclosures complied with federal and state laws and whether any deficiencies in the process or related documentation resulted in financial injury to borrowers . we are not involved in these enforcement actions and we do not believe that we are exposed to significant losses resulting from faulty foreclosure practices . our title insurance underwriters issue title policies on real estate owned properties to new purchasers and lenders to those purchasers . we believe that these policies will not result in significant additional claims exposure to us because even if a court sets aside a foreclosure due to a defect in documentation , the foreclosing lender would be required to return to our insureds all funds obtained from them , resulting in reduced exposure under the title insurance policy . further , we believe that under current law and the rights we have under our policies , we would have the right to seek recovery from the foreclosing lender in the event of a failure to comply with state laws or local practices in connection with a foreclosure . many states continue to evaluate foreclosure practices and related legislation may change in the future . the consent orders imposed by the federal regulators have continued to delay lender foreclosure completions . in january 2012 , ten large mortgage servicers concluded the reviews required by the 2011 consent orders and agreed to monetary settlements . on february 9 , 2012 , federal officials , state attorneys general and representatives of bank of america , jp morgan chase , wells fargo , citigroup and ally financial agreed to a $ 25 billion settlement of federal and state investigations into the foreclosure practices of banks and other mortgage servicers from september 2008 to december 2011. under the settlement , approximately 1,000,000 underwater borrowers will have their mortgages reduced by lenders and 300,000 homeowners will be able to refinance their homes at lower interest rates .
| the increase in 2011 as compared to 2010 is due to an overall increase in the fixed maturity security portfolio book value during 2011 as well as dividend income received on our preferred stock which was not held during 2010. effective return on average invested assets , excluding realized gains and losses , was 4.4 % , 4.3 % , and 4.0 % for the years ended december 31 , 2012 , 2011 , and 2010 , respectively . 36 net realized gains and losses totaled $ 186.9 million , $ 6.7 million , and $ 235.7 million for the years ended december 31 , 2012 , 2011 , and 2010 , respectively . the net realized gain for the year ended december 31 , 2012 includes a $ 72.5 million gain on the consolidation of abrh and o'charley 's , a $ 48.1 million bargain purchase gain on the acquisition of o'charley 's , a $ 78.8 million gain on the consolidation of remy , and $ 14.4 million in net gains from the sale of other various investments and assets , offset by a $ 5.9 million impairment on land held at our majority-owned affiliate cascade timberlands , a $ 5.7 million loss on the early extinguishment of our 5.25 % bonds , $ 2.7 million impairment charges on investments determined to be other-than-temporarily impaired and a $ 12.6 million impairment for title plants no longer in use . the net realized gain for the year ended december 31 , 2011 includes $ 28.2 million net gains on various investments and other assets , offset by a $ 4.4 million decrease in the value of our structured notes and $ 17.1 million in impairment charges on investments determined to be other-than-temporarily impaired . the net realized gain for the year ended december 31 , 2010 includes a $ 98.4 million gain on the sale of our 32 % interest in sedgwick in may 2010 , a $ 27.2 million gain on the sale of a corporate bond purchased during 2009 , a $ 21.7 million gain on the sale of fis
| 14,297 |
in october 2014 , we completed the acquisition of certain proved and unproved oil and gas properties in the eagle ford shale in south texas for approximately $ 210.0 million and paid total net cash consideration as of the closing date of approximately $ 185.2 million , which reflects the purchase price and adjustments of approximately $ 17.4 million for consents that the seller was unable to obtain for certain leaseholds prior to closing and approximately $ 8.0 million for the impact of customary purchase price adjustments and acquisition costs . the acquisition was funded with proceeds from the private placement of senior unsecured fixed rate notes completed in september 2014. in october 2014 , we completed the divestiture of certain proved and unproved oil and gas properties in east texas to a third party for approximately $ 44.3 million . total cash consideration received by the company as of the closing date was approximately $ 42.8 million , which reflects the impact of customary purchase price adjustments . financial condition capital resources and liquidity our primary sources of cash in 2014 were from funds generated from the sale of natural gas and oil production , the issuance of fixed rate notes and proceeds from the sale of certain oil and gas properties during the year . these cash flows were primarily used to fund our capital and exploration expenditures , repayments of borrowings under our revolving credit facility and related interest payments , share repurchases and the payment of dividends . see below for additional discussion and analysis of cash flow . operating cash flow fluctuations are substantially driven by commodity prices and changes in our production volumes and operating expenses . prices for natural gas and crude oil have historically been volatile , including seasonal influences and demand ; however , the impact of other risks and uncertainties have also influenced prices throughout the recent years . in addition , fluctuations in cash flow may result in an increase or decrease in our capital and exploration expenditures . see `` results of operations '' for a review of the impact of prices and volumes on revenues . our working capital is also substantially influenced by the variables discussed above . from time to time , our working capital will reflect a surplus , while at other times it will reflect a deficit . this fluctuation is not unusual . we believe we have adequate availability under our revolving credit facility and liquidity available to meet our working capital requirements . replace_table_token_12_th operating activities . net cash provided by operating activities in 2014 increase d by $ 211.9 million over 2013 . this increase was primarily due to higher operating revenues , partially offset by higher operating expenses ( excluding non-cash expenses ) and an increase in working capital . the increase in operating revenues was primarily due to an increase in equivalent production , partially offset by a decrease in realized natural gas and crude oil prices . equivalent production volumes increased by 29 % for 2014 compared to 2013 as a result of higher natural gas and oil production . average realized natural gas and crude oil prices decrease d by 8 % and 12 % , respectively , for 2014 compared to 2013 . net cash provided by operating activities in 2013 increased by $ 372.4 million over 2012. this increase was primarily due to higher operating revenues partially offset by higher operating expenses ( excluding non-cash expenses ) and unfavorable changes in working capital and other assets and liabilities . the increase in operating revenues was primarily due to an increase in equivalent production , partially offset by lower realized natural gas and crude oil prices . equivalent production volumes increased by 55 % for 2013 compared to 2012 as a result of higher natural gas and crude oil production . average realized natural gas and crude oil prices decreased by 3 % and less than 1 % , respectively , for 2013 compared to 2012 . 37 see `` results of operations '' for additional information relative to commodity price , production and operating expense movements . we are unable to predict future commodity prices and , as a result , can not provide any assurance about future levels of net cash provided by operating activities . realized prices may decline in future periods . investing activities . cash flows used in investing activities increase d by $ 746.6 million from 2013 to 2014 due to a $ 284.9 million increase in capital and exploration expenditures , a decrease of $ 284.0 million in proceeds from the sale of assets , a $ 214.7 million increase in acquisition expenditures related to the acquisitions of eagle ford shale assets that closed in the fourth quarter of 2014 , and a $ 19.2 million increase in capital contributions associated with our equity investments . partially offsetting the increases was a $ 56.2 million decrease in restricted cash related to the release of funds by our qualified intermediary due to a lapse in the statutory holding period and the funding of oil and gas lease acquisitions during 2014 associated with like-kind exchange transactions pursuant to section 1031 of the internal revenue code . cash flows used in investing activities increased by $ 152.7 million from 2012 to 2013 due to a $ 266.8 million increase in capital and exploration expenditures and a $ 12.0 million increase associated with our equity investment in constitution . these increases were partially offset by a net $ 126.1 million increase in proceeds from the sale of assets , a portion of which was retained in a qualified intermediary and recognized as restricted cash on the consolidated balance sheet . financing activities . cash flows provided by financing activities increase d by $ 539.6 million from 2013 to 2014 due to $ 545.0 million of higher net borrowings and a decrease in share repurchases of $ 25.8 million , partially offset by a decrease of $ 20.3 million in tax benefits associated with our stock-based compensation , an $ 8.0 story_separator_special_tag million increase in dividends paid and an increase in cash paid for capitalized debt issuance costs of $ 2.9 million . cash flows used in financing activities increased by $ 227.9 million from 2012 to 2013 due to $ 164.6 million of stock repurchases , $ 77.0 million of lower net borrowings and an increase in dividends paid of $ 8.5 million , partially offset by an $ 18.9 million increase in the tax benefit associated with our stock‑based compensation and a decrease in cash paid for capitalized debt issuance costs of $ 2.3 million . in september 2014 , we completed a private placement of $ 925 million aggregate principal amount of senior unsecured fixed rate notes with a weighted-average interest rate of 3.65 % , consisting of amounts due in 2021 , 2024 and 2026. effective april 15 , 2014 , the lenders under our revolving credit facility approved an increase in our borrowing base from $ 2.3 billion to $ 3.1 billion as part of the annual redetermination under the terms of the revolving credit facility agreement . the commitments under the revolving credit facility remain unchanged at $ 1.4 billion . see note 5 of the notes to the consolidated financial statements for further details . at december 31 , 2014 , we had $ 140.0 million of borrowings outstanding under our revolving credit facility at a weighted-average interest rate of 2.4 % compared to $ 460.0 million of borrowings outstanding at a weighted-average interest rate of 2.0 % at december 31 , 2013 . as of december 31 , 2014 , we had $ 1.3 billion available for future borrowings under our revolving credit facility . we were in compliance with all restrictive financial covenants in both the revolving credit facility and fixed rate notes as of december 31 , 2014 . we strive to manage our debt at a level below the available credit line in order to maintain borrowing capacity . our revolving credit facility includes a covenant limiting our total debt . management believes that , with internally generated cash flow , existing cash on hand and availability under our revolving credit facility , we have the capacity to finance our spending plans and maintain our strong financial position . 38 capitalization information about our capitalization is as follows : replace_table_token_13_th _ ( 1 ) includes $ 140.0 million and $ 460.0 million of borrowings outstanding under our revolving credit facility at december 31 , 2014 and 2013 , respectively . for the years ended december 31 , 2014 and 2013 , we repurchased 4.3 million shares for a total cost of $ 138.9 million and 4.8 million shares for a total cost of $ 164.6 million , respectively . during 2014 and 2013 , we also paid dividends of $ 33.3 million ( $ 0.08 per share ) and $ 25.2 million ( $ 0.06 per share ) on our common stock , respectively . a regular dividend has been declared for each quarter since we became a public company in 1990. capital and exploration expenditures on an annual basis , we generally fund most of our capital and exploration expenditures , excluding any significant property acquisitions , with cash generated from operations and , when necessary , borrowings under our revolving credit facility . we budget these expenditures based on our projected cash flows for the year . the following table presents major components of our capital and exploration expenditures : replace_table_token_14_th we plan to drill approximately 125 gross wells ( or 115.0 net ) in 2015 compared to 200 gross wells ( 176.5 net ) drilled in 2014 . in 2015 , we plan to spend approximately $ 900.0 million in total capital and exploration expenditures , compared to $ 1.6 billion ( excluding property acquisitions of $ 214.7 million , as discussed in note 2 to the consolidated financial statements ) in 2014 . due to the weak commodity price environment , our overall capital and exploration spending in 2015 is expected to be lower than our expenditures in 2014. we will continue to assess the natural gas and crude oil price environment and our liquidity position and may increase or decrease our capital and exploration expenditures accordingly . 39 contractual obligations a summary of our contractual obligations as of december 31 , 2014 are set forth in the following table : replace_table_token_15_th _ ( 1 ) interest payments have been calculated utilizing the fixed rates associated with our fixed rate notes outstanding at december 31 , 2014 . interest payments on our revolving credit facility were calculated by assuming that the december 31 , 2014 outstanding balance of $ 140.0 million will be outstanding through the may 2017 maturity date and that our fixed rate notes will remain outstanding through their respective maturity dates . a constant interest rate of 2.4 % was assumed for the interest payments on our revolving credit facility , which was the december 31 , 2014 weighted-average interest rate . actual results will differ from these estimates and assumptions . ( 2 ) in january 2015 , we entered into a natural gas transportation agreement associated with our production in pennsylvania , which increased our future aggregate obligations under our transportation commitments by approximately $ 105.9 million over the next 10 years , which is not included in the table above . for further information on our obligations under transportation and gathering agreements , drilling rig commitments and operating leases , see note 9 of the notes to the consolidated financial statements . ( 3 ) for further information on our equity investment contribution commitment , see note 4 of the notes to the consolidated financial statements . amounts related to our asset retirement obligation are not included in the above table given the uncertainty regarding the actual timing of such expenditures . the total amount of our asset retirement obligation at december 31 , 2014 was $ 126.7 million . see note 8 of the notes to the consolidated financial statements for further details .
| the increase in production was a result of our oil-focused eagle ford shale drilling program in south texas , partially offset by lower production associated with certain non-core asset dispositions in oklahoma and west texas in the fourth quarter of 2013. gain ( loss ) on derivative instruments effective april 1 , 2014 , we elected to discontinue hedge accounting on a prospective basis . subsequent to april 1 , 2014 , our derivative instruments were accounted for on a mark-to-market basis with changes in fair value recognized currently in operating revenues in the consolidated statement of operations . gain ( loss ) on derivative instruments includes an $ 81.7 million gain related to the change in fair value of realized cash settlements of derivative instruments previously frozen in accumulated other comprehensive income ( loss ) and a $ 137.6 million unrealized mark-to-market gain on our commodity derivative instruments . 44 impact of derivative instruments on operating revenues the following table reflects the realized and unrealized gain ( loss ) of our derivative instruments : replace_table_token_18_th brokered natural gas replace_table_token_19_th the $ 2.1 million decrease in brokered natural gas margin is a result of lower brokered volumes and an increase in purchase price that outpaced the increase in sales price . 45 operating and other expenses replace_table_token_20_th total costs and expenses from operations increase d by $ 869.9 million from 2013 to 2014 . the primary reasons for this fluctuation are as follows : direct operations increase d $ 4.7 million largely due to higher operating costs as a result of higher production , an increase in disposal and recycling costs related to our marcellus shale operations and an increase in costs associated with oil processing and related fuel charges related to our eagle ford shale operations . partially offsetting these increases were lower costs associated with certain non-core assets in oklahoma and west texas that were sold in the fourth quarter of 2013. transportation and gathering increase d $ 119.8 million due to higher throughput as a result of higher production , slightly higher transportation
| 14,298 |
we consider the markets in which we compete to be highly competitive , with a significant amount of the business involving competitive public bidding . it is common in the laboratory and healthcare furniture industries for customer orders to require delivery at extended future dates , as products are frequently to be installed in buildings yet to be constructed . changes or delays in building construction may cause delays in delivery of the orders and our recognition of the sale . since prices are normally quoted on a firm basis in the industry , we bear the burden of possible increases in labor and material costs between quotation of an order and delivery of the product . the impact of such possible increases is considered when determining the sales price . the principal raw materials and products manufactured by others used in our products are cold-rolled carbon and stainless steel , hardwood lumbers and plywood , paint , chemicals , resins , hardware , plumbing and electrical fittings . such materials and products are purchased from multiple suppliers and are typically readily available . critical accounting policies in the ordinary course of business , we have made estimates and assumptions relating to the reporting of results of operations and financial position in the preparation of our consolidated financial statements in conformity with generally accepted accounting principles in the united states of america . actual results could differ significantly from those estimates . we believe that the following discussion addresses our most critical accounting policies , which are those that are most important to the portrayal of our financial condition and results of operations , and require management 's most difficult , subjective and complex judgments , often as a result of the need to make estimates about the effect of matters that are inherently uncertain . revenue recognition the company recognizes revenue when control of a good or service promised in a contract ( i.e. , performance obligation ) is transferred to a customer . control is obtained when a customer has the ability to direct the use of and obtain substantially all of the remaining benefits from that good or service . the majority of the company 's revenues are recognized over time as the customer receives control as the company performs work under a contract . however , a portion of the company 's revenues are recognized at a point-in-time as control is transferred at a distinct point in time per the terms of a contract . allowance for doubtful accounts evaluation of the allowance for doubtful accounts involves management judgments and estimates . we evaluate the collectability of our trade accounts receivable based on a number of factors . in circumstances where management is aware of a customer 's inability to meet its financial obligations to us , or a project dispute makes it unlikely that all of the receivable owed by a customer will be collected , a specific reserve for bad debts is estimated and recorded to reduce the recognized receivable to the estimated amount we believe will ultimately be collected . in addition to specific customer identification of potential bad debts , a general reserve for bad debts is estimated and recorded based on our recent past loss history and an overall assessment of past due trade accounts receivable amounts outstanding . inventories the company 's inventories are valued at the lower of cost or net realizable value . prior to august 1 , 2018 , the company 's domestic segment 's inventories were valued under the last-in , first-out ( “ lifo ” ) valuation method . on august 1 , 2018 , the company changed its method of valuing inventory for the domestic segment from lifo to first-in , first-out ( “ fifo ” ) . the company believes that this method change to fifo will improve financial reporting by better reflecting the current value of inventory on the consolidated balance sheet , more closely aligning the flow of physical inventory with the accounting for the inventory , and providing better matching of revenues and expenses . inventories at our international subsidiaries are , and remain , measured on the fifo method . pension benefits we sponsor pension plans covering all employees who met eligibility requirements as of april 30 , 2005. these pension plans were amended as of april 30 , 2005 , no further benefits have been , or will be , earned under the plans subsequent to the amendment date , and no additional participants have been , or will be , added to the plans . several statistical and other factors , which attempt to anticipate future events , are used in calculating the expense and liability related to the pension plans . these factors include assumptions about the discount rate used to calculate and determine benefit obligations and the expected return on plan assets within certain guidelines . the actuarial assumptions used by us may differ materially from actual results due to changing market and economic conditions , higher or lower withdrawal rates , or longer or shorter life spans of participants . these differences may significantly affect the amount of pension income or expense recorded by us in future periods . self-insurance reserves 10 the company 's domestic operations are self-insured for employee health care . the company has purchased specific stop-loss insurance to limit claims above a certain amount . estimated medical costs were accrued for claims incurred but not reported ( “ ibnr ” ) using assumptions based upon historical loss experiences . story_separator_special_tag the company 's exposure reflected in the self-insurance reserves varies depending upon market conditions in the insurance industry , availability of cost-effective insurance coverage , and actual claims versus estimated future claims . story_separator_special_tag $ 2,030,000 paid to stockholders , cash dividends of $ 51,000 paid to minority interest holders and repayment of long-term debt of $ 1,177,000. the company 's financing activities used cash of $ 2,484,000 during fiscal year 2018 for cash dividends of $ 1,794,000 paid to stockholders , cash dividends of $ 74,000 paid to minority interest holders , and repayment of long-term debt of $ 918,000 , partially offset by an increase in short-term borrowings of $ 294,000. see note 4 of the notes to consolidated financial statements included in item 8 of this annual report for additional information concerning our credit facility . the majority of the april 30 , 2019 accounts receivable balances are expected to be collected during the first quarter of fiscal year 2020 , with the exception of retention amounts on fixed-price contracts which are collected when the entire construction project is completed and all retention funds are paid by the owner . as discussed above , no further benefits have been , or will be , earned under our pension plans after april 30 , 2005 , and no additional participants have been , or will be , added to the plans . we do not expect to make any contributions to the plans in fiscal year 2020. we made contributions of $ 1,000,000 and $ 600,000 to the plans in fiscal years 2019 and 2018 , respectively . capital expenditures were $ 4.2 million and $ 3.4 million in fiscal years 2019 and 2018 , respectively . capital expenditures in fiscal year 2019 were funded primarily from operations . fiscal year 2020 capital expenditures are anticipated to be approximately $ 2.5 million , with the majority of these expenditures for manufacturing equipment and facilities improvements . the fiscal year 2020 expenditures are expected to be funded primarily by operating activities , supplemented as needed by borrowings under our revolving credit facility . working capital was $ 32.6 million at april 30 , 2019 , down from $ 36.8 million at april 30 , 2018 , and the ratio of current assets to current liabilities was 2.0-to-1.0 at april 30 , 2019 and 2.3-to-1.0 at april 30 , 2018. the decrease in working capital for fiscal year 2019 was primarily due to the increase in current liabilities related to the outstanding line of credit at year end along with the decrease in inventories , partially offset by an increase in cash and receivables . we paid cash dividends of $ 0.74 per share in fiscal year 2019. we paid cash dividends of $ 0.66 per share in fiscal year 2018. we expect to pay a dividend in the future in line with our actual and anticipated future operating results . the declaration and payment of future dividends under the quarterly dividend policy will be at the discretion of the board of directors and will depend upon many factors , including the company 's earnings , capital requirements , financial conditions , the terms of the company 's indebtedness and other factors that the board of directors may deem to be relevant . recent accounting standards new accounting standards in may 2014 , the financial accounting standards board ( “ fasb ” ) issued accounting standards update 2014-09 , “ revenue from contracts with customers ” ( “ asu 2014-09 ” ) . this update outlined a new comprehensive revenue recognition model that 12 supersedes most prior revenue recognition guidance and required companies to recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflected the consideration to which the entity expected to be entitled in exchange for those goods or services . the company adopted this standard effective may 1 , 2019. see note 2 of the notes to consolidated financial statements included in item 8 for a discussion of the impact of the adoption of this standard . in july 2015 , the fasb issued asu 2015-11 , “ inventory—simplifying the measurement of inventory. ” this guidance changes the measurement principle for inventory from the lower of cost or market to the lower of cost and net realizable value . net realizable value is defined as estimated selling prices in the ordinary course of business , less reasonably predictable costs of completion , disposal , and transportation . this guidance is effective for fiscal years , and interim periods within those years , beginning after december 15 , 2016. the company adopted this standard effective may 1 , 2017. the adoption of this standard did not have a significant impact on the company 's consolidated financial position or results of operations . in february 2016 , the fasb issued asu 2016-02 , “ leases. ” this guidance establishes a right-of-use ( rou ) model that requires a lessee to record a rou asset and a lease liability on the balance sheet for all leases with terms longer than 12 months . leases will be classified as either finance or operating , with classification affecting the pattern of expense recognition in the income statement . a modified retrospective transition approach is required for lessees for capital and operating leases existing at , or entered into after , the beginning of the earliest comparative period presented in the financial statements , with certain practical expedients available .
| the increase in operating expense dollars in fiscal year 2019 as compared to fiscal year 2018 is related primarily to management separation expenses of $ 502,000 , audit and tax services of $ 637,000 , and an increase of $ 893,000 in operating expense for the company 's international operations , partially offset by a decrease in incentive compensation of $ 1.2 million . other income ( expense ) was $ 389,000 and ( $ 1,000 ) in fiscal years 2019 and 2018 , respectively . the increase in other income in fiscal year 2019 was primarily due to the decrease in pension plan expense as discussed in note 9 of the notes to the consolidated financial statements included in item 8. interest expense was $ 367,000 and $ 299,000 in fiscal years 2019 and 2018 , respectively . the increase in interest expense for fiscal year 2019 was primarily due to increases in the levels of bank borrowings . domestic pre-tax earnings were impacted by a significant decline in the company 's operating volumes during the second half of the fiscal year which resulted in the company operating at levels below the rate we believe is necessary to generate favorable financial results . the company 's financial results were unfavorably impacted by shifts in the manufacturing demand which occurred more rapidly than the company 's ability to reduce its fixed cost structure . profitability was also impacted by higher raw material costs in steel and resin that we were not able to pass along to customers . international pre-tax earnings were impacted by the year-over-year decline in sales as well as the year-over-year decline in the exchange rate of the indian rupee versus the us dollar . finally , profitability was impacted by one-time non-operating costs related to management changes . income tax expense was $ 446,000 and $ 4,161,000 in fiscal years 2019 and 2018 , respectively , or 20.9 % and 43.3 % of pretax earnings , respectively . the effective tax rate decreased in fiscal year 2019 , primarily due to the effect of the enactment of the tax cuts and jobs act ( `` 2017 tax act '' ) . the effective rate increased in fiscal
| 14,299 |
in addition , the revolving credit agreement is scheduled to expire on april 1 , 2013. wells fargo may also refuse to renew the facility when it expires on april 1 , 2013 , and if they do so , we will have to repay the outstanding balance of $ 3.0 million . see `` management 's discussion and analysis of financial condition and results of operationoutstanding indebtedness . '' impairment charges . in fiscal 2012 , we determined that a quantitative assessment of our goodwill was warranted for the energy solutions reporting unit . this assessment indicated that the estimated fair value of such reporting unit was less than its carrying value . for this testing , we weighted the income approach and the market approach at 80 % and 20 % , respectively . we further determined that all of the remaining goodwill for the energy solutions reporting unit was impaired and recognized an impairment charge of $ 15.2 million . components of income and expense contract revenue we provide our services under contracts , purchase orders or retainer letters . the contracts we enter into with our clients contain three principal types of pricing provisions : time and materials , unit based , and fixed price . revenue on our time and materials and unit based contracts are recognized as the work is performed in accordance with specific terms of the contract . approximately 33 % of our contracts are based on contractual rates per hour plus costs incurred . some of these contracts include maximum contract prices , but the majority of these contracts are not expected to exceed the maximum . contract revenue on our fixed price contracts is determined on the percentage of completion method based generally on the ratio of direct costs incurred to date to estimated total direct costs at 32 completion . many of our fixed price contracts are relatively short in duration , thereby lowering the risks of not properly estimating the percent complete . adjustments to contract cost estimates are made in the periods in which the facts requiring such revisions become known . when the revised estimate indicates a loss , such loss is recognized currently in its entirety . claims revenue is recognized only upon resolution of the claim . change orders in dispute are evaluated as claims . costs related to un-priced change orders are expensed when incurred and recognition of the related contract revenue is based on an evaluation of the probability of recovery of the costs . estimated profit is recognized for un-priced change orders if realization of the expected price of the change order is probable . our contracts come up for renewal periodically and at the time of renewal may be subject to renegotiation , which could impact the profitability on that contract . in addition , during the term of a contract , public agencies may request additional or revised services which may impact the economics of the transaction . most of our contracts permit our clients , with prior notice , to terminate the contracts at any time without cause . while we have a large volume of transactions , the renewal , termination or modification of a contract , in particular our contract with consolidated edison , may have a material adverse effect on our consolidated operations . direct costs of contract revenue direct costs of contract revenue consist primarily of subconsultant services and that portion of technical and nontechnical salaries and wages that have been incurred in connection with revenue producing projects . direct costs of contract revenue also include production expenses and other expenses that are incurred in connection with revenue producing projects . direct costs of contract revenue generally exclude depreciation and amortization , that portion of technical and nontechnical salaries and wages related to marketing efforts , vacations , holidays and other time not spent directly generating revenue under existing contracts . such costs are included in general and administrative expenses . additionally , payroll taxes , bonuses and employee benefit costs for all of our personnel are included in general and administrative expenses since no allocation of these costs is made to direct costs of contract revenue . no allocation of facilities costs is made to direct costs of contract revenue nor is depreciation and amortization allocated to direct costs . we expense direct costs of contract revenue when incurred . as a firm that provides multiple and diverse services , we do not believe gross margin is a consistent or appropriate indicator of our performance and therefore we do not use this measure as construction contractors and other types of consulting firms may . other companies may classify as direct costs of contract revenue some of the costs that we classify as general and administrative expenses . as a result , our direct costs of contract revenue may not be comparable to direct costs for other companies , either as a line item expense or as a percentage of contract revenue . general and administrative expenses general and administrative expenses include the costs of the marketing and support staffs , other marketing expenses , management and administrative personnel costs , payroll taxes , bonuses and employee benefits for all of our employees and the portion of salaries and wages not allocated to direct costs of contract revenue for those employees who provide our services . general and administrative expenses also include facility costs , depreciation and amortization , professional services , legal and accounting fees and administrative operating costs . within general and administrative expenses , `` other '' includes expenses such as provision for billed or unbilled receivables , professional services , legal and accounting , computer costs , travel and entertainment and marketing costs . we expense general and administrative costs when incurred . 33 critical accounting policies this discussion and analysis of financial condition and results of operations is based upon our consolidated financial statements , which have been prepared in accordance with generally accepted accounting principles in the u.s. , or gaap . story_separator_special_tag to prepare these financial statements in conformity with gaap , we must make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amount of revenue and expenses in the reporting period . our actual results may differ from these estimates . we have provided a summary of our significant accounting policies in note 2 to our consolidated financial statements included elsewhere in this report . we describe below those accounting policies that require material subjective or complex judgments and that have the most significant impact on our financial condition and results of operations . our management evaluates these estimates on an ongoing basis , based upon information currently available and on various assumptions management believes are reasonable as of the date of this report . contract accounting applying the percentage-of-completion method of recognizing revenue requires us to estimate the outcome of our long-term contracts . we forecast such outcomes to the best of our knowledge and belief of current and expected conditions and our expected course of action . differences between our estimates and actual results often occur resulting in changes to reported revenue and earnings . such changes could have a material effect on our future consolidated financial statements . accounts receivable are carried at original invoice amount less an estimate made for doubtful accounts based upon our review of all outstanding amounts on a monthly basis . we determine the allowance for doubtful accounts by identifying troubled accounts and by using historical experience applied to an aging of accounts . our credit risk is minimal with governmental entities . accounts receivable are written off when deemed uncollectible . recoveries of accounts receivable previously written off are recorded when received . for further information on the types of contracts under which we perform our services , see `` businesscontract structure '' elsewhere in this report . goodwill we test our goodwill at least annually for possible impairment . we complete our annual testing of goodwill as of the last day of the first month of our fourth fiscal quarter each year to determine whether there is impairment . in addition to our annual test , we regularly evaluate whether events and circumstances have occurred that may indicate a potential impairment of goodwill . we recognized a goodwill impairment charge of $ 15.2 million related to our energy solutions reporting unit during fiscal 2012. following this impairment charge , none of our reporting units had any goodwill remaining . we did not recognize any goodwill impairment charges in fiscal years 2011 or 2010. we test our goodwill for impairment at the level of our reporting units , which are components of our operating segments . in september 2011 , the financial accounting standards board ( `` fasb '' ) issued accounting standards update no . 2011-08 ( `` asu 2011-08 '' ) , intangiblesgoodwill and other ( topic 350 ) : testing goodwill for impairment . this accounting guidance allows companies to perform a qualitative assessment on goodwill impairment to determine whether a quantitative assessment is necessary . the guidance is for goodwill impairment tests performed in interim and annual periods for fiscal years beginning after december 15 , 2011. the process of testing goodwill for impairment , pursuant to asu 2011-08 , now involves an optional qualitative assessment on goodwill impairment of our reporting units to determine whether a quantitative assessment is necessary . if a quantitative assessment is warranted , we then determine the fair value of the applicable reporting units . to estimate the fair value of our reporting units , we use both an income approach based on management 's estimates of future cash flows and other market data and a market approach based upon multiples of 34 ebitda earned by similar public companies . for our annual impairment testing in fiscal 2011 , we weighted the income approach and the market approach at 80 % and 20 % , respectively . the income approach was given a higher weight because it has a more direct correlation to the specific economics of the reporting units than the market approach , which is based on multiples of public companies that , although comparable , may not provide the same mix of services as our reporting units . once the fair value is determined , we then compare the fair value of the reporting unit to its carrying value , including goodwill . if the fair value of the reporting unit is determined to be less than the carrying value , we perform an additional assessment to determine the extent of the impairment based on the implied fair value of goodwill compared with the carrying amount of the goodwill . in the event that the current implied fair value of the goodwill is less than the carrying value , an impairment charge is recognized . inherent in such fair value determinations are significant judgments and estimates , including but not limited to assumptions about our future revenue , profitability and cash flows , our operational plans and our interpretation of current economic indicators and market valuations . to the extent these assumptions are incorrect or economic conditions that would impact the future operations of our reporting units change , any goodwill may be deemed to be impaired , and an impairment charge could result in a material adverse effect on our financial position or results of operation . during the second quarter of 2012 , we determined that a quantitative assessment of our goodwill was warranted for the energy solutions reporting unit . this assessment indicated that the estimated fair value of such reporting unit was less than its carrying value . for this testing , we weighted the income approach and the market approach at 80 % and 20 % , respectively . we further determined that all of the remaining goodwill for the energy solutions reporting unit was impaired and recognized an impairment charge of $ 15.2 million .
| measures from the energy efficiency audits in new york and california and delays in the renewal of contracts for such services in those states . revenue in the homeland security services segment decreased due to lower levels of activity in the traditional planning , training and exercise consulting services business . contract revenue for the engineering services segment continues to be impacted by the decline in the california residential housing market and state and local government budget cuts . direct costs of contract revenue . direct costs of contract revenue were $ 59.0 million for the fiscal year ended december 28 , 2012 , with $ 18.8 million attributable to the engineering services segment , $ 34.6 million attributable to the energy efficiency services segment , $ 3.4 million attributable to the public finance services segment , and $ 2.2 million attributable to the homeland security services segment . overall , direct costs of contract revenue decreased by $ 5.8 million , or 8.9 % , to $ 59.0 million for the fiscal year ended december 28 , 2012 from $ 64.7 million for the fiscal year ended december 30 , 2011. this decrease is primarily attributable to a decrease in direct costs within our energy efficiency services segment of $ 6.4 million , or 15.7 % , as a result of delays in the renewal of contracts for the provision of these services . direct costs of contract revenue also decreased by $ 0.8 million , or 26.3 % , in our homeland solutions services segment . these decreases were partially offset by increases of $ 1.1 million , or 6.0 % , and $ 0.4 million , or 12.8 % , respectively , in our engineering services and public finance services segments . direct costs of contract revenue as a percentage of contract revenue for the fiscal year ended december 28 , 2012 increased to 63.1 % from 60.4 % for the fiscal year ended december 30 , 2011. direct costs decreased primarily as
| 14,300 |
million and $ 5.9 million respectively . based on historical performance and current expectations , we believe our cash and cash equivalents balance , the projected cash flows generated from our operations , our existing committed revolving credit facility ( or comparable financing ) and our expected ability to access capital markets will satisfy our working capital needs , capital expenditures and other liquidity requirements associated with our operations in 2014 and the foreseeable future . 16 statement of cash flows the table below reflects a summary of our net cash flows provided by operating activities , net cash flows used in investing activities , and net cash flows used in financing activities for the years indicated . replace_table_token_18_th cash flows from operating activities accounts receivable decreased as a result of lower fourth quarter sales in 2013 compared to 2012. fourth quarter sales in 2012 were higher than fourth quarter 2011 , which caused accounts receivable at december 31 , 2012 to increase compared to 2011. the higher 2011 income statement adjustment and change in income tax receivable was due to deferred taxes from additional bonus depreciation and capital expenditures done in 2011. cash flows from investing activities capital expenditures were primarily investments in our manufacturing and production equipment to support our growth and improve efficiencies with equipment which combines the latest advancement in automation and laser technology . we took advantage of 2011 bonus depreciation tax deductions , which caused the large amount of capital expenditures in 2011. the capital expenditure program for 2014 is estimated to be approximately $ 13 million . many of these projects are subject to review and cancellation at the discretion of our ceo and board of directors without incurring substantial charges . investment purchase activity in 2013 and 2012 is primarily attributable to investment of excess cash flows from operations . 17 cash flows from financing activities we continued to increase our buyback activity in 2013 compared to prior years . off-balance sheet arrangements we are not party to any off-balance sheet arrangements that have or are reasonably likely to have a material current or future effect on our financial condition , changes in financial condition , revenues , expenses , results of operations , liquidity , capital expenditures or capital resources . commitments and contractual agreements we had one material contractual agreement as of december 31 , 2013 , as follows : payments due by period ( in thousands ) total less than 1 year 1 to 3 years 3 to 5 years more than 5 years purchase obligations ( 1 ) $ 1,361 $ 1,361 $ — $ — $ — ( 1 ) the purchase obligation consists of delivery of aluminum ingot from one supplier . the quantity and price are fixed over the life of the contract . contingencies we are subject to various claims and legal actions that arise in the ordinary course of business . we closely monitor these claims and legal actions and frequently consult with our legal counsel to determine whether they may , when resolved , have a material adverse effect on our financial position or results of operations . while we are unable to estimate the ultimate dollar amount of exposure or loss in connection with these matters , we make accruals as warranted . we believe that we have adequately provided in our consolidated financial statements for the potential impact of these contingencies . we also believe that the outcomes will not significantly affect the long-term results of operations , our financial position or our cash flows . critical accounting estimates the preparation of financial statements in conformity with accounting principles generally accepted in the united states of america ( “ us gaap ” ) requires management to make estimates and assumptions about future events , and apply judgments that affect the reported amounts of assets , liabilities , revenue and expenses in our consolidated financial statements and related notes . we base our estimates , assumptions and judgments on historical experience , current trends and other factors believed to be relevant at the time our consolidated financial statements are prepared . however , because future events and their effects can not be determined with certainty , actual results could differ from our estimates and assumptions , and such differences could be material . we believe the following critical accounting policies affect our more significant estimates , assumptions and judgments used in the preparation of our consolidated financial statements . inventory reserves – we establish a reserve for inventories based on the change in inventory requirements due to product line changes , the feasibility of using obsolete parts for upgraded part substitutions , the required parts needed for part supply sales , replacement parts and for estimated shrinkage . warranty – a provision is made for estimated warranty costs at the time the product is shipped and revenue is recognized . the warranty period is : the earlier of one year from the date of first use or 18 months from date of shipment for parts only ; an additional four years on compressors ( if applicable ) ; 15 years on aluminized steel gas-fired heat exchangers ( if applicable ) ; 25 years on stainless steel heat exchangers ( if applicable ) ; and 10 years on gas-fired heat exchangers in rl products ( if applicable ) . with the introduction of the rq product line in 2010 , our warranty policy for the rq series was implemented to cover parts for two years from date of unit shipment and labor for one year from date of unit shipment . warranty expense is estimated based on the warranty period , historical warranty trends and associated costs , and any known identifiable warranty issue . due to the absence of warranty history on new products , an additional provision may be made for such products . our estimated future warranty cost is subject to adjustment from time to time depending on changes story_separator_special_tag million and $ 5.9 million respectively . based on historical performance and current expectations , we believe our cash and cash equivalents balance , the projected cash flows generated from our operations , our existing committed revolving credit facility ( or comparable financing ) and our expected ability to access capital markets will satisfy our working capital needs , capital expenditures and other liquidity requirements associated with our operations in 2014 and the foreseeable future . 16 statement of cash flows the table below reflects a summary of our net cash flows provided by operating activities , net cash flows used in investing activities , and net cash flows used in financing activities for the years indicated . replace_table_token_18_th cash flows from operating activities accounts receivable decreased as a result of lower fourth quarter sales in 2013 compared to 2012. fourth quarter sales in 2012 were higher than fourth quarter 2011 , which caused accounts receivable at december 31 , 2012 to increase compared to 2011. the higher 2011 income statement adjustment and change in income tax receivable was due to deferred taxes from additional bonus depreciation and capital expenditures done in 2011. cash flows from investing activities capital expenditures were primarily investments in our manufacturing and production equipment to support our growth and improve efficiencies with equipment which combines the latest advancement in automation and laser technology . we took advantage of 2011 bonus depreciation tax deductions , which caused the large amount of capital expenditures in 2011. the capital expenditure program for 2014 is estimated to be approximately $ 13 million . many of these projects are subject to review and cancellation at the discretion of our ceo and board of directors without incurring substantial charges . investment purchase activity in 2013 and 2012 is primarily attributable to investment of excess cash flows from operations . 17 cash flows from financing activities we continued to increase our buyback activity in 2013 compared to prior years . off-balance sheet arrangements we are not party to any off-balance sheet arrangements that have or are reasonably likely to have a material current or future effect on our financial condition , changes in financial condition , revenues , expenses , results of operations , liquidity , capital expenditures or capital resources . commitments and contractual agreements we had one material contractual agreement as of december 31 , 2013 , as follows : payments due by period ( in thousands ) total less than 1 year 1 to 3 years 3 to 5 years more than 5 years purchase obligations ( 1 ) $ 1,361 $ 1,361 $ — $ — $ — ( 1 ) the purchase obligation consists of delivery of aluminum ingot from one supplier . the quantity and price are fixed over the life of the contract . contingencies we are subject to various claims and legal actions that arise in the ordinary course of business . we closely monitor these claims and legal actions and frequently consult with our legal counsel to determine whether they may , when resolved , have a material adverse effect on our financial position or results of operations . while we are unable to estimate the ultimate dollar amount of exposure or loss in connection with these matters , we make accruals as warranted . we believe that we have adequately provided in our consolidated financial statements for the potential impact of these contingencies . we also believe that the outcomes will not significantly affect the long-term results of operations , our financial position or our cash flows . critical accounting estimates the preparation of financial statements in conformity with accounting principles generally accepted in the united states of america ( “ us gaap ” ) requires management to make estimates and assumptions about future events , and apply judgments that affect the reported amounts of assets , liabilities , revenue and expenses in our consolidated financial statements and related notes . we base our estimates , assumptions and judgments on historical experience , current trends and other factors believed to be relevant at the time our consolidated financial statements are prepared . however , because future events and their effects can not be determined with certainty , actual results could differ from our estimates and assumptions , and such differences could be material . we believe the following critical accounting policies affect our more significant estimates , assumptions and judgments used in the preparation of our consolidated financial statements . inventory reserves – we establish a reserve for inventories based on the change in inventory requirements due to product line changes , the feasibility of using obsolete parts for upgraded part substitutions , the required parts needed for part supply sales , replacement parts and for estimated shrinkage . warranty – a provision is made for estimated warranty costs at the time the product is shipped and revenue is recognized . the warranty period is : the earlier of one year from the date of first use or 18 months from date of shipment for parts only ; an additional four years on compressors ( if applicable ) ; 15 years on aluminized steel gas-fired heat exchangers ( if applicable ) ; 25 years on stainless steel heat exchangers ( if applicable ) ; and 10 years on gas-fired heat exchangers in rl products ( if applicable ) . with the introduction of the rq product line in 2010 , our warranty policy for the rq series was implemented to cover parts for two years from date of unit shipment and labor for one year from date of unit shipment . warranty expense is estimated based on the warranty period , historical warranty trends and associated costs , and any known identifiable warranty issue . due to the absence of warranty history on new products , an additional provision may be made for such products . our estimated future warranty cost is subject to adjustment from time to time depending on changes
| income taxes replace_table_token_10_th the income tax provision for 2013 reflected benefits related to the r & d credit and the indian employment credit of approximately $ 0.9 million for tax years 2013 and 2012. these federal credits were retroactively reinstated on january 2 , 2013 , with the enactment of the american taxpayer relief act of 2012 ( `` atra '' ) . no r & d credit or indian employment credit benefits were recorded in the income tax provision for 2012. the company also had a change in estimate related to the recoverability of certain 2012 tax credits that was recorded in the first quarter of 2013 for approximately $ 0.6 million , causing our effective tax rate to be lower than expected . this change in estimate was the result of additional and better information . in addition , our domestic manufacturing deduction for 2013 increased approximately $ 0.7 million compared to 2012 . 13 year ended december 31 , 2012 vs. year ended december 31 , 2011 net sales replace_table_token_11_th the increase in net sales was the result of the favorable reception to our new products and increased market share , along with 3 % to 5 % price increases introduced during the year . because of our wide product mix and flexibility of features within each product , overall net sales increased approximately 14 % . we estimate that approximately 4 % of the net sale increase was related to the price increases during the year and the other 9 % was related to increased unit sales . cost of sales replace_table_token_12_th the principal components of cost of sales are labor , raw materials , component costs , factory overhead , freight out and engineering expense . the principal high volume raw materials used in our manufacturing processes are steel , copper and aluminum , which are obtained from domestic suppliers . higher component prices adversely affected gross profit in 2011. also , the company experienced the negative effect of manufacturing inefficiencies due to the introduction of new products and our decision to replace approximately 50 % of aaon 's heavily-used sheet metal equipment in 2011. the new equipment allowed us to
| 14,301 |
technology solutions revenues increased in 2014 compared to 2013 primarily due to small business acquisitions and higher volumes in our transaction processing businesses , partially offset by a decrease in software products and services revenues . 32 mckesson corporation financial review ( continued ) gross profit : replace_table_token_7_th bp - basis points ( 1 ) gross profit for our distribution solutions segment for 2015 , 2014 and 2013 includes lifo-related inventory charges of $ 337 million , $ 311 million and $ 13 million . consolidated gross profit and gross profit margin increased in 2015 and 2014 primarily due to an increase in our distribution solutions segment . distribution solutions distribution solutions gross profit margin increased over the last two years primarily reflecting our business acquisitions and higher buy margin within our north american distribution business , partially offset by a decrease in sell margin primarily driven by higher sales volume , and an increase in lifo-related inventory charges . buy margin primarily reflects volume and timing of compensation we receive from pharmaceutical manufacturers . gross profit margin for 2015 was also unfavorably affected by the increased sales associated with newly launched drugs for the treatment of hepatitis c. gross profit margin for 2014 was also favorably affected by growth in sales of higher margin generic drugs . our lifo-related inventory expense was $ 337 million in 2015 , $ 311 million in 2014 and $ 13 million in 2013. our north american distribution business uses the lifo method of accounting for the majority of its inventories , which results in cost of sales that more closely reflects replacement cost than under other accounting methods . the business ' practice is to pass on to customers published price changes from suppliers . manufacturers generally provide us with price protection , which limits price-related inventory losses . a lifo expense is recognized when the net effect of price increases on pharmaceutical and non-pharmaceutical products held in inventory exceeds the impact of price declines , including the effect of branded pharmaceutical products that have lost market exclusivity . a lifo credit is recognized when the net effect of price declines exceeds the impact of price increases on pharmaceutical and non-pharmaceutical products held in inventory . our annual lifo expense is affected by expected changes in year-end inventory quantities , product mix and manufacturer pricing practices , which may be influenced by market and other external influences . changes to any of the above factors could have a material impact to our annual lifo expense . as a result of cumulative net price deflation , at march 31 , 2013 , pharmaceutical inventories at lifo were $ 60 million more than market and , accordingly , a $ 60 million lower-of-cost or market ( “ lcm ” ) reserve reduced inventories to market . in 2015 and 2014 , we experienced net inflation in our pharmaceutical inventories and lifo-related charges were incurred , and in 2014 , the $ 60 million lcm reserve was fully released resulting in an increase in gross profit . as of march 31 , 2015 and 2014 , pharmaceutical inventories at lifo did not exceed market . additional information regarding our lifo accounting is included under the caption “ critical accounting policies and estimates , ” included in this financial review . 33 mckesson corporation financial review ( continued ) technology solutions technology solutions gross profit margin decreased in 2015 primarily due to a $ 34 million pre-tax charge representing a catch-up in depreciation and amortization expense not recognized in 2014 when certain assets were classified as held-for-sale and our mix of business . these decreases were partially offset by the planned elimination of a product line and lower product alignment charges . gross profit margin increased in 2014 compared to 2013 primarily due to growth in higher margin revenues , partially offset by higher product alignment charges . in 2014 , we committed to a plan to sell our international technology and hospital automation businesses from our technology solutions segment . as required , we classified the results of operations and cash flows of these businesses as discontinued operations for all periods presented in our consolidated financial statements in 2014 and depreciation and amortization expense was not recognized as the assets were held-for-sale . during the first quarter of 2015 , we decided to retain the workforce business within our international technology business . as a result , we reclassified the workforce business , which had been designated as a discontinued operation during 2014 , as a continuing operation for all periods presented . additionally , we recorded a pre-tax charge of $ 34 million as a catch-up of depreciation and amortization expense not recognized in 2014 when the assets were classified as held-for-sale . in 2014 , the segment recorded pre-tax charges totaling $ 57 million . these charges primarily consisted of $ 35 million of product alignment charges , $ 15 million of integration-related expenses and $ 7 million of reduction-in-workforce severance charges . included in the total charge was $ 35 million for severance for employees primarily in our research and development , customer services and sales functions , and $ 15 million for asset impairments which primarily represents the write-off of deferred costs for a product that will no longer be developed . charges were recorded in our consolidated statement of operations as follows : $ 34 million in cost of sales and $ 23 million in operating expenses . in 2013 , this segment recorded $ 46 million of non-cash pre-tax impairment charges . these charges were the result of a significant decrease in estimated revenues for a software product . the charge included a $ 36 million goodwill impairment to reduce the carrying value of goodwill within the applicable reporting unit to its implied fair value . in addition , the goodwill had a nominal tax basis . this impairment charge was recorded in operating expenses within our consolidated statement of operations . story_separator_special_tag the balance of the charge represents a $ 10 million impairment to reduce the carrying value of the unamortized capitalized software held for sale costs for this product to its net realizable value . we concluded that the estimated future undiscounted revenues , net of estimated related costs , were insufficient to recover its carrying value . this impairment charge was recorded in cost of sales within our consolidated statement of operations . operating expenses : replace_table_token_8_th operating expenses increased over the last two years primarily due to our distribution solutions segment , which includes our celesio and pssi business acquisitions . 34 mckesson corporation financial review ( continued ) distribution solutions distribution solutions segment 's operating expenses and operating expenses as a percentage of revenues increased over the last two years primarily due to our business acquisitions , including increases in acquisition-related expenses and higher intangible asset amortization , and higher compensation and benefit costs . operating expenses in 2015 also included a pre-tax and after-tax $ 150 million charge associated with the settlement of controlled substance distribution claims with the dea , doj and various u.s. attorney 's offices , and 2014 and 2013 operating expenses included $ 68 million and $ 72 million of charges associated with our awp litigation . additionally , operating expenses for 2013 were negatively impacted by a $ 40 million charge for a legal dispute in our canadian business . during the fourth quarter of 2015 , the company reached an agreement in principle with the dea , doj and various u.s. attorney 's offices to settle all potential administrative and civil claims relating to investigations about the company 's suspicious order reporting practices for controlled substances . the global settlement with the dea and doj is subject to the execution of final settlement agreements . under the terms of the agreement in principle , the company has agreed to pay the sum of $ 150 million , implement certain remedial measures and the suspension of four distribution centers ' dea registrations for the specified products and time periods . accordingly , during the fourth quarter of 2015 , we recorded a pre-tax and after-tax charge of $ 150 million in operating expenses within our distribution solutions segment . refer to financial note 23 , “ other commitments and contingent liabilities , ” to the consolidated financial statements in this annual report on form 10-k for further information on the controlled substance distribution claim and the awp litigation matter . technology solutions technology solutions segment 's operating expenses and operating expenses as a percentage of revenue in 2015 decreased compared to 2014 primarily due to lower research and development expenses , and integration-related expenses and severance charges recorded in 2014. the segment 's operating expenses increased in 2014 compared to 2013 primarily due to small business acquisitions , integration-related expenses , reduction-in-workforce severance charges , and continued investment in research and development activities . these increases were partially offset by a $ 36 million goodwill impairment charge incurred in 2013. the segment 's operating expenses as a percentage of revenues decreased in 2014 compared to 2013 primarily reflecting an increase in revenue . corporate corporate expenses increased in 2015 compared to 2014 primarily due to higher compensation and benefit costs and asset impairments , partially offset by lower acquisition-related expenses and lower costs associated with corporate initiatives . corporate expenses increased in 2014 primarily due to higher compensation and benefit costs and higher acquisition-related expenses . additionally , 2013 corporate expenses include a non-cash pre-tax gain of $ 81 million gain ( $ 51 million after-tax ) related to our purchase of the remaining 50 % ownership interest in our corporate headquarters building located in san francisco , california . acquisition expenses and related adjustments acquisition expenses and related adjustments , which include transaction and integration expenses that are directly related to acquisitions by the company and gains and losses related to business combinations were $ 224 million , $ 218 million and $ 1 million in 2015 , 2014 and 2013. expenses for 2015 and 2014 primarily related to our acquisitions and integrations of celesio and pssi . additionally , expenses for 2013 include an $ 81 million pre-tax gain on business combination resulting from our acquisition of the remaining 50 % ownership interest in our corporate headquarters building . 35 mckesson corporation financial review ( continued ) replace_table_token_9_th acquisition expenses and related adjustments by segment were as follows : replace_table_token_10_th during 2015 and 2014 , we incurred $ 109 million and $ 129 million of acquisition-related expenses for our acquisition of celesio . during 2015 , 2014 and 2013 , we incurred $ 110 million , $ 68 million and $ 55 million in acquisition-related expenses for our acquisition of pssi . these expenses primarily include restructuring , severance and relocation expenses , employee retention incentives , outside service fees and other costs to integrate the business , and bridge loan fees . additionally , our acquisition-related expenses for our pssi acquisition include amounts associated with distribution center rationalization and information technology conversions to common platforms . amortization expenses of acquired intangible assets amortization expenses of acquired intangible assets purchased in connection with acquisitions recorded in operating expenses were $ 483 million , $ 308 million and $ 196 million in 2015 , 2014 and 2013. the increases in amortization expense primarily reflect our business acquisitions . amortization expense by segment was as follows : replace_table_token_11_th 36 mckesson corporation financial review ( continued ) other income , net : replace_table_token_12_th other income , net increased for 2015 from 2014 primarily due to our celesio acquisition including higher equity investment income . additionally , 2014 other income , net included a loss on a foreign exchange option relating to our acquisition of celesio .
| interest expense increased in 2015 primarily due to our acquisition of celesio . additionally , income from continuing operations in 2013 included a pre-tax non-cash impairment charge of $ 191 million associated with the sale of our 49 % equity interest in nadro , s.a. de c.v ( “ nadro ” ) . the impairment reduced the investment 's carrying value to its estimated fair value . nadro was sold in 2014 with no material gain or loss on disposition . our reported income tax rates were 30.7 % , 34.9 % and 30.1 % in 2015 , 2014 and 2013. income tax expense for 2014 included a charge of $ 122 million relating to our litigation with the canadian revenue agency ( “ cra ” ) . during the fourth quarter of 2015 , we committed to a plan to sell our brazilian pharmaceutical distribution business which we acquired through our acquisition of celesio . financial results for this business have been reclassified as discontinued operations for all periods presented in our consolidated financial statements . as a result , loss from discontinued operations , net of tax , for 2015 includes $ 241 million pre-tax ( $ 235 million after-tax ) non-cash impairment charges to write-off the business ' long-lived assets and reduce the carrying value of this business to its fair value , less costs to sell . loss from discontinued operations , net of tax , for 2014 included a non-cash pre-tax and after-tax impairment charge of $ 80 million related to our international technology business , which was sold in part in 2015. net loss attributable to noncontrolling interests for 2015 primarily reflects the $ 62 million of guaranteed dividends and recurring compensation that mckesson is obligated to pay the noncontrolling shareholders of celesio under the domination and profit and loss transfer agreement ( the “ domination agreement ” ) , which became effective in december 2014 as further described below . net income attributable to mckesson corporation was $ 1,476 million , $ 1,263 million and $ 1,338 million in
| 14,302 |
collaborative licensing and milestone revenue increased by more than 100 % in 2018 versus 2017 , due to a $ 3.0 million upfront payment earned under a license agreement with nuance biotech co. ltd. , or nuance , for the development and commercialization of exparel in china . the decrease in collaborative licensing and milestone revenue of 89 % in 2017 versus 2016 was primarily due to $ 2.0 million in milestones earned in 2016 under our agreement with aratana and the conclusion of recognizing deferred revenue from a development and licensing agreement with amylin pharmaceuticals , inc. which expired in january 2017. in 2018 , royalty revenue primarily reflects royalties earned on sales to aratana . royalty revenue decreased 3 % in 2018 versus 2017 and 34 % in 2017 versus 2016 due to the discontinuation of our depocyt ( e ) manufacturing activities in june 2017 , partially offset by increased aratana royalties earned . cost of goods sold cost of goods sold primarily relates to the costs to produce , package and deliver our products to customers . these expenses include labor , raw materials , manufacturing overhead and occupancy costs , depreciation of facilities , royalty payments , quality control and engineering . 50 the following table provides information regarding cost of goods sold and gross margin during the periods indicated , including percent changes ( dollar amounts in thousands ) : replace_table_token_5_th the five percentage point improvement in our gross margin for 2018 versus 2017 was primarily due to lower manufacturing costs per vial resulting from increased utilization of our facilities to manufacture exparel , impacting gross margins by four percentage points . in addition , gross margin improved by one percentage point as a result of scrapped lots of depocyt ( e ) that were expensed in 2017 before manufacturing was discontinued in june 2017. the nine percentage point improvement in our gross margin in 2017 versus 2016 was largely due to a $ 20.7 million charge for inventory and related reserves in second half of 2016 related to a single stability batch for exparel that was outside of specification for one of 21 acceptance criteria , improving 2017 gross margin by seven percentage points . the manufacturing issue that existed when this batch was made was subsequently corrected . we also had $ 5.9 million of unplanned manufacturing shutdown charges in 2016 related to this event , improving gross margin in 2017 by two percentage points . research and development expenses research and development expenses primarily consist of costs related to clinical trials and related outside services , product development and other research and development costs , including phase 4 trials that we are conducting to generate new data and best-practice administration techniques for exparel and stock-based compensation expense . clinical development expenses include costs for clinical personnel , clinical trials performed by third-parties , materials and supplies , database management and other third-party fees . product development and other research and development expenses include development costs for our products and medical information expenses , which include personnel , equipment , materials and contractor costs for process development and product candidates , toxicology studies , development costs related to significant scale-ups of our manufacturing capacity , facility costs for our research space and regulatory activities related to unapproved products and indications . stock-based compensation expense relates to the costs of stock option grants , awards of restricted stock units , or rsus , and our employee stock purchase plan , or espp . the following table provides a breakout of our research and development expenses during the periods indicated , including percent changes ( dollar amounts in thousands ) : replace_table_token_6_th total research and development expense decreased 3 % in 2018 versus 2017. the 47 % decrease in clinical development expense in 2018 versus 2017 was primarily due to the prior completion of our two phase 3 trials evaluating exparel as a single-dose nerve block for prolonged regional analgesia . enrollment in these studies concluded in june 2017. there were also decreases in costs related to the completion of product-related bioequivalence trials . the decreases in clinical development expense were partially offset by increased costs related to our snda submission for nerve block , including expenses related to an fda anesthetic and analgesic drug products advisory committee ( aadpac ) meeting held in february 2018 , increased clinical personnel and increased global expansion activities for exparel . product development and other expenses increased 64 % in 2018 versus 2017 due to development costs related to a significant scale-up of our manufacturing capacity for exparel in swindon , england in partnership with thermo fisher , additional expenditures for pipeline candidates , increased regulatory expense related to exparel in certain territories not yet approved ( including the european union , or e.u . ) and indications and products currently in development . in february 2019 , 51 we announced that commercial production of exparel was underway at the first of two dedicated manufacturing suites at the swindon facility . stock-based compensation increased 18 % in 2018 versus 2017 primarily due to an increase in personnel as well as the number of awards granted during 2018. total research and development expenses increased 25 % in 2017 versus 2016 largely due to a 41 % increase in clinical development expenses driven by the completion of our two phase 3 trials evaluating exparel as a single-dose nerve block for prolonged regional analgesia . enrollment in these studies began in the second quarter of 2016 and concluded in june 2017. the increase in clinical development expense was partially offset by a decrease in research grants . product development and other expense increased 11 % which reflects higher research and development facility costs at our science center campus in san diego , increased support from commercial manufacturing and quality organizations to support research and development functions and expenditures to develop a 200-liter manufacturing skid as part of a scale-up of our manufacturing capacity in swindon , england . story_separator_special_tag these increases were partially offset by reduced expenditures investigating the 2016 stability issue and fewer preclinical toxicology studies . stock-based compensation increased 1 % . selling , general and administrative expenses sales and marketing expenses primarily consist of compensation and benefits for our sales force and personnel that support our sales , marketing , medical and scientific affairs operations , commission payments to our marketing partners for the promotion and sale of exparel , expenses related to communicating health outcome benefits of exparel and educational programs for our customers . general and administrative expenses consist of compensation and benefits for legal , finance , regulatory activities related to approved products and indications , compliance , information technology , human resources , business development , executive management and other supporting personnel . it also includes professional fees for legal , audit , tax and consulting services . stock-based compensation expense relates to the costs of stock option grants , rsu awards and our espp . the following table provides information regarding selling , general and administrative expenses during the periods indicated , including percent changes ( dollar amounts in thousands ) : replace_table_token_7_th total selling , general and administrative expenses increased 10 % in 2018 versus 2017. sales and marketing expenses increased 13 % in 2018 versus 2017. in 2018 , we expanded our public affairs campaign focused on driving policy change to improve patient access to non-opioid treatment options . selling and promotional activities also increased to support the growth of exparel , including additional sales representatives focused on the outpatient market , initiatives and commissions related to our co-promotion agreement with depuy synthes and additional marketing spend for the commercial launch of exparel as a brachial plexus nerve block . we continued our marketing investment in exparel—including educational initiatives and programs to create product awareness within key surgical markets . we also continued to support multiple educational programs related to the impact of opioids and postsurgical pain management and our national advocacy campaign to educate patients about non-opioid treatment options . general and administrative expenses increased 7 % in 2018 versus 2017. the increase was primarily due to an increase in business development activities and an increase in legal expenditures related to securing ambulatory and dental reimbursement codes and ongoing costs related to a doj subpoena received in april 2015. stock-based compensation increased 2 % in 2018 versus 2017 , primarily due to accelerated stock-based compensation expense that occurred in the second half of 2018. total selling , general and administrative expenses increased 6 % in 2017 versus 2016 . 52 sales and marketing expenses increased by 6 % in 2017 versus 2016. the year over year increase was driven by an increase in spending for exparel marketing , educational initiatives and programs to create product awareness within key surgical markets . included in this increase are salaries and related personnel costs for field-based medical and sales professionals to better support and educate our customers , initiatives related to our co-promotion agreement with depuy synthes and a new exparel website that includes a surgeon selector tool . we also supported multiple educational programs related to the impact of opioids and postsurgical pain management along with our “ choices matter ” campaign , designed to raise awareness about non-opioid treatment options . the increase was partially offset by a $ 7.1 million contract termination charge due to crosslink bioscience , llc , or crosslink , which was recognized in 2016. general and administrative expenses increased 5 % in 2017 versus 2016. the increase in general and administrative expenses was largely attributable to an increase in regulatory expenses , primarily in preparation for a european medicines agency marketing authorization application for exparel in the e.u . other increased expenditures included support related to our expanded manufacturing facility in england and the development and launch of new corporate and exparel.com websites . stock-based compensation increased 6 % in 2017 versus 2016 , primarily due to new awards granted in mid-to-late 2016 and 2017. product discontinuation expenses in june 2017 , we discontinued production of depocyt ( e ) due to persistent technical issues specific to the depocyt ( e ) manufacturing process . the following table provides information regarding product discontinuation expenses during the periods indicated , including percent changes ( dollar amounts in thousands ) : replace_table_token_8_th in 2018 , we recorded non-recurring charges of $ 1.6 million related to the discontinuation of our depocyt ( e ) manufacturing activities for lease costs , asset retirement obligations and other estimated exit costs . the charges incurred in 2018 primarily represent additional lease and facility costs due to the fact that we do not expect to be able to sub-lease the property where depocyt ( e ) was manufactured considering the short period of time remaining on our existing lease . in 2017 , we recorded a non-recurring charge of $ 5.4 million , of which $ 0.5 million was for related inventory recorded in cost of goods sold , and the remaining $ 4.9 million was recorded in product discontinuation expense , including $ 2.0 million for lease costs less an estimate of potential sub-lease income , $ 1.9 million for the write-off of fixed assets and $ 1.0 million relating to employee severance , asset retirement obligations and other product discontinuation costs . other ( expense ) income the following table provides information regarding other ( expense ) income during the periods indicated , including percent changes ( dollar amounts in thousands ) : replace_table_token_9_th total other expense , net decreased 7 % in 2018 versus 2017. the impacts of the march 2017 issuance of $ 345.0 million of 2.375 % convertible senior notes due 2022 , or 2022 notes , and the 2017 repurchase of $ 118.2 million of our 3.25 % convertible senior notes due 2019 , or 2019 notes , resulted in an increase in interest expense of $ 3.9 million and a reduction in loss on early extinguishment of debt of $ 3.7 million .
| major fixed asset purchases included continuing expenditures for expanding our exparel manufacturing capacity in swindon , england in partnership with thermo fisher and facility upgrades at our science center campus in san diego , california . in 2017 , net cash used in investing activities was $ 223.8 million . this included purchases of fixed assets of $ 19.3 million , including continued expenditures for expanding our exparel manufacturing capacity in swindon , england in partnership with thermo fisher and facility upgrades at our science center campus in san diego . we also purchased $ 181.0 million of short-term and long-term investments ( net of maturities ) primarily funded from the net proceeds of the 2022 notes , made $ 8.5 million of contingent consideration payments to skyepharma on collections of net sales of depobupivacaine products , including exparel and made an equity investment in tela bio , inc. of $ 15.0 million . in 2016 , net cash used in investing activities was $ 61.8 million , which included purchases of fixed assets of $ 24.7 million . major capital projects included the continued expansion of our manufacturing capacity in swindon , england . we also purchased $ 21.2 million of short-term investments ( net of maturities ) and made $ 15.9 million of contingent consideration payments to skyepharma , including an $ 8.0 million milestone payment in connection with achieving $ 250.0 million of net sales of depobupivacaine products , including exparel , collected on a rolling annual basis and $ 7.9 million of related contingent consideration payments . financing activities in 2018 , net cash provided by financing activities was $ 9.0 million , which consisted of proceeds from the exercise of stock options of $ 7.2 million and $ 1.8 million from the issuance of shares under our espp . in 2017 , net cash provided by financing activities was $ 224.2 million , which consisted of proceeds from the issuance of the 2022 notes of $ 345.0 million , partially offset by $ 11.0 million of debt issuance and financing costs . in addition , a portion of the net proceeds from the
| 14,303 |
we assemble all of our products at our manufacturing facility , but certain critical processes such as coating and sterilization are done by outside vendors . we expect our current manufacturing facility will be sufficient through at least 2019. in addition to commercialization of pantheris in the united states and select international markets in march 2016 , we began commercializing our initial non-lumivascular platform products in 2009 and introduced our lumivascular platform products in the united states in late 2012. we generated revenues of $ 7.9 million in the year ended december 31 , 2018 and $ 9.9 million in the year ended december 31 , 2017. during the years ended december 31 , 2018 and 2017 , our net loss and comprehensive loss was $ 27.6 million and $ 48.7 million , respectively . we have not been profitable since inception , and as of december 31 , 2018 , our accumulated deficit was $ 328.9 million . since inception , we have financed our operations primarily through private and public placements of our preferred and common securities and , to a lesser extent , debt financing arrangements . in january 2015 , we completed an initial public offering , or ipo , of 125,000 shares . as a result of our ipo , which closed in february 2015 , we received net proceeds of approximately $ 56.9 million , after underwriting discounts and commissions of approximately $ 4.5 million and other expenses associated with our ipo of approximately $ 3.6 million . in september 2015 , we entered into a term loan agreement , or loan agreement , with crg partners iii l.p. and certain of its affiliated funds , collectively crg , under which we were able to borrow up to $ 50.0 million on or before march 29 , 2017 , subject to certain terms and conditions . we borrowed $ 30.0 million on september 22 , 2015 and an additional $ 10.0 million on june 15 , 2016 under the loan agreement . contingent on achievement of certain revenue milestones , among other conditions , we would have been eligible to borrow an additional $ 10.0 million , on or prior to march 29 , 2017 ; however , we did not achieve the level of revenues required to borrow the final $ 10.0 million . contemporaneously with the execution of the loan agreement , we entered into a securities purchase agreement with crg , pursuant to which crg purchased 8,705 shares of our common stock on september 22 , 2015 at a price of $ 559.64 per share , which represents the 10-day average of closing prices of our common stock ending on september 21 , 2015. pursuant to the securities purchase agreement , we filed a registration statement covering the resale of the shares sold to crg and must comply with certain affirmative covenants during the time that such registration statement remains in effect . we used the proceeds from the crg borrowing and securities purchase to retire our outstanding principal and accrued interest with pdl biopharma , or pdl , and to retire the principal and accrued interest underlying our outstanding promissory notes , or the notes . on february 3 , 2016 , we filed a universal shelf registration statement to offer up to $ 150.0 million of our securities and entered into an “ at-the-market ” program pursuant to a sales agreement with cowen and company , or cowen , through which we may , from time to time , issue and sell shares of common stock having an aggregate offering value of up to $ 50.0 million . the shelf registration statement also covers the resale of the shares sold to crg . the registration statement was declared effective by the sec on march 8 , 2016. during the year ended december 31 , 2016 , we sold 27,374 shares of common stock through the “ at-the-market ” program at an average price of $ 194.74 and raised net proceeds of $ 5.2 million , after payment of $ 0.2 million in commissions and fees to cowen . during the year ended december 31 , 2017 , we sold 189,684 shares of common stock through the “ at-the-market ” program at an average price of $ 17.68 and raised net proceeds of $ 3.2 million , after payment of $ 0.1 million in commissions and fees to cowen . due to the sec 's “ baby shelf rules , ” which prohibit companies with a public float of less than $ 75 million from issuing securities under a shelf registration statement in excess of one-third of such company 's public float in a twelve-month period , at this time we are unable to issue more shares through our “ at-the-market ” program . in addition , in august 2016 we completed a follow-on public offering of 246,445 shares of our common stock for net proceeds of approximately $ 31.5 million after deducting underwriting discounts and commissions of approximately $ 2.4 million and other expenses of approximately $ 0.6 million . the 246,445 shares include the exercise in full by the underwriters of their option to purchase an additional 32,145 shares of our common stock . 44 in april 2017 , we undertook an organizational realignment which included a reduction in force , that lowered our total headcount by approximately 33 % compared to december 31 , 2016. the organizational realignment was designed to focus our commercial efforts on driving catheter utilization in our strongest markets , around our most productive sales professionals . our field sales personnel headcount was reduced to 32 , down from 60 as of december 31 , 2016. this workforce reduction was designed to reduce operating expenses while continuing to support major product development and clinical initiatives . the strategic reduction in the field sales force was designed to maintain robust engagement with higher volume users of our lumivascular technology and position us to increase utilization of our catheters within our installed base of accounts in 2018 following the launch of our next generation products . story_separator_special_tag in september 2017 , we effected a cost reduction plan , which also included a company-wide reduction in force , lowering our total headcount by an additional 24 employees . our field sales personnel headcount was further reduced to a total of 20 people . in addition , as part of the cost reduction plan , in october 2017 , we subleased a portion of the company 's facilities and consolidated our operations primarily into one building . on november 3 , 2017 , we entered into a purchase agreement with lincoln park capital fund , llc , or lincoln park , pursuant to which lincoln park is obligated to purchase , at our request , up to $ 15.0 million of our common stock over a 30-month period , subject to certain limitations set forth in the purchase agreement ( the “ lincoln park purchase agreement ” ) . as a fee for lincoln park 's commitment to purchase such shares , we issued 23,584 shares of common stock to lincoln park on november 3 , 2017. as obligated under a registration rights agreement entered into with lincoln park in connection with the lincoln park purchase agreement , we filed a registration statement on form s-1 on november 6 , 2017 for up to 248,750 of such shares , which registration statement was declared effective by the sec on november 17 , 2017. on february 14 , 2018 , we entered into amendment no . 2 to the term loan agreement ( the “ amendment no . 2 loan agreement ” ) with crg . under its terms , the amendment no . 2 loan agreement , among other things : ( 1 ) extended the interest-only period through june 30 , 2021 ; ( 2 ) extended the period during which the company may elect to pay a portion of interest in payment-in-kind , or pik , interest payments through june 30 , 2021 so long as no default has occurred and is continuing ; ( 3 ) permitted the company to make its entire interest payments in pik interest payments for through december 31 , 2019 so long as no default has occurred and is continuing ; ( 4 ) extended the maturity date to june 30 , 2023 ; ( 5 ) reduced the minimum liquidity requirement to $ 3.5 million at all times ; ( 6 ) eliminated the minimum revenue covenant for 2018 and 2019 ; ( 7 ) reduced the minimum revenue covenant to $ 15 million for 2020 , $ 20 million for 2021 and $ 25 million for 2022 ; and ( 8 ) provided crg with board observer rights . in addition , on february 14 , 2018 , we entered into a series a preferred stock purchase agreement ( the “ series a purchase agreement ” ) with crg , pursuant to which it agreed to convert $ 38.0 million of the outstanding principal amount of its senior secured term loan ( plus the back-end fee and prepayment premium applicable thereto ) under the loan agreement into a newly authorized series a preferred stock . as discussed in the section of this report titled “ dividend policy , ” the holders of series a preferred stock are entitled to receive annual accruing dividends at a rate of 8 % , payable in additional shares of series a preferred stock or cash , at our option . the shares of series a preferred stock have no voting rights and rank senior to all other classes and series of the company 's equity in terms of repayment and certain other rights . the series a preferred stock and any of the company 's common stock issued upon conversion of the series a preferred stock is subject to a lockup agreement through february 14 , 2019. on february 16 , 2018 , we completed a public offering of 17,979 shares of series b preferred stock and warrants to purchase 17,979,000 shares of common stock . as a result , we received net proceeds of approximately $ 15.5 million after underwriting discounts , commissions , legal and accounting fees . each share of series b preferred stock is accompanied by one warrant that expires on the seventh anniversary of the date of issuance to purchase up to 500 shares of common stock ( the “ series 1 warrants ” ) and one warrant that expires on the earlier of ( i ) the seventh anniversary of the date of issuance or ( ii ) the 60th calendar day following the receipt and announcement of fda clearance of our pantheris below-the-knee device ( or the same or similar product with a different name ) to purchase up to 500 shares of common stock ; provided , however , if at any time during such 60-day period the volume weighted average price for any trading day is less than the then effective exercise price , the termination date shall be extended to the seven year anniversary of the initial exercise date ( the “ series 2 warrants ” ) . in addition , pursuant to the series a purchase agreement , we issued to crg 41,800 shares of series a preferred stock at the closing of the series b offering . the series a preferred stock was issued in exchange for the conversion of $ 38.0 million of the outstanding principal amount of their senior secured term loan ( plus the back-end fee and prepayment premium applicable thereto ) , totaling approximately $ 41.8 million . the series a preferred stock is initially convertible into 20,900,000 shares of common stock subject to certain limitations contained in the series a purchase agreement . on july 12 , 2018 , we entered into a securities purchase agreement with certain investors pursuant to which we agreed to sell and issue , in a registered direct offering , an aggregate of 2,166,180 shares of our common stock at an offering price of $ 1.6425 per share .
| sg & a expenses decreased $ 7.7 million , or 31 % , to $ 17.4 million during the year ended december 31 , 2018 , compared to $ 25.1 million during the year ended december 31 , 2017. this decrease was primarily due to a decrease in personnel-related expenses as a result of fewer employees and lower professional services expenses . stock-based compensation expense within sg & a totaled $ 2.4 million and $ 2.9 million for the years ended december 31 , 2018 and 2017 , respectively . restructuring . in april , september and october 2017 , we undertook organizational realignment and cost reduction activities to conserve resources which included reductions in force that lowered our total headcount and the sublease of one of our facilities . we recorded $ 1.3 million in restructuring charges during the year ended december 31 , 2017 , which consisted of severance related costs specific to the termination of 44 and 24 employees in april and september 2017 , respectively , and an operating lease related liability for one of our facilities . litigation settlement . between may 22 , 2017 and may 25 , 2017 , three class actions were filed in the superior court of the state of california , county of san mateo , or the state court , against us and certain of our officers and directors . the underwriters of our ipo in january 2015 were also named as defendants . these lawsuits allege that the registration statement for our ipo made false and misleading statements and omissions in violation of the securities act of 1933. plaintiffs sought , among other things , unspecified compensatory damages , interest , costs , recission , and attorneys ' fees . 48 the company and its directors believe that the foregoing lawsuits were without merit ; however , in the interest of avoiding the cost and disruption of continuing to defend against these lawsuits , the company entered into a settlement of the actions . the settlement is for a total of $ 5 million . the company 's total contribution to the settlement fund was $ 1.76 million , which was expensed in 2017
| 14,304 |
claim reserves are calculated using assumptions based on past experience adjusted for current trends and any other factors that would modify past experience and are subject to revision as current claim experience emerges and alters our view of future expectations . the two fundamental assumptions in the development of the group life waiver reserve are mortality and recovery . our emerging experience and that which continues to emerge within the industry indicate an increase in life expectancies , which decreases the ultimate anticipated death benefits to be paid under the group life waiver benefit . emerging experience also reflects an improvement in claim recovery rates , which also lessens the likelihood of payment of a death benefit while the insured is disabled . during the fourth quarter of 2013 , we completed a review of our assumptions and modified our mortality and claim recovery assumptions for our unum us group life waiver reserves and , as a result , reduced the applicable claim reserves by $ 85.0 million and increased 2013 net income $ 55.2 million . consolidated company outlook for 2016 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 maintaining a strong customer focus while providing an innovative product portfolio of financial protection choices to deepen employee coverages , broaden employer relationships , and open new markets . 35 our focus throughout 2016 will remain on profitably growing our business , maintaining solid margins through disciplined pricing , underwriting and expense management , and effectively managing our capital . although 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 , we continue to analyze and employ strategies that we believe will help us navigate this 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 . 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 in this item 7 and in the `` notes to consolidated financial statements '' contained herein in item 8. reconciliation of non-gaap 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 measures of `` operating revenue , '' `` before-tax operating income '' or `` before-tax operating loss , '' and `` after-tax operating income '' differ from total revenue , income before income tax , and 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 , non-operating retirement-related gains or losses , and certain other items as specified in the reconciliations below . we believe operating revenue and operating income or loss are better performance measures and better indicators of the revenue and profitability and underlying trends in our business . 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 . the amortization of prior period actuarial gains or losses , a component of the net periodic benefit cost for our pensions and other postretirement benefit plans , is driven by market performance as well as plan amendments and is not indicative of the operational results of our businesses . we believe that excluding the amortization of prior period gains or losses , as well as the 2014 settlement loss from our pension plan amendment , from operating income or loss provides investors with additional information for comparison and analysis of our operating results . although we manage our non-operating retirement-related gains or losses separately from the operational performance of our business , these gains or losses impact the overall profitability of our company and have historically increased or decreased over time , depending on plan amendments and market conditions and the resulting impact on the actuarial gains or losses in our pensions and other postretirement benefit plans . we believe that excluding the 2014 costs related to the early retirement of debt is appropriate because in conjunction with the debt redemption , we recognized in realized investment gains and losses a deferred gain from previously terminated derivatives which were associated with the hedge of this debt . story_separator_special_tag the amount recognized as a realized investment gain , which basically offsets the cost of the debt redemption , is also excluded from our non-gaap financial measures since we analyze our performance excluding amounts reported as realized investment gains or losses . we believe it provides investors with a more realistic view of our overall profitability if we are consistent in excluding both the cost of the debt retirement as well as the gain on the hedge of the debt . 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 . 36 a reconciliation of `` operating revenue '' to total revenue and `` before-tax operating income '' to income before income tax is as follows : replace_table_token_5_th the after-tax impacts of these items are reflected in the following reconciliation of after-tax operating income to net income . replace_table_token_6_th 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 37 contract benefits equaled $ 41.4 billion and $ 41.3 billion at december 31 , 2015 and 2014 , respectively , or approximately 79.8 percent and 76.6 percent of our total liabilities , respectively . reserves ceded to reinsurers were $ 6.9 billion at both december 31 , 2015 and 2014 , 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 . thereafter , the policy reserves for the product line are calculated using the same method we used for the loss recognition testing , referred to as the gross premium valuation method , wherein we use our best estimate as of the gross premium valuation ( loss recognition ) date rather than the initial policy issue date to determine the expected future claims , commissions , and expenses we will pay and the expected future gross premiums we will receive . because the key policy reserve assumptions for policy persistency , mortality and morbidity , and discount rates are all locked in at policy issuance based on assumptions appropriate at that time , policy reserve assumptions are generally not changed due to a change in claim status from active to disabled subsequent to policy issuance .
| before-tax operating income , which excludes net realized investment gains and losses and non-operating retirement-related gains or losses , as well as the 2014 long-term care reserve increase and the 2014 costs related to the early retirement of debt , declined 1.0 percent compared to 2014 , primarily as the result of a higher operating loss in our corporate segment and the impact on reported financial results of our u.k. subsidiaries from a lower foreign currency exchange rate in 2015. our unum us segment reported a slight increase in operating income of 0.6 percent in 2015 compared to 2014 , with growth in premium income and overall favorable benefits experience partially offset by lower net investment income . premium income increased 6.4 percent in 2015 compared to 2014 . the benefit ratio for our unum us segment for 2015 was 70.1 percent , compared to 70.6 percent in 2014 . unum us sales increased 4.2 percent in 2015 compared to 2014 . persistency for certain of our product lines is slightly below the level of the prior year but remains within our range of expectations . our unum uk segment reported an increase in operating income , as measured in unum uk 's local currency , of 2.4 percent in 2015 compared to 2014 , with an increase in premium income and overall favorable benefits experience partially offset by lower net investment income . premium income in local currency increased 2.3 percent in 2015 relative to 2014 . the benefit ratio for unum uk was 68.5 percent in 2015 compared to 70.9 percent in 2014 . unum uk sales in local currency increased 6.2 percent in 2015 compared to 2014 . persistency remains within our range of expectations . our colonial life segment reported an increase in operating income of 3.4 percent in 2015 compared to 2014 , with growth in premium income and favorable benefits experience . premium income grew 5.1 percent in 2015 compared to
| 14,305 |
eog 's composite wellhead crude oil and condensate price for 2014 decreased 10 % to $ 92.58 per barrel compared to $ 103.20 per barrel in 2013. ngl revenues in 2014 increased $ 160 million , or 21 % , to $ 934 million from $ 774 million in 2013 , due to an increase of 15 mbbld , or 23 % , in ngl deliveries ( $ 179 million ) , partially offset by a lower composite average price ( $ 19 million ) . the increase in deliveries primarily reflects increased volumes in the eagle ford and the permian basin . eog 's composite ngl price in 2014 decreased 2 % to $ 31.91 per barrel compared to $ 32.55 per barrel in 2013. wellhead natural gas revenues in 2014 increased $ 235 million , or 14 % , to $ 1,916 million from $ 1,681 million in 2013 , primarily due to a higher composite wellhead natural gas price . eog 's composite average wellhead natural gas price increased 13 % to $ 3.88 per mcf in 2014 compared to $ 3.42 per mcf in 2013. natural gas deliveries in 2014 increased less than 1 % to 1,353 mmcfd as compared to 1,347 mmcfd in 2013. increased production in the united states ( 12 mmcfd ) and trinidad ( 8 mmcfd ) was offset by lower production in canada ( 15 mmcfd ) . in the united states , increased production of associated natural gas in the eagle ford and permian basin areas was partially offset by lower production in the upper gulf coast and fort worth basin barnett shale areas . 33 during 2014 , eog recognized net gains on the mark-to-market of financial commodity derivative contracts of $ 834 million , which included net cash received from settlements of crude oil and natural gas financial derivative contracts of $ 34 million . during 2013 , eog recognized net losses on the mark-to-market of financial commodity derivative contracts of $ 166 million , which included net cash received from settlements of crude oil and natural gas financial derivative contracts of $ 116 million . gathering , processing and marketing revenues less marketing costs in 2014 declined $ 75 million compared to 2013 , primarily due to lower margins on crude oil marketing activities . operating and other expenses 2015 compared to 2014 . during 2015 , operating expenses of $ 15,444 million were $ 2,650 million higher than the $ 12,794 million incurred during 2014. operating expenses for 2015 included impairments of proved properties , other property , plant and equipment and other assets of $ 6,326 million primarily due to commodity price declines . the following table presents the costs per barrel of oil equivalent ( boe ) for the years ended december 31 , 2015 and 2014 : replace_table_token_14_th ( 1 ) total excludes gathering and processing costs , exploration costs , dry hole costs , impairments , marketing costs and taxes other than income . the primary factors impacting the cost components of per-unit rates of lease and well , transportation costs , dd & a , g & a and net interest expense for 2015 compared to 2014 are set forth below . see `` net operating revenues '' above for a discussion of production volumes . lease and well expenses include expenses for eog-operated properties , as well as expenses billed to eog from other operators where eog is not the operator of a property . lease and well expenses can be divided into the following categories : costs to operate and maintain crude oil and natural gas wells , the cost of workovers and lease and well administrative expenses . operating and maintenance costs include , among other things , pumping services , salt water disposal , equipment repair and maintenance , compression expense , lease upkeep and fuel and power . workovers are operations to restore or maintain production from existing wells . each of these categories of costs individually fluctuates from time to time as eog attempts to maintain and increase production while maintaining efficient , safe and environmentally responsible operations . eog continues to increase its operating activities by drilling new wells in existing and new areas . operating and maintenance costs within these existing and new areas , as well as the costs of services charged to eog by vendors , fluctuate over time . lease and well expenses of $ 1,182 million in 2015 decreased $ 234 million from $ 1,416 million in 2014 primarily due to lower operating and maintenance costs in the united states ( $ 125 million ) , lower lease and well expenses in other international ( $ 99 million ) primarily due to the sale of the canadian assets and lower workover expenditures in the united states ( $ 21 million ) , partially offset by increased lease and well administrative expenses in the united states ( $ 12 million ) . transportation costs represent costs associated with the delivery of hydrocarbon products from the lease to a downstream point of sale . transportation costs include transportation fees , costs associated with crude-by-rail operations , the cost of compression ( the cost of compressing natural gas to meet pipeline pressure requirements ) , dehydration ( the cost associated with removing water from natural gas to meet pipeline requirements ) , gathering fees and fuel costs . story_separator_special_tag 34 transportation costs of $ 849 million in 2015 decreased $ 123 million from $ 972 million in 2014 primarily due to decreased transportation costs in the rocky mountain area ( $ 81 million ) and the eagle ford ( $ 48 million ) primarily due to an increase in the use of pipelines to transport crude oil production , partially offset by increased transportation costs related to higher production from the permian basin ( $ 19 million ) . dd & a of the cost of proved oil and gas properties is calculated using the unit-of-production method . eog 's dd & a rate and expense are the composite of numerous individual dd & a group calculations . there are several factors that can impact eog 's composite dd & a rate and expense , such as field production profiles , drilling or acquisition of new wells , disposition of existing wells and reserve revisions ( upward or downward ) primarily related to well performance , economic factors and impairments . changes to these factors may cause eog 's composite dd & a rate and expense to fluctuate from period to period . dd & a of the cost of other property , plant and equipment is generally calculated using the straight-line depreciation method over the useful lives of the assets . dd & a expenses in 2015 decreased $ 683 million to $ 3,314 million from $ 3,997 million in 2014. dd & a expenses associated with oil and gas properties in 2015 were $ 691 million lower than in 2014 primarily due to lower unit rates in the united states ( $ 513 million ) and trinidad ( $ 28 million ) , a decrease in production in the united states ( $ 44 million ) and lower dd & a expense in other international ( $ 104 million ) primarily due to the sale of the canadian assets . unit rates in the united states decreased primarily due to impairments of proved oil and gas properties ( see note 14 to the consolidated financial statements ) , upward reserve revisions and reserves added at lower costs as a result of increased efficiencies . g & a expenses of $ 367 million in 2015 were $ 35 million lower than 2014 primarily due to lower employee-related expenses . net interest expense of $ 237 million in 2015 was $ 36 million higher than 2014 primarily due to interest incurred on the notes issued in march 2015 ( $ 28 million ) , as well as a decrease in capitalized interest ( $ 15 million ) . this was partially offset by the reduction of interest on debt repaid in june 2015 and during 2014 ( $ 11 million ) . exploration costs of $ 149 million in 2015 decreased $ 35 million from $ 184 million in 2014 primarily due to decreased geological and geophysical expenditures in the united states ( $ 19 million ) and lower exploration administrative expenses in other international ( $ 10 million ) primarily due to the sale of the canadian assets . impairments include amortization of unproved oil and gas property costs ; as well as impairments of proved oil and gas properties ; other property , plant and equipment ; and other assets . unproved properties with acquisition costs that are not individually significant are aggregated , and the portion of such costs estimated to be nonproductive is amortized over the remaining lease term . when circumstances indicate that a proved property may be impaired , eog compares expected undiscounted future cash flows at a dd & a group level to the unamortized capitalized cost of the asset . if the expected undiscounted future cash flows are lower than the unamortized capitalized cost , the capitalized cost is reduced to fair value . fair value is generally calculated by using the income approach described in the fair value measurement topic of the financial accounting standards board 's accounting standards codification ( asc ) . in certain instances , eog utilizes accepted bids as the basis for determining fair value . impairments of $ 6,614 million in 2015 increased $ 5,870 million from $ 744 million in 2014 primarily due to increased impairments of proved properties and other assets in the united states ( $ 5,959 million ) , primarily due to commodity price declines ; and increased amortization of unproved property costs in the united states ( $ 112 million ) , which was caused by higher amortization rates being applied to undeveloped leasehold costs in response to the significant decrease in commodity prices and an increase in eog 's estimates of undeveloped properties not expected to be developed before lease expiration ; partially offset by decreased impairments of proved properties in the united kingdom ( $ 156 million ) and argentina ( $ 43 million ) . proved property and other asset impairments in the united states were primarily related to legacy natural gas assets and marginal liquids plays . eog recorded impairments of proved properties ; other property , plant and equipment ; and other assets of $ 6,326 million and $ 575 million in 2015 and 2014 , respectively . taxes other than income include severance/production taxes , ad valorem/property taxes , payroll taxes , franchise taxes and other miscellaneous taxes . severance/production taxes are generally determined based on wellhead revenues , and ad valorem/property taxes are generally determined based on the valuation of the underlying assets . taxes other than income in 2015 decreased $ 336 million to $ 422 million ( 6.6 % of wellhead revenues ) from $ 758 million ( 6.0 % of wellhead revenues ) in 2014. the decrease in taxes other than income was primarily due to decreases in severance/production taxes ( $ 307 million ) , primarily as a result of decreased wellhead revenues and lower ad valorem/property taxes ( $ 17 million ) , both in the united states
| crude oil equivalent volumes are determined using a ratio of 1.0 barrel of crude oil and condensate or ngls to 6.0 thousand cubic feet of natural gas . mmboe is calculated by multiplying the mboed amount by the number of days in the period and then dividing that amount by one thousand . 32 2015 compared to 2014. wellhead crude oil and condensate revenues in 2015 decreased $ 4,807 million , or 49 % , to $ 4,935 million from $ 9,742 million in 2014 , due to a lower composite average wellhead crude oil and condensate price ( $ 4,677 million ) and a decrease of 5 mbbld , or 2 % , in wellhead crude oil and condensate deliveries ( $ 131 million ) . the decrease in deliveries primarily reflects decreased production in the north dakota bakken , the fort worth barnett shale area and other international , partially offset by increased production in the permian basin and eagle ford . the decrease in other international is due to the sale of the canadian assets . eog 's composite wellhead crude oil and condensate price for 2015 decreased 49 % to $ 47.53 per barrel compared to $ 92.58 per barrel in 2014. ngl revenues in 2015 decreased $ 526 million , or 56 % , to $ 408 million from $ 934 million in 2014 , due to a lower composite average price ( $ 490 million ) and a decrease of 3 mbbld , or 4 % , in ngl deliveries ( $ 36 million ) . eog 's composite ngl price in 2015 decreased 55 % to $ 14.49 per barrel compared to $ 31.91 per barrel in 2014. wellhead natural gas revenues in 2015 decreased $ 855 million , or 45 % , to $ 1,061 million from $ 1,916 million in 2014 , primarily due to a lower composite wellhead natural gas price ( $ 730 million ) and a decrease in wellhead natural gas deliveries ( $ 125 million ) . eog 's composite average wellhead natural
| 14,306 |
the major components of other revenue are the revenues generated from the operation of two managed landfills in florida , landfill gas-to-energy projects and the brokerage business . fiscal year ended december 31 , 2012 compared to 2011 revenue for 2012 was $ 537.9 , an increase of $ 110.5 , or 25.9 % , from revenue of $ 427.4 in 2011. the increase in revenue in 2012 compared to 2011 was due to the following : collection revenue increased by $ 72.7 , or 24.4 % , of which $ 63.9 was attributable to the acquisition of veolia . the remaining increase is due in large part to other acquisition activity . disposal revenue increased by $ 27.3 , or 19.4 % , of which $ 11.7 was attributable to the acquisition of veolia . additionally , disposal revenue in the south region increased by $ 10.3 due to the full year impact of a transaction that was completed in june 2011 and higher special waste volumes and an additional $ 1.1 of revenue was generated as a result of the full year impact of other acquisitions . sale of recyclables decreased by $ 0.3 , or 1.8 % , in 2012 due to a decrease in the market price of recycled commodities . the national average monthly published price for occ decreased by approximately 25 % from 2011 to 2012. the decline in prices were partially offset by an increase in volumes processed due to a new recycling facility that began operations in january 2012 and the acquisition of veolia , which contributed $ 2.2 to the sale of recyclables . fuel fees and environmental fees increased by $ 5.4 , or 27.1 % . the acquisition of veolia contributed $ 5.3 in additional fuel fees and environmental fees . without giving effect to the acquisition , fuel fees and environmental fees were relatively stable year over year . other revenue increased by $ 23.7 , or 116.7 % , in 2012. the main driver of the increase was the acquisition of veolia which contributed $ 12.4 in other revenue . the major components of other revenue are the revenues generated from the operation of two managed landfills in florida and landfill gas-to-energy projects . the remaining increase relates to a $ 10.5 increase in the south region due primarily to the full year impact of the acquisition of the brokerage business . operating expenses the following table summarizes our operating expenses ( in millions and as a percentage of our revenue ) . replace_table_token_5_th our operating expenses include the following : labor and related benefits consist of salaries and wages , health and welfare benefits , incentive compensation and payroll taxes . 27 transfer and disposal costs include tipping fees paid to third-party disposal facilities and transfer stations and transportation and subcontractor costs ( which include costs for independent haulers who transport waste from transfer stations to our disposal facilities and costs for local operators who provide waste handling services associated with our national accounts in markets outside our standard operating areas ) . maintenance and repairs expenses include maintenance and repairs to our vehicles , equipment and containers . fuel costs include the direct cost of fuel used by our vehicles , net of fuel credits and any ineffectiveness on our fuel hedges . the company also incurs certain indirect fuel costs in its operations that are not taken into account in the above analysis . franchise fees and taxes consist of municipal franchise fees , host community fees and royalties . risk management expenses include casualty insurance premiums and claims payments and estimates for claims incurred but not reported . other expenses include expenses such as facility operating costs , equipment rent , leachate treatment and disposal , and other landfill maintenance costs . accretion expense related to landfill capping , closure and post-closure is included in operating expenses in the company 's consolidated income statements , however , it is excluded from the table below ( refer to discussion below accretion of landfill retirement obligations for a detailed discussion of the changes in amounts ) . the following table summarizes the major components of our operating expenses , excluding accretion expense ( in millions and as a percentage of our revenue ) : replace_table_token_6_th the cost categories shown above may not be comparable to similarly titled categories used by other companies . thus , you should exercise caution when comparing our cost of operations by cost component to that of other companies . fiscal year ended december 31 , 2013 compared to 2012 operating expenses increased by $ 486.5 , or 149.6 % , to $ 811.8 for 2013 from $ 325.3 in 2012. operating expenses , as a percentage of revenue , increased by 110 basis points in 2013 compared to 2012. labor and related benefits increased by $ 179.0 or 160.0 % to $ 290.9 , of which $ 176.9 of this increase was attributable to the acquisition of veolia . the remainder is primarily due to other acquisition activity and merit-based wage increases in 2013 as well as increases in health care costs . transfer and disposal costs increased by $ 105.3 or 125.8 % to $ 189.0. the acquisition of veolia accounted for $ 101.1 of the increase . offsetting these increase were the benefits of increased internalization of waste which reduces the cost base . 28 maintenance and repairs expense increased by $ 36.9 , or 129.5 % to $ 65.4. the acquisition of veolia accounted for $ 38.1 of the increase . absent the acquisition of veolia , maintenance and repairs expenses decreased due to an effort to standardize maintenance programs across the company . during 2013 , our fuel costs increased $ 56.2 , or 129.2 % to $ 99.7. the impact of the veolia acquisition accounted for $ 57.5 of our 2013 fuel costs . excluding the impact of the veolia acquisition our fuel costs were relatively stable year over year . franchise fees and taxes increased $ 41.7 or 270.8 % to $ 57.1 story_separator_special_tag during 2013 primarily due to the acquisition of businesses in franchise markets . risk management expenses increased $ 12.6 or 115.6 % to $ 23.5 during 2013 primarily due to the acquisition of veolia offset by the favorable development of existing claims compared to the prior year . other operating costs increased $ 54.8 or 174.5 % to $ 86.2 in 2013 , of which $ 46.9 relates to the acquisition of veolia . additional costs were incurred in the current year as a result of extremely wet weather , which increased landfill leachate disposal costs and costs incurred to control odor issues at our moretown landfill . fiscal year ended december 31 , 2012 compared to 2011 operating expenses increased by $ 71.5 , or 28.2 % , to $ 325.3 for 2012 from $ 253.8 for 2011. operating expenses , as a percentage of revenue , increased by 1.1 % in 2012 compared to 2011. labor and related benefits increased by $ 24.2 or 27.6 % to $ 111.9 , of which $ 22.1 of this increase is attributable to the acquisition of veolia . the remainder is primarily due to other acquisition activity and merit-based wage increases in 2012 as well as increases in health care costs . as a percentage of revenue , labor and related benefits were negatively impacted by the relative mix of higher collection revenue and lower landfill , transfer , commodity and subcontract revenue compared to 2011 as these revenues have lower associated variable labor costs . transfer and disposal costs increased by $ 16.0 or 23.6 % to $ 83.7. the acquisition of veolia accounted for $ 7.2 of the increase . the brokerage business contributed an additional $ 9.2 of expenses in 2012 due to the timing of the acquisition in 2011. offsetting these increase were the benefits of increased internalization of waste which reduces the cost base . maintenance and repairs expense increased by $ 5.6 , or 24.5 % to $ 28.5. the acquisition of veolia accounted for $ 5.1 of the increase . the remaining increase is due to costs associated with our fleet maintenance initiative as well as the increased cost of tires and container refurbishment expenses . during 2012 , our fuel costs increased $ 7.2 , or 19.8 % to $ 43.5. the impact of the veolia acquisition accounted for $ 7.1 of our 2012 fuel costs . excluding the impact of the veolia acquisition our fuel costs were relatively stable year over year . franchise fees and taxes increased $ 8.8 or 133.3 % to $ 15.4 during 2012 primarily due to the acquisition of businesses in franchise markets . risk management expenses increased $ 2.5 or 29.8 % to $ 10.9 during 2012 primarily due to the acquisition of veolia and the unfavorable development of claims compared to the prior year . other operating costs increased $ 7.2 or 30.0 % to $ 31.4 in 2012 , of which $ 8.2 relates to the acquisition of veolia , partially offset by operational synergies achieved through consolidation of the companies . accretion of landfill retirement obligations accretion expense was $ 14.1 , $ 7.9 and $ 8.0 for 2013 , 2012 and 2011 , respectively . veolia contributed approximately $ 8.1 in 2013 and $ 1.2 in 2012. further , the current year cost changes were discounted at a lower interest rate in 2013 compared to 2012 and compared to 2011 and obligations were settled in 2013 and 2012 in the amount of $ 12.0 in 2013 compared to $ 6.2 in 2012 and $ 3.1 in 2011 . 29 selling , general and administrative selling , general and administrative expenses include salaries , legal and professional fees , rebranding and integration costs and other expenses . salaries expenses include salaries and wages , health and welfare benefits and incentive compensation for corporate and field general management , field support functions , sales force , accounting and finance , legal , management information systems , and clerical and administrative departments . rebranding and integration costs are those costs associated with renaming all of the acquired and merged businesses ' trucks and containers and those costs expended to align the corporate and strategic operations of the acquired and merged businesses . other expenses include rent and office costs , fees for professional services provided by third parties , marketing , directors ' and officers ' insurance , general employee relocation , travel , entertainment and bank charges , but excludes any such amounts recorded as restructuring charges . the following table provides the components of our selling , general and administrative expenses for the periods indicated ( in millions and as a percentage of our revenue ) : replace_table_token_7_th fiscal year ended december 31 , 2013 compared to 2012 our salaries expenses increased by $ 64.6 primarily due to the acquisition of veolia , which contributed $ 47.3. other contributing factors to the increase included : increases in stock compensation expense of $ 3.3 , retention bonuses paid to certain employees of $ 3.2 , merit increases of $ 1.9 and increased corporate employees and region staff ; however , salaries expense decreased 10 basis points as a percentage of revenue for 2013 compared to 2012. legal and professional fees increased by $ 12.1 in 2013 compared to 2012 primarily as a result of increased fees related to union contract negotiations and costs incurred in connection with the defense of a legal matter . refer to note 20 in the consolidated financial statements included in item 8 for further details regarding the legal matter . rebranding and integration costs are mainly related to the costs associated with the acquisition of veolia . these costs are mainly comprised of professional fees , including legal , accounting , engineering and rebranding fees paid to outside parties to rebrand all containers and equipment .
| in 2011 , we used cash of $ 108.7 to acquire businesses and $ 72.6 to acquire property and equipment . we received cash of $ 48.0 related to divestitures of operations . cash flows used in financing activities cash flows used in financing activities in 2013 were $ 32.3 , as compared to an inflow from financing activities of $ 1.94 billion in 2012. in 2013 , we incurred approximately $ 22.9 in costs paid to our lenders in connection with refinancing our term loan b facility and payments of other costs associated with the original term b loan facility ( defined below ) . we made payments on our revolver and long-term debt obligations in the amount of $ 196.8 during 2013 and borrowed approximately $ 184.0 on the revolver . borrowings on the revolver were utilized to fund acquisition of businesses and for interest payments on debt . cash flows provided by financing activities in 2012 were $ 1.94 billion as compared to $ 40.7 in 2011 , mainly related to debt incurred to finance the acquisition of veolia . senior secured credit facilities in november 2012 , the company entered into ( i ) a $ 1.8 billion term loan b facility ( the term loan b facility ) and ( ii ) a $ 300 revolving credit facility ( the revolving credit facility and , together with the term loan b facility , the senior secured credit facilities ) with deutsche bank trust company americas , as administrative agent , and affiliates of barclays capital inc. , deutsche bank securities inc. , macquarie capital ( usa ) inc. , ubs securities llc and credit suisse securities ( usa ) llc , and other lenders from time to time party thereto and effected a re-pricing transaction in february 2013 that reduced the applicable margin by 100 basis points . the company paid down $ 18.0 during the year ended december 31 , 2013 related to the term loan . see note 13 , debt , to our consolidated financial statements for the
| 14,307 |
completion of the merger is subject to various customary closing conditions , including , but not limited to , ( i ) approval by lakes ' shareholders of the issuance of shares of lakes common stock under the merger agreement , ( ii ) the expiration or termination of any applicable waiting period under the hart-scott-rodino antitrust improvements act of 1976 , as amended ( if applicable ) , ( iii ) certain gaming approvals having been obtained from the relevant gaming authorities , ( iv ) the absence of any order or injunction prohibiting the consummation of the merger , ( v ) no material adverse effect or other specified adverse events occurring with respect to lakes or golden gaming , ( vi ) the refinancing of certain indebtedness of golden gaming , ( vii ) subject to certain exceptions , the accuracy of the representations and warranties of the parties , and ( viii ) performance and compliance in all material respects with agreements and covenants contained in the merger agreement . the merger agreement also contains certain termination rights for each of lakes and golden gaming , including if the merger is not consummated by november 3 , 2015 ( subject to automatic extension to february 1 , 2016 if all conditions to closing other than specified gaming approvals have been satisfied or waived ) . the merger agreement further provides that , upon termination of the merger agreement , under specified circumstances , lakes is required to pay golden gaming a cash termination fee of $ 5.0 million or reimburse golden gaming 's transaction expenses up to $ 0.5 million . in addition , the merger agreement provides that , upon termination of the merger agreement , under specified circumstances , golden gaming will be required to reimburse lakes ' transaction expenses up to $ 0.5 million . contemporaneous with entering into the merger agreement , lakes also amended and restated its rights agreement dated as of december 12 , 2013 , to help preserve its ability to utilize approximately $ 89.0 million of federal net operating tax loss carryforwards by , among other things , lowering the voting securities ownership threshold of an acquiring person from 15 % to 4.99 % , and making such other changes which lakes deemed necessary to effectuate the purposes of the rights agreement in light of the transactions contemplated by the merger agreement . the terms of the transaction and merger agreement are explained in greater detail in the current report on form 8-k filed by lakes with the sec , which is available on the sec 's website at www.sec.gov under `` lakes entertainment '' . 21 story_separator_special_tag times new roman '' > impairment s and other losses during fiscal 2014 , lakes recognized impairments and other losses of $ 21.0 million related to its investment in rock ohio ventures . based on information provided by rock ohio ventures , lakes determined that there was significant uncertainty surrounding the recovery of lakes ' investment in rock ohio ventures . the ohio gaming properties have not performed as expected , which has led to forecasted potential working capital requirement issues that did not exist in prior periods . as a result , lakes determined that an other-than-temporary impairment had occurred and reduced the carrying value of the investment to its estimated fair value of zero as of december 28 , 2014. during fiscal 2013 , lakes recognized impairment and other losses of $ 2.4 million related to the intangible assets associated with the development and management agreement with the shingle springs tribe , which were considered fully impaired upon the termination of the management agreement on august 29 , 2013 and were written down to zero . lakes also recognized an impairment charge of $ 1.0 million related to receivables from related parties that were directly related to the development and opening of lakes ' indian casino projects which were determined to be uncollectible during fiscal 2013 . preopening expenses lakes expenses certain project preopening costs as incurred . there were no preopening expenses during fiscal 2014. during fiscal 2013 , lakes recognized preopening expenses of $ 1.2 million related to the rocky gap project . amortization of i ntangible a ssets r elated to indian c asino p rojects amortization of intangible assets related to indian casino projects was $ 0.7 million for fiscal 2013 and were associated with the project with the shingle springs tribe . in connection with the debt termination agreement entered into with the shingle springs tribe during the third quarter of 2013 , the remaining intangible assets associated with that project were fully impaired as of august 29 , 2013 , and therefore there was no amortization of intangible assets related to indian casino projects for fiscal 2014. depreciation and amortization depreciation and amortization was $ 3.5 million for fiscal 2014 compared to $ 2.3 million for fiscal 2013. the increase was due primarily to depreciation on rocky gap property and equipment . other i ncome ( e xpense ) , net other income ( expense ) , net was $ ( 0.9 ) million for fiscal 2014 compared to $ 5.2 million for fiscal 2013 . the current fiscal year amount relates primarily to interest expense associated with the financing facility with centennial bank . during the prior year period , lakes recognized a $ 1.7 million gain on the modification of its financing facility with centennial bank to reduce the interest rate from 10.5 % to 5.5 % . a significant portion of the remaining amount of other income , net for fiscal 2013 relates to non-cash interest income associated with accretion on the notes receivable from the shingle springs tribe . income taxes there was no income tax benefit for fiscal 2014 because there is no remaining potential to carry back losses to prior years and future realization of the benefit is uncertain . there was no income tax provision for fiscal 2013 because we released valuation allowance against deferred tax assets available to offset current income . story_separator_special_tag our effective tax rate for each of fiscal 2014 and fiscal 2013 was 0 % . for fiscal 2014 , the effective tax rate differs from the federal tax rate of 35 % primarily due to the limitation of the income tax benefit due to the uncertainty of its future realization . for fiscal 2013 , the effective tax rate differs from the federal tax rate of 35 % primarily due to the release of valuation allowance against deferred tax assets which were available to offset current income . as of december 28 , 2014 , we evaluated all available positive and negative evidence related to our ability to utilize our deferred tax assets . we considered the non-recurring nature of current year book loss , expected future book income ( losses ) , lack of taxable loss carryback potential and other factors in reaching the conclusion that the deferred tax assets are not currently expected to be realized , and therefore the valuation allowance against the deferred tax assets continues to be appropriate as of december 28 , 2014 . 23 fiscal year ended december 29 , 2013 ( “ f iscal 2013 ” ) compared to fiscal year ended december 30 , 2012 ( “ f iscal 2012 ” ) net revenues net revenues were $ 38.8 million for fiscal 2013 compared to $ 11.0 million for fiscal 2012. the increase in net revenues for fiscal 2013 compared to fiscal 2012 was due primarily to additional net revenue of $ 27.8 million related to the operation of rocky gap , which lakes acquired on august 3 , 2012 and which commenced gaming operations on may 22 , 2013. net revenues also included $ 7.8 million and $ 7.7 million in management fees earned related to the red hawk casino during fiscal 2013 and fiscal 2012 , respectively . due to entering into the debt termination agreement with the shingle springs tribe , lakes ' consolidated statement of operations do not include management fee revenues related to the management of the red hawk casino subsequent to august 29 , 2013. property operating expenses property operating expenses were $ 19.5 million for fiscal 2013 compared to $ 1.7 million for fiscal 2012 which primarily related to gaming , rooms , food and beverage and golf operations of rocky gap . the increase in property operating expenses was primarily due to the inclusion of gaming-related expenses in the fiscal 2013 period . gaming commenced in may 2013 , therefore there were no such expenses in the fiscal 2012 period . in addition , because rocky gap was acquired on august 3 , 2012 , fiscal 2012 included only a partial period of operating expenses . selling , general and administrative expenses selling , general and administrative expenses were $ 19.3 million for fiscal 2013 compared to $ 10.2 million for fiscal 2012. included in these amounts were lakes corporate selling , general and administrative expenses of $ 6.8 million and $ 7.8 million during fiscal 2013 and fiscal 2012 , respectively , and rocky gap selling , general and administrative expenses of $ 12.5 million and $ 2.4 million during fiscal 2013 and 2012 , respectively . for fiscal 2013 , selling , general and administrative expenses included payroll and related expenses of $ 9.6 million ( including share-based compensation ) , marketing and advertising expenses of $ 2.0 million , building and rent expense of $ 2.4 million and professional fees of $ 2.8 million . for fiscal 2012 , selling , general and administrative expenses included payroll and related expenses of $ 5.0 million ( including share-based compensation ) , building and rent expense of $ 0.8 million and professional fees of $ 2.6 million . recovery of impairment on notes receivable on july 17 , 2013 , lakes entered into the debt termination agreement with the shingle springs tribe relating to amounts lakes had previously advanced to the shingle springs tribe . pursuant to the debt termination agreement , the shingle springs tribe paid lakes $ 57.1 million on august 29 , 2013 which constituted full and final payment of all debt owed to lakes as of that date . as a result of the receipt of the debt payment and due to the fact that the shingle springs notes had previously been impaired , lakes recognized $ 17.4 million in recovery of impairment on notes receivable during fiscal 2013. gain on extinguishment of liabilities during fiscal 2013 , lakes recognized a gain on extinguishment of liabilities of $ 3.8 million associated with contract acquisition costs related to the project with the shingle springs tribe that were no longer owed upon the termination of the management agreement between lakes and the shingle springs tribe . impairment s and other losses impairments and other losses were $ 3.4 million in fiscal 2013 and $ 4.5 million in fiscal 2012. during fiscal 2013 , lakes recognized impairment charges of $ 2.4 million related to the intangible assets associated with the development and management agreement with the shingle springs tribe , which were considered fully impaired upon the termination of the management agreement on august 29 , 2013 and were written down to zero . lakes also recognized an impairment charge of $ 1.0 million related to receivables from related parties that were directly related to the development and opening of lakes ' indian casino projects which were determined to be uncollectible during fiscal 2013. during fiscal 2012 , lakes recognized impairment charges of $ 1.8 million due to lakes determining that it would not continue to move forward with the project with the jamul tribe . also included in impairments and other losses for fiscal 2012 were $ 1.2 million related to costs associated with development plans for the rocky gap project which were subsequently revised , and an impairment charge of $ 1.3 million as a result of selling the majority of the land owned in vicksburg , mississippi for an amount less than its recorded book value . preopening expenses lakes expenses certain project preopening costs as incurred .
| the increase in property operating expenses for fiscal 2014 compared to fiscal 2013 was primarily due to the inclusion of a full period of gaming-related expenses as gaming commenced in may 2013. selling , general and administrative expenses selling , general and administrative expenses were $ 22.6 million for fiscal 2014 compared to $ 19.3 million for fiscal 2013. included in these amounts were lakes corporate selling , general and administrative expenses of $ 7.6 million and $ 6.8 million during fiscal 2014 and fiscal 2013 , respectively , and rocky gap selling , general and administrative expenses of $ 15.0 million and $ 12.5 million during fiscal 2014 and 2013 , respectively . the increase in rocky gap selling , general and administrative expenses year over year was due primarily to the addition of gaming during may 2013. for fiscal 2014 , selling , general and administrative expenses included payroll and related expenses of $ 11.3 million ( including share-based compensation ) , marketing and advertising expenses of $ 2.5 million , building and rent expense of $ 2.6 million , professional fees of $ 2.3 million and business development expenses of $ 1.3 million . for fiscal 2013 , selling , general and administrative expenses included payroll and related expenses of $ 9.6 million ( including share-based compensation ) , marketing and advertising expenses of $ 2.0 million , building and rent expense of $ 2.4 million and professional fees of $ 2.8 million . recovery of impairment on notes receivable on july 17 , 2013 , lakes entered into the debt termination agreement with the shingle springs tribe relating to amounts lakes had previously advanced to the shingle springs tribe . pursuant to the debt termination agreement , the shingle springs tribe paid lakes $ 57.1 million on august 29 , 2013 which constituted full and final payment of all debt owed to lakes as of that date . as a result of the receipt of the debt payment and due to the fact that the shingle springs notes had previously been impaired , lakes recognized $ 17.4 million in recovery of impairment on notes receivable during fiscal 2013. gain on extinguishment of liabilities during fiscal 2013 , lakes recognized a gain on extinguishment of liabilities of $ 3.8 million associated with contract acquisition costs related to the project with the shingle
| 14,308 |
we paid the purchase price using a combination of cash on hand and borrowings under our existing credit facilities . the financial results of woodcrafters are included in the company 's results of operations and cash flows beginning in the third quarter of 2013. this acquisition greatly expanded our offering of bathroom cabinetry products . during 2012 , the market for our products improved over 2011. we believe new housing construction grew over 20 % and spending for home repair and remodeling increased approximately 4 % to 5 % . we 24 introduced new product innovations , expanded into adjacent markets and refined our supply chain . in 2012 , operating income increased on higher sales volume , productivity improvements , lower recognition of defined benefit plan actuarial losses and lower asset impairment charges . separation from our former parent on september 27 , 2011 , the board of directors of our former parent approved the separation . the distribution of home & security common stock was made on october 3 , 2011 , with our former parent stockholders receiving one share of home & security common stock for each share of former parent common stock held on september 20 , 2011. following the separation , our former parent changed its name to beam inc. and retained no ownership interest in home & security . on october 4 , 2011 , our common stock began trading regular-way on the new york stock exchange under the ticker symbol fbhs . basis of presentation the consolidated financial statements included in this annual report on form 10-k have been derived from the accounts of the company and its majority-owned subsidiaries . prior to the separation , the company was a wholly-owned subsidiary of our former parent . our financial statements from periods prior to the separation were derived from the historical results of operations and the historical basis of assets and liabilities and include allocations of certain corporate expenses of our former parent incurred directly by our former parent totaling $ 23.4 million in the first nine months of 2011. these allocated expenses include costs associated with legal , finance , treasury , accounting , internal audit and general management services and are included in corporate in the accompanying segment information . management believes that the assumptions and methodologies underlying the allocation of these general corporate expenses are reasonable . however , such expenses may not be indicative of the actual level of expense that would have been incurred by the company if it had operated as an independent company during such period . the consolidated financial statements included in this annual report on form 10-k for periods prior to the separation may not necessarily reflect what the company 's results of operations , financial condition and cash flows would have been had the company been a stand-alone company during such pre-separation periods . 25 results of operations the following discussion of both consolidated results of operations and segment results of operations refers to the year ended december 31 , 2013 compared to the year ended december 31 , 2012 , and the year ended december 31 , 2012 compared to the year ended december 31 , 2011. the discussion of consolidated results of operations should be read in conjunction with the discussion of segment results of operations and our financial statements and notes thereto included in this annual report on form 10-k. years ended december 31 , 2013 , 2012 and 2011 replace_table_token_9_th ( a ) corporate expenses include the components of defined benefit plan expense other than service cost which totaled ( income ) expense of $ ( 4.9 ) million , $ 38.7 million and $ 74.2 million for the years ended december 31 , 2013 , 2012 and 2011 , respectively . there are no amounts that represent the elimination or reversal of transactions between reportable segments . corporate expenses in 2011 prior to the separation also include allocations of certain former parent general corporate expenses incurred directly by our former parent . these allocated expenses include costs associated with legal , finance , treasury , accounting , internal audit and general management services . certain items had a significant impact on our results in 2013 , 2012 and 2011. these included the woodcrafters acquisition , asset impairment charges , defined benefit plan recognition of actuarial losses and gains , restructuring and other charges and the impact of changes in foreign currency exchange rates . in 2013 , financial results included : > the impact of the woodcrafters acquisition , which added approximately $ 115 million of net sales , > asset impairment charges in our kitchen & bath cabinetry segment of $ 21.2 million ( $ 13.8 after tax ) associated with the abandonment of certain internal use software , > defined benefit plan recognition of actuarial losses , recorded in the corporate segment , of $ 5.2 million ( $ 3.3 million after tax ) compared to $ 42.2 million ( $ 26.2 million after tax ) in 2012. this change was primarily due to a higher than expected increase in pension plan assets and higher discount rates in 2013 , as well as lower postretirement liabilities due to plan amendments to reduce health benefits . the 2012 actuarial loss was principally due to both decreasing discount rates and actual returns on plan assets that were lower than our expected return , > restructuring and other charges of $ 5.1 million before tax ( $ 3.6 million ) , primarily associated with supply chain initiatives and 26 > the impact of foreign exchange , which had an unfavorable impact compared to 2012 , of approximately $ 7 million on net sales and approximately $ 1 million on operating income and net income . the effects of foreign exchange on the company 's results are principally associated with movements in the canadian dollar . story_separator_special_tag in 2012 , financial results included : > defined benefit plan recognition of actuarial losses , recorded in the corporate segment , of $ 42.2 million ( $ 26.2 million after tax ) compared to losses of $ 80.0 million ( $ 49.9 million after tax ) in 2011 , primarily due to a decrease in the discount rate used to value our pension and other postretirement obligations , > asset impairment charges of $ 15.8 million ( $ 9.7 million after tax ) associated with the tradenames in the advanced material windows & door systems segment ( $ 9.9 million before tax ) and the kitchen & bath cabinetry segment ( $ 5.9 million before tax ) . these charges were primarily the result of an increase in our market-participant cost of capital discount rates . one tradename in the kitchen & bath cabinetry segment was also impacted by reduced revenue growth expectations for high-end discretionary cabinet purchases developed during our annual planning process that was completed in the fourth quarter in 2012 , > restructuring and other charges of $ 10.0 million before tax ( $ 6.6 million after tax ) , primarily associated with cabinet manufacturing facility closures and > the impact of foreign exchange , which had an unfavorable impact compared to 2011 , of approximately $ 5 million on both net sales and operating income and approximately $ 3 million on net income . the effects of foreign exchange on the company 's results are principally associated with movements in the canadian dollar and the euro . in 2011 , financial results included : > defined benefit plan recognition of actuarial losses , recorded in the corporate segment , of $ 80.0 million ( $ 49.9 million after tax ) compared to gains of $ 3.5 million ( $ 2.2 million after tax ) in 2010 , primarily due to a decrease in the discount rate as well as a lower than expected rate of return on pension plan assets , > asset impairment charges of $ 90.0 million before tax ( $ 55.3 million after tax ) associated with the tradenames in the advanced material windows & door systems segment , primarily as the result of reduced revenue growth and profit margin expectations associated with our simonton tradename . our revenue and profit margin expectations were lowered based upon the results of our annual planning process that was completed in the fourth quarter of 2011 and included consideration of our actual fourth quarter 2011 results , including lower 2011 sales due to the expiration of u.s. tax incentives for purchases of energy-efficient home products , as well as our projection of the recovery of the u.s. home products market , > restructuring and other charges of $ 20.0 million before tax ( $ 12.5 million after tax ) associated with cabinet and window manufacturing facility closures , > business separation costs of $ 2.4 million and > the impact of foreign exchange , which had a favorable impact compared to 2010 , of approximately $ 20 million on net sales , approximately $ 5 million on operating income and approximately $ 1 million on net income . the effects of foreign exchange on the company 's results are principally associated with movements in the canadian dollar . 27 2013 compared to 2012 total home & security net sales net sales increased $ 566.3 million , or 16 % . the increase was due to higher sales volume , primarily from improved u.s. market conditions for home products , and new product introductions , as well as a benefit of approximately $ 115 million from the acquisition of woodcrafters . net sales also benefited from price increases that helped mitigate raw material cost increases . cost of products sold cost of products sold increased $ 297.5 million , or 12 % , due to higher sales volume and the impact of the woodcrafters acquisition , partially offset by the benefit of productivity improvements , including cost savings from previously announced restructuring actions . cost of products sold also benefited from lower expense from actuarial losses related to defined benefit plans ( $ 2.7 million in 2013 compared to $ 14.2 million in 2012 ) . selling , general and administrative expenses selling , general and administrative expenses increased $ 66.2 million , or 7 % , due to higher volume-related expenses and planned increases in strategic spending to support growth initiatives that included approximately $ 16 million of higher advertising spending . administrative expenses also increased due to higher consulting expenses and acquisition-related transaction expenses . selling , general and administrative expenses benefited from lower expense from actuarial losses related to defined benefit plans ( $ 2.5 million in 2013 compared to $ 28.0 million in 2012 ) . amortization of intangible assets amortization of intangible assets increased $ 2.1 million due to $ 2.9 million of amortization of identifiable intangible assets associated with the woodcrafters acquisition , partially offset by the absence of expense for an identifiable intangible asset that was fully amortized in the second quarter of 2012. restructuring charges restructuring charges of $ 4.2 million and $ 4.5 million in 2013 and 2012 , respectively , were related to supply chain initiatives . asset impairment charges at the end of the third quarter of 2013 , our kitchen and bath cabinetry segment completed an evaluation of its information technology strategy . the evaluation considered opportunities arising from the improving u.s. home market conditions . as a result of this evaluation , the segment abandoned certain software developed for internal use in order to redirect financial resources toward developing more flexible systems that provide industry leading content for consumers and more advanced tools for designers to deliver a superior purchasing experience for their customers . the abandonment of this internal use software resulted in a pre-tax impairment charge of $ 21.2 million , which was recorded in operating income and reduced property , plant and equipment , and will not materially impact current or future cash flow or future operating income .
| million , or 10 % , and sales of window products increased $ 5.3 million , or 2 % . net sales also benefited from price increases implemented to help mitigate higher raw material and transportation costs , as well as new business . operating income improved $ 100.2 million , to a loss of $ 1.0 million , primarily due to $ 80.1 million in lower tradename impairment charges . in addition , operating income benefited from higher sales volume , particularly related to door products , and $ 10.0 million of lower restructuring and other charges . operating income was unfavorably impacted by higher incentive compensation expense . security & storage net sales increased $ 20.0 million , or 4 % , due to higher global sales , including new product introductions . net sales of security products increased $ 19.9 million , or 5 % . net sales of storage products were flat . net sales were impacted by approximately $ 5 million of unfavorable foreign exchange . operating income increased $ 12.8 million , or 20 % , due to higher sales volume and productivity improvements , partially offset by strategic growth spending . operating income also benefited by approximately $ 3 million of lower employee benefit costs associated with the reduction of certain retiree medical benefits in our storage product line . price increases offset the impact of higher sourced material costs . corporate corporate expenses decreased $ 18.3 million , primarily due to $ 37.8 million of lower expense from actuarial losses related to defined benefit plans ( $ 42.2 million in 2012 compared to $ 80.0 million in 2011 ) , as well as the absence of $ 2.4 million of business separation costs in 2012. corporate expenses were unfavorably impacted by $ 15.0 million in higher administrative expenses associated with operating as a stand-alone company and increased incentive compensation expense . in the first nine months of 2011 , the company operated as a subsidiary of our former parent . corporate
| 14,309 |
restricted cash is kept on deposit with the trustees for our cdos and clos , and primarily represents proceeds received from loan payoffs and paydowns that have not yet been disbursed to bondholders or redeployed into new assets , as well as unfunded loan commitments and interest payments received from loans . our loan and investment portfolio balance , including our available-for-sale securities was $ 1.59 billion and $ 1.70 billion at december 31 , 2014 and 2013 , respectively . the decline in our portfolio balance was primarily due to loan payoffs exceeding loan originations by $ 78.9 million and selling our available-for-sale rmbs securities totaling $ 33.4 million during 2014. our portfolio had a weighted average current interest pay rate of 5.44 % and 5.21 % at december 31 , 2014 and 2013 , respectively . including certain fees and costs associated with the loan and investment portfolio , the weighted average current interest rate was 6.16 % and 5.69 % , respectively . advances on our financing facilities totaled $ 1.23 billion and $ 1.22 billion at december 31 , 2014 and 2013 , respectively , with a weighted average funding cost of 3.65 % and 3.03 % , respectively , which excludes changes in the market value of certain interest rate swaps and financing costs . including the financing costs , the weighted average funding rate was 4.07 % and 3.34 % , respectively . loan and investment activity during 2014 was primarily comprised of : originated 80 loans totaling $ 900.7 million with a weighted average interest rate of 7.03 % . received full satisfaction of 81 loans totaling $ 931.0 million that had a weighted average interest rate of 6.05 % . received partial pay downs on four loans totaling $ 41.3 million that had a weighted average interest rate of 4.17 % . modified and extended a loan for $ 35.0 million resulting in an increase in the interest rate from 1.95 % to 2.95 % . extended 45 loans totaling $ 596.5 million . our allowance for loan losses was $ 115.5 million at december 31 , 2014 , a decrease of $ 6.8 million from december 31 , 2013. the reduction was the result of $ 9.3 million in recoveries received and $ 6.5 million in charge-offs recorded , partially offset by a $ 9.0 million increase to the provision . since december 31 , 2014 , we have originated six new loans for a total of $ 112.0 million and received a total of $ 83.6 million for the repayment in full of five loans . 40 real estate owned and held-for-salewe sold three real estate properties with a combined carrying value of $ 19.7 million and paid down the related mortgage note payable by $ 18.8 million in 2014. we recognized a net gain of $ 1.6 million on these sales . prepaid management feerelated party decreased $ 19.0 million . in july 2014 , we recognized a non-cash gain as a result of our debt guarantee on the 450 west 33rd street property being terminated in connection with a refinancing of the existing debt on this property . as a result , we also recorded a $ 19.0 million incentive management fee that had been prepaid in 2007 in relation to the transaction . liabilitiescomparison of balances at december 31 , 2014 to december 31 , 2013 : credit facilities and repurchase agreements increased $ 21.3 million . during 2014 , we utilized the capacity in our warehouse lines to redeem the $ 87.5 million in outstanding clo i notes and added a new $ 15.0 million term debt facility . these increases were partially offset by the repayment of $ 53.0 million in short-term credit facilities with proceeds from our third clo and debt offering in the second quarter , as well as the payoff of our repurchase agreements totaling $ 26.9 million due to the sale of the rmbs available-for-sale securities . collateralized debt obligations decreased $ 308.2 million primarily due to proceeds received from cdo loan runoff used to repay cdo bond investors . collateralized loan obligations increased $ 193.8 million primarily due to the completion of our third clo in april 2014 in which we issued $ 281.3 million of investment grade notes , partially offset by the redemption of the $ 87.5 million in outstanding clo i notes in december 2014. senior unsecured noteswe issued $ 97.9 million aggregate principal amount of 7.375 % senior unsecured notes due in 2021 , raising net proceeds of $ 92.9 million after deducting the underwriting discount and offering expenses . deferred revenue decreased $ 77.1 million . in july 2014 , we recognized a non-cash gain of $ 77.1 million as a result of our debt guarantee on the 450 west 33rd street investment being terminated . equity in february 2014 , we completed an underwritten public offering of 900,000 shares of 8.50 % series c cumulative redeemable preferred stock with a liquidation preference of $ 25.00 per share , generating net proceeds of $ 21.6 million after deducting the underwriting discount and other offering expenses . in february 2014 , we entered into an atm equity offering sales agreement with jmp whereby , in accordance with the terms of the agreement , from time to time we may issue and sell through jmp up to 7,500,000 shares of our common stock . sales of the shares are made by means of ordinary brokers ' transactions or otherwise at market prices prevailing at the time of sale , at prices related to prevailing market prices or at negotiated prices . as of december 31 , 2014 , we sold 1,000,000 shares for net proceeds of $ 6.5 million . we used the net proceeds from these offerings to make investments , to repurchase or pay liabilities and for general corporate purposes . story_separator_special_tag 41 in may 2014 , we issued 278,000 shares of restricted common stock under the 2014 plan to certain employees of ours and our manager and recorded $ 0.3 million to employee compensation and benefits and $ 0.3 million to selling and administrative expense in our consolidated statements of income . one third of the shares vested as of the date of grant , one third will vest in may 2015 , and the remaining third will vest in may 2016. also in may 2014 , we issued 63,000 shares of fully vested common stock to the independent members of the board of directors under the 2014 plan and recorded $ 0.4 million to selling and administrative expense . as of february 13 , 2015 , we have $ 330.4 million available under our $ 500.0 million shelf registration statement that was declared effective by the sec in august 2013. in connection with a debt restructuring with wachovia bank in 2009 , we issued wachovia 1,000,000 warrants at an average strike price of $ 4.00 and an expiration date in july 2015. on july 1 , 2014 , we acquired and canceled all of the warrants in return for the payment of $ 2.6 million , recorded to additional paid in capital , which reflects a 5 % discount to the prior day closing price of our common stock of $ 6.95. the following table presents dividends declared ( on a per share basis ) for the year ended december 31 , 2014 : replace_table_token_9_th ( 1 ) the dividend declared on february 3 , 2014 for the series a and b preferred stock was for the period december 1 , 2013 through february 28 , 2014. the dividend declared on april 29 , 2014 for the series a , b and c preferred stock was for the period march 1 , 2014 through may 31 , 2014. the dividend declared on july 30 , 2014 for the series a , b and c preferred stock was for the period june 1 , 2014 through august 31 , 2014. the dividend declared on november 3 , 2014 for the series a , b and c preferred stock was for the period september 1 , 2014 through november 30 , 2014. common stock on february 11 , 2015 , the board of directors declared a cash dividend of $ 0.13 per share of common stock . the dividend is payable on march 2 , 2015 to common stockholders of record as the close of business on february 25 , 2015. preferred stock on february 2 , 2015 , the board of directors declared a cash dividend of $ 0.515625 per share of 8.25 % series a preferred stock ; a cash dividend of $ 0.484375 per share of 7.75 % series b preferred stock ; and a cash dividend of $ 0.53125 per share of 8.50 % series c preferred stock . these amounts reflect dividends from december 1 , 2014 through february 28 , 2015 and are payable on march 2 , 2015 to preferred stockholders of record on february 15 , 2015 . 42 comparison of results of operations for years ended 2014 and 2013 the following table sets forth our results of operations for the years ended december 31 , 2014 and 2013 : replace_table_token_10_th nmnot meaningful 43 the following table presents the average balance of interest-earning assets and related interest-bearing liabilities , associated interest income and expense and the corresponding weighted average yields ( dollars in thousands ) : replace_table_token_11_th ( 1 ) based on unpaid principal balance for loans , amortized cost for securities and principal amount for debt . ( 2 ) weighted average yield calculated based on annualized interest income or expense divided by average carrying value . net interest income interest income increased $ 7.7 million , or 8 % , in 2014 as compared to 2013. this increase was primarily due to a 15 % increase in the average yield on core interest-earning assets from 5.65 % for 2013 to 6.47 % for 2014 , primarily from $ 4.3 million of fee income from accelerated runoff as well as from higher interest rates on our portfolio during 2014. the increase was partially offset by a 6 % decrease in our average core interest-earning assets from $ 1.75 billion for 2013 to $ 1.64 billion for 2014 , due to loan payoffs exceeding loan originations by $ 78.9 million and selling our available-for-sale rmbs securities totaling $ 33.4 million during 2014. interest expense increased $ 5.8 million , or 14 % , for 2014 as compared to 2013. the increase was primarily due to a 24 % increase in the average cost of these interest-bearing liabilities from 3.22 % for 2013 to 3.99 % for 2014 , primarily due to an overall increase in our cdo debt cost as a result of runoff in these vehicles , the proceeds of which are used to paydown low cost debt within these cdo 's , $ 1.0 million in accelerated fees related to the redemption of clo i in december 2014 and the issuance 44 of $ 97.9 million of 7.375 % senior unsecured notes during 2014. the increase was partially offset by an 8 % decrease in the average balance of our interest-bearing liabilities from $ 1.30 billion for 2013 to $ 1.20 billion for 2014. the decrease in the average balance was primarily due to a decrease in cdo debt due to runoff and decreases in our securities and other non-recourse financing , partially offset by the issuance of $ 281.3 million in clo iii notes in april 2014 and the issuance of $ 97.9 million of senior unsecured notes during 2014. other revenue property operating results ( income less expenses ) are comprised of our multifamily and hotel portfolios .
| cost control we seek to minimize our operating costs , which consist primarily of employee compensation and related costs , management fees and other general and administrative expenses . if there are increases in foreclosures and non-performing loans and investments , certain of these expenses , particularly employee compensation expenses and asset management related expenses , may increase . significant developments during 2014 loan and investment activity we originated 80 loans totaling $ 900.7 million with a weighted average interest rate of 7.03 % . we received full satisfaction of 81 loans totaling $ 931.0 million with a weighted average interest rate of 6.05 % and partial paydowns on four loans totaling $ 41.3 million with a weighted average interest rate of 4.17 % . we recorded $ 9.3 million of cash recoveries of previously recorded loan loss reserves and recognized provision for loan losses totaling $ 9.0 million , resulting in net recoveries of $ 0.3 million during 2014. capital raising activities we raised $ 121.0 million of capital through several offerings in 2014 , including : $ 92.9 million raised through the issuance of 7.375 % senior unsecured notes due in 2021 through two offerings in may and august 2014 ; 37 $ 21.6 million raised from the issuance of 8.50 % series c cumulative redeemable preferred stock in february 2014 ; and $ 6.5 million raised through an `` at-the-market '' ( `` atm '' ) common stock offering in the first quarter of 2014. financing activities in april 2014 , we closed our third clo totaling $ 375.0 million of real estate related assets and cash . we issued $ 281.3 million of investment grade notes in this clo and we used a portion of the funds raised in this clo issuance and the senior unsecured notes offering to substantially pay down three credit facilities and to fully pay off two facilities totaling $ 53.0 million . during 2014 , we also increased the capacity on three financing facilities by an aggregate of $ 70.0 million and
| 14,310 |
we also plan to reassess our testing and buying processes to ensure we have the right data to inform our decisions . we will begin bringing in 24 increased quantities of forward season merchandise , which will give us a better read on styles and more time to maximize trend-right product during the heart of the selling season . brand and product clarity in 2019 , we are going to ensure there is a focus on brand and product clarity through the following : 1 ) sharpening our edit points for the women 's and men 's customer to ensure that we have a single fashion point of view for our design , merchandise , marketing , and stores teams ; 2 ) creating a new commercial planning process to align and focus key customer messages with the key fashion trends and brand work to ensure we have clear and consistent messaging on the most important items across all customer touchpoints ; and 3 ) optimizing our product portfolio to improve clarity , particularly in our stores . customer acquisition and retention in 2019 , we will address this focus area through a combination of analytics , new retention initiatives , and partnerships with key fashion influencers to reach new customers . these plans will include launching a new first impressions initiative , continuing to focus on signing up more customers in our next loyalty program , and launching product collections designed in collaboration with rocky barnes and karla welch . in addition , we will continue our partnership with the nba by expanding our assortment and offering fashionable women 's nba licensed products . how we assess the performance of our business in assessing the performance of our business , we consider a variety of performance and financial measures . these key measures include net sales , comparable sales , cost of goods sold , buying and occupancy costs , gross profit/gross margin , and selling , general , and administrative expenses . the following table describes and discusses these measures . financial measures description discussion net sales revenue from the sale of merchandise , less returns and discounts , as well as shipping and handling revenue related to e-commerce , advertising revenue from the rental of our led sign in times square , gift card breakage , revenue earned from the card agreement , and revenue earned from our franchise agreements . our business is seasonal , and we have historically realized a higher portion of our net sales in the third and fourth quarters due primarily to the impact of the holiday season . generally , approximately 46 % of our annual net sales occur in the spring season , which includes the first and second quarters , and 54 % occur in the fall season , which includes the third and fourth quarters . comparable sales comparable sales is a measure of the amount of sales generated in a period relative to the amount of sales generated in the comparable prior year period . comparable sales for the fourth quarter of 2018 were calculated using the 52-week period ended february 2 , 2019 as compared to the 52- week period ended february 3 , 2018. comparable sales includes : sales from stores that were open 12 months or more as of the end of the reporting period , including conversions e-commerce sales comparable sales excludes : sales from stores where the square footage has changed during the year by more than 20 % due to remodel or relocation activity sales from stores in a phased remodel where a portion of the store is under construction and therefore not productive selling space sales from stores that can not open due to weather damage or other catastrophe our business and our comparable sales are subject , at certain times , to calendar shifts , which may occur during key selling periods close to holidays such as easter , thanksgiving , and christmas . 25 financial measures description discussion cost of goods sold , buying and occupancy costs includes the following : direct cost of purchased merchandise inventory shrink and other adjustments inbound and outbound freight merchandising , design , planning and allocation , and manufacturing/production costs occupancy costs related to store operations , such as rent and common area maintenance , utilities , and depreciation on assets logistics costs associated with our e-commerce business our cost of goods sold typically increases in higher volume quarters because the direct cost of purchased merchandise is tied to sales . the primary drivers of the costs of individual goods are raw materials , labor in the countries where our merchandise is sourced , and logistics costs associated with transporting our merchandise . buying and occupancy costs related to stores are largely fixed and do not necessarily increase as volume increases ; however , buying and occupancy costs related to e-commerce sales are variable and increase as volume increases . changes in the mix of products sold by type of product or by channel may also impact our overall cost of goods sold , buying and occupancy costs . gross profit/gross margin gross profit is net sales less cost of goods sold , buying and occupancy costs . gross margin measures gross profit as a percentage of net sales . gross profit/gross margin is impacted by the price at which we are able to sell our merchandise and the direct cost of goods sold and buying and occupancy costs . we review our inventory levels on an on-going basis in order to identify slow-moving merchandise and generally use markdowns to clear such merchandise . the timing and level of markdowns are driven primarily by seasonality and customer acceptance of our merchandise and have a direct effect on our gross margin . any marked down merchandise that is not sold is marked-out-of-stock . we use third-party vendors to dispose of this marked-out-of-stock merchandise . story_separator_special_tag selling , general , and administrative expenses includes operating costs not included in cost of goods sold , buying and occupancy costs such as : payroll and other expenses related to operations at our corporate offices store expenses other than occupancy costs marketing expenses , including production , mailing , print , and digital advertising costs , among other things with the exception of store payroll , certain marketing expenses , and incentive compensation , selling , general , and administrative expenses generally do not vary proportionally with net sales . as a result , selling , general , and administrative expenses as a percentage of net sales are usually higher in lower volume quarters and lower in higher volume quarters . 26 story_separator_special_tag # 000000 ; padding-left:2px ; padding-top:2px ; padding-bottom:2px ; padding-right:2px ; '' > 2018 2017 2016 ( in thousands ) income tax expense $ 10,660 $ 9,978 $ 33,757 the effective tax rate was 52.5 % in 2018 compared to 34.6 % in 2017 . the effective tax rate for 2018 includes a net tax expense of approximately $ 3.7 million attributable to certain discrete items , predominately related to income tax reform related non-deductible executive compensation including the impact of our ceo transition , and no tax benefit associated with the impairment of our equity investment in homage . the increase in our effective tax rate was partially offset by the reduction in the federal corporate income tax rate to 21 % in 2018 due to the tax cuts and jobs act ( the `` tcja '' ) . the effective tax rate for 2017 was 34.6 % compared to 36.7 % for 2016 . the effective tax rate for 2017 includes a net tax benefit of approximately $ 1.1 million attributable to certain discrete items , predominately related to the exit from canada , executive compensation , and the impact of the u.s. tax law change described below . on december 22 , 2017 , the tcja was enacted into law . the tcja impacted us through the reduction in the federal corporate income tax rate from 35 % to 21 % and the one-time re-measurement of our deferred taxes using this new lower tax rate . as a result of the reduction of the federal corporate income tax rate under tcja , we remeasured our net deferred tax liabilities and recorded an income tax benefit of approximately $ 2.1 million in 2017. we completed our assessment of the final impact of the tcja in november 2018 and recorded an additional tax benefit of $ 0.2 million in 2018. refer to note 7 of the consolidated financial statements included elsewhere in this annual report on form 10-k for additional information regarding the tax rate . adjusted net income the following table presents adjusted operating income , adjusted net income , and adjusted diluted earnings per share , each a non-gaap financial measure , for the stated periods which eliminate certain non-core operating costs : replace_table_token_10_th * no adjustment was made to operating income for 2016 . we supplement the reporting of our financial information determined under gaap with certain non-gaap financial measures : adjusted operating income , adjusted net income , and adjusted diluted earnings per share . we believe that these non-gaap measures provide additional useful information to assist stockholders in understanding our financial results and assessing our prospects for future performance . management believes adjusted operating income , adjusted net income , and adjusted diluted earnings per share are important indicators of our business performance because they exclude items that may not be indicative of , or are unrelated to , our underlying operating results , and provide a better baseline for analyzing trends in our business . in addition , adjusted operating income is used as a performance measure to determine short-term cash incentive compensation , and adjusted diluted earnings per share is used as a performance measure in our executive compensation program for purposes of determining the payout of the 30 long-term incentive awards . since non-gaap financial measures are not standardized , it may not be possible to compare these financial measures with other companies ' non-gaap financial measures having the same or similar names . these adjusted financial measures should not be considered in isolation or as a substitute for reported operating income , net income , and reported diluted earnings per share . these non-gaap financial measures reflect an additional way of viewing our operations that , when viewed with our gaap results and the below reconciliations to the corresponding gaap financial measures , provide a more complete understanding of our business . we strongly encourage investors and stockholders to review our financial statements and publicly-filed reports in their entirety and not to rely on any single financial measure . the table below reconciles the non-gaap financial measures , adjusted operating income , adjusted net income , and adjusted diluted earnings per share , with the most directly comparable gaap financial measures , operating income , net income , and diluted earnings per share . replace_table_token_11_th ( a ) the tax effect of the $ 8.4 million impairment of our equity method investment is $ 2.1 million offset by a full valuation allowance against the related deferred tax assets . replace_table_token_12_th ( a ) includes $ 22.9 million in restructuring costs and an additional $ 1.3 million in inventory adjustments related to the canadian exit as discussed in note 14 of our consolidated financial statements . replace_table_token_13_th ( a ) represents non-core items related to the amendment of the times square flagship store lease discussed in note 5 of our consolidated financial statements . ( b ) items were tax affected at our statutory rate of approximately 39 % for 2016 .
| gross profit the following table shows cost of goods sold , buying and occupancy costs , gross profit in dollars , and gross margin percentage for the stated periods : replace_table_token_5_th gross margin percentage , or gross profit as a percentage of net sales , is essentially flat in 2018 compared to 2017 . the decrease in costs of goods sold , buying and occupancy costs is primarily related to decreased rent and other occupancy costs , as well as decreased cost of sales due to reduction in sales . these were partially offset by increased shipping costs . the 150 basis point decrease in gross margin percentage , or gross profit as a percentage of net sales , in 2017 compared to 2016 was comprised of a 90 basis point decrease in merchandise margin and a 60 basis point increase in buying and occupancy costs as a percentage of net sales . the decrease in merchandise margin was driven by a highly promotional retail environment partially offset by reductions in sourcing costs as part of our cost savings initiatives . the increase in buying and occupancy costs as a percentage of sales was primarily the result of the deleveraging effect of the decrease in sales . selling , general , and administrative expenses the following table shows selling , general , and administrative expenses in dollars and as a percentage of net sales for the stated periods : 28 replace_table_token_6_th the $ 13.8 million increase in selling , general , and administrative expenses in 2018 compared to 2017 was primarily the result of increased e-commerce marketing and technology , incentive compensation , and severance charges related to the departure of the ceo . the ceo departure resulted in $ 5.4 million in additional expense and related to the acceleration of certain equity awards and other severance charges . these were partially offset by decreased store payroll as a result of decreased sales . the $ 4.0 million increase in selling , general , and administrative expenses in 2017 compared to 2016 was primarily the result of increased depreciation of $ 6.5 million related to new
| 14,311 |
the decrease in the gross profit rate was primarily driven by the impact of the covid-19 outbreak on our operations , which we addressed with aggressive promotional activity . the impact of covid-19 and the actions we took also resulted in increased shipping costs associated with higher digital penetration and the deleveraging of distribution and fulfillment , store occupancy , and royalty expenses on lower sales volume . net loss for fiscal 2020 was $ 488.7 million , or a loss of $ 6.77 per diluted share , which included net after-tax charges of $ 207.1 million , or $ 2.87 per diluted share , primarily related to impairment and restructuring charges , a settlement gain with a vendor , and the valuation allowance established against deferred tax assets . net income for fiscal 2019 was $ 94.5 million , or $ 1.27 earnings per diluted share , which included net after-tax charges of $ 15.1 million , or $ 0.20 per diluted share , primarily related to integration and restructuring expenses associated with the businesses acquired in fiscal 2018 and impairment charges , partially offset by a valuation allowance release related to the net operating loss utilization for our legal entity in canada . comparable sales performance metric the following table presents comparable sales for each segment and in total for the last two fiscal years : replace_table_token_2_th we consider comparable sales , a primary metric commonly used throughout the retail industry , to be an important indicator of the performance of our retail and direct-to-consumer businesses . we include stores in our comparable sales metric for those stores in operation for at least 14 months at the beginning of the fiscal year . stores are added to the comparable base at the beginning of the year and are dropped for comparative purposes in the quarter in which they are closed . comparable sales include stores temporarily closed during fiscal 2020 as a result of the covid-19 outbreak as management continues to believe that this metric is meaningful to monitor our performance . comparable sales include e-commerce sales . comparable sales for the canada retail segment exclude the impact of foreign currency translation and are calculated by translating current period results at the foreign currency exchange rate used in the comparable period of the prior year . comparable sales for the brand portfolio segment include the direct-to-consumer e-commerce site at www.vincecamuto.com . beginning with the third quarter of fiscal 2020 , comparable sales no longer include the other segment due to no longer having activity in the other segment . the calculation of comparable sales varies across the retail industry and , as a result , the calculations of other retail companies may not be consistent with our calculation . 19 number of stores at the end of the last two fiscal years , we had the following number of stores : replace_table_token_3_th story_separator_special_tag other property and equipment in the brand portfolio segment related to the planned consolidation of certain locations as part of our integration efforts , and $ 3.0 million primarily for operating lease assets related to under-performing stores ( $ 2.3 million and $ 0.7 million for the u.s. retail and canada retail segments , respectively ) . interest expense , net - during fiscal 2020 , interest expense increased over last year due to additional debt under our new abl revolver and term loan , which have higher interest rates . income taxes- the effective tax rate for fiscal 2020 was 19.7 % co mpared to 21.1 % for fiscal 2019. the effective tax rates reflect the impact of federal , state and local , and foreign taxes and the decrease in the effective tax rate was primarily driven by the recording of an additional valuation allowance of $ 87.6 million partially offset by the ability to carry back current year losses to a tax year where the u.s. federal statutory tax rate was 35 % . during fiscal 2019 , we had $ 3.9 million valuation allowance release primarily related to the net operating loss utilization for our legal entity in canada . 22 liquidity and capital resources overview our primary ongoing operating cash flow requirements are for inventory purchases , payments on lease obligations and licensing commitments , other working capital needs , capital expenditures , and debt service . our working capital and inventory levels fluctuate seasonally . for additional information on our material cash requirements , refer to note 13 , debt , note 14 , leases , and note 15 , commitments and contingencies - contractual obligations , of the consolidated financial statements of this form 10-k. we are committed to a cash management strategy that maintains liquidity to adequately support the operation of the business and withstand unanticipated business volatility , including the impact of covid-19 . we believe that cash generated from our operations , together with our current levels of cash , as well as the use of our abl revolver , are sufficient to maintain our ongoing operations , fund capital expenditures , and meet our debt service obligations over the next 12 months . operating cash flows for fiscal 2020 , net cash used in operations was $ 153.8 million compared to net cash provided by operations of $ 196.7 million for fiscal 2019. the change was driven by the net loss incurred during fiscal 2020 as a result of the covid-19 outbreak after adjusting for non-cash activity , including impairment charges and the change in deferred taxes , which was partially offset by measures that we implemented to manage our working capital to preserve liquidity , including renegotiating vendor and landlord terms , reducing inventory orders , and significantly cutting costs . investing cash flows for fiscal 2020 , net cash provided by investing activities was $ 2.6 million , due to the liquidation of our available-for sale-securities and the proceeds from a settlement with a vendor , partially offset by capital expenditures of $ 31.1 million that were reduced in order to preserve liquidity . story_separator_special_tag for fiscal 2019 , net cash used in investing activities was $ 27.4 million , primarily due to capital expenditures of $ 77.8 million exceeding the net liquidation of our available-for-sale securities and the proceeds from a working capital settlement related to the camuto group acquisition . financing cash flows for fiscal 2020 , net cash provided by financing activities was $ 123.0 million compared to net cash used in financing activities of $ 183.4 million for fiscal 2019. during fiscal 2020 , we had net proceeds from borrowings from our abl revolver and term loan offset by the settlement of borrowings under our senior unsecured revolving credit agreement ( the `` credit facility '' ) and the payment of debt issuance costs associated with the changes we made to our debt structure . we also significantly reduced the amount of dividends paid during the first quarter of fiscal 2020 and did not pay any dividends subsequently . during fiscal 2019 , net cash used in financing activities was primarily due to the payment of dividends and the repurchase of class a common shares partially financed using our credit facility . debt abl revolver- on august 7 , 2020 , we replaced the credit facility with the abl revolver , which provides a revolving line of credit of up to $ 400.0 million , including a canadian sub-limit of up to $ 20.0 million , a $ 50.0 million sub-limit for the issuance of letters of credit , a $ 40.0 million sub-limit for swing loan advances for u.s. borrowings , and a $ 2.0 million sub-limit for swing loan advances for canadian borrowings . our abl revolver matures in august 2025 and is secured by substantially all of our personal property assets , including a first priority lien on credit card receivables and inv entory and a second priority lien on personal property assets that constitute first priority collateral for the term loan . the amount of credit available is limited to a borrowing base based on , among other things , a percentage of the book value of eligible inventory and credit card receivables , as reduced by certain reserves . as of january 30 , 2021 , the abl revolver had a borrowing base of $ 400.0 million , with $ 100.0 million outstanding and $ 5.3 million in letters of credit issued , resulting in $ 294.7 million available for borrowings . 23 borrowings and letters of credit issued under the abl revolver accrue interest , at our option , at a rate equal to : ( a ) a base rate per annum equal to the greatest of ( i ) the prime rate , ( ii ) the overnight bank funding rate plus 0.5 % , and ( iii ) the adjusted one-month london interbank offered rate ( `` libor '' ) ( as defined ) plus 1.0 % ; or ( b ) an adjusted libor per annum ( subject to a floor of 0.75 % ) plus , in each instance , an applicable rate to be determined based on average availability , with an interest rate of 3.25 % as of january 30 , 2021. commitment fees are based on the unused portion of the abl revolver . interest expense related to the abl revolver includes interest on borrowings and letters of credit , commitment fees and the amortization of debt issuance costs . term loan- on august 7 , 2020 , we also entered into a $ 250.0 million term loan . the term loan requires minimum quarterly principal payments with the remaining outstanding balance due i n august 2025. the term loan has limited prepayment requirements under certain conditions . the term loan is collateralized by a first priority lien on substantially all of our personal and real property ( subject to certain exceptions ) , including investment property and intellectual property , and by a second priority lien on certain other personal property , primarily credit card receivables and inventory , that constitute first priority collateral for the abl revolver . borrowings under the term loan accrue interest , at our option , at a rate equal to : ( a ) a base rate per annum equal to the greater of ( i ) 3.25 % , ( ii ) the prime rate , ( iii ) the overnight bank funding rate plus 0.5 % , and ( iv ) the adjusted one-month libor plus 1.0 % , plus , in each instance , 7.5 % ; or ( b ) an adjusted libor per annum ( subject to a floor of 1.25 % ) , plus 8.5 % , with an interest rate of 9.75 % ( effective interest rate of 11.81 % when including the amortization of debt issuance costs ) as of january 30 , 2021. debt covenants- the abl revolver contains a minimum availability covenant in which an event of default shall occur if availability is less than the greater of $ 30.0 million or 10.0 % of the maximum credit amount . the term loan includes a springing covenant imposing a minimum ebitda covenant , which arises when liquidity is less than $ 150.0 million . in addition , the abl revolver and the term loan each contain customary covenants restricting our activities , including limitations on the ability to sell assets , engage in acquisitions , enter into transactions involving related parties , incur additional debt , grant liens on assets , pay dividends or repurchase stock , and make certain other changes . there are specific exceptions to these covenants including , in some cases , upon satisfying specified payment conditions . we are restricted from paying dividends or repurchasing stock until the third quarter of fiscal 2021 at the earliest , after which certain limitations apply . both the abl revolver and the term loan contain customary events of default with cross-default provisions .
| 21 elimination of intersegment gross loss ( profit ) consisted of the following : replace_table_token_7_th nm - not meaningful operating expenses- operating expenses decreased by $ 121.5 million over last year , primarily driven by the implementation of temporary leaves of absence without pay for a significant number of our employees , the reduction of pay for nearly all remaining employees in response to the covid-19 outbreak for most of the first half of fiscal 2020 and the reduction of our workforce , and reductions in store labor initiated at the end of the second quarter of fiscal 2020 , which was partially offset by higher incentive compensation and marketing expense , and incremental costs directly related to covid-19 . o perating expenses during fiscal 2020 were offset by government subsidies in the form of qualified payroll tax credits of $ 11.4 million and a gain of $ 9.0 million f rom a settlement with a vendor . income from equity investment- we account for our equity investment in abg-camuto using the equity method of accounting , with the net earnings attributable to our 40 % investment being classified within operating profit . abg-camuto is an integral part of the brand portfolio segment given the licensing agreement between us and abg-camuto that allows us to sell licensed , branded products to wholesale customers . impairment charges- as a result of the material reduction in net sales and cash flows , we performed our impairment analysis for our u.s. retail and canada retail segments at the store-level . in addition , we evaluated other long-lived assets based on our intent to use such assets going forward . during fiscal 2020 , we recorded impairment charges of $ 127.1 million ( $ 104.2 million and $ 22.9 million for the u.s. retail and canada retail segments , respectively ) . also during fiscal 2020 , we recorded an impairment charge of $ 6.5 million for the brand portfolio segment customer relationship intangible asset resulting in a full impairment due to the lack of projected cash flows over the remaining useful life . also as a result of the material reduction in net sales and cash flows and the decrease in the company 's market capitalization due to the impact of the covid-19 outbreak on macroeconomic conditions , we updated our impairment analysis for
| 14,312 |
fiscal 2017 compared to fiscal 2016 for fiscal 2017 , our consolidated gross margin was 160 basis points lower than fiscal 2016 , primarily driven by the following factors : higher nike brand full-price asp , net of discounts , on a wholesale equivalent basis ( increasing gross margin approximately 70 basis points ) aligned with our strategy to deliver innovative , premium products to the consumer ; higher nike brand product costs ( decreasing gross margin approximately 100 basis points ) as an increase in the mix of higher cost products and labor input cost inflation more than offset lower material input costs ; unfavorable changes in net foreign currency exchange rates , including hedges ( decreasing gross margin approximately 90 basis points ) ; and lower nike direct margins ( decreasing gross margin approximately 20 basis points ) reflecting the impact of higher off-price sales . total selling and administrative expense replace_table_token_6_th ( 1 ) demand creation expense consists of advertising and promotion costs , including costs of endorsement contracts , complimentary product , television , digital and print advertising and media costs , brand events and retail brand presentation . fiscal 2018 compared to fiscal 2017 demand creation expense increased 7 % for fiscal 2018 compared to fiscal 2017 , driven by higher sports marketing costs . changes in foreign currency exchange rates increased demand creation expense by approximately 3 percentage points for fiscal 2018. operating overhead expense increased 10 % compared to fiscal 2017 , due to higher administrative costs , continued investments in our growing nike direct business and one-time wage-related costs associated with the consumer direct offense organizational realignment . changes in foreign currency exchange rates increased operating overhead expense by approximately 2 percentage points for fiscal 2018. fiscal 2017 compared to fiscal 2016 demand creation expense increased 2 % for fiscal 2017 compared to fiscal 2016 , driven by higher sports marketing costs , as well as higher marketing and advertising costs , primarily to support key sporting events including the rio olympics and european football championship . these increases were partially offset by lower retail brand presentation costs . changes in foreign currency exchange rates reduced demand creation expense by approximately 1 percentage point . operating overhead expense was flat compared to fiscal 2016 as continued investments in our growing nike direct business were offset by administrative cost efficiencies and lower variable compensation . changes in foreign currency exchange rates reduced operating overhead expense by approximately 1 percentage point for fiscal 2017. other expense ( income ) , net replace_table_token_7_th other expense ( income ) , net comprises foreign currency conversion gains and losses from the re-measurement of monetary assets and liabilities denominated in non-functional currencies , and the impact of certain foreign currency derivative instruments , as well as unusual or non-operating transactions outside the normal course of business . 24 fiscal 2018 compared to fiscal 2017 other expense ( income ) , net changed from $ 196 million of other income , net for fiscal 2017 to $ 66 million of other expense , net for fiscal 2018 , primarily due to a $ 287 million net detrimental change in foreign currency conversion gains and losses , including hedges . we estimate the combination of the translation of foreign currency-denominated profits from our international businesses and the year-over-year change in foreign currency-related gains and losses included in other expense ( income ) , net had an unfavorable impact on our income before income taxes of $ 110 million for fiscal 2018. fiscal 2017 compared to fiscal 2016 other expense ( income ) , net increased from $ 140 million of other income , net for fiscal 2016 to $ 196 million of other income , net for fiscal 2017 , primarily due to a $ 56 million net beneficial change in foreign currency conversion gains and losses . we estimate the combination of the translation of foreign currency-denominated profits from our international businesses and the year-over-year change in foreign currency-related gains and losses included in other expense ( income ) , net had an unfavorable impact on our income before income taxes of $ 59 million for fiscal 2017. income taxes replace_table_token_8_th fiscal 2018 compared to fiscal 2017 our effective tax rate was 55.3 % for fiscal 2018 , reflecting the impact of the tax cuts and jobs act ( the “ tax act ” ) . the impact of the tax act primarily reflects provisional expense of $ 1,875 million for the one-time transition tax on the deemed repatriation of undistributed foreign earnings and $ 158 million resulting from the remeasurement of deferred tax assets and liabilities . the remaining provisions of the tax act , which were a net benefit to the effective tax rate , did not have a material impact on our consolidated financial statements during fiscal 2018. the increase in the effective tax rate resulting from the tax act was partially offset by the tax benefit from stock-based compensation in the current period as a result of the adoption of accounting standards update ( asu ) 2016-09 in the first quarter of fiscal 2018. refer to note 1 — summary of significant accounting policies in the accompanying notes to the consolidated financial statements for additional information on the impact of asu 2016-09 , and note 9 — income taxes for additional information on the impact of the tax act . fiscal 2017 compared to fiscal 2016 the 550 basis point decrease in our effective tax rate for the fiscal year was primarily due to a one-time benefit in the first quarter of the fiscal year related to the resolution with the irs of a foreign tax credit matter and a decrease in foreign earnings taxed in the united states . operating segments our operating segments are evidence of the structure of the company 's internal organization . the nike brand segments are defined by geographic regions for operations participating in nike brand sales activity . story_separator_special_tag each nike brand geographic segment operates predominantly in one industry : the design , development , marketing and selling of athletic footwear , apparel and equipment . the company 's reportable operating segments for the nike brand are : north america ; europe , middle east & africa ; greater china ; and asia pacific & latin america , and include results for the nike , jordan and hurley brands . the company 's nike direct operations are managed within each geographic operating segment . converse is also a reportable segment for the company and operates in one industry : the design , marketing , licensing and selling of casual sneakers , apparel and accessories . as part of our centrally managed foreign exchange risk management program , standard foreign currency rates are assigned twice per year to each nike brand entity in our geographic operating segments and converse . these rates are set approximately nine and twelve months in advance of the future selling seasons to which they relate ( specifically , for each currency , one standard rate applies to the fall and holiday selling seasons and one standard rate applies to the spring and summer selling seasons ) based on average market spot rates in the calendar month preceding the date they are established . inventories and cost of sales for geographic operating segments and converse reflect the use of these standard rates to record non-functional currency product purchases into the entity 's functional currency . differences between assigned standard foreign currency rates and actual market rates are included in corporate , together with foreign currency hedge gains and losses generated from our centrally managed foreign exchange risk management program and other conversion gains and losses . 25 the breakdown of revenues is as follows : replace_table_token_9_th ( 1 ) certain prior year amounts have been reclassified to conform to fiscal 2018 presentation . this includes reclassified operating segment data to reflect the changes in the company ' s operating structure , which became effective june 1 , 2017. these changes had no impact on previously reported consolidated results of operations or shareholders ' equity . ( 2 ) the percent change has been calculated using actual exchange rates in use during the comparative prior year period to enhance the visibility of the underlying business trends excluding the impact of translation arising from foreign currency exchange rate fluctuations , which is considered a non-gaap financial measure . ( 3 ) global brand divisions revenues are primarily attributable to nike brand licensing businesses that are not part of a geographic operating segment . ( 4 ) corporate revenues primarily consist of foreign currency hedge gains and losses related to revenues generated by entities within the nike brand geographic operating segments and converse , but managed through our central foreign exchange risk management program . the primary financial measure used by the company to evaluate performance of individual operating segments is earnings before interest and taxes ( commonly referred to as “ ebit ” ) , which represents net income before interest expense ( income ) , net and income tax expense in the consolidated statements of income . as discussed in note 17 — operating segments and related information in the accompanying notes to the consolidated financial statements , certain corporate costs are not included in ebit of our operating segments . the breakdown of earnings before interest and taxes is as follows : replace_table_token_10_th ( 1 ) certain prior year amounts have been reclassified to conform to fiscal 2018 presentation . this includes reclassified operating segment data to reflect the changes in the company ' s operating structure , which became effective june 1 , 2017. these changes had no impact on previously reported consolidated results of operations or shareholders ' equity . 26 north america replace_table_token_11_th in the current marketplace environment , we believe there has been a meaningful shift in the way consumers shop for product and make purchasing decisions . consumers are demanding a constant flow of fresh and innovative product , and have an expectation for superior service and real-time delivery , all fueled by the shift toward digital . specifically , in north america we anticipate continued evolution within the retail landscape , driven by shifting consumer traffic patterns across digital and physical channels . the evolution of the north america marketplace has resulted in third-party retail store closures ; however , we are currently seeing stabilization and momentum building in our business , fueled by innovative product and nike brand consumer experiences , leveraging digital . fiscal 2018 compared to fiscal 2017 north america revenues decreased 2 % , as growth in our sportswear and nike basketball categories was more than offset by declines in all other categories , most notably the jordan brand and running . nike direct revenues increased 5 % for fiscal 2018 due to digital commerce sales growth and the addition of new stores . footwear revenues declined 4 % for fiscal 2018 , as lower revenues in nearly all categories , most notably the jordan brand , more than offset higher revenues in sportswear . unit sales of footwear decreased 5 % , while asp per pair contributed approximately 1 percentage point of footwear growth , driven by the favorable impact of growth in our nike direct business . apparel revenue growth of 1 % for fiscal 2018 was attributable to higher revenues in our sportswear and nike basketball categories , which was only partially offset by declines in nearly all other categories . unit sales of apparel decreased 4 % , while higher asp per unit contributed approximately 5 percentage points of apparel revenue growth , primarily due to the favorable impact of growth in our nike direct business and , to a lesser extent , higher full-price asp and favorable changes in off-price sales . ebit declined 7 % for fiscal 2018 , primarily reflecting lower revenues and higher selling and administrative expense . gross margin declined 10 basis points as lower full-price asp more than offset the favorable impact of growth in our nike direct business .
| all international nike brand geographies delivered higher revenues for fiscal 2018 as our consumer direct offense delivered innovative products , deep brand connections and compelling retail experiences to consumers through digital platforms and at nike-owned and retail partner stores , driving demand for nike brand products . revenue growth was broad-based , as greater china , emea and apla each contributed approximately 2 percentage points of the increase in nike , inc. revenues . for fiscal 2018 , lower revenues from north america and converse each reduced nike , inc. revenues by approximately 1 percentage point . on a currency-neutral basis , nike brand footwear and apparel revenues increased 4 % and 9 % , respectively , for fiscal 2018 , while nike brand equipment revenues decreased 4 % . on a category basis , the increase in nike brand footwear revenues was due to strong growth in sportswear and running , which was partially offset by lower revenues in several other categories , most notably the jordan brand . footwear unit sales for fiscal 2018 increased 2 % and higher average selling price ( asp ) per pair contributed approximately 2 percentage points of footwear revenue growth , primarily due to the favorable impact of growth in our nike direct business . the currency-neutral increase in nike brand apparel revenues for fiscal 2018 was fueled by growth in nearly all key categories , most notably sportswear , nike basketball and football ( soccer ) . unit sales of apparel increased 4 % and higher asp per unit contributed approximately 5 percentage points of apparel revenue growth , primarily due to higher asps from full-price , off-price and nike direct sales . for fiscal 2018 , nike direct revenues represented approximately 30 % of our total nike brand revenues compared to 28 % for fiscal 2017. on a currency-neutral basis , nike direct revenues increased 12 % for fiscal 2018 , driven by strong digital commerce sales growth of 25 % , the addition of new stores and 4 % comparable store sales growth . comparable store sales include revenues from
| 14,313 |
further , negative economic conditions often have a longer and more severe impact on the apparel industry than on other industries . we believe the changes in consumer preferences for discretionary spending , the current global economic conditions and economic uncertainty continue to impact the business of each of our operating groups , and the apparel industry as a whole . 40 we believe the retail apparel market is evolving very rapidly and in ways that are having a disruptive impact on traditional fashion retailing . the application of technology , including the internet and mobile devices , to fashion retail provides consumers increasing access to multiple , responsive distribution platforms and an unprecedented ability to communicate directly with brands and retailers . as a result , consumers may have more information and greater control over information they receive as well as broader , faster and cheaper access to goods than ever before . this , along with the coming of age of the “ millennial ” generation , is revolutionizing the way that consumers shop for fashion and other goods . the evidence of the evolution is apparent with weakness and store closures for certain department stores and mall-based retailers , decreased consumer retail traffic , a more promotional retail environment , expansion of off-price and discount retailers , and a shift from bricks and mortar to internet purchasing . these changes may require that brands and retailers approach their operations , including marketing and advertising , differently than historical practices . while this evolution in the fashion retail industry presents significant risks , especially for traditional retailers who fail or are unable to adapt , we believe it also presents a tremendous opportunity for brands and retailers to capitalize on the changing consumer environment . we believe our brands have true competitive advantages in this new retailing paradigm , and we are leveraging technology to serve our consumers when and where they want to be served . we continue to believe that our lifestyle brands , with their strong emotional connections with consumers , are well suited to succeed and thrive in the long-term while managing the various challenges facing our industry . specifically , we believe our lifestyle brands have opportunities for long-term growth in their direct to consumer businesses . we anticipate increased sales in our e-commerce operations , which are expected to grow at a faster rate than bricks and mortar comparable store sales . we also believe growth can be achieved through prudent expansion of bricks and mortar full-price retail store operations and modest comparable full-price retail store sales increases . despite the changes in the retail environment , we expect there will continue to be desirable locations for additional stores . we believe our lifestyle brands have an opportunity for modest sales increases in their wholesale businesses in the long-term . however , we must be diligent in our effort to avoid compromising the integrity of our brands by maintaining or growing sales with wholesale customers that may not be aligned with our long-term strategy . this is particularly important with the challenges in the department store channel , which represented approximately 14 % of our consolidated net sales in fiscal 2017 , compared to approximately 16 % in fiscal 2016. as a result , this management of our wholesale distribution for our lifestyle brands is likely to result in lower wholesale sales in fiscal 2018 , as well as in the near-term future , as we may reduce the amount of sales to certain wholesale accounts by reducing the number of doors that carry our product , reducing the volume sold for a particular door or exiting the account altogether . we anticipate that sales increases in our wholesale businesses in the long-term will stem primarily from current customers adding within their existing door count and increasing their online business ; increased sales to online retailers ; and our selective addition of new wholesale customers who generally follow a retail model with limited discounting and who present and merchandise our products in a way that is consistent with our full-price , direct to consumer distribution strategy . we also believe that there are opportunities for modest sales growth for lanier apparel in the future through new product programs and licenses . we believe we must continue to invest in our lifestyle brands to take advantage of their long-term growth opportunities . investments include capital expenditures primarily related to the direct to consumer operations such as technology enhancements , e-commerce initiatives and retail store and restaurant build-out for new , relocated or remodeled locations , as well as distribution center and administrative office expansion initiatives . additionally , we anticipate increased advertising , employment and other costs to support ongoing business operations and fuel future sales growth . fiscal 2018 advertising expense is expected to increase for each of our brands with a focus on new consumer acquisition as well as consumer retention and engagement . in the midst of the changes in our industry , an important initiative for us in fiscal 2017 was to increase the profitability of the tommy bahama business . these initiatives generally focused on increasing gross margin and operating margin through efforts such as : product cost reductions ; selective price increases ; reducing inventory purchases ; redefining our approach to inventory clearance ; effectively managing controllable and discretionary operating expenses ; taking a more conservative approach to retail store openings and lease renewals ; and continuing our efforts to reduce asia-pacific operating losses . in fiscal 2017 , we made progress with these initiatives and expect to make additional progress in fiscal 2018. we continue to believe it is important to maintain a strong balance sheet and liquidity . we believe positive cash flow from operations in the future , coupled with the strength of our balance sheet and liquidity , will provide us with sufficient resources to fund future investments in our owned lifestyle brands . story_separator_special_tag while we believe we have significant opportunities to appropriately deploy our capital and resources in our existing lifestyle brands , we will continue to evaluate opportunities to add additional lifestyle brands to our portfolio if we identify appropriate targets that meet our investment criteria . with the evolving fashion 41 retail environment , our interest in acquiring smaller brands and earlier stage companies is evolving , particularly where we may have the opportunity to more fully integrate the brand into our existing infrastructure and shared services functions . important factors relating to certain risks , many of which are beyond our ability to control or predict , which could impact our business are described in part i , item 1a . risk factors of this report . the following table sets forth our consolidated operating results from continuing operations ( in thousands , except per share amounts ) for fiscal 2017 compared to fiscal 2016 : replace_table_token_12_th the higher net earnings in fiscal 2017 was primarily due to ( 1 ) a lower effective tax rate primarily resulting from u.s. tax reform as discussed in note 8 to our consolidated financial statements included in this report , ( 2 ) higher operating income in tommy bahama and ( 3 ) improved operating results in southern tide , which included certain purchase accounting charges in fiscal 2016 and was not owned for the full year in fiscal 2016 . these items were partially offset by ( 1 ) the impact of lifo accounting on corporate and other operating results , ( 2 ) lower operating income in lilly pulitzer , due in part to charges associated with the fiscal 2017 acquisition of certain lilly pulitzer signature store operations , and ( 3 ) lower operating income in lanier apparel . operating groups our business is primarily operated through our tommy bahama , lilly pulitzer , lanier apparel and southern tide operating groups . we identify our operating groups based on the way our management organizes the components of our business for purposes of allocating resources and assessing performance . our operating group structure reflects a brand-focused management approach , emphasizing operational coordination and resource allocation across each brand 's direct to consumer , wholesale and licensing operations , as applicable . tommy bahama , lilly pulitzer and southern tide each design , source , market and distribute apparel and related products bearing their respective trademarks and license their trademarks for other product categories , while lanier apparel designs , sources and distributes branded and private label men 's tailored clothing , sportswear and other products . corporate and other is a reconciling category for reporting purposes and includes our corporate offices , substantially all financing activities , elimination of inter-segment sales , lifo accounting adjustments for inventory , other costs that are not allocated to the operating groups and operations of our other businesses , including our lyons , georgia distribution center and beaufort bonnet , which are not included in our operating groups . our lifo inventory pool does not correspond to our operating group definitions ; therefore , lifo inventory accounting adjustments are not allocated to our operating groups . for additional information about each of our operating groups , see part i , item 1. business and note 2 to our consolidated financial statements , both included in this report . comparable store sales we often disclose comparable store sales in order to provide additional information regarding changes in our results of operations between periods . our disclosures of comparable store sales include net sales from full-price retail stores and our e-commerce sites , excluding sales associated with e-commerce flash clearance sales . we believe that the inclusion of both our full-price retail stores and e-commerce sites in the comparable store sales disclosures is a more meaningful way of reporting our comparable store sales results , given similar inventory planning , allocation and return policies , as well as our cross-channel marketing and other initiatives for the direct to consumer channel . for our comparable store sales disclosures , we exclude ( 1 ) outlet store sales , warehouse sales and e-commerce flash clearance sales , as those clearance sales are used primarily to liquidate end of season inventory , which may vary significantly depending on the level of end of season inventory on hand and generally occur at lower gross margins than our non-clearance direct to consumer sales , and ( 2 ) restaurant sales , as we do not currently believe that the inclusion of restaurant sales in our comparable store sales disclosures is meaningful in assessing our consolidated results of operations . comparable store sales information reflects net sales , including shipping and handling revenues , if any , associated with product sales . 42 for purposes of our disclosures , we consider a comparable store to be , in addition to our e-commerce sites , a physical full-price retail store that was owned and open as of the beginning of the prior fiscal year and which did not have during the relevant periods , and is not within the current fiscal year scheduled to have , ( 1 ) a remodel or other event resulting in the store being closed for an extended period of time ( which we define as a period of two weeks or longer ) , ( 2 ) a greater than 15 % change in the size of the retail space due to expansion , reduction or relocation to a new retail space , ( 3 ) a relocation to a new space that was significantly different from the prior retail space , or ( 4 ) a closing or opening of a tommy bahama restaurant adjacent to the full-price retail store . for those stores which are excluded from comparable stores based on the preceding sentence , the stores continue to be excluded from comparable store sales until the criteria for a new store is met subsequent to the remodel , relocation or restaurant closing or opening , or other event .
| the increase in consolidated net sales was driven by ( 1 ) an incremental net sales increase of $ 20.9 million associated with the operation of non-comp full-price retail stores and the southern tide e-commerce operations , which we acquired in april 2016 , ( 2 ) an $ 18.5 million , or 4 % increase in comparable store sales to $ 444.7 million in fiscal 2017 from $ 426.1 million in fiscal 2016 , ( 3 ) a net $ 17.7 million aggregate increase in wholesale sales , primarily consisting of higher sales in southern tide , which we acquired in april 2016 , lanier apparel , tommy bahama and corporate and other partially offset by a decrease in lilly pulitzer and ( 4 ) a $ 9.5 million increase in restaurant sales in tommy bahama . these increases were partially offset by a $ 3.1 million decrease in net sales through our off-price direct to consumer clearance channels consisting of lower sales in tommy bahama and higher sales in lilly pulitzer . we estimate that the 53rd week in fiscal 2017 provided an approximate $ 17 million benefit to our consolidated net sales . on a 53 week to 53 week basis , comparable store sales increased 3 % in fiscal 2017 . we believe that certain macroeconomic factors , including lower retail store traffic and the evolving impact of digital technology on consumer shopping habits , continue to impact the sales in each of our direct to consumer and wholesale businesses . the changes in net sales by operating group are discussed below . the following table presents the proportion of our consolidated net sales by distribution channel for each period presented : replace_table_token_15_th tommy bahama : the tommy bahama net sales increase of $ 27.1 million , or 4.1 % , in the 53 week fiscal 2017 compared to the 52 week fiscal 2016 was primarily a result of ( 1 ) a $ 20.5 million , or 6 % , increase in comparable store sales to $ 340.0 million in fiscal 2017 from $ 319.5 million in fiscal 2016 , ( 2 ) a $ 9.5 million increase in restaurant sales reflecting sales from a restaurant that opened in fiscal 2017 , a marlin bar that opened in late fiscal 2016 and increased sales at existing restaurants , ( 3 ) an incremental net sales increase of $ 5.4
| 14,314 |
based upon the initial timetable and revisions , the company determined that changes to the remaining depreciable lives for base stations and certain other assets were required , adding $ 8.4 million of additional depreciation expense to 2012 's results and $ 3.4 million to 2013. the 4g lte base stations require either fiber or microwave backhaul . accordingly , the company has replaced the copper-based t1 circuits it previously had with fiber and microwave technology . in addition to incurring the costs to install the new backhaul facilities , the company incurred duplicate network costs during the replacement period for each base station , and higher monthly costs of the higher capacity circuits ( though much less expensive per megabit of capacity ) following the upgrade , impacting 2012 , 2013 and future years . however , the additional capacity of the new fiber-based backhaul facilities will delay the need to further upgrade its capacity to accommodate additional network traffic . due to increases in capacity needs , the company expects to replace microwave backhaul that it deployed at approximately 150 of its cell sites with fiber-based backhaul facilities in 2015 or 2016. revision of prepaid cost pass-throughs in july 2010 , the company executed an amendment to its management agreement with sprint to allow the company to participate in sprint 's prepaid wireless offerings . the amendment specified that the revenue and cost per unit ( per average subscriber or per gross addition or upgrade , as defined ) as determined by sprint on a national basis would be passed through to the company . in december 2012 , sprint determined it had incorrectly calculated certain cost pass-throughs from inception of the company 's participation , and reimbursed the company for $ 11.8 million to correct its errors from july 2010 through september 2012. the company recognized this receipt as a reduction of expenses in the quarter and year ended december 31 , 2012. approximately $ 6.1 million of this adjustment related to miscalculations of costs incurred in 2010 and 2011. cable segment goodwill impairment during 2012 , the company determined that the fair value of the company 's cable segment had declined during the year , and that the goodwill associated with this segment had become impaired . as a result the company recorded an $ 11.0 million write-down of cable segment goodwill in december of 2012. factors contributing to this determination included weak economic conditions , underperformance relative to market operating margins and penetration levels , and continued capital spending to upgrade the last remaining markets , improve the customer experience , and combat subscriber loss . critical accounting policies the company relies on the use of estimates and makes assumptions that affect its financial condition and operating results . these estimates and assumptions are based on historical results and trends as well as the company 's forecasts as to how these might change in the future . the most critical accounting policies that materially affect the company 's results of operations include the following : revenue recognition the company recognizes revenue when persuasive evidence of an arrangement exists , services have been rendered or products have been delivered , the price to the buyer is fixed and determinable and collectability is reasonably assured . revenues are recognized by the company based on the various types of transactions generating the revenue . for services , revenue is recognized as the services are performed . for equipment sales , revenue is recognized when the sales transaction is complete . for transactions with customers in our wireless segment that involve multiple elements , such as the sale of service combined with the sale of a handset , the consideration received at the time of sale is measured and allocated to the separate units based upon their relative fair values . this method generally results in all cash received at the time of the initial sale being allocated to and recognized as equipment revenue . 36 under the sprint management agreement , postpaid wireless service revenues are reported net of an 8 % management fee and , since its imposition effective january 1 , 2007 , the net service fee retained by sprint . the net service fee was set at 12 % , the maximum then allowed under the management agreement , during 2010. in accordance with the february 2012 amendment , the fee increased to 14 % , the maximum allowed , effective august 1 , 2013. prepaid wireless service revenues are reported net of a 6 % management fee . allowance for doubtful accounts estimates are used in determining the allowance for doubtful accounts and are based on historical collection and write-off experience , current trends , credit policies , and the analysis of the accounts receivable by aging category . in determining these estimates , the company compares historical write-offs in relation to the estimated period in which the subscriber was originally billed . the company also looks at the historical average length of time that elapses between the original billing date and the date of write-off and the financial position of its larger customers in determining the adequacy of the allowance for doubtful accounts . from this information , the company assigns specific amounts to the aging categories . the company provides an allowance for all receivables over 60 days old and partial allowances for all other receivables . the company does not carry an allowance for receivables related to sprint pcs customers . in accordance with the terms of the affiliate contract with sprint , the company receives payment from sprint for the monthly net billings to pcs customers in weekly installments over the following four or five weeks . income taxes income taxes are accounted for under the asset and liability method . deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between financial statement carrying amounts of existing assets and liabilities and their respective tax bases . story_separator_special_tag deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled . the effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date . the company evaluates the recoverability of deferred tax assets generated on a state-by-state basis from net operating losses apportioned to that state . management uses a more likely than not threshold to make the determination if a valuation allowance is warranted for tax assets in each state . management evaluates the effective rate of taxes based on apportionment factors , the company 's operating results , and the various state income tax rates . leases the company recognizes rent expense on a straight-line basis over the initial lease term and renewal periods that are reasonably assured at the inception of the lease . in light of the company 's investment in each leased site , including acquisition costs and leasehold improvements , the company includes the exercise of certain renewal options in the recording of operating leases . where the company is the lessor , the company recognizes revenue on a straight line basis over the non-cancelable term of the lease . long-lived assets the company views the determination of the carrying value of long-lived assets as a critical accounting estimate since the company must determine an estimated economic useful life in order to properly amortize or depreciate long-lived assets and because the company must consider if the value of any long-lived assets have been impaired , requiring adjustment to the carrying value . economic useful life is the duration of time the asset is expected to be productively employed by us , which may be less than its physical life . the company 's assumptions on obsolescence , technological advances , and other factors affect the determination of estimated economic useful life . the estimated economic useful life of an asset is monitored to determine if it continues to be appropriate in light of changes in business circumstances . for example , technological advances may result in a shorter estimated useful life than originally anticipated . in such a case , the company would depreciate the remaining net book value of the asset over the new estimated remaining life , increasing depreciation expense on a prospective basis . during 2013 , based upon company projections , the company determined that microwave equipment used to backhaul wireless traffic from approximately 150 of its cell sites would be inadequate to carry its traffic by 2016 , and accordingly , reduced the remaining useful life of this class of assets . the additional depreciation expense for 2013 was not significant . 37 goodwill and other intangible assets goodwill represents the excess of consideration paid over the fair value of net assets acquired in business combinations and was created primarily through cable acquisitions . the company determined that cable segment goodwill had become impaired during 2012 , and the full carrying value was written off . cable franchises included in intangible assets , net provide us with the non-exclusive right to provide video services in a specified area . while some cable franchises are issued for a fixed time ( generally 10 years ) , renewals of cable franchises have occurred routinely and at nominal cost . moreover , we have determined that there are currently no legal , regulatory , contractual , competitive , economic or other factors that limit the useful lives of our cable franchises . cable franchise rights and other intangible assets with indefinite lives are not amortized but are tested at least annually for impairment . the testing is performed on the value as of november 30 each year , and is generally composed of comparing the book value of the assets to their estimated fair value . cable franchises are tested for impairment on an aggregate basis , consistent with the management of the cable segment as a whole , utilizing a greenfield valuation approach . it is the company 's practice to engage an independent appraiser to prepare these fair value analyses . intangible assets that have finite useful lives are amortized over their useful lives . acquired subscriber base assets are amortized using accelerated amortization methods over the expected period in which those relationships are expected to contribute to our future cash flows . other finite-lived intangible assets are generally amortized using the straight-line method of amortization . other the company does not have any unrecorded off-balance sheet transactions or arrangements ; however , the company has significant commitments under operating leases . 38 results of continuing operations 2013 compared to 2012 consolidated results the company 's consolidated results from continuing operations for the years ended december 31 , 2013 and 2012 are summarized as follows : replace_table_token_7_th operating revenues operating revenues increased $ 20.9 million , or 7.2 % , in 2013 over 2012 , primarily due to an increase of $ 18.5 million in the wireless segment and $ 5.1 million in the cable segment . the increase in the wireless segment resulted from increases in postpaid service revenues of $ 11.1 million and $ 8.9 million in prepaid service revenues . the postpaid revenues grew as a result of a 4.1 % increase in subscribers during the year , and incremental data fees charged to customers with smartphones . the prepaid service revenues grew as a result of improved product mix and a 6.9 % increase in prepaid customers during 2013. the cable segment revenues grew primarily due to revenue generating unit growth of 11.7 % and 22.2 % in high speed data and voice service , respectively . the growth in revenue described above was partially offset by a $ 2.0 million increase in affiliated revenue , which is eliminated in consolidation .
| the adjusted wireless segment operations accounted for $ 27.2 million of the year over year increase , principally due to incremental handset subsidies of $ 9.4 million and a $ 9.1 million increase in depreciation expense due to accelerated depreciation on base station and other assets being replaced earlier than originally expected . the remaining increase in wireless segment operating expenses was largely a result of costs to expand and upgrade the wireless network , along with higher selling and marketing expenses associated with prepaid wireless plans . cable segment operating expenses increased $ 16.3 million , due to an $ 11.0 million write-off of goodwill , along with growth in customer service support costs , programming costs , network costs and maintenance expenses . 48 other income ( expense ) the change in other income ( expense ) resulted primarily from improvement in investment results in 2012 over 2011. the decrease in interest expense that resulted from declining rates and lower outstanding balances ( prior to the refinancing in september 2012 ) was largely offset by the write-off of $ 0.8 million of unamortized loan costs remaining from the 2010 loan as a result of replacing certain lenders from the original credit agreement . changes in the fair value of the swap agreement entered into in 2010 added $ 0.4 million to interest expense during 2011 , while reducing interest expense $ 0.2 million during 2012. income tax expense the company 's effective tax rate on income from continuing operations decreased from 44.1 % in 2011 to 42.0 % in 2012 principally due to changes undertaken to simplify the company 's corporate structure that reduced the impact of state taxes on the company 's overall effective tax rate . net income from continuing operations net income from continuing operations increased $ 3.1 million in 2012 from 2011 , primarily as a result of the prepaid adjustment offset by the goodwill impairment , improved investment results , lower interest
| 14,315 |
if we are unable to raise capital when needed or on attractive terms , we would be forced to delay , reduce or eliminate our research and development programs or any future commercialization efforts . we will need to generate significant revenues to achieve profitability , and we may never do so . financial operations overview revenue to date , we have not generated any revenues . our ability to generate product revenues will depend heavily on the successful development and potential commercialization of our product candidates . research and development expenses research and development expenses consist of costs associated with our research activities , including our drug discovery efforts , and the development of our product candidates . our research and development expenses consist of : · employee‑related expenses , including salaries , benefits , travel and stock‑based compensation expense ; · external research and development expenses incurred under arrangements with third parties , such as contract research organizations ( cros ) , clinical sites , manufacturing organizations and consultants , including our scientific advisory board ; · license fees ; and · facilities , depreciation and other allocated expenses , which include direct and allocated expenses for rent and maintenance of facilities , depreciation of leasehold improvements and equipment , and laboratory and other supplies . we expense research and development costs to operations as incurred . we account for nonrefundable advance payments for goods and services that will be used in future research and development activities as expenses when the service has been performed or when the goods have been received , rather than when the payment is made . 68 we allocate the expenses related to external research and development services , such as cros , clinical sites , manufacturing organizations and consultants by project . the table below summarizes our external allocation of research and development expenses to our clinical programs , including duvelisib , defactinib , vs‑4718 and vs‑5584 , for the years ended december 31 , 2016 , 2015 and 2014. we use our employee and infrastructure resources across multiple research and development projects . our project costing methodology does not allocate personnel and other indirect costs to specific clinical programs . these unallocated research and development expenses are summarized in the table below and include $ 3.9 million , $ 7.3 million and $ 5.9 million of personnel costs for the years ended december 31 , 2016 , 2015 and 2014 , respectively . replace_table_token_6_th due to the uncertainty in drug development and the stage of development of our product candidates , we are unable to predict the requirements , specific timing and estimated costs to complete the development of our product candidates or the timing of when material cash inflows may commence , if ever . we anticipate that our research and development expenses will increase significantly in future periods as we undertake costlier development activities for our existing and future product candidates , including larger and later‑stage clinical trials . the successful development of our product candidates is highly uncertain . at this time , we can not reasonably estimate or know the nature , timing and estimated costs of the efforts that will be necessary to complete development of our product candidates or the period , if any , in which material net cash inflows from our product candidates may commence . this is due to the numerous risks and uncertainties associated with developing drugs , including the uncertainty of : · clinical trial results ; · the scope , rate of progress and expense of our research and development activities , including preclinical research and clinical trials ; · the potential benefits of our product candidates over other therapies ; · our ability to market , commercialize and achieve market acceptance for any of our product candidates that we receive regulatory approval for ; · the terms and timing of regulatory approvals ; and · the expense of filing , prosecuting , defending and enforcing patent claims and other intellectual property rights . a change in the outcome of any of these variables with respect to the development of a product candidate could mean a significant change in the costs and timing associated with the development of that product candidate . for example , if the u.s. food and drug administration or other regulatory authority were to require us to conduct clinical trials beyond those which we currently anticipate will be required for the completion of clinical development of a product candidate or if we experience significant delays in enrollment in any clinical trials , we could be required to expend significant additional financial resources and time on the completion of clinical development . 69 general and administrative expenses general and administrative expenses consist primarily of salaries and related costs for personnel , including stock‑based compensation expense , in our executive , finance and business development functions . other general and administrative expenses include allocated facility costs and professional fees for legal , patent , investor and public relations , consulting , insurance premiums , audit , tax and other public company costs . critical accounting policies and significant judgments and estimates our management 's discussion and analysis of our financial condition and results of operations is based on our consolidated financial statements , which we have prepared in accordance with u.s. generally accepted accounting principles ( gaap ) . the preparation of these consolidated financial statements requires us to make estimates and judgments that affect the reported amounts of certain assets , liabilities and expenses and the disclosure of contingent assets and liabilities in our financial statements . on an ongoing basis , we evaluate our estimates and judgments , including those related to accrued expenses and stock‑based compensation described in greater detail below . story_separator_special_tag we base our estimates on our limited historical experience , known trends and events and various other factors that we believe are reasonable under the circumstances , the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources . actual results may differ from these estimates under different assumptions or conditions . our significant accounting policies are described in more detail in the notes to our consolidated financial statements appearing elsewhere in this annual report on form 10‑k . however , we believe that the following accounting policies are the most critical to aid you in fully understanding and evaluating our financial condition and results of operations . accrued research and development expenses as part of the process of preparing our consolidated financial statements , we are required to estimate our accrued expenses . this process involves reviewing contracts , identifying services that have been performed on our behalf and estimating the level of service performed and the associated cost incurred 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 . 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 . the significant estimates in our accrued research and development expenses include fees paid to cros in connection with research and development activities for which we have not yet been invoiced . we base our expenses related to cros on our estimates of the services received and efforts expended pursuant to quotes and contracts with cros that conduct research and development on our behalf . the financial terms of these agreements are subject to negotiation , vary from contract to contract and may result in uneven payment flows . there may be instances in which payments made to our vendors will exceed the level of services provided and result in a prepayment of the research and development expense . in accruing service fees , we estimate the time period over which services will be performed and the level of effort to be expended in each period . if the actual timing of the performance of services or the level of effort varies from our estimate , we adjust the accrual or prepaid accordingly . although we do not expect our estimates to be materially different from amounts actually incurred , our understanding of the status and timing of services performed relative to the actual status and timing of services performed may vary and could result in us reporting amounts that are too high or too low in any particular period . to date , there have been no material differences between our estimates of such expenses and the amounts actually incurred . 70 stock‑based compensation we recognize stock‑based compensation expense for stock options issued to employees based on the grant date fair value of the awards on a straight‑line basis over the requisite service period . we record stock‑based compensation expense for stock options issued to non‑employees based on the estimated fair value of the services received or of the equity instruments issued , whichever is more reliably measured , based on the vesting date fair value of the awards on a straight‑line basis over the vesting period . we estimate the fair value of stock option awards using the black‑scholes option‑pricing model . determining the fair value of share‑based awards requires the use of subjective assumptions , including the expected term of the award and expected stock price volatility . the assumptions used in determining the fair value of share‑based awards represent management 's best estimates , which involve inherent uncertainties and the application of management judgment . as a result , if factors change , and we use different assumptions , our share‑based compensation could be materially different in the future . the risk‑free interest rate used for each grant is based on a u.s. treasury instrument whose term is consistent with the expected term of the stock option . because we do not have a sufficient history to estimate the expected term , we use the simplified method as described in securities and exchange commission staff accounting bulletin topic 14.d.2 for estimating the expected term . the simplified method is based on the average of the vesting tranches and the contractual life of each grant . because there was no public market for our common stock prior to our initial public offering , we lacked company‑specific historical and implied volatility information . therefore , we used the historical volatility of a representative group of public biotechnology and life sciences companies with similar characteristics to us . our current computation of expected volatility is based on the historical volatility of five companies equally weighted , including our own and a representative group of four public biotechnology and life sciences companies with similar characteristics to us , including similar stage of product development and therapeutic focus . we have not paid and do not anticipate paying cash dividends on our shares of common stock ; therefore , the expected dividend yield is assumed to be zero . we also recognize compensation expense for only the portion of options that are expected to vest . accordingly , we have estimated expected forfeitures of stock options based on our historical forfeiture rate , adjusted for known trends , and used these rates in developing a future forfeiture rate . we have also granted performance‑based restricted stock units ( rsus ) and stock options with terms that allow the recipients to vest in a specific number of shares based upon the achievement of performance‑based milestones as specified in the grants .
| this increase was primarily due to higher interest rates on investments in the 2016 period compared to the 2015 period . comparison of the year ended december 31 , 2015 to the year ended december 31 , 2014 research and development expense . research and development expense for the 2015 period was $ 40.6 million compared to $ 35.4 million for the year ended december 31 , 2014 ( 2014 period ) . the $ 5.2 million increase from the 2014 period to the 2015 period was primarily related to an increase of approximately $ 5.8 million in external cro expense for outsourced biology , chemistry , development and clinical services , which includes our clinical trial costs , a $ 1.4 million increase in personnel related costs , primarily due to increased headcount and salaries ( before our restructuring ) and to restructuring costs associated with the reduction in workforce in october 2015 , and an increase of approximately $ 558,000 in consulting expense . these increases were partially offset by a decrease of $ 1.3 million in stock-based compensation expense , $ 1.2 million in license fees related to the encarta asset purchase in the 2014 period and $ 126,000 in lab supplies . general and administrative expense . general and administrative expense for the 2015 period was $ 17.6 million compared to $ 18.2 million for the 2014 period . the approximate $ 525,000 decrease from the 2014 period to the 2015 period primarily resulted from a decrease of approximately $ 1.1 million in stock-based compensation expense and a decrease in professional fees of approximately $ 446,000 , primarily related to lower intellectual property and general legal costs . these decreases were partially offset by an increase of approximately $ 856,000 in personnel costs , due to increased headcount and salaries ( before our restructuring ) and to restructuring costs associated with the reduction in workforce in october 2015 , and an increase in consulting fees of approximately $ 189,000 .
| 14,316 |
we financed the acquisition of our initial portfolio by using a portion of a $ 200.0 million credit facility ( the “ bridge facility ” ) provided by deutsche bank ag , new york branch ( “ deutsche bank ” ) . on march 11 , 2014 , we completed our initial public offering and sold 9,840,665 shares of common stock ( including 1,250,000 shares of common stock through the underwriters ' exercise of their overallotment option and the concurrent private placement of 257,332 shares of common stock to our adviser 's senior team and other persons associated with tpc ) of our common stock at an offering price of $ 15.00 per share . we received $ 141.6 million of net proceeds in connection with the initial public offering and concurrent private placement , net of the portion of the underwriting sales load and offering costs we paid . we used a portion of these net proceeds to pay down all amounts outstanding under the bridge facility and terminated the bridge facility in conjunction with such repayment . 76 in february 2014 , we entered into a credit agreement with deutsche bank acting as administrative agent and a lender , and keybank national association , everbank commercial lender finance , inc. , and alostar bank of commerce , as other lenders , which provided us with a $ 150.0 million commitment , subject to borrowing base requirements ( “ credit facility ” ) . in august 2014 , we amended the credit facility to increase the total commitments by $ 50.0 million to $ 200.0 million in aggregate . effective as of a january 2016 amendment to the credit facility , borrowings under the credit facility bear interest at the sum of ( i ) a floating rate based on certain indices , including libor and commercial paper rates , plus ( ii ) a margin of 3.0 % during the credit facility 's revolving period . the revolving period under the amended credit facility expires on february 21 , 2018 and the maturity date of the credit facility is february 21 , 2019. on march 27 , 2015 , we priced a public offering of 6,500,000 shares of our common stock , raising approximately $ 93.7 million after offering costs . on april 29 , 2015 , we received an additional approximately $ 2.2 million through the issuance of 154,018 shares of our common stock as the result of the underwriters ' partial exercise of their overallotment option . on august 4 , 2015 , we completed a public offering of $ 50.0 million in aggregate principal amount of our 2020 notes and received net proceeds of $ 48.3 million after the payment of fees and offering costs . the interest on the 2020 notes is payable quarterly on january 15 , april 15 , july 15 and october 15 , beginning on october 15 , 2015. on september 2 , 2015 , we issued an additional $ 4.6 million in aggregate principal amount of our 2020 notes and received net proceeds of approximately $ 4.5 million , after the payment of the underwriting sales load and offering costs , as a result of the underwriters ' partial exercise of their option to purchase additional 2020 notes . portfolio composition , investment activity and asset quality portfolio composition we originate and invest primarily in venture growth stage companies . companies at the venture growth stage have distinct characteristics differentiating them from venture capital-backed companies at other stages in their development lifecycle . we invest primarily in ( i ) growth capital loans that have a secured collateral position and that are used by venture growth stage companies to finance their continued expansion and growth , ( ii ) equipment financings , which may be structured as loans or leases , that have a secured collateral position on specified mission-critical equipment , ( iii ) on a select basis , revolving loans that have a secured collateral position and that are used by venture growth stage companies to advance against inventory , components , accounts receivable , contractual or future billings , bookings , revenues , sales or cash payments and collections including proceeds from a sale , financing or the equivalent and ( iv ) direct equity investments in venture growth stage companies . in connection with our growth capital loans , equipment financings and revolving loans , we generally receive warrants that allow us to participate in any equity appreciation of our borrowers and enhance our overall investment returns . as of december 31 , 2016 , we had 99 investments in 33 companies and our four largest portfolio companies represented approximately 38 % of our portfolio investments . our investments included 63 debt investments , 29 warrant investments , and 7 direct equity and related investments . as of december 31 , 2016 , the total cost and fair value of these investments were approximately $ 370.1 million and approximately $ 374.3 million , respectively . as of december 31 , 2016 , one of our customers was publicly traded . as of december 31 , 2016 , the 63 debt investments with an aggregate fair value of approximately $ 360.0 million had a weighted average loan to enterprise value at the time of underwriting ratio of approximately 8.6 % . enterprise value of the borrower is estimated based on information available , including any information regarding the most recent rounds of borrower funding . as of december 31 , 2015 , we had 85 investments in 34 companies and our four largest portfolio companies represented approximately 43.7 % of our portfolio investments . our investments included 47 debt investments , 31 warrant investments , and seven direct equity investments . as of december 31 , 2015 , the total cost and fair value of these investments were approximately $ 276.4 million and approximately $ 271.7 million , respectively . as of december 31 , 2015 , two of our customers were publicly traded . as of december 31 , 2015 , the 47 debt investments with an aggregate fair value of approximately $ 259.6 story_separator_special_tag million had a weighted average loan to enterprise value at the 77 time of underwriting ratio of approximately 19.2 % . enterprise value of the borrower is estimated based on information available , including any information regarding the most recent rounds of borrower funding . excluding the debt investment to intermodal data , inc. ( due to its foreclosure agreement to purchase certain assets and assume the outstanding obligations - see further discussion in “ asset quality ” section ) , the weighted average loan to enterprise value at the time of underwriting ratio was approximately 8.6 % as of december 31 , 2015. the following tables provide information on the cost , fair value , and net unrealized gains ( losses ) of our investments in companies along with the number of companies in our portfolio as of december 31 , 2016 and december 31 , 2015. replace_table_token_4_th replace_table_token_5_th * represents non-duplicative number of companies . 78 the following tables show the fair value of the portfolio of investments , by industry and the percentage of the total investment portfolio , as of december 31 , 2016 and december 31 , 2015. replace_table_token_6_th 79 replace_table_token_7_th * less than 0.05 % . the following tables present the product type of our debt investments as of december 31 , 2016 and december 31 , 2015. replace_table_token_8_th replace_table_token_9_th 80 approximately 18.7 % and 18.0 % of the debt investments in our portfolio as of december 31 , 2016 and december 31 , 2015 , respectively , based on the aggregate fair value , consisted of growth capital loans where the borrower has a term loan facility , with or without an accompanying revolving loan , in priority to our senior lien . investment activity during the year ended december 31 , 2016 , we entered into seventeen new commitments with eight new customers and nine existing customers totaling $ 286.9 million , funded twenty-eight debt investments for approximately $ 158.3 million in principal value , acquired warrants representing approximately $ 2.5 million of value , and made two equity and related investments of approximately $ 0.2 million . during the year ended december 31 , 2015 , we entered into fifteen new commitments with eight new customers , six existing customers and one previous customer totaling $ 213.8 million , funded seventeen debt investments for approximately $ 101.3 million in principal value , acquired warrants representing approximately $ 1.8 million of value and exercised warrants into equity with a cost basis of approximately $ 0.2 million in one company , and made two equity investments of approximately $ 0.7 million . during the year ended december 31 , 2016 , three of our portfolio companies fully prepaid their outstanding principal of approximately $ 34.8 million and one of our portfolio companies made a partial principal prepayment of $ 5.0 million . during the year ended december 31 , 2015 , six of our portfolio companies fully prepaid their outstanding principal of approximately $ 73.4 million . as of december 31 , 2016 , our unfunded commitments to nine companies totaled approximately $ 117.4 million ; as of december 31 , 2015 , our unfunded commitments to twelve companies totaled $ 190.0 million . during the year ended december 31 , 2016 , $ 161.2 million in unfunded commitments expired or were terminated and approximately $ 158.3 million were funded . during the year ended december 31 , 2015 , $ 133.5 in unfunded commitments expired or were terminated and approximately $ 101.3 million were funded . the following table provides additional information on our unfunded commitments regarding milestones , expirations , and the companies ' industries , and types of loans . replace_table_token_10_th _ * does not include $ 40.0 million backlog of potential future commitments . see “ -backlog of potential future commitments ” below . our credit agreements with our customers contain customary lending provisions which allow us relief from funding obligations for previously made commitments in instances where the underlying company experiences materially adverse events that affect the financial condition or business outlook for the company . since these commitments may expire without being drawn upon , unfunded commitments do not necessarily represent future cash requirements or future earning assets for the company . we generally expect approximately 75 % of our gross unfunded commitments to eventually be drawn before the expiration of their corresponding availability periods . 81 the fair value at the inception of the agreement of the delay draw credit agreements with our customers is equal to the fees and or warrants received to enter into these agreements , taking into account the remaining terms of the agreements and the counterparties ' credit profile . the unfunded commitment liability reflects the fair value of these future funding commitments . as of december 31 , 2016 and december 31 , 2015 , the fair value for these unfunded commitments totaled approximately $ 1.2 million and $ 1.1 million , respectively , and was included in “ other accrued expenses and liabilities ” in our consolidated statements of assets and liabilities . our level of investment activity can vary substantially from period to period as our adviser chooses to slow or accelerate new business originations depending on market conditions , rate of investment of tpc 's select group of leading venture capital investors , our adviser 's knowledge , expertise and experience , our funding capacity ( including availability under our credit facility and our ability or inability to raise equity or debt capital ) , and other market dynamics . the following table shows the debt commitments , fundings of debt investments ( principal balance ) and equity investments and non-binding term sheet activity for the years ended december 31 , 2016 and december 31 , 2015. replace_table_token_11_th _ * includes $ 40.0 million backlog of potential future commitments . see “ -backlog of potential future commitments ” below . backlog of potential future commitments we entered into commitments with certain portfolio companies which permit an increase in the commitment amount in the future in the event that conditions to such increases are met .
| one borrower , xirrus , inc. , with a principal balance of $ 20.5 million was downgraded from white ( 2 ) to yellow ( 3 ) . one borrower , kncminer ab , with a principal balance of $ 5.6 million was downgraded from white ( 2 ) to yellow ( 3 ) and subsequently to orange ( 4 ) . during the year ended december 31 , 2015 , there were five changes within the credit categories . one borrower with a principal balance of $ 5.0 million was upgraded from white ( 2 ) to clear ( 1 ) . one borrower with a principal balance of $ 6.9 million was downgraded from white ( 2 ) to yellow ( 3 ) . two borrowers , virtual instruments corporation with principal balance of $ 25.6 million and mind candy limited with principal balance of $ 10.0 million , were downgraded from yellow ( 3 ) to orange ( 4 ) . the other downgrade included the debt investments that were initially to coraid , inc. , which were assumed by intermodal data , inc. as part of the foreclosure agreement it entered into to purchase certain assets and assume the outstanding obligations owed to us . the debt investment to intermodal data , inc. was ranked as orange ( 4 ) as of december 31 , 2015 . 83 the following tables show the credit rankings for the portfolio companies that had outstanding obligations to us as of december 31 , 2016 and december 31 , 2015. replace_table_token_12_th replace_table_token_13_th results of operations comparison of operating results for the years ended december 31 , 2016 and december 31 , 2015 and the period from march 5 , 2014 ( commencement of operations ) to december 31 , 2014 an important measure of our financial performance is net increase ( decrease ) in net assets resulting from operations , which includes net investment income ( loss ) , net realized gains ( losses ) and net unrealized gains ( losses ) . net investment income ( loss ) is the difference between our income from interest , dividends , fees and other investment income and our operating expenses including interest on borrowed funds . net realized gains ( losses ) on investments are the difference between the proceeds received from dispositions of portfolio investments
| 14,317 |
pharmacy management 's services include ( i ) traditional pharmacy benefit management ( `` pbm '' ) services ; ( ii ) pharmacy benefit administration ( `` pba '' ) for state medicaid and other government sponsored programs ; ( iii ) specialty pharmaceutical dispensing operations , contracting and formulary optimization programs ; ( iv ) medical pharmacy management programs ; and ( v ) programs for the integrated management of specialty drugs across both the medical and pharmacy benefit that treat complex conditions , regardless of site of service , method of delivery , or benefit reimbursement . in addition , pharmacy management has subcontract arrangements to provide pbm services for certain public sector customers . the company 's pharmacy management programs are provided under contracts with health plans , employers , medicaid mcos , state medicaid programs , and other government agencies , and encompass risk-based and fee-for-service ( `` ffs '' ) arrangements . 43 corporate this segment of the company is comprised primarily of operational support functions such as sales and marketing and information technology , as well as corporate support functions such as executive , finance , human resources and legal . acquisition of partners rx management llc pursuant to the september 6 , 2013 agreement and plan of merger ( the `` merger agreement '' ) with partners rx management , llc ( `` partners rx '' ) , on october 1 , 2013 the company acquired all of the outstanding ownership interests of partners rx . partners rx is a full-service commercial pbm with a strong focus on health plans and self-funded employers primarily through sales through third party administrators , consultants and brokers . as consideration for the transaction , the company paid $ 99.3 million in cash , including net receipts of $ 0.7 million for working capital adjustments . the company funded the acquisition with cash on hand . for further discussion , see note 3 '' acquisitions '' to the consolidated financial statements set forth elsewhere herein . acquisition of alphacare holdings , inc. pursuant to the august 13 , 2013 stock purchase agreement ( the `` stock purchase agreement '' ) , on december 31 , 2013 the company acquired a 65 % equity interest in alphacare holdings , inc. ( `` alphacare holdings '' ) , the holding company for alphacare new york , inc. ( `` alphacare '' ) , a health maintenance organization ( `` hmo '' ) in new york that operates a new york managed long-term care plan ( `` mltcp '' ) in bronx , new york , queens , kings and westchester counties , and medicare plans in bronx , new york , queens and kings counties . prior to december 31 , 2013 , the company held a 7 % equity interest in alphacare through a previous equity investment of $ 2.0 million in preferred membership units of alphacare 's previous holding company , alphacare holdings , llc on may 17 , 2013. the company also previously loaned $ 5.9 million to alphacare holdings , llc . as part of the stock purchase agreement , alphacare holdings , llc was reorganized into a delaware corporation , and on december 31 , 2013 the preferred membership units and the loan were converted into series a participating preferred stock ( `` series a preferred '' ) of alphacare holdings and the company purchased an additional $ 17.4 million of series a preferred . during 2014 , the company purchased $ 2.2 million in common shares from the minority owners of alphacare . during 2014 , the company also purchased an additional $ 8.9 million in shares of series b participating preferred stock and series c participating preferred stock issued by alphacare holdings . as of december 31 , 2014 , the company held a 75 % voting interest and the remaining shareholders held a 25 % voting interest in alphacare holdings . based on the company 's 75 % equity and voting interest in alphacare holdings , the company has included the results of operations in its consolidated financial statements . the company reports the results of operations of alphacare holdings within the public sector segment . for further discussion , see note 3 '' acquisitions '' to the consolidated financial statements set forth elsewhere herein . acquisition of cdmi , llc pursuant to the march 31 , 2014 purchase agreement ( the `` cdmi agreement '' ) with cdmi , llc ( `` cdmi '' ) , on april 30 , 2014 the company acquired all of the outstanding equity interests of cdmi . cdmi provides a range of clinical consulting programs and negotiates and administers drug rebates for managed care organizations and other customers . as consideration for the transaction , the company paid a base price of $ 201.1 million , including net receipts of $ 3.9 million for working capital adjustments . pursuant to the cdmi agreement , the sellers and certain key management of cdmi 44 purchased a total of $ 80.0 million in magellan restricted common stock , which will generally vest over a 42-month period , conditioned upon continued employment . in addition to the base purchase price , the cdmi agreement provides for potential contingent payments up to a maximum aggregate amount of $ 165.0 million . the potential future payments are contingent upon cdmi meeting certain client retention , client conversion , and gross profit milestones through december 31 , 2016. the company reports the results of operations of cdmi within its pharmacy management segment . for further discussion , see note 3 '' acquisitions '' to the consolidated financial statements set forth elsewhere herein . other acquisitions pursuant to the july 1 , 2014 purchase agreement ( the `` cobalt agreement '' ) with cobalt therapeutics , llc ( `` cobalt '' ) , the company acquired all of the outstanding equity interests of cobalt . cobalt provides computerized cognitive behavioral therapy self-service programs . as consideration for the transaction , the company paid a base price of $ 8.0 million in cash , subject to working capital adjustments . story_separator_special_tag in addition to the base purchase price , the cobalt agreement provides for potential contingent payments up to a maximum aggregate amount of $ 6.0 million . the potential future payments are contingent upon engagement of new members and new contract execution through june 30 , 2017. the purchase price has been allocated based upon the estimated fair value of net assets acquired at the date of acquisition . the company will make appropriate adjustments to the purchase price allocations prior to the completion of the measurement period as required . the company reports the results of operations of cobalt within its commercial segment . for further discussion , see note 3 '' acquisitions '' to the consolidated financial statements set forth elsewhere herein . managed care and other revenue managed care revenue . managed care revenue , inclusive of revenue from the company 's risk , eap and aso contracts , is recognized over the applicable coverage period on a per member basis for covered members . the company is paid a per member fee for all enrolled members , and this fee is recorded as revenue in the month in which members are entitled to service . the company adjusts its revenue for retroactive membership terminations , additions and other changes , when such adjustments are identified , with the exception of retroactivity that can be reasonably estimated . the impact of retroactive rate amendments is generally recorded in the accounting period that terms to the amendment are finalized , and that the amendment is executed . any fees paid prior to the month of service are recorded as deferred revenue . managed care revenues approximated $ 2.5 billion , $ 2.7 billion and $ 2.6 billion for the years ended december 31 , 2012 , 2013 and 2014 , respectively . fee-for-service and cost-plus contracts . the company has certain fee-for-service contracts , including cost-plus contracts , with customers under which the company recognizes revenue as services are performed and as costs are incurred . this includes revenues received in relation to aca fees billed on a cost reimbursement basis . revenues from these contracts approximated $ 151.4 million , $ 215.1 million and $ 290.9 million for the years ended december 31 , 2012 , 2013 and 2014 , respectively . block grant revenues . the maricopa contract ( as defined below ) was partially funded by federal , state and county block grant money , which represents annual appropriations . the company recognizes revenue from block grant activity ratably over the period to which the block grant funding applies . block grant revenues were approximately $ 124.8 million , $ 131.5 million and $ 33.3 million for the years ended december 31 , 2012 , 2013 and 2014 , respectively . 45 performance-based revenue . the company has the ability to earn performance-based revenue under certain risk and non-risk contracts . performance-based revenue generally is based on either the ability of the company to manage care for its clients below specified targets , or on other operating metrics . for each such contract , the company estimates and records performance-based revenue after considering the relevant contractual terms and the data available for the performance-based revenue calculation . pro-rata performance-based revenue may be recognized on an interim basis pursuant to the rights and obligations of each party upon termination of the contracts . performance-based revenues were $ 25.4 million , $ 14.0 million and $ 12.0 million for the years ended december 31 , 2012 , 2013 and 2014 , respectively . rebate revenue . the company administers a rebate program for certain clients through which the company coordinates the achievement , calculation and collection of rebates and administrative fees from pharmaceutical manufacturers on behalf of clients . each period , the company estimates the total rebates earned based on actual volumes of pharmaceutical purchases by the company 's clients , as well as historical and or anticipated sharing percentages . the company earns fees based upon the volume of rebates generated for its clients . the company does not record as rebate revenue any rebates that are passed through to its clients . total rebate revenues for the years ended december 31 , 2012 , 2013 and 2014 were $ 40.2 million , $ 34.8 million and $ 43.6 million , respectively . in relation to the company 's pbm business , the company administers rebate programs through which it receives rebates from pharmaceutical manufacturers that are shared with its customers . the company recognizes rebates when the company is entitled to them and when the amounts of the rebates are determinable . the amount recorded for rebates earned by the company from the pharmaceutical manufacturers are recorded as a reduction of cost of goods sold . pbm and dispensing revenue pharmacy benefit management revenue . the company recognizes pbm revenue , which consists of a negotiated prescription price ( ingredient cost plus dispensing fee ) , co-payments collected by the pharmacy and any associated administrative fees , when claims are adjudicated . the company recognizes pbm revenue on a gross basis ( i.e . including drug costs and co-payments ) as it is acting as the principal in the arrangement and is contractually obligated to its clients and network pharmacies , which is a primary indicator of gross reporting . in addition , the company is solely responsible for the claims adjudication process , negotiating the prescription price for the pharmacy , collection of payments from the client for drugs dispensed by the pharmacy , and managing the total prescription drug relationship with the client 's members . if the company enters into a contract where it is only an administrator , and does not assume any of the risks previously noted , revenue will be recognized on a net basis . prior to the year ended december 31 , 2013 the company had no pbm business . pbm revenues were $ 106.7 million and $ 575.7 million for the years ended december 31 , 2013 and 2014 , respectively . dispensing revenue .
| the following table reconciles segment profit to consolidated income before income taxes for the years ended december 31 , 2012 , 2013 and 2014 ( in thousands ) : replace_table_token_16_th non-gaap measures the company reports its financial results in accordance with gaap , however the company 's management also assesses business performance and makes business decisions regarding the company 's operations using certain non-gaap measures . in addition to segment profit , as defined above , the company also uses adjusted net income attributable to magellan health , inc. ( `` adjusted net income '' ) and adjusted net income per common share attributable to magellan health , inc. on a diluted basis ( `` adjusted eps '' ) . adjusted net income and adjusted eps reflect certain adjustments made for acquisitions completed after january 1 , 2013 to exclude non-cash stock compensation expense resulting from restricted stock purchases by sellers , changes in the fair value of contingent consideration , as well as amortization of identified acquisition intangibles . the company believes these non-gaap measures provide a more useful comparison of the company 's underlying business performance from period to period and is more representative of the earnings capacity of the company . non-gaap financial measures we disclose , such as segment profit , adjusted net income , and adjusted eps , should not be considered a substitute for , or superior to , financial measures determined or calculated in accordance with gaap . the following table reconciles adjusted net income to net income attributable to magellan health , inc. for the years ended december 31 , 2012 , 2013 , and 2014 ( in thousands ) : replace_table_token_17_th 55 the following table reconciles adjusted eps to net income per common share attributable to magellan health , inc.diluted for the years ended december 31 , 2012 , 2013 , and 2014 : replace_table_token_18_th year ended december 31 , 2014 ( `` 2014 '' ) compared to the year ended december 31 , 2013 ( `` 2013 '' ) commercial net revenue net revenue related to commercial decreased by 12.1 percent or $ 92.8 million from 2013 to 2014. the decrease in revenue is mainly due to terminated contracts of $ 193.4 million , program change of $ 16.5 million , customer settlements in 2013 of $ 5.6 million and retroactive rate and membership adjustments recorded in 2013 of $ 2.9 million . these decreases were partially offset by revenue related to cost-plus
| 14,318 |
under the company 's methodology , loans are first segmented into 1 ) those comprising large groups of homogeneous loans which are collectively evaluated for impairment and 2 ) all other loans which are individually evaluated . those loans in the second category are further segmented utilizing a defined grading system which involves categorizing loans by severity of risk based on conditions that may affect the ability of the borrowers to repay their debt , such as current financial information , collateral valuations , historical payment experience , credit documentation , public information , and current trends . the loans subject to credit classification represent the portion of the portfolio subject to the greatest credit risk and where adjustments to the allowance for losses on loans as a result of provisions and charge-offs are most likely to have a significant impact on operations . a periodic review of selected credits ( based on loan size and type ) is conducted to identify loans with heightened risk or probable losses and to assign risk grades . the primary responsibility for this review rests with risk management personnel . this review is supplemented with periodic examinations of both selected credits and the credit review process by applicable regulatory agencies . the information from these reviews assists management in the timely identification of problems and potential problems and provides a basis for deciding whether the credit represents a probable loss or risk that should be recognized . loans are considered impaired if , based on current information and events , it is probable that southern bank will be unable to collect the scheduled payments of principal or interest when due according to the contractual terms of the loan agreement . the measurement of impaired loans is generally based on the fair value of the collateral for collateral-dependent loans . if the loan is not collateral-dependent , the measurement of impairment is based on the present value of expected future cash flows discounted at the historical effective interest rate or the observable market price of the loan . in measuring the fair value of the collateral , management uses the assumptions ( i.e. , discount rates ) and methodologies ( i.e. , comparison to the recent selling price of similar assets ) consistent with those that would be utilized by unrelated third parties . impairment identified through this evaluation process is a component of the allowance for loan losses . if a loan is not considered impaired , it is grouped together with loans having similar characteristics ( i.e. , the same risk grade ) , and an allowance for loan losses is based upon a quantitative factor ( historical average charge-offs for similar loans over the past one to five years ) , and qualitative factors such as changes in lending policies ; national , regional , and local economic conditions ; changes in mix and volume of portfolio ; experience , ability , and depth of lending management and staff ; entry to new markets ; levels and trends of delinquent , nonaccrual , special mention , and classified loans ; concentrations of credit ; changes in collateral values ; agricultural economic conditions ; and regulatory risk . for portfolio loans that are evaluated for impairment as part of homogenous pools , an allowance is maintained based upon similar quantitative and qualitative factors . changes in the financial condition of individual borrowers , in economic conditions , in historical loss experience and in the conditions of the various markets in which collateral may be sold may all affect the required level of the allowance for losses on loans and the associated provision for losses on loans . financial condition story_separator_special_tag style= '' max-width:100 % ; padding-left:5.88 % ; padding-right:5.88 % ; position : relative ; '' > ● experience , ability , and depth of lending management and staff ● entry to new markets ● levels and trends of delinquent , nonaccrual , special mention and classified loans ● concentrations of credit ● changes in collateral values ● agricultural economic conditions ● regulatory risk the qualitative factors are applied to the allowance for loan losses based upon the following percentages by loan type : replace_table_token_26_th at june 30 , 2020 , the amount of our allowance for loan losses attributable to these qualitative factors increased to approximately $ 19.7 million , as compared to $ 17.1 million at june 30 , 2019 , due in part to the increase in loan balances , as well as the increased economic uncertainty triggered by the covid-19 pandemic . at june 30 , 2020 , following regulatory guidance encouraging financial institutions to work with borrowers affected by the covid-19 pandemic , the company had granted payment deferrals or interest-only modifications for approximately 900 loans totaling $ 380.2 million . these are loans that were otherwise current and performing prior to the covid-19 pandemic , but for which borrowers anticipated difficulties in the coming months due to impact of the pandemic . generally , deferrals were granted for three-month periods , while interest-only modifications were for six-month periods . these deferrals and modifications were made in compliance with provisions of the cares act that allows financial institutions the option to temporarily suspend certain requirements under u.s. gaap related to troubled debt restructurings ( tdrs ) , and the company has not accounted for these loans as tdrs . at august 31 , 220 , the balance of loans for which payment deferrals or interest-only modifications were in place had declined to approximately 600 loans with balances of $ 305.6 million . 54 the table below provides detailed information about the outstanding balance of loans with payment deferrals or interest-only modifications in place at august 31 , 2020 , and at june 30 , 2020 , which are not considered tdrs as provided for under the cares act . replace_table_token_27_th replace_table_token_28_th 55 replace_table_token_29_th premises and equipment . story_separator_special_tag premises and equipment increased to $ 65.1 million , up $ 2.4 million , or 3.8 % , as compared to june 30 , 2019. the increase was due to construction of a new facility for a re-located bank branch , leasehold improvements for a de novo bank branch , a branch added through the central federal acquisition , and other acquisitions of equipment , partially offset by depreciation . boli . the bank has purchased “ key person ” life insurance policies ( boli ) on employees at various times since fiscal 2003 , and has acquired additional boli in connection with certain acquisitions . at june 30 , 2020 , the cash surrender value of all such policies was $ 43.4 million , up $ 5.0 million , or 13.1 % , as compared to june 30 , 2019 , due primarily to additional boli purchases during the fiscal year . intangible assets . the july 2009 acquisition of the southern bank of commerce resulted in goodwill of $ 126,000. the october 2013 acquisition of ozarks legacy community financial , inc. , resulted in goodwill of $ 1.5 million and a $ 1.4 million core deposit intangible , which was amortized over a five-year period using the straight-line method and was fully amortized as of june 30 , 2020. the february 2014 acquisition of citizens state bankshares , inc. , resulted in a $ 624,000 core deposit intangible , which was amortized over a five-year period using the straight-line method and was fully amortized as of june 30 , 2020. the august 2014 acquisition of peoples service company , inc. , and its subsidiary , peoples bank of the ozarks ( the “ peoples acquisition ” ) resulted in goodwill of $ 3.0 million and a $ 3.0 million core deposit intangible , which is being amortized over a six-year period using the straight-line method . the june 2017 acquisition of tammcorp , inc. , and its subsidiary , capaha bank ( the “ capaha acquisition ” ) resulted in goodwill of $ 4.1 million and a $ 3.4 million core deposit intangible , which is being amortized over a seven-year period using the straight-line method . the smb-marshfield acquisition resulted in goodwill of $ 4.4 million and a $ 1.3 million core deposit intangible , which is being amortized over a seven-year period using the straight-line method . the gideon acquisition resulted in goodwill of $ 1.0 million and a $ 4.1 million core deposit intangible , which is being amortized over a seven-year period using the straight-line method . the may 2020 central federal acquisition resulted in a bargain purchase gain of $ 123,000 and a $ 540,000 core deposit intangible , which is being amortized over a six-year period using the straight-line method . goodwill from these acquisitions is not being amortized , but is tested for impairment at least annually . deposits . deposits were $ 2.2 billion at june 30 , 2020 , an increase of $ 291.2 million , or 15.4 % , as compared to june 30 , 2019. the increase was attributable in part to the central federal acquisition , which included deposits assumed at a fair value of $ 46.7 million . since june 30 , 2019 , the company 's public unit deposits increased by $ 38.4 million , to total $ 305.3 million at june 30 , 2020 , with the increase primarily resulting from higher nonmaturity balances held by our existing customer base ; public unit deposits 56 assumed in the central federal acquisition were minimal . since june 30 , 2019 , brokered certificates of deposit decreased by $ 21.6 million , to total $ 23.3 million at june 30 , 2020 , while brokered nonmaturity deposits increased by $ 11.7 million , to total $ 20.0 million at june 30 , 2020. no brokered funding was assumed in the central federal acquisition . the company decreased brokered funding during the fiscal year as better core liquidity in the second half of the fiscal year reduced the company 's need for wholesale funding . our discussion of brokered deposits excludes those deposits originated through reciprocal arrangements , as our reciprocal deposits are primarily originated by our public unit depositors and utilized as an alternative to pledging securities against those deposits . recently updated regulatory guidance , adopted following the may 2018 enactment of the economic growth , regulatory relief , and consumer protection act ( senate bill 2155 ) , has generally exempted deposits originated through such reciprocal arrangements from classification as brokered deposits for regulatory purposes , subject to some limitations . we continued to utilize reciprocal deposit programs , and at fiscal year end , we had placed deposits of $ 231.9 million through reciprocal programs , up from $ 186.1 million a year earlier . at june 30 , 2020 , $ 138.1 million reflected deposits we had placed on behalf of our public unit depositors , up from $ 119.9 million a year ago . inclusive of the central federal acquisition , deposit balances saw growth primarily in interest-bearing transaction accounts , noninterest-bearing transaction accounts , money market deposit accounts , and savings accounts , partially offset by declines in certificates of deposit . the average loan-to-deposit ratio for the fourth quarter of fiscal 2020 was 98.9 % , as compared to 97.6 % for the same period of the prior fiscal year . borrowings . fhlb advances were $ 70.0 million at june 30 , 2020 , an increase of $ 25.1 million , or 55.9 % , as compared to june 30 , 2019 , with the increase primarily attributable to the company 's use of this funding source to fund increases in loans , cash balances , and securities in excess of our increases in deposits and retained earnings .
| commercial loans were higher as a result of the ppp loans , which totaled $ 132.3 million at june 30 , 2020. residential real estate loan balances were higher as the company saw increases in loans secured by both 1-to-4 family and multifamily real estate . commercial real estate loans increased primarily due to loans secured by nonresidential properties , combined with a small increase in loans secured by agricultural real estate . construction loan balances were increased as a result of both draws on existing construction loans and new loan originations , primarily secured by multifamily , 1-4 family , and non-owner occupied commercial properties . reductions in consumer loans consisted primarily of loans secured by deposits , partially offset by a modest increase in other consumer loans . nonperforming loans were $ 8.7 million , or 0.40 % of gross loans , at june 30 , 2020 , as compared to $ 21.0 million , or 1.13 % of gross loans at june 30 , 2019. the decrease in nonperforming loans over the fiscal year was attributed primarily to the resolution of certain nonperforming loans acquired in the gideon acquisition . in connection with the gideon acquisition , we acquired nonperforming loans which totaled $ 10.2 million ( at fair value ) as of june 30 , 2019 , and this group of nonperforming loans has declined to $ 1.8 million as of june 30 , 2020. allowance for loan losses . the allowance for loan losses was $ 25.1 million at june 30 , 2020 , an increase of $ 5.2 million , or 26.3 % , as compared to june 30 , 2019. the allowance represented 1.16 % of gross loans receivable at june 30 , 2020 , as compared to 1.07 % of gross loans receivable at june 30 , 2019. the increase in the allowance as a percentage of gross loans receivable was due in part to the covid-19 pandemic and the aggregate impact that it will have on global and regional economies , including uncertainty regarding the effectiveness of recent efforts by the u.s. government and federal reserve to respond
| 14,319 |
diluted earnings per share were $ 1.28 for the twelve months ended december 31 , 2012 , an increase of $ 0.12 , or 10 % , compared to the same period in 2011 . deposits and loans outstanding have increased by $ 141.9 million , or 11 % , and $ 114.2 million , or 9 % , respectively , since december 31 , 2011 . during the quarter ended december 31 , 2012 , loans outstanding increased $ 61.3 million , including $ 26.4 million of purchased residential loans , and deposits increased $ 4.6 million . total assets amounted to $ 1.67 billion , which represented an increase of $ 176.6 million , or 12 % , since december 31 , 2011 , and $ 28.2 million , or 2 % , since september 30 , 2012 . additionally , investment assets under management increased $ 87.2 million , or 17 % , since december 31 , 2011 , and $ 13.4 million , or 2 % , since september 30 , 2012 , to $ 592.4 million at december 31 , 2012 . strategically , our focus remains on organic growth and market expansion , while continually planning for our future by investing in our branch network , technology , progressive product capabilities , and , most importantly , in our people . in 2012 , we opened two new branches , in pelham , nh and tyngsboro , ma , and anticipate an early spring 2013 , opening of our new lawrence , ma branch , which will be our twenty-first banking center . composition of earnings the company 's growth contributed to increases in net interest income and the level of operating expenses for the year ended december 31 , 2012 compared to 2011. in 2012 , the provision for loan losses decreased compared to the 2011 period , while non-interest income increased . 36 the company 's earnings are largely dependent on its net interest income , which is the difference between interest earned on loans and investments and the cost of funding ( primarily deposits and borrowings ) . net interest income expressed as a percentage of average interest earning assets is referred to as net interest margin . the company reports net interest margin on a tax equivalent basis ( `` margin '' ) . the re-pricing frequency of the company 's assets and liabilities are not identical , and therefore subject the company to the risk of adverse changes in interest rates . this is often referred to as “ interest rate risk ” and is reviewed in more detail in item 7a , “ quantitative and qualitative disclosures about market risk , ” of this form 10-k. net interest income increased $ 3.6 million , or 6 % , for the year ended december 31 , 2012 and amounted to $ 61.9 million . the increases in net interest income over the comparable 2011 period was due primarily to revenue generated from loan growth , which has been funded through non-interest bearing deposits , partially offset by a decrease in margin . average balances of loans and loans held for sale for the year ended december 31 , 2012 increased $ 97.5 million compared to the same period in 2011 . the margin was 4.27 % for the year ended december 31 , 2012 compared to 4.37 % for the year ended december 31 , 2011 . for the quarter ended december 31 , 2012 , the margin was 4.21 % compared to 4.39 % for the quarter ended december 31 , 2011 . the margin was 4.20 % for the quarter ended september 30 , 2012 . consistent with the industry , the 2012 margin continued to trend downward , as the yield on interest-earning assets declined faster than the cost of funding , as funding rates have reached a level leaving little room for significant reductions . for the twelve months ended december 31 , 2012 and 2011 , the provision for loan losses amounted to $ 2.8 million and $ 5.2 million , respectively . the decrease in the provision reflects modest credit stabilization within the loan portfolio compared to the 2011 periods . in making the provision to the allowance for loan losses , management takes into consideration the level of loan growth , adversely classified and non-performing loans , specific reserves for impaired loans , net charge-offs , and the estimated impact of current economic conditions on credit quality . the level of loan growth for the twelve months ended december 31 , 2012 , excluding $ 26.4 million of purchased residential loans , was $ 87.8 million , compared to $ 108.5 million during the same period in 2011 . these purchased loans are booked at fair market value and , in accordance with accounting guidance , do not carry an initial allowance for loan losses . the balance of the allowance for loan losses allocated to impaired loans amounted to $ 4.1 million at december 31 , 2012 , compared to $ 4.4 million at december 31 , 2011 . total non-performing assets as a percentage of total assets were 1.33 % at december 31 , 2012 , compared to 1.83 % at december 31 , 2011 . for the year ended december 31 , 2012 , the company recorded net charge-offs of $ 1.7 million , the majority of which had reserves specifically allocated in prior periods . for 2011 , net charge-offs were $ 1.5 million . management continues to closely monitor the non-performing assets , charge-offs and necessary allowance levels , including specific reserves . the allowance for loan losses to total loans ratio was 1.78 % at december 31 , 2012 , compared to 1.86 % at december 31 , 2011 . story_separator_special_tag for further information regarding loan quality statistics and the allowance for loan losses , see the sections below under the heading `` financial condition '' titled `` credit risk/asset quality '' and `` allowance for loan losses . '' non-interest income for the year ended december 31 , 2012 amounted to $ 12.2 million , an increase of $ 233 thousand , or 2 % , compared to 2011 . the increase over the prior year was primarily due to increases in deposit and interchange fees , investment advisory fees , gains on loan sales , and other income , partially offset by decrease in gains on securities sales . the increases in other income were primarily in insurance commissions , other fee income and gains on sales of oreo properties . for the year ended december 31 , 2012 , non-interest expense amounted to $ 52.6 million , an increase of $ 3.6 million , or 7 % , compared to the prior year . increased expenses related to salaries and benefits and technology were primarily due to the company 's strategic growth initiatives , including branch growth . the year-to-date expenses were also impacted primarily by increases in legal and other professional services and occupancy expenses , partially offset by reductions in fdic insurance expense and costs of advertising and public relations . sources and uses of funds the company 's primary sources of funds are deposits , federal home loan bank ( `` fhlb '' ) borrowings , current earnings and proceeds from the sales , maturities and pay-downs on loans and investment securities . the company may also , from time to time , utilize brokered deposits and overnight borrowings from correspondent banks as additional funding sources . these funds are used to originate loans , purchase investment securities , conduct operations , expand the branch network , and pay dividends to shareholders . 37 total assets amounted to $ 1.67 billion at december 31 , 2012 , an increase of $ 176.6 million , or 12 % , since december 31 , 2011 . enterprise 's main asset strategy is to grow loans , primarily high quality commercial loans . total loans increased $ 114.2 million , or 9 % , since december 31 , 2011 and amounted to $ 1.36 billion , or 82 % of total assets . total commercial loans amounted to $ 1.16 billion , or 85 % of gross loans at december 31 , 2012 . the investment portfolio is the other key component of earning assets and is primarily used to invest excess funds , provide liquidity and to manage the company 's asset-liability position . the carrying value of total investments amounted to $ 184.5 million at december 31 , 2012 , or 11 % of total assets , compared to 9 % of total assets at december 31 , 2011 . investments increased $ 44.1 million , or 31 % , since december 31 , 2011 . management 's preferred strategy for funding asset growth is to grow low cost deposits ( comprised of demand deposit accounts , interest and business checking accounts and traditional savings accounts ) . asset growth in excess of low cost deposits is typically funded through higher cost deposits ( comprised of money market accounts , commercial tiered rate or “ investment savings ” accounts and term certificates of deposit ) and wholesale funding ( brokered deposits and borrowed funds ) . at december 31 , 2012 , total deposits , excluding brokered deposits , amounted to $ 1.47 billion , representing , an increase of $ 138.8 million , or 10 % , over december 31 , 2011 balances . deposit growth was noted in all categories except higher costing certificates of deposits , with the majority of the increase in checking account balances . at december 31 , 2012 , checking account balances increased $ 121.6 million , or 26 % , of which 63 % of the increase was in non-interest bearing checking account balances . management believes that the deposit growth , which occurred primarily in the first nine months of the year , was primarily attributed to a general inflow of funds into the deposit market place due to current economics and low returns on other investment options . management also attributes the increase to new customer relationship acquisition , based on sales efforts and our ability to differentiate our products and services for customers seeking an alternative to larger regional and national banks . the company had $ 3.0 million in brokered deposits as of december 31 , 2012 and none at december 31 , 2011 . wholesale funding amounted to $ 29.6 million at december 31 , 2012 , compared to $ 4.5 million at december 31 , 2011 . at december 31 , 2012 , wholesale funding was comprised of $ 26.5 million in fhlb borrowings and $ 3.0 million of brokered deposits . at december 31 , 2011 , wholesale funding was comprised of fhlb borrowings . opportunities and risks the company 's ability to achieve its long-term growth and market share objectives will depend in part upon the company 's continued success in differentiating itself in the market place . while the current economic environment continues to present significant challenges for all companies , management believes that it has also created opportunities for growth and customer acquisition . notwithstanding the competitive landscape facing the company and the bank , discussed above under the heading `` competition , '' in item 1 , `` business '' , management believes that customers continue to migrate from larger , national and regional banks to local , stable community banks , choosing to do business with local professional bankers who can offer them the flexibility , responsiveness and personalized service that a community bank such as enterprise provides . management believes that the company is well positioned to take advantage of the market opportunities created by
| the increase resulted primarily from growth in the average balance of interest earning assets of $ 88.3 million , or 7 % , for the year ended december 31 , 2011 , partially offset by a 19 basis point decline in the average tax equivalent yield on interest earning assets , due to the lower interest rate environment during 2011. interest income on loans and loans held for sale , which accounts for the majority of interest income , increased $ 2.5 million , or 4 % , compared to the prior period , primarily due to loan growth partially offset by a decline in loan yields . average loan and loans held for sale balances increased $ 79.8 million , or 7 % , compared to the prior year , and amounted to $ 1.19 billion , for the year ended december 31 , 2011 , while the average yield on loans declined 14 basis points compared to the prior period and amounted to 5.39 % for the year ended december 31 , 2011. total investment income amounted to $ 3.6 million for the year ended december 31 , 2011 a decrease of $ 578 thousand , or 14 % , compared to the prior period . the decrease resulted primarily from the impact of the 55 basis point decrease in the average yield on investment securities , as investments that were sold , matured , or were called had higher yields than investment purchases during the period . partially offsetting this decrease was an increase of $ 8.6 million , or 5 % in the average balance of investments over the year ended december 31 , 2010. interest expense total interest expense amounted to $ 8.6 million , a decrease of $ 1.4 million , or 14 % , compared to the prior year . the decrease resulted primarily from a 16 basis point decrease in the average cost of funding due primarily to the reduction in deposit market interest rates over the period . this decrease was partially offset by the expense associated with
| 14,320 |
our accretion of asset retirement obligations for the year ended december 31 , 2019 , decreased versus 2018 , due to the significant reduction in our powder river basin asset retirement obligation liability at the end of 2018 due to mine plan changes . amortization of sales contracts , net . the decrease in amortization of sales contracts , net in 2019 versus 2018 is primarily related to the value of certain powder river basin supply contracts being fully amortized at the end of 2018 . change in fair value of coal derivatives and coal trading activities , net . the benefit in 2019 versus the cost in the prior year is primarily related to mark-to-market gains on coal derivatives that we utilized to hedge our price risk for international thermal coal shipments . as international thermal markets declined during the current year , the market value of these positions increased . selling , general and administrative expenses . the decrease in selling , general and administrative expenses in 2019 versus 2018 is primarily due to decreased legal costs of approximately $ 2.3 million and compensation costs of approximately $ 1.8 million . costs related to proposed joint venture with peabody energy . on june 18 , 2019 , we entered into a definitive implementation agreement ( the “ implementation agreement ” ) with peabody , to establish a joint venture that will combine the companies ' powder river basin and colorado mining operations . all costs associated with execution of the implementation agreement are reflected herein . for further information on our proposed joint venture with peabody energy see note 6 , “ joint venture with peabody energy ” to the consolidated financial statements . loss on sale of coal-mac llc . during the year ended december 31 , 2019 , we sold coal-mac llc to condor holdings llc , incurring a loss of approximately $ 9.0 million . for further information on the sale of coal-mac llc to condor holdings llc , please see note 5 , “ divestitures ” to the consolidated financial statements . preference rights lease application ( prla ) settlement income . our prla settlement income relates to a settlement with the united states department of interior over a long-standing dispute on the valuation and disposition of a prla arch controlled in northwestern new mexico . for further information on our prla settlement income see note 7 , “ preference rights lease application settlement income ” to the consolidated financial statements . ( gain ) loss on sale of lone mountain processing llc . during the year ended december 31 , 2017 , we sold lone mountain processing llc and cumberland river coal llc to revelation energy llc , generating a gain of approximately $ 21.3 million . our loss on sale of lone mountain processing , llc in the current year relates to recognition of certain contingent workers ' compensation liabilities , both occupational disease and traumatic , that may accrue to us as a result of the bankruptcy filing by revelation energy llc . for further information on the sale of lone mountain processing llc and cumberland river coal llc to revelation energy llc , please see note 5 , “ divestitures ” to the consolidated financial statements . other operating income , net . the decline in other operating income , net in 2019 versus 2018 results primarily from reduced income from equity investments of approximately $ 3.4 million , the unfavorable impact of mark to market movements on heating oil positions of approximately $ 1.8 million , option premium benefit in the prior year of approximately $ 2.2 million , and reduced royalty income of approximately $ 1.8 million , offset by the favorable impact of coal derivative settlements in the current year of approximately $ 9.2 million . non-operating expense . the following table summarizes non-operating expense for the years ended december 31 , 2019 and 2018 : replace_table_token_10_th 56 nonoperating expenses declined in the year ended december 31 , 2019 versus 2018 primarily due to post retirement obligation gain amortization in the current year and costs associated with the repricing of our term loan and from chapter 11 reorganization costs in the prior year . see further discussion in note 20 , “ employee benefit plans ” , note 3 , “ emergence from bankruptcy , ” and note 13 , “ debt and financing arrangements ” to the consolidated financial statements . provision for ( benefit from ) income taxes . the following table summarizes our provision for income taxes for the years ended december 31 , 2019 and 2018 : year ended december 31 , 2019 year ended december 31 , 2018 increase / ( decrease ) in net income ( in thousands ) provision for ( benefit from ) income taxes $ 248 $ ( 52,476 ) $ ( 52,724 ) see note 14 , to the consolidated financial statements “ taxes , ” for a reconciliation of the statutory federal income tax provision ( benefit ) at the statutory rate to the actual benefit from taxes . 57 operational performance year ended december 31 , 2019 and 2018 our mining operations are evaluated based on adjusted ebitda , per-ton cash operating costs ( defined as including all mining costs except depreciation , depletion , amortization , accretion on asset retirements obligations , and pass-through transportation expenses ) , and on other non-financial measures , such as safety and environmental performance . adjusted ebitda is defined as net income attributable to the company before the effect of net interest expense , income taxes , depreciation , depletion and amortization , the amortization of sales contracts , the accretion on asset retirement obligations , and non-operating income ( expense ) . adjusted ebitda may also be adjusted for items that may not reflect the trend of future results by excluding transactions that are not indicative of our core operating performance . story_separator_special_tag adjusted ebitda is not a measure of financial performance in accordance with generally accepted accounting principles , and items excluded from adjusted ebitda are significant in understanding and assessing our financial condition . therefore , adjusted ebitda should not be considered in isolation , nor as an alternative to net income , income from operations , cash flows from operations or as a measure of our profitability , liquidity or performance under generally accepted accounting principles . furthermore , analogous measures are used by industry analysts to evaluate the company 's operating performance . investors should be aware that our presentation of adjusted ebitda may not be comparable to similarly titled measures used by other companies . the following table shows operating results of coal operations for the years ended december 31 , 2019 and 2018 . replace_table_token_11_th this table reflects numbers reported under a basis that differs from u.s. gaap . see the “ reconciliation of non-gaap measures ” below for explanation and reconciliation of these amounts to the nearest gaap figures . other companies may calculate these per ton amounts differently , and our calculation may not be comparable to other similarly titled measures . powder river basin — adjusted ebitda for the year ended december 31 , 2019 , declined from the year ended december 31 , 2018 due to decreased volume and increased cash cost per ton sold versus the prior year . the volume decline was due to the continued increase in generation from competing fuels , in particular low cost natural gas and subsidized renewable sources , particularly wind . volume was further impacted by off-site flooding that disrupted rail performance in the first half of the current year . pricing improved slightly in the current year due to an increase in the percentage of higher quality tons sold from scaling back operations at our lower quality coal creek mine . due to market weakness for lower quality powder river basin coal , we decided to reduce operations at our coal creek mine rather than pursue uneconomic business . the resulting change in the mix of tons sold put upward pressure on both sales price per ton sold and cash cost per ton sold . we believe the reduction at coal creek will last at least through 2020. cash cost per ton sold increased in the current year due to the volume decrease and lower percentage of coal creek volume , but the increase in cash cost per ton sold was mitigated somewhat by the reversion of the federal black lung excise tax rate to the pre-1986 rates . the current period federal black lung excise tax rate for surface mines is $ 0.25 per ton or 2 % of gross selling price on all domestic sales , versus the prior year 58 period rate of $ 0.55 per ton sold or 4.4 % of gross selling price . at this time , federal black lung excise tax rates for 2020 are set to return to the higher rates that applied from 1986 through 2018. metallurgical — adjusted ebitda for the year ended december 31 , 2019 , decreased from the year ended december 31 , 2018 due to reduced pricing over the second half of the current year as discussed in the overview . our cash cost per ton sold for the year ended december 31 , 2019 , decreased versus the prior year due to increased productivity at our leer mine and lower operating taxes and royalties . these cost benefits were largely offset by decreased productivity at our mountain laurel mine as conditions were difficult in the mine 's final longwall panels . the mountain laurel mine ceased longwall operations in the fourth quarter of the current year and is transitioning to dedicated continuous miner operations . total tons sold increased slightly as coking coal volume increased and associated thermal coal volume decreased . the change in sales mix put upward pressure on sales price per ton . the adverse geologic conditions in the final mountain laurel longwall panel prevented us from recovering approximately two thirds of the longwall system 's hydraulic shields . these shields were planned to be rebuilt and utilized at our leer south mine currently under development . we are finalizing a claim under our insurance policy that will cover the amount of capital required to replace the abandoned shields with new shields . our metallurgical segment sold 6.8 million tons of coking coal and 1.0 million tons of associated thermal coal in the year ended december 31 , 2019 , as compared to 6.7 million tons of coking coal and 1.1 million tons of associated thermal coal in the prior year . longwall operations accounted for approximately 71 % of our shipment volume in both the current and prior years . other thermal — adjusted ebitda for the year ended december 31 , 2019 declined from the year ended december 31 , 2018 due to reduced sales volume and increased cash cost of tons sold . tons sold volume decreased at all three of our other thermal operations in the current year due to continued softness in both domestic and international thermal coal markets as discussed in the overview section . the volume decline was largest at our west elk mine due to a planned first quarter reduction to accommodate customer delivery schedules and our longwall development requirements , and an unfavorable international pricing environment in the second half of the year . the decreased percentage of tons sold from the lower priced and lower cost west elk mine contributed to the increases in both pricing and cash cost per ton sold . in december of the current year we sold our other thermal operation , coal-mac llc , to condor holdings llc . for further information on the sale of coal-mac llc to condor holdings llc , please see note 5 to the consolidated financial statements , “ divestitures .
| the increase consists primarily of increased transportation costs of approximately $ 42.2 million , labor related costs of approximately $ 37.4 million , repairs and supplies costs of approximately $ 30.5 million , and a net increase in change in coal inventory costs of approximately $ 31.0 million at ongoing operations . these cost increases were partially offset by the previously discussed sale of lone mountain which incurred approximately $ 75.2 million of cost of sales in 2017. see discussion in “ operational performance ” for further information about segment results . depreciation , depletion and amortization . our depreciation , depletion and amortization costs for the year ended december 31 , 2018 decreased versus 2017 due to reduced depreciation of plant and equipment and amortization of development costs of approximately $ 8.1 million . of this total approximately $ 4.5 million is related to our lone mountain operation in 2017. this reduction is partially offset by increased depletion of reserves of approximately $ 5.2 million primarily in our metallurgical segment . 60 accretion on asset retirement obligation . our accretion of asset retirement obligations for the year ended december 31 , 2018 , decreased versus 2017 , primarily at idle properties where we have performed significant reclamation . amortization of sales contracts , net . the decrease in amortization of sales contracts , net in 2018 versus 2017 is primarily related to the value of certain powder river basin supply contracts being fully amortized at the end of 2017 . change in fair value of coal derivatives and coal trading activities , net . the increased cost in 2018 versus 2017 is primarily related to mark-to-market losses on coal derivatives that we entered to hedge our price risk for anticipated international thermal coal shipments . as international thermal markets strengthened during 2018 , the market value of these positions declined . selling , general and administrative expenses . the increase in selling , general and administrative expenses in 2018 versus 2017 is primarily due to increased compensation costs of approximately $ 9.0 million , of which approximately $ 6.1 million is stock based , and professional services of approximately $ 2.9 million . gain on
| 14,321 |
our regulators ; changes in the scope and costs of fdic insurance and other coverages ; governmental monetary and fiscal policies ; hurricanes ( including the recent hurricanes , tropical storms and tropical depressions that have affected the company 's market areas ) , floods , winter storms , other natural disasters and adverse weather ; oil spills and other man-made disasters ; acts of terrorism , an outbreak of hostilities or other international or domestic calamities , acts of god and other matters beyond our control ; and other circumstances , many of which are beyond our control . the foregoing factors should not be construed as exhaustive and should be read together with the other cautionary statements included herein . if one or more events related to these or other risks or uncertainties materialize , or if our underlying assumptions prove to be incorrect , actual results may differ materially from what we anticipate . accordingly , you should not place undue reliance on any such forward-looking statements . any forward-looking statement speaks only as of the date on which it is made , and we do not undertake any obligation to publicly update or review any forward-looking statement , whether as a result of new information , future developments or otherwise . new factors emerge from time to time , and it is not possible for us to predict which will arise . in addition , we can not assess the impact of each factor on our business or the extent to which any factor , or combination of factors , may cause actual results to differ materially from those contained in any forward-looking statements . we qualify all of our forward-looking statements by these cautionary statements . recent developments related to covid-19 overview . in march 2020 , covid-19 was declared a pandemic by the world health organization and a national emergency by the president of the united states . the global covid-19 pandemic and the public health response to minimize its impact have had severe adverse and disruptive effects on economic , financial market and oil market conditions beginning in the latter part of the first quarter of 2020 , and continuing through the fourth quarter of 2020 and beyond . beginning in the first quarter of 2020 , government responses to the pandemic included mandated closures of businesses not deemed essential , restrictions on other businesses , and stay-at-home orders or recommendations , along with crowd restrictions , which caused steep increases in unemployment and decreases in consumer and business spending . government authorities in our markets began allowing the re-opening of businesses and easing other restrictions in the second quarter of 2020 ; however , the country , including areas in which we do business , experienced multiple periods of resurgences of new cases in both the third and fourth quarters of 2020. authorities reacted to these resurgences by extending or re-imposing some restrictions . 35 legislative and regulatory developments . in a measure aimed at lessening the economic impact of covid-19 , the federal reserve reduced the federal funds rate to 0 % to 0.25 % on march 16 , 2020. this action by the federal reserve followed a prior reduction of the targeted federal funds rates to a range of 1.0 % to 1.25 % on march 3 , 2020. on march 27 , 2020 , the u.s. government enacted the coronavirus aid , relief , and economic security act ( “ cares act ” ) , the largest economic stimulus package in the nation 's history , which included the small business administration 's ( “ sba ” ) and u.s. department of treasury 's paycheck protection program ( “ ppp ” ) , discussed further below , in an effort to lessen the impact of covid-19 on consumers and businesses . as funds available under the ppp were quickly depleted , on april 24 , 2020 , the paycheck protection program and health care enhancement act was signed into law , which , among other things , increased amounts available under the program . on june 5 , 2020 , the paycheck protection program flexibility act of 2020 ( “ flexibility act ” ) was enacted , which among other things , provided expanded relief under the ppp . on december 27 , 2020 , legislation was enacted providing additional aid to individuals and businesses , which among other things , provided additional funding for the ppp and allowed businesses meeting certain requirements to obtain a second ppp loan . paycheck protection program . beginning in the second quarter of 2020 , the bank has participated as a lender in the ppp as established by the cares act and enhanced by the paycheck protection program and health care enhancement act and the flexibility act . the ppp was established to provide unsecured low interest rate loans to small businesses that have been impacted by the covid-19 pandemic . the ppp loans are 100 % guaranteed by the sba . the loans have a fixed interest rate of 1 % , and payments are deferred until the date on which the amount of loan forgiveness is remitted to the lender by the sba , the forgiveness application is otherwise denied , or if no forgiveness application is filed 10 months after the end of the borrower 's covered period . ppp loans made prior to june 5 , 2020 mature two years from origination , or if made on or after june 5 , 2020 , five years from origination . ppp loans are forgiven by the sba ( which makes forgiveness payments directly to the lender ) to the extent the borrower uses the proceeds of the loan for certain purposes ( primarily to fund payroll costs ) during a certain time period following origination and maintains certain employee and compensation levels . lenders receive processing fees from the sba for originating the ppp loans which are based on a percentage of the loan amount . story_separator_special_tag the original ppp program ceased taking applications on august 8 , 2020. on december 27 , 2020 , legislation was enacted that renewed the ppp and allocated additional funding for both new first time ppp loans under the original ppp and also authorized second draw ppp loans for certain eligible borrowers that had previously received a ppp loan . the sba began accepting applications on the next round of the ppp in january 2021 , and the application period will last until march 31 , 2021 , subject to the availability of funds . in april 2020 , we began originating loans to qualified small businesses under the ppp . at december 31 , 2020 , our loan portfolio included ppp loans with a balance of $ 94.5 million , all of which are included in commercial and industrial loans . guidance on treatment of pandemic-related loan modifications pursuant to the cares act and interagency statement . section 4013 of the cares act provides that , from the period beginning march 1 , 2020 until the earlier of december 31 , 2020 or the date that is 60 days after the date on which the national emergency concerning the covid-19 pandemic declared by the president of the united states under the national emergencies act terminates ( the “ applicable period ” ) , we may elect to suspend gaap for loan modifications related to the pandemic that would otherwise be categorized as troubled debt restructurings ( “ tdrs ” ) and suspend any determination of a loan modified as a result of the effects of the pandemic as being a tdr , including impairment for accounting purposes . the suspension is applicable for the term of the loan modification that occurs during the applicable period for a loan that was not more than 30 days past due as of december 31 , 2019. the suspension is not applicable to any adverse impact on the credit of a borrower that is not related to the pandemic . legislation enacted on december 27 , 2020 , extended this relief to the earlier of january 1 , 2022 or 60 days after the national emergency termination date . in addition , our banking regulators and other financial regulators , on march 22 , 2020 and revised april 7 , 2020 , issued a joint interagency statement titled the “ interagency statement on loan modifications and reporting for financial institutions working with customers affected by the coronavirus ” that encourages financial institutions to work prudently with borrowers who are or may be unable to meet their contractual payment obligations due to the effects of the covid-19 pandemic . pursuant to the interagency statement , loan modifications that do not meet the conditions of section 4013 of the cares act may still qualify as a modification that does not need to be accounted for as a tdr . specifically , the agencies confirmed with the staff of the financial accounting standards board that short-term modifications made in good faith in response to the pandemic to borrowers who were current prior to any relief are not tdrs under gaap . this includes short-term ( e.g . six months ) modifications such as payment deferrals , fee waivers , extensions of repayment terms , or delays in payment that are insignificant . borrowers considered current are those that are less than 30 days past due on their contractual payments at the time a modification program is implemented . appropriate allowances for loan and lease losses are expected to be maintained . with regard to loans not otherwise reportable as past due , financial institutions are not expected to designate loans with deferrals granted due to the pandemic as past due because of the deferral . the interagency statement also states that during short-term pandemic-related loan modifications , these loans generally should not be reported as nonaccrual . 36 accordingly , during 2020 , we offered short-term modifications made in response to covid-19 to borrowers who were current and otherwise not past due . these include short-term modifications of 90 days or less , in the form of deferrals of payment of principal and interest , principal only , or interest only , and fee waivers . as of december 31 , 2020 , the balance of loans participating in the 90-day deferral program was approximately $ 5.9 million , or 0.3 % of the total loan portfolio . see further discussion in the loans section of the discussion and analysis of financial condition below . impact on our operations . as discussed above , within the states in which we operate , beginning in the first quarter of 2020 , many jurisdictions declared health emergencies and executed stay-at-home orders and closed non-essential businesses which impacted our operations as well as the operations of our customers . though authorities began phasing out certain restrictions in the summer of 2020 , resurgences in the number of covid-19 cases in the second and third quarters of 2020 resulted in the extension and , in some instances , the re-imposition of certain restrictions . for example , in louisiana , where most of our operations are currently located , a stay-at-home order was issued on march 22 , 2020 , and the state moved into phase 1 of recovery on may 15 , 2020 , phase 2 on june 4 , 2020 , and phase 3 on september 11 , 2020. however , the state experienced several resurgences in the number of cases in the fall and winter of 2020 , which prompted the issuance of an order reverting back to a modified phase 2 as of november 25 , 2020 , which was extended through march 2 , 2021 , when louisiana re-entered phase 3. under phase 3 , generally speaking , places of public amusement are closed , only bars in qualifying parishes may open with stringent restrictions ( except for takeout ) , most other nonessential businesses are restricted to 75 % capacity , crowd sizes are limited to 250 people or 50 % capacity for indoor gatherings , face coverings are mandatory and all individuals with
| 2019 vs. 2018. for the year ended december 31 , 2019 , net income was $ 16.8 million , or $ 1.68 per basic common share and $ 1.66 per diluted common share , compared to net income of $ 13.6 million , or $ 1.41 per basic common share and $ 1.39 per diluted common share , for the year ended december 31 , 2018. the increases in basic and diluted earnings per common share and net income were primarily driven by an increase in net interest income resulting from both organic loan growth and loans acquired during 2019 , as well as an increase in the yields on interest-earning assets , offset , in part , by an increase in the cost of funds . the increase in net interest income was partially offset by an increase in noninterest expense . return on average assets increased to 0.85 % for the year ended december 31 , 2019 from 0.81 % for the year ended december 31 , 2018. return on average equity was 8.21 % for the year ended december 31 , 2019 compared to 7.68 % for the year ended december 31 , 2018. the increase in both return on average assets and return on average equity is mainly attributable to the $ 3.2 million increase in net income . net interest income and net interest margin net interest income , our principal source of earnings , is the difference between the interest income generated by earning assets and the total interest cost of the deposits and borrowings obtained to fund those assets . factors affecting the level of net interest income include the volume of earning assets and interest-bearing liabilities , yields earned on loans and investments and rates paid on deposits and other borrowings , the level of nonperforming loans , the amount of noninterest-bearing liabilities supporting earning assets , and the interest rate environment . the primary factors affecting net interest margin are changes in interest rates , competition , and the shape of the interest rate yield curve . the federal reserve board sets various benchmark rates , including the federal funds rate , and thereby influences the general market rates of interest , including the deposit and loan rates offered by financial institutions . since december 31 , 2015 , the federal funds target rate had increased a total of 175 basis points and remained at 2.25 % to 2.50 % , as of december 19 , 2018 , until it was lowered to 2.00 to
| 14,322 |
these policies , along with the disclosures presented in the notes to the financial statements and in this discussion , provide information on how significant assets and liabilities are valued in the financial statements and how those values are determined . based on the valuation techniques used and the sensitivity of financial statement amounts to the methods , assumptions , and estimates underlying those amounts , management has determined that the accounting policies with respect to the allowance for credit losses and goodwill are critical accounting policies . these policies are considered critical because they relate to accounting areas that require the most subjective or complex judgments , and , as such , could be most subject to revision as new information becomes available . 37 the allowance for credit losses represents management 's estimate of credit losses inherent in the loan portfolio as of the balance sheet date . determining the amount of the allowance for credit losses is considered a critical accounting estimate because it requires significant judgment and the use of estimates related to the amount and timing of expected future cash flows on impaired loans , estimated losses on pools of similar loans based on historical loss experience , and consideration of current economic trends and conditions and other factors impacting the loan portfolio , all of which may be susceptible to significant change . the loan portfolio also represents the largest asset type on the consolidated balance sheets . note 1 to the consolidated financial statements describes the methodology used to determine the allowance for credit losses . a discussion of the allowance determination and factors driving changes in the amount of the allowance for credit losses is included in the asset quality - provision for credit losses and risk management section below . goodwill represents the excess of the cost of an acquisition over the fair value of the net assets acquired . determining fair value is subjective , requiring the use of estimates , assumptions and management judgment . goodwill is tested at least annually for impairment , usually during the fourth quarter , or on an interim basis if circumstances dictate . impairment testing requires a qualitative assessment or that the fair value of each of the company 's reporting units be compared to the carrying amount of its net assets , including goodwill . 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 , 2020 , 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 2020 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 2020 was $ 52.7 million . this represented a $ 2.4 million , or 4.9 % , increase from 2019. the increase in net interest income when comparing 2020 to 2019 was primarily the result of higher average balances on loans and lower average rates paid on interest-bearing deposits , partially offset by lower average yields on taxable investment securities and interest-bearing deposits with other banks . in addition , the issuance of subordinated debt in the third quarter of 2020 , contributed to the offset in the increase in net interest income when comparing the periods . 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 3.27 % for 2020 and 3.54 % for 2019. the net interest margin decreased when comparing 2020 to 2019 primarily due to a decline in the average yields on total earning assets of 50bps , which was compounded by the significant increase in deposits , resulting in excess liquidity being invested in lower yielding assets . partially offsetting the decrease in average yields on earnings assets was a decline in the average rates paid on interest-bearing deposits of 34bps and the decrease in the average balance on long-term advances from the fhlb . the net interest spread , which is the difference between the average yield on earning assets and the average rate paid for interest-bearing liabilities was 3.05 % for 2020 and 3.20 % for 2019 . 38 the following table sets forth the major components of net interest income , on a tax-equivalent basis , for the years ended december 31 , 2020 and 2019. replace_table_token_3_th ( 1 ) all amounts are reported on a tax-equivalent basis computed using the statutory federal income tax rate of 21 % for 2020 and 2019 , exclusive of nondeductible interest expense . the tax-equivalent adjustment amounts used in the above table to compute yields aggregated $ 141 thousand in 2020 and $ 162 thousand in 2019 . ( 2 ) average loan balances include nonaccrual loans . story_separator_special_tag ( 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 $ 59.8 million for 2020 compared to $ 59.9 million for 2019. the decrease in interest income for 2020 compared to 2019 was primarily due to the decrease in the average yields of loans , offset by the increase in the average balance on loans and the addition of fees , net of costs , on ppp loans during 2020. the average balance of loans in 2020 increased $ 142.5 million and the yield earned on these loans declined to 4.13 % from 4.53 % . this was primarily the result of the origination of ppp loans which had an average balance at the end of 2020 of $ 58.6 million and an average yield of 2.18 % , well below the average yield on the bank 's traditional loans . the decrease in interest income on interest-bearing deposits and taxable investment securities was impacted by federal reserve rate cuts during the first quarter of 2020 , as seen in the rate/volume variance analysis below . as a percentage of total average earning assets , loans , investment securities , and interest-bearing deposits were 85.0 % , 8.6 % , and 6.4 % , respectively , for 2020. the comparable percentages for 2019 were 86.2 % , 11.0 % , and 2.8 % , respectively . 39 interest expense was $ 7.1 million for 2020 compared to $ 9.6 million for 2019. the decrease in interest expense for 2020 was primarily due to decreases in the average rates paid on interest-bearing deposits , partially offset by the addition of interest on subordinated debt in the third quarter of 2020. during 2020 , 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 $ 90.9 million , $ 45.8 million and $ 16.1 million , respectively , while the average rates paid on these deposits ( decreased ) /increased ( 43 ) , ( 45 ) and 7bps , respectively . in addition , the elimination of brokered deposits resulted in a decrease in the average balance of $ 16.4 million for 2020. during 2020 , the lower average rates on interest-bearing liabilities , specifically short-term and long-term advances from the fhlb produced $ 229 thousand less in interest expense and decreased volume produced $ 563 thousand less in interest expense , as shown in the table below . partially offsetting these decreases was the addition of subordinated debt during 2020 resulting in an average balance of $ 8.6 million with a rate of 6.06 % . 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_4_th noninterest income noninterest income from continuing operations increased $ 729 thousand , or 7.3 % , in 2020 when compared to 2019. the increase in noninterest income in 2020 when compared to 2019 was primarily due to increases in other noninterest income of $ 1.4 million which was the result of increases in boli and coli income of $ 656 thousand , swap fee income of $ 495 thousand and other fees on bank services of $ 264 thousand , partially offset by a decrease in service charges on deposit accounts of $ 1.1 million . in addition , the bank had gains on sales of securities during 2020 of $ 347 thousand and an increase in trust and investment fee income of $ 36 thousand . the significant decrease in bank service fees was due to the bank providing fee waivers during 2020 for customers who were impacted by the pandemic . the increase in boli income was attributed to a full year of earnings from $ 25.6 million in insurance contracts purchased in 2019 used to offset future employee benefit costs . 40 the following table summarizes our noninterest income from continuing operations for the years ended december 31. replace_table_token_5_th noninterest expense noninterest expense from continuing operations increased $ 842 thousand , or 2.2 % , in 2020 when compared to 2019. the increase in noninterest expenses was primarily due to increases in employee benefits of $ 1.2 million , due to an increase in medical claims from the company 's self-funded insurance program and a full year of expense for the supplemental executive retirement plans ( “ serps ” ) in 2020 , data processing of $ 498 thousand , the result of utilizing additional services from our core processor , occupancy expense of $ 161 thousand due to the addition of a new branch in 2020 and fdic insurance premium expense due to the absence of a credit received in 2019 , partially offset by decreases in salaries and wages of $ 478 thousand , oreo expenses , net of $ 369 thousand and other noninterest expenses of $ 432 thousand . the decrease in salaries and wages resulted from the deferral of direct origination costs related to the origination of ppp loans in 2020. the decrease in other noninterest expense was primarily due to decreases in advertising , marketing , travel and entertainment expenses due to the pandemic , coupled with a decrease in other loan expenses .
| we have the intent and current ability to hold such securities until maturity . at december 31 , 2020 , 68 % of the portfolio was classified as available for sale and 32 % as held to maturity . at december 31 , 2019 , 94 % of the portfolio was classified as available for sale and 6 % as held to maturity . total investment securities increased $ 73.2 million from $ 137.1 million at december 31 , 2019 to $ 210.3 million at december 31 , 2020. the bank purchased $ 130.7 million in securities in 2020 , of which $ 73.5 million was classified as available for sale and $ 57.2 million as held to maturity . the significant change in investment strategy when comparing 2020 to 2019 was due to excess liquidity experienced in 2020 , which was partially utilized to purchase securities with a higher yield than the then current overnight fed funds rate . the larger percentage of securities designated as held to maturity reflects the amount that management believes is not needed to support our anticipated growth and liquidity needs . we do not typically invest in derivative securities and held no such investments at december 31 , 2020 or december 31 , 2019. investment securities available for sale were $ 139.6 million at the end of 2020 and $ 122.8 million at the end of 2019. the bank purchased $ 73.5 million in available for sale securities in 2020 and $ 0 for 2019. during 2020 , the bank purchased thirteen mortgage-backed securities and four government agency bonds of $ 55.4 million and $ 18.0 million , respectively . at year-end 2020 , 16.9 % of the available for sale securities in the portfolio were u.s. government agencies and 83.1 % of the securities were mortgage-backed securities , compared to 19.4 % and 80.6 % , respectively , at year-end 2019. our investments in mortgage-backed securities are issued or guaranteed by u.s. government agencies or government-sponsored agencies . 42 investment securities held to
| 14,323 |
12 revenue recognition : for sales transactions , we comply with the provisions of the securities and exchange commission ( “ sec ” ) staff accounting bulletin no . 104 , revenue recognition , which states that revenue should be recognized when all of the following revenue recognition criteria are met : ( 1 ) persuasive evidence of an arrangement exists ; ( 2 ) title transfers and the customer assumes the risk of loss ; ( 3 ) the selling price is fixed or determinable ; and ( 4 ) collection of the resulting receivable is reasonably assured . these criteria are satisfied upon shipment of product , and sales are recognized accordingly . sales returns , rebates and allowances : sales are reduced for any anticipated sales returns , rebates and allowances based on historical experience . since our return policy is only 90 days and our products are not generally susceptible to external factors such as technological obsolescence or significant changes in demand , we are able to make a reasonable estimate for returns . we offer end-user product specific and sales volume rebates to select distributors . our rebates are based on actual sales and are accrued monthly . stock - based compensation : the company accounts for stock-based awards using financial accounting standards board ( “ fasb ” ) accounting standards codification ( “ asc ” ) 718 , stock compensation ( “ asc 718 ” ) . asc 718 requires companies to record compensation expense for the value of all outstanding and unvested share-based payments , including employee stock options and similar awards . the fair values of stock option grants are determined using the black-scholes option-pricing model and are based on the following assumptions : expected stock price volatility based on historical data and management 's expectations of future volatility , risk-free interest rates from published sources , expected term based on historical data and no dividend yield , as the board of directors currently has no plans to pay dividends in the near future . the black-scholes option-pricing model was developed for use in estimating the fair value of traded options that have no vesting restrictions and that are fully transferable . in addition , the option-pricing model requires the input of highly subjective assumptions , including expected stock price volatility . our stock options have characteristics significantly different from those of traded options , and changes in the subjective input assumptions can materially affect the fair value of such options . overview alpha pro tech is in the business of protecting people , products and environments . we accomplish this by developing , manufacturing and marketing a line of high-value , disposable protective apparel and infection control products for the cleanroom , industrial , pharmaceutical , medical and dental markets . we also manufacture a line of building supply construction weatherization products . our products are sold under the alpha pro tech brand name , as well as under private label . our products are grouped into three business segments : the building supply segment , consisting of construction weatherization products , such as housewrap and synthetic roof underlayment , as well as other woven material ; the disposable protective apparel segment , consisting of disposable protective apparel , such as shoecovers , bouffant caps , gowns , coveralls , lab coats , frocks and other miscellaneous products ; and the infection control segment , consisting of face masks and eye shields . all financial information presented herein reflects the current segmentation . our target markets include pharmaceutical manufacturing , bio-pharmaceutical manufacturing and medical device manufacturing , lab animal research , high technology electronics manufacturing ( which includes the semi-conductor market ) , medical and dental distributors , and construction , building supply and roofing distributors . our products are used primarily in cleanrooms , industrial safety manufacturing environments , health care facilities , such as hospitals , laboratories and dental offices , and building and re-roofing sites . our products are distributed principally in the united states through a network consisting of purchasing groups , national distributors , local distributors , independent sales representatives and our own sales and marketing force . story_separator_special_tag income of unconsolidated affiliate and interest income . other income consisted primarily of equity in income of unconsolidated affiliate of $ 498,000 and interest income of $ 5,000 for the year ended december 31 , 2016. other income consisted primarily of equity in income of unconsolidated affiliate of $ 32,000 and interest income of $ 14,000 for the year ended december 31 , 2015. the equity in income of unconsolidated affiliate was significantly higher in 2016 due to higher gross margin and more income in relation to government incentive programs . income before provision for income taxes . income before provision for income taxes for the year ended december 31 , 2016 was $ 4,175,000 , compared to income before provision for income taxes of $ 1,521,000 for 2015 , representing an increase of $ 2,654,000 , or 174.5 % . this increase in income before provision for income taxes was primarily due to an increase in income from operations of $ 2,197,000 and an increase in other income of $ 457,000 . 14 provision for income taxes . the provision for income taxes for the year ended december 31 , 2016 was $ 1,007,000 , compared to $ 480,000 for 2015. the estimated effective tax rate was 24.1 % for the year ended december 31 , 2016 , compared to 31.6 % for 2015. in the fourth quarter of 2016 , the company recorded a tax benefit of $ 194,000 from reversing an uncertain tax position that was accrued in 2012. excluding this tax benefit , the effective tax rate would have been 28.8 % for the year ended december 31 , 2016. net income . story_separator_special_tag net income for the year ended december 31 , 2016 was $ 3,168,000 , compared to net income of $ 1,041,000 for 2015 , representing an increase of $ 2,127,000 , or 204.3 % . the net income increase was due to an increase in income before provision for income taxes of $ 2,654,000 , partially offset by an increase in provision for income taxes of $ 632,000. net income as a percentage of net sales for the year ended december 31 , 2016 was 6.9 % , and net income as a percentage of net sales for 2015 was 2.3 % . basic and diluted earnings per common share for the years ended december 31 , 2016 and 2015 were $ 0.19 and $ 0.06 , respectively . liquidity and capital resources as of december 31 , 2016 , we had cash of $ 9,456,000 and working capital of $ 27,198,000 , representing a decrease in working capital of 12.1 % , or $ 3,728,000 , from december 31 , 2015. as of december 31 , 2016 , our current ratio ( current assets/current liabilities ) was 12:1 , compared to a 15:1 current ratio as of december 31 , 2015. cash decreased by 2.3 % , or $ 225,000 , to $ 9,456,000 as of december 31 , 2016 , compared to $ 9,681,000 as of december 31 , 2015. the decrease in cash was due to cash used in financing activities of $ 6,750,000 and cash used in investing activities of $ 308,000 , offset by cash provided by operating activities of $ 6,833,000. we have a $ 3,500,000 credit facility with wells fargo bank , consisting of a line of credit with interest at prime plus 0.5 % . as of december 31 , 2016 , the prime interest rate was 3.75 % . this credit line was renewed in may 2016 and expires in may 2018. the available line of credit is based on a formula of eligible accounts receivable and inventories . our borrowing capacity on the line of credit was $ 3,500,000 as of december 31 , 2016. as of december 31 , 2016 , we did not have any borrowings under this credit facility and do not anticipate using it in the near future . net cash provided by operating activities of $ 6,833,000 for the year ended december 31 , 2016 was due to net income of $ 3,168,000 , impacted primarily by the following : share-based compensation expense of $ 190,000 , depreciation and amortization of $ 544,000 , equity in income of unconsolidated affiliate of $ 498,000 , a decrease in deferred income taxes of $ 21,000 , an increase in accounts receivable of $ 2,052,000 , an increase in prepaid expenses of $ 254,000 , a decrease in inventory of $ 5,404,000 , and an increase in accounts payable and accrued liabilities of $ 310,000. net cash provided by operating activities of $ 5,971,000 for the year ended december 31 , 2015 was due to net income of $ 1,041,000 , impacted by the following : share-based compensation expense of $ 24,000 , depreciation and amortization of $ 703,000 , equity in income of unconsolidated affiliate of $ 32,000 , a decrease in deferred income taxes of $ 48,000 , a decrease in accounts receivable of $ 2,896,000 , a decrease in inventories of $ 146,000 , a decrease in prepaid expenses of $ 1,380,000 , and a decrease in accounts payable and accrued liabilities of $ 139,000. accounts receivable increased by $ 2,052,000 , or 74.1 % , to $ 4,822,000 as of december 31 , 2016 , from $ 2,770,000 as of december 31 , 2015. the increase in accounts receivable was primarily related to extended payment terms that we provided on some building supply segment sales to remain competitive , as our competition offers these extended payment terms as well . the number of days that sales remained outstanding as of december 31 , 2016 , calculated by using an average of accounts receivable outstanding and annual revenue , was 30 days , compared to 34 days as of december 31 , 2015. inventory decreased by $ 5,404,000 , or 33.0 % , to $ 10,994,000 as of december 31 , 2016 , from $ 16,398,000 as of december 31 , 2015. the decrease was primarily due to a decrease in inventory for the disposable protective apparel segment of $ 2,033,000 , or 35.2 % , to $ 3,736,000 , a decrease in inventory for the building supply segment of $ 2,916,000 , or 37.3 % , to $ 4,909,000 , and a decrease in inventory for the infection control segment of $ 455,000 , or 16.2 % , to $ 2,349,000. inventory decreased across all segments as a result of a strategic decision to carry less days of inventory . prepaid expenses and other current assets increased by $ 254,000 , or 8.2 % , to $ 3,346,000 as of december 31 , 2016 , from $ 3,092,000 as of december 31 , 2015. the increase was primarily due to an increase in prepaid tax payments . accounts payable and accrued liabilities as of december 31 , 2016 increased by $ 310,000 , or 14.4 % , to $ 2,465,000 from $ 2,155,000 as of december 31 , 2015. the change was primarily due to an increase in accrued liabilities offset by a small decrease in trade payables .
| this compared to 62 % for synthetic roof underlayment , 33 % for housewrap and 5 % for other woven material for the year ended december 31 , 2015. sales for the disposable protective apparel segment for the year ended december 31 , 2016 decreased by $ 442,000 , or 3.0 % , to $ 14,219,000 , compared to $ 14,661,000 for 2015. the decrease was primarily due to a decrease in sales to our national and regional distributors and to a lesser extent decreased sales to our major international supply chain partner . infection control segment sales for the year ended december 31 , 2016 increased by $ 120,000 , or 2.7 % , to $ 4,614,000 , compared to $ 4,494,000 for 2015. shield sales were up by 14.2 % , or $ 175,000 , to $ 1,404,000 , and mask sales were down by 1.7 % , or $ 55,000 , to $ 3,210,000. gross profit . gross profit increased by $ 1,012,000 , or 6.3 % , to $ 16,984,000 for the year ended december 31 , 2016 , from $ 15,972,000 for 2015. the gross profit margin was 36.8 % for the year ended december 31 , 2016 , compared to 35.5 % for 2015. in 2015 , gross profit margin was positively affected by the u.s. customs and border protection issuing in 2015 a retroactive generalized system of preferences ( gsp ) refund for duty paid on eligible products . certain building supply and disposable apparel segment products were eligible for this refund and will remain duty free under this program until at least december 31 , 2017. management expects gross profit margin to be in a similar range in 2017. selling , general and administrative expenses . selling , general and administrative expenses decreased by $ 1,026,000 , or 7.4 % , to $ 12,768,000 for the year ended december 31 , 2016 from $ 13,794,000 for 2015. as a percentage of net sales , selling , general and administrative expenses decreased to 27.7 % for the year ended december 31 , 2016 , from 30.7 % for 2015. the decrease in expenses was primarily due to an accrual of $ 601,000 related to the retirement of our former chief executive officer in the third quarter of 2015 , which was not repeated in 2016 , and a decrease in legal expenses of $ 335,000 in 2016 compared to 2015. the change in
| 14,324 |
quicklabel 's current year 's segment operating profit was $ 7,259,000 , reflecting a profit margin of 12.1 % , an increase from prior year 's segment profit of $ 5,154,000 and related profit margin of 10.5 % . the increase in quicklabel 's current year 's segment operating profit and related margin is primarily due to higher sales and favorable product mix . 18 test & measurement t & m 's sales increased 46.3 % in fiscal 2015 to $ 28,568,000 from $ 19,527,000 in the prior year . the increase is primarily due to the 45.5 % growth in the ruggedized printer product line related to the acquisition of the miltope business as well as the continued increase in contract sales . also contributing to the increase in sales was the continued increase in demand for the high speed data recorder product line , as current year sales grew 24.5 % as compared to the prior year . repair and parts revenue was also up with contributions from the newly integrated miltope business . t & m 's segment operating profit was $ 5,627,000 in fiscal 2015 , reflecting a profit margin of 19.7 % , an increase as compared to the prior year 's segment operating profit of $ 2,655,000 and related profit margin of 13.6 % . the fiscal 2015 increase in operating profit and related margin is due to increased sales and favorable product mix . liquidity and capital resources the company expects to finance its future working capital needs , capital expenditures and acquisition requirements through internal funds and believes that cash provided by operations will be sufficient to meet our operating and capital needs for at least the next twelve months . to the extent our capital and liquidity requirements are not satisfied internally , we may utilize a $ 10.0 million revolving bank line of credit . borrowings made under this line of credit bear interest at either a fluctuating base rate equal to the highest of ( i ) the prime rate , ( ii ) 1.50 % above the daily one month libor , and ( iii ) the federal funds rate in effect plus 1.50 % or at a fixed rate of libor plus an agreed upon margin of between 0 % and 2.25 % , based on the company 's funded debt to ebitda ratio as defined in the agreement . see note 6 , line of credit , in the consolidated financial statements for additional information . as of the filing date of this annual report on form 10-k , there have been no borrowings against this line of credit and the entire line is currently available . astro-med 's statements of cash flows for the years ended january 31 , 2015 and 2014 are included on page 36. net cash flows provided by operating activities were $ 1,491,000 in the current year compared to net cash used by operating activities of $ 4,462,000 in the previous year . the increase in net cash flow from operations for the current year is related to increased net income ; tax payments made in the prior year in connection with the gain on the sale of grass ; and slightly lower increased working capital requirements for the current year . the combination of accounts receivable , inventory and accounts payable and accrued expenses increased working capital by $ 2,335,000 in fiscal 2015 , compared to an increase of $ 2,402,000 in fiscal 2014 , with the year over year improvement related to lower receivable and inventory turns , offset slightly by increased sales and purchasing volume . the accounts receivable collection cycle decreased to 52 days sales outstanding at january 31 , 2015 compared to 54 days outstanding at prior year end . inventory days on hand decreased to 106 days at the end of the current fiscal year from 113 days at prior year end . net cash flows provided by investing activities for fiscal 2015 were $ 5,745,000 , which includes $ 1,800,000 of cash received related to the funds held in escrow as part of the grass sale and $ 2,355,000 of cash received related to the disposition of the inventory to the purchaser of grass . cash used for investing activities for fiscal 2015 also included cash used for capital expenditures of $ 2,247,000 , including $ 1,428,000 for information technology primarily related to the purchase and implementation of the company 's new erp system ; $ 309,000 for machinery and equipment ; $ 307,000 for land and building improvements ; $ 126,000 for furniture and fixtures and other capital expenditures ; and $ 77,000 for tools and dies . included in net cash flows used by financing activities for fiscal 2015 were dividends paid of $ 2,128,000. dividends paid in fiscal 2014 were $ 2,103,000. the company 's annual dividend per share was $ 0.28 in both fiscal 2015 and fiscal 2014. also included in current year financing activities was the december 5 , 2014 repurchase of 500,000 shares of the company 's common stock at a per share price of $ 12.50 , for an aggregate repurchase price of $ 6,250,000. the purchase of these shares was from the estate of a former executive of the company and did not impact the shares available as part of the company 's stock buy back program . excluding the december 5 , 2014 repurchase from the ondis estate and shares purchased in connection with the exercise of employee stock options , the company has repurchased a total of 1,530,000 shares of its common stock since the 19 inception of the common stock buy back program in fiscal 1997. at january 31 , 2015 , the company 's board of directors has authorized the purchase of an additional 390,000 shares of the company 's common stock in the future . story_separator_special_tag contractual obligations , commitments and contingencies astro-med is subject to contingencies , including legal proceedings and claims arising out of its businesses that cover a wide range of matters , such as : contract and employment claims ; workers compensation claims ; product liability claims ; warranty claims ; and claims related to modification , adjustment or replacement of component parts of units sold . while it is impossible to ascertain the ultimate legal and financial liability with respect to contingent liabilities , including lawsuits , we believe that the aggregate amount of such liabilities , if any , in excess of amounts provided or covered by insurance , will not have a material adverse effect on our consolidated financial position or results of operations . it is possible , however , that results of operations for any particular future period could be materially affected by changes in our assumptions or strategies related to these contingencies or changes out of the company 's control . critical accounting policies and estimates astro-med 's discussion and analysis of financial condition and results of operations are based upon the company 's consolidated financial statements , which have been prepared in accordance with accounting principles generally accepted in the united states . certain of our accounting policies require the application of judgment in selecting the appropriate assumptions for calculating financial estimates . by their nature , these judgments are subject to an inherent degree of uncertainty . we periodically evaluate the judgments and estimates used for our critical accounting policies to ensure that such judgments and estimates are reasonable for our interim and year-end reporting requirements . these judgments and estimates are based on the company 's historical experience , current trends and information available from other sources , as appropriate . if different conditions result from those assumptions used in our judgments , the results could be materially different from our estimates . we believe the following are our most critical accounting policies as they require significant judgments and estimates in the preparation of our financial statements : revenue recognition : our product sales are recognized when all of the following criteria have been met : persuasive evidence of an arrangement exists ; price to the buyer is fixed or determinable ; delivery has occurred and legal title and risk of loss have passed to the customer ; and collectability is reasonably assured . when other significant obligations remain after products are delivered , revenue is recognized only after such obligations are fulfilled . returns and customer credits are infrequent and are recorded as a reduction to sales . rights of return are not included in sales arrangements . revenue associated with products that contain specific customer acceptance criteria is not recognized before the customer acceptance criteria are satisfied . when a sale arrangement involves training or installation , the deliverables in the arrangement are evaluated to determine whether they represent multiple element arrangements . this evaluation occurs at inception of the arrangement and as each item in the arrangement is delivered . the total fee from the arrangement is allocated to each unit of accounting based on its relative fair value . fair value for each element is established generally based on the sales price charged when the same or similar element is sold separately . we allocate revenue to each element in our multiple-element arrangements based upon their relative selling prices . we determine the selling price for each deliverable based on a selling price hierarchy . the selling price for a deliverable is based on our vendor specific objective evidence ( vsoe ) if available , third-party evidence ( tpe ) if vsoe is not available , or estimated selling price ( esp ) if neither vsoe nor tpe is available . revenue allocated to each element is then recognized when the basic revenue recognition criteria for that element have been met . the amount of product revenue recognized is affected by our judgments as to whether an arrangement includes multiple elements . astro-med recognizes revenue for non-recurring engineering ( nre ) fees , as necessary , for product modification orders upon completion of agreed-upon milestones . revenue is deferred for any amounts received prior to completion of milestones . certain of our nre arrangements include formal customer acceptance provisions . in such cases , we determine whether we have obtained customer acceptance for the specific milestone before recognizing revenue . 20 infrequently , the company receives requests from customers to hold product being purchased from us for the customers ' convenience . we recognize revenue for such bill and hold arrangements provided the transaction meets the following criteria : a valid business purpose for the arrangement exists ; risk of ownership of the purchased product has transferred to the buyer ; there is a fixed delivery date that is reasonable and consistent with the buyer 's business purpose ; the product is ready for shipment ; the payment terms are customary ; we have no continuing performance obligation in regards to the product ; and the product has been segregated from our inventories . the majority of our equipment contains embedded operating systems and data management software which is included in the purchase price of the equipment . the software is deemed incidental to the systems as a whole as it is not sold separately or marketed separately and its production costs are minor as compared to those of the hardware system . therefore , the company 's hardware appliances are considered non-software elements and are not subject to the industry-specific software revenue recognition guidance . warranty claims and bad debts : provisions for the estimated costs for future product warranty claims and bad debts are recorded in cost of sales and general and administrative expense , respectively .
| service and other sales revenue in fiscal 2015 were $ 6,094,000 , a 53.3 % increase compared to prior year sales of $ 3,974,000 and was primarily due to increases in service and parts revenue related to the newly integrated miltope business . 16 the company achieved $ 36,977,000 in gross profit for fiscal 2015 and generated a gross profit margin of 41.9 % , an increase as compared to prior year 's gross profit of $ 26,983,000 and related margin of 39.3 % . the increase in gross profit margin for the current year is due to higher sales , lower manufacturing costs , favorable product mix , as well as the company 's lean manufacturing incentives . the prior year 's gross profit includes a charge of $ 672,000 for product replacement program costs related to a reserve established to address a non-compliant component used in certain models of t & m 's toughwriter printers . operating expenses for the current year were $ 29,746,000 , representing a 16.9 % increase from prior year 's operating expenses of $ 25,450,000. specifically , selling and marketing expenses increased 23.8 % from prior year to $ 18,289,000 in fiscal 2015 , representing 20.7 % of sales , a decrease as compared to the prior year 's 21.5 % of sales . the increase in selling and marketing was primarily the result of increases in personnel costs and related benefit and commission costs , as well as increases in targeted marketing and trade show expenditures . general and administrative ( g & a ) expenses increased less than one percent from prior year to $ 5,655,000 in fiscal 2015. the nominally higher g & a expense in the current year as compared to the prior year was primarily due to the fee for the fairness opinion obtained in connection with the stock repurchase from the ondis estate . funding of research & development ( r & d ) in fiscal 2015 has increased 14.4 % to $ 5,802,000. the increase in r & d for fiscal 2015 is primarily due to increased spending related to outside r & d design and testing for the portable
| 14,325 |
in its alternative asset management operations , subsidiaries of the company serve as general partner or investment manager to investment funds including limited partnerships , offshore companies and separate accounts . the company primarily manages assets in equity event-driven value strategies , across a range of risk and event arbitrage portfolios , earning management and incentive fees from its assets under management ( aum ) . the institutional research business offers domain knowledge-driven research and a sales and trading platform for institutional investors , earning fees from its institutional clients via trading commissions or direct payment . the company manages its proprietary portfolio to maximize shareholder value and to support its other operating businesses . organizational chart overview combined consolidated statements of income investment advisory and incentive fees , which are based on the amount and composition of aum in our funds and accounts , represent our largest source of revenues . growth in revenues depends on good investment performance , which influences the value of existing aum as well as contributes to higher investment and lower redemption rates and facilitates the ability to attract additional investors while maintaining current fee levels . growth in aum is also dependent on being able to access various distribution channels , which is usually based on several factors , including performance and service . incentive fees generally consist of an incentive allocation on the absolute gain in a portfolio or a fee of 20 % of the economic profit , as defined in the agreements governing the investment vehicle . we recognize revenue only when the measurement period has been completed and when the incentive fees have been earned . institutional research services revenues consist of brokerage commissions derived from securities transactions executed on an agency basis or direct payments on behalf of institutional clients commission revenues vary directly with the perceived value of the research , as well as account trading activity and new account generation . compensation costs include variable and fixed compensation and related expenses paid to officers , portfolio managers , sales , trading , research and all other professional staff . variable compensation paid to sales personnel and portfolio management generally represents 40 % of revenues and is the largest component of total compensation costs . 29 management fee is incentive-based and entirely variable compensation in the amount of 10 % of the aggregate pre-tax profits which is paid to mr. gabelli or his designee for acting as ceo pursuant to his employment agreement so long as he is an executive of ac . other operating expenses include general and administrative operating costs and clearing charges and fees incurred by the brokerage business . other income and expenses include net gains and losses from investments ( which include both realized and unrealized gains and losses from trading securities and equity in earnings of investments in partnerships ) , interest and dividend income , and interest expense . net gains and losses from investments are derived from our proprietary investment portfolio consisting of various public and private investments . net income ( loss ) attributable to noncontrolling interests represents the share of net income attributable to the minority stockholders , as reported on a separate company basis , of our consolidated majority-owned subsidiaries and net income attributable to third party limited partners of certain partnerships and offshore funds we consolidate . please refer to notes a and d in our consolidated financial statements included elsewhere in this report . consolidated statement of financial condition we ended the 2015 year with approximately $ 753 million in cash and investments , net of securities sold , not yet purchased of $ 10 million . this includes $ 306 million of cash and short term us treasuries ; $ 219 million of securities , net , including 4.4 million shares of gamco stock ; and $ 228 million invested in affiliated and third party funds and partnerships . our financial resources underpin our flexibility to pursue strategic objectives that may include acquisitions , lift-outs , seeding new investment strategies , and co-investing , as well as shareholder compensation in the form of share repurchase and dividends . total shareholders ' equity was $ 752 million or $ 29.54 per share on december 31 , 2015 compared to $ 583 million or $ 22.54 per share on december 31 , 2014. the increase in equity from the end of 2014 was largely comprised of an increase in securities , net of $ 200 million , including 4.4 million shares of gamco stock , a reduction of $ 24 million in liabilities , a reduction of $ 63 million in redeemable non-controlling interests due to the deconsolidation of an affiliated fund , partially offset by a reduction in cash and cash equivalents by $ 80 million and receivables by $ 20 million . the company also reviews an analysis of adjusted economic book value ( `` aebv '' ) , and aebv per share , a non-gaap financial measure that management believes is useful for analyzing ac 's financial condition . a $ 250 million note from gamco to ac ( the `` gamco note '' ) that was issued as part of the spin-off transaction is not treated as an asset for gaap purposes , but as a reduction in equity , and will continue to be reflected as a reduction in equity in future periods in the amount of the principal then outstanding . the gamco note is expected to be paid down ratably over five years or sooner at gamco 's option . as the gamco note pays down , the company 's total equity will increase , and once the gamco note is fully paid off by gamco , the company 's total equity and aebv will be the same . story_separator_special_tag at december 31 , 2015 , aebv for the company was $ 1.002 billion and the aebv per share was $ 39.37 per share , a non-gaap measure reflecting the impact on book value when the gamco note is viewed as an asset as opposed to a reduction in equity . the reconciliation of gaap book value and gaap book value per share to aebv and aebv per share at december 31 , 2015 is shown below ( in thousands , except for per share data ) : reconciliation of total equity to adjusted economic book value total per share total equity as reported $ 751,549 $ 29.54 add : gamco note 250,000 9.83 adjusted economic book value $ 1,001,549 $ 39.37 our primary goal is to use our liquid resources to opportunistically and strategically grow book value and net income . while this goal is a priority , if opportunities are not present with what we consider a margin of safety , we will consider alternatives to return capital to our shareholders , including stock repurchases and dividends . 30 story_separator_special_tag in the three months ended december 31 , 2015 from $ 1.7 million in the three months ended december 31 , 2014 due primarily to interest income earned in december of $ 0.8 million from the gamco note . interest expense : interest expense was $ 0.4 million in the quarter ended december 31 , 2015 and $ 0.3 million on the comparable quarter in 2014. income taxes the effective tax rate ( `` etr '' ) was 27.4 % and 61.4 % for the periods ended december 31 , 2015 and 2014 , respectively . the fluctuation in rates in attributable to permanent book versus tax differences that are large relative to the net income base . noncontrolling interest net income attributable to noncontrolling interests was $ 0.3 million in the 2015 period compared to $ 1.6 million in the 2014 period due to the deconsolidation of certain funds in 2015 that were consolidated into our results in 2014. net income net income for the three months ended december 31 , 2015 was $ 4.2 million versus $ 2.3 million for the three months ended december 31 , 2014 substantially the result of the higher gains from ac 's proprietary investments partially offset by increased operating losses . operating results for the year ended december 31 , 2015 as compared to the year ended december 31 , 2014 revenues total revenues were $ 22.8 million for the year ended december 31 , 2015 , $ 1.8 million higher than total revenues of $ 21.0 million for the year ended december 31 , 2014. total revenues by revenue component were as follows ( dollars in thousands ) : replace_table_token_8_th investment advisory and incentive fees : investment advisory income is directly influenced by the level and mix of average aum . we earn advisory fees based on the level of average aum in our products . advisory fees were $ 8.4 million for 2015 compared to $ 7.1 million for 2014 , an increase of $ 1.3 million , or 18 % . this increase is a result of the increase in average aum to $ 1.07 billion in 2015 from $ 982 million in 2014 , an increase of $ 85 million , or 9 % and the effect of deconsolidating certain funds in 2015 that were previously consolidated in 2014. incentive fees are directly related to the gains generated for our clients . we earn a percentage , usually 20 % , of the economic gains of our clients ' aum . incentive fees were $ 4.3 million in 2015 , up $ 1.6 million , or 58 % , from $ 2.7 million in 2014 as market appreciation in our clients ' accounts were higher in 2015 as compared to 2014. institutional research services : institutional research services revenues in 2015 were $ 8.4 million , a $ 0.8 million , or 8 % , decrease from $ 9.2 million in 2014 resulting from lower brokerage commissions derived from securities transactions executed on an agency basis . 33 other income : other income was $ 1.8 million for 2015 versus $ 2.1 million for 2014 , a decrease of $ 0.3 million . expenses compensation : compensation costs , which include variable compensation , salaries , bonuses and benefits , were $ 26.4 million for the year ended december 31 , 2015 , an 18 % increase from $ 22.3 million for the year ended december 31 , 2014. fixed compensation costs , which include salaries , bonuses and benefits , increased 10 % to $ 17.3 million in 2015 from $ 15.8 million in 2014 due primarily to an increase in research analyst headcount and additional administrative personnel necessary to support our reporting as a stand-alone public company . the remainder of the compensation expenses represents variable compensation that fluctuates with management fee and incentive fee revenues . for 2015 , variable payouts on revenues were $ 9.0 million , up $ 2.5 million from the $ 6.5 million in 2014. variable payouts are impacted by the mix of products upon which performance fees are earned and the extent to which they may exceed their allocated costs . stock based compensation : stock based compensation was $ 4.9 million in 2015 , an increase of $ 3.0 million , as compared to $ 1.9 million in 2014. the increase was primarily due to the accelerated vesting of restricted stock that occurred in october of 2015. management fees : management fee expense is incentive-based and entirely variable compensation in the amount of 10 % of the aggregate pre-tax profits which is paid to mario j. gabelli or his designees pursuant to his employment agreements with ac and gamco . in 2015 and 2014 , ac recorded a management fee contra-expense of $ 0.3 million and $ 0.0 million , respectively , as presented in the combined consolidated statements of income .
| these fees are recorded at the end of the measurement period , which is typically year-end . for the quarter ended december 31 , 2015 , we recognized $ 4.2 million in incentive fees versus $ 2.7 million for the comparable quarter in 2014 due to improved performance in our merger arbitrage funds . institutional research services : institutional research services revenues in the 2015 period were $ 2.3 million , a decrease from $ 2.4 million in the 2014 period resulting from lower brokerage commissions derived from securities transactions executed on an agency basis . expenses compensation : compensation costs , which include variable compensation , salaries , bonuses and benefits , were $ 9.5 million for the three months ended december 31 , 2015 , an increase from $ 7.5 million for the three months ended december 31 , 2014. fixed compensation costs , which include salaries , bonuses and benefits , increased to $ 5.2 million in the 2015 period from $ 4.7 million in the 2014 period primarily due to an increase in research analyst headcount and additional administrative personnel necessary to support our reporting as a stand-alone public company . the remainder of the compensation expense represents variable compensation that fluctuates with management fee and incentive fee revenues . for fourth quarter of 2015 , variable payouts on revenues were $ 4.3 million , an increase of $ 1.4 million from the $ 2.9 million in the fourth quarter of 2014. variable payouts as a percent of revenues are impacted by the mix of products upon which management and performance fees are earned and the extent to which they may exceed their allocated costs . stock based compensation : stock based compensation expense increased to $ 3.0 million in the fourth quarter of 2015 versus $ 0.5 million in the fourth quarter of 2014 due to the accelerated vesting of restricted stock that occurred in october of 2015. management fees : management fee expense is incentive-based and entirely variable compensation in the amount of 10 % of the aggregate pre-tax profits , which
| 14,326 |
we can not forecast with any degree of certainty which proprietary products , if any , will be subject to future collaborative arrangements , in whole or in part , and how such arrangements would affect our development plan or capital requirements . our programs may also benefit from subsidies , grants , contracts or government or agency-sponsored studies that could reduce our development costs . as a result of the uncertainties discussed above , among others , it is difficult to accurately estimate the duration and completion costs of our research and development projects or when , if ever , and to what extent we will receive cash inflows from the commercialization and sale of a product . our inability to complete our research and development projects in a timely manner or our failure to enter into collaborative agreements , when appropriate , could significantly increase our capital requirements and could adversely impact our liquidity . these uncertainties could force us to seek additional , external sources of financing from time to time in order to continue with our business strategy . our inability to raise additional capital , or to do so on terms reasonably acceptable to us , would jeopardize the future success of our business . during the past five years through december 31 , 2020 , we incurred an aggregate of $ 350.6 million in research and development expenses . the following table indicates the amount incurred for each of our significant research programs and for other identified research and development activities during the years ended december 31 , 2020 , 2019 and 2018. the amounts disclosed in the following table reflect direct research and development costs , license fees associated with the underlying technology and an allocation of indirect research and development costs to each program . 52 replace_table_token_4_th clinical development programs while our clinical development programs have not been significantly , negatively impacted by covid-19 to date , we continue to carefully monitor the evolving situation closely across all our development programs and work to minimize potential impact/disruptions . cdx-0159 cdx-0159 is a humanized monoclonal antibody that specifically binds the receptor tyrosine kinase kit and potently inhibits its activity . kit is expressed in a variety of cells , including mast cells , and its activation by its ligand scf regulates mast cell growth , differentiation , survival , chemotaxis and degranulation . in certain inflammatory diseases , such as chronic spontaneous urticaria ( csu ) , also known as chronic idiopathic urticaria ( ciu ) and chronic inducible urticaria ( cindu ) , mast cell degranulation plays a central role in the onset and progression of the disease . cdx-0159 is designed to block kit activation by disrupting both scf binding and kit dimerization . celldex believes that by targeting kit , cdx-0159 may be able to inhibit mast cell activity and decrease mast cell numbers to provide potential clinical benefit in mast cell related diseases . in june 2020 , we completed a randomized , double-blind , placebo-controlled , single ascending dose escalation phase 1a study of cdx-0159 in healthy subjects ( n=32 ; 8 subjects per cohort , 6 cdx-0159 ; 2 placebo ) . subjects received a single intravenous infusion of cdx-0159 at 0.3 , 1.0 , 3.0 , or 9.0 mg/kg or placebo . the objectives of the study included safety and tolerability , pharmacokinetics ( pk ) and pharmacodynamics ( tryptase and stem cell factor ) and immunogenicity . tryptase is an enzyme synthesized and secreted almost exclusively by mast cells and decreases in plasma tryptase levels are believed to reflect a systemic reduction in mast cell burden in both healthy volunteers and in disease . data from the study were featured in a late breaking presentation at the european academy of allergy and clinical immunology ( eaaci ) annual congress 2020 in june . cdx-0159 demonstrated a favorable safety profile as well as profound and durable reductions of plasma tryptase , consistent with systemic mast cell suppression . most common adverse events were mild infusion-related reactions , all of which spontaneously resolved without intervention . mild and asymptomatic decreases in neutrophil and white blood cell count were observed in laboratory testing . a single dose of cdx-0159 suppressed plasma tryptase levels in a dose-dependent manner , indicative of systemic mast cell suppression . tryptase suppression below the level of detection was observed after a single 1.0 mg/kg dose and was maintained for more than 2 months at single doses of both 3.0 and 9.0 mg/kg of cdx-0159 . a subset of subjects from the 3mg/kg and 9 mg/kg cohorts agreed to continued follow up for tryptase suppression which remained below the level of detection for over 3 months ( 14 weeks ) in 50 % of subjects and over 4 months ( 18 weeks ) in all subjects , respectively . dose dependent increases in plasma stem cell factor mirror decreases in tryptase , consistent with allosteric blockade of stem cell factor to kit and demonstrate complete target engagement in vivo . long serum half-life and non-immunogenic profile support a convenient dosing schedule . enhanced pk profile and durable tryptase suppression at low doses support re-formulation for sub-cutaneous administration . 53 these data supported expansion of the cdx-0159 program into mast cell driven diseases , including initially in chronic spontaneous urticaria ( csu ) and chronic inducible urticaria ( cindu ) , diseases where mast cell degranulation plays a central role in the onset and progression of the disease . the prevalence of csu and cindu is approximately 0.5-1 % of the total population or up to 1 to 3 million patients in the united states alone ( weller et al . 2010. hautarzt . 61 ( 8 ) , bartlett et al . 2018. dermnet . org ) . csu presents as itchy hives , angioedema or both for at least six weeks without a specific trigger ; multiple episodes can play out over years or even decades . story_separator_special_tag about 50 % of patients with csu achieve symptomatic control with antihistamines or leukotriene receptor antagonists . omalizumab , an ige inhibitor , provides relief for roughly half of the remaining antihistamine/leukotriene refractory patients . consequently , there is a need for additional therapies . cindus are forms of urticaria that have an attributable cause or trigger associated with them , typically resulting in hives or wheals . celldex is exploring cold-induced and dermographism ( scratch-induced ) urticarias . in october 2020 , we announced that enrollment had opened and the first patient had been dosed in a phase 1b multi-center study of cdx-0159 in csu . this study is a randomized , double-blind , placebo-controlled clinical trial designed to assess the safety of multiple ascending doses of cdx-0159 in up to 40 patients with csu who remain symptomatic despite treatment with antihistamines . secondary and exploratory objectives include pharmacokinetic and pharmacodynamic assessments , including measurement of tryptase and stem cell factor levels and clinical activity outcomes ( impact on urticaria symptoms , disease control , clinical response ) as well as quality of life assessments . cdx-0159 is administered intravenously ( 0.5 , 1.5 , 3 and 4.5 mg/kg at varying dosing schedules ) as add on treatment to h1-antihistamines , either alone or in combination with h2-antihistamines and or leukotriene receptor agonists . in december 2020 , we announced that enrollment had opened and the first patient had been dosed in a second phase 1b study in cindu being conducted in germany . this study is an open label clinical trial designed to evaluate the safety of a single dose of cdx-0159 in up to 20 patients with cold contact urticaria ( n=10 ) or symptomatic dermographism ( n=10 ) who are refractory to antihistamines . patient 's symptoms are induced via provocation testing that resembles real life triggering situations . secondary and exploratory objectives include pharmacokinetic and pharmacodynamic assessments , including changes from baseline provocation thresholds , measurement of tryptase and stem cell factor levels , clinical activity outcomes ( impact on urticaria symptoms , disease control , clinical response ) , quality of life assessments and measurement of tissue mast cells through skin biopsies . cdx-0159 is administered intravenously ( 3.0 mg/kg ) on day 1 as add on treatment to h1-antihistamines . in march of 2021 , we reported positive interim data from the phase 1b study in cindu in patients with cold contact urticaria and symptomatic dermographism . fifteen out of 20 planned patients with antihistamine refractory cindu had received a single intravenous infusion of cdx-0159 at 3 mg/kg , including nine patients with cold contact urticaria ( coldu ) and six patients with symptomatic dermographism ( sd ) . safety results were reported for all 15 patients ; activity results were reported for all patients assessed for at least 15 days/2 weeks after treatment ( n=10 ; 7 coldu and 3 sd ) . patients had high disease activity as assessed by provocation threshold testing . in coldu and sd pts , baseline critical temperature thresholds were 18.7 +/- 2.7 °c ( range : 5-27°c ) and frictest® thresholds were 3.7 +/- 0.3 ( range : 3-4 ) of 4. eight of 10 patients ( 7 coldu ; 1 sd ) experienced a complete response ( cr ) as assessed by provocation threshold testing . the remaining two patients ( both with sd ) , had been recently treated and were followed for two weeks . one patient experienced a partial response ( pr ) thus far and one patient reported symptomatic improvement ( decreased itching ) . all patients will continue to be assessed for response through week 12 . patient global assessment ( pat-ga ) and physician global assessment ( phy-ga ) results were consistent with provocation testing results . measurements of serum tryptase levels are available for only the first six patients evaluated for activity , all with coldu . the mean baseline was 3.3 +/- 0.2 ng/ml and levels on day 15 after treatment were at or below the limit of detection . these patients all experienced complete responses . cdx-0159 was generally well tolerated . six of 15 patients had mild infusion reactions , generally areas of localized redness and itching , which resolved rapidly . a single severe infusion reaction was observed ( brief loss of consciousness , followed by shaking and sweating ) . the patient was treated with 54 antihistamines and steroids ; no epinephrine was administered . the patient rapidly recovered and was hospitalized for observation with no further manifestations of this event . importantly , there was no evidence of mast cell activation as measured by decreases in serum tryptase levels shortly after the infusion and further at a later time point . through day 15 , three patients had transient , mild decreases in hemoglobin , and no patients had meaningful declines in white blood cells . enrollment is currently being completed in the coldu and sd cohorts ( 10 per cohort ; 20 total ) . based on these compelling results , the study is being expanded to also include 10 patients with cholinergic urticaria and is planned to begin enrolling these patients in may of 2021 . we continue to assess potential opportunities for cdx-0159 in other diseases where mast cells play an important role , such as dermatologic , respiratory , allergic , gastrointestinal and ophthalmic conditions . in february of 2021 , we announced that we plan to expand clinical development of cdx-0159 into prurigo nodularis ( pn ) , a chronic skin disease characterized by the development of hard , intensely itchy ( pruritic ) nodules on the skin . mast cells through their interactions with sensory neurons and other immune cells are believed to play an important role in amplifying chronic itch and neuroinflammation , both of which are a hallmark of pn . there are currently no fda approved therapies for pn , representing an area of significant unmet need .
| research and development expense research and development expenses consist primarily of ( i ) personnel expenses , ( ii ) laboratory supply expenses relating to the development of our technology , ( iii ) facility expenses and ( iv ) product development expenses associated with our drug candidates as follows : 60 replace_table_token_6_th personnel expenses primarily include salary , benefits , stock-based compensation and payroll taxes . the $ 0.4 million increase in personnel expenses for the year ended december 31 , 2020 , as compared to the year ended december 31 , 2019 , was primarily due to an increase in bonus expense . we expect personnel expenses to remain relatively consistent over the next twelve months , although there may be fluctuations on a quarterly basis . laboratory supplies expenses include laboratory materials and supplies , services , and other related expenses incurred in the development of our technology . the $ 0.1 million increase in laboratory supply expenses for the year ended december 31 , 2020 , as compared to the year ended december 31 , 2019 , was primarily due to higher laboratory materials and supplies purchases . we expect laboratory supplies expenses to remain relatively consistent over the next twelve months , although there may be fluctuations on a quarterly basis . facility expenses include depreciation , amortization , utilities , rent , maintenance and other related expenses incurred at our facilities . the $ 0.4 million decrease in facility expenses for the year ended december 31 , 2020 , as compared to the year ended december 31 , 2019 , was primarily due to lower rent and depreciation expense . we expect facility expenses to remain relatively consistent over the next twelve months , although there may be fluctuations on a quarterly basis . product development expenses include clinical investigator site fees , external trial monitoring costs , data accumulation costs , contracted research and outside clinical drug product manufacturing . the $ 0.1 million increase in product development expenses for the year ended december 31 , 2020 , as compared to the year ended december 31 , 2019 , was primarily due to an increase in clinical trial and contract manufacturing expenses of $ 1.2 million , partially offset by a decrease in contract research expenses of $ 1.0 million . we expect product development expenses to increase over the
| 14,327 |
as a result of the number of transactions we have completed over the years , we have a complex organizational structure consisting of numerous licensed entities across many jurisdictions . in managing our group , we continue to look for opportunities to simplify our legal structure by way of company amalgamations and mergers , reinsurance , or other transactions in order to improve capital efficiency and decrease ongoing compliance and operational costs over time . in addition , we seek to pool risk in areas where we maintain the expertise to manage such risk to achieve operational efficiencies , which will allow us to most efficiently manage our assets and to achieve capital diversification benefits . underwriting our underwriting results can be affected by changes in premium rates , significant losses , development of prior year loss reserves and current year underwriting margins . in general , our expectation for 2017 is that underwriting margins will be flat or lower than in 2016 , with premium rates expected to be impacted by both market and general economic conditions . we continue to see overcapacity in many markets for insurable risks , resulting in continued pressure on premium rates and terms and conditions . if general economic conditions worsen , a decrease in the level of economic activity may impact insurable risks and our ability to write premium that is acceptable to us . we may adjust our level of reinsurance to maintain an amount of net exposure that is aligned with our risk tolerance . our strategy is to maintain our disciplined underwriting approach and strong risk management practices , which may result in us writing less premium in certain lines of business than we wrote in 2016. however , we will seek to mitigate these challenging conditions through our diversified book of business , established distribution channels and geographic reach . we will continue to seek growth in certain areas where we have identified opportunities for expansion and the opportunity for increases in premium rates . in addition , our underwriting operations are well-positioned to capture profitable active business from our run-off transactions , where such business is in attractive specialty lines . in both our atrium and starstone segments we will maintain our focus on underwriting for profitability . in our starstone segment we aim to continue reducing our expense base and generating operational efficiencies through ongoing integration into enstar ' s operations . investments we expect to maintain our investment strategy , which emphasizes the preservation of our assets , credit quality , and diversification . we will continue to seek superior risk-adjusted returns , by allocating a portion of our portfolio to non-investment grade securities or alternative investments in accordance with our investment guidelines . net investment income is a significant component of our earnings . we are in a period of considerable market uncertainty in which we see fully priced asset valuations across many asset classes compared to historical averages and deteriorating underlying company fundamentals in certain classes . if investment conditions or general economic conditions change during 2017 , we may experience further pressure on our investment yields and realized or unrealized losses on investments could materialize . for further discussion of our investments , see `` investable assets '' below . 45 non-gaap financial measures in presenting our results for the atrium and starstone segments , we discuss the loss ratio , acquisition cost ratio , other operating expense ratio , and the combined ratio of our active underwriting operations within these segments . while we consider these measures to be non-gaap , management believes that these ratios provide the most meaningful measure for understanding our underwriting profitability . these non-gaap measures may be defined or calculated differently by other companies . there are no comparable gaap measures to our insurance ratios . the loss ratio is calculated by dividing net incurred losses and lae by net premiums earned . the acquisition cost ratio is calculated by dividing acquisition costs by net premiums earned . the other operating expense ratio is calculated by dividing other operating expenses by net earned premiums . the combined ratio is the sum of the loss ratio , the acquisition cost ratio and the other operating expense ratio . the ratios exclude expenses related to the holding companies , which we believe is the most meaningful presentation because these expenses are not incremental and or directly related to the individual underwriting operations . in the loss ratio , the excluded net premiums earned and net incurred losses and lae of the holding companies relate to the amortization of our fair value adjustments associated with the liabilities for unearned premiums and losses and lae acquired on acquisition date . fair value purchase accounting adjustments established at date of acquisition are recorded by the holding companies . in atrium 's other operating expense ratio , the excluded general and administrative expenses relate to amortization of the definite-lived intangible assets in the holding company , and expenses relating to aul managing agency employee salaries , benefits , bonuses and current year share grant costs . the excluded aul general and administrative expenses relate to expenses incurred in managing the syndicate , and eliminated items represent atrium 5 's share of the fees and commissions paid to aul . we believe it is a more meaningful presentation to exclude the costs in managing the syndicate because they are principally funded by the profit commission fees earned from syndicate 609 , which is a revenue item not included in the insurance ratios . in starstone 's other operating expense ratio for 2016 , the excluded general and administrative expenses relate to the amortization of the definite-lived intangible assets , recorded at the holding company level . for 2015 , the excluded general and administrative expenses relate to the amortization of the definite-lived intangible assets and acquisition-related expenses , in each case as recorded at the holding company level . story_separator_special_tag for 2014 , the excluded general and administrative expenses relate to management fee expenses charged by our non-life run-off segment primarily related to our costs incurred in managing starstone , the amortization of the definite-lived intangible assets , and acquisition-related expenses , in each case recorded at the holding company level . 46 consolidated results of operations - for the years ended december 31 , 2016 , 2015 and 2014 the following table sets forth our consolidated statements of earnings for each of the periods indicated . for a discussion of the critical accounting policies that affect the results of operations , see `` critical accounting policies '' below . replace_table_token_6_th highlights consolidated results of operations for the year ended december 31 , 2016 consolidated net earnings of $ 264.8 million and basic and diluted earnings per share of $ 13.72 and $ 13.62 , respectively net earnings from non-life run-off and life and annuities segments of $ 206.7 million and $ 26.5 million , respectively net premiums earned of $ 823.5 million , including $ 676.6 million and $ 124.4 million in our starstone and atrium segments combined ratios of 98.6 % and 94.0 % for the active underwriting operations within our starstone and atrium segments , respectively ( refer to `` non-gaap financial measures '' above ) net investment income of $ 185.5 million and net realized and unrealized gains of $ 77.8 million 47 consolidated financial condition as at december 31 , 2016 total investments , cash and funds held of $ 8,438.1 million total reinsurance balances recoverable of $ 1,460.7 million total a ssets of $ 12,865.7 million shareholders ' equity of $ 2,802.3 million and redeemable noncontrolling interest of $ 454.5 million total gross reserves for losses and lae of $ 5,987.9 million , with $ 1,350.5 million of reserves acquired and assumed in our non-life run-off operations during 2016 diluted book value per ordinary share of $ 143.68 consolidated overview 2016 versus 2015 : we reported consolidated net earnings attributable to enstar group limited shareholders of $ 264.8 million for the year ended december 31 , 2016 , an increase of $ 44.5 million from $ 220.3 million for the year ended december 31 , 2015. our results were impacted by the loss portfolio transfer reinsurance transactions we completed during 2016 with allianz , coca-cola and neon . our results were also impacted by our acquisition activity during 2015 , when we acquired sussex , wilton re 's life settlements business , and alpha , and completed loss portfolio transfer reinsurance transactions with reciprocal of america , voya , and sun life . the most significant drivers of the change in our financial performance during 2016 as compared to 2015 included : net incurred losses and lae in our non-life run-off segment - net reduction in the liability for net incurred losses and lae within our non-life run-off segment continued to be the predominant driver of our consolidated earnings for the year ended december 31 , 2016 , improving by $ 15.1 million from 2015. net earnings provided by the non-life run-off segment increased by $ 33.5 million in 2016 compared to 2015 primarily due to improved investment results , partially offset by higher expenses and other items ; higher net investment income - total net investment income increased by $ 62.9 million for the year ended december 31 , 2016 compared to 2015. the increase was attributable to an average increase of 53 basis points in the book yield we obtained on our assets , due to our asset allocation and a broad increase in treasury yields ; starstone - net earnings attributable to the starstone segment were $ 25.2 million for the year ended december 31 , 2016 , as compared to $ 13.7 million in 2015. the combined ratio of 98.6 % was the same as last year as challenging underwriting conditions resulted in higher loss and acquisition ratios , which was fully offset by improvement in the other operating expense ratio attributable to the continued execution of expense management initiatives ; atrium - net earnings attributable to the atrium segment were $ 6.4 million , for the year ended december 31 , 2016 as compared to $ 16.6 million for the year ended december 31 , 2015. atrium continued to deliver solid underwriting performance with a combined ratio of 94.0 % . the 2016 results included a lower level of favorable prior period loss development and some large losses in 2016 compared to a lower level of losses in 2015 ; life settlements business - the life settlements business contributed $ 11.0 million to earnings in 2016 compared to $ 16.5 million in 2015 ; change in net realized and unrealized gains ( losses ) - for the year ended december 31 , 2016 , net realized and unrealized gains amounted to $ 77.8 million , as compared to net realized and unrealized losses of $ 41.5 million for 2015. the net realized and unrealized gains in 2016 were primarily attributable to an increase in the valuation of our other investments , as well as tighter credit spreads in fixed income markets ; and noncontrolling interest - noncontrolling interest in losses ( earnings ) is directly attributable to the results from those subsidiary companies in which there are either noncontrolling interests or redeemable noncontrolling interests . for the year ended december 31 , 2016 , the noncontrolling interest in earnings was $ 39.6 million as compared to the noncontrolling interest in losses of $ 10.0 million in 2015 . 48 2015 versus 2014 : we reported consolidated net earnings attributable to enstar group limited shareholders of $ 220.3 million for the year ended december 31 , 2015 , an increase of $ 6.6 million from $ 213.7 million for the year ended december 31 , 2014. during 2014 , our primary acquisition was starstone .
| gross premiums written : the following table provides gross premiums written by line of business for the atrium segment for the years ended december 31 , 2016 , 2015 and 2014 : replace_table_token_14_th ( 1 ) terrorism previously included war-related premiums which have been reclassified to marine and aviation lines . for the twelve months ended december 31 , 2015 , gross premiums written of $ 2.1 million and $ 5.3 million were reclassified to the marine and aviation lines , respectively . see below for a discussion of the drivers of the decrease in net premiums earned for the year ended december 31 , 2016 as compared with the year ended december 31 , 2015 , which also explain the decrease in gross premium written for the same periods . 57 net premiums earned : the following table provides net premiums earned by line of business for the atrium segment for the years ended december 31 , 2016 , 2015 and 2014 : replace_table_token_15_th ( 1 ) terrorism previously included war-related premiums which have been reclassified to marine and aviation lines . for the twelve months ended december 31 , 2015 , net premiums earned of $ 2.0 million and $ 2.3 million were reclassified to the marine and aviation lines , respectively . 2016 versus 2015 : net premiums earned for the atrium segment were $ 124.4 million and $ 134.7 million for the years ended december 31 , 2016 and 2015 , respectively . the decrease in net premiums earned was due to underwriting discipline to non-renew certain business that no longer met our underwriting standards , particularly in the marine , reinsurance and upstream energy lines . we are seeing continued pressure on premium rates and terms and conditions due to overcapacity in many markets for insurable risks . we continue to focus on risk selection and underwriting for profitability . these premium decreases were partially offset by the increase in the property and casualty binding authority line , which reflects the continued success of au gold , our proprietary online underwriting platform . 2015 versus 2014 : net premiums earned
| 14,328 |
if we breach any of our representations or warranties , we will be obligated to repurchase the automobile contract at a price equal to the principal balance plus accrued and unpaid interest . we may then be entitled under the terms of our dealer agreement to require the selling dealer to repurchase the contract at a price equal to our purchase price , less any principal payments made by the customer . subject to any recourse against dealers , we will bear the risk of loss on repossession and resale of vehicles under automobile contracts that we repurchase . in a securitization , the related special purpose subsidiary may be unable to release excess cash to us if the credit performance of the securitized automobile contracts falls short of pre-determined standards . such releases represent a material portion of the cash that we use to fund our operations . an unexpected deterioration in the performance of securitized automobile contracts could therefore have a material adverse effect on both our liquidity and results of operations . critical accounting policies we believe that our accounting policies related to ( a ) finance receivables at fair value , ( b ) allowance for finance credit losses , ( c ) amortization of deferred origination costs and acquisition fees , ( d ) term securitizations , ( e ) accrual for contingent liabilities and ( f ) income taxes are the most critical to understanding and evaluating our reported financial results . such policies are described below . 32 allowance for finance credit losses in order to estimate an appropriate allowance for losses incurred on finance receivables , we use a loss allowance methodology commonly referred to as `` static pooling , `` which stratifies our finance receivable portfolio into separately identified pools based on the period of origination . using analytical and formula driven techniques , we estimate an allowance for finance credit losses , which we believe is adequate for probable incurred credit losses that can be reasonably estimated in our portfolio of automobile contracts . net losses incurred on finance receivables are charged to the allowance . we evaluate the adequacy of the allowance by examining current delinquencies , the characteristics of the portfolio , prospective liquidation values of the underlying collateral and general economic and market conditions . as circumstances change , our level of provisioning and or allowance may change as well . receivables acquired after 2017 , are accounted for using fair value and will have no allowance for finance credit losses in accordance with the fair value method of accounting for finance receivables . broad economic factors such as recession and significant changes in unemployment levels influence the credit performance of our portfolio , as does the weighted average age of the receivables at any given time . our internal credit performance data consistently show that new receivables have lower levels of delinquency and losses early in their lives , with delinquencies increasing throughout their lives and losses gradually increasing to a peak between 36 and 42 months , after which they gradually decrease . the credit performance of our portfolio is also significantly influenced by our underwriting guidelines and credit criteria we use when evaluating contracts for purchase from dealers . we regularly evaluate our portfolio credit performance and modify our purchase criteria to maximize the credit performance of our portfolio , while maintaining competitive programs and levels of service for our dealers . we generally do not lower the contractual interest rate or waive or forgive principal when our borrowers incur financial difficulty on either a temporary or permanent basis . an exception to this policy is when a court order mandates the terms of the contract to be modified , such as in a chapter 13 bankruptcy proceeding . in such cases , which represent an immaterial portion of our portfolio of finance receivables , we have estimated the amount of impairment that results from such modification and established an appropriate allowance within our allowance for finance credit losses . finance receivables measured at fair value effective january 1 , 2018 , we adopted the fair value method of accounting for finance receivables acquired on or after that date . for each finance receivable acquired after 2017 , we consider the price paid on the purchase date as the fair value for such receivable . we estimate the cash to be received in the future with respect to such receivables , based on our experience with similar receivables acquired in the past . we then compute the internal rate of return that results in the present value of those estimated cash receipts being equal to the purchase date fair value . thereafter , we recognize interest income on such receivables on a level yield basis using that internal rate of return as the applicable interest rate . cash received with respect to such receivables is applied first against such interest income , and then to reduce the carrying value of the receivables . we re-evaluate the fair value of such receivables at the close of each measurement period . if the reevaluation were to yield a value materially different from the carrying value , an adjustment would be required . in the twelve-month period ended december 31 , 2019 , the net present value of the forecasted cash flows for the receivables acquired in the first and second quarter of 2018 exceeded the carrying value of that pool by $ 2.1 million , which we have recorded as a mark to market value of that pool of receivables . anticipated credit losses are included in our estimation of cash to be received with respect to receivables . because such credit losses are included in our computation of the appropriate level yield , we do not thereafter make periodic provision for credit losses , as our best estimate of the lifetime aggregate of credit losses is included in that initial computation . story_separator_special_tag also because we include anticipated credit losses in our computation of the level yield , the computed level yield is materially lower than the average contractual rate applicable to the receivables . because our initial carrying value is fixed as the price we pay for the receivable , rather than as the contractual principal balance , we do not record acquisition fees as an amortizing asset related to the receivables , nor do we capitalize costs of acquiring the receivables . rather we recognize the costs of acquisition as expenses in the period incurred . amortization of deferred originations costs and acquisition fees upon purchase of a contract from a dealer , we generally either charge or advance the dealer an acquisition fee . in addition , we incur certain direct costs associated with acquisitions of our contracts . all such acquisition fees and direct costs are applied to the carrying value of finance receivables and are accreted into earnings as an adjustment to the yield over the estimated life of the contract using the interest method . receivables acquired after 2017 are accounted for using fair value . in accordance with the fair value method of accounting for finance receivables , any dealer acquisition fees will be incorporated into acquisition price of the receivables and no direct costs will be deferred . 33 term securitizations our term securitization structure has generally been as follows : we sell automobile contracts we acquire to a wholly-owned special purpose subsidiary , which has been established for the limited purpose of buying and reselling our automobile contracts . the special-purpose subsidiary then transfers the same automobile contracts to another entity , typically a statutory trust . the trust issues interest-bearing asset-backed securities , in a principal amount equal to or less than the aggregate principal balance of the automobile contracts . we typically sell these automobile contracts to the trust at face value and without recourse , except that representations and warranties similar to those provided by the dealer to us are provided by us to the trust . one or more investors purchase the asset-backed securities issued by the trust ; the proceeds from the sale of the asset-backed securities are then used to purchase the automobile contracts from us . we may retain or sell subordinated asset-backed securities issued by the trust or by a related entity . we structure our securitizations to include internal credit enhancement for the benefit the investors ( i ) in the form of an initial cash deposit to an account ( `` spread account `` ) held by the trust , ( ii ) in the form of overcollateralization of the senior asset-backed securities , where the principal balance of the senior asset-backed securities issued is less than the principal balance of the automobile contracts , ( iii ) in the form of subordinated asset-backed securities , or ( iv ) some combination of such internal credit enhancements . the agreements governing the securitization transactions require that the initial level of internal credit enhancement be supplemented by a portion of collections from the automobile contracts until the level of internal credit enhancement reaches specified levels , which are then maintained . the specified levels are generally computed as a percentage of the principal amount remaining unpaid under the related automobile contracts . the specified levels at which the internal credit enhancement is to be maintained will vary depending on the performance of the portfolios of automobile contracts held by the trusts and on other conditions , and may also be varied by agreement among us , our special purpose subsidiary , the insurance company , if any , and the trustee . such levels have increased and decreased from time to time based on performance of the various portfolios , and have also varied from one transaction to another . the agreements governing the securitizations generally grant us the option to repurchase the sold automobile contracts from the trust when the aggregate outstanding balance of the automobile contracts has amortized to a specified percentage of the initial aggregate balance . upon each transfer of automobile contracts in a transaction structured as a secured financing for financial accounting purposes , we retain on our consolidated balance sheet the related automobile contracts as assets and record the asset-backed notes or loans issued in the transaction as indebtedness . we receive periodic base servicing fees for the servicing and collection of the automobile contracts . under our securitization structures treated as secured financings for financial accounting purposes , such servicing fees are included in interest income from the automobile contracts . in addition , we are entitled to the cash flows from the trusts that represent collections on the automobile contracts in excess of the amounts required to pay principal and interest on the asset-backed securities , base servicing fees , and certain other fees and expenses ( such as trustee and custodial fees ) . required principal payments on the asset-backed notes are generally defined as the payments sufficient to keep the principal balance of such notes equal to the aggregate principal balance of the related automobile contracts ( excluding those automobile contracts that have been charged off ) , or a pre-determined percentage of such balance . where that percentage is less than 100 % , the related securitization agreements require accelerated payment of principal until the principal balance of the asset-backed securities is reduced to the specified percentage . such accelerated principal payment is said to create overcollateralization of the asset-backed notes . if the amount of cash required for payment of fees , expenses , interest and principal on the senior asset-backed notes exceeds the amount collected during the collection period , the shortfall is withdrawn from the spread account , if any . if the cash collected during the period exceeds the amount necessary for the above allocations plus required principal payments on the subordinated asset-backed notes , and there is no shortfall in the related spread account or the required overcollateralization level , the excess is released to us .
| provision for credit losses is affected by the balance and credit performance of our portfolio of finance receivables ( other than our portfolio of finance receivables measured at fair value , as to which expected credit losses have the effect of reducing the interest rate applicable to such receivables ) . interest expense is significantly affected by the volume of automobile contracts we purchased during the trailing 12-month period and the use of our warehouse facilities and asset-backed securitizations to finance those contracts . employee costs and general and administrative expenses are incurred as applications and automobile contracts are received , processed and serviced . factors that affect margins and net income include changes in the automobile and automobile finance market environments , and macroeconomic factors such as interest rates and changes in the unemployment level . 36 employee costs include base salaries , commissions and bonuses paid to employees , and certain expenses related to the accounting treatment of outstanding stock options , and are one of our most significant operating expenses . these costs ( other than those relating to stock options ) generally fluctuate with the level of applications and automobile contracts processed and serviced . other operating expenses consist largely of facilities expenses , telephone and other communication services , credit services , computer services , sales and advertising expenses , and depreciation and amortization . total operating expenses were $ 336.6 million for the year ended december 31 , 2019 , compared to $ 371.1 million for the prior year , a decrease of $ 34.4 million , or 9.3 % . the decrease is primarily due to a decrease in provision for credit losses , offsetting increases in interest expense , employee costs , and general and administrative expenses . employee costs increased by $ 1.6 million or 2.0 % , to $ 80.9 million during the year ended december 31 , 2019 , representing 24.0 % of total operating expenses , from $ 79.3 million for the prior year , or 24.5 % of total operating expenses . the table below summarizes our employees by category as well as contract purchases and units in
| 14,329 |
we compensate for these limitations by relying primarily on our u.s. gaap results and using non-gaap net income ( loss ) , ebitda , and adjusted ebitda only as supplemental support for management 's analysis of business performance . non-gaap net income ( loss ) , ebitda and adjusted ebitda are calculated as follows for the periods presented . reconciliation of non-gaap financial measures in accordance with the requirements of regulation g issued by the sec , we are presenting the most directly comparable u.s. gaap financial measures and reconciling the unaudited non-gaap financial metrics to the comparable u.s. gaap measures . 16 replace_table_token_3_th replace_table_token_4_th critical accounting policies and estimates the consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the united states . the following accounting policies are the most critical in understanding our consolidated financial position , results of operations or cash flows , and that may require management to make subjective or complex judgments about matters that are inherently uncertain . goodwill – goodwill is tested for impairment using a fair-value-based approach on an annual basis ( december 31 ) and between annual tests if indicators of potential impairment exist . intangible assets - our intangible assets consist primarily of customer relationships and developed technology . the intangible assets are amortized following the patterns in which the economic benefits are consumed . we periodically review the estimated useful lives of our intangible assets and review these assets for impairment whenever events or changes in circumstances indicate that the carrying value of the assets may not be recoverable . the determination of impairment is based on estimates of future undiscounted cash flows . if an intangible asset is considered to be impaired , the amount of the impairment will be equal to the excess of the carrying value over the fair value of the asset . contingent liabilities - contingent liabilities require significant judgment in estimating potential payouts . contingent considerations arising from business combinations require management to estimate future payouts based on forecasted results , which are highly sensitive to the estimates of discount rates and future revenues . these estimates can change significantly from period to period and reviewed each reporting period to establish the fair value of the contingent liability . for additional information on use of estimates , see summary of significant accounting policies in the notes to the consolidated financial statements . 17 story_separator_special_tag font-size : 13px '' > other income/ ( expense ) other income/ ( expense ) primarily relates to the allocated portions of interest expense and sublease rental income . other income/ ( expense ) decreased 151 % or $ 107,000 to $ ( 36,000 ) for the year ended december 31 , 2016 as compared to $ 71,000 for the year ended december 31 , 2015. the decrease is due to an increase in interest expense on notes payable and sublease income ending november 2016 from the expiration of the lease . 20 operating results of our web services segment ( in thousands ) replace_table_token_9_th quarterly financial information replace_table_token_10_th replace_table_token_11_th year ended december 31 , 2016 compared to year ended december 31 , 2015 revenue revenue from web services is generated primarily through website hosting , professional web management services , and eptas . web services segment revenue decreased 26 % or $ 472,000 , to $ 1,362,000 for the year ended december 31 , 2016 as compared to $ 1,834,000 for the year ended december 31 , 2015. the decrease in revenue is related to $ 91,000 decrease in web management professional services , a $ 127,000 decrease in epta revenue due to decrease in outstanding receivables , and a $ 254,000 decrease in hosting revenue . 21 cost of revenue cost of revenue consists primarily of bandwidth , customer service costs , and outsourcing fees related to fulfillment of our professional web management services . cost of revenue decreased 50 % or $ 199,000 , to $ 203,000 for the year ended december 31 , 2016 as compared to $ 402,000 for the year ended december 31 , 2015. the cost of revenue decrease is directly related to the reduction in revenue . research and development research and development expenses primarily consist of salaries and benefits , and related expenses which are attributable to the development of our website development software products . research and development expenses decreased 31 % or $ 15,000 , to $ 33,000 for the year ended december 31 , 2016 as compared to $ 48,000 for the year ended december 31 , 2015. the decrease was related to a reduction of salaries and benefits expenses . selling and marketing selling and marketing expenses consist primarily of salaries and benefits , commissions as well as production of marketing materials . selling and marketing expense decreased 100 % or $ 16,000 , to $ 0 for the year ended december 31 , 2016 compared to $ 16,000 for the year ended december 31 , 2015. the decrease is attributed to our shift in focus to our cloud telecommunications services segment . general and administrative general and administrative expenses consist of salaries and benefits for executives , administrative personnel , legal , rent , accounting and other professional services , and other administrative corporate expenses . general and administrative expenses decreased 45 % or $ 588,000 , to $ 715,000 for the year ended december 31 , 2016 as compared to $ 1,303,000 for the year ended december 31 , 2015. the decrease in general and administrative expenses is primarily due to less of an allocation of corporate general and administrative expenses resulting from the 26 % decrease in revenue for the year ended december 31 , 2016 compared to the year ended december 31 , 2015 , and a company-wide reduction in general and administrative expenses as we continue to cut unnecessary expenses . story_separator_special_tag consolidated general and administrative expenses decreased 16 % , or $ 961,000 to $ 4,900,000 for the year ended december 31 , 2016 compared to $ 5,861,000 for the year ended december 31 , 2015. other income other income decreased 91 % or $ 196,000 , to $ 19,000 for the year ended december 31 , 2016 as compared to $ 215,000 for the year ended december 31 , 2015. this decrease is primarily related to the reversal of certain legal accruals totaling $ 193,000 during the year ended december 31 , 2015 that were determined to no longer have a reasonable possibility of being paid out . liquidity and capital resources the company has transformed into a start-up company with the inherent risks and uncertainties of funding operations until profitability is achieved . after considering the company 's historical negative cash flow from operating activities as well as a range of internal forecast outcomes , our cash and cash equivalents of $ 619,000 at december 31 , 2016 does not appear adequate to meet our obligations as they become due within one year following the date the financial statements are issued . management evaluated the significance of the potential negative cash flows and determined that borrowing availability under an existing loan agreement would be sufficient to alleviate concerns about the company 's ability to continue as a going concern , the company entered into an amendment to our loan agreement with steven g. mihaylo , extending the ability of the board of directors to request the remaining $ 1.0 million available under the loan agreement if necessary to fund operations through may 30 , 2018. working capital working capital decreased 94 % or $ 941,000 to $ 57,000 as of december 31 , 2016 as compared to $ 998,000 as of december 31 , 2015. the decrease in working capital is primarily due to a decrease in cash and restricted cash of $ 890,000 , a decrease in prepaid expenses of $ 360,000 , and an increase in accrued expenses of $ 185,000. additionally , during the year ended december 31 , 2016 , the company adopted asu 2015-17 , balance sheet classification of deferred taxes , which requires entities to present deferred tax assets and deferred tax liabilities as non-current . as a result , we reclassified current deferred income tax assets of $ 423,000 to non-current during 2016 . 22 cash and cash equivalents cash and cash equivalents decreased 59 % or $ 878,000 , to $ 619,000 as of december 31 , 2016 as compared to $ 1,497,000 as of december 31 , 2015. during the year ended december 31 , 2016 , we used cash flows for operating activities of $ 1,126,000 , offset by $ 11,000 provided by investing activities and $ 237,000 provided by financing activities . trade receivables current and long-term trade receivables , net of allowance for doubtful accounts , decreased 13 % or $ 56,000 , to $ 389,000 as of december 31 , 2016 as compared to $ 445,000 as of december 31 , 2015. long-term trade receivables , net of allowance for doubtful accounts , decreased 47 % or $ 38,000 , to $ 43,000 as of december 31 , 2016 as compared to $ 81,000 as of december 31 , 2015. in prior years , we offered our customers an installment contract with payment terms between 24 and 36 months , as one of several payment options . the payments that become due more than 12 months after the end of the reporting period are classified as long-term trade receivables . the decrease in our accounts receivable balance is primarily related to outstanding balances with our third-party leasing companies at the end of 2015 , which have been collected . accounts payable accounts payable increased 53 % or $ 40,000 , to $ 116,000 as of december 31 , 2016 as compared to $ 76,000 as of december 31 , 2015. the aging of accounts payable as of december 31 , 2016 and 2015 were generally within our vendors ' terms of payment . notes payable notes payables increased 1 % or $ 10,000 , to $ 1,032,000 as of december 31 , 2016 as compared to $ 1,022,000 at december 31 , 2015. the increase is primarily due to accreting the related party notes payable balance up $ 23,000 from the note payable discount , offset by payments on other notes payable balances ( note 10 ) . capital total stockholders ' equity decreased 77 % or $ 1,689,000 , to $ 515,000 as of december 31 , 2016 as compared to $ 2,204,000 as of december 31 , 2015. the decrease in total stockholders ' equity was attributable to net loss of $ 2,792,000 offset by an increase in additional paid-in capital of $ 653,000 for stock options issued to employees , $ 300,000 for the exercise of warrants , $ 9,000 for the exercise of employee stock options , $ 101,000 in common stock issued for annual interest payment on note payable , and $ 40,000 issued to settle contingent consideration obligations . off balance sheet arrangements as of december 31 , 2016 , we are not involved in any off-balance sheet arrangements , as defined in item 303 ( a ) ( 4 ) ( ii ) of sec regulation s-k. related party transactions note payable on december 30 , 2015 , crexendo , inc. ( the `` company '' ) entered into a term loan agreement ( the `` loan agreement '' ) , with steven g. mihaylo , as trustee of the steven g. mihaylo trust dated august 19 , 1999 ( the `` lender '' ) . mr. mihaylo is the principal shareholder and chief executive officer of the company . pursuant to the loan agreement , the lender has agreed to make an unsecured loan to the company in the initial principal amount of $ 1,000,000 ( the “ loan ” ) .
| pre-tax loss for the years ended december 31 , 2016 and 2015 of $ 2,780,000 and $ 4,553,000 , respectively , and a full valuation allowance on all of our deferred tax assets for the years ended december 31 , 2016 and 2015. segment operating results the company has two operating segments , which consist of cloud telecommunications services and web services . the information below is organized in accordance with our two reportable segments . segment operating income ( loss ) is equal to segment net revenue less segment cost of revenue , sales and marketing , research and development , and general and administrative expenses . 18 operating results of our cloud telecommunications services segment ( in thousands ) replace_table_token_6_th quarterly financial information replace_table_token_7_th replace_table_token_8_th 19 year ended december 31 , 2016 compared to year ended december 31 , 2015 revenue cloud telecommunications services segment revenue increased 30 % or $ 1,768,000 , to $ 7,757,000 for the year ended december 31 , 2016 as compared to $ 5,989,000 for the year ended december 31 , 2015. a substantial portion of cloud telecommunications services segment revenue is generated through 36 to 60 month service contracts . as such , we believe growth in cloud telecommunications services segment will initially be seen through increases in our backlog . backlog represents future revenue on contracts signed with no service or payment provided at december 31 , 2016 and december 31 , 2015. cloud telecommunications services backlog as of december 31 , 2016 $ 15,921 cloud telecommunications services backlog as of december 31 , 2015 $ 13,907 cost of revenue cost of revenue consists primarily of fees we pay to third-party telecommunications and business internet providers , costs related to installations , customer service , and the costs associated with the purchase of desktop devices and third party equipment . cost of revenue increased 8 % or $ 247,000 , to $ 3,422,000 for the year ended december 31 , 2016 as compared
| 14,330 |
the company 's products capitalize the large volume of the 24-hour forex markets to achieve capital appreciation over a medium- to long-term basis , combined with the usage of a good wealth vehicle designed to control risk , profit from both bull or bear markets , and maximize liquidity and economic resilience . our proprietary trading models were developed by a team of professional engineers in communications , electronic circuitry design and financial engineering . this diverse team is the key factor in our successful development of non-traditional and innovative trading models . our systems were designed to take intelligent positions as the market moves/changes and , upon development , our systems were to bring a rigorously tested track-record . the company 's systems were designed to adapt themselves and to take intelligent positions as the market moves/changes . the models were subjected to rigorous testing akin to the volatile trading environment of major financial events/crises that have happened in recent history . these models were also programmed to have the ability to learn and adapt new manners of trading , effectively translating the human behavioral of trading into a predictive science . the company 's quantitative strategies and proprietary algorithmic trading system were developed to generate risk adjustable returns for its licensees and their clients . since 2016 , the company 's focus has been to license its algorithm to licensees , regulated funds and banks to capitalize on the large volume of the 24-hour forex markets to achieve capital appreciation over a medium- to long- term basis , combined with the usage of a good wealth vehicle designed to control risk , profit from both bull or bear markets , and maximize liquidity and economic resilience . on august 25 , 2015 , the company entered into a sale and purchase agreement ( the “ purchase agreement ” ) with anthony ng zi qin , pursuant to which the company acquired magdallen quant pte ltd ( “ mql ” ) . the mql acquisition was accomplished through a share exchange with anthony ng zi qin of 7,422,000 restricted shares of common stock of the company ( `` consideration shares '' ) , with a value of $ 0.41 per share , and an aggregate fair value of $ 3,043,020 , in exchange for the entire issued and outstanding capital of mql held by mr. anthony ng zi qin , consisting of 8,000,100 shares of stock issued at par value of sgd 1.00 per share , or $ 0.714 on the acquisition date . on august 19 , 2016 , the company and anthony ng zi qin entered into an addendum ( the “ first mql addendum ” ) to the purchase agreement to extend the august 25 , 2016 anniversary date for the adjustment of issued shares for an additional period of 12 months . on november 10 , 2017 , the company and anthony ng zi qin signed an addendum ( the “ second mql addendum ” ) to the purchase agreement , as amended , pursuant to which the company agreed to issue an aggregate of 3,339,900 shares of common stock , in satisfaction of the shortfall in the value of the shares issued . these shares were issued on december 12 , 2017 in full satisfaction of the aforementioned contingent liability . the purchase agreement , as amended , is referred to herein as the “ mql acquisition agreement. ” the algorithms were placed into commercial operation in november 2015 upon the execution of a software licensing agreement ( the “ mql license agreement ” ) between and new asia momentum limited ( “ naml ” ) , a company owned and controlled by dr. lin kok peng , the company 's chief executive officer , chief financial officer and chairman of the board . under the terms of the mql license agreement , mql agreed to license its proprietary trainable , trading algorithms to naml in exchange for payment of a license fee and certain other fixed and time and materials fees . pursuant to the terms of the mql license agreement , mql licensed its proprietary trainable , trading algorithms . naml , in turn , offered these proprietary , trainable , algorithm trading software solutions to broker-dealers , banks , funds and other clients on the basis of a saas licensing and delivery model , with sub-licensed users availing themselves of service-based contractual arrangements . naml was required to pay mql royalty fees equal to 20 % of the trading profits achieved by the saas contract agreements that naml executed with its clients . the targeted geographic market was asia , with an initial emphasis on singapore , hong kong , indonesia , and australia . from 2015 to 2017 , naml grew its retail assets under management ( “ aum ” ) from zero to approximately $ 2.5 million . in conjunction with the expansion into the regulated fund and bank model , naml decided to ask its clients to redeem the aum and as of september 30 , 2017 , trading on the aum was terminated . the company initiated its focus on the regulated bank and fund model in 2017 with the launch of the feuris fund a with aum of approximately $ 6.67 million . because the risk profiles required by these regulated funds and banks reflect a lower level of risk , there was a significantly reduced frequency of trading activities . as of september 30 , 2019 , due to market conditions that impacted trading frequencies and volumes , naml liquidated the feuris fund a and returned the aum to the investors . 26 the mql license agreement remains in place . story_separator_special_tag while the company continues to improve its algorithm products , there are no guarantees that such product improvements will translate to improved financial performance . the company , in its efforts to expand its business , is currently involved in the development of new business opportunities , including the following : · the company may integrate a business solution to provide an e-commerce platform where buyers and sellers trade products online through incentive-based marketing . if launched , the platform is expected to offer a wide range of selective products to the buyers within a social network of community led by influencers and dedicated services integrated with logistical and payment support to provide buyers with easy , simple and secure online shopping experience and be rewarded at the same time . the platform would use a hybrid of business-to-business ( b2b ) and business-to-consumer ( b2c ) business model . the global e-commerce revenue has exceeded more than $ 2 trillion and has been enjoying double-digital growth annually fueled by increasing numbers of internet users , greater familiarity and dependence with online shopping without the need of physical interactions especially during the ongoing pandemic , and improved purchasing power of the middle-class population . · a global digital payment system that would allow users to gain access to the existing global merchant base in multiple countries and regions and earn attractive rewards and cashback benefits . we expect that access to the existing global merchant base would be established through proven payment merchant networks . the company continues to improve its products and has been working to create new products . the company is doing its best to provide the basis for improved performance in the coming quarters , however , there is no guarantee that such new products and product improvements will translate to improved financial performance . in may 2020 , the company filed with the securities and exchange commission ( the “ sec ” ) a definitive information statement on schedule 14c relating to a proposed change of the company 's corporate name from new asia holdings , inc. to digital alliance holdings , inc. and the increase of the number of authorized shares of common stock and preferred stock . on july 8 , 2020 , the company filed a certificate of amendment ( the “ amendment ” ) to the company 's articles of incorporation , as amended , with the secretary of state of the state of nevada . the amendment had the effect of increasing the number of authorized shares of the company 's common stock from 400,000,000 to 4,000,000,000 and the number of authorized shares of the company 's preferred stock from 30,000,000 to 400,000,000. the amendment was approved by the company 's board of directors on march 26 , 2020 and by the holders of a majority of the voting power of the company 's issued and outstanding capital stock on may 22 , 2020. the company has decided not to pursue the change in the company 's name at this time . on september 18 , 2020 , the company entered into that certain equity purchase agreement ( the “ global crypto equity purchase agreement ” ) between the company and global crypto offering exchange ltd. ( “ global crypto ” ) . pursuant to the terms of the global crypto equity purchase agreement , the company agreed to sell to global crypto , and global crypto agreed to purchase , an aggregate of 50,000,000 restricted shares of the company 's common stock at a per share purchase price of $ 0.01 , for an aggregate purchase price of $ 500,000 ( the “ share purchase ” ) . the global crypto equity purchase agreement provides that the share purchase will be effected in 10 separate blocks ( each , a “ block ” and collectively , “ blocks ” ) , with the first block closing on september 18 , 2020. in the first block , global crypto purchased 2,000,000 shares for an aggregate purchase price of $ 20,000. the parties to the global crypto equity purchase agreement agreed that each of the remaining nine blocks will close within 12 months of september 18 , 2020. the global crypto equity purchase agreement will terminate ( i ) upon the completion of the full share purchase , or ( ii ) on september 18 , 2021. if the global crypto equity purchase agreement terminates on september 18 , 2021 prior to completion of the full share purchase , no additional shares may be purchased under the global crypto equity purchase agreement . the parties to the global crypto equity purchase agreement do not intend to effect a change in control as a result of entering into the global crypto equity purchase agreement . on september 21 , 2020 , the company entered into an equity purchase agreement ( the “ enju equity purchase agreement ” ) with enju planning pte ltd. ( the “ subscriber ” ) . pursuant to the terms of the equity purchase agreement , the company agreed to sell to the subscriber , and the subscriber agreed to purchase , 1,000,000 restricted shares of the company 's common stock at purchase price of $ 0.20 per share , for an aggregate purchase price of $ 200,000 ( the “ share purchase ” ) . the purchase price was received by the company on october 8 , 2020 . 27 in december 2019 , a novel strain of coronavirus ( covid-19 ) emerged in wuhan , hubei province , china . while initially the outbreak was largely concentrated in china and caused significant disruptions to its economy , it has now spread to several other countries and infections have been reported globally .
| the nominal increase in such expenses in the year ended december 31 , 2020 was related to increased professional fees . as a result of the foregoing , we had net loss of $ 190,154 for the year ended december 31 , 2020. this compares with a net loss for the year ended december 31 , 2019 of $ 180,002. we expect that we will need to raise additional funds to support our business ( focused on the implementation of new business solutions as described above ) including , working capital and for the acquisition of new businesses and technologies , or if we must respond to unanticipated events that require us to make additional investments . we can not assure that additional financing will be available when needed on favorable terms , or at all . we had begun to generate nominal revenues since the second quarter of 2016 , however , due to the change in strategy to focus on the regulated bank and fund model , the company 's licensee decided to terminate all activities with retail clients and the retail aum was returned to retail clients . the focus on the regulated bank and fund model was initiated in 2017 with the launch of the feuris fund a with aum of approximately $ 6.67 million . however , since the adoption of the regulated fund and bank models , the risk profiles required by these regulated funds and banks reflects a lower level of risk , which has resulted in significantly reduced frequency of trading activities over the last several quarters and the company 's licensee , momentum decided , as of september 30 , 2019 , to liquidate the feuris fund a and return the aum to the investors . the license agreement between mql and momentum still remains in place . the company continues to improve its products and , coupled the self-learning capabilities of the algorithms the company is doing its best
| 14,331 |
in addition , an independent academic , patient-level , cost-effectiveness analysis of icosapent ethyl led by dr. william s. weintraub , m.d. , director of outcomes research with medstar cardiovascular research network , indicated that vascepa was projected to not only be cost-effective but also to reduce long-term health care costs in a majority of the scenarios analyzed . the fda granted priority review designation to our march 2019 supplemental new drug application , or snda , seeking an expanded indication for vascepa in the united states based on the positive results of the reduce-it study . the fda grants priority review designation to applications for drugs that , if approved , have the potential to offer significant improvements in the effectiveness and safety of the treatment of serious conditions . in november 2019 , fda held an endocrinologic and metabolic drugs advisory committee , or emdac , meeting to review the reduce-it snda . the emdac voted unanimously ( 16-0 ) to recommend approval of an indication and label expansion for vascepa to reduce cardiovascular events in high-risk patients based on the reduce-it results . on december 13 , 2019 the fda approved a new indication and label expansion for vascepa capsules . vascepa is the first and only drug approved by the fda as an adjunct to maximally tolerated statin therapy to reduce the risk of myocardial infarction , stroke , coronary revascularization , and unstable angina requiring hospitalization in adult patients with elevated triglyceride , or tg , levels ( ≥150 mg/dl ) and either established cardiovascular disease or diabetes mellitus and two or more additional risk factors for cardiovascular disease . commercialization we commenced the commercial launch of vascepa through sales and shipments to our network of u.s.-based wholesalers in the united states in january 2013. we began selling and marketing 1-gram size vascepa capsules in january 2013 , and in october 2016 , introduced a smaller 0.5-gram capsule size . the fda-approved dosing for vascepa continues to be 4 grams per day , and , as expected , the majority of new and existing patients taking vascepa continue to be prescribed the 1-gram size vascepa capsule . vascepa is sold principally to a limited number of major wholesalers , as well as selected regional wholesalers and specialty pharmacy providers , or collectively , our distributors or our customers , that in turn resell vascepa to retail pharmacies for subsequent resale to patients and healthcare providers . prior to results of the reduce-it study we did not have outcomes data regarding the clinical effect of vascepa and a substantial portion of our resources were being spent on the reduce-it study . as a result , our commercialization of vascepa was somewhat limited . prior to the reduce-it results topline announcement in september 2018 , our direct sales force consisted of approximately 170 sales professionals , including sales representatives and their managers . based on the positive reduce-it results , in early 2019 , we increased the size of our sales team to approximately 440 sales professionals , including approximately 400 sales representatives . as a result of the fda 's newly approved indication and label expansion , we are close to completing the expansion of our direct sales force to approximately 900 sales professionals , including approximately 800 sales representatives . hiring , training and deploying approximately 400 new sales representatives is a multi-stage process which commenced in july 2019 and is expected to be completed in early 2020. most of the expanded sales management team needed to support this sales force expansion was hired , or internally promoted , and trained prior to december 31 , 2019. from may 2014 through the end of december 2018 , in addition to vascepa promotion by our sales representatives , kowa pharmaceuticals america , inc. co-promoted vascepa in conjunction with its promotion of its primary product , a branded statin for patients with high cholesterol . amarin and kowa pharmaceuticals america , inc. intentionally designed the co-promotion to naturally end as of december 31 , 2018 and mutually agreed not to renew the agreement . during 2018 , as a result of not renewing the agreement , we incurred expense for the accrual of co-promotion tail payments , which were calculated as a percentage of the 2018 co-promotion fee . kowa pharmaceuticals america , inc. will receive $ 17.8 million in co-promotion tail payments , the present value of which , $ 16.6 million , was fully accrued as of december 31 , 2018 and will be paid over three years with declining amounts each year . we made $ 7.3 million in tail payments as of december 31 , 2019 . 78 we also employ various medical affairs and marketing personnel to support our commercialization of vascepa . we expanded certain medical education and market awareness initiatives following the reporting of positive reduce-it results in 2018. we intend to further expand promotion of vascepa , including direct to consumer advertising , as a result of the new indication and label expansion of vascepa approved by the fda on december 13 , 2019. in january 2020 , we launched an educational campaign , true to your heart , to help people learn more about cardiovascular disease and how to better protect against persistent cardiovascular risk . based on monthly compilations of data provided by a third party , symphony health , the estimated number of normalized total vascepa prescriptions for the three months ended december 31 , 2019 was approximately 992,000 compared to 865,000 , 756,000 , 618,000 , and 539,000 in the three months ended september 30 , 2019 , june 30 , 2019 , march 31 , 2019 , and december 31 , 2018 , respectively . story_separator_special_tag according to data from another third party , iqvia , the estimated number of normalized total vascepa prescriptions for the three months ended december 31 , 2019 was approximately 909,000 compared to 787,000 , 683,000 , 553,000 , and 492,000 in the three months ended september 30 , 2019 , june 30 , 2019 , march 31 , 2019 , and december 31 , 2018 , respectively . normalized total prescriptions represent the estimated total number of vascepa prescriptions dispensed to patients , calculated on a normalized basis ( i.e. , one month 's supply , or total capsules dispensed multiplied by the number of grams per capsule divided by 120 grams ) . inventory levels at wholesalers tend to fluctuate based on seasonal factors , prescription trends and other factors . companies such as symphony health and iqvia collect and report estimates of weekly , monthly , quarterly and annual prescription information . there is a limited amount of information available to such companies to determine the actual number of total prescriptions for prescription products like vascepa during such periods . each vendor 's estimates utilize a proprietary projection methodology and are based on a combination of data received from pharmacies and other distributors , and historical data when actual data is unavailable . their calculations of changes in prescription levels between periods can be significantly affected by lags in data reporting from various sources or by changes in pharmacies and other distributors providing data . such methods can from time to time result in significant inaccuracies in information when ultimately compared with actual results . these inaccuracies have historically been most prevalent and pronounced during periods of time of inflections upward or downward in rates of use . further , data for a single and limited period may not be representative of a trend or otherwise predictive of future results . data reported by symphony health and iqvia is rarely identical . as such , the resulting conclusions from such sources should be viewed with caution . we are not responsible for the accuracy of these companies ' information and amarin does not receive prescription data directly from retail pharmacies . we recognize revenue from product sales when the distributor obtains control of our product , which occurs at a point in time , typically upon delivery to the distributor . timing of shipments to wholesalers , as used for revenue recognition purposes , and timing of prescriptions as estimated by these third parties may differ from period to period . although we believe these data are prepared on a period-to-period basis in a manner that is generally consistent and that such results can be generally indicative of current prescription trends , these data are based on estimates and should not be relied upon as definitive . while we expect to be able to grow vascepa revenues over time , no guidance should be inferred from the operating metrics described above . we also anticipate that such sales growth will be inconsistent from period to period . we believe that investors should view the above-referenced operating metrics with caution , as data for this limited period may not be representative of a trend consistent with the results presented or otherwise predictive of future results . seasonal fluctuations in pharmaceutical sales , for example , may affect future prescription trends of vascepa , as could changes in prescriber sentiment , quarterly changes in distributor purchases , and other factors . we believe investors should consider our results over several quarters , or longer , before making an assessment about potential future performance . in addition to promotion of vascepa in the united states , based on reduce-it , we have increased focus on expansion of our development efforts for vascepa to major markets outside the united states . we currently have strategic collaborations to develop and commercialize vascepa in select territories outside the united states . in february 2015 , we announced an exclusive agreement with eddingpharm to develop and commercialize vascepa capsules in what we refer to as the china territory , consisting of the territories of mainland china , hong kong , macau and taiwan , for uses that are currently commercialized and under development by us in the united states . in march 2016 , we entered into an agreement with biologix to register and commercialize vascepa in several middle eastern and north african countries . in september 2017 , we entered into an agreement with hls to register , commercialize and distribute vascepa in canada . in march 2019 , hls received formal confirmation from health canada that the canadian regulatory authority has granted priority review status for the upcoming new drug submission , which was filed in april 2019 , for vascepa . in december 2019 , hls received formal confirmation from health canada that the canadian regulatory authority has granted approval for vascepa to reduce the risk of cardiovascular events ( cardiovascular death , non-fatal myocardial infarction , non-fatal stroke , coronary revascularization or hospitalization for unstable angina ) in statin-treated patients with elevated triglycerides , who are at high risk of cardiovascular events due to : established cardiovascular disease , or diabetes , and at least one other cardiovascular risk factor . in january 2020 hls obtained a regulatory exclusivity designation . commercial launch in canada began in february 2020 on a limited scale with subsequent expansion intended . in 2020 , we intend to explore potential development and commercial paths for vascepa in other markets such as the european union . in december 2019 , the european medicines agency , or ema , has validated the marketing authorization application seeking approval for vascepa . the validation confirms the submission is sufficiently complete for the ema to begin its review , which review is currently expected to be completed before the end of 2020. we plan to assess other potential partnership opportunities for licensing vascepa to partners outside of the united states .
| such rebates are intended to offset the differential for patients of vascepa not covered by commercial insurers at the time of launch on tier 2 for formulary purposes , resulting in higher co-pay amounts for such patients . our cost for these co-payment mitigation rebates during the years ended december 31 , 2019 and 2018 was up to $ 70 per 30-day prescription filled and , beginning in march 2017 , included up to $ 140 per 90-day prescription filled . since launch , certain third-party payors have added vascepa to their tier 2 coverage , which results in lower co-payments for patients covered by these third-party payors . in connection with such tier 2 coverage , we have agreed to pay customary rebates to these third-party payors on the resale of vascepa to patients covered by these third-party payors . 83 as is typical for the pharmaceutical industry , the majority of vascepa sales are to major commercial wholesalers which then resell vascepa to retail pharmacies . licensing revenue . licensing revenue during the years ended december 31 , 2019 and 2018 was $ 2.4 million and $ 0.8 million , respectively , an increase of $ 1.5 million , or 180 % . licensing revenue relates to the recognition of amounts received in connection with the following vascepa licensing agreements : eddingpharm – a $ 15.0 million up-front payment received in february 2015 and a $ 1.0 million milestone payment achieved in march 2016. hls – a $ 5.0 million up-front payment which was received upon closing of the agreement in september 2017 , a $ 2.5 million milestone payment that was received following achievement of the reduce-it trial primary endpoint in september 2018 and a $ 2.5 million milestone payment that was received following fda approval of a new indication and label expansion in december 2019. the up-front and milestone payments are being recognized over the estimated period in which we are required to provide regulatory and development support pursuant to the agreements . the amount
| 14,332 |
old sequential was the accounting acquirer in the mergers ; therefore , the historical consolidated financial statements for old sequential for period prior to the mergers are considered to be the historical financial statements of sequential brands group , inc. and thus , our consolidated financial statements for fiscal 2015 reflect old sequential 's consolidated financial statements for period from january 1 , 2015 through december 4 , 2015 , and sequential brands group inc. 's thereafter . recently issued accounting standards refer to “ recently issued accounting standards ” in note 2 of notes to consolidated financial statements included in this form 10-k. critical accounting policies , judgments and estimates the preparation of our consolidated financial statements in conformity with gaap requires management to exercise its judgment . we exercise considerable judgment with respect to establishing sound accounting policies and in making estimates and assumptions that affect the reported amounts of our assets and liabilities , our recognition of revenues and expenses , and our disclosure of commitments and contingencies at the date of the financial statements . on an on-going basis , we evaluate our estimates and judgments . we base our estimates and judgments on a variety of factors , including our historical experience , knowledge of our business and industry and current and expected economic conditions , that are believed to be reasonable under the circumstances , the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources . we periodically re-evaluate our estimates and assumptions with respect to these judgments and modify our approach when circumstances indicate that modifications are necessary . while we believe that the factors we evaluate provide us with a meaningful basis for establishing and applying sound accounting policies , we can not guarantee that the results will always be accurate . since the determination of these estimates requires the exercise of judgment , actual results could differ from such estimates . a description of significant accounting policies that require us to make estimates and assumptions in the preparation of our consolidated financial statements is as follows : revenue recognition . we have entered into various license agreements that provide revenues based on guaranteed minimum royalty payments and advertising/marketing fees with additional royalty revenues based on a percentage of defined sales . guaranteed minimum royalty payments and advertising/marketing revenue are recognized on a straight-line basis over the term of each contract year , as defined in each license agreement . royalty payments exceeding the guaranteed minimum royalty payments are recognized as income during the period corresponding to the licensee 's sales . payments received as consideration for the grant of a license are recorded as deferred revenue at the time payment is received and recognized ratably as revenue over the term of the license agreement . advanced royalty payments are recorded as deferred revenue at the time payment is received and recognized as revenue when earned . revenue is not recognized unless collectability is reasonably assured . if license agreements are terminated prior to the original licensing period , we recognize revenue in the amount of any contractual termination fees , unless such amounts are deemed non-recoverable . with respect to editorial content for books , we receive advance payments from our publishers and recognize revenue when manuscripts are delivered to and accepted by the publishers . revenue is also earned from book publishing when sales on a unit basis exceed the advanced royalty . television sponsorship revenues are generally recorded ratably across the period when new episodes initially air . 27 we entered into a transaction with a media company for which we receive advertising credits as part of the consideration exchanged for trademark licensing rights . th is transaction is recorded at the estimated fair value of the advertising credits received , as their fair value is deemed more readily determinable than the fair value of the trademark licensing right provided by the company , in accordance with asc 845 , nonmonetary transactions . the fair value of the advertising credits are recorded as revenue and in other assets when earned , and expensed when the advertising credits are utilized . we recorded revenue of $ 3.7 million for the year ended december 31 , 2017 related to the advertising credits earned . we did not record any expense related to the advertising credits as they have not yet been utilized . goodwill and intangible assets . goodwill is tested for impairment at the reporting unit level ( operating segment or one level below an operating segment ) on an annual basis ( on october 1 st ) and between annual tests if an event occurs or circumstances change that would more likely than not reduce the fair value of a reporting unit below its carrying value . the company considers its market capitalization and the carrying value of its assets and liabilities , including goodwill , when performing its goodwill impairment test . in evaluating goodwill for impairment , we 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 . qualitative factors considered include , for example , macroeconomic and industry conditions , overall financial performance , and other relevant entity-specific events . if we bypass the qualitative assessment , or conclude that it is more likely than not that the fair value of a reporting unit is less than its carrying value , we then perform a quantitative goodwill impairment test to identify potential goodwill impairment and measure the amount of goodwill impairment to be recognized , if any . if the carrying value of the reporting unit 's goodwill exceeds the implied fair value of the goodwill , an impairment loss is recognized in the amount of that excess , not to exceed the carrying amount of goodwill . see note 2 – summary of significant accounting policies in notes to our consolidated financial statements for further information . story_separator_special_tag intangible assets represent trademarks , customer agreements and patents related to our brands and a favorable lease . finite-lived intangible assets are amortized on a straight-line basis over the estimated useful lives of the assets . indefinite-lived intangible assets are not amortized , but instead are subject to impairment evaluation . the carrying value of intangible assets and other finite-lived assets is reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable . indefinite-lived intangible assets are tested for impairment on an annual basis ( on october 1 st ) and between annual tests if an event occurs or circumstances change that indicate that the carrying amount of the indefinite-lived intangible asset may not be recoverable . when conducting its impairment assessment of indefinite-lived intangible assets , we initially perform a qualitative evaluation of whether it is more likely than not that the asset is impaired . if it is determined by a qualitative evaluation that it is more likely than not that the asset is impaired , we then test the asset for recoverability . recoverability of assets to be held and used is measured by a comparison of the carrying amou nt of the asset to its future discounted net cash flows . if the carrying amount of such assets are considered to be impaired , the impairment to be recognized is measured by the amount by which the carrying amount of the assets exceeds the fair value of the assets . assets to be disposed of are reported at the lower of the carrying amount or fair value less costs to sell . assumptions used in our fair value estimates are as follows : ( i ) discount rates ; ( ii ) projected annual revenue growth rates ; and ( iii ) projected long-term growth rates . our estimates also factor in economic conditions and expectations of management which may change in the future based on period-specific facts and circumstances . due to the identification of impairment indicators during the quarter ended september 30 , 2017 , specifically the impairment of certain tradenames due to reduced contractual minimums or reduced sales forecasts in key distribution channels , the company performed impairment testing of its goodwill and indefinite-lived assets at september 30 , 2017 , which replaced its october 1 st annual test . as a result of its testing , the company recorded a non-cash impairment charge of $ 36.5 million relating to its indefinite-lived intangible assets during the quarter ended september 30 , 2017 . due to the identification of impairment indicators during the quarter ended december 31 , 2017 , the company performed impairment testing of its goodwill and indefinite-lived assets at december 31 , 2017. as a result of its testing , the company recorded a non-cash goodwill impairment charge of $ 304.1 million during the quarter ended december 31 , 2017. during the year ended december 31 , 2016 , we changed our annual impairment testing date from december 31 to october 1. we believe this new date is preferable because it allows for more timely completion of the annual impairment test prior to the end of our annual financial reporting period . this cha nge in accounting principle did not delay , accelerate or avoid an impairment charge . we have determined that it would be impracticable to objectively determine projected cash flow and related valuation estimates that would have been used as of each october 1 of prior reporting periods without the use of hindsight . as such , we applied the change in annual impairment testing date prospectively beginning october 1 , 2016 . 28 income taxes . current income taxes are based on the respective periods ' taxable income for federal , foreign and state income tax reporting purposes . deferred tax liabilities and assets are determined based on the difference between the financial statement and income tax bases of assets and liabilities , using statutory tax rates in effect for the year in which the differences are expected to reverse . in accordance with asu no . 2015-17 “ balance sheet classification of deferred taxes ” , all deferred income taxes are reported and classified as non-current . a valuation allowance is required if , based on the weight of available evidence , it is more likely than not that some portion or all of the deferred tax assets will not be realized . management considers the scheduled reversal of deferred income tax liabilities , projected future taxable income , and tax planning strategies in making this assessment . based on consideration of these items and new tax provisions under the tax act , primarily the new limitation on interest expense deductions , management has determined that enough certainty exists to warrant the release of the valuation allowance recorded against substantially all of the company 's deferred tax assets as of december 31 , 2017 . see note 15 to our consolidated financial statements for further information on the release of the our valuation allowance . the company applies the fasb guidance on accounting for uncertainty in income taxes . the guidance clarifies the accounting for uncertainty in income taxes recognized in an enterprise 's financial statements in accordance with other authoritative gaap and prescribes a recognition threshold and measurement process for financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return . the guidance also addresses derecognition , classification , interest and penalties , accounting in interim periods , disclosure and transition . during the year ended december 31 , 2017 , the company did not have any reserves or accrued interest and penalties recorded through current income tax expense in accordance with asc 740 , income taxes ( “ asc 740 ” ) .
| 2 million , $ 1.0 million of higher expenses related to the martha & snoop 's potluck dinner party show , and increase d contributions of $ 0.9 million . impairment c harges . during the year ended december 31 , 2017 we recorded non-cash impairment charges of $ 304.1 related to our goodwill and $ 36.5 million for indefinite-lived intangible assets related to the trademarks of five of our non-core brands : caribbean joe , revo , franklin mint , nevados , and ful . fair value for each trademark was determined based on estimates of future discounted cash flows . the trademark impairments arose due to reduced contractual minimums or reduced sales forecasts in key distribution channels for these brands . the goodwill impairment was triggered in the fourth quarter of 2017 by the continued decline of our stock price and the related decline in our market capitalization . during the fourth quarter of 2017 , our stock price and market capitalization declined approximately 41 % , consistent with the decline in market capitalization of similar companies in our sector . 30 other expense . other expense during the year ended december 31 , 2017 consists of a $ 1.9 million loss recorded in connection with the sale of available-for-sale securities and other immaterial items partially offset by mslo pre-acquisition sales tax refunds of $ 0.1 million and other immaterial items . other expense during the year ended december 31 , 2016 consists of the impairment of our available-for-sale securities of $ 4.4 million partially offset by other immaterial items . interest expense , net . the year-over-year increase in net interest expense of $ 9.4 million is primarily due to an increase in interest incurred under our loan agreements . interest expense , net during the year ended december 31 , 2017 includes interest incurred under our loan agreements of $ 55.1 million , non-cash interest related to the amortization of deferred financing costs of $ 3.9 million and
| 14,333 |
for the years ended december 31 , 2018 and 2017 , approximately 41 % and 45 % of our total revenues from continuing operations , respectively , were derived from sales to distributors . for the years ended december 31 , 2018 and 2017 , approximately 85 % and 82 % of our revenues from continuing operations , respectively , were derived from products we manufacture and approximately 15 % and 18 % , respectively , were derived from complementary products we distribute in order to provide the researcher with a single source for all equipment needed to conduct a particular experiment . for the years ended december 31 , 2018 and 2017 , approximately 30 % and 46 % of our revenues from continuing operations , respectively , were derived from sales made by our non-united states operations . as discussed later under “ selected results of operations ” , the increase in revenues is primarily attributable to the acquisition of dsi and the effect of currency translation . changes in the relative proportion of our revenue sources between direct sales and distribution sales , and the proportion of u.s. and non-u.s sales are primarily the result of the acquisition of dsi . cost of revenues . cost of revenues includes material , labor and manufacturing overhead costs , obsolescence charges , packaging costs , warranty costs , shipping costs and royalties . our cost of revenues may vary over time based on the mix of products sold . we sell products that we manufacture and products that we purchase from third parties . the products that we purchase from third parties typically have a higher cost of revenues as a percent of revenues because the profit is effectively shared with the original manufacturer . we anticipate that our manufactured products will continue to have a lower cost of revenues as a percentage of revenues as compared with the cost of non-manufactured products for the foreseeable future . additionally , our cost of revenues as a percent of revenues will vary based on mix of direct to end user sales and distributor sales , mix by product line and mix by geography . sales and marketing expenses . sales and marketing expense consists primarily of salaries and related expenses for personnel in sales , marketing and customer support functions . we also incur costs for travel , trade shows , demonstration equipment , public relations and marketing materials , consisting primarily of the printing and distribution of catalogs , supplements and the maintenance of our websites . we may from time to time expand our marketing efforts by employing additional technical marketing specialists in an effort to increase sales of selected categories of products . we may also from time to time expand our direct sales organizations in an effort to concentrate on key accounts or promote certain product lines . general and administrative expenses . general and administrative expense consists primarily of salaries and other related costs for personnel in executive , finance , accounting , information technology and human resource functions . other costs include professional fees for legal and accounting services , information technology infrastructure , facility costs , investor relations , insurance and provision for doubtful accounts . 25 research and development expenses . research and development expense consists primarily of salaries and related expenses for personnel and spending to develop and enhance our products . other research and development expense includes fees for consultants and outside service providers , and material costs for prototype and test units . we expense research and development costs as incurred . grants received from governmental entities related to research projects are accounted for as a reduction in research and development expense over the period of the project . we believe that investment in product development is a competitive necessity and plan to continue to make these investments in order to realize the potential of new technologies that we develop , license or acquire for existing markets . stock-based compensation expenses . stock-based compensation expense for the years ended december 31 , 2018 and 2017 was $ 3.0 million and $ 3.5 million , respectively . included in stock-based compensation expense for the years ended december 31 , 2018 and 2017 was stock-based compensation related to discontinued operations of $ 0.2 million and $ 0.1 million , respectively . the stock-based compensation expense related to stock options , restricted stock units , restricted stock units with a market condition and the employee stock purchase plan was recorded as a component of cost of revenues , sales and marketing expenses , general and administrative expenses , research and development expenses , and income from discontinued operations . story_separator_special_tag expense , net other expense , net , was $ 9.0 million and $ 2.0 million for the years ended december 31 , 2018 and 2017 , respectively . the increase in other expense , net was primarily due to an increase in interest expense , net as a result of higher debt balances during the current period compared to the same period last year as well as transaction costs incurred in 2018 of approximately $ 3.4 million , related to the acquisition of dsi and divestiture of denville . these increases were offset by a decrease in foreign currency losses as compared to the prior period . interest expense was $ 5.4 million and $ 0.7 million for the years ended december 31 , 2018 and 2017 , respectively . currency exchange rate fluctuations included as a component of net loss resulted in approximately $ 0.1 million of currency gains and $ 0.5 million in currency losses during the years ended december 31 , 2018 and 2017 , respectively . income taxes income tax from continuing operations was a benefit of $ 3.7 million and $ 0.6 million for the years ended december 31 , 2018 and 2017 , respectively . story_separator_special_tag the effective income tax rate was 46.1 % for the year ended december 31 , 2018 , compared with 23.1 % for the same period in 2017. the difference in our effective tax rate year over year was primarily attributable to lower pre-tax income at certain individual subsidiaries in 2018 versus the impact of certain provisions of u.s. tax reform in 2017. on december 22 , 2017 , tax reform legislation known as the tax cuts and jobs act ( the tax act ) was signed into law . a majority of the provisions of the tax act are effective january 1 , 2018. the tax act makes broad and complex changes to the u.s. internal revenue code which include , but are not limited to : ( 1 ) the reduction of the corporate income tax rate from 35 % to 21 % ; ( 2 ) the implementation of a modified territorial tax system with a one-time transition tax on previously unremitted earnings of foreign subsidiaries ; ( 3 ) a new provision designed to tax global intangible low-taxed income ( gilti ) ; ( 4 ) the deduction for foreign-derived intangible income ( fdii ) ; ( 5 ) a new limitation on deductible interest expense ; and ( 6 ) limitations on the deductibility of certain executive compensation . the impacts of the tax act have been recorded in expense from continuing operations and the details are discussed more fully in note 20 , income taxes , in the notes to consolidated financial statements . 27 income from discontinued operations discontinued operations resulted in income of $ 1.4 million and $ 1.2 million for the years ended december 31 , 2018 and 2017 , respectively . on january 22 , 2018 , we sold substantially all the assets of denville , for approximately $ 20.0 million , which included a $ 3.0 million earn-out provision . the results of denville were presented in discontinued operations for both the years ended december 31 , 2018 and 2017. income from discontinued operations for the year ended december 31 , 2018 included a gain on sale of denville of $ 1.3 million and an income tax benefit of $ 0.4 million . the income tax benefit was mainly due to the reversal of deferred tax liabilities associated with indefinite lived intangibles following the denville transaction . liquidity and capital resources historically , we have financed our business through cash provided by operating activities , bank borrowings , and the issuance of common stock . our liquidity requirements arise primarily from investing activities , including funding of acquisitions , and other capital expenditures . on january 22 , 2018 , we sold the operations of denville , and received approximately $ 15.8 million , net of cash on hand . simultaneously , we retired the existing debt balances of approximately $ 11.9 million . on january 31 , 2018 , we entered into a financing agreement , which comprised of a $ 64.0 million term loan and up to a $ 25.0 million line of credit . finally , on january 31 , 2018 , we acquired dsi for approximately $ 68.0 million , net of cash acquired . as of december 31 , 2018 , we held cash and cash equivalents from continuing operations of $ 8.2 million , compared with $ 5.2 million at december 31 , 2017. as of december 31 , 2018 and december 31 , 2017 , we had $ 60.8 million and $ 11.7 million of borrowings outstanding under our credit facility , net of deferred financing costs , respectively . total debt , net of cash and cash equivalents was $ 52.6 million at december 31 , 2018 , compared to $ 6.5 million at december 31 , 2017. in addition , we had an underfunded united kingdom pension liability of approximately $ 0.9 million and $ 1.2 million at december 31 , 2018 and december 31 , 2017 , respectively . as of december 31 , 2018 and december 31 , 2017 , cash and cash equivalents held by our foreign subsidiaries was $ 3.2 million and $ 4.8 million , respectively . as of december 31 , 2017 , we changed our indefinite reinvestment assertion to provide that all foreign cash balances above the level required for local operating expenses would be repatriated to the u.s. in tax years after 2017. we maintain this modified assertion at december 31 , 2018. as a result of the 2017 tax act , post-2017 dividends from qualifying controlled foreign corporations are no longer taxed in the u.s. however , any dividends to the u.s. must still be assessed for withholding tax liability as well as income state tax liability . as a result of our assertion , we determined the potential state income tax liability related to available cash balances at foreign subsidiaries would be immaterial in both 2018 and 2017 , and we had an accrued withholding tax liability of $ 38 thousand as of both december 31 , 2018 and december 31 , 2017 , related to amounts determined to be available for repatriation . replace_table_token_5_th 28 our operating activities provided cash of $ 2.9 million and $ 1.1 million for the year ended december 31 , 2018 and 2017 , respectively . the decrease in net cash flow from operations was primarily due to the increase in net loss as well as the effect of changes in working capital period over period . our investing activities used cash of $ 53.8 million and $ 0.9 million for the year ended december 31 , 2018 and 2017 , respectively . investing activities during the year ended december 31 , 2018 primarily consisted of $ 68.5 million paid for the acquisition of dsi and $ 15.8 million received from the disposition of denville . investing activities during the year ended december 31 , 2017 primarily included cash used for purchases of property , plant and equipment .
| the non-gaap financial information provided in the table above should be considered in addition to , not as a substitute for , the financial information provided and presented in accordance with accounting principles generally accepted in the united states , or gaap . 26 cost of revenues cost of revenues increased $ 19.4 million , or 50.6 % , to $ 57.6 million for the year ended december 31 , 2018 compared with $ 38.2 million for the year ended december 31 , 2017. the increase in cost of revenues was primarily due to the effect on cost of revenues of the acquisition of dsi which was approximately $ 18.5 million . gross profit margin as a percentage of revenues increased to 52.3 % for the year ended december 31 , 2018 compared with 50.6 % for 2017. the increase in gross profit margin is primarily attributable to the effect of higher margin products following the acquisition of dsi . the increase in gross profit margin was offset by the effect of a $ 3.8 million charge recognized in cost of revenues during the year ended december 31 , 2018 related to a purchase accounting inventory fair value step up amortization . this inventory fair value step up was fully recognized into cost of revenues over approximately six months . sales and marketing expenses sales and marketing expenses increased $ 9.3 million , or 62.1 % , to $ 24.4 million for the year ended december 31 , 2018 compared with $ 15.1 million for the year ended december 31 , 2017. the increase in sales and marketing expenses was primarily due to the impact of the acquisition of dsi , as well as to a lesser extent , increases in employee , consulting , and travel costs . general and administrative expenses general and administrative expenses increased $ 3.9 million , or 22.0 % , to $ 21.4 million for the year ended december 31 , 2018 compared with $ 17.5 million for the year ended december 31 , 2017. the increase was primarily attributable to the impact of the acquisition of dsi , as well as an increase in accrued
| 14,334 |
we maintain retail channel relationships with online and traditional retailers in the u.s. and canada , including national retailers such as amazon.com , best buy , costco.com , staples , officemax , and walmart and various regional retailers . we have experienced significant growth in recent periods , with total revenues of $ 104.5 million , $ 88.8 million and $ 72.2 million in fiscal 2017 , 2016 and 2015 , respectively , generating year-over-year increases of 18 % and 23 % , respectively . we have made significant investments in research and development , brand marketing and channel development and incurred net losses of $ 12.9 million , $ 14.1 million and $ 6.4 million in fiscal 2017 , 2016 and 2015 , respectively . 54 key factors affecting our performance our historical financial performance and key business metrics have been , and we expect that our financial performance and key business metrics in the future will be , primarily driven by the following factors . core user growth . our core user growth is a key indicator of our market penetration , the growth of our business and our anticipated future subscription and services revenue . low core user churn . we believe that maintaining our current low core user churn is an important factor in our ability to continue to improve our financial performance and is a distinguishing advantage over many of our competitors . we focus on providing high-quality services and support to our users so they are motivated to remain with us . our core user churn rate is higher for ooma small business customers than ooma residential customers , which is driven in part by the failure rate of small businesses . accordingly , we expect that our overall core user churn rate will increase if sales of ooma small business products increase relative to sales of ooma residential products , or if churn rate of our business promoter customers increases . growth in additional services . we believe that there is a significant opportunity for us to increase the additional subscription services that our customers purchase from us . customers who purchase additional subscription services from us generate more value to us over the life of our customer relationship . in order to drive adoption of additional subscription services , we will need to continually add valuable new features to our existing solutions and develop new connected services . investing in growth . we intend to continue focusing on long-term revenue growth . we believe that our market opportunity is large and we intend to continue investing in sales and marketing to grow our user base . we also expect to continue investing in research and development to enhance our platform and develop additional connected services . we also may acquire complementary technologies or additional connected services . to support our expected growth and our operation as a public company , we intend to invest in other operational and administrative functions . key business metrics we regularly review a number of metrics , including the following key business metrics , to evaluate our business , measure our performance , identify trends affecting our business , formulate financial projections and make strategic decisions . core users we believe that the number of our core users is an indicator of our market penetration , the growth of our business and our anticipated future subscription and services revenue . we define our core users as the number of home user accounts , office user extensions and standalone business promoter accounts , which means business promoter users who do not subscribe to any other services from us . talkatone users are excluded from the total number of core users . we believe that the relationship that we establish with our core users positions us to sell additional premium communications services and other new connected services to them . replace_table_token_5_th annualized exit recurring revenue we believe that our annualized exit recurring revenue , or aerr , for our core users is an indicator of recurring subscription and services revenue for near-term future periods . we estimate our aerr as of the end of a quarter by dividing our recurring revenue ( which is defined as total subscription and service revenue , excluding talkatone revenue ) for a quarter by the average of the number of core users at the beginning and end of that quarter , and annualize by multiplying by four . we then multiply that result by the number of core users at the end of the period to calculate aerr . we have generally experienced a year-over-year increase in aerr due to an increase in the number of core users . replace_table_token_6_th 55 annual net dollar subscription retention rate we believe that our annual net dollar subscription retention rate for our core users , or our annual net dollar retention rate , provides insight into our ability to retain and grow our subscription and services revenue , and is an indicator of the long-term value of our customer relationships and the stability of our revenue base . our annual net dollar retention rate measures the percentage year-over-year change in our recurring revenue ( which is defined as total subscription and service revenue , excluding talkatone revenue ) for the period per core user , which is then adjusted by factoring in the percentage of our core users we have retained during the same period . our annual net dollar retention rate is affected by changes in average amounts that our core users pay to us , fluctuations in the number of our core users , and our core user churn rate . story_separator_special_tag we calculate our estimated annual net dollar subscription retention rate for our core users by multiplying : ( i ) our year-over-year percentage change in annual recurring revenue per core user , which is calculated by : determining the annual recurring revenue per core user by dividing annual recurring revenue for the period ended by the number of core users at the end of that particular period ; and calculating the year-over-year percentage change in annual recurring revenue per core user by dividing the current period recurring revenue per core user by the annual recurring revenue per core user for the same period in the prior year . by : ( ii ) our core user annual retention rate , which is calculated by : determining our core user churn , by identifying the number of paying core users who terminate service during a month , excluding infant churn , which we define as office extensions and home users who terminate service prior to the end of the second full calendar month after their activation date ; calculating our monthly churn rate by dividing our churn in a month by the number of core users at the beginning of that month ; and calculating our annual retention rate as one minus the sum of our monthly churn rates for the preceding 12-month period . replace_table_token_7_th net dollar subscription retention rate decreased year over year primarily due to decline in average revenue per user from our business promoter users on a year-over-year basis . adjusted ebitda we use adjusted ebitda to manage our business , evaluate our performance and make planning decisions . we consider this measure to be a useful measure of the operating performance of the company , because it contains adjustments for unusual events or factors that do not directly affect what management considers to be the core operating performance , and are used by the management for that purpose . we also believe that this measure enables us to better evaluate our performance by facilitating a meaning comparison of our core operating results in a given period to those in prior and future periods . in addition , investors often use similar measures to evaluate the operating performance with competitors . adjusted ebitda represents net loss before interest and other ( income ) expense , net , write-off of non-cash deferred debt issuance costs , depreciation and amortization , stock-based compensation and related taxes , income tax benefit , change in the fair value of our warrants and change in fair value of our acquisition-related contingent consideration . 56 adjusted ebitda has limitations as an analytical tool , and you should not consider it in isolation or as a substitute for analysis of our results as reported under gaap . some of these limitations are : adjusted ebitda does not consider any expenses for assets being depreciated and amortized that are necessary to operate our business ; adjusted ebitda does not consider the impact of stock-based compensation and related taxes , change in fair value of warrants , change in fair value of acquisition-related contingent consideration or write-off of non-cash deferred debt issuance costs ; adjusted ebitda does not reflect other non-operating expenses , net of other non-operating income , including net interest expense ( income ) ; and other companies , including companies in our industry , may calculate adjusted ebitda differently , which reduces its usefulness as a comparative measure . because of these limitations , you should consider adjusted ebitda alongside other financial performance measures , including net loss and our other gaap results . the following table provides a reconciliation of net loss ( the most directly comparable gaap financial measure ) to adjusted ebitda for each of the periods indicated ( in thousands ) : replace_table_token_8_th components of results of operations revenue we generate revenue primarily through the sale of subscriptions to our communications solutions and other connected services . we also generate revenue from the sale of our on-premise appliances and end-point devices that enable our solutions , as well as from porting fees to enable our customers to transfer their existing phone numbers to the ooma service . subscription and services revenue . our subscription and services revenue consists primarily of fees we bill to our customers in connection with their subscriptions to our communications solutions . our revenue varies based upon the services and features utilized by our core users . we derive subscription and services revenue primarily from recurring monthly payments related to service plans , such as ooma premier , ooma office , international calling plans , and other subscriptions , which we refer to as service subscription plans . subscription and services revenue also includes revenue generated from payments for qualified lead generation , prepaid international and directory assistance . we also earn revenue from the display of advertisements through our talkatone mobile application , primarily based on advertisement impressions displayed . we expect our subscription and services revenue to continue to increase as we expand our user base . product and other revenue . our product and other revenue consists primarily of the sale of our on-premise appliances and end-point devices used in connection with our services and includes shipping and handling fees . we also generate other revenue from porting fees we charge our customers to enable them to transfer their existing phone numbers to ooma office or telo . we expect our product and other revenue to remain relatively flat on a year-over-year basis . 57 cost of revenue our cost of revenue consists of the cost of our subscription and services revenue and the cost of our product and other revenue . cost of subscription and services revenue .
| the improvement in subscription and services revenue gross margin was primarily due to increase in revenue from ooma office and also due to economies of scale as our subscriber base increased . the total gross profit increased by $ 12.4 million in fiscal 2017 as compared to fiscal 2016 , due to an increase in subscription and services gross profit of $ 14.1 million which was offset by a decrease in product and other gross profit of $ 1.7 million . the increase in cost of subscription and services revenue of $ 3.9 million was primarily attributable to an increase in telecom and hosting fees of $ 1.6 million driven by a growth in our core users , an increase in credit card processing fee of $ 0.9 million , an increase in personnel and consultant costs of $ 0.7 million driven by increased headcount and growth in business , and an increase in stock-based compensation of $ 0.5 million . the decrease in cost of product and other revenue of $ 0.6 million was primarily due to a decrease in the number of on-premise appliances sold in fiscal 2017 as compared to fiscal 2016 , offset by an increase in the number of end-point devices sold to both our residential and small business customers . operating expenses replace_table_token_14_th sales and marketing expenses increased by $ 5.2 million in fiscal 2017 as compared to fiscal 2016. the increase was primarily due to an increase in personnel and consultant related costs of $ 3.2 million driven by increased headcount and growth in business , an increase in stock-based compensation of $ 0.8 million , an increase in marketing activities of $ 0.7 million and an increase in facilities and equipment related costs of $ 0.4 million . research and development expenses increased by $ 5.7 million in fiscal 2017 as compared to fiscal 2016. the increase was primarily attributable to an increase in personnel and
| 14,335 |
● the net loan portfolio at december 31 , 2011 totaled $ 564.2 million , a net decrease of $ 3.1 million from the december 31 , 2010 net loan portfolio of $ 567.3 million . net loans are reduced by the allowance for loan losses which totaled $ 8.9 million at december 31 , 2011 and $ 8.3 million at december 31 , 2010. total loans net of unearned income were $ 573.1 million for december 31 , 2011 compared to $ 575.6 million for december 31 , 2010 . ● nonperforming assets at december 31 , 2011 were $ 28.9 million , a decrease of $ 2.1 million compared to $ 31.0 million at december 31 , 2010 . ● total deposits were $ 1.2 billion at december 31 , 2011 , an increase of $ 200.0 million or 19.8 % from the year end december 31 , 2010 of $ 1.0 billion . the december 31 , 2011 total includes deposits acquired in the acquisition of greensburg bancshares . ● return on average assets for the year end december 31 , 2011 and december 31 , 2010 was 0.65 % and 0.99 % respectively . return on average common equity for the year end december 31 , 2011 and december 31 , 2010 was 9.77 % and 12.65 % , respectively . return on average assets is calculated by dividing annualized net income before preferred dividends by average assets . return on common shareholders ' equity is calculated by dividing net earnings applicable to common shareholders by average common shareholders ' equity . ● book value per common share was $ 13.85 as of december 31 , 2011 compared to $ 12.58 as of december 31 , 2010 . ● cash dividends declared and paid for 2011 and 2010 were $ 0.58 per common share . ● on september 22 , 2011 , the company received $ 39.4 million in funds under the u.s. treasury 's small business lending fund ( `` sblf '' ) program . a portion of the funds from the sblf were used to redeem the company 's series a preferred stock issued to the treasury under the cpp . the dividend rate on the shares of the preferred stock issued in connection with the sblf will be dependent on the company 's volume of qualified small business loans . the initial dividend rate is 5.0 % . 27 application of critical accounting policies the accounting and reporting policies of the company conform to generally accepted accounting principles in the united states of america and to predominant accounting practices within the banking industry . certain critical accounting policies require judgment and estimates which are used in the preparation of the financial statements . other-than-temporary impairment of investment securities . securities are evaluated periodically to determine whether a decline in their value is other-than-temporary . the term “ other-than-temporary ” is not intended to indicate a permanent decline in value . rather , it means that the prospects for near term recovery of value are not necessarily favorable , or that there is a lack of evidence to support fair values equal to , or greater than , the carrying value of the investment . management reviews criteria such as the magnitude and duration of the decline , the reasons for the decline , and the performance and valuation of the underlying collateral , when applicable , to predict whether the loss in value is other-than-temporary . once a decline in value is determined to be other-than-temporary , the carrying value of the security is reduced to its fair value and a corresponding charge to earnings is recognized . allowance for loan losses . the company 's most critical accounting policy relates to its allowance for loan losses . the allowance for loan losses is established through a provision for loan losses charged to expense . loans are charged against the allowance for loan losses when management believes that the collectability of the principal is unlikely . the allowance , which is based on the evaluation of the collectability of loans and prior loan loss experience , reflects the risks inherent in the existing loan portfolio and that exist at the reporting date . the evaluations take into consideration a number of subjective factors including changes in the nature and volume of the loan portfolio , overall portfolio quality , review of specific problem loans , current economic conditions that may affect a borrower 's ability to pay , adequacy of loan collateral and other relevant factors . changes in such estimates may have a significant impact on the financial statements . for further discussion of the allowance for loan losses , see the “ allowance for loan losses ” section of this analysis and note 1 and note 7 to the consolidated financial statements . valuation of goodwill , intangible assets and other purchase accounting adjustments . intangible assets are comprised of goodwill , core deposit intangibles and mortgage servicing rights . goodwill and intangible assets deemed to have indefinite lives are no longer amortized , but are subject to annual impairment tests . the company 's goodwill is tested for impairment on an annual basis , or more often if events or circumstances indicate that there may be impairment . adverse changes in the economic environment , declining operations , or other factors could result in a decline in the implied fair value of goodwill . if the implied fair value is less than the carrying amount , a loss would be recognized in other non-interest expense to reduce the carrying amount to implied fair value of goodwill . the company 's goodwill impairment test includes two steps that are precluded by a , “ step zero ” , qualitative test . the qualitative test allows management to assess whether qualitative factors indicate that it is more likely than not that impairment exists . if it is not more likely than not that impairment exists , then the two step quantitative test would not be necessary . story_separator_special_tag these qualitative indicators include factors such as earnings , share price , market conditions , etc . if the qualitative factors indicate that it is more likely than not that impairment exists , then the two step quantitative test would be necessary . step one is used to identify potential impairment and compares the estimated fair value of a reporting unit with its carrying amount , including goodwill . if the estimated fair value of a reporting unit exceeds its carrying amount , goodwill of the reporting unit is considered not impaired . if the carrying amount of a reporting unit exceeds its estimated fair value , the second step of the goodwill impairment test is performed to measure the amount of impairment loss , if any . step two of the goodwill impairment test compares the implied estimated fair value of reporting unit goodwill with the carrying amount of that goodwill . if the carrying amount of goodwill for that reporting unit exceeds the implied fair value of that unit 's goodwill , an impairment loss is recognized in an amount equal to that excess . identifiable intangible assets are acquired assets that lack physical substance but can be distinguished from goodwill because of contractual or legal rights or because the assets are capable of being sold or exchanged either on their own on in combination with related contract , asset or liability . the company 's intangible assets primarily relate to core deposits . management periodically evaluates whether events or circumstances have occurred that would result in impairment of value . 28 financial condition assets . total assets at december 31 , 2011 were $ 1.4 billion , an increase of $ 221.1 million , or 19.5 % , from $ 1.1 billion at december 31 , 2010. federal funds sold increased $ 59.5 million from december 31 , 2010 to december 31 , 2011 and total loans for the same period decreased $ 2.5 million . cash and due from banks increased $ 8.1 million from 2010 to 2011. additionally , total investment securities increased $ 151.2 million to $ 633.2 million from december 31 , 2010 to december 31 , 2011. total deposits increased by $ 199.9 million or 19.8 % from 2010 to 2011. at december 31 , 2011 , the company had $ 3.2 million in long-term borrowings compared to no long-term borrowings at december 31 , 2010. investment securities . the securities portfolio consisted principally of u.s. government agency securities , corporate debt securities and mutual funds or other equity securities . the securities portfolio provides us with a relatively stable source of income and provides a balance to credit risks as compared to other categories of assets . the securities portfolio totaled $ 633.2 million at december 31 , 2011 , representing an increase of $ 151.2 million from december 31 , 2010. the primary changes in the portfolio consisted of $ 858.7 million in purchases which was partially offset by maturities , calls and sales totaling $ 718.2 million . at december 31 , 2011 , approximately 2.1 % of the securities portfolio ( excluding federal home loan bank stock ) matures in less than one year while securities with maturity dates over 10 years totaled 44.1 % of the portfolio . at december 31 , 2011 , the average maturity of the securities portfolio was 7.8 years , compared to the average maturity at december 31 , 2010 of 6.5 years . at december 31 , 2011 , securities tot aling $ 520.5 million were classified as available for sale and $ 112.7 million were classified as held to maturity as compared to $ 322.1 million and $ 159.8 million , respectively at december 31 , 2010. securities classified as available for sale are measured at fair market value . for these securities , the company obtains fair value measurements from an independent pricing service . the fair value measurements consider observable data that may include dealer quotes , market spreads , cash flows , market yield curves , prepayment speeds , credit information and the instrument 's contractual terms and conditions , among other things . securities classified as held to maturity are measured at book value . the held to maturity portfolio is principally used to collateralize public funds deposits . the company believes that it has the ability to maintain the current level of securities in the portfolio . the company has maintained public funds in excess of $ 175.0 million since 2007. the book yields on securities available for sale ranged from 0.2 % to 9.6 % at december 31 , 2011 , exclusive of the effect of changes in fair value reflected as a component of stockholders ' equity . the book yields on held to maturity securities ranged from 1.0 % to 4.0 % . see note 5 to the consolidated financial statements for additional information . securities classified as available for sale had gross unrealized losses totaling $ 1.6 million at december 31 , 2011. the gross unrealized gains for our available for sale securities totaled $ 8.3 million at december 31 , 2011 compared to $ 5.1 million for the same period in 2010. the company believes that it will collect all amounts contractually due and has the intent and the ability to hold these securities until the fair value is at least equal to the carrying value . at december 31 , 2010 , securities classified as available for sale had gross unrealized losses totaling $ 5.5 million . see note 5 to the consolidated financial statements for additional information . average securities as a percentage of average interest-earning assets were 46.7 % and 35.5 % at december 31 , 2011 and 2010 , respectively . at december 31 , 2011 and 2010 , $ 428.6 million and $ 290.0 million in securities were pledged , respectively . 29 loans .
| there were no long-term borrowings in 2010. see note 12 of the consolidated financial statements for additional information . stockholders ' equity . total stockholders ' equity increased $ 28.7 million or 29.3 % to $ 126.6 million at december 31 , 2011 from $ 97.9 million at december 31 , 2010. the increase in stockholders ' equity is attributable to the $ 8.0 million in consolidated earnings , $ 39.4 million in capital received from the issuance of preferred stock under the u.s. department of treasury small business lending fund program , $ 3.0 million in common stock issued for the acquisition of greensburg bancshares and $ 4.7 million change in accumulated other comprehensive income . the increases were partially offset by $ 3.6 million in dividends on common stock , $ 1.8 million in dividends on preferred stock , and $ 21.1 million in redemption of preferred stock issued under the u.s. department of treasury capital purchase program . 30 loan portfolio composition . the following table sets forth the composition of our loan portfolio , excluding loans held for sale , by type of loan at the dates indicated . replace_table_token_4_th replace_table_token_5_th 31 the four most significant categories of our loan portfolio are construction and land development real estate loans , 1-4 family residential loans , non-farm non-residential real estate loans and commercial and industrial loans . th e company 's credit policy dictates specific loan-to-value and debt service coverage requirements . the company generally requires a maximum loan-to-value of 85.0 % and a debt service coverage ratio of 1.25x to 1.0x for non-farm non-residential real estate loans . in addition , personal guarantees of borrowers are required as well as applicable hazard , title and flood insurance . loans may have a maximum maturity of five years and a maximum amortization of 25 years . the company may require additional real estate or non-real estate collateral when deemed appropriate to secure the loan . the company generally requires all 1-4 family residential loans to be underwritten based on the fannie
| 14,336 |
but whether consumers engage us through our website , at our stores , or through a retail partner—and whether they 're looking for information , content , or to purchase—we believe those who interact with casper have an experience that is genuine , trustworthy and approachable , as well as fun and playful across every channel . we intend to continue leveraging our marketing strategy to drive increased consumer traffic to both casper.com and to our physical retail locations . as of december 31 , 2020 , we operated 67 retail store locations in key cities in the united states and canada . additionally , as of december 31 , 2020 , we had over 20 retail partners , including amazon , costco , hudson 's bay company , and target , among others . our research indicates that these partnerships not only expand our consumer base but also provide access to future consumers that have yet to engage with the casper brand . we believe our retail channel improves our consumer experience , attracting and educating more consumers about casper , which in turn attracts more partners to our brand thereby further enhancing our ability to generate revenue . we continue to evaluate partnerships with a wide variety of retailers , including online retailers , big-box retailers , department stores and specialty retailers . investments in research and development and ability to improve existing products and introduce new products based on superior innovation . casper is constantly investing in and improving existing products and introducing new products and services with proprietary technologies to address the full sleep arc . for example , we recently expanded our existing mattress product offering by designing new hybrid mattresses that combine our proprietary foam technology with resilient springs . through casper labs we develop , rapidly prototype and test multiple design iterations . we thoughtfully curate our product and services offerings utilizing high-quality materials and advanced manufacturing processes to create a differentiated experience . the improvement of existing products and the introduction of new products have been , and we expect will continue to be , integral to our growth . we believe our rigorous approach to creating and improving our products has helped redefine and grow the addressable market that we call the sleep economy . this in turn offers consumers more opportunities to interact with us and purchase from us , which drives new consumer as well as repeat consumer business . cost-effective acquisition of new consumers and retention of existing customers . to continue to grow our business , we must acquire new consumers as well as retain existing customers in a cost-effective manner . we continually evolve our marketing strategies , and adjust our messages , the amount we spend on advertising and the channels in which we spend . we have made , and we expect that we will continue to make , significant investments in attracting new consumers , including through traditional , digital , social media and original casper content . it is critical for us to maintain reasonable costs for these 51 marketing efforts relative to sales derived from new consumers . we believe our multi-channel expansion creates synergies and that these channels , to date , have proven to be complementary , not cannibalistic . moreover , we expect our marketing efficiency ( which we define as net revenue as a percentage of total media spend over a specific time period ) to improve over time as sales through our owned retail stores and retail partners increase . because increasing sales through these channels requires minimal incremental marketing investment , we believe we will be able to drive natural leverage in our marketing efficiency . as we continue to launch new products and improve existing products , we expect customers generating repeat revenue to grow due to our efforts to create a differentiated and joyful experience , eliminating friction and boundaries . competitive industry dynamics . we operate in the highly competitive mattress , soft goods , bedroom furniture , sleep technology and services industries , among others industries . the competitive environment of the industries in which we operate continually subjects us to the risk of loss of market share , loss of significant customers , reductions in margins , discounting by competitors , and to the challenge of acquiring new customers . while the mattress industry is highly consolidated and is dominated by a few long-standing players , the soft goods , bedroom furniture , sleep technology and services industries are highly fragmented , which presents opportunities for growth in each of those markets . we combine our offerings with a differentiated in-store experience and high-quality consumer experience , which has enabled us to continue to grow our market share and drive revenue . disciplined approach to operations . as we scale our business , we intend to continue to drive continued operational improvement so that we can provide quality products and services to ensure the best possible consumer experiences while improving our revenue and controlling our costs . in particular , we plan to drive operational efficiencies through a focus on reducing product return rates , price optimization , investing in our supply chain , improving the efficiency and enhancing performance of our marketing investments , and realizing economies of scale . impact of covid-19 pandemic casper continues to closely monitor how the spread of the covid-19 pandemic caused by the novel coronavirus is affecting its employees , customers and business operations . we have developed and implemented preparedness plans to help protect the safety of our employees and customers , while safely continuing business operations . in order to protect the health and safety of our employees , particularly given the severity of the pandemic in new york and california , we have continued to limit access to our corporate offices and our corporate workforce has spent and continues to spend a significant amount of time working from home during this period . story_separator_special_tag access to our offices will remain limited until we are able to safely and responsibly re-open them on a broader basis in accordance with governmental and public health guidance , as well as internal health and safety policies tailored to our operations . since the temporary closure of all our retail stores in north america in mid-march 2020 , we have been able to open and operate all of our 69 stores , as of the date of this annual report on form 10-k , across the united states and canada , with each providing a range of service offerings to accommodate evolving consumer preferences and local public health guidance in response to changing covid-19 conditions . the health and safety of our customers and employees remain our top priority , and we continuously monitor developments related to covid-19 in locations where we have retail operations , and have developed procedures to enable us to responsibly and efficiently open or close our stores and adjust our service offerings as needed in response to changing covid-19 conditions and applicable guidance from government and public health officials . for the year ended december 31 , 2020 , sales were adversely impacted in our retail stores due to temporary closures , limitations in service offerings and significant reductions in retail foot traffic as a result of restrictions on retail businesses and shifting consumer preferences in response to the pandemic . in addition , we reduced the number of planned new store openings in 2020 due to the impacts of covid-19 . since the onset of the covid-19 outbreak , certain of our suppliers and logistics providers have experienced supply constraints or labor shortages due to the pandemic . these impacts , coupled with the lean levels of safety stock inventory we generally maintain as part of our flexible manufacturing model , resulted in disruptions to our product and delivery supply chain , including increased delivery times for certain of our products through our e-commerce platform and order fulfillment delays for certain of our retail partners , which negatively impacted sales in our e-commerce and retail partnership channels in the third quarter of 2020. in response , we have on-boarded and continue to actively qualify and on-board new suppliers , as well as enhance internal inventory planning and monitoring capabilities . we expect these actions to mitigate inventory and other supply chain disruptions in future quarters , although there remains significant uncertainty relating to the trajectory of the covid-19 pandemic , including the potential persistence or resurgence of the pandemic , and its impacts on our supply chain . 52 in addition , while the stores of certain of our retail partners temporarily closed due to the covid-19 pandemic in the second quarter of 2020 , our largest partners remained open for business both in-store and online , and all of our partners resumed in-store operations by the third quarter of 2020. accordingly , we have not experienced any material issues to date with respect to our accounts receivables from our retail partners or needed to materially increase our allowances for accounts receivable balances . we are , however , continuing to work closely with our retail partners to monitor the situation . the covid-19 pandemic has impacted , and we expect will continue to impact , our revenue , results of operations and financial condition . in response , we have taken proactive measures focused on optimizing our business model and cash management . as part of these measures , during the year ended december 31 , 2020 , we implemented an employee furlough program initially applicable to almost all of our retail employees , reduced our corporate personnel by approximately 21 % , wound down our european operations , and ceased or reduced rent payments to a majority of our retail store landlords during the closure period for each store . we have been actively negotiating with our landlords on rent deferrals and abatements related to each store 's closure period since the second quarter of 2020 and have resolved the majority of such negotiations as of the date of this annual report on form 10-k. at this time , however , there is significant uncertainty relating to the trajectory of the covid-19 pandemic and impact of related responses . we will continue to closely monitor the impact of covid-19 on our business , including how it is impacting our customers , employees , supply chain , and retail partners . the future impact that covid-19 will have on our financial position and operating results , however , may be affected by numerous uncertainties , including the duration of the outbreak , governmental and public health actions , impacts on our supply chain , the effect on customer demand , and changes to our operations . see “ risk factors—the covid-19 pandemic has affected , and could continue to adversely affect , our business , financial condition and results of operations . '' components of our results of operations revenue revenue is comprised of global sales through our direct-to-consumer channels and our retail partnerships . revenue reflects the impact of product returns as well as discounts for certain sales programs and promotions . revenue comprises the consideration received or receivable for the sale of goods and services in the ordinary course of our activities net of estimates of variable consideration , including product returns , customer discounts and allowances . promotions are occasionally offered , primarily in the form of discounts , and are recorded as a reduction of gross revenue at the date of revenue recognition . we typically accept sales returns during a 30- or 100-night trial period , depending on the product , with our mattresses having a 100-night trial period . a sales return accrual is estimated based on historical return rates and is then adjusted for any current trends as appropriate . returns are netted against the sales allowance reserve for the period . sales are recognized as deferred revenue at the point of sale and are recognized as revenue upon the delivery to the consumer .
| north america direct-to-consumer revenue was $ 351.5 million for the year ended december 31 , 2020 an increase of $ 24.4 million or 7.5 % , compared to the year ended december 31 , 2019. sales to retail partners increased by $ 45.2 million , or 50.9 % compared to the year ended december 31 , 2019. this increase was driven by revenue growth with our existing retail partners , the introduction of new retail partners compared to the same period in the prior year to end the quarter with over 20 partners , and the expansion of our product offerings . north america retail partnership revenue was $ 133.6 million , an increase of $ 47.6 million or 55.4 % , compared to the year ended december 31 , 2019. gross profit and cost of goods sold gross profit was $ 253.9 million for the year ended december 31 , 2020 , an increase of $ 38.5 million , or 17.9 % , compared to $ 215.4 million for the year ended december 31 , 2019. cost of goods sold was $ 243.1 million for the year ended december 31 , 2020 , an increase of $ 19.3 million , or 8.6 % , compared to $ 223.8 million for the year ended december 31 , 2019. gross margin for the year ended december 31 , 2020 was 51.1 % compared to 49.0 % for the year ended december 31 , 2019. the increase in gross margin was driven by the positive impact of supply chain initiatives designed to reduce product unit costs , favorable product mix related to our new mattress line launched in march 2020 and lower logistics costs compared to the prior 55 year . this was partially offset by a shift in channel mix to lower margin retail partnerships in the year ended december 31 , 2020 compared to the prior year . sales and marketing sales and marketing expenses were $ 156.8 million for the year ended december 31 , 2020 , an increase of $ 2.2 million or 1.4 % , compared to $ 154.6 million for the year ended december 31 , 2019. sales and marketing expenses remained relatively flat as we continued to invest in driving traffic to our e-commerce website , market our products to consumers and build our brand . sales and marketing expenses
| 14,337 |
accordingly , these representations and warranties may not describe the actual state of affairs as of the date they were made or at any other time . additional information about the company may be found elsewhere in this form 10-k and the company 's other public filings , which are available without charge through the sec 's website at http : //www.sec.gov . the following exhibits are included as part of this report : exhibit number exhibit description 31.1 * certification of principal executive officer and principal financial officer pursuant to section302 of the sarbanes-oxley act 32.1 * rule 1350 certification of principal executive officer and principal financial officer 101.ins * * xbrl instance document . 101.sch * * xbrl taxonomy extension schema document . 101.cal * * xbrl taxonomy extension calculation linkbase document . 101.def * * xbrl taxonomy extension definition linkbase document . 101.lab * * xbrl taxonomy extension label linkbase document . 101.pre * * xbrl taxonomy extension presentation linkbase document . * filed herewith . * * furnished herewith . 27 signatures pursuant to the requirements of section 13 or 15 ( d ) of the securities exchange act of 1934 , the registrant has duly caused this report to be signed on its behalf by the undersigned , thereto duly authorized . knight knox development corp. ( registrant ) dated : december 11 , 2015 james manley james manley president , chief executive officer and chief financial officer ( principal executive officer and principal financial and accounting officer ) pursuant to the requirements of the securities exchange act of 1934 , this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated . dated : december 11 , 2015 james manley james manley president , chief executive officer and chief financial officer ( principal executive officer and principal financial and accounting officer ) 28 story_separator_special_tag the following discussion should be read in conjunction with our audited financial statements and the related notes that appear elsewhere in this annual report on form 10-k. the following discussion contains forward‑looking statements that reflect our plans , estimates and beliefs . our actual results could differ materially from those discussed in the forward-looking statements . factors that could cause or contribute to such differences include , but are not limited to , those discussed below and elsewhere in this annual report on form 10-k. our audited financial statements are stated in united states dollars and are prepared in accordance with united states generally accepted accounting principles . story_separator_special_tag href= '' https : //www.sec.gov/archives/edgar/data/0001621221/000164033415000413/ # tableofcontents '' > limited operating history ; need for additional capital there is no historical financial information about us on which to base an evaluation of our performance . we have generated no revenues from operations . we can not guarantee we will be successful in our business operations . our business is subject to risks inherent in the establishment of a new business enterprise , including limited capital resources , possible delays in developing our website , and possible cost overruns due to the price and cost increases in supplies and services . at present , we do not have enough cash on hand to cover operating costs for the next 12 months . if we are unable to meet our needs for cash from either our operations , or possible alternative sources , then we may be unable to continue , develop , or expand our operations . we have no plans to undertake any product research and development during the next twelve months . there are also no plans or expectations to acquire or sell any plant or plant equipment in the first year of operations . liquidity and capital resources to meet our need for cash we raised money from our recent offering . on january 28 , 2015 , the company 's registration statement on form s-1 was declared effective , which the company sought to raise $ 80,000 under the offering . the company sold 1,640,000 shares at $ 0.01 per share for $ 16,400 cash of which $ 15,800 cash was received prior to august 31 , 2015 and $ 600 was received after august 31 , 2015 and was recorded as a subscription receivable . to date we have not developed our business and principal plan of operations and thus our expenses have been primarily for professional fees related to our registration statement and ongoing regulatory expenses . off-balance sheet arrangements we do not have any off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition , changes in financial condition , revenues or expenses , results of operations , liquidity , capital expenditures or capital resources that is material to investors . critical accounting policies and estimates we prepare our financial statements in conformity with gaap , which requires management to make certain estimates and apply judgments . we base our estimates and judgments on historical experience , current trends and other factors that management believes to be important at the time the financial statements are prepared . on a regular basis , we review our accounting policies and how they are applied and disclosed in our financial statements . while we believe that the historical experience , current trends and other factors considered support the preparation of our financial statements in conformity with gaap , actual results could differ from our estimates and such differences could be material . story_separator_special_tag accordingly , these representations and warranties may not describe the actual state of affairs as of the date they were made or at any other time . additional information about the company may be found elsewhere in this form 10-k and the company 's other public filings , which are available without charge through the sec 's website at http : //www.sec.gov . the following exhibits are included as part of this report : exhibit number exhibit description 31.1 * certification of principal executive officer and principal financial officer pursuant to section302 of the sarbanes-oxley act 32.1 * rule 1350 certification of principal executive officer and principal financial officer 101.ins * * xbrl instance document . 101.sch * * xbrl taxonomy extension schema document . 101.cal * * xbrl taxonomy extension calculation linkbase document . 101.def * * xbrl taxonomy extension definition linkbase document . 101.lab * * xbrl taxonomy extension label linkbase document . 101.pre * * xbrl taxonomy extension presentation linkbase document . * filed herewith . * * furnished herewith . 27 signatures pursuant to the requirements of section 13 or 15 ( d ) of the securities exchange act of 1934 , the registrant has duly caused this report to be signed on its behalf by the undersigned , thereto duly authorized . knight knox development corp. ( registrant ) dated : december 11 , 2015 james manley james manley president , chief executive officer and chief financial officer ( principal executive officer and principal financial and accounting officer ) pursuant to the requirements of the securities exchange act of 1934 , this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated . dated : december 11 , 2015 james manley james manley president , chief executive officer and chief financial officer ( principal executive officer and principal financial and accounting officer ) 28 story_separator_special_tag the following discussion should be read in conjunction with our audited financial statements and the related notes that appear elsewhere in this annual report on form 10-k. the following discussion contains forward‑looking statements that reflect our plans , estimates and beliefs . our actual results could differ materially from those discussed in the forward-looking statements . factors that could cause or contribute to such differences include , but are not limited to , those discussed below and elsewhere in this annual report on form 10-k. our audited financial statements are stated in united states dollars and are prepared in accordance with united states generally accepted accounting principles . story_separator_special_tag href= '' https : //www.sec.gov/archives/edgar/data/0001621221/000164033415000413/ # tableofcontents '' > limited operating history ; need for additional capital there is no historical financial information about us on which to base an evaluation of our performance . we have generated no revenues from operations . we can not guarantee we will be successful in our business operations . our business is subject to risks inherent in the establishment of a new business enterprise , including limited capital resources , possible delays in developing our website , and possible cost overruns due to the price and cost increases in supplies and services . at present , we do not have enough cash on hand to cover operating costs for the next 12 months . if we are unable to meet our needs for cash from either our operations , or possible alternative sources , then we may be unable to continue , develop , or expand our operations . we have no plans to undertake any product research and development during the next twelve months . there are also no plans or expectations to acquire or sell any plant or plant equipment in the first year of operations . liquidity and capital resources to meet our need for cash we raised money from our recent offering . on january 28 , 2015 , the company 's registration statement on form s-1 was declared effective , which the company sought to raise $ 80,000 under the offering . the company sold 1,640,000 shares at $ 0.01 per share for $ 16,400 cash of which $ 15,800 cash was received prior to august 31 , 2015 and $ 600 was received after august 31 , 2015 and was recorded as a subscription receivable . to date we have not developed our business and principal plan of operations and thus our expenses have been primarily for professional fees related to our registration statement and ongoing regulatory expenses . off-balance sheet arrangements we do not have any off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition , changes in financial condition , revenues or expenses , results of operations , liquidity , capital expenditures or capital resources that is material to investors . critical accounting policies and estimates we prepare our financial statements in conformity with gaap , which requires management to make certain estimates and apply judgments . we base our estimates and judgments on historical experience , current trends and other factors that management believes to be important at the time the financial statements are prepared . on a regular basis , we review our accounting policies and how they are applied and disclosed in our financial statements . while we believe that the historical experience , current trends and other factors considered support the preparation of our financial statements in conformity with gaap , actual results could differ from our estimates and such differences could be material .
| working capital august 31 , 2015 august 31 , 2014 current assets $ 17,029 $ 14,731 current liabilities $ 1,739 $ - working capital $ 15,290 $ 14,731 cash flows replace_table_token_2_th cash flow from operating activities during the year ended august 31 , 2015 , our company used $ 13,502 in cash from operating activities compared to the use of $ 15,269 of cash for operating activities during the period ended august 31 , 2014. the decrease in cash used for operating activities was primarily attributed to an increase in accounts payable and accrued liabilities of $ 1,739. cash flow from investing activities from inception through to august 31 , 2015 , we did not have any cash flows from investing activities . cash flow from financing activities during the year ended august 31 , 2015 , our company received $ 15,800 cash from the issuance of common shares to 29 unaffiliated investors , compared to $ 30,000 cash received from the company 's officer and director for purchase of common shares . we had no material commitments for capital expenditures as at august 31 , 2015 and 2014. we have no known demands or commitments , and we are not aware of any events or uncertainties as at august 31 , 2015 that will result in or that is reasonably likely to materially increase or decrease our current liquidity . going concern our auditors have issued a going concern opinion . this means that there is substantial doubt that we can continue as an on-going business for the next twelve months unless we obtain additional capital to pay for our expenses . this is because we have generated limited revenues and have limited operating history . there are no assurances that we will be able to obtain additional financing through either private placements , and or bank financing or other loans necessary to support our working capital requirements . to the extent that funds generated from operations and any private placements , public offerings and or bank financing are insufficient , we will have to raise additional working capital . no
| 14,338 |
on a same-space basis totaling 1,041,389 square feet at an average rental rate of $ 15.93 per square foot on a gaap basis and $ 15.63 per square foot on a cash basis and , generating average rent spreads of 9.3 % on a gaap basis and 5.8 % on a cash basis . 29 investment strategy . our investment strategy is to selectively deploy capital through redevelopment and development of our existing assets and through acquisitions in our target markets that are expected to generate attractive risk-adjusted returns . at the same time , we plan to sell assets that no longer meet our investment criteria . during 2017 , we : increased the number of active development and redevelopment projects ; active projects have a total expected investment of $ 195.5 million of which $ 104.9 million remains to be funded ; completed projects at east hanover , east hanover warehouses , garfield , hackensack , rockaway , turnersville , walnut creek ( mt . diablo ) , and freeport ; identified approximately $ 115.5 million of additional development and redevelopment projects expected to be completed over the next several years ; acquired nine retail assets , predominantly in the new york metropolitan area , totaling $ 464 million , including transaction costs , with gross leasable area of 2.0 million sf ; and completed the sale of a 32,000 sf , vacant building in eatontown , nj for $ 4.8 million , and completed the sale of excess land in kearny , nj for $ 0.3 million , both net of selling costs . capital strategy . our capital strategy is to keep our balance sheet strong , flexible and capable of supporting growth by using cash flow from operations , refinancing debt when opportunities are favorable , and reinvesting funds from selective asset sales . during 2017 , we : refinanced our $ 544 million cross-collateralized mortgage with 18 individual , non-recourse mortgage financings totaling $ 710 million ; refinanced our $ 74 million , 4.59 % mortgage loan secured by our tonnelle commons property in north bergen , nj , increasing the principal balance to $ 100 million with a 10-year fixed rate mortgage , at 4.18 % ; amended and extended our $ 500 million unsecured revolving credit agreement . the amendment increased its size to $ 600 million and extended the maturity date to march 7 , 2021 with two six -month extension options ; issued 1.8 million op units in connection with the acquisition of a ground lease under yonkers gateway center at $ 27.09 per unit . additionally , we issued 2.6 million op units and 1.9 million op units in connection with the portfolio acquisition of seven retail assets ( the `` portfolio ” ) at a value of $ 27.02 per unit ; issued 7.7 million common shares of beneficial interest in an underwritten public offering in may 2017. this offering generated cash proceeds of $ 193.5 million , net of $ 1.3 million of issuance costs ; issued 6.25 million common shares of beneficial interest in august 2017 to a large institutional investor at a net price of $ 24.80 per share . there was no underwriter or placement agent and net cash proceeds to the company were $ 155 million ; and ended the year with cash and cash equivalents , including restricted cash , of $ 501 million and debt , net of cash , to total market capitalization of 22.4 % . 2018 outlook . we seek growth in earnings , funds from operations , and cash flows primarily by : leasing vacant spaces , extending expiring leases at higher rents , processing the exercise of tenant options and , when possible , replacing underperforming tenants with tenants that can pay higher rents ; expediting the delivery of space to and the collection of rents from tenants with executed leases that have not yet commenced ; creating additional value from our existing assets by redevelopment of existing space , development of new space and pad sites , and by anchor repositioning ; and disposing of non-core assets and , when possible , reinvesting the proceeds in existing properties and in acquiring additional properties meeting our investment criteria . ( 1 ) refer to page 38 for a reconciliation to the nearest gaap measure . ( 2 ) information provided on a same-property basis includes the results of properties that were owned and operated for the entirety of the reporting periods being compared and excludes properties that were under development , redevelopment , acquired , sold , or in the foreclosure process during the periods being compared and totals 74 properties for the years ended december 31 , 2017 and december 31 , 2016 . ( 3 ) our retail portfolio includes shopping centers and malls and excludes warehouses . ( 4 ) the “ same-space ” designation is used to compare leasing terms ( cash leasing spreads ) from the prior tenant to the new/current tenant . in some cases , leases are excluded from `` same-space '' because the gross leasable area of the prior lease is combined/divided to form a larger/smaller , non-comparable space . 30 critical accounting policies and estimates the preparation of financial statements in conformity with accounting principles generally accepted in the united states of america , referred to as “ gaap ” , requires management to make estimates and assumptions that in certain circumstances affect the reported amounts of assets and liabilities , disclosure of contingent assets and liabilities , and revenue and expenses . these estimates are prepared using management 's best judgment , after considering past and current events and economic conditions . in addition , certain information relied upon by management in preparing such estimates includes internally generated financial and operating information , external market information , when available , and when necessary , information obtained from consultations with third party experts . actual results could differ from these estimates . a discussion of possible risks which may affect these estimates is included in “ item 1a . story_separator_special_tag risk factors ” of this annual report on form 10-k. management considers an accounting estimate to be critical if changes in the estimate could have a material impact on our consolidated and combined results of operations or financial condition . our significant accounting policies are more fully described in note 3 to the consolidated and combined financial statements included in part ii , item 8 of this annual report on form 10-k ; however , the most critical accounting policies , which involve the use of estimates and assumptions as to future uncertainties and , therefore , may result in actual amounts that differ from estimates , are as follows : real estate — the nature of our business as an owner , redeveloper and operator of retail shopping centers means that we invest significant amounts of capital into our properties . depreciation , amortization and maintenance costs relating to our properties constitute substantial costs for us as well as the industry as a whole . real estate is capitalized and depreciated on a straight-line basis in accordance with gaap and consistent with industry standards based on our best estimates of the assets ' physical and economic useful lives which range from 3 to 40 years . we periodically review the estimated lives of our assets and implement changes , as necessary , to these estimates . these assessments have a direct impact on our net income . real estate is carried at cost , net of accumulated depreciation and amortization . expenditures for ordinary maintenance and repairs are expensed to operations as they are incurred . significant renovations that improve or extend the useful lives of assets are capitalized . real estate undergoing redevelopment activities is also carried at cost but no depreciation is recognized . all property operating expenses directly associated with and attributable to the redevelopment , including interest , are capitalized to the extent the capitalized costs of the property do not exceed the estimated fair value of the property when completed . if the cost of the redeveloped property , including the net book value of the existing property , exceeds the estimated fair value of redeveloped property , the excess is charged to impairment expense . the capitalization period begins when redevelopment activities are underway and ends when the project is substantially complete . generally , a redevelopment is considered substantially completed and ready for its intended use upon completion of tenant improvements , but no later than one year from completion of major construction activity . we make judgments as to the time period over which to capitalize such costs and these assumptions have a direct impact on net income because capitalized costs are not subtracted in calculating net income . upon the acquisition of real estate , we assess the fair value of acquired assets ( including land , buildings and improvements , identified intangibles , such as acquired above and below-market leases , acquired in-place leases and tenant relationships ) and acquired liabilities . we assess fair value based on estimated cash flow projections utilizing appropriate discount and capitalization rates and available market information . estimates of future cash flows are based on a number of factors including historical operating results , known trends , and market/economic conditions . based on these estimates , we allocate the purchase price to the applicable assets and liabilities based on their relative fair values at date of acquisition . in allocating the purchase price to identified intangible assets and liabilities of an acquired property , the value of above-market and below-market leases is estimated based on the present value of the difference between the contractual amounts , including fixed rate below-market renewal options , to be paid pursuant to the in-place leases and our estimate of the market lease rates and other lease provisions for comparable leases measured over a period equal to the estimated remaining term of the lease . tenant related intangibles and improvements are amortized on a straight-line basis over the related lease term , including any bargain renewal options . we amortize identified intangibles that have finite lives over the period they are expected to contribute directly or indirectly to the future cash flows of the property or business acquired . we consider qualitative and quantitative factors in evaluating the likelihood of a tenant exercising a below market renewal option and include such renewal options in the calculation of in-place leases . if the value of below-market lease intangibles includes renewal option periods , we include such renewal periods in the amortization period utilized . if a lease terminates prior to its stated expiration , all unamortized amounts relating to that lease are written off . our properties are individually reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable . an impairment exists when the carrying amount of an asset exceeds the aggregate projected future cash flows over the anticipated holding period on an undiscounted basis . an impairment loss is measured based on the excess of 31 the property 's carrying amount over its estimated fair value . impairment analyses are based on our current plans , intended holding periods and available market information at the time the analyses are prepared . if our estimates of the projected future cash flows , anticipated holding periods , or market conditions change , our evaluation of impairment losses may be different and such differences could be material to our consolidated and combined financial statements . plans to hold properties over longer periods decrease the likelihood of recording impairment losses . the carrying value of a property may also be individually reassessed in the event a casualty occurs at that property . casualty events may include property damage from a natural disaster or fire . when such an event occurs , management estimates the net book value of assets damaged over the property 's total gross leasable area and adjusts the property 's carrying value to reflect the damages . estimates are subjective and may change if additional damage is later assessed .
| ( 2 ) refer to page 38 for a reconciliation to the nearest gaap measure . 33 comparison of the year ended december 31 , 2017 to december 31 , 2016 net income for the year ended december 31 , 2017 was $ 72.9 million , compared to net income of $ 96.6 million for the year ended december 31 , 2016 . the following table summarizes certain line items from our consolidated statements of income that we believe are important in understanding our operations and or those items which significantly changed in the year ended december 31 , 2017 as compared to the same period of 2016 : replace_table_token_17_th total revenue increased by $ 81.1 million to $ 407.0 million in the year ended december 31 , 2017 from $ 326.0 million in the year ended december 31 , 2016 . the increase is primarily attributable to : $ 39.2 million in income from acquired leasehold interest due to the write-off of the unamortized intangible liability related to the below-market ground lease acquired in connection with the acquisition of the ground lease at shops at bruckner ; $ 32.6 million increase as a result of acquisitions net of dispositions ; $ 6.3 million increase in tenant expense reimbursements due to an increase in recoverable expenses and revenue from recoverable capital projects ; and $ 4.5 million increase in property rentals due to rent commencements , contractual rent increases and an increase in percentage rental income , net of tenant vacancies primarily at properties undergoing development , partially offset by $ 1.3 million decrease in other income due to a decrease in tenant bankruptcy settlement income received during 2017 ; and $ 0.2 million decrease in management and development fee income . property operating expenses increased by $ 5.6 million to $ 50.9 million in the year ended december 31 , 2017 from $ 45.3 million in the year ended december 31 , 2016 . the increase is primarily attributable to an increase in common area
| 14,339 |
13 on a periodic basis , management reviews its inventory quantities on hand for obsolescence , physical deterioration , changes in price levels and the existence of quantities on hand which may not reasonably be expected to be sold within the company 's normal operating cycle . to the extent that any of these conditions is believed to exist or the market value of the inventory expected to be realized in the ordinary course of business is otherwise no longer as great as its carrying value , an allowance against the inventory value is established . to the extent that this allowance is established or increased during an accounting period , an expense is recorded in cost of products sold in the company 's consolidated statements of income . only when inventory for which an allowance has been established is later sold or is otherwise disposed is the allowance reduced accordingly . significant management judgment is required in determining the amount and adequacy of this allowance . in the event that actual results differ from management 's estimates or these estimates and judgments are revised in future periods , the company may not fully realize the carrying value of its inventory or may need to establish additional allowances , either of which could materially impact the company 's financial position and results of operations . revenue recognitio n : sales are recorded when goods are shipped to customers and are reported net of allowances for estimated returns and allowances in the consolidated statements of income . allowances for returns are estimated based on historical rates . allowances for returns , advertising allowances , warehouse allowances , placement fees and volume rebates are recorded commensurate with sales activity or using the straight-line method , as appropriate , and the cost of such allowances is netted against sales in reporting the results of operations . shipping and handling costs , net of amounts reimbursed by customers , are not material and are included in net sales . allowances against accounts receivable : the company 's allowances against accounts receivable are primarily contractually agreed-upon deductions for items such as cooperative advertising and warehouse allowances , placement fees and volume rebates . these deductions are recorded throughout the year commensurate with sales activity or using the straight-line method , as appropriate . funding of the majority of the company 's allowances occurs on a per-invoice basis . the allowances for customer deductions , which are netted against accounts receivable in the consolidated balance sheets , consist of agreed-upon cooperative advertising support , placement fees , markdowns and warehouse and other allowances . all such allowances are recorded as direct offsets to sales , and such costs are accrued commensurate with sales activities or as a straight-line amortization charge of an agreed-upon fixed amount , as appropriate to the circumstances for each arrangement . when a customer requests deductions , the allowances are reduced to reflect such payments or credits issued against the customer 's account balance . the company analyzes the components of the allowances for customer deductions monthly and adjusts the allowances to the appropriate levels . the timing of the customer-initiated funding requests for advertising support can cause the net balance in the allowance account to fluctuate from period to period . the timing of such funding requests has a minimal impact on the consolidated statements of income since such costs are accrued commensurate with sales activity or using the straight-line method , as appropriate . to reduce its exposure to credit losses , the company assigns the majority of its receivables under factoring agreements with cit . in the event a factored receivable becomes uncollectible due to creditworthiness , cit bears the risk of loss . the company 's management must make estimates of the uncollectiblity of its non-factored accounts receivable when evaluating the adequacy of its allowance for doubtful accounts , which it accomplishes by specifically analyzing accounts receivable , historical bad debts , customer concentrations , customer creditworthiness , current economic trends and changes in its customers ' payment terms . depreciation and amortization : the company 's consolidated balance sheets reflect property , plant and equipment , and certain intangible assets at cost less accumulated depreciation or amortization . the company capitalizes additions and improvements and expenses maintenance and repairs as incurred . depreciation and amortization are computed using the straight-line method over the estimated useful lives of the assets , which are three to eight years for property , plant and equipment , and one to twenty years for intangible assets other than goodwill . the company amortizes improvements to its leased facilities over the term of the lease or the estimated useful life of the asset , whichever is shorter . valuation of long-lived assets , identifiable intangible a s sets and goodwill : in addition to the depreciation and amortization procedures set forth above , the company reviews for impairment long-lived assets and certain identifiable intangible assets whenever events or changes in circumstances indicate that the carrying amount of any asset may not be recoverable . in the event of impairment , the asset is written down to its fair market value . assets to be disposed of , if any , are recorded at the lower of net book value or fair market value , less estimated costs to sell at the date management commits to a plan of disposal , and are classified as assets held for sale on the consolidated balance sheets . the company tests the carrying value of its goodwill annually on the first day of the company 's fiscal year . story_separator_special_tag an additional impairment test is performed during the year whenever an event or change in circumstances suggest that the fair value of the goodwill of either of the reporting units of the company has more likely than not fallen below its carrying value . the company considers its wholly-owned subsidiaries , ccip and hamco , to each be a reporting unit of the company for goodwill impairment testing purposes . 14 patent costs : the company incurs certain legal and related costs in connection with applications for patents . the company capitalizes such costs to be amortized over the expected life of the patent to the extent that an economic benefit is anticipated from the resulting patent or alternative future use is available to the company . the company also capitalizes legal and other costs incurred in the protection or defense of the company 's patents when it is believed that the future economic benefit of the patent will be maintained or increased and a successful outcome of the litigation is probable . capitalized patent protection or defense costs are amortized over the remaining expected life of the related patent . the company 's assessment of future economic benefit of its patents involves considerable management judgment , and a different conclusion could result in a material impairment charge up to the carrying value of these assets . royalty payments : the company has entered into agreements that provide for royalty payments based on a percentage of sales with certain minimum guaranteed amounts . these royalty amounts are accrued based upon historical sales rates adjusted for current sales trends by customers . royalty expense is included in cost of products sold and amounted to $ 9.0 million and $ 8.7 million for fiscal years 2016 and 2015 , respectively . provision for income taxes : the company 's provision for income taxes includes all currently payable federal , state , local and foreign taxes that are based on the company 's taxable income and the change during the fiscal year in net deferred income tax assets and liabilities . the company provides for deferred income taxes based on the difference between the financial statement and tax bases of assets and liabilities using enacted tax rates that will be in effect when the differences are expected to reverse . the company 's policy is to recognize the effect that a change in enacted tax rates would have on net deferred income tax assets and liabilities in the period that the tax rates are changed . management evaluates items of income , deductions and credits reported on the company 's various federal and state income tax returns filed and recognizes the effect of positions taken on those income tax returns only if those positions are more likely than not to be sustained . the company applies the provisions of fasb asc sub-topic 740-10-25 , which requires a minimum recognition threshold that a tax benefit must meet before being recognized in the financial statements . recognized income tax positions are measured at the largest amount that has a greater than 50 % likelihood of being realized . changes in recognition or measurement are reflected in the period in which the change in judgment occurs . during fiscal year 2016 , an evaluation was made of the company 's process regarding the calculation of the state portion of its income tax provision . this evaluation resulted in a tax position which reflects opportunities for the application of more favorable state apportionment percentages for the past few years . after considering all relevant information , the company believes that the technical merits of this tax position would more likely than not be sustained . however , the company also believes that the ultimate resolution of the tax position will result in a tax benefit that is less than the full amount being sought . therefore , the company 's measurement regarding the tax impact of the revised state apportionment percentages resulted in the company recording during fiscal year 2016 a gross reserve for unrecognized tax benefits of $ 773,000 , less an offset of $ 573,000 to reflect state income tax overpayments net of the federal income tax impact , for a net reserve for unrecognized tax benefits of $ 200,000 in the accompanying consolidated financial statements . the company 's policy is to accrue interest expense and penalties as appropriate on any estimated unrecognized tax benefits as a charge to interest expense in the company 's consolidated statements of income . as of april 3 , 2016 , the company had accrued $ 11,000 for accrued interest expense and penalties on the portion of the unrecognized tax benefit that has been refunded to the company but for which the relevant statute of limitations remained unexpired . no interest expense or penalties is accrued with respect to estimated unrecognized tax benefits that are associated with state income tax overpayments that remain receivable . recently issued accounting standards on may 28 , 2014 , the fasb issued accounting standards update ( “ asu ” ) no . 2014-09 , revenue from contracts wit h customers ( topic 606 ) , which will replace most existing gaap guidance on revenue recognition and which will require the use of more estimates and judgments , as well as additional disclosures . when issued , asu no . 2014-09 was to become effective in the fiscal year beginning after december 15 , 2016 , but on august 12 , 2015 the fasb issued asu no . 2015-14 , revenue from contracts with customers ( topic 606 ) : deferral of the effective date , which provides for a one-year deferral of the effective date to apply the guidance of asu no . 2014-09. early adoption was originally not permitted in asu no .
| the company recorded during the current year a discrete net income tax benefit of approximately $ 260,000 , primarily resulting from the application of more favorable state apportionment percentages . known trends and uncertainties the company 's financial results are closely tied to sales to the company 's top two customers , which represented approximately 65 % of the company 's gross sales in fiscal year 2016. a significant downturn experienced by either or both of these customers could lead to pressure on the company 's revenues . at times , the company has also faced higher raw material costs , primarily related to cotton , as well as increases in labor , transportation and currency costs associated with the company 's sourcing activities in china . increases in these costs could adversely affect the profitability of the company if it can not pass the cost increases along to its customers in the form of price increases or if the timing of price increases does not closely match the cost increases . for additional discussion of trends , uncertainties and other factors that could impact the company 's operating results , see “ risk factors ” in item 1a . of part i. of this annual report on form 10-k. financial position , liquidity and capital resources net cash provided by operating activities increased from $ 4.8 million for the fiscal year ended march 29 , 2015 to $ 11.0 million for the fiscal year ended april 3 , 2016. in the current year , the company experienced a decrease in its inventory and accounts receivable balances as compared with increases in these balances in the prior year . the decrease in inventory in the current year is primarily related to the selloff of new programs gained during the prior year , and the decrease in accounts receivable in the current year was primarily the result of lower sales during the fourth quarter of the current year as compared with the same period of the prior year . net cash used in investing activities
| 14,340 |
we hedge commodity prices associated with a portion of our expected natural gas , ngl and condensate equity volumes in our gathering and processing segment . drilling activity levels vary by geographic area ; we will continue to target our strategy in geographic areas where we expect producer drilling activity . we believe our contract structure with our producers provides us with significant protection from credit risk since we generally hold the product , sell it and withhold our fees prior to remittance of payments to the producer . currently , our top 20 producers account for a majority of the total natural gas that we gather and process and of these top 20 producers , 6 have investment grade credit ratings . the global economic outlook continues to be cause for concern for u.s. financial markets and businesses and investors alike . this uncertainty may contribute to volatility in financial and commodity markets . we believe we are positioned to withstand current and future commodity price volatility as a result of the following : our growing fee-based business represents a significant portion of our margins . we have positive operating cash flow from our well-positioned and diversified assets . we have focused cost reduction efforts . we have a well-defined and targeted multi-year hedging program . we manage our disciplined capital growth program with a significant focus on fee-based agreements and projects with long-term volume outlooks . we believe we have a solid capital structure and balance sheet . we believe we have access to sufficient capital to fund our growth including excess distribution coverage and divestitures . during 2021 , our strategic objectives are to generate excess free cash flows ( a non-gaap measure defined in “ reconciliation of non-gaap measures - excess free cash flows ” ) and reduce leverage . we believe the key elements to generating excess free cash flows are the diversity of our asset portfolio , our fee-based business which represents a significant portion of our estimated margins , plus our hedged commodity position , the objective of which is to protect against downside risk in our excess free cash flows . we will continue to pursue incremental revenue , cost efficiencies and operating improvements of our assets through process and technology improvements . our expectations are based on assumptions made by us and information currently available to us . to the extent our underlying assumptions about or interpretations of available information prove to be incorrect , our actual results may vary materially from our expected results . we incur capital expenditures for our consolidated entities and our unconsolidated affiliates . our 2021 plan includes sustaining capital expenditures of between $ 45 million and $ 85 million and expansion capital expenditures of between $ 25 million and $ 75 million . recent events common and preferred distributions on january 21 , 2021 , we announced that the board of directors of the general partner declared a quarterly distribution on our common units of $ 0.39 per common unit . the distribution was paid on february 12 , 2021 to unitholders of record on february 5 , 2021. on the same date , the board of directors of the general partner declared a quarterly distribution on our series b and series c preferred units of $ 0.4922 and $ 0.4969 per unit , respectively . the series b distributions will be paid on march 15 , 2021 to 59 unitholders of record on march 1 , 2021. the series c distribution will be paid on april 15 , 2021 to unitholders of record on april 1 , 2021. factors that may significantly affect our results logistics and marketing segment our logistics and marketing segment operating results are impacted by , among other things , the throughput volumes of the ngls we transport on our ngl pipelines and the volumes of ngls we fractionate and store . we transport , fractionate and store ngls primarily on a fee basis . throughput may be negatively impacted as a result of our customers operating their processing plants in ethane rejection mode , often as a result of low ethane prices relative to natural gas prices . factors that impact the supply and demand of ngls , as described below in our gathering and processing segment , may also impact the throughput and volume for our logistics and marketing segment . these contractual arrangements may require our customers to commit a minimum level of volumes to our pipelines and facilities , thereby mitigating our exposure to volume risk . however , the results of operations for this business segment are generally dependent upon the volume of product transported , fractionated or stored and the level of fees charged to customers . we do not take title to the products transported on our ngl pipelines , fractionated in our fractionation facilities or stored in our storage facility ; rather , the customer retains title and the associated commodity price risk . the volumes of ngls transported on our pipelines are dependent on the level of production of ngls from processing plants connected to our ngl pipelines . when natural gas prices are high relative to ngl prices , it is less profitable to process natural gas because of the higher value of natural gas compared to the value of ngls and because of the increased cost of separating the ngls from the natural gas . as a result , we have experienced periods in the past , in which higher natural gas or lower ngl prices reduce the volume of ngls extracted at plants connected to our ngl pipelines and , in turn , lower the ngl throughput on our assets . our results of operations for our logistics and marketing segment are also impacted by increases and decreases in the volume , price and basis differentials of natural gas associated with our natural gas storage and pipeline assets , as well as our underlying derivatives associated with these assets . story_separator_special_tag we manage commodity price risk related to our natural gas storage and pipeline assets through our commodity derivative program . the commercial activities related to our natural gas storage and pipeline assets primarily consist of the purchase and sale of gas and associated time spreads and basis spreads . a time spread transaction is executed by establishing a long gas position at one point in time and establishing an equal short gas position at a different point in time . time spread transactions allow us to lock in a margin supported by the injection , withdrawal , and storage capacity of our natural gas storage assets . we may execute basis spread transactions to mitigate the risk of sale and purchase price differentials across our system . a basis spread transaction allows us to lock in a margin on our physical purchases and sales of gas , including injections and withdrawals from storage . gathering and processing segment our results of operations for our gathering and processing segment are impacted by ( 1 ) the prices of and relationship between commodities such as ngls , crude oil and natural gas , ( 2 ) increases and decreases in the wellhead volume and quality of natural gas that we gather , ( 3 ) the associated btu content of our system throughput and our related processing volumes , ( 4 ) the operating efficiency and reliability of our processing facilities , ( 5 ) potential limitations on throughput volumes arising from downstream and infrastructure capacity constraints , and ( 6 ) the terms of our processing contract arrangements with producers . this is not a complete list of factors that may impact our results of operations but , rather , are those we believe are most likely to impact those results . volume and operating efficiency generally are driven by wellhead production , plant recoveries , operating availability of our facilities , physical integrity and our competitive position on a regional basis , and more broadly by demand for natural gas , ngls and condensate . historical and current trends in the price changes of commodities may not be indicative of future trends . volume and prices are also driven by demand and take-away capacity for residue natural gas and ngls . our processing contract arrangements can have a significant impact on our profitability and cash flow . our actual contract terms are based upon a variety of factors , including the commodity pricing environment at the time the contract is executed , natural gas quality , geographic location , customer requirements and competition from other midstream service providers . our gathering and processing contract mix and , accordingly , our exposure to natural gas , ngl and condensate prices , may change as a result of producer preferences , impacting our expansion in regions where certain types of contracts are more common as well as other market factors . we generate our revenues and our adjusted gross margin for our gathering and processing 60 segment principally from contracts that contain a combination of fee based arrangements and percent-of-proceeds/liquids arrangements . our gathering and processing segment operating results are impacted by market conditions causing variability in natural gas , crude oil and ngl prices . the midstream natural gas industry is cyclical , with the operating results of companies in the industry significantly affected by drilling activity , which may be impacted by prevailing commodity prices and global demand . the number of active oil and gas drilling rigs in the united states significantly decreased , from 866 on december 31 , 2019 to 351 on december 31 , 2020. although the prevailing price of residue natural gas has less short-term significance to our operating results than the price of ngls , in the long-term , the growth and sustainability of our business depends on commodity prices being at levels sufficient to provide incentives and capital for producers to explore for and produce natural gas . the prices of ngls , crude oil and natural gas can be extremely volatile for periods of time , and may not always have a close relationship . due to our hedging program , changes in the relationship of the price of ngls and crude oil may cause our commodity price exposure to vary , which we have attempted to capture in our commodity price sensitivities in item 7a in this 2020 form 10-k , “ quantitative and qualitative disclosures about market risk. ” our results may also be impacted as a result of non-cash lower of cost or net realizable value inventory or imbalance adjustments , which occur when the market value of commodities decline below our carrying value . we face strong competition in acquiring raw natural gas supplies . our competitors in obtaining additional gas supplies and in gathering and processing raw natural gas includes major integrated oil and gas companies , interstate and intrastate pipelines , and companies that gather , compress , treat , process , transport , store and or market natural gas . competition is often the greatest in geographic areas experiencing robust drilling by producers and during periods of high commodity prices for crude oil , natural gas and or ngls . competition is also increased in those geographic areas where our commercial contracts with our customers are shorter term and therefore must be renegotiated on a more frequent basis . weather the economic impact of severe weather may negatively affect the nation 's short-term energy supply and demand , and may result in commodity price volatility . additionally , severe weather may restrict or prevent us from fully utilizing our assets , by damaging our assets , interrupting utilities , and through possible ngl and natural gas curtailments downstream of our facilities , which restricts our production . these impacts may linger past the time of the actual weather event .
| ( e ) represents average throughput for full years 2020 and 2019. cheyenne connector was placed in service june 2020 and had an average throughput of .3 tbtu/d for the fourth quarter of 2020. gulf coast express pipeline was placed in service september 2019 and had an average throughput of .5 tbtu/d for the fourth quarter of 2019. year ended december 31 , 2020 vs. year ended december 31 , 2019 total operating revenues — total operating revenues decreased $ 1,323 million in 2020 compared to 2019 , primarily as a result of the following : $ 1,326 million decrease for our logistics and marketing segment , primarily due to lower commodity prices and lower ngl and gas sales volumes , partially offset by favorable commodity derivative activity and increase in transportation , processing and other ; and $ 840 million decrease for our gathering and processing segment , primarily due to lower commodity prices and decreased volumes in the midcontinent and south regions , partially offset by increased volume from growth projects in the dj basin , increased volumes in the permian region and favorable commodity derivative activity and an increase in transportation , processing and other . these decreases were partially offset by : $ 843 million change in inter-segment eliminations , which relate to sales of gas and ngl volumes from our gathering and processing segment to our logistics and marketing segment , primarily due to lower commodity prices and lower ngl and gas sales volumes . total purchases — total purchases decreased $ 1,279 million in 2020 compared to 2019 , primarily as a result of the following : $ 1,405 million decrease for our logistics and marketing segment for the commodity price and volume changes discussed above ; and $ 717 million decrease for our gathering and processing segment for the commodity price and volume changes discussed above . these decreases were partially offset by : $ 843 million change in inter-segment eliminations , for the reasons discussed above . operating and maintenance expense — operating and maintenance expense decreased in 2020 compared to 2019 , primarily as a result of decreased base operating costs across all regions as a result of transformation efforts , restructuring and operational efficiencies . depreciation and amortization expense — depreciation and amortization expense decreased in 2020 compared to 2019 , primarily as a result of asset dispositions and asset impairments . general and administrative expense — general and administrative expense decreased in 2020 compared to
| 14,341 |
we believe that we can provide enhanced certainty of closure and liquidity to sellers and we look for management to continue on in their current roles . this strategy has comprised approximately 5 % -10 % of our portfolio . 68 purchasing controlling equity positions and lending to financial services companies - this strategy involves purchasing yield-producing debt and control equity investments in financial services companies , including consumer direct lending , sub-prime auto lending and other strategies . these investments are often structured in tax-efficient partnerships , enhancing returns . this strategy has comprised approximately 5 % -15 % of our portfolio . purchasing controlling equity positions and lending to real estate companies - we purchase debt and controlling equity positions in tax-efficient real estate investment trusts ( “ reit ” or “ reits ” ) . the real estate investments of national property reit corp. ( “ nprc ” ) are in various classes of developed and occupied real estate properties that generate current yields , including multi-family properties , student housing , and self-storage . nprc seeks to identify properties that have historically significant occupancy rates and recurring cash flow generation . nprc generally co-invests with established and experienced property management teams that manage such properties after acquisition . additionally , nprc purchases loans originated by certain consumer loan facilitators . it purchases each loan in its entirety ( i.e. , a “ whole loan ” ) . the borrowers are consumers , and the loans are typically serviced by the facilitators of the loans . this investment strategy has comprised approximately 10 % -20 % of our business . purchasing controlling equity positions and lending to aircraft leasing companies - we invest in debt as well as equity in companies with aircraft assets subject to commercial leases to airlines across the globe . we believe that these investments can present attractive return opportunities due to cash flow consistency from long-term leases coupled with hard asset residual value . we believe that these investment companies seek to deliver risk-adjusted returns with strong downside protection by analyzing relative value characteristics across a variety of aircraft types and vintages . this strategy historically has comprised less than 5 % of our portfolio . investing in structured credit - we make investments in clos , often taking a significant position in the subordinated interests ( equity ) and debt of the clos . the underlying portfolio of each clo investment is diversified across approximately 100 to 200 broadly syndicated loans and does not have direct exposure to real estate , mortgages , or consumer-based credit assets . the clos in which we invest are managed by established collateral management teams with many years of experience in the industry . this strategy has comprised approximately 10 % -20 % of our portfolio . investing in syndicated debt - on a primary or secondary basis , we purchase primarily senior and secured loans and high yield bonds that have been sold to a club or syndicate of buyers . these investments are often purchased with a long-term , buy-and-hold outlook , and we often look to provide significant input to the transaction by providing anchoring orders . this strategy has comprised approximately 10 % -25 % of our portfolio . investing in consumer and small business loans and asset-backed securitizations - we purchase loans originated by certain consumer and small-and-medium-sized business ( “ sme ” ) loan platforms . we generally purchase each loan in its entirety ( i.e. , a “ whole loan ” ) and we invest in asset-backed securitizations collateralized by consumer or small business loans . the borrowers are consumers and smes and the loans are typically serviced by the platforms of the loans . this investment strategy has comprised up to approximately 0 % of our portfolio . we invest primarily in first and second lien secured loans and unsecured debt , which in some cases includes an equity component . first and second lien secured loans generally are senior debt instruments that rank ahead of unsecured debt of a given portfolio company . these loans also have the benefit of security interests on the assets of the portfolio company , which may rank ahead of or be junior to other security interests . our investments in clos are subordinated to senior loans and are generally unsecured . we invest in debt and equity positions of clos which are a form of securitization in which the cash flows of a portfolio of loans are pooled and passed on to different classes of owners in various tranches . our clo investments are derived from portfolios of corporate debt securities which are generally risk rated from bb to b. we hold many of our control investments in a two-tier structure consisting of a holding company and one or more related operating companies for tax purposes . these holding companies serve various business purposes including concentration of management teams , optimization of third party borrowing costs , improvement of supplier , customer , and insurance terms , and enhancement of co-investments by the management teams . in these cases , our investment , which is generally equity in the holding company , the holding company 's equity investment in the operating company and any debt from us directly to the operating company structure represents our total exposure for the investment . as of june 30 , 2019 , as shown in our consolidated schedule of investments , the cost basis and fair value of our investments in controlled companies was $ 2,385,806 and $ 2,475,924 , respectively . this structure gives rise to several of the risks described in our public documents and highlighted elsewhere in this annual report . we consolidate all wholly-owned and substantially wholly-owned holding companies formed by us for the purpose of holding our controlled investments in operating companies . there is no significant effect of consolidating these holding companies as they hold minimal assets other than their investments in the controlled operating companies . investment company accounting prohibits the consolidation of any operating companies . story_separator_special_tag 69 story_separator_special_tag found in the corresponding section of our form 10-k for the year ended june 30 , 2018. replace_table_token_11_th ( 1 ) includes follow-on investments in existing portfolio companies and refinancings , if any . ( 2 ) includes partial prepayments of principal , scheduled amortization payments , and refinancings , if any . 74 investment valuation in determining the range of values for debt instruments , except clos and debt investments in controlling portfolio companies , management and the independent valuation firm estimated corporate and security credit ratings and identified corresponding yields to maturity for each loan from relevant market data . a discounted cash flow technique was then prepared using the appropriate yield to maturity as the discount rate , to determine a range of values . in determining the range of values for debt investments of controlled companies and equity investments , the enterprise value was determined by applying earnings before interest , income tax , depreciation and amortization ( “ ebitda ” ) multiples , the discounted cash flow technique , net income and or book value multiples for similar guideline public companies and or similar recent investment transactions . the enterprise value technique may also be used to value debt investments which are credit impaired . for stressed debt and equity investments , a liquidation analysis was prepared . in determining the range of values for our investments in clos , the independent valuation firm uses a discounted multi-path cash flow model . the valuations were accomplished through the analysis of the clo deal structures to identify the risk exposures from the modeling point of view as well as to determine an appropriate call date ( i.e. , expected maturity ) . these risk factors are sensitized in the multi-path cash flow model using monte carlo simulations , which is a simulation used to model the probability of different outcomes , to generate probability-weighted ( i.e. , multi-path ) cash flows for the underlying assets and liabilities . these cash flows are discounted using appropriate market discount rates , and relevant data in the clo market and certain benchmark credit indices are considered , to determine the value of each clo investment . in addition , we generate a single-path cash flow utilizing our best estimate of expected cash receipts , and assess the reasonableness of the implied discount rate that would be effective for the value derived from the corresponding multi-path cash flow model . with respect to our online consumer and sme lending initiative , we invest primarily in marketplace loans through marketplace lending facilitators . we do not conduct loan origination activities ourselves . therefore , our ability to purchase consumer and sme loans , and our ability to grow our portfolio of consumer and sme loans , are directly influenced by the business performance and competitiveness of the marketplace loan origination business of the marketplace lending facilitators from which we purchase consumer and sme loans . in addition , our ability to analyze the risk-return profile of consumer and sme loans is significantly dependent on the marketplace facilitators ' ability to effectively evaluate a borrower 's credit profile and likelihood of default . if we are unable to effectively evaluate borrowers ' credit profiles or the credit decisioning and scoring models implemented by each facilitator , we may incur unanticipated losses which could adversely impact our operating results . the board of directors looked at several factors in determining where within the range to value the asset including : recent operating and financial trends for the asset , independent ratings obtained from third parties , comparable multiples for recent sales of companies within the industry and discounted cash flow models for our investments in clos . the composite of all these various valuation techniques , applied to each investment , was a total valuation of $ 5,653,553 . our portfolio companies are generally lower middle-market companies , outside of the financial sector , with less than $ 100,000 of annual ebitda . we believe our investment portfolio has experienced less volatility than others because we believe there are more buy and hold investors who own these less liquid investments . control investments offer increased risk and reward over straight debt investments . operating results and changes in market multiples can result in dramatic changes in values from quarter to quarter . significant downturns in operations can further result in our looking to recoveries on sales of assets rather than the enterprise value of the investment . equity positions in our portfolio are susceptible to potentially significant changes in value , both increases as well as decreases , due to changes in operating results and market multiples . several of our controlled companies discussed below experienced such changes and we recorded corresponding fluctuations in valuations during the year ended june 30 , 2019 . cp energy services inc. prospect owns 100 % of the equity of cp holdings , a consolidated holding company . cp holdings owns 99.8 % of the equity of cp energy , and the remaining equity is owned by cp energy management . cp energy provides oilfield flowback services and fluid hauling and disposal services through its subsidiaries . on april 6 , 2018 , arctic oilfield equipment usa , inc. ( “ arctic equipment ” ) , a previously controlled portfolio company , merged with and into cp energy , with cp energy continuing as the surviving corporation . in june 2019 , cp energy purchased approximately 64.1 % of the common equity of spartan holdings , which owns 100 % of spartan , a portfolio company of prospect with $ 34,399 in senior secured term loans due to us as of june 30 , 2019. as a result of cp energy 's purchase , and given prospect 's controlling interest in cp energy , our spartan term loans are presented as control investments under cp energy beginning june 30 , 2019. spartan remains the direct borrow and guarantor to prospect for the spartan term loans . see note 14 in our consolidated financial statements for further discussion .
| the newly issued notes mature between april 15 , 2024 and june 15 , 2029 and generated net proceeds of $ 110,548 . during the three months ended june 30 , 2019 , we repurchased an additional $ 24,588 aggregate principal amount of the 2020 notes at a weighted average price of 101.1 , including commission . as a result of these transactions , we recorded a net loss of $ 414 during the three months ended june 30 , 2019 , in the amount of the difference of the reacquisition price and the net carrying amounts of the 2020 notes , net of the proportionate amount of unamortized debt issuance costs . on june 28 , 2019 , we commenced a tender offer to purchase for cash any and all of the $ 224,114 outstanding aggregate principal amount of the 2020 notes . the tender offer expired at 12:00 midnight on july 26 , 2019. in connection with follow-on programs for our unsecured public notes , we completed the following at-the-market ( “ atm ” ) offerings of additional debt during the three months ended june 30 , 2019 : replace_table_token_6_th equity issuances on april 18 , 2019 , may 23 , 2019 , and june 20 , 2019 , we issued 82,697 , 81,323 , and 82,031 shares of our common stock in connection with the dividend reinvestment plan , respectively . investment holdings as of june 30 , 2019 , we continue to pursue our investment strategy . at june 30 , 2019 , approximately $ 5,653,553 , or 171.0 % , of our net assets are invested in 135 long-term portfolio investments and clos . our annualized current yield was 13.1 % and 13.0 % as of june 30 , 2019 and june 30 , 2018 , respectively , across all performing interest bearing investments , excluding equity investments and non-accrual loans . our annualized current yield was 10.6 % and 10.5 % as of june 30 , 2019 and june 30 , 2018 , respectively , across all investments . monetization of equity positions that
| 14,342 |
constant currency measures exclude the impact of changes in currency exchange rates since the prior period under comparison . we believe that excluding the impacts of currency exchange rates provides a better understanding of the underlying revenue performance . constant currency change is calculated by converting the current period non-u.s. dollar denominated revenue using the prior year 's exchange rate . where constant currency measures are not provided , the actual change and constant currency change are the same . business services business services revenue increased 9 % in 2019 compared to 2018. growth in domestic parcel and shipping solutions volumes contributed 8 % of revenue growth and higher volumes at presort services contributed 1 % of revenue growth . cost of business services as a percentage of business services revenue increased to 81.2 % in 2019 primarily due to higher incremental fulfillment costs , investments for growth including new facilities , engineering , and marketing programs and a shift in the mix of business to fast growing , but lower margin services , partially offset by lower labor costs resulting from productivity actions . business services revenue increased 46 % in 2018 compared to 2017 primarily due to : 39 % from the acquisition of newgistics ; 5 % from growth in global ecommerce driven by higher revenue from shipping solutions , partially offset by lower cross-border revenue due to lower volumes ; and 2 % from higher volumes of mail processed in presort services . cost of business services as a percentage of business services revenue increased to 78.7 % in 2018 primarily due to continued investment in global ecommerce , higher labor and transportation costs in commerce services of $ 40 million driven by increased competition for labor and transportation resources due to the rapid growth in ecommerce and $ 8 million from the launch of a marketing mail pilot program in presort services . support services support services revenue decreased 8 % in 2019 compared to 2018 and 5 % as reported and 6 % at constant currency in 2018 compared to 2017 primarily due to a worldwide decline in our meter population . cost of support services as a percentage of support services revenue of 32.1 % in 2019 was flat compared to the prior year period . cost of support services as a percentage of support services revenue increased 17 to 32.3 % in 2018 primarily due to the decline in support services revenue . financing financing revenue decreased 7 % as reported and 6 % at constant currency in 2019 compared to 2018 and 3 % in 2018 compared to 2017 primarily due to a declining portfolio and lower fees . we allocate a portion of our total cost of borrowing to financing interest expense based on an 8:1 debt to equity leverage ratio , our overall effective interest rate and the average outstanding finance receivables . financing interest expense as a percentage of financing revenue increased to 12.1 % in 2019 compared to 11.2 % in 2018 due to a higher effective interest rate . financing interest expense as a percentage of financing revenue in 2018 of 11.2 % was consistent with the prior year period . equipment sales equipment sales decreased 11 % as reported and 10 % at constant currency in 2019 compared to 2018 , primarily due to lower sales in mailing finishing products and a longer installation period due to a higher mix of solutions sold with our equipment relative to the prior year . market exits accounted for 2 % of the decline . cost of equipment sales as a percentage of equipment sales revenue increased to 69.4 % from 59.7 % in the prior year period . a charge related to a sendpro c tablet replacement program , trade tariffs and engineering costs adversely impacted equipment sales margins by 2 percentage points , 2 percentage points and 1 percentage point , respectively . equipment sales in 2018 were down slightly compared to 2017. lower sales in the u.s. and u.k. each contributed a 1 % decline in revenue . cost of equipment sales as a percentage of equipment sales revenue of 59.7 % was consistent with the prior year . supplies supplies revenue decreased 14 % as reported and 13 % at constant currency in 2019 compared to 2018 , primarily due to a declining meter population . market exits accounted for 4 % of the decline . cost of supplies as a percentage of supplies revenue of 26.6 % in 2019 was consistent with the prior year . supplies revenue decreased 6 % as reported and 7 % at constant currency in 2018 compared to 2017 , driven by a global decline in installed mailing equipment and postage volumes . cost of supplies as a percentage of supplies revenue improved to 27.9 % in 2018 compared to 28.7 % due to a favorable mix of sales . rentals rentals revenue decreased 4 % as reported and 3 % at constant currency in 2019 compared to 2018 and 10 % in 2018 compared to 2017 primarily due to a declining meter population . cost of rentals as a percentage of rentals revenue decreased to 39.1 % in 2019 compared to 2018 primarily due to a favorable adjustment to cost of rentals recorded in the third quarter . cost of rentals as a percentage of rentals revenue increased to 44.2 % in 2018 compared to 2017 primarily due to higher scrapping costs associated with retiring aging meters . selling , general and administrative ( sg & a ) sg & a expense was flat in 2019 compared to 2018. sg & a expense decreased 3 % , or $ 27 million , in 2018 compared to 2017 , despite $ 51 million of incremental expenses from the acquisition of newgistics . the underlying decrease in sg & a was primarily due to lower employee related expenses of $ 36 million , lower marketing and advertising spend of $ 34 million , and other operating expense cost reductions as a result of our cost savings initiatives . story_separator_special_tag restructuring charges and asset impairments , net in 2019 , restructuring charges and asset impairments , net of $ 70 million consisted of $ 24 million of restructuring related charges and $ 46 million of asset impairment charges . asset impairment charges primarily includes the write-off of capitalized software costs related to the development of an erp system in our international markets resulting from changes in our international footprint . in 2018 , restructuring charges and asset impairments , net of $ 26 million consisted of $ 25 million of restructuring related charges and $ 1 million of asset impairment charges . in 2017 , restructuring charges and asset impairments , net of $ 45 million consisted of $ 41 million of restructuring related charges and $ 4 million of asset impairment charges . 18 other components of net pension and postretirement cost as a result of the funded status of our pension plans and the fact that most plans have been frozen , we recognized income in 2019. the 2018 amount includes a $ 32 million charge in connection with the disposition of the production mail business and certain other actions . the amount of other components of net pension and postretirement cost recognized each year will vary based on actuarial assumptions and actual results of our pension plans . other expense other expense for 2019 includes a loss of $ 18 million from market exits , primarily from the write-off of cumulative translation adjustments and a $ 6 million loss on the early extinguishment of debt . other expense for 2018 and 2017 represents a loss on the early extinguishment of debt . income taxes the effective tax rate for 2019 includes benefits of $ 23 million from the release of a foreign valuation allowance and $ 9 million from the resolution of certain tax examinations . the effective tax rate for 2019 also includes a tax of $ 3 million on the $ 18 million book loss from market exits , primarily due to nondeductible basis differences . the effective tax rate for 2018 includes tax benefits of $ 37 million related to true-ups from the tax cuts and jobs act of 2017 and $ 17 million from the resolution of certain tax examinations . the effective tax rate for 2017 includes provisional tax benefits of $ 39 million from the tax cuts and jobs act of 2017 and $ 30 million from the resolution of tax examinations . see note 15 to the consolidated financial statements for further information . income from discontinued operations discontinued operations includes the software solutions business , sold in december 2019 and the production mail business , sold in july 2018. see note 4 to the consolidated financial statements for further information . 19 business segments our reportable segments are global ecommerce , presort services and sendtech solutions . the commerce services reporting group comprises global ecommerce and presort services . the principal products and services of each reportable segment are as follows : global ecommerce : includes the revenue and related expenses from products and services that facilitate domestic retail and ecommerce shipping solutions , including fulfillment and returns , and global cross-border ecommerce transactions . presort services : includes revenue and related expenses from sortation services to qualify large volumes of first class mail , marketing mail and bound and packet mail ( marketing mail flats and bound printed matter ) for postal worksharing discounts . sendtech solutions : includes the revenue and related expenses from physical and digital mailing and shipping solutions , financing , services , supplies and other applications to help simplify and save on the sending , tracking and receiving of letters and packages . management measures segment profitability and performance using segment earnings before interest and taxes ( ebit ) . segment ebit is calculated by deducting from segment revenue the related costs and expenses attributable to the segment . segment ebit excludes interest , taxes , general corporate expenses , restructuring charges , asset impairment charges and other items not allocated to a particular business segment . management believes that it provides investors a useful measure of operating performance and underlying trends of the business . segment ebit may not be indicative of our overall consolidated performance and therefore , should be read in conjunction with our consolidated results of operations . revenue and ebit by business segment are presented in the tables below . replace_table_token_5_th replace_table_token_6_th global ecommerce global ecommerce revenue increased 13 % in 2019 compared to 2018. growth in domestic parcel volumes and shipping solutions volumes contributed 9 points and 5 points , respectively ; partially offset by a 1 point decline due to lower cross border volumes . ebit loss in 2019 increased to $ 70 million from a loss of $ 32 million in 2018 primarily driven by higher incremental fulfillment costs , investments for growth including new facilities , engineering , and marketing programs and a shift in the mix of business to fast growing , but lower margin services . we also estimate that ebit was adversely impacted by $ 6 million as a result of the ransomware attack . global ecommerce revenue increased 85 % in 2018 compared to 2017. excluding newgistics , global ecommerce revenue increased 13 % driven by higher revenue from shipping solutions , partially offset by lower cross-border revenue due to lower volumes . ebit loss in 2018 increased to $ 32 million compared to a loss of $ 18 million in 2017 primarily due to higher amortization expense of $ 12 million due to a full year of amortization related to newgistics and higher transportation and labor costs of $ 6 million due to increased competition for labor and transportation resources as a result of the rapid growth in ecommerce , partially offset by higher revenue . 20 presort services presort services revenue increased 3 % in 2019 compared to 2018 , driven primarily from acquisitions as well as growth in existing clients ' volumes .
| financing activities in 2019 , cash used in financing activities of $ 687 million included the net repayment of debt of $ 540 million , the repurchase of 18.6 million shares of our common stock for $ 105 million and common stock dividend payments of $ 35 million . in 2018 , cash used in financing activities of $ 766 million included the repayment of $ 570 million of debt , common stock dividend payments of $ 140 million and the settlement of a $ 46 million timing difference between our investing excess cash at the subsidiary level and the funding of an intercompany cash transfer at december 31 , 2017. in 2017 , cash provided by financing activities of $ 368 million included the net issuance of debt of $ 472 million and common stock dividend payments of $ 139 million . 22 debt and capitalization during 2019 , we completed a series of transactions to refinance our debt portfolio , including the following : repaid the $ 150 million term loan due november 2019 , the remaining balance of the $ 200 million term loan due september 2020 and the $ 300 million term loan due december 2020 ; redeemed the $ 300 million september 2020 notes ; secured a new five-year $ 400 million secured term loan due november 2024 ( the 2024 term loan ) ; and replaced our $ 1 billion revolving credit facility scheduled to mature in january 2021 with a $ 500 million secured revolving credit facility that expires in november 2024 ( the credit facility ) . as of december 31 , 2019 , we have not drawn upon the credit facility . in december 2019 , we obtained commitments for a five-year $ 650 million term loan , and in february 2020 , we obtained lender commitments for an additional $ 200 million . the combined commitment amount of $ 850 million is scheduled to mature january 2025 ( the
| 14,343 |
see “ exchange rates ” at the end of this section for information concerning the exchanges rates at which renminbi ( “ rmb ” ) were translated into u.s. dollars ( “ usd ” or “ $ ” ) at various pertinent dates and for pertinent periods . overview we currently operate in four business segments in china : ( 1 ) retail drugstores , ( 2 ) online pharmacy , ( 3 ) wholesale of products similar to those that we carry in our pharmacies , and ( 4 ) farming and selling herbs used for traditional chinese medicine ( “ tcm ” ) . 35 our drugstores offer customers a wide variety of pharmaceutical products , including prescription and over-the-counter ( “ otc ” ) drugs , nutritional supplements , tcm , personal and family care products , medical devices , and convenience products , including consumable , seasonal , and promotional items . additionally , we have licensed doctors of both western medicine and tcm on site for consultation , examination and treatment of common ailments at scheduled hours . as of march 31 , 2017 , we had 67 pharmacies in hangzhou city and its adjacent town lin'an under the store brand of “ jiuzhou grand pharmacy. ” during the year ended march 31 , 2017 , we had opened thirteen new pharmacies while closing three stores due to termination of their lease contracts . since may 2010 , we have also been selling certain otc drugs , medical devices , nutritional supplements and other sundry products online . our online pharmacy sells through several third-party platforms such as alibaba 's tmall , jd.com and amazon.com , and the company 's own platform all over china . in fiscal year 2017 , in order to keep top rankings in certain third-party platforms such as tmall , we have spent reasonable resources on marketing our products through these third-party platforms . our sales through our own platform are primarily generated by customers who use their private commercial medical insurances package . we operate a wholesale business through jiuxin medicine distributing third-party pharmaceutical products ( similar to those carried by our pharmacies ) primarily to trading companies throughout china . we also farm certain herbs used in tcm but have not incurred sales in the year ended march 31 , 2017. critical accounting policies and estimates in preparing our audited consolidated financial statements in accordance with accounting principles generally accepted in the united states of america , we are required to make judgments , estimates and assumptions that affect : ( i ) the reported amounts of our assets and liabilities ; ( ii ) the disclosure of our contingent assets and liabilities at the end of each reporting period ; and ( iii ) the reported amounts of revenue and expenses during each reporting period . we continually evaluate these estimates based on our own historical experience , knowledge and assessment of current business and other conditions , our expectations regarding the future based on available information and reasonable assumptions , which together form our basis for making judgments about matters that are not readily apparent from other sources . since the use of estimates is an integral component of the financial reporting process , our actual results could differ materially from those estimates . we believe that any reasonable deviation from those judgments and estimates would not have a material impact on our financial condition or results of operations . to the extent that the estimates used differ from actual results , however , adjustments to the statement of operations and corresponding balance sheet accounts would be necessary . these adjustments would be made in future financial statements . when reading our financial statements , you should consider : ( i ) our critical accounting policies ; ( ii ) the judgment and other uncertainties affecting the application of such policies ; and ( iii ) the sensitivity of reported results to changes in conditions and assumptions . the critical accounting policies and related judgments and estimates used to prepare our financial statements are identified in note 2 to our audited consolidated financial statements accompanying in this report . 36 story_separator_special_tag products on its online pharmacy . as a result , the sales on our own official website declined dramatically . in order to offset the negative effect , we had been actively working with a similar vendor , who may refer to us a big customer pool in the near future . if we are able to retain the new vendor , our own website sales will continue to grow in the future . wholesale revenue increased by $ 2,911,708 or 25.5 % , primarily as a result of our ability to resell certain products , which our retail stores made large order on , to other vendors . as our retail drugstores achieved large quantity sales of certain brand name merchandises , we were able to bargain lower purchase prices than the market level on these merchandises . as a result , certain vendors who were unable to obtain a better price than ours , will turn to us for these merchandises , leading the wholesale volume to grow . however , hospitals still act as a major source of drug retailers in china . local hospitals usually have stronger ties with their existing suppliers and we have not been able to make significant progress in becoming a major supplier to local hospitals . until we can establish a new customer base and secure a status to serve as provincial or national exclusive sale agent for certain popular drugs , we do not expect our wholesale business to increase significantly in the immediate future . in the year ended march 31 , 2017 and 2016 , we have not harvested and generated revenue from our farming business . story_separator_special_tag we planted ginkgo and maidenhair trees during the year ended march 31 , 2013. a ginkgo tree may have a growth period of up to twenty years before it is mature enough for harvest . usually , the longer it grows the more valuable it becomes . we plan to continue cultivating the trees in order to maximize their market value in the future . during the year ended march 31 , 2017 , we had cultivated white tea among the ginkgo trees . we anticipate that we will continue to grow ginkgo trees and start cultivating other herbs in the future . 38 gross profit gross profit decreased by $ 884,664 or 5.1 % period over period primarily as a result of a decrease in gross profit provided by online sale , which decreased significantly in the year ended march 31 , 2017. at the same time , gross margin increased from 19.7 % to 20.4 % due to higher retail and wholesale profit margins . the average gross margins for each of our four business segments are as follows : replace_table_token_4_th retail gross margin increased primarily because of more vendor rebates attributable to our focused marketing efforts in promoting brand-name products with large pharmaceutical suppliers , continuous efforts to renegotiate prices with our suppliers periodically , and selection of certain higher profit margin products . instead of labeling our own products , we focused on promoting brand name products . we believe selling brand name products will increase our store popularity and customer loyalty . for instance , we negotiated with the largest brand name provider of colla coril asini , which we have been actively marketing starting in the third quarter of fiscal 2017 , and have obtained a large vendor rebate from this vendor . additionally , we have been searching for ways to improve our profit margin . from time to time , we compared existing products among our suppliers to negotiate lower cost . gross margin of online pharmacy sales decreased primarily because of the decline in our sales via our own official website , as well as due to our promotion of certain products sold at low profit margin . we conduct our business either through certain e-commerce platforms such as tmall and jd.com or via our own official online pharmacy website , www.dada360.com . the sales on our own official website usually have higher profit margins because customers referred by yikatong and commercial insurance companies are premium customers who can afford premium products with higher profit margins . as described in the above , yikatong has continuously cut its customer referrals to our online pharmacy . in addition , to promote sales via third-party platforms , we also organized several market campaigns focusing on competitive pricings . as a result , our overall online sales profit margin declined in the year ended march 31 , 2017. wholesale gross margin varies period by period primarily as a result of different products we carried and sold to certain pharmaceutical vendors . although we tried marketing our products to major local hospitals and other pharmacies , we had not been able to make significant progress . until we are able to obtain status as provincial or national exclusive sale agent for certain popular drugs or have sales access to large local hospitals , we may have to keep low profit margins in order to drive sales on our wholesale business . 39 selling and marketing expenses sales and marketing expenses increased by $ 562,320 or 4.5 % period over period , primarily due to reclassification of certain staff salary to selling and marketing expense in our wholesale business . as certain wholesale staff providing general customer cares and warehouses supports are more related to our sales , we reclassified these expense to sales and marketing expense to better reflect their nature . primarily due to the decrease in overall sales , such expenses as a percentage of our revenue , increased to 15.9 % , from 13.9 % for the same period a year ago . except for online business , which declined significantly , we expect other sections ' future sales and marketing expenses to not deviate significantly from the current level . general and administrative expenses general and administrative expenses increased by $ 2,509,386 or 48.5 % period over period . such expenses as a percentage of revenue increased to 9.4 % from 5.8 % for the same period a year ago . the decrease in absolute dollars reflects accounts receivable allowance reversal of $ 683,739 and additional advances to vendors allowance of $ 1,396,713 in the year ended march 31 , 2017 , as compared to a total of accounts receivables and advances to suppliers allowance reversal of $ 1,891,546 in the year ended march 31 , 2016. the net effect is approximately $ 2,604,520 decrease in general and administrative expense . certain advance accounts with suppliers became aged and we made additional reserve on these accounts . excluding such an effect , general and administrative expenses slightly decreased by $ 95,134. loss from operations as a result of the above , we had loss from operations of $ 3,981,136 , as compared to loss from operations of $ 24,766 a year ago . our operating margin for the year ended march 31 , 2017 and 2016 was ( 4.9 ) % and ( 0.0 ) % , respectively . impairment of long-lived assets we recorded an impairment of long-lived assets of $ 2,117,042 for the year ended march 31 , 2017. such impairment was made after we estimated that the implied fair value of long-lived assets was lower than the carrying value .
| on the other hand , the g20 summit held in hangzhou in september 2016 impeded our sales in the first two quarters of fiscal 2017 , as the local government has significantly tightened its security requirements and prevented people from entering hangzhou city before and during the g20 summit for several months . in order to catch up with the sales plan in 2016 , after the g20 summit , we have made a series of marketing activities to promote sales . for instance , close to the chinese spring festival , people tend to purchase more nutritional supplements such as ginseng , bird's-nest and colla coril asini . we have negotiated with major manufacturers and vendors of nutritional supplements in advance and ordered a large quantity at favorable prices . as a result , we are able to implement various marketing campaigns to promote sales . additionally , since the beginning of 2016 , we have expended considerable efforts in establishing and improving our chronic disease management program , which has gradually attracted quite a few loyal customers who continuously refill their prescriptions and purchase supplemental products at our stores . furthermore , starting from fiscal 2018 , we have accelerated our new stores expansion , which is expected to generate more retail drugstore revenue . our store count increased to 67 as of march 31 , 2017 , compared to 58 stores as of march 31 , 2016. our online pharmacy sales decreased by approximately $ 11,060,985 , or 41.8 % for the year ended march 31 , 2017 , as compared to the year ended march 31 , 2016. the decrease was primarily caused by the decline in business referred from yikatong and decline in our sales via various e-commerce platforms , as further explained below , during this year . we carry our business either through certain e-commerce platforms such as tmall and jd.com or via our own official online pharmacy website . such arrangements with third-party platforms have exposed our online presence to a wider consumer base . in order to increase the popularity of our products , we
| 14,344 |
this exclusivity commitment would not bind an acquirer of us that owns or controls such a product so long as certain precautions are followed to ensure that csl behring 's confidential information and our proprietary technology related to the product are not used or accessed by personnel of such acquirer who are developing or commercializing such competing product . unless earlier terminated as described below , the csl behring agreement will continue on a country-by-country basis until expiration of the royalty term in a country . the royalty term expires in a country on the later of ( a ) 15 years after the first commercial sale of the product in such country , ( b ) expiration of regulatory exclusivity for the product in such country and ( c ) expiration of all valid claims of specific licensed patents covering the product in such country . either we or csl behring may terminate the csl behring agreement for the other party 's material breach if such breach is not cured within a specified cure period . in addition , if csl behring fails to commercialize the product in any of a group of major countries for an extended period following the first regulatory approval of the product in any of such group of countries ( other than due to certain specified reasons ) and such failure has not been cured within a specified cure period , then we may terminate the csl behring agreement . csl behring may also terminate the csl behring agreement for convenience . on november 11 , 2020 , the accc determined , pursuant to section 50 of the competition and consumer act 2010 of australia , that it will not intervene in the csl behring agreement . thus , the accc has completed its review of the csl behring agreement , and the transactions contemplated by the csl behring agreement may close from the perspective of the australian competition authority . on november 24 , 2020 , the competition and markets authority in the united kingdom ( the “ cma ” ) adopted a decision not to refer the csl behring agreement for proceedings under section 33 of the enterprise act 2002 of the united kingdom . the decision was made public by the cma on january 6 , 2021. thus , the cma has completed its review of the csl behring agreement , and the transactions contemplated by the csl behring agreement may close from the perspective of the united kingdom competition authority . 81 on december 3 , 2020 , we and csl behring filed a premerger notification and report form under the hsr act . on january 4 , 2021 , the ftc issued a second request under the hsr act . the ftc similarly issued a second request to csl behring also with respect to the antitrust review of the csl behring agreement . the effect of the second requests is to extend the waiting period imposed under the hsr act until 30 days after all parties to the csl behring agreement have substantially complied with the requests unless the waiting period is terminated earlier by the ftc or voluntarily extended by the parties . the effectiveness of the transactions contemplated by the csl behring agreement is contingent on completion of review under antitrust laws in the united states , australia , and the united kingdom and certain provisions of the csl behring agreement will not become effective until after we receive such regulatory approvals . regulatory approval in the united states has not occurred to date . closing of the transaction is expected to materially impact our profitability and cash flows . receipt of the $ 450.0 million payment due on closing would extend the funding of our operations from the second half of 2022 into the second half of 2024 ( assuming a full repayment of funds borrowed from hercules under our term loan facility by 2023 ) . however , we expect to continue to incur losses and to generate negative cash flows beyond the fiscal year in which we would close the transaction . bms collaboration we and bristol-myers squibb entered into a collaboration and license agreement in may 2015. bms initially designated four collaboration targets in 2015 and in accordance with the terms of the bms cla could have designated a fifth to tenth collaboration target . in february 2019 , bms requested a one-year extension of the initial research term . in april 2019 , following an assessment of the progress of this collaboration and our expanding proprietary programs , we notified bms that we did not intend to agree to an extension of the initial research term . accordingly , the initial four-year research term under the collaboration terminated on may 21 , 2019. on december 1 , 2020 , we and bms amended the bms cla . following the amendment bms is no longer entitled to designate a fifth to tenth collaboration target and as such we are no longer entitled to receive an aggregate $ 16.5 million in target designation payments for the research , development , and regulatory milestone payments related to the fifth to tenth collaboration targets . for a period of one year from the effective date of the amended bms cla , bms may replace up to two of the four active collaboration targets with two new targets in the field of cardiovascular disease . we continue to be entitled to receive up to $ 217.0 million for each of the four collaboration targets if defined milestones are achieved , as well as royalties on net sales associated with any collaboration target . on december 17 , 2020 , bms designated one of the four collaboration targets as a candidate to advance into ind-enabling studies entitling the company to receive a $ 4.4 million research milestone payment . the company recorded the $ 4.4 million as license revenue in the twelve-month period ended december 31 , 2020. the amended bms cla does not extend the initial research term . story_separator_special_tag bms may place purchase orders to provide limited services primarily related to analytical and development efforts in respect of the four collaboration targets . bms may request such services for a period not to exceed the earlier of ( i ) the completion of all activities under a research plan and ( ii ) either ( a ) three years after the last replacement target has been designated by bms during the one-year replacement period following the amended bms cla effective date or ( b ) three years if no replacement targets are designated during this one-year period and bms continues to reimburse us for these services . for as long as any of the four collaboration targets are being advanced , bms may place a purchase order to be supplied with research , clinical and commercial supplies . subject to the terms of the amended bms cla , bms has the right to terminate the research , clinical and commercial supply relationships , and has certain remedies for failures of supply , up to and including technology transfer for any such failure that otherwise can not be reasonably resolved . both we and bms may agree to a technology transfer of manufacturing capabilities pursuant to the terms of the amended bms cla . 82 the amended bms cla also terminated two warrants to increase bms ownership in the company to up to 19.9 % through purchasing a specific number of our ordinary shares following the designation of a seventh and a tenth collaboration target , respectively . we and bms agreed that upon the consummation of a change of control transaction of uniqure that occurs prior to the earlier of ( i ) december 1 , 2026 and ( ii ) bms ' delivery of a target cessation notice for all four collaboration targets , we ( or our third party acquirer ) shall pay to bms a one-time , non-refundable , non-creditable cash payment of $ 70.0 million , provided that ( x ) if $ 70.0 million is greater than five percent of the net proceeds ( as contractually defined ) from such change of control transaction , the payment shall be an amount equal to five percent of such net proceeds , and ( y ) if $ 70.0 million is less than one percent of such net proceeds , the change of control payment shall be an amount equal to one percent of such net proceeds . we have not consummated any change of control transaction as of december 31 , 2020 that would obligate us to make a payment to bms . hemophilia b program – etranacogene dezaparvovec ( amt-061 ) in august 2018 , we initiated a phase iib dose-confirmation study of etranacogene dezaparvovec and in september 2018 , we completed the dosing for that study . in february , may , july , and december 2019 , and in december 2020 , we presented updated data from the phase iib dose-confirmation study of etranacogene dezaparvovec . the most recent data that we announced from the phase iib study of etranacogene dezaparvovec show that all three patients experienced increasing and sustained fix levels after a one-time administration of etranacogene dezaparvovec . mean fix activity was 44.2 % of normal two years after administration , exceeding threshold fix levels generally considered sufficient to significantly reduce the risk of bleeding events . the first patient achieved fix activity of 44.7 % of normal , the second patient was 51.6 % of normal and the third patient was 36.3 % of normal . the second and third patients had previously screen-failed and were excluded from another gene therapy study due to pre-existing neutralizing antibodies to a different aav vector . at two years after dosing , two of the three participants remain free from bleeds and use of fix replacement therapy . a single bleed has been reported in one participant , who has used a total of two fix infusions ( excluding surgery ) . all patients have remained free of prophylaxis in the two years since receiving etranacogene dezaparvovec . in june 2018 , we initiated the six-month lead-in period of our hope-b trial . the hope-b trial is a multinational , multi-center , open-label , single-arm study to evaluate the safety and efficacy of etranacogene dezaparvovec . after the six-month lead-in period , patients received a single intravenous administration of etranacogene dezaparvovec . patients enrolled in the hope-b trial were tested for the presence of pre-existing neutralizing antibodies to aav5 but not excluded from the trial based on their titers . the primary endpoints of the study are based on the fix activity level achieved following the administration of etranacogene dezaparvovec after 26 weeks and 52 weeks after dosing as well annualized bleed rates during the 52 weeks after dosing . in march 2020 , we completed dosing of the 54 patients in the hope-b trial . the targeted number of patients to be dosed per the clinical trial protocol was 50. in december 2020 , we announced top-line data from the hope-b trial . the 26-week follow-up date from the trial showed that fix activity in the 54 patients increased after dosing from ≤ 2 % to a mean of 37.2 % at 26 weeks , meeting a first primary endpoint of the hope-b trial . no correlation between pre-existing neutralizing antibodies and fix activity was found in patients with neutralizing antibody titers up to 678.2 , a range expected to include more than 95 % of the general population ; one patient with a neutralizing antibody titer of 3,212.3 did not show an increase in fix activity . less than 1 % of the general population is expected to have neutralizing antibody titers of greater than 3,000 . 83 during the 26-week period after dosing , 15 patients ( 28 % ) reported a total of 21 bleeding events , representing a reduction of 83 % compared to the 123 bleeding events reported by 38 patients ( 70 % ) during the observational lead-in phase of the trial .
| on an ongoing basis , we evaluate our estimates and judgments , including those related to the treatment of the csl behring agreement , the amended bms cla , share-based payments , corporate income taxes related to valuation allowance and accounting for operating leases under asc 842. we base our assumptions , judgments and estimates on historical experience and various other factors that we believe to be reasonable under the circumstances , the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not clear from other sources . actual results may differ from these estimates under different assumptions or conditions . in making estimates and judgments , management employs critical accounting policies . we also discuss our critical accounting policies and estimates with the audit committee of our board of directors . we believe that the assumptions , judgments , and estimates involved in the treatment of the csl behring agreement , the amended bms cla , share-based payments , corporate income taxes related to valuation allowance and accounting for operating leases under asc 842 to be our critical accounting policies . historically , our assumptions , judgments and estimates relative to our critical accounting policies have not differed materially from actual results . csl behring agreement the effectiveness of the transactions contemplated by the csl behring agreement is contingent on completion of review under antitrust laws in the united states , australia , and the united kingdom and certain provisions of the csl behring agreement will not become effective until after we receive all such regulatory approvals . we obtained regulatory approvals in australia and the united kingdom prior to january 6 , 2021. we received a second request from the ftc on january 4 , 2021 , and as such , regulatory approval in the united states has not occurred to date . we do not believe that the ftc will determine that the consummation of the transaction will result in a violation of the hsr act . however ,
| 14,345 |
· increase our presence and gain penetration of our bentonite based foundry customers for the metalcasting industry in emerging markets , such as china and india . · increase our presence and market share in global pet care products , particularly in emerging markets . · deploy new products in pet care such as lightweight litter . · 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 carbonate 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 . · increase our presence and market share in asia and in the global powdered detergent market . · continue the development of our proprietary enersol® products for agricultural applications worldwide . · pursue opportunities for our products in environmental and building and construction markets in the middle east , asia pacific and south america regions . · increase our presence and market share for geosynthetic clay liners within the environmental products product line . · increase our presence and market penetration in offshore produced water and offshore filtration and well testing within the energy services segment . · deploy operational excellence principles into all aspects of the organization , including system infrastructure and lean principles . · continue to 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 . 30 results of operations consolidated income statement review replace_table_token_7_th * not meaningful net sales replace_table_token_8_th 31 worldwide net sales in 2017 increased 2 % from the previous year to $ 1,675.7 million . net sales in the united states increased slightly to $ 939.3 million in 2017 and represented 56 % of consolidated net sales . international sales increased to $ 736.4 million from $ 701.8 million and represented 44 % of consolidated net sales . worldwide net sales in 2016 decreased 9 % from the previous year to $ 1,638.0 million . foreign exchange had an unfavorable impact on sales of $ 34.0 million or 2 percent . net sales in the united states decreased to $ 936.2 million in 2016 and represented 57 % of consolidated net sales . international sales decreased slightly to $ 701.8 million from $ 748.0 million and represented 43 % of consolidated net sales . operating costs and expenses consolidated cost of sales was $ 1,208.5 million , $ 1,177.6 million and $ 1,326.6 million in 2017 , 2016 and 2015 , respectively . production margin as a percentage of net sales was 27.9 % in 2017 , 28.1 % in 2016 and 26.2 % in 2015. marketing and administrative costs were $ 182.4 million , $ 179.4 million and $ 190.1 million in 2017 , 2016 and 2015 , respectively . marketing and administrative costs as a percentage of net sales were 10.9 % in 2017 , 10.9 % in 2016 and 10.6 % in 2015. research and development expenses were $ 23.7 million , $ 23.8 million and $ 23.6 million in 2017 , 2016 and 2015 , respectively . research and development expenses as a percentage of net sales were 1.4 % in 2017 , 1.4 % in 2016 and 1.3 % in 2015. the company incurred $ 3.4 million , $ 8.0 million and $ 11.8 million in 2017 , 2016 and 2015 , respectively for the acquisition related transaction and integration costs . in 2017 , the company recorded a $ 15.0 million restructuring and non-cash impairment charges from the closure of paper mills in north america , as well as the alignment of corporate and paper pcc staffing levels into higher growth regions . this restructuring is expected to result in approximately $ 6 million in savings on an annualized basis , of which $ 3 million is expected to be realized in 2018. in 2016 , the company recorded a $ 28.3 million charge for impairment of assets and other restructuring costs , including lease termination costs relating to its exit of u.s. on-shore service lines , including the nitrogen and pipeline product lines in our energy services segment . in 2015 , the company recorded a $ 45.2 million charge for asset impairments , severance and other employee costs resulting from a restructuring program that was initiated in 2014 to realign business operations and improve efficiencies . income from operations during 2017 , the company recorded income from operations of $ 242.7 million as compared with $ 220.9 million in the prior year . income from operations represente d 14.5 % of sales compared with 13.5 % of sales in the prior year . income from operations in 2017 included acquisition related integration costs of $ 3.4 million and restructuring and other items of $ 15.0 million . during 2016 , the company recorded income from operations of $ 220.9 million as compared with $ 200.3 million in the prior year . income from operations represente d 13.5 % of sales compared with 11.1 % of sales in the prior year . income from operations in 2016 included acquisition related integration costs of $ 8.0 million and restructuring and other items of $ 28.3 million . non-operating income ( deductions ) the company recorded non-operating deductions of $ 51.8 million in 2017 as compared with $ 50.6 million in the previous year . story_separator_special_tag net interest expense was $ 43.4 million in 2017 as compared to $ 54.4 million in the prior year , as a result of lower debt balances due to principal repayments and lower interest costs relating to lower interest rates resulting from debt repricing . the company recorded $ 3.9 million in debt modification costs and fees relating to its repricing of the variable tranche of the term loan debt in february 2017. during 2015 , the company repriced the outstanding balance of its senior secured loan facility and recorded $ 4.5 million in non-cash debt modification costs and other debt modification fees . in addition , the company recorded a $ 7.6 million charge relating to the write-down of an investment in a development stage enterprise . provision ( benefit ) for taxes on income provision ( benefit ) for taxes was $ ( 6.6 ) million , $ 35.3 million and $ 22.8 million in 2017 , 2016 and 2015 , respectively . the effective tax rates were ( 3.5 ) % , 20.7 % and 17.2 % during 2017 , 2016 and 2015 , respectively . included in the benefit from taxes in the current year is a provisional $ 47.3 million income tax benefit from the u.s. tax cuts and jobs act ( “ u.s . tax reform ” ) legislation , enacted in december 2017. this benefit is comprised of an $ 82.4 million gain related primarily to the re-measurement of the company 's u.s. deferred tax liabilities at a lower u.s. tax rate of 21 % , partially offset by tax expense of $ 35.1 million for the deemed repatriation of unremitted earnings of foreign subsidiaries . 32 the lower effective tax rate in 2017 was primarily due to the benefit of the re-measurement of the company 's us deferred tax liabilities to 21 % . our future effective tax rate will be affected by the u.s. tax reform . effective in 2018 , u.s. tax reform reduces the u.s. statutory tax rate from 35 % to 21 % and creates new taxes on certain foreign-sourced earnings and certain related-party payments . the other factors having the most significant impact on our effective tax rates in recent periods are the rate differentials related to foreign earnings indefinitely invested , percentage depletion , and the tax benefits on restructuring and impairment charges at a higher rate . the higher effective tax rate in 2016 was primarily due to a lower benefit from depletion as a percentage of earnings and to the mix of earnings . 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 $ 12.9 million in 2017 , $ 11.3 million in 2016 and $ 11.2 million in 2015. 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 . 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 $ 10.7 million , $ 14.7 million and $ 11.0 million in 2017 , 2016 and 2015 , respectively . consolidated net income consolidated net income wa s $ 199.0 million in 2017 and included a $ 15.5 million charge , net of tax . this charge consisted of acquisition related transaction and integration costs and restructuring and other items , net . additionally it includes a $ 47.3 million tax benefit from the u.s. tax cuts and jobs act . consolidated net income wa s $ 137.1 million in 2016 and included a $ 24.0 million charge , net of tax . such charge consisted of restructuring and other net items , acquisition transaction and integration costs and lease termination costs , inventory write-offs and impairment of assets relating to the company 's exit from the nitrogen and pipeline product lines and the restructuring of other onshore services within the energy services segment . story_separator_special_tag en_12_th * not meaningful 2017 v 2016 net sales in the energy services segment declined $ 9.2 million in 2017. the sales decrease was due to continued weak market conditions in the oil and gas sector and the shutdown of u.s. on-shore service lines , including nitrogen and pipeline in the second quarter of 2016. the segment recorded income from operations of $ 6.1 million in 2017. included in income from operations was $ 1.7 million of additional restructuring charges relating to the exit of certain businesses in 2016 , which was offset by a $ 1.1 million gain on sale of previously impaired assets . 2016 v 2015 net sales in the energy services segment declined $ 96.3 million in 2016. the sales decrease was due to weak market conditions in the oil and gas sector and the shutdown of u.s. on-shore service lines , including nitrogen and pipeline in the second quarter of 2016 and the shutdown of the coiled tubing service line in august 2015 . 35 the segment recorded a loss from operations of $ 25.9 million in 2016. included in the loss from operations was $ 30.3 million of impairment and restructuring charges relating to the company 's exit from the nitrogen and pipeline product lines and restructuring of other onshore services within the energy services segment . going forward , energy services ' primary service offerings will be off-shore filtration and well testing to the worldwide oil and gas industry . liquidity and capital resources cash provided from continuing operations in 2017 was $ 207.6 million , compared with $ 225.1 million in prior year .
| this was partially offset by an increase in pcc sales in china of 12 percent over last year due to the ramp-up of two new facilities and the successful startup of a 100,000 ton satellite in the third quarter of 2016. income from operations increased $ 1.9 million to $ 102.7 million and represented 17.4 % of net sales compared to $ 100.8 million and 16.1 % of sales in 2016. performance materials segment replace_table_token_10_th 2017 v 2016 net sales in the performance materials segment of $ 734.8 million increased $ 48.7 million in 2017. metalcasting 's sales increased $ 36.3 million or 14 percent primarily due to higher volumes in asia and north america . basic minerals sales increased $ 21.1 million or 20 percent primarily due to higher sales of chromite and drilling products . these sales increases were partially offset by lower environmental products sales and lower fabric care sales which impacted household , personal care and & specialty products . income from operations decreased $ 1.4 million to $ 119.7 million and represented 16.3 % of net sales compared to $ 121.1 million and 17.7 % of sales in 2016 . 2016 v 2015 net sales in the performance materials segment of $ 686.1 million decreased $ 8.8 million in 2016. foreign exchange had an unfavorable impact on performance materials segment sales of approximately $ 19.0 million , or 3 percent . excluding the effects of foreign exchange , higher china metalcasting sales , increased sales of bulk chromite in our basic minerals product line and increased sales in environmental products were partially offset by lower fabric care sales in our household , personal care & specialty minerals product line and lower sales in building materials resulting from smaller scale water proofing projects completed in the western united states and europe in 2016 as compared to the prior year . income from operations increased $ 2.7 million and represented 17.7 % of
| 14,346 |
4,000,000 ( the “ investor notes principal ” ) ( collectively , the “ financing ” ) . andy heyward , the company 's chairman and chief executive officer , participated as an investor and invested $ 1,000,000 in connection with the financing , all of which were paid at the closing and not pursuant to an investor note . the closing of the sale and issuance of the 2020 convertible notes , the warrants and the placement agent warrants described below occurred on march 17 , 2020 ( the “ closing date ” ) . the maturity date of the 2020 convertible notes is september 30 , 2021 and the maturity date of the investor notes is march 11 , 2060. the spa contains certain representations and warranties , covenants and indemnities customary for similar transactions . in addition , the company agreed to the following additional covenants including , but not limited to : ( i ) the company shall hold a stockholder meeting ( the “ stockholder meeting ” ) , by no later than may 15 , 2020 , to approve the issuance of shares of common stock issuable under the 2020 convertible notes and pursuant to the terms of the spa for the purposes of compliance with the stockholder approval rules of the nasdaq stock market ( “ stockholder approval ” ) and the company will be obligated to continue to seek stockholder approval every 90 days until such approval is obtained , ( ii ) until the date that the 2020 convertible notes are no longer outstanding , the company will not issue , offer , sell or grant any equity or equity-linked security , subject to certain limited exceptions described in the spa , unless ( a ) stockholder approval has been obtained prior thereto and ( b ) ( i ) at least 75 % of the gross proceeds in excess of the first $ 2,000,000 of gross proceeds of all subsequent financings consummated prior to the six month anniversary of the closing date are first applied to the redemption of the 2020 convertible notes ( pro-rata based on an investor 's purchase price which redemption may be waiver by an investor and it will not increase the pro-rata percentage of any other investors ) or ( ii ) at least 75 % of the gross proceeds of any such subsequent placement consummated after the six month anniversary of the closing date are first applied to the redemption of the 2020 convertible notes ( pro-rata ) , ( iii ) the company shall use its best efforts to effectuate the transactions contemplated by the voting agreements executed by the company and the stockholders who hold in the aggregate approximately 40 % of the outstanding shares of common stock which require that such stockholders vote in favor of the proposals voted on at the stockholder meeting , and ( iv ) promptly securing the listing of certain shares issuable pursuant to the transaction documents and maintaining the listing of the shares of common stock on an eligible market . 20 in addition , pursuant to the terms of the spa , the 2020 convertible notes and the warrants , the company agreed that the following will apply or become effective only following stockholder approval : ( 1 ) the conversion price of the 2020 convertible notes shall be reduced to $ 0.21 per share and may be further reduced to any amount and for any period of time deemed appropriate by the board of directors of the company , ( 2 ) the exercise price of the warrants shall be immediately reduced to $ 0.21 per share and may be further reduced to any amount and for any period of time deemed appropriate by the board of directors of the company , ( 3 ) the 2020 convertible notes and warrants shall each have full ratchet anti-dilution protection for subsequent financings ( subject to certain exceptions ) , ( 4 ) existing warrant holders that are participating in the financing ( representing warrants to purchase an aggregate of 8,715,229 shares of company common stock ) will have their existing warrants ' exercise prices reduced to $ 0.21 and ( 5 ) the investors shall have a most favored nations right which provides that if the company enters into a subsequent financing , then the investors ( together with their affiliates ) at their sole discretion shall have the ability to exchange their 2020 convertible notes on a $ 1 for $ 1 basis into securities issued in the new transaction . additionally , in the event that any warrants or options ( or any similar security or right ) issued in a subsequent financing include any terms more favorable to the holders thereof ( less favorable to the company ) than the terms of the warrants , the warrants shall be automatically amended to include such more favorable terms . in addition , for as long as any 2020 convertible notes or warrants remain outstanding , the company will not ( i ) issue or sell any rights , warrants or options to subscribe for or purchase common stock or directly or indirectly convertible into or exchangeable or exercisable for common stock at a price which varies or may vary with the market price of the common stock , including by way of one or more reset ( s ) to any fixed price , unless the conversion , exchange or exercise price of any such security can not be less than the then applicable conversion price with respect to the common stock into which any 2020 convertible notes are convertible or redeemable or the then applicable exercise price ( as defined in the warrants ) with respect to the common stock into which any warrant is exercisable or ( ii ) enter into , or effect any transaction under , any agreement , including , but not limited to , an equity line of credit , an “ at-the-market ” offering or similar agreement , whereby the company may issue securities at a future determined price . story_separator_special_tag on march 16 , 2020 the holders of the august 2018 secured convertible notes were repaid in full including any outstanding interest . amortization of principal the 2020 convertible notes provide that the company will repay the principal amount of 2020 convertible notes in equal monthly installments of 1/12th of the principal amount of the 2020 convertible notes beginning october 31 , 2020 and the last business day of each calendar month anniversary thereafter ( each an “ installment date ” ) . on each installment date , assuming the equity conditions described below are met and stockholder approval has been obtained , all or some of the installment amount ( as defined in the 2020 convertible notes ) shall be converted into shares of common stock , provided however that the company may elect prior to any installment date to pay all or a portion of the installment amount in cash , as described below . the company may elect to pay each monthly installment amount in ( i ) cash ( a “ company redemption ” and such cash payment , the “ company installment redemption price ” ) equal to 100 % of the portion of such installment amount which the company elects or is required to redeem pursuant to a company redemption ( the “ company redemption amount ” ) or ( ii ) if ( a ) the equity conditions described below are satisfied or waived and ( b ) the company so elects and stockholder approval has been obtained , by conversion of all or some of an installment amount into common stock ( a “ company conversion ” ) . to the extent that the company elects to pay an installment amount in shares of common stock , then ( a ) twenty-three ( 23 ) trading days prior to the applicable installment date ( each such date being a “ pre-installment date ” ) , the company shall deliver to the investor ( s ) a number of shares of common stock ( each such quantity being a “ pre-installment share amount ” ) equal to the installment amount being paid in shares of common stock divided by the lower of ( i ) the then prevailing conversion price or ( ii ) the market price ( as defined below ) determined on the applicable pre-installment date , and ( b ) on the applicable installment date , the company shall deliver to the investor a number of shares of common stock equal to ( a ) the amount of the applicable installment amount being paid in shares of common stock divided by the lower of ( i ) the then prevailing conversion price or ( ii ) the market price determined on the applicable installment date , less ( b ) any applicable pre-installment share amount delivered pursuant to the applicable installment amount . “ market price ” means 85 % of the arithmetic average of the five ( 5 ) lowest daily weighted average prices of the common stock during the twenty ( 20 ) consecutive trading day period ending on the trading day immediately preceding the applicable date of determination , subject to adjustments for any stock split , stock dividend , stock combination , reclassification or other similar transaction during such measuring period . 21 with respect to any given date of determination , the “ equity conditions ” include : ( i ) on each day during the period beginning thirty ( 30 ) trading days immediately prior to the applicable date of determination and ending on and including the applicable date of determination ( the “ equity conditions measuring period ” ) , the shares of common stock issuable pursuant to the 2020 convertible notes and upon exercise of the warrants ( the “ underlying securities ” ) shall be registered for resale pursuant to one or more registration statements filed with the sec or eligible for sale pursuant to rule 144 promulgated under the securities act ( or a successor rule thereto ) ( collectively , “ rule 144 ” ) ; ( ii ) on each day during the equity conditions measuring period , the common stock is designated for quotation on the nasdaq capital market ( the “ principal market ” ) or any other eligible market and shall not have been suspended from trading on such exchange or market nor shall delisting or suspension by such exchange or market been threatened ( with delisting reasonably likely to occur after giving effect to all applicable notice , appeal , cure , compliance and hearing periods ) , commenced or pending either ( a ) in writing by such exchange or market or ( b ) by falling below the then effective minimum listing maintenance requirements of such exchange or market ; ( iii ) during the equity conditions measuring period , the company shall have delivered shares of common stock pursuant to the terms of the 2020 convertible notes and shares of common stock upon exercise of the warrants to the holders on a timely basis as set forth in the 2020 convertible notes and the warrants , respectively ; ( iv ) the shares of common stock issuable upon conversion of the conversion amount that is subject to the applicable company conversion or company optional redemption , as applicable , requiring the satisfaction of the equity conditions may be issued in full without violating the 2020 convertible notes and the rules or regulations of the principal market or any other applicable eligible market ; ( v ) during the equity conditions measuring period , the company shall not have failed to timely make any payments within five ( 5 ) business days of when such payment is due pursuant to any transaction document ; ( vi ) during the equity conditions measuring period , there shall not have occurred either ( a ) the public announcement of a pending , proposed or intended fundamental transaction ( as defined in the 2020 convertible notes ) which has not been abandoned , terminated or consummated , ( b ) an event of default or ( c )
| advertising sales increased by $ 5,660 , or 3 % , during the twelve months ended december 31 , 2019 compared to the twelve months ended december 31 , 2018 primarily due to the addition of new distribution partners , increased advertising impressions served and additional ad campaigns in 2019. this was a result of our efforts to continue to grow this area of the business through new distribution channels and with new partners . product sales represent physical products in which we hold intellectual property rights such as trademarks and copyrights to the characters and which are manufactured and sold by us directly . during the twelve months ended december 31 , 2019 compared to the twelve months ended december 31 , 2018 , product sales associated with warren buffett 's secret millionaire club increased by $ 604 , or 26 % , due to additional warren buffet doll sales in 2019. replace_table_token_2_th 28 marketing and sales expenses decreased $ 7,922 , or 1 % , for the twelve months ended december 31 , 2019 compared to the twelve months ended december 31 , 2018 , primarily due to a slight decrease in marketing and advertising expenses to promote the rainbow rangers and llama llama properties . direct operating costs include costs of our product sales , unamortizable post-production costs , film and television cost amortization expense , and participation expense related to agreements with various animation studios , post-production studios , writers , directors , musicians or other creative talent with which we are obligated to share net profits of the properties on which they have rendered services . direct operating costs for the twelve months ended december 31 , 2019 increased $ 3,031,775 , or 197 % , compared to the twelve months ended december 31 , 2018. during the twelve months ended december 31 , 2019 , we recorded film and television cost amortization expense of $ 2,230,024 and participation expense of $ 1,690,936 , compared to the twelve months ended december 31 , 2018 , where we recorded expenses of $ 1,079,723 and $ 397,988 , respectively . the increases in direct operating costs in the year ended december 31 , 2019 compared to the prior year reflect increases in film amortization expense , participation expense and dubbing costs related to the delivery of llama llama to netflix and the delivery of rainbow rangers
| 14,347 |
for additional information , please read note 20 , litigation , to our consolidated financial statements included in this report . multiple tecfidera generic entrants are now in the u.s. market and have deeply discounted prices compared to tecfidera . the generic competition for tecfidera significantly reduced our tecfidera revenues during the year ended december 31 , 2020 , and is expected to have a substantial negative impact on our tecfidera revenues for as long as there is generic competition . for additional information , please read the discussion under results of operations - product revenues - multiple sclerosis ( ms ) - fumarate below . business update regarding covid-19 the covid-19 pandemic continues to present a substantial public health and economic challenge around the world . the length of time and full extent to which the covid-19 pandemic directly or indirectly impacts our business , results of operations and financial condition depends on future developments that are highly uncertain , subject to change and are difficult to predict , including as a result of new information that may emerge concerning covid-19 and the actions taken to contain or treat covid-19 as well as the economic impact on local , regional , national and international customers and markets . we are monitoring the demand for our products , including the duration and degree to which we may see delays in starting new patients on a product due to hospitals diverting the resources that are necessary to administer certain of our products to care for covid-19 patients , including products , such as tysabri and spinraza , that are administered in a physician 's office or hospital setting . we may also see reduced demand for immunosuppressant therapies during the covid-19 pandemic . while we are currently continuing the clinical trials we have underway in sites across the globe , covid-19 precautions have impacted the timeline for some of our clinical trials and these precautions may , directly or indirectly , have a further impact on timing in the future . for example , our phase 3 study of biib093 for lhi , a severe form of ischemic stroke , has been delayed as this study involves administration of biib093 in an acute hospital setting . to help mitigate the impact of the covid-19 pandemic to our clinical trials , we are pursuing innovative approaches such as remote monitoring , remote patient visits and supporting home infusions . these alternative measures have resulted in an immaterial increase to the cost of the clinical trials underway . for additional information on the various risks posed by the covid-19 pandemic , please read item 7a . quantitative and qualitative disclosures about market risk and item 1a . risk factors included in this report . brexit effective january 31 , 2020 , the u.k. ceased to be a member state of the e.u. , a process known as brexit , and began a transition period , which expired on december 31 , 2020. in december 2020 the u.k. and the e.u . agreed on a trade and cooperation agreement , under which the e.u . and the u.k. will now form two separate markets governed by two distinct regulatory and legal regimes . the trade and cooperation agreement covers the general objectives and framework of the relationship between the u.k. and the e.u. , including as it relates to trade , transport and visas . notably , under the trade and cooperation agreement , u.k. service suppliers no longer benefit from automatic access to the entire e.u . single market , u.k. goods no longer benefit from the free movement of goods and there is no longer the free movement of people between the u.k. and the e.u . depending on the application of the terms of the trade and cooperation agreement , we could face new regulatory costs and challenges . we do not expect brexit to have a material impact on our consolidated results of operations as less than 4.0 % of our total product revenues in 2020 , 2019 and 2018 were derived from u.k. sales . however , we can not predict the direction brexit-related developments will take nor the impact of those developments on our european operations and the economies of the markets where we operate . brexit could lead to legal uncertainty and potentially divergent national laws and regulations as the u.k. determines which e.u . laws to replace or replicate , including u.k. competition laws . therefore , we will continue to monitor for developments in this area and assess any potential impacts on our business and results of operations . 53 table of contents story_separator_special_tag style= '' color : # 000000 ; font-family : 'franklin gothic book ' , sans-serif ; font-size:10pt ; font-weight:400 ; line-height:120 % '' > in january 2021 the fda extended the review period for the bla for aducanumab by three months . the updated pdufa action date is june 7 , 2021. as part of the ongoing review , we submitted a response to an information request by the fda , including additional analyses and clinical data , which the fda considered a major amendment to the application that will require additional time for review . in october 2020 the ema accepted for review the maa for aducanumab . in december 2020 the ministry of health , labor and welfare accepted for review the japanese new drug application for aducanumab . 2020 share repurchase program in october 2020 our board of directors authorized our 2020 share repurchase program , which is a program to repurchase up to $ 5.0 billion of our common stock . our 2020 share repurchase program does not have an expiration date . all share repurchases under our 2020 share repurchase program will be retired . 55 table of contents results of operations revenues revenues are summarized as follows : replace_table_token_6_th product revenues product revenues are summarized as follows : replace_table_token_7_th * fumarate includes tecfidera and vumerity . vumerity became commercially available in the u.s. in november 2019 . * * interferon includes avonex and plegridy . story_separator_special_tag nm not meaningful . 56 table of contents multiple sclerosis ( ms ) fumarate fumarate revenues include sales from tecfidera and vumerity . in october 2019 the fda approved vumerity for the treatment of rms and vumerity became commercially available in the u.s. in november 2019. for 2020 compared to 2019 , the 17.2 % decrease in u.s. fumarate revenues was primarily due to a decrease in tecfidera demand and price as a result of multiple tecfidera generic entrants entering the u.s. market during the year ended december 31 , 2020. this decrease was partially offset by an increase of approximately $ 60.0 million in vumerity sales , which became commercially available in the u.s. in november 2019. for 2020 compared to 2019 , the 3.3 % increase in rest of world fumarate revenues was primarily due to an increase in tecfidera sales volumes of 8.6 % , partially offset by pricing reductions in certain european countries and the unfavorable impact of foreign currency exchange . the increase in volumes was primarily due to continued strong patient growth in our e.u . direct markets , including italy , spain and the u.k. , as well as growth in japan and brazil . in june 2020 and september 2020 judgments were entered in favor of the defendants in the patent infringement proceedings relating to tecfidera orange-book listed patents pursuant to the hatch-waxman act in west virginia and delaware . we have appealed the judgments in both actions . for additional information , please read note 20 , litigation , to our consolidated financial statements included in this report . multiple tecfidera generic entrants are now in the u.s. market and have deeply discounted prices compared to tecfidera . the generic competition for tecfidera significantly reduced our tecfidera revenues during the year ended december 31 , 2020 , and is expected to have a substantial negative impact on our tecfidera revenues for as long as there is generic competition . we anticipate an increase in tecfidera sales volume in rest of world in 2021 , compared to 2020 , notwithstanding the increasing competition from additional treatments for ms and potential disruptions due , directly or indirectly , to the covid-19 pandemic . we expect an increase in vumerity sales volume in the u.s. , mostly driven by the continued launch of vumerity . for additional information on our collaboration arrangement with alkermes , please read note 18 , collaborative and other relationships , to our consolidated financial statements included in this report . interferon for 2020 compared to 2019 , the 10.7 % decrease in u.s. interferon revenues was primarily due to a decrease in interferon sales volumes of 12.0 % . the net decline in sales volumes reflects the continued decline of the interferon market as patients transition to other higher efficacy and oral ms therapies . for 2020 compared to 2019 , the 10.5 % decrease in rest of world interferon revenues was primarily due to a decrease in interferon sales volumes of 7.1 % , which negatively impacted comparative revenue of $ 48.1 million . we expect that interferon revenues will continue to decline in both the u.s. and rest of world markets in 2021 , compared to 2020 , as a result of increasing 57 table of contents competition from our other ms products as well as other treatments for ms , including biosimilars , and pricing reductions in certain european markets . avonex for 2020 , 2019 and 2018 u.s. avonex revenues totaled $ 1,083.4 million , $ 1,202.1 million and $ 1,420.2 million , respectively . for 2020 , 2019 and 2018 rest of world avonex revenues totaled $ 408.5 million , $ 463.8 million and $ 495.3 million , respectively . plegridy for 2020 , 2019 and 2018 u.s. plegridy revenues totaled $ 190.1 million , $ 224.5 million and $ 248.1 million , respectively . for 2020 , 2019 and 2018 rest of world plegridy revenues totaled $ 195.5 million , $ 211.4 million and $ 199.4 million , respectively . tysabri for 2020 compared to 2019 , the 5.3 % increase in u.s. tysabri revenues was primarily due to an increase in tysabri sales volume of 1.0 % and price increases , partially offset by higher discounts and allowance rates . for 2020 compared to 2019 , rest of world tysabri revenues remained flat , with stable volume and pricing . we anticipate tysabri sales volume to modestly increase on a global basis in 2021 , compared to 2020 , despite increasing competition from additional treatments for ms , including ocrevus . we believe that some tysabri infusions may be delayed due , directly or indirectly , to the covid-19 pandemic . we expect to continue to face price reductions in certain european markets . spinal muscular atrophy ( sma ) spinraza for 2020 compared to 2019 , the 15.6 % decrease in u.s. spinraza revenues was primarily due to a decrease in sales volumes of 15.0 % , resulting from increased competition as well as lower loading and maintenance doses due to the impact of site of care closures as a result of the covid-19 pandemic . for 2020 compared to 2019 , the 8.7 % increase in rest of world spinraza revenues was primarily due to a net increase in sales volumes of 16.8 % , which was reflective of the impact of a shift from loading to maintenance doses and the impact of site of care closures as a result of the covid-19 pandemic . this increase was partially lower net prices and the unfavorable impact of foreign currency exchange . in 2021 we expect that spinraza revenues will be subject to increased competition resulting in higher discontinuations and a lower rate of new patient starts combined with the impact of loading dose dynamics as patients transition to dosing once every four months and lower prices in certain rest of world countries . we believe that some spinraza doses may continue to be delayed due , directly or indirectly , to the covid-19 pandemic .
| million for 2020 , representing an increase of 9.5 % over $ 707.7 million in 2019. this increase was due to higher contract manufacturing revenues , primarily resulting from $ 346.2 million in revenues related to the delivery of the license for certain of our manufacturing-related intellectual property to a contract manufacturing customer . expenses total cost and expenses were $ 8,894.5 million for 2020 , representing an increase of 21.3 % from $ 7,335.3 million in 2019. this increase was primarily due to a $ 1,710.3 million , or 75.0 % , increase in research and development expense . ◦ the increase in research and development expense was primarily due to $ 1,893.3 million in charges recognized in connection with upfront payments associated with entering into our collaborations with sangamo , denali and sage . this increase was partially offset by : ◦ a 5.1 % decrease in amortization and impairment of acquired intangible assets ; and ◦ a $ 92.5 million gain recognized in 2020 associated with the divestiture of our hillerød , denmark manufacturing operations . as described below under financial condition , liquidity and capital resources : we generated $ 4,229.8 million of net cash flows from operations for 2020. cash , cash equivalents and marketable securities totaled approximately $ 3,382.2 million as of december 31 , 2020. we repurchased and retired approximately 22.4 million shares of our common stock at a cost of approximately $ 6.7 billion during 2020 under our 2020 , december 2019 and march 2019 share repurchase programs . acquisitions , collaborative and other relationships for additional information on our acquisitions , collaborative and other relationships discussed below , please read note 2 , acquisitions , note 18 , collaborative and other relationships , and note 19 , investments in variable interest entities , to our consolidated financial statements included in this report . biib118 acquisition in march 2020 we acquired biib118 , a novel cns-penetrant small molecule inhibitor of casein kinase 1 , for the potential
| 14,348 |
our success depends on our ability to address the rapid pace of change in mobile devices , and we must continuously collaborate with mobile device oems to incorporate our technologies . further , we rely on a small number of partnerships with key participants in the mobile market . if we are unable to maintain these key relationships , we may experience a decline in mobile devices incorporating our technologies . finally , we must continue to support the development and distribution of dolby content via various ecosystems . to the extent that oems do not incorporate our technologies in current and future products , our revenue could be impacted . consumer electronics highlights : we have an established presence in the home theater market across devices such as avrs , soundbars , blu-ray players , and dmas , through the inclusion of our dd+ technology , and increasingly through the inclusion of our dolby atmos technology , as well as our aac and he-aac technologies and related patent licensing programs . these hardware offerings can be paired with a growing array of dolby enabled content via ott services and blu-ray discs . in fiscal 2019 , the availability of devices compatible with dolby technologies gained momentum , as a number of streaming services indicated that they will be supporting dolby vision and dolby atmos enabled content . apple announced that its new content programming and video subscription service , apple tv+ , which is expected to be released in the market during calendar year 2019 , will support dolby vision and dolby atmos . in addition , disney 's new streaming service , disney+ , will support content in dolby vision and dolby atmos . additional ott services supporting the combined experience of dolby vision and dolby atmos include netflix , amazon , tencent , and iqiyi . with the growing list of global streaming partners supporting our technologies , there are now over 2,400 pieces of content available in dolby vision , and over 1,600 pieces available in dolby atmos . in addition , the first dolby atmos enabled smart speaker , the amazon echo studio , was announced in fiscal 2019. the availability of dolby-atmos enabled soundbars also continued to grow in fiscal 2019 as three of our partners , samsung , sony , and vizio , introduced their new lineup of soundbars . certain models are now available starting at $ 300. in general , as entry level price points decline , a wider range of consumers have the ability to purchase products incorporating dolby technologies . key challenges : we must continue to present compelling reasons for consumers to demand our technologies wherever they enjoy entertainment content , while promoting creation and broad availability of content in our formats . to the extent that oems do not incorporate our technologies in current and future products , our revenue could be impacted . personal computers story_separator_special_tag subscription fee . we continue to focus on expanding dolby voice 's availability to the global market for audio and video conferencing services . key challenges : our success in this market will depend on the number of service providers and enterprise customers we are able to attract , the volume of products that we are able to sell , and the volume of usage of the service . revenue from significant customers in fiscal 2019 , 2018 , and 2017 , we did not have any individual customers that accounted for more than 10 % of our total revenue . critical accounting policies and estimates our consolidated financial statements and accompanying notes are prepared in accordance with u.s. gaap , pursuant to sec rules and regulations . the preparation of these financial statements requires us to establish accounting policies and make certain estimates and assumptions that affect the reported amounts of assets and liabilities , revenue and expenses . the sec considers an accounting policy and estimate to be critical if it is both important to a company 's financial condition or results of operations and requires significant judgment by management in its application . on a regular basis , we evaluate our assumptions , judgments , and estimates , and historically , actual results have not differed significantly from them . if actual results or events differ materially from our judgments and estimates , our reported financial condition and results of operation for future periods could be materially affected . we have reviewed the selection and development of the critical accounting policies and estimates discussed below with the audit committee of our board of directors . revenue recognition we derive our revenue primarily from the licensing of our technologies and patents . in determining how revenue should be recognized , a five-step process is used , which requires judgment and estimates within the revenue recognition process . generally , revenue is recognized upon transfer of control of promised products , services or intellectual property and technologies ( “ ip ” ) rights to customers in an amount that reflects the consideration that we expect to receive in exchange for those products , services or licensing of the ip rights . the primary judgments include estimating sales-based revenues in advance of receiving statements from our licensees , estimating variable consideration , identifying the performance obligations in the contract , and determining whether the performance obligations are distinct , and allocating consideration accordingly . most of our licensing arrangements are structured as sales-based whereby we are paid a unit-based royalty . the unit based sales data that triggers the royalty obligation is generally reported to us in the quarter after triggering the royalty obligation . we apply the royalty exception to these arrangements , which requires that we recognize sales-based royalties at the later of when the sales occur based on our estimates or the completion of our performance obligations . these estimates involve the use of historical data and judgment for several key attributes including industry estimates of expected shipments , the percentage of markets using our technologies , and average sale prices . story_separator_special_tag generally , our estimates represent the current period 's shipments for which we expect our licensees to submit royalty statements in the following quarter . upon receipt of royalty statements from the licensees with the actual reporting of sales-based royalties that we previously estimated , we record a favorable or unfavorable adjustment based on the difference , if any , between estimated and actual sales . we also enter into fixed and guaranteed licensing fees arrangements , which require the licensee to pay a fixed , non-refundable fee independent of the actual sales . in these cases , control is transferred and the transaction price - the amount we expect to be entitled to in exchange for the license right - is recognized upon the later of contract execution or the effective date . transaction price is determined at contract execution and , to the extent variable consideration applies , is updated each subsequent reporting period until the completion of the contract . in addition , we evaluate whether a significant financing component exists when we recognize revenue in advance of customer payments that occur over time and extend beyond one year . in general , if the payment arrangements extend beyond the first year of the contract , we treat a portion of the payments as a financing component . the discount rate used for 32 each arrangement reflects the rate that would be used in a separate financing transaction between us and the licensee at contract inception and takes into account the credit characteristics of the licensee and market interest rates as of the date of the agreement . as such , the amount of fixed fee revenue recognized at the beginning of the license term will be reduced by the calculated financing component . the portion related to the financing component is recorded as interest income , and is not material to our consolidated financial statements . our arrangements often include promises to transfer multiple performance obligations , such as license rights , multiple products , pcs , or services . in such arrangements where we have identified distinct performance obligations within the contract , we determine the ssp for each distinct performance obligation , the timing of revenue recognition for each distinct performance obligation and allocate the transaction price accordingly . ssps for distinct performance obligations are based on direct observable pricing . in instances where the ssp is not directly observable , such as when we do not sell the product or service separately , we determine the ssp using information that may include market conditions , entity-specific factors and other inputs . in some licensing arrangements , we use the residual approach when the ssp for one or more promised goods or services is highly variable or uncertain . under the residual approach , the unallocated portion of the transaction price can be allocated to a delivered performance obligation . for additional information , see note 3 “ revenue recognition ” to our consolidated financial statements in part ii , item 8 of this annual report . impact of new accounting standards not yet adopted leases . in february 2016 , the fasb issued asu 2016-02 , leases ( topic 842 ) , which amends the existing accounting standards for leases . under the new standard , a lessee will be required to recognize a lease liability and right-of-use asset for most leases . the new standard also modifies the classification criteria and accounting for sales-type and direct financing leases , and requires additional disclosures to enable users of financial statements to understand the amount , timing , and uncertainty of cash flows arising from leases . we will adopt the new standard using the modified retrospective transition method , thereby recognizing the cumulative effect of initially applying topic 842 as an adjustment to opening retained earnings on the adoption date , without revising the balances in comparative periods . we have evaluated the impact of topic 842 , and upon adoption , we will recognize a lease liability and right-of-use asset for each of our existing lease arrangements , which we anticipate to be material on our consolidated balance sheet . adoption of the standard will not have a material impact on our consolidated income statement or our consolidated statement of cash flow . we plan to elect to utilize the transition guidance within the new standard which allows us to retain the historical lease classification and initial direct costs for any leases that exist prior to adoption of the standard . all new leases executed subsequent to adoption will be evaluated , and accounted for under topic 842. asu 2016-02 is effective for dolby beginning september 28 , 2019. we are still completing our assessment of the remaining lease term of our existing leases , assessing the completeness of our population of leases , and finalizing our determination of the discount rate used to calculate the right of use asset and lease liability . income taxes : comprehensive income . on december 22 , 2017 , the u.s. government enacted comprehensive tax legislation commonly referred to as the tax cuts and jobs act ( `` tax act '' ) . in february 2018 , the fasb issued asu 2018-02 , income statement - reporting comprehensive income ( topic 220 ) : reclassification of certain tax effects from accumulated other comprehensive income , which allows a reclassification from accumulated other comprehensive income to retained earnings for stranded tax effects resulting from the tax act and requires entities to provide certain disclosures regarding stranded tax effects . the asu is effective for dolby beginning september 28 , 2019. we do not believe that this standard will have a material impact on our consolidated financial statements . collaborative arrangements . in november 2018 , the fasb issued asu 2018-18 , collaborative arrangements ( topic 808 ) : clarifying the interaction between topic 808 and topic 606 , which clarifies that certain transactions between participants in a collaborative arrangement should be accounted for under asc 606 when the counterparty is a customer .
| we also generate revenue from the automotive industry primarily through disc playback devices as well as other elements of the entertainment system . key challenges : the gaming console market continues to be challenged by competition from mobile devices and gaming pcs , which have faster refresh cycles and appeal to a broader consumer base . this may impact our future revenues . cinema and other cinema products & services highlights : to help enable the playback of content in dolby formats , we offer a range of servers and audio processors to cinema exhibitors globally . we continue to see adoption of dolby atmos by studios , content creators , post-production facilities , and exhibitors . at the end of fiscal 2019 , there were over 5,000 dolby atmos-enabled screens installed or committed across 90 countries around the world , and over 1,500 dolby atmos theatrical titles announced or released . we also offer a variety of newer cinema products , which include the ims3000 , an integrated imaging and audio server with dolby atmos , the dolby multichannel amplifier , and our 3-axis speaker . these products allow us to offer exhibitors a more complete dolby atmos solution that is often more cost effective than what was previously available to them . key challenges : demand for our cinema products is dependent upon industry and economic cycles and box office performance generally , along with our ability to develop and introduce new technologies , further our relationships with content creators , and promote new cinematic audio and imaging experiences . a significant portion of our growth opportunity lies in international markets , such as china , which are subject to economic risks as well as geo-political risks . to the extent that these factors persist or worsen , we may be faced with pricing pressures or competing technologies , our revenue may be affected . dolby cinema highlights : in fiscal 2019 , we continued to expand our global presence for dolby cinema . at the end of the year , we had over 230 dolby cinema locations in operation
| 14,349 |
in performance-based fee billing arrangements , fees are tied to the attainment of contractually defined objectives . we enter into performance-based engagements in essentially two forms . first , we generally earn fees that are directly related to the savings formally acknowledged by the client as a result of adopting our recommendations for improving operational and cost effectiveness in the areas we review . second , we have performance-based engagements in which we earn a success fee when and if certain predefined outcomes occur . often , performance-based fees supplement our time-and-expense or fixed-fee engagements . we do not recognize revenues under performance-based billing arrangements until all related performance criteria are met . performance-based fee revenues represented 8.7 % , 17.2 % , and 19.6 % of our revenues in 2015 , 2014 , and 2013 , respectively . performance-based fee engagements may cause significant variations in quarterly revenues and operating results depending on the timing of achieving the performance-based criteria . clients that have purchased one of our software licenses can pay an annual fee for software support and maintenance . we also generate subscription revenue from our cloud-based analytic tools and solutions . software support and maintenance and subscription-based revenues are recognized ratably over the support or subscription period , which ranges from one to three years . these fees are billed in advance and included in deferred revenues until recognized . software support and maintenance and subscription-based revenues represented 4.6 % , 4.2 % , and 4.2 % of our revenues in 2015 , 2014 , and 2013 , respectively . our quarterly results are impacted principally by our full-time consultants ' utilization rate , the billing rates we charge our clients , the number of our revenue-generating professionals who are available to work , and the amount of performance-based fees recognized , which often vary significantly between quarters . our utilization rate can be negatively affected by increased hiring because there is generally a 22 transition period for new professionals that results in a temporary drop in our utilization rate . our utilization rate can also be affected by seasonal variations in the demand for our services from our clients . for example , during the third and fourth quarters of the year , vacations taken by our clients can result in the deferral of activity on existing and new engagements , which would negatively affect our utilization rate . the number of business work days is also affected by the number of vacation days taken by our consultants and holidays in each quarter . we typically have fewer business work days available in the fourth quarter of the year , which can impact revenues during that period . time-and-expense engagements do not provide us with a high degree of predictability as to performance in future periods . unexpected changes in the demand for our services can result in significant variations in utilization and revenues and present a challenge to optimal hiring and staffing . moreover , our clients typically retain us on an engagement-by-engagement basis , rather than under long-term recurring contracts . the volume of work performed for any particular client can vary widely from period to period . reimbursable expenses reimbursable expenses that are billed to clients , primarily relating to travel and out-of-pocket expenses incurred in connection with engagements , are included in total revenues and reimbursable expenses , and typically an equivalent amount of these expenses are included in total direct costs and reimbursable expenses . reimbursable expenses also include those subcontractors who are billed to our clients at cost . we manage our business on the basis of revenues before reimbursable expenses . we believe this is the most accurate reflection of our services because it eliminates the effect of reimbursable expenses that we bill to our clients at cost . total direct costs our most significant expenses are costs classified as total direct costs . these total direct costs primarily include salaries , performance bonuses , payroll taxes , and benefits for revenue-generating professionals , as well as technology costs and fees paid to independent contractors that we retain to supplement our revenue-generating professionals , typically on an as-needed basis for specific client engagements . direct costs also include share-based compensation , which represents the cost of restricted stock and performance-based share awards granted to our revenue-generating professionals . compensation expense for restricted stock awards and performance-based share awards is recognized ratably using either the graded vesting attribution method or the straight-line attribution method , as appropriate , over the requisite service period , which is generally three to four years . as a result of the granting of restricted stock awards , performance-based share awards , and anticipated future awards , share-based compensation expense may increase in the future . total direct costs also include amortization of intangible assets primarily relating to customer contracts , certain customer relationships , and technology and software , as well as internally developed software costs . operating expenses and other operating gains our operating expenses include selling , general and administrative expenses , which consist primarily of salaries , performance bonuses , payroll taxes , benefits , and share-based compensation for our support personnel . as a result of the granting of restricted stock awards and performance-based share awards and anticipated future awards , share-based compensation expense may increase in the future . also included in this category are sales and marketing related expenses , rent and other office related expenses , professional fees , recruiting and training expenses , restructuring charges , and litigation and other gains and losses . other operating expenses include depreciation and certain amortization expenses not included in total direct costs . segment results segment operating income consists of the revenues generated by a segment , less the direct costs of revenue and selling , general and administrative costs that are incurred directly by the segment . unallocated corporate costs include corporate costs related to administrative functions that are performed in a centralized manner that are not attributable to a particular segment . story_separator_special_tag these administrative function costs include corporate office support costs , certain office facility costs , costs relating to accounting and finance , human resources , legal , marketing , information technology , and company-wide business development functions , as well as costs related to overall corporate management . 23 results of operations the following table sets forth , for the periods indicated , selected segment and consolidated operating results and other operating data . the results of operations for acquired businesses have been included in our results of operations since the date of their respective acquisition . all of the results of operations for the huron legal segment have been reclassified as discontinued operations for the periods presented . see note 3 `` discontinued operations '' within the notes to our consolidated financial statements for additional information on the huron legal divestiture . replace_table_token_5_th 24 replace_table_token_6_th ( 1 ) consists of our full-time professionals who provide consulting services and generate revenues based on the number of hours worked . ( 2 ) utilization rate for our full-time billable consultants is calculated by dividing the number of hours all of our full-time billable consultants worked on client assignments during a period by the total available working hours for all of these consultants during the same period , assuming a forty-hour work week , less paid holidays and vacation days . ( 3 ) average billing rate per hour for our full-time billable consultants is calculated by dividing revenues for a period by the number of hours worked on client assignments during the same period . ( 4 ) the huron business advisory segment includes the operations of rittman mead india , a business we acquired effective july 1 , 2015. absent the impact of rittman mead india , the average billing rate per hour for huron business advisory for the year ended december 31 , 2015 would have been $ 256 . ( 5 ) consists of consultants who work variable schedules as needed by our clients , including full-time employees who provide software support and maintenance services to our clients , and cultural transformation consultants within our studer group solution , which include coaches and their support staff . n/m - not meaningful non-gaap measures we also assess our results of operations using certain non-gaap financial measures . these non-gaap financial measures differ from gaap because the non-gaap financial measures we calculate to measure adjusted earnings before interest , taxes , depreciation and amortization ( “ ebitda ” ) , adjusted net income from continuing operations , and adjusted diluted earnings per share from continuing operations exclude a number of items required by gaap , each discussed below . these non-gaap financial measures should be considered in addition to , and not as a substitute for or superior to , any measure of performance , cash flows , or liquidity prepared in accordance with gaap . our non-gaap financial measures may be defined differently from time to time and may be defined differently than similar terms used by other companies , and accordingly , care should be exercised in understanding how we define our non-gaap financial measures . our management uses the non-gaap financial measures to gain an understanding of our comparative operating performance , for example when comparing such results with previous periods or forecasts . these non-gaap financial measures are used by management in their financial and operating decision making because management believes they reflect our ongoing business in a manner that allows for meaningful period-to-period comparisons . management also uses these non-gaap financial measures when publicly providing our business outlook , for internal management purposes , and as a basis for evaluating potential acquisitions and dispositions . we believe that these non-gaap financial measures provide useful information to investors and others in understanding and evaluating huron 's current operating performance and future prospects in the same manner as management does and in comparing in a consistent manner huron 's current financial results with huron 's past financial results . 25 the reconciliations of these financial measures from gaap to non-gaap are as follows ( in thousands ) : replace_table_token_7_th replace_table_token_8_th these non-gaap financial measures include adjustments for the following items : restructuring charges : we have incurred charges due to the restructuring of various parts of our business . these restructuring charges have primarily consisted of costs associated with office space consolidations , including the accelerated depreciation of certain leasehold improvements , and severance charges . we have excluded the effect of the restructuring charges from our non-gaap measures because the amount of each restructuring charge is significantly affected by the timing and size of the restructured business or component of a business . litigation and other gains , net : we have excluded the effects of the net litigation gain and remeasurement gain related to a contingent acquisition liability recorded in 2015 , the remeasurement gain related to a contingent acquisition liability recorded in 2014 , and the net litigation gains recorded in 2013 to permit comparability with periods that were not impacted by these items . amortization of intangible assets : we have excluded the effect of amortization of intangible assets from the calculation of adjusted net income from continuing operations presented above . amortization of intangibles is inconsistent in its amount and frequency and is significantly affected by the timing and size of our acquisitions . non-cash interest on convertible notes : we incur non-cash interest expense relating to the implied value of the equity conversion component of our $ 250 million principal amount of 1.25 % convertible senior notes due 2019 ( the “ convertible notes ” ) that we issued in september 2014. the value of the equity conversion component is treated as a debt discount and amortized to interest expense over the life of the convertible notes using the effective interest rate method . we exclude this non-cash interest expense that does not represent cash interest payments made to our note holders from the calculation of adjusted net income from continuing operations .
| this decrease in revenue was largely driven by lower performance-based fees , a decrease in revenue in our performance improvement solutions , and project timing , all compared to the prior year . performance-based fee revenue was $ 52.3 million during 2015 compared to $ 103.2 million during 2014. the level of performance-based fees earned may vary based on our clients ' risk sharing preferences and the mix of services we provide . performance-based fee arrangements may cause significant variations in revenues , operating results , and average billing rates due to our level of execution and the timing of achievement of the performance-based criteria . operating income huron healthcare segment operating income increased $ 10.5 million , or 6.6 % , to $ 169.6 million for the year ended december 31 , 2015 , from $ 159.0 million for the year ended december 31 , 2014 . the huron healthcare segment operating margin , defined as segment operating income expressed as a percentage of segment revenues , decreased slightly to 37.9 % in 2015 from 38.2 % in 2014 . the slight decrease in this segment 's operating margin was primarily attributable to increases , as a percentage of revenues , in salaries and related expenses for our revenue-generating professionals , salaries and related expenses and bonus expense for our support personnel , intangible asset amortization expense related to our acquisition of studer group , and product and event costs during 2015 compared to the prior year . the unfavorable impact of these items was largely offset by a decrease in bonus expense for our revenue-generating professionals , as well as a decrease in technology expense , during 2015 compared to 2014. huron education and life sciences revenues huron education and life sciences segment revenues increased $ 22.0 million , or 15.1 % , to $ 167.9 million for the year ended december 31 , 2015 , from $ 146.0 million for the year ended december 31 , 2014 . revenues from fixed-fee engagements , time-and-expense engagements , performance-based arrangements , and software support and maintenance
| 14,350 |
the u.s. economy remains healthy and tax reform has increased earnings expectations . the european economy continues to recover . corporate cash balances remain high , and borrowing costs remain low for companies with strong credit ratings . although market volatility may affect our business from time to time , the longer-term trends appear to remain favorable for both of our businesses . our outlook with respect to our financial advisory and asset management businesses is described below . financial advisory – the fundamentals for continued m & a activity appear to remain in place , and we believe our financial advisory business is in a strong competitive position . demand continues for expert , independent strategic advice that can be levered across geographies and our range of advisory capabilities . the global scale and breadth of our financial advisory business allows us to advise on large , complex cross-border transactions and restructuring transactions across a variety of industries . in addition , we believe our businesses throughout the emerging markets position us for growth in these markets , while enhancing our relationships with , and the services that we can provide to , clients in other economies . in the third quarter of 2016 , we expanded our north american financial advisory business through the acquisition of an independent financial advisory firm based in canada . in addition , in october 2016 , we acquired the portion of mba lazard that we did not previously own , thereby fully integrating our latin american operations . we believe that these transactions have augmented the strength of our financial advisory business throughout the americas . asset management – in the short to intermediate term , we expect most investor demand will come from defined benefit and defined contribution plans in the developed economies because of their sheer scope and size . over the longer term , we expect an increasing share of our aum to come from the developing economies in asia , latin america and the middle east , as their retirement systems evolve and individual wealth is increasingly deployed in the financial markets . our global footprint is already well established in the developed economies and we expect our business in the developing economies will slowly expand . given our diversified investment platform and our ability to provide investment solutions for a global mix of clients , we believe we are positioned to benefit from growth that may occur in the asset management industry . we are continually developing and seeding new investment strategies 39 that extend our existing platforms and assessing potential product acquisitions or other inorganic growth opportunities . recent examples of growth initiatives include the following investment strategies : various quantitative equity strategies , various multi-asset strategies , a real assets strategy , an international value strategy and a global equity franchise strategy . we operate in a very competitive and rapidly changing environment . new risks and uncertainties emerge continuously , and it is not possible for our management to predict all risks and uncertainties , nor can we assess the impact of all potentially applicable factors on our business or the extent to which any factor , or combination of factors , may cause actual results to differ materially from those contained in any forward-looking statements . see item 1a , “ risk factors ” in this form 10-k. furthermore , net income and revenue in any period may not be indicative of full-year results or the results of any other period and may vary significantly from year to year and quarter to quarter . overall , we continue to focus on the development of our business , including the generation of stable revenue growth , earnings growth and shareholder returns , the evaluation of potential growth opportunities , the prudent management of our costs and expenses , the efficient use of our assets and the return of capital to our shareholders . certain data with respect to our financial advisory and asset management businesses is included below . financial advisory as reflected in the following table , which sets forth global m & a industry statistics , the value and number of all completed transactions , including completed transactions with values greater than $ 500 million , decreased in 2017 as compared to 2016. with respect to announced m & a transactions , the value of all transactions , including announced transactions with values greater than $ 500 million , also decreased in 2017 as compared to 2016 , while the number of all such transactions increased as compared to 2016. replace_table_token_7_th source : dealogic as of january 6 , 2018. global restructuring activity during 2017 , as measured by the number of corporate defaults , decreased as compared to 2016. the number of defaulting issuers decreased to 90 in 2017 , according to moody 's investors service , inc. , as compared to 142 in 2016. net revenue trends in financial advisory for strategic advisory and restructuring are generally correlated to the level of completed industry-wide m & a transactions and restructuring transactions occurring subsequent to corporate debt defaults , respectively . however , deviations from this relationship can occur in any given year for a 40 number of reasons . for instance , our results can diverge from industry-wide activity where there are material variances from the level of industry-wide m & a activity in a particular market where lazard has significant market share , or regarding the relative number of our advisory engagements with respect to larger-sized transactions , and where we are involved in non-public or sovereign advisory assignments . story_separator_special_tag for example , our strategic advisory revenue , which includes m & a advisory , capital advisory , capital raising , sovereign advisory and shareholder advisory revenue , increased 2 % in 2017 as compared to 2016. the industry statistics for global m & a transactions described above reflect a 10 % decrease in the value of all completed transactions in 2017 as compared to 2016. for m & a deals with values greater than $ 500 million , the value of completed transactions in 2017 decreased 11 % as compared to 2016. in addition , with respect to our restructuring activity , revenue increased 30 % in 2017 as compared to 2016 , in contrast to a 37 % decrease in global default activity in 2017 as compared to 2016. asset management the percentage change in major equity market indices ( i ) at december 31 , 2017 , as compared to such indices at december 31 , 2016 , and ( ii ) at december 31 , 2016 , as compared to such indices at december 31 , 2015 , is shown in the table below . replace_table_token_8_th the fees that we receive for providing investment management and advisory services are primarily driven by the level of aum and the nature of the aum product mix . accordingly , market movements , foreign currency exchange rate volatility and changes in our aum product mix will impact the level of revenues we receive from our asset management business when comparing periodic results . a substantial portion of our aum is invested in equities . movements in aum during the period generally reflect the changes in equity market indices . our aum at december 31 , 2017 increased 26 % versus aum at december 31 , 2016 , due to market and foreign exchange appreciation and net inflows . average aum for 2017 increased 16 % as compared to average aum in 2016. financial statement overview net revenue the majority of lazard 's financial advisory net revenue historically has been earned from the successful completion of m & a transactions , strategic advisory matters , restructuring and capital structure advisory services , capital raising and similar transactions . the main drivers of financial advisory net revenue are overall m & a activity , the level of corporate debt defaults and the environment for capital raising activities , particularly in the industries and geographic markets in which lazard focuses . in some client engagements , often those involving financially distressed companies , revenue is earned in the form of retainers and similar fees that are contractually agreed upon with each client for each assignment and are not necessarily linked to the completion of a transaction . in addition , lazard also earns fees from providing strategic advice to clients , with such fees not being dependent on a specific transaction , and may also earn fees in connection with public and private securities offerings . significant fluctuations in financial advisory net revenue can occur over the course of any given year , because a significant portion of such net revenue is earned upon the successful completion of a transaction , restructuring or capital raising activity , the timing of which is uncertain and is not subject to lazard 's control . 41 lazard 's asset management segment principally includes lam , lfg and edgewater . asset management net revenue is derived from fees for investment management and advisory services provided to clients . as noted above , the main driver of asset management net revenue is the level and product mix of aum , which is generally influenced by the performance of the global equity markets and , to a lesser extent , fixed income markets as well as lazard 's investment performance , which impacts its ability to successfully attract and retain assets . as a result , fluctuations ( including timing thereof ) in financial markets and client asset inflows and outflows have a direct effect on asset management net revenue and operating income . asset management fees are generally based on the level of aum measured daily , monthly or quarterly , and an increase or reduction in aum , due to market price fluctuations , currency fluctuations , changes in product mix , or net client asset flows will result in a corresponding increase or decrease in management fees . the majority of our investment advisory contracts are generally terminable at any time or on notice of 30 days or less . institutional and individual clients , and firms with which we have strategic alliances , can terminate their relationship with us , reduce the aggregate amount of aum or shift their funds to other types of accounts with different rate structures for a number of reasons , including investment performance , changes in prevailing interest rates and financial market performance . in addition , as lazard 's aum includes significant amounts of assets that are denominated in currencies other than u.s. dollars , changes in the value of the u.s. dollar relative to foreign currencies will impact the value of lazard 's aum and the overall amount of management fees generated by the aum . fees vary with the type of assets managed and the vehicle in which they are managed , with higher fees earned on equity assets and alternative investment funds , such as hedge funds and private equity funds , and lower fees earned on fixed income and cash management products . the company earns performance-based incentive fees on various investment products , including traditional products and alternative investment funds , such as hedge funds and private equity funds . for hedge funds , incentive fees are calculated based on a specified percentage of a fund 's net appreciation , in some cases in excess of established benchmarks or thresholds . the company records incentive fees on traditional products and hedge funds at the end of the relevant performance measurement period , when potential uncertainties regarding the ultimate realizable amounts have been determined .
| adjusted compensation and benefits expense ( which excludes certain items and which we believe allows for improved comparability between periods , as described above ) was $ 1,481 million , an increase of $ 156 million , or 12 % , as compared to $ 1,325 million in 2016. the ratio of adjusted compensation and benefits expense to operating revenue was 55.8 % for 2017 , as compared to 56.5 % for 2016. awarded compensation and benefits expense in 2017 was $ 1,476 million , an increase of $ 159 million , or 12 % , when compared to $ 1,317 million in 2016. the ratio of awarded compensation and benefits expense to operating revenue was 55.6 % and 56.2 % for 2017 and 2016 , respectively . the year-end deferred incentive compensation awarded for 2017 was $ 351 million , representing an increase of $ 9 million , or 2 % , as compared to 2016. as described above , when analyzing compensation and benefits expense on a full-year basis , we believe that awarded compensation and benefits expense provides the most meaningful basis for comparison of compensation and benefits expense between present , historical and future years . non-compensation expense increased $ 59 million , or 13 % , as compared to 2016 , primarily due to expenses associated with the erp system implementation and expenses related to office space reorganization , as well as higher mutual fund service fees related to the growth in aum and higher marketing and business development expenses . adjusted non-compensation expense , which excludes non-compensation costs related to the erp system implementation , office space reorganization and noncontrolling interests , increased $ 27 million , or 6 % , as compared to 2016. the ratio of adjusted non-compensation expense to operating revenue was 17.4 % for 2017 , as compared to 18.5 % in 2016 . 48 amortization and other acquisition-related costs decreased $ 26 million as compared to 2016 , primarily due to the change in fair value of the contingent consideration in 2016 associated with the edgewater business acquisition . the contingent consideration associated with the edgewater business acquisition was settled during 2016. the tax act reduced the u.s. corporate tax rate from 35 % to 21 % , which required us to remeasure the tax receivable agreement obligation . as a result of the change in the u.s. corporate tax rate , we reduced the tax receivable agreement obligation by $ 203 million in the fourth quarter of 2017 and recorded a $ 203 million benefit pursuant to the tax receivable agreement ( see note 18 of notes to consolidated financial statements for additional information ) . operating income increased $ 308 million , or 60 % , as compared to 2016. in 2017 , operating income included the
| 14,351 |
director independence the otc bulletin board on which our common stock is quoted on does not have any director independence requirements . we have also not developed a definition of independence , as each of our three directors occupies one or more executive officer positions and would therefore not qualify as independent . we may appoint additional directors in the future , at which time we plan to develop a definition of independence and scrutinize our board of directors with regard to this definition . item 14. principal accountant fees and services the following table sets forth the fees for professional services rendered by our auditors in connection with the audit of our financial statements for the years ended june 30 , 2010 and 2009 and the review of our quarterly financial statements during such years , as well as any other fees billed for services rendered by our auditors during these periods : audit fees $ 61,000 audit-related fees $ 0 tax fees $ 0 all other fees $ 0 total $ 61,000 since our inception , our board of directors , performing the duties of the audit committee , has reviewed all audit fees and non audit-related fees at least annually . the board , acting as the audit committee , pre-approved all audit related services for the year ended june 30 , 2010 . 19 part iv item 15. exhibits , financial statement schedules financial statements see page f-1 . financial statement schedules none . the financial statement schedules are omitted because they are inapplicable or the requested information is shown in our financial statements or the notes related thereto . exhibits exhibit number exhibit description 3.1 articles of merger and plan of merger filed with the nevada secretary of state on september 15 , 2009 ( 1 ) 10.1 share exchange agreement with agr stone & tools usa , inc. dated july 21 , 2009 ( 2 ) 10.2 share exchange agreement with agr stone & tools usa , inc. dated october 29 , 2009 ( 3 ) 31.1 certification of the chief executive officer pursuant to rule 13a-14 ( a ) or rule 15d-14 ( a ) promulgated under the securities exchange act of 1934 , as adopted pursuant to section 302 of the sarbanes-oxley act of 2002 31.2 certification of the chief financial officer pursuant to rule 13a-14 ( a ) or rule 15d-14 ( a ) promulgated under the securities exchange act of 1934 , as adopted pursuant to section 302 of the sarbanes-oxley act of 2002 32.1 certification of the chief executive officer pursuant to 18 u.s.c . 1350 , as adopted pursuant to section 906 of the sarbanes-oxley act of 2002 32.2 certification of the chief financial officer pursuant to 18 u.s.c . 1350 , as adopted pursuant to section 906 of the sarbanes-oxley act of 2002 ( 1 ) included as an exhibit to our current report on form 8-k filed on september 16 , 2009 . ( 2 ) included as an exhibit to our current report on form 8-k filed on july 27 , 2009 . ( 3 ) included as an exhibit to our current report on form 8-k filed on november 2 , 2009 . 20 signatures pursuant to the requirements of section 13 or 15 ( d ) of the exchange act , the registrant has duly caused this report to be signed on its behalf by the undersigned , thereunto duly authorized . date : september 28 , 2010 agr tools , inc. by : rock rutherford rock rutherford president , chief executive officer , director pursuant to the requirements of the exchange act , this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated . signature title date rock rutherford president , chief executive officer , director september 28 , 2010 rock rutherford michael killman chief financial officer , principal accounting officer september 28 , 2010 michael killman john kuykendall secretary , treasurer , director september 28 , 2010 john kuykendall michael todd rutherford vice president of information technology , director september 28 , 2010 michael todd rutherford 21 story_separator_special_tag the following discussion should be read in conjunction with our consolidated financial statements for the fiscal year ended june 30 , 2010 , including the notes thereto , appearing elsewhere in this annual report . the discussions of results , causes and trends should not be construed to imply any conclusion that these results or trends will necessarily continue into the future . as a result of the completion of our reverse merger with agr usa , on may 27 , 2010 , we adopted june 30 as our fiscal year end to coincide with the fiscal year end of agr usa . story_separator_special_tag additional explanatory paragraph in note 1 which identifies issues that raise substantial doubt about our ability to continue as a going concern . our financial statements do not include any adjustments that might result from the outcome of this uncertainty . off-balance sheet arrangements as of september 28 , 2010 we have no significant off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition , changes in our financial condition , revenues or expenses , results of operations , liquidity , capital expenditures or capital resources that are material to our stockholders . critical accounting policies our financial statements are affected by the accounting policies used and the estimates and assumptions made by management during their preparation . a complete summary of these policies is included in note 2 of the notes to our financial statements for the fiscal year ended june 30 , 2010. we have identified below the accounting policies that are of particular importance in the presentation of our financial position , results of operations and cash flows , and which require the application of significant judgment by management . reclassification in story_separator_special_tag director independence the otc bulletin board on which our common stock is quoted on does not have any director independence requirements . we have also not developed a definition of independence , as each of our three directors occupies one or more executive officer positions and would therefore not qualify as independent . we may appoint additional directors in the future , at which time we plan to develop a definition of independence and scrutinize our board of directors with regard to this definition . item 14. principal accountant fees and services the following table sets forth the fees for professional services rendered by our auditors in connection with the audit of our financial statements for the years ended june 30 , 2010 and 2009 and the review of our quarterly financial statements during such years , as well as any other fees billed for services rendered by our auditors during these periods : audit fees $ 61,000 audit-related fees $ 0 tax fees $ 0 all other fees $ 0 total $ 61,000 since our inception , our board of directors , performing the duties of the audit committee , has reviewed all audit fees and non audit-related fees at least annually . the board , acting as the audit committee , pre-approved all audit related services for the year ended june 30 , 2010 . 19 part iv item 15. exhibits , financial statement schedules financial statements see page f-1 . financial statement schedules none . the financial statement schedules are omitted because they are inapplicable or the requested information is shown in our financial statements or the notes related thereto . exhibits exhibit number exhibit description 3.1 articles of merger and plan of merger filed with the nevada secretary of state on september 15 , 2009 ( 1 ) 10.1 share exchange agreement with agr stone & tools usa , inc. dated july 21 , 2009 ( 2 ) 10.2 share exchange agreement with agr stone & tools usa , inc. dated october 29 , 2009 ( 3 ) 31.1 certification of the chief executive officer pursuant to rule 13a-14 ( a ) or rule 15d-14 ( a ) promulgated under the securities exchange act of 1934 , as adopted pursuant to section 302 of the sarbanes-oxley act of 2002 31.2 certification of the chief financial officer pursuant to rule 13a-14 ( a ) or rule 15d-14 ( a ) promulgated under the securities exchange act of 1934 , as adopted pursuant to section 302 of the sarbanes-oxley act of 2002 32.1 certification of the chief executive officer pursuant to 18 u.s.c . 1350 , as adopted pursuant to section 906 of the sarbanes-oxley act of 2002 32.2 certification of the chief financial officer pursuant to 18 u.s.c . 1350 , as adopted pursuant to section 906 of the sarbanes-oxley act of 2002 ( 1 ) included as an exhibit to our current report on form 8-k filed on september 16 , 2009 . ( 2 ) included as an exhibit to our current report on form 8-k filed on july 27 , 2009 . ( 3 ) included as an exhibit to our current report on form 8-k filed on november 2 , 2009 . 20 signatures pursuant to the requirements of section 13 or 15 ( d ) of the exchange act , the registrant has duly caused this report to be signed on its behalf by the undersigned , thereunto duly authorized . date : september 28 , 2010 agr tools , inc. by : rock rutherford rock rutherford president , chief executive officer , director pursuant to the requirements of the exchange act , this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated . signature title date rock rutherford president , chief executive officer , director september 28 , 2010 rock rutherford michael killman chief financial officer , principal accounting officer september 28 , 2010 michael killman john kuykendall secretary , treasurer , director september 28 , 2010 john kuykendall michael todd rutherford vice president of information technology , director september 28 , 2010 michael todd rutherford 21 story_separator_special_tag the following discussion should be read in conjunction with our consolidated financial statements for the fiscal year ended june 30 , 2010 , including the notes thereto , appearing elsewhere in this annual report . the discussions of results , causes and trends should not be construed to imply any conclusion that these results or trends will necessarily continue into the future . as a result of the completion of our reverse merger with agr usa , on may 27 , 2010 , we adopted june 30 as our fiscal year end to coincide with the fiscal year end of agr usa . story_separator_special_tag additional explanatory paragraph in note 1 which identifies issues that raise substantial doubt about our ability to continue as a going concern . our financial statements do not include any adjustments that might result from the outcome of this uncertainty . off-balance sheet arrangements as of september 28 , 2010 we have no significant off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition , changes in our financial condition , revenues or expenses , results of operations , liquidity , capital expenditures or capital resources that are material to our stockholders . critical accounting policies our financial statements are affected by the accounting policies used and the estimates and assumptions made by management during their preparation . a complete summary of these policies is included in note 2 of the notes to our financial statements for the fiscal year ended june 30 , 2010. we have identified below the accounting policies that are of particular importance in the presentation of our financial position , results of operations and cash flows , and which require the application of significant judgment by management . reclassification in
| liquidity and capital resources as of june 30 , 2010 , we had $ 11,396 in cash , $ 375,486 in total assets , $ 980,990 in total liabilities and a working capital deficit of $ 498,423. as of june 30 , 2010 , we had an accumulated deficit of $ 1,135,754. during the fiscal year ended june 30 , 2010 , we spent $ 49,638 on operating activities , compared to spending of $ 110,768 on operating activities during the fiscal year ended june 30 , 2009. the decrease in our expenditures on operating activities during the fiscal year ended june 30 , 2010 , was primarily due to a reduction in our building activities as noted above . customer deposits provided $ 103,992 in cash during the fiscal year ended june 30 , 2010 , compared to $ 19,415 during the previous fiscal year . however , we only received $ 1,133 from accrued liabilities and $ 11,735 from accounts receivable during the recent fiscal year , compared to receiving $ 27,817 and $ 101,363 from the same sources , respectively , during the fiscal year ended june 30 , 2009. we spent $ 4,328 on investing activities during the fiscal year ended june 30 , 2010 , compared to spending of $ 5,752 on investing activities during the fiscal year ended june 30 , 2009. our only investing activities during each period involved purchases of property and equipment . during the fiscal year ended june 30 , 2010 , we received $ 61,679 from financing activities , including $ 70,000 in the form of loans from related parties . during the fiscal year ended june 30 , 2009 , we received $ 116,629 from financing activities , $ 109,025 of which was attributable to proceeds from the issuance of our common stock . our plan of operations over the next 12 months is to ( i ) expand our stocking dealer network throughout the unites states and canada , ( ii ) monitor the quality of our products and accessories ,
| 14,352 |
the current income tax liability also includes income tax expense related to our uncertain tax positions as required in asc topic 740 , income taxes. changes to the estimated accrued taxes can occur due to changes in tax rates , implementation of new business strategies , resolution of issues with taxing authorities and recently enacted statutory , judicial and regulatory guidance . these changes can be material to the company 's operating results for any particular reporting period . the analysis of the income tax provision requires the assessments of the relative risks and merits of the appropriate tax treatment of transactions , filing positions , filing methods and taxable income calculations after considering statutes , regulations , judicial precedent and other information . united strives to keep abreast of changes in the tax laws and the issuance of regulations which may impact tax reporting and provisions for income tax expense . united is also subject to audit by 38 federal and state authorities . because the application of tax laws is subject to varying interpretations , results of these audits may produce indicated liabilities which differ from united 's estimates and provisions . united continually evaluates its exposure to possible tax assessments arising from audits and records its estimate of probable exposure based on current facts and circumstances . the potential impact to united 's operating results for any of the changes can not be reasonably estimated . see note m , notes to consolidated financial statements for information regarding united 's asc topic 740 disclosures . use of fair value measurements united determines the fair value of its financial instruments based on the fair value hierarchy established in asc topic 820 , whereby the fair value of certain assets and liabilities is an exit price , representing the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants . asc topic 820 establishes a three-level hierarchy for disclosure of assets and liabilities recorded at fair value . the classification of assets and liabilities within the hierarchy is based on whether the inputs in the methodology for determining fair value are observable or unobservable . observable inputs reflect market-based information obtained from independent sources ( level 1 or level 2 ) , while unobservable inputs reflect management 's estimate of market data ( level 3 ) . for assets and liabilities that are actively traded and have quoted prices or observable market data , a minimal amount of subjectivity concerning fair value is needed . prices and values obtained from third party vendors that do not reflect forced liquidation or distressed sales are not adjusted by management . when quoted prices or observable market data are not available , management 's judgment is necessary to estimate fair value . at december 31 , 2017 , approximately 11.91 % of total assets , or $ 2.27 billion , consisted of financial instruments recorded at fair value . of this total , approximately 85.90 % or $ 1.95 billion of these financial instruments used valuation methodologies involving observable market data , collectively level 1 and level 2 measurements , to determine fair value . approximately 14.10 % or $ 319.98 million of these financial instruments were valued using unobservable market information or level 3 measurements . most of these financial instruments valued using unobservable market information were trup cdos classified as available-for-sale . at december 31 , 2017 , only $ 477 thousand or less than 1 % of total liabilities were recorded at fair value . this entire amount was valued using methodologies involving observable market data . united does not believe that any changes in the unobservable inputs used to value the financial instruments mentioned above would have a material impact on united 's results of operations , liquidity , or capital resources . see note u for additional information regarding asc topic 820 and its impact on united 's financial statements . any material effect on the financial statements related to these critical accounting areas is further discussed in this management 's discussion and analysis of financial condition and results of operations . 2017 compared to 2016 united 's total assets as of december 31 , 2017 were $ 19.06 billion which was an increase of $ 4.55 billion or 31.36 % from december 31 , 2016 , primarily the result of the acquisition of cardinal on april 21 , 2017. portfolio loans increased $ 2.67 billion or 25.82 % , loans held for sale increased $ 257.51 million or 3,049.26 % , cash and cash equivalents increased $ 231.64 million or 16.15 % , investment securities increased $ 668.01 million or 47.59 % , goodwill increased $ 614.61 million or 71.15 % , other assets increased $ 69.47 million or 16.75 % , bank premises and equipment increased $ 28.99 million or 38.18 % and interest receivable increased $ 13.42 million or 34.05 % due primarily to the cardinal merger . total liabilities increased $ 3.55 billion or 28.89 % from year-end 2016. this increase in total liabilities was due mainly to an increase of $ 3.03 billion or 28.10 % and $ 459.99 million or 33.29 % in deposits and borrowings , respectively , mainly due to the cardinal acquisition . shareholders ' equity increased $ 1.00 billion or 44.94 % from year-end 2016 due primarily to the acquisition of cardinal . the following discussion explains in more detail the changes in financial condition by major category . 39 cash and cash equivalents cash and cash equivalents at december 31 , 2017 increased $ 231.64 million or 16.15 % from year-end 2016. of this total increase , interest-bearing deposits with other banks increased $ 210.30 million or 16.71 % as united placed more cash in an interest-bearing account with the federal reserve while cash and due from banks increased $ 21.27 million or 12.12 % and fed funds increased $ 64 thousand or 8.83 story_separator_special_tag the current income tax liability also includes income tax expense related to our uncertain tax positions as required in asc topic 740 , income taxes. changes to the estimated accrued taxes can occur due to changes in tax rates , implementation of new business strategies , resolution of issues with taxing authorities and recently enacted statutory , judicial and regulatory guidance . these changes can be material to the company 's operating results for any particular reporting period . the analysis of the income tax provision requires the assessments of the relative risks and merits of the appropriate tax treatment of transactions , filing positions , filing methods and taxable income calculations after considering statutes , regulations , judicial precedent and other information . united strives to keep abreast of changes in the tax laws and the issuance of regulations which may impact tax reporting and provisions for income tax expense . united is also subject to audit by 38 federal and state authorities . because the application of tax laws is subject to varying interpretations , results of these audits may produce indicated liabilities which differ from united 's estimates and provisions . united continually evaluates its exposure to possible tax assessments arising from audits and records its estimate of probable exposure based on current facts and circumstances . the potential impact to united 's operating results for any of the changes can not be reasonably estimated . see note m , notes to consolidated financial statements for information regarding united 's asc topic 740 disclosures . use of fair value measurements united determines the fair value of its financial instruments based on the fair value hierarchy established in asc topic 820 , whereby the fair value of certain assets and liabilities is an exit price , representing the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants . asc topic 820 establishes a three-level hierarchy for disclosure of assets and liabilities recorded at fair value . the classification of assets and liabilities within the hierarchy is based on whether the inputs in the methodology for determining fair value are observable or unobservable . observable inputs reflect market-based information obtained from independent sources ( level 1 or level 2 ) , while unobservable inputs reflect management 's estimate of market data ( level 3 ) . for assets and liabilities that are actively traded and have quoted prices or observable market data , a minimal amount of subjectivity concerning fair value is needed . prices and values obtained from third party vendors that do not reflect forced liquidation or distressed sales are not adjusted by management . when quoted prices or observable market data are not available , management 's judgment is necessary to estimate fair value . at december 31 , 2017 , approximately 11.91 % of total assets , or $ 2.27 billion , consisted of financial instruments recorded at fair value . of this total , approximately 85.90 % or $ 1.95 billion of these financial instruments used valuation methodologies involving observable market data , collectively level 1 and level 2 measurements , to determine fair value . approximately 14.10 % or $ 319.98 million of these financial instruments were valued using unobservable market information or level 3 measurements . most of these financial instruments valued using unobservable market information were trup cdos classified as available-for-sale . at december 31 , 2017 , only $ 477 thousand or less than 1 % of total liabilities were recorded at fair value . this entire amount was valued using methodologies involving observable market data . united does not believe that any changes in the unobservable inputs used to value the financial instruments mentioned above would have a material impact on united 's results of operations , liquidity , or capital resources . see note u for additional information regarding asc topic 820 and its impact on united 's financial statements . any material effect on the financial statements related to these critical accounting areas is further discussed in this management 's discussion and analysis of financial condition and results of operations . 2017 compared to 2016 united 's total assets as of december 31 , 2017 were $ 19.06 billion which was an increase of $ 4.55 billion or 31.36 % from december 31 , 2016 , primarily the result of the acquisition of cardinal on april 21 , 2017. portfolio loans increased $ 2.67 billion or 25.82 % , loans held for sale increased $ 257.51 million or 3,049.26 % , cash and cash equivalents increased $ 231.64 million or 16.15 % , investment securities increased $ 668.01 million or 47.59 % , goodwill increased $ 614.61 million or 71.15 % , other assets increased $ 69.47 million or 16.75 % , bank premises and equipment increased $ 28.99 million or 38.18 % and interest receivable increased $ 13.42 million or 34.05 % due primarily to the cardinal merger . total liabilities increased $ 3.55 billion or 28.89 % from year-end 2016. this increase in total liabilities was due mainly to an increase of $ 3.03 billion or 28.10 % and $ 459.99 million or 33.29 % in deposits and borrowings , respectively , mainly due to the cardinal acquisition . shareholders ' equity increased $ 1.00 billion or 44.94 % from year-end 2016 due primarily to the acquisition of cardinal . the following discussion explains in more detail the changes in financial condition by major category . 39 cash and cash equivalents cash and cash equivalents at december 31 , 2017 increased $ 231.64 million or 16.15 % from year-end 2016. of this total increase , interest-bearing deposits with other banks increased $ 210.30 million or 16.71 % as united placed more cash in an interest-bearing account with the federal reserve while cash and due from banks increased $ 21.27 million or 12.12 % and fed funds increased $ 64 thousand or 8.83
| this change in securities available for sale reflects $ 215.06 million acquired from bank of georgetown , $ 513.74 million in sales , maturities and calls of securities , 61 $ 504.98 million in purchases , and a decrease of $ 12.42 million in market value . securities held to maturity decreased $ 5.84 million or 14.94 % from year-end 2015 due to calls and maturities of securities . other investment securities increased $ 12.42 million or 12.57 % from year-end 2015. bank of georgetown added $ 4.72 million in other investment securities . otherwise , federal reserve bank ( frb ) stock increased $ 7.94 million and fhlb stock decreased $ 1.05 million . other assets increased $ 36.59 million or 9.67 % from year-end 2015. the cash surrender value of bank-owned life insurance policies increased $ 16.29 million , of which $ 13.03 million was acquired from bank of georgetown while the remaining increase was due to an increase in the cash surrender value . the remainder of the increase in other assets is the result of an increase of $ 10.81 million in deferred tax assets and an increase of $ 5.11 million in core deposit intangibles . partially offsetting these increases in other assets is a decrease of $ 1.30 million in income tax receivable . total liabilities increased $ 1.41 billion or 12.96 % from year-end 2015. this increase in total liabilities was due mainly to an increase of $ 1.46 billion or 15.58 % in deposits , mainly due to the bank of georgetown acquisition . partially offsetting these increases in liabilities , is a $ 56.70 million decrease in borrowings . shareholders ' equity increased $ 523.11 million or 30.54 % from year-end 2015 due primarily to the acquisition of bank of georgetown , a common stock offering , and earnings less dividends paid for the year of 2016. the increase in noninterest-bearing deposits was due mainly to increases in commercial noninterest-bearing deposits of $ 423.39 million or 21.11 % , personal noninterest-bearing deposits of
| 14,353 |
although the company believes that its plans , intentions , expectations and estimates reflected or implied in such forward-looking statements are reasonable , the company can not assure you that such plans , intentions or estimates will be achieved in whole or in part , that the company has identified all potential risks , or that the company can successfully avoid or mitigate such risks in whole or in part . you should carefully review the risk factors described above ( see item 1a – risk factors , above ) and any other cautionary statements contained or incorporated by reference in this annual report . all forward-looking and other statements attributable to the company or persons acting on its behalf are expressly subject to and qualified by all such risk factors and other cautionary statements . you should not place undue reliance on the company 's forward-looking statements because the matters they describe are subject to known and unknown risks , uncertainties and other unpredictable factors , many of which are beyond its control . the company 's forward-looking statements are based on the information currently available to it and speak only as of the date on the cover of december 31 , 2011 , or other referenced date or , in the case of forward-looking statements incorporated by reference , as of the date of the sec report that includes such statement . new risks and uncertainties arise from time to time , and it is impossible for the company to predict these matters or how they may arise or affect the company . over time , the company 's actual assets , business , capital , cash flow , credit , expenses , financial condition , income , liabilities , liquidity , locations , marketing , operations , prospects , sales , strategies , taxation or other achievements , results , risks or condition will likely differ from those expressed or implied by the company 's forward-looking statements , and such difference could be significant and materially adverse to the company and the value of your investment in the company 's common stock . the company does not intend or promise , and the company expressly disclaims any obligation , to publicly update or revise any forward-looking statements , risk factors or other cautionary statements ( in whole or in part ) , whether as a result of new information , future events or recognition or otherwise , except as and to the extent required by applicable law . overview spar group , inc. ( “ sgrp ” ) , and its subsidiaries ( together with sgrp , the “ spar group ” or the “ company ” ) , is a diversified international merchandising and marketing services company and provides a broad array of services worldwide to help companies improve their sales , operating efficiency and profits at retail locations . the company provides merchandising and other marketing services to manufacturers , distributors and retailers worldwide , primarily in mass merchandisers , office supply , grocery , drug store , independent , convenience and electronics stores , as well as providing furniture and other product assembly services in stores , homes and offices . the company has supplied these project and product services in the united states since certain of its predecessors were formed in 1979 and internationally since the company acquired its first international subsidiary in japan in may of 2001. today the company operates in 10 countries that encompass approximately 47 % of the total world population through operations in the united states , canada , japan , south africa , india , romania , china , australia , mexico and turkey . -24- critical accounting policies & estimates the company 's critical accounting policies , including the assumptions and judgments underlying them , are disclosed in the note 2 to the consolidated financial statements . these policies have been consistently applied in all material respects and address such matters as revenue recognition , depreciation methods , asset impairment recognition , consolidation of subsidiaries and other companies . while the estimates and judgments associated with the application of these policies may be affected by different assumptions or conditions , the company believes the estimates and judgments associated with the reported amounts are appropriate in the circumstances . four critical accounting policies are consolidation of subsidiaries , revenue recognition , allowance for doubtful accounts , and internal use software development costs . consolidation of subsidiaries the company consolidates its 100 % owned subsidiaries . the company also consolidates all of its 51 % owned subsidiaries as the company believes it is the primary beneficiary and controls the economic activities in accordance with accounting standards codification ( asc ) 810-10 , consolidation of variable interest entity . revenue recognition the company 's services are provided to its clients under contracts or agreements . the company bills its clients based upon service fee and per unit fee billing arrangements . revenues under service fee billing arrangements are recognized when the service is performed . the company 's per unit fee arrangements provide for fees to be earned based on the retail sales of a client 's products to consumers . the company recognizes per unit fees in the period such amounts become determinable and are reported to the company . allowance for doubtful accounts the company continually monitors the validity of its accounts receivable based upon current client credit information and financial condition . balances that are deemed to be uncollectible after the company has attempted reasonable collection efforts are written off through a charge to the bad debt allowance and a credit to accounts receivable . accounts receivable balances , net of any applicable reserves or allowances , are stated at the amount that management expects to collect from the outstanding balances . story_separator_special_tag the company provides for probable uncollectible amounts through a charge to earnings and a credit to bad debt allowance based in part on management 's assessment of the current status of individual accounts . based on management 's assessment , the company established an allowance for doubtful accounts of $ 57,000 and $ 143,000 at december 31 , 2011 , and 2010 , respectively . in 2011 , the company had minimal write offs of accounts receivable resulting in recovery of $ 55,000 for the twelve months ended december 31 , 2011. bad debt expense was $ 265,000 in 2010. internal use software development costs in accordance with asc-350-10-720 , accounting for the costs of computer software developed or obtained for internal use , the company capitalizes certain costs associated with its internally developed software . specifically , the company capitalizes the costs of materials and services incurred in developing or obtaining internal use software . these costs include ( but are not limited to ) the cost to purchase software , the cost to write program code , payroll and related benefits and travel expenses for those employees who are directly involved with and who devote time to the company 's software development projects . capitalized software development costs are amortized over three years on a straight-line basis . the company capitalized $ 609,000 and $ 632,000 of costs related to software developed for internal use in 2011 , and 2010 , respectively , and recognized approximately $ 579,000 and $ 518,000 of amortization of capitalized software for the twelve months ended december 31 , 2011 , and 2010 , respectively . -25- story_separator_special_tag 1.25 ; text-indent : 0pt ; display : block '' > domestic selling , general and administrative expenses totaled $ 8.9 million for the twelve months ended december 31 , 2011 , compared to $ 9.2 million for the same period in 2010. the decrease of approximately $ 300,000 was due primarily to cost reduction efforts in legal , postage , program materials and other related expenses . international selling , general and administrative expenses totaled $ 9.6 million for the twelve months ended december 31 , 2011 , compared to $ 7.9 million for the same period in 2010. the increase of approximately $ 1.7 million was primarily due to salary and other employee related benefit expenses in the markets of australia , china , japan , as well as additional cost related to the new subsidiary in mexico , partially offset by lower expenses in canada . depreciation and amortization depreciation and amortization expenses totaled $ 1.1 million for the twelve months ended december 31 , 2011 , compared to $ 1.0 million for the same period in 2010. the increase was primarily due to higher capital expenditures related to software development compared to prior year . interest expense , net the company 's net interest expense was $ 197,000 and $ 310,000 for the twelve months ended december 31 , 2011 and 2010 , respectively . the decrease in interest expense was primarily due to lower debt levels . other income other income was $ 11,000 and $ 21,000 for the twelve months ended december 31 , 2011 and 2010 , respectively . income taxes the income tax provision for the twelve months ended december 31 , 2011 and 2010 was $ 362,000 and $ 263,000 , respectively . the tax provision resulted primarily from domestic state taxes and for tax provisions related to certain international profits . the company recognizes minimum federal tax provisions as the company anticipates utilizing operating loss carry forwards in 2011. non-controlling interest net operating profits from the non-controlling interests , respecting the company 's 51 % owned subsidiaries , resulted in a reduction of the company 's net income of $ 123,000 and $ 112,000 for the twelve months ended december 30 , 2011 and 2010 , respectively . -27- net income the company reported a net income of $ 2.2 million for the twelve months ended december 31 , 2011 , or $ 0.10 per diluted share , compared to a net income of $ 2.2 million , or $ 0.11 per diluted share , for the corresponding period last year , based on diluted shares outstanding of 21.3 million and 20.6 million at december 31 , 2011 , and 2010 , respectively . off balance sheet arrangements none . liquidity and capital resources the company had net income before non-controlling interest of $ 2.3 million for both the twelve months ended december 31 , 2011 and december 31 , 2010. the company 's cash provided by operating activities for the year ended december 31 , 2011 was $ 3.5 million , compared to net cash provided by operating activities of $ 260,000 in 2010. the net cash provided by operating activities was primarily due to a reported net income , partially offset by an increase in accounts receivable . net cash used by the company in investing activities for the year ended december 31 , 2011 and 2010 , was $ 1.3 million and $ 1.4 million , respectively . the net cash used in investing activities was a result of capitalization of software development costs , the purchases of non-controlling interest in mexico and turkey subsidiaries and the purchase of computer equipment . net cash used by the company 's financing activities for the year ended december 31 , 2011 was $ 1.5 million compared with net cash provided by financing activities of $ 376,000 for the year ended december 31 , 2010. the cash used in financing activities was primarily a result of the company 's net payments on its lines of credit .
| labor and field management wages , related benefits , travel and other direct labor-related expenses and was 69.4 % of net revenues for the twelve months ended december 31 , 2011 , compared to 66.8 % of net revenues for the twelve months ended december 31 , 2010. domestic cost of revenues was 66.7 % of net revenues for the twelve months ended december 31 , 2011 , and 64.1 % of net revenues for the twelve months ended december 31 , 2010. the increase in cost of revenues as a percentage of net revenues of 2.6 % was due primarily to an unfavorable mix within both syndicated and project work compared to the prior year . approximately 88 % and 87 % of the company 's domestic cost of revenues in the twelve months ended december 31 , 2011 and 2010 , respectively , resulted from in-store merchandiser specialist and field management services purchased from certain of the company 's affiliates , spar marketing services , inc. ( `` sms '' ) , and spar management services , inc. ( `` smsi '' ) , ( see - note 10 - related-party transactions ) . -26- internationally , cost of revenue as a percent of net revenue increased slightly to 72.3 % of net revenues for the twelve months ended december 31 , 2011 , compared to 70.4 % of net revenues for the twelve months ended december 31 , 2010. the cost of revenue percentage increase of 1.9 % was primarily due to higher cost margin business in the mexico , china , japan and romania markets , partially offset by lower cost margins in canada and india markets . selling , general and administrative expenses selling , general and administrative expenses of the company include its corporate overhead , project management , information technology , executive compensation , human resources , legal and accounting expenses . selling , general and administrative expenses were approximately $ 18.5 million and $ 17.1 million for the twelve months ended december 30 , 2011
| 14,354 |
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 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 , 2018. 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 . 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 . goodwill and other intangible assets we test goodwill for impairment annually , or more frequently if events or circumstances indicate there may be impairment , using either a qualitative or quantitative 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 , which is consistent with our sole operating segment , community banking . if we elect to perform a qualitative assessment , we evaluate factors such as macroeconomic conditions , industry and market considerations , overall financial performance , changes in stock price , and progress towards stated objectives in assessing the fair value of our reporting unit . if we conclude that it is more likely than not that the fair value of our reporting unit is less than its carrying amount , a quantitative test is performed ; otherwise , no further testing is required . the quantitative test consists of comparing the fair value of our reporting unit to its carrying amount , including goodwill . if the fair value of our reporting unit is greater than its book value , no goodwill impairment exists . if the carrying amount of our reporting unit is greater than its calculated fair value , a goodwill impairment charge is recognized for the difference , but limited to the amount of goodwill allocated to the reporting unit . other identifiable intangible assets are evaluated for impairment if events or changes in circumstances indicate a possible impairment . for additional information , see note 9 , “ goodwill and other intangible assets , ” to the consolidated financial statements in item 8 of this report . 23 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 . story_separator_special_tag 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 tax cuts and jobs act ( “ tax reform act ” ) was enacted on december 22 , 2017. among other things , the new law established a new , flat corporate federal statutory income tax rate of 21 % ; eliminated the corporate alternative minimum tax and allows the use of any such carryforwards to offset regular tax liability for any taxable year ; limits the deduction for net interest expense incurred by u.s. corporations ; allows businesses to immediately expense the cost of new investments in certain qualified depreciable assets for tax purposes ; eliminates or reduces certain deductions related to meals and entertainment expenses ; modifies the limitation on excessive employee remuneration to eliminate the exception for performance-based compensation and clarifies the definition of a covered employee ; and limits the deductibility of deposit insurance premiums for certain size financial institutions . the tax reform act also significantly changes u.s. tax law related to foreign operations , however , such changes do not currently impact us . for additional information , see note 15 , “ income taxes , ” to the consolidated financial statements in item 8 of this report . non-gaap financial measures in addition to financial statements prepared in accordance with gaap , we use certain non-gaap financial measures that provide useful information for financial and operational decision making , evaluating trends , and comparing financial results to other financial institutions . the non-gaap financial measures presented in this report include certain financial measures presented on a fully taxable equivalent ( “ fte ” ) basis . while we believe certain non-gaap financial measures enhance the understanding of our business and performance , they are supplemental and not a substitute for , or more important than , financial measures prepared in accordance with gaap and may not be comparable to those reported by other financial institutions . the reconciliations of non-gaap to gaap measures are presented below . we believe fte basis is the preferred industry measurement of net interest income and provides better comparability between taxable and tax exempt amounts . we use this non-gaap financial measure to monitor net interest income performance and to manage the composition of our balance sheet . fte basis adjusts for the tax benefits of income from certain tax exempt loans and investments using the federal statutory income tax rate of 21 % for periods after january 1 , 2018 , and 35 % for periods prior to january 1 , 2018. the following table reconciles net interest income and margin , as presented in our consolidated statements of income , to net interest income on a fte basis for the periods indicated : replace_table_token_4_th ( 1 ) fte basis of 21 % for 2018 and 35 % for 2017 and 2016 24 performance overview highlights of our results of operations in 2018 , and financial condition as of december 31 , 2018 , include the following : ● net income increased $ 14.86 million to $ 36.34 million and diluted earnings per share increased $ 0.92 to $ 2.18 compared to the prior year . the large increase reflects the deferred tax asset revaluation charge taken in the fourth quarter of 2017 . ● gaap net interest margin increased 23 basis points to 4.37 % and non-gaap , fte net interest margin increased 23 basis points to 4.46 % compared to the prior year . ● we repurchased 1,060,312 shares of our common stock for $ 34.41 million and paid common stock cash dividends of $ 21.09 million , or $ 1.26 per share , in 2018. cash dividends included a one-time special dividend to common shareholders of $ 0.48 per common share . ● book value per common share increased $ 0.16 to $ 20.79 compared to the prior year . ● we finalized the deferred tax asset revaluation charge originally taken in the fourth quarter of 2017 , which resulted in a reduction in tax expense of approximately $ 1.67 million . ● we sold our remaining insurance agency assets to bankers insurance , llc of glen allen , virginia ( “ bi ” ) in exchange for an equity interest in bi , which resulted in a one-time goodwill impairment of $ 1.49 million . ● we prepaid our remaining $ 50 million fhlb convertible advance , which resulted in a loss on the extinguishment of the debt of $ 1.10 million . ● we completed our agreement and plan of reincorporation and merger changing our corporate domicile from nevada to virginia . ● the divestiture of the insurance agency assets and the extinguishment of fhlb debt , in conjunction with the sale of the remaining trust preferred securities , culminate a 5-year plan to return the balance sheet and business model to a traditional , simplified , and de-risked community bank . ● the company and its subsidiary bank both significantly exceed regulatory “ well-capitalized ” targets as of december 31 , 2018. story_separator_special_tag million .
| ( 3 ) interest on loans include non-cash purchase accounting accretion of $ 6.39 million in 2018 , $ 5.42 million in 2017 , and $ 4.77 million in 2016 . 26 the following table presents the impact to net interest income on a fte basis due to changes in volume ( average volume times the prior year 's average rate ) , rate ( average rate times the prior year 's average volume ) , and rate/volume ( average volume times the change in average rate ) , for the periods indicated : replace_table_token_7_th ( 1 ) fte basis based on the federal statutory rate of 21 % for periods after january 1 , 2018 , and 35 % for periods prior to january 1 , 2018 201 8 compared to 201 7 . net interest income comprised 77.45 % of total net interest and noninterest income in 2018 compared to 78.02 % in 2017. net interest income increased $ 3.63 million , or 4.16 % , compared to an increase of $ 3.54 million , or 3.97 % , on a fte basis . the fte net interest margin increased 23 basis points and the fte net interest spread increased 24 basis points . average earning assets decreased $ 29.18 million , or 1.38 % , primarily due to a decrease in average loans offset by an increase in available-for-sale securities and interest-bearing deposits . the yield on earning assets increased 21 basis points as the yields on loans , debt securities , and interest-bearing deposits increased . average loans decreased $ 41.70 million , or 2.27 % , and the average loan to deposit ratio decreased to 94.74 % from 98.22 % . non-cash accretion income related to pci loans increased $ 974 thousand , or 17.98 % , to $ 6.39 million due to continued acquired portfolio attrition . the impact of non-cash purchase accounting accretion income on the fte net interest margin was 31 basis points compared to 26 basis points in the prior year . average interest-bearing liabilities , which consist of interest-bearing deposits and borrowings , decreased $ 48.20 million , or 3.09 % , primarily due to a decline in average borrowings . the yield on interest-bearing liabilities decreased 3 basis
| 14,355 |
on demand , the cost of the leased wireless device is depreciated to its estimated residual value over the lease term rather than recognized as cost of 24 equipment sales when the device is delivered to the customer . if customers continue to shift to leasing devices with jump ! on demand , we expect depreciation associated with leased wireless devices to continue to increase in 2016. cost of metropcs business combination of $ 376 million in 2015 primarily reflects network decommissioning costs associated with the business combination . in 2014 , we began decommissioning the metropcs cdma network and certain other redundant network cell sites . on july 1 , 2015 , t-mobile officially completed the shutdown of the metropcs cdma network . network decommissioning costs , which are excluded from adjusted ebitda , primarily relate to the acceleration of lease costs for cell sites that would have otherwise been recognized as cost of services over the remaining lease term had we not decommissioned the cell sites . although we expect to incur additional network decommissioning costs in 2016 as cell site assets are removed , these costs are not expected to be significant . see note 2 – business combination with metropcs of the notes to the consolidated financial statements included in part ii , item 8 of this form 10-k for further information . gains on disposal of spectrum licenses of $ 163 million in 2015 primarily consisted of a non-cash gain of $ 139 million from spectrum license transactions with verizon recorded in the fourth quarter of 2015 . gains on disposal of spectrum licenses of $ 840 million in 2014 primarily consisted of non-cash gains from spectrum license transactions with verizon , and to a lesser extent , a non-cash gain from a spectrum license transaction with at & t during the fourth quarter of 2014 . see note 6 – goodwill , spectrum licenses and other intangible assets of the notes to the consolidated financial statements included in part ii , item 8 of this form 10-k for further information . other income ( expense ) interest expense increased $ 12 million , or 1 % , in 2015 , compared to 2014 . the increase was primarily attributable to higher debt balances with third parties in 2015 compared to 2014 , partially offset by a decrease from interest costs that were capitalized associated with the build out of our network to utilize our 700 mhz a-block spectrum licenses . interest expense to affiliates increased $ 133 million , or 48 % , in 2015 , compared to 2014 . the increase was primarily attributable to changes in the fair value of embedded derivative instruments associated with the senior reset notes issued to deutsche telekom , partially offset by a decrease from interest costs that were capitalized associated with the build out of our network to utilize our 700 mhz a-block spectrum licenses . interest income increased $ 61 million , or 17 % , in 2015 , compared to 2014 . the increase was primarily attributable to higher interest income from devices financed through eip . interest associated with eip receivables is imputed at the time of sale and then recognized over the financed installment term . see note 4 – equipment installment plan receivables of the notes to the consolidated financial statements included in part ii , item 8 of this form 10-k for further information . income taxes income tax expense increased $ 79 million in 2015 , compared to 2014 primarily due to an increase in pre-tax income , partially offset by a lower effective tax rate . the effective tax rate was 25.1 % in 2015 , compared to 40.2 % in 2014 . the decrease in the effective income tax rate was primarily due to the impact of discrete income tax items recognized in 2015 , including recent changes in state and local income tax laws and the recognition of foreign tax credits . net income net income increased $ 486 million in 2015 , compared to 2014 , as a result of the factors described above . 25 guarantor subsidiaries pursuant to the indenture and the supplemental indentures , the long-term debt to affiliates and third parties of t-mobile usa , inc. ( “ issuer ” ) , excluding senior secured term loans and capital leases , is fully and unconditionally guaranteed , jointly and severally , on a senior unsecured basis by t-mobile us , inc. ( “ parent ” ) and certain of the issuer 's 100 % owned subsidiaries ( “ guarantor subsidiaries ” ) . additionally , t-mobile usa incurred $ 2.0 billion of senior secured term loans in 2015 , which are secured by a first priority lien on substantially all of t-mobile usa 's assets and the assets of t-mobile usa 's guarantor subsidiaries . in addition , the senior secured term loans are subject to a first priority pledge of the equity interests held by t-mobile usa and substantially all of its direct and indirect subsidiaries . in the fourth quarter of 2015 , t-mobile entered into an arrangement to sell certain eip accounts receivable on a revolving basis . in connection with the sales arrangement , the company formed a wholly-owned subsidiary to sell eip accounts receivables ( “ eip bre ” ) , which is included in the non-guarantor subsidiaries condensed consolidating financial information . see note 3 – sales of certain receivables of the notes to the consolidated financial statements included in part ii , item 8 of this form 10-k for further information . the financial condition of the parent , issuer and guarantor subsidiaries is substantially similar to the company 's consolidated financial condition . similarly , the results of operations of the parent , issuer and guarantor subsidiaries are substantially similar to the company 's consolidated results of operations . story_separator_special_tag as of december 31 , 2015 and december 31 , 2014 , the most significant components of the financial condition of the non-guarantor subsidiaries were property and equipment of $ 454 million and $ 537 million , respectively , tower obligations of $ 2.2 billion and $ 2.3 billion , respectively , and stockholders ' deficit of $ 1.4 billion and $ 1.5 billion , respectively . the most significant components of the results of operations of our non-guarantor subsidiaries in 2015 were service revenues of $ 1.7 billion , partially offset by costs of equipment sales of $ 720 million and selling , general and administrative expenses of $ 733 million resulting in a net comprehensive income of $ 60 million . in 2014 , service revenues of $ 1.3 billion were offset by costs of equipment sales of $ 702 million , selling , general and administrative expenses of $ 518 million and other items resulting in a net comprehensive loss of $ 38 million . see note 15 – guarantor financial information of the notes to the consolidated financial statements included in part ii , item 8 of this form 10-k for further information . year ended december 31 , 2014 compared to the year ended december 31 , 2013 revenues branded postpaid revenues increased $ 1.2 billion , or 9 % , in 2014 , compared to 2013 . the increase was primarily attributable to growth in the number of average branded postpaid customers driven by the continued success of our un-carrier proposition and strong customer response to promotions for services and devices . additional increases resulted from customer adoption of upgrade and insurance programs and changes in requalification requirements for corporate discount programs . the increase was partially offset by lower branded postpaid average revenue per account ( “ arpa ” ) . see “ performance measures ” for further information on arpa . branded postpaid arpa was negatively impacted by continued growth of our simple choice plans , which have lower monthly service charges compared to traditional bundled plans . branded postpaid customers on simple choice plans increased over the past twelve months to 89 % of the branded postpaid customer base as of december 31 , 2014 , compared to 69 % as of december 31 , 2013 . branded prepaid revenues increased $ 2.0 billion , or 41 % , in 2014 , compared to 2013 . the increase was primarily driven by growth of the customer base from the expansion of the metropcs brand and an increase in promotional activities . in addition , the inclusion of metropcs operating results for the full year period following the business combination in april 2013 contributed to the increase . wholesale revenues increased $ 118 million , or 19 % , in 2014 , compared to 2013 . the increase was primarily attributable to growth in customer programs and monthly plans , including data , offered by our mvno partners and changes to our mvno contractual arrangements . roaming and other service revenues decreased $ 78 million , or 23 % , in 2014 , compared to 2013 , primarily due to a decline in early termination fees ( “ etfs ” ) following our introduction of the no annual service contract feature of the simple choice plan launched in march 2013. equipment sales increased $ 1.8 billion , or 35 % , in 2014 , compared to 2013 . the increase was primarily attributable to significant growth in the number of devices sold due to higher gross customer additions and higher device upgrade volumes , including jump ! redemptions . the volume of device sales increased 48 % in 2014 , compared to 2013 . additionally , the 26 inclusion of metropcs operating results for the full year period in 2014 following the business combination in april 2013 contributed to the increase . the increase was partially offset by reimbursements of other carriers ' etfs and a lower average revenue per device sold . we financed $ 5.8 billion of equipment sales revenues through eip during 2014 , an increase from $ 3.3 billion in 2013 , resulting from growth of our simple choice plans . additionally , customers had associated eip billings of $ 3.6 billion in 2014 , compared to $ 1.5 billion in 2013 . other revenues increased $ 81 million , or 25 % , in 2014 , compared to 2013 . the increase was primarily due to higher co-location rental income from leasing space on wireless communication towers to third parties and higher lease income associated with spectrum license lease agreements resulting from spectrum swap transactions . operating expenses cost of services increased $ 509 million , or 10 % , in 2014 , compared to 2013 . the increase was primarily due to the inclusion of metropcs operating results for the full year period in 2014 following the business combination in april 2013. additionally , higher lease expense primarily relating to spectrum license lease agreements resulting from spectrum swap transactions contributed to the increase . cost of equipment sales increased $ 2.6 billion , or 38 % , in 2014 , compared to 2013 . the increase was primarily attributable to significant growth in the number of devices sold due to higher gross customer additions and higher device upgrade volumes , including jump ! redemptions . additionally , the inclusion of metropcs operating results for the full year period in 2014 following the business combination in april 2013 contributed to the increase . the volume of device sales increased 48 % in 2014 , compared to 2013 . the increase was partially offset by a lower average cost per device sold . selling , general and administrative increased $ 1.5 billion , or 20 % , in 2014 , compared to 2013 . the increase was primarily due to higher employee-related costs as a result of increases in the number of retail and customer support employees , higher commissions driven by increased gross customer additions and higher promotional costs .
| financial highlights we generate revenues by offering affordable wireless communication services to our postpaid , prepaid and wholesale customers , as well as through sales and leasing of a wide selection of wireless devices and accessories . total revenues increased to $ 32.1 billion in 2015 compared to $ 29.6 billion in 2014 and $ 24.4 billion in 2013 . our most significant expenses are related to acquiring and retaining high-quality customers , providing a full range of devices , compensating employees , and operating and expanding our network . operating expenses were $ 30.0 billion in 2015 , compared to $ 28.1 billion in 2014 and $ 23.4 billion in 2013 . net income increased to $ 733 million in 2015 , compared to $ 247 million in 2014 and $ 35 million in 2013 . adjusted ebitda increased to $ 7.4 billion in 2015 , compared to $ 5.6 billion in 2014 and $ 4.9 billion in 2013 . liquidity and capital resources highlights the ongoing success of our un-carrier proposition and continued modernization of our network has further repositioned t-mobile to provide customers with an exceptional customer experience , which requires substantial investment in our business . we have substantially completed the process of upgrading our network to lte , which provides our customers with the fastest nationwide 4g lte network in the united states . in addition , we are currently in the process of building out our network to utilize our 700 mhz a-block spectrum licenses . cash capital expenditures for property and equipment , excluding payments for capitalized interest , were $ 4.5 billion in 2015 , compared to $ 4.3 billion in 2014 and $ 4.0 billion in 2013 . payments for capitalized interest costs included in purchases of property and equipment were $ 246 million in 2015 , $ 65 million in 2014 and were not significant in 2013 . we provide mobile communication services using spectrum licenses , consisting of 700 mhz a-block , aws and pcs licenses . we intend to continue to opportunistically acquire spectrum licenses in private
| 14,356 |
in april 2016 , we amended this agreement to provide that novartis has exclusive research , development and commercialization rights outside of the united states to ruxolitinib ( excluding topical formulations ) in the gvhd field . under this amendment , we received a $ 5.0 million payment in exchange for the development and commercialization rights to ruxolitinib in gvhd outside of the united states and became eligible to receive up to $ 75.0 million of additional potential development and regulatory milestones relating to gvhd . in march 2017 , we recognized a $ 25.0 million milestone for the first patient first visit in a gvhd study and in december 2017 , we recognized a $ 40.0 million milestone for novartis achieving annual net sales of a jak licensed product of $ 600.0 million . in december 2018 , we recognized a $ 60.0 million milestone for novartis achieving annual net sales of a jak licensed product of $ 900.0 million . the novartis agreement will continue on a program‑by‑program basis until novartis has no royalty payment obligations with respect to such program or , if earlier , the termination of the agreement or any program in accordance with 55 the terms of the agreement . royalties are payable by novartis on a product‑by‑product and country‑by‑country basis until the latest to occur of ( i ) the expiration of the last valid claim of the licensed patent rights covering the licensed product in the relevant country , ( ii ) the expiration of regulatory exclusivity for the licensed product in such country and ( iii ) a specified period from first commercial sale in such country of the licensed product by novartis or its affiliates or sublicensees . the agreement may be terminated in its entirety or on a program‑by‑program basis by novartis for convenience . the agreement may also be terminated by either party under certain other circumstances , including material breach . lilly in december 2009 , we entered into a license , development and commercialization agreement with lilly . under the terms of the agreement , lilly received exclusive worldwide development and commercialization rights to baricitinib and certain back‑up compounds for inflammatory and autoimmune diseases . we received an initial payment of $ 90.0 million , and were initially eligible to receive additional payments of up to $ 665.0 million based on the achievement of defined development , regulatory and commercialization milestones . we retained options to co-develop our jak1/jak2 inhibitors with lilly on a compound-by-compound and indication-by-indication basis . lilly is responsible for all costs relating to the development and commercialization of the compounds unless we elect to co-develop any compounds or indications . if we elect to co-develop any compounds and or indications , we would be responsible for funding 30 % of the associated future global development costs from the initiation of a phase iib trial through regulatory approval , including post-launch studies required by a regulatory authority . we would receive an incremental royalty rate increase across all tiers resulting in effective royalty rates ranging up to the high twenties on potential future global net sales for compounds and or indications that we elect to co-develop . for indications that we elect not to co-develop , we would receive tiered , double-digit royalty payments on future global net sales with rates ranging up to 20 % if the product is successfully commercialized . we previously had retained an option to co-promote products in the united states but , in march 2016 , we waived our co-promotion option as part of an amendment to the agreement . in july 2010 , we elected to co-develop baricitinib with lilly in rheumatoid arthritis and we are responsible for funding 30 % of the associated future global development costs for this indication from the initiation of the phase iib trial through regulatory approval , including post-launch studies required by a regulatory authority . we subsequently elected to co-develop baricitinib with lilly in psoriatic arthritis , atopic dermatitis , alopecia areata , systemic lupus erythematosus and axial spondyloarthritis . in march 2016 , we entered into an amendment to the agreement with lilly that allows us to engage in the development and commercialization of ruxolitinib in the gvhd field . we paid lilly an upfront payment of $ 35.0 million and lilly is eligible to receive up to $ 40.0 million in additional regulatory milestone payments relating to ruxolitinib in the gvhd field . in february 2017 , the european commission announced the approval of baricitinib as olumiant , triggering a $ 65.0 million milestone payment from lilly . in july 2017 , japan 's mhlw granted marketing approval for olumiant , triggering a $ 15.0 million milestone payment from lilly . in december 2017 , we recognized a $ 30.0 million milestone payment for the first patient treated in the atopic dermatitis phase iii program for baricitinib . in june 2018 , the fda approved the 2mg dose of olumiant , triggering a $ 100.0 million milestone payment from lilly . in september 2018 , we recognized a $ 20.0 million milestone payment for the first patient treated in systemic lupus erythematosus phase iii program for baricitinib . the lilly agreement will continue until lilly no longer has any royalty payment obligations or , if earlier , the termination of the agreement in accordance with its terms . royalties are payable by lilly on a product‑by‑product and country‑by‑country basis until the latest to occur of ( i ) the expiration of the last valid claim of the licensed patent rights covering the licensed product in the relevant country , ( ii ) the expiration of regulatory exclusivity for the licensed product in such country and ( iii ) a specified period from first commercial sale in such country of the licensed product by lilly or its affiliates or sublicensees . the agreement may be terminated by lilly for convenience , and may also be terminated under certain other circumstances , including material breach . story_separator_special_tag 56 agenus in january 2015 , we entered into a license , development and commercialization agreement with agenus inc. and its wholly-owned subsidiary , 4-antibody ag ( now known as agenus switzerland inc. ) , which we collectively refer to as agenus . under this agreement , the parties have agreed to collaborate on the discovery of novel immuno-therapeutics using agenus ' antibody discovery platforms . in february 2017 , we and agenus amended this agreement . under the terms of this agreement , as amended , we received exclusive worldwide development and commercialization rights to four checkpoint modulators directed against gitr , ox40 , lag-3 and tim-3 . in addition to the initial four program targets , we and agenus have the option to jointly nominate and pursue additional targets within the framework of the collaboration , and in november 2015 , three more targets were added . targets may be designated profit-share programs , where all costs and profits are shared equally by us and agenus , or royalty-bearing programs , where we are responsible for all costs associated with discovery , preclinical , clinical development and commercialization activities . the programs relating to gitr and ox40 and two of the undisclosed targets were profit-share programs until february 2017 , while the other targets currently under collaboration are royalty-bearing programs . the february 2017 amendment converted the programs relating to gitr and ox40 to royalty-bearing programs and removed from the collaboration the profit-share programs relating to the two undisclosed targets , with one reverting to us and one reverting to agenus . should any of those removed programs be successfully developed by a party , the other party will be eligible to receive the same milestone payments as the royalty-bearing programs and royalties at a 15 % rate on global net sales . there are currently no profit-share programs . for each royalty-bearing product other than gitr and ox40 , agenus will be eligible to receive tiered royalties on global net sales ranging from 6 % to 12 % . for gitr and ox40 , agenus will be eligible to receive 15 % royalties on global net sales . under the february 2017 amendment , we paid agenus $ 20.0 million in accelerated milestones relating to the clinical development of the gitr and ox40 programs . agenus is eligible to receive up to an additional $ 510.0 million in future contingent development , regulatory and commercialization milestones across all programs in the collaboration . the agreement may be terminated by us for convenience upon 12 months ' notice and may also be terminated under certain other circumstances , including material breach . takeda ( ariad ) in june 2016 , we acquired from ariad pharmaceuticals , inc. all of the outstanding shares of ariad pharmaceuticals ( luxembourg ) s.à.r.l. , the parent company of ariad 's european subsidiaries responsible for the development and commercialization of iclusig in the european union and other countries . we obtained an exclusive license to develop and commercialize iclusig in europe and other select countries . ariad pharmaceuticals , inc. was subsequently acquired by takeda pharmaceutical company limited in 2017. as such , takeda will be eligible to receive from us tiered royalties on net sales of iclusig in our territory and up to $ 135.0 million in potential future oncology development and regulatory approval milestone payments , together with additional milestone payments for non-oncology indications , if approved , in our territory . merus in december 2016 , we entered into a collaboration and license agreement with merus n.v. under this agreement , which became effective in january 2017 , the parties have agreed to collaborate with respect to the research , discovery and development of bispecific antibodies utilizing merus ' technology platform . the collaboration encompasses up to eleven independent programs . the most advanced collaboration program is mcla-145 , a bispecific antibody targeting pd-l1 and cd137 , for which we received exclusive development and commercialization rights outside of the united states . merus retained exclusive development and commercialization rights in the united states to mcla-145 . each party will share equally the costs of mutually agreed global development activities for mcla-145 , and fund itself any independent development activities in its territory . merus will be responsible for commercializing mcla-145 in the united states and we will be responsible for commercializing it outside of the united states . in addition to receiving rights to mcla-145 outside of the united states , we received worldwide exclusive development and commercialization rights to up to ten additional programs . of these ten additional programs , merus 57 retained the option , subject to certain conditions , to co-fund development of up to two such programs . if merus exercises its co-funding option for a program , merus would be responsible for funding 35 % of the associated future global development costs and , for certain of such programs , would be responsible for reimbursing us for certain development costs incurred prior to the option exercise . merus will also have the right to participate in a specified proportion of detailing activities in the united states for one of those co-developed programs . all costs related to the co-funded collaboration programs are subject to joint research and development plans and overseen by a joint development committee , but we will have final determination as to such plans in cases of dispute . we will be responsible for all research , development and commercialization costs relating to all other programs . in february 2017 , we paid merus an upfront non-refundable payment of $ 120.0 million . for each program as to which merus does not have commercialization or development co-funding rights , merus will be eligible to receive up to $ 100.0 million in future contingent development and regulatory milestones , and up to $ 250.0 million in commercialization milestones as well as tiered royalties ranging from 6 % to 10 % of global net sales .
| we expect government rebates and chargebacks as a percentage of our gross product sales will continue to increase in connection with any future jakafi price increases greater than the rate of inflation , and any such increase in these government rebates and chargebacks will have a negative impact on our reported product revenues , net . we adjust our estimates for government rebates and chargebacks based on new information regarding actual rebates as it becomes available . claims by third-party payors for rebates and chargebacks are frequently submitted after the period 63 in which the related sales occurred , which may result in adjustments to prior period accrual balances in the period in which the new information becomes available . we also adjust our allowance for product returns based on new information regarding actual returns as it becomes available . we expect our sales allowances to fluctuate from quarter to quarter as a result of the medicare part d coverage gap , the volume of purchases eligible for government mandated discounts and rebates as well as changes in discount percentages which are impacted by potential future price increases , rate of inflation , and other factors . product royalty revenues on commercial sales of jakavi by novartis are based on net sales of licensed products in licensed territories as provided by novartis . product royalty revenues on commercial sales of olumiant by lilly are based on net sales of licensed products in licensed territories as provided by lilly . our milestone and contract revenues were $ 180.0 million and $ 175.0 million for the years ended december 31 , 2018 and 2017 , respectively , and were derived from milestone payments from lilly and novartis earned during the period . during the year ended december 31 , 2018 , under the lilly agreement , we recognized a $ 20.0 million development milestone for the first patient treated in systemic lupus erythematosus phase iii program for baricitinib and
| 14,357 |
” 47 timeline views , timeline views per mau and advertising revenue per timeline view . we define ti meline views as the total number of timelines requested and delivered when registered users visit twitter , refresh a timeline or view search results while logged in on our website , mobile website or desktop or mobile applications ( excluding our tweetdeck and mac clients , as we do not fully track this data ) . we believe that timeline views and timeline views per mau are measures of user engagement . timeline views per mau are calculated by dividing the total timeline views for the period by the average maus for the last three months of such period . in the three months and year ended december 31 , 2013 , we had 147.8 billion and 593.8 billion timeline views , respectively , which represent increases of 26 % and 55 % from the three months and year ended december 31 , 2012 , respectively . in the three months and year ended december 31 , 2013 , we had 40.9 billion and 164.2 billion timeline views in the united states , respectively , which represent increases of 14 % and 37 % from the three months and year ended december 31 , 2012 , respectively . in the three months and year ended december 31 , 2013 , we had 106.9 billion and 429.5 billion timeline views in the rest of the world , respectively , which represent increases of 31 % and 62 % from the three months and year ended december 31 , 2012 , respectively . in the three months ended december 31 , 2013 , we had 613 timeline views per mau , which represents an decrease of 3 % from the three months ended december 31 , 2012. in the three months ended december 31 , 2013 , we had 756 timeline views per mau in the united states and 572 timeline views per mau in the rest of the world , which represent decreases of 6 % and 2 % from the three months ended december 31 , 2012 , respectively . for additional information on how we calculate the number of timeline views and factors that can affect this metric , see the section titled “ note regarding key metrics. ” we define advertising revenue per timeline view as advertising revenue per 1,000 timeline views during the applicable period . we believe that advertising revenue per timeline view is a measure of our ability to monetize our platform . in the three months ended december 31 , 2013 , our advertising revenue per timeline view was $ 1.49 , which represents a 76 % increase from the three months ended december 31 , 2012. in the three months ended december 31 , 2013 , our advertising revenue per timeline view in the united states was $ 3.80 and our advertising revenue per timeline view in the rest of the world was $ 0.60 , which represent increases of 73 % and 139 % from the three months ended december 31 , 2012 , respectively . we record advertising revenue based on the billing location of our advertisers , rather than the location of our users . 48 factors affecting our future performance user growth , user engagement and monetization . user growth trends reflected in the number of maus , user engagement trends reflected in timeline views and timeline views per mau and monetization trends reflected in advertising revenue per timeline view are key factors that affect our revenue . as our u ser base and the level of engagement of our users grow , we believe the potential to increase our revenue grows . user growth . we have experienced significant growth in our number of users over the last several years . in general , a higher proportion of internet users in the united states uses twitter than internet users in other countries . accordingly , in the future we expect ou r user growth rate in certain international markets , such as argentina , france , japan , russia , saudi arabia and south africa , to continue to be higher than our user growth rate in the united states . however , we expect to face challenges in entering some markets , such as china , where access to twitter is blocked , as well as certain other countries that have intermittently restricted access to twitter . restrictions or limitations on access to twitter may adversely impact our ability to increase the size of our user base and generate additional revenue in certain markets . although we do not separately track whether an mau has only used twitter on a desktop or on a mobile device , the usage of our mobile applications continues to grow . in the three months ended december 31 , 2013 , 76 % of our average maus accessed twitter from a mobile device , compared to 72 % in the three months ended december 31 , 2012. we may face challenges in increasing the size of our user base , including , among others , competition from alternative products and services , a decline in the number of influential users on twitter or a perceived decline in the quality of content available on twitter . we intend to drive growth in our user base by continuing to demonstrate the value and usefulness of our products and services to potential new users , and by introducing new products , services and features . our user growth rate has slowed over time , and we anticipate that it may continue to slow , with increases to the size of our user base . to the extent our user growth or user growth rate continues to slow , our revenue growth will become increasingly dependent on our ability to increase levels of user engagement , as measured by timeline views and timeline views per mau , and monetization , as measured by advertising revenue per timeline view . user engagement . story_separator_special_tag two broad measures of user engagement on our platform are timeline views and the number of timeline views per mau . in the three months ended december 31 , 2013 , timeline views increased 26 % and timeline views per mau decreased 3 % , compared to the three months ended december 31 , 2012. we experienced a 10 % decline in timeline views per mau during the three months ended december 31 , 2013 from the three months ended september 30 , 2013 , which we believe was primarily driven by certain product changes we made in the three months ended december 31 , 2013 to enhance user experience . our most engaged users are generally those who access twitter via our mobile applications . in the three months ended december 31 , 2013 , a substantial majority of timeline views were on mobile devices . we expect this trend to continue in the near term , and we plan to continue to develop and improve our mobile applications to further drive user adoption of these applications . we intend to continue to optimize our products to improve the overall user experience , and the changes we may make to our products may result in slower growth , or a decline , in the number of timeline views or the number of timeline views per mau . to the extent user engagement as measured by timeline views and timeline views per mau does not increase , our revenue growth will depend in large part on our ability to increase maus or monetization of our platform . monetization . we measure monetization of ou r platform through advertising revenue per timeline view . there are many variables that impact timeline views and advertising revenue per timeline view , such as the number of maus , the number of timeline views per mau , which timeline views we monetize and the amount of advertising we choose to display , our users ' engagement with our promoted products and advertiser demand . generally , for our pay-for-performance promoted products , we design our algorithms to optimize for the combined impact of a number of factors , including the overall user experience , the number of ads we deliver to a particular user , the likelihood that our users will engage with the ads , the value we deliver to advertisers and the impact of the advertisers ' bids . we design our algorithms to enhance the user experience by delivering relevant ads to a user based on the user 's interest graph , and these ads may contain information of interest to the user or may provide promotional offers that are not available anywhere else . our algorithms also enhance the value that we deliver to advertisers because the targeting capabilities of our algorithms allow advertisers to deliver ads that are relevant to a user 's interests , thereby increasing the effectiveness of an advertiser 's advertising campaign . 49 we regularly refine our algorithms to drive monetization while maximizing the long-term value of our platform for our users and advertisers . given the large number of variables that drive advertising revenue per timeline view , including decisions that we make regarding optimizing user experience and satisfying advertiser demand , certain individual components may decline while others increase . ultimately , it is the combination of the changes in these components that impacts advertising revenue per timeline v iew . for example , advertising revenue has increased sequentially in each of the seven quarters ended december 31 , 2013 , driven by sequential increases in paid user engagements with our pay-for-performance promoted products , or ad engagements , over those same periods , partially offset by sequential decreases in average cost per ad engagement during the same periods . the number of ad engagements increased 55 % , 32 % , 78 % , 15 % , 124 % , 58 % and 74 % sequentially in the three months ended june 30 , 2012 , september 30 , 2012 , december 31 , 2012 , march 31 , 2013 , june 30 , 2013 , september 30 , 2013 and december 31 , 2013 , respectively . the increases in ad engagements over these periods were primarily due to increases in maus , user engagement levels , as measured by timeline views per mau , and advertiser demand . average cost per ad engagement decreased 18 % , 9 % , 19 % , 12 % , 46 % , 20 % and 18 % sequentially in the three months ended june 30 , 2012 , september 30 , 2012 , december 31 , 2012 , march 31 , 2013 , june 30 , 2013 , september 30 , 2013 and december 31 , 2013 , respectively . the decreases in cost per ad engagement over these periods were primarily driven by higher ad engagements as a result of continued improvements made to our ad products and our prediction and targeting capabilities . supply of advertising inventory increased as we expanded the distribution of our promoted products to our mobile applications and additional markets outside of the united states in 2012. the increase in advertising inventory provided us with additional opportunities to place ads on our platform . this reduction in cost per ad engagement made our promoted products more attractive for our existing advertisers and new advertisers , including small and medium sized businesses with smaller advertising budgets , as well as international advertisers . as we continue to optimize for advertiser value and the overall user experience , the cost per ad engagement may continue to decline over time , and we expect the cost per ad engagement to decline in the near term . in the event that cost per ad engagement continues to decline , and we are unable to continue to offset the impact of such decreases on advertising revenue by increasing the number of ad engagements , our advertising revenue would decline .
| this increase in data licensing revenue was primarily attributable to a 27 % net increase in licensing fees from existing data partners in 2013 compared to 2012 , and to a lesser extent from an increase in licensing fees from new data partners . 2012 compared to 2011 . revenue in 2012 increased by $ 210.6 million compared to 2011. in 2012 , advertising revenue increased by 247 % compared to 2011. the increase was primarily attributable to the expansion of our advertising service offerings in the second half of 2011 and the first half of 2012 , as well as a 59 % increase in average maus in 2012 compared to 2011. we expanded our advertising se rvice offerings through the introduction of promoted tweets in all user timelines in october 2011 and promoted products on mobile applications in february 2012. in 2012 , data licensing revenue increased by 66 % compared to 2011. the increase in data licensing revenue was primarily attributable to a 51 % net increase in licensing fees from existing data partners in 2012 compared to 2011 , and to a lesser extent from an increase in licensing fees from new data partners . cost of revenue replace_table_token_10_th 2013 compared to 2012 . in 2013 , cost of revenue increased by $ 138.0 million compared to 2012. the increase was primarily attributable to a $ 64.6 million increase in personnel-related costs , mainly driven by an inc rease in average employee headcount and recognition of stock-based compensation expense triggered by our initial public offering , a $ 34.4 million increase in depreciation expense related to capital leases for additional server and networking equipment , a $ 28.0 million increase in allocated facilities and other supporting overhead costs due to the continued expansion of our real estate footprint and increase in support functions , and a $ 14.8 million increase in data center costs related to our co-located facilities . these increases were partially offset
| 14,358 |
regional results include : the americas grew 17 % across all products within both the products and systems integration and the services and software segments , inclusive of incremental revenue from acquisitions ; emea grew 18 % on broad-based growth within all offerings within our products and systems integration and services and software segments , inclusive of incremental revenue from acquisitions ; and ap was relatively flat with growth in the services and software segment offset by lower products and systems integration revenue . products and systems integration the 13 % growth in the products and systems integration segment was driven by the following : $ 318 million of incremental revenue from the acquisitions of avigilon in 2018 and interexport during 2017 ; $ 78 million from the adoption of asc 606 ; devices revenues were up significantly due to the acquisition of avigilon along with strong demand in the americas and emea ; and systems and systems integration revenues increased 10 % in 2018 , as compared to 2017 driven by incremental revenue from avigilon , as well as system deployments in emea and ap . services and software the 20 % growth in the services and software segment was driven by the following : $ 189 million of incremental revenue primarily from the acquisitions of plant and avigilon in 2018 and kodiak networks and interexport during 2017 ; $ 5 million from the adoption of asc 606 ; services were up $ 174 million , or 9 % , driven by growth in both maintenance and managed service revenues , and incremental revenue from the acquisitions of interexport and plant ; and software was up $ 202 million , or 89 % , driven primarily by incremental revenue from the acquisitions of plant , avigilon , and kodiak networks , and growth in our command center software suite . 30 gross margin years ended december 31 ( in millions ) 2018 2017 % change gross margin $ 3,480 $ 3,024 15 % gross margin was 47.4 % of net sales in both 2018 and 2017 . the primary drivers of increases , with offsetting decreases , are as follows : higher margins within the services and software segment primarily driven by operational improvements and efficiencies in service delivery costs of our services portfolio and higher margin contribution within our software portfolio from acquisitions ; lower margins in the products and systems integration segment primarily driven by lower margin in systems and systems integration due to certain large projects where we have taken an integrator role , partially offset by higher devices volumes ; and $ 50 million of additional reorganization of business charges ( see further detail in “ reorganization of businesses ” section ) primarily associated with costs related to the closure of certain supply chain operations in europe in 2018 as compared to 2017. selling , general and administrative expenses years ended december 31 ( in millions ) 2018 2017 % change selling , general and administrative expenses $ 1,254 $ 1,025 22 % sg & a expenses increased 22 % compared to 2017 . sg & a expenses were 17.1 % of net sales compared to 16.1 % of net sales in 2017 . the increase in sg & a expenditures is primarily due to increased expenses associated with acquired businesses , $ 72 million related to the change in classification of our third-party sales commissions from the adoption of asc 606 , and higher incentive compensation . research and development expenditures replace_table_token_6_th r & d expenditures increased 12 % . r & d expenditures were 8.7 % of net sales compared to 8.9 % of net sales in 2017 . the increase in r & d expenditures is primarily due to increased expenses associated with acquired businesses . other charges replace_table_token_7_th the other charges in 2018 as compared to 2017 can be summarized as follows : $ 188 million of amortization of intangibles in 2018 compared to $ 151 million in 2017 , driven by 2018 acquisitions ; $ 61 million of net reorganization of business charges in 2018 as compared to $ 33 million in 2017 , with higher charges coming in 2018 as we continue to integrate acquisitions ( see further detail in “ reorganization of businesses ” section ) ; a $ 57 million charge in 2018 related to ongoing remediation efforts for an environmental clean-up incurred by a legacy business ( see note 3 of our consolidated financial statements ) ; a gain of $ 47 million in 2017 , related to the recovery of financial receivables owed to us by a former customer of a legacy business ; and 31 $ 24 million of charges for acquisition-related transaction fees in 2018 as compared to $ 1 million in 2017 . operating earnings replace_table_token_8_th operating earnings were down $ 29 million , or 2 % , compared to 2017 . the decrease in operating earnings was due to : products and systems integration was down $ 115 million from 2017 to 2018 , driven by : ( i ) $ 69 million more reorganization of business expenses , ( ii ) environmental reserve expenses of $ 40 million in 2018 , ( iii ) $ 28 million more intangible amortization driven by acquisitions , and ( iv ) $ 12 million of acquisition-related transaction fees ; and partially offset by the services and software segment , which was up $ 86 million from 2017 to 2018 , driven by higher sales and partially offset by : ( i ) environmental reserve expenses of $ 17 million in 2018 , ( ii ) $ 9 million more reorganization of business expenses , ( iii ) $ 9 million more intangible amortization from 2018 acquisitions , and ( iv ) $ 11 million more of acquisition-related transactions fees . story_separator_special_tag net interest expense replace_table_token_9_th the increase in net interest expense in 2018 compared to 2017 was a result of increases in outstanding debt : $ 500 million of senior notes due in 2028 , that were used to make a voluntary contribution to the u.s. pension plan , issued during the first quarter of 2018 ; $ 400 million term loan due in 2021 ( `` the term loan '' ) that was issued during the first quarter of 2018 and was used to complete the acquisition of avigilon ; $ 400 million borrowed under our revolving credit facility at the end of the first quarter of 2018 and repaid throughout the year ; and $ 200 million of follow-on senior notes due in 2028 , issued in the third quarter of 2018 , which were used to repurchase $ 200 million of convertible notes . gains ( losses ) on sales of investments and businesses , net replace_table_token_10_th the net gains in 2018 and 2017 were primarily related to the sales of various equity investments . other replace_table_token_11_th the net other income in 2018 as compared to 2017 was primarily comprised of : $ 75 million of net periodic pension and postretirement benefit in 2018 as compared to $ 46 million in 2017 ; $ 48 million of losses on settlements within our u.k. defined benefit plan during 2017 with no activity in 2018 ; $ 11 million of favorable fair value adjustments to investments ; 32 a $ 6 million gain from the repurchase of $ 200 million of our convertible notes in 2018 , foreign currency losses of $ 24 million in 2018 as compared to $ 31 million of losses in 2017 ; and a $ 14 million loss on derivative instruments in 2018 , as compared to a gain of $ 15 million in 2017. effective tax rate replace_table_token_12_th income tax expense decreased by $ 1.1 billion compared to 2017 , for an effective tax rate of 12 % . our effective tax rate for 2018 was lower than the current u.s. federal statutory rate of 21 % primarily due to : a $ 79 million benefit related to updates of the provisional amounts on the impact of the tax act ; and a $ 30 million benefit due to the recognition of excess tax benefits on share-based compensation . our effective tax rate in 2017 was 114 % primarily due to the implementation of tax act . as a result of the tax act we recorded $ 874 million of non-recurring charges , primarily related to : a $ 471 million valuation allowance against u.s. foreign tax credit carryforwards ; and income tax expense of $ 366 million from the remeasurement of our deferred tax balances at the lower federal tax rate of 21 % . excluding the income tax effects from the tax act , our effective tax rate was lower than the 2017 u.s. statutory tax rate of 35 % ( see note 6 of our consolidated financial statements ) . results of operations— 2017 compared to 2016 net sales replace_table_token_13_th the products and systems integration segment 's net sales represented 71 % of our consolidated net sales in 2017 , compared to 73 % in 2016 . the services and software segment 's net sales represented 29 % of our consolidated net sales in 2017 , compared to 27 % in 2016 . net sales were up $ 342 million , or 6 % , compared to 2016 . the increase in net sales is reflective of growth in every region with a 3 % increase in the products and systems integration segment and a 14 % increase in the services and software segment . the growth includes : $ 186 million of incremental revenue from the acquisitions of interexport and kodiak networks in 2017 and spillman and airwave which were acquired during 2016 ; and $ 8 million from favorable currency rates . regional results include : the americas grew 7 % due to increases in the services and software segment , inclusive of incremental revenue from acquisitions , as well as in systems and system integration , offset by a slight decrease in device revenues ; emea grew 5 % across all portfolios within our products and systems integration segment , as well as within our services and software segment , inclusive of incremental revenues from airwave ; and ap grew 1 % due to increases in both devices and systems and systems integration within our products and systems integration segment , partially offset by a slight decrease in our services and software segment . products and systems integration the 3 % growth in the products and systems integration segment was driven by the following : systems and systems integration revenues increased 5 % in 2017 as compared to 2016 driven by system deployments in the americas and $ 19 million of incremental revenue from the acquisition of interexport in 2017 ; and 33 an increase in devices in every region . services and software the 14 % growth in the services and software segment was driven by the following : $ 167 million of incremental revenue from the acquisitions of interexport and kodiak networks in 2017 and spillman and airwave in 2016 ; services were up $ 128 million , or 8 % , driven by incremental revenue from the acquisitions of interexport and airwave as well as growth in maintenance services and managed service revenues ; and software was up $ 95 million , or 72 % , driven primarily by incremental revenue from the acquisitions of spillman and kodiak networks , in addition to higher command center software sales not attributed to acquisitions . gross margin years ended december 31 ( in millions ) 2017 2016 % change gross margin $ 3,024 $ 2,869 5 % gross margin was 47.4 % of net sales compared to 47.5 % of net sales in 2016 .
| in the services and software segment , net sales were $ 2.2 billion in 2018 , an increase of $ 376 million , or 20 % , compared to $ 1.9 billion in 2017 . on a geographic basis , net sales increased in every region . the increase in net sales was driven by growth excluding acquisitions in both services and software and also including the acquisitions of plant , kodiak networks , and interexport . operating earnings were $ 401 million in 2018 , compared to $ 315 million in 2017 . operating margin increased in 2018 to 17.9 % from 16.9 % in 2017 on higher sales and gross margin . looking forward entering 2019 , we believe we are well-positioned for continued leadership in mission-critical communications . our technology platforms in communications , video , services , and software help make cities safer and enable communities and businesses to thrive . at motorola solutions , we are ushering in a new era in public safety and security . we are a leading provider of solutions that enable first responders , federal and local governments , as well as commercial customers , to communicate in everyday and extreme situations . our land mobile radio ( `` lmr '' ) solutions are uniquely designed , built , and delivered for our customers ' specific needs , and we continue to expect lmr to be the preferred solution for our customers in the years ahead . our services and software business supplements our lmr business . as communication networks have become increasingly complex , software-centric , and data-driven , we have expanded our services offering to maintain , monitor , secure and manage our customers ' networks . we expect continued growth for our value-added services going forward . additionally , we have command center software solutions for the public safety workflow to serve the 6,000+ emergency call centers in north america . we have invested organically and via the acquisitions of plant , kodiak networks and spillman in 2018 , 2017 and 2016 , respectively , to add new capabilities to our command
| 14,359 |
the timing and amount of our research and development expenses will depend largely upon the outcomes of current and future trials for our prescription drug product candidates as well as the related regulatory requirements , the outcomes of current and future species‑specific formulation studies for our non‑prescription products , manufacturing costs and any costs associated with the advancement of our line extension programs . we can not determine with certainty the duration and completion costs of the current or future development activities . the duration , costs and timing of trials , formulation studies and development of our prescription drug and non‑prescription products will depend on a variety of factors , including : · the scope , rate of progress , and expense of our ongoing , as well as any additional clinical trials , formulation studies and other research and development activities ; · future clinical trial and formulation study results ; · potential changes in government regulations ; and · the timing and receipt of any regulatory approvals . a change in the outcome of any of these variables with respect to the development of a prescription drug product candidate or non‑prescription product could mean a significant change in the costs and timing associated with our development activities . 74 we expect research and development expense to increase significantly as we add personnel , commence additional clinical studies and other activities to develop our prescription drug product candidates and non‑prescription products . sales and marketing expense sales and marketing expenses consist of personnel and related benefit expense , stock‑based compensation expense , direct sales and marketing expense , employee travel expense , and management consulting expense . we currently incur sales and marketing expenses to promote mytesi and neonorm calf and foal sales . we expect sales and marketing expenses to increase significantly as we develop and commercialize new products and grow our existing neonorm market . we will need to add sales and marketing headcount to promote the sales of existing and new products . general and administrative expense general and administrative expenses consist of personnel and related benefit expense , stock‑based compensation expense , employee travel expense , legal and accounting fees , rent and facilities expense , and management consulting expense . we expect general and administrative expense to increase in order to enable us to effectively manage the overall growth of the business . this will include adding headcount , enhancing information systems and potentially expanding corporate facilities . interest expense interest expense consists primarily of non-cash and cash interest costs related to our borrowings . critical accounting policies and significant judgments and estimates the preparation of financial statements in conformity with u.s. generally accepted accounting principles , or u.s. gaap , requires the use of estimates and assumptions that affect the reported amounts of assets and liabilities , revenues and expenses , and related disclosures in the financial statements . critical accounting policies are those accounting policies that may be 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 that have a material impact on financial condition or operating performance . while we base our estimates and judgments on our experience and on various other factors that we believe to be reasonable under the circumstances , actual results may differ from these estimates under different assumptions or conditions . we believe the following critical accounting policies used in the preparation of our financial statements require significant judgments and estimates . for additional information relating to these and other accounting policies , see note 2 to our audited financial statements , appearing elsewhere in this report . revenue recognition the company recognizes revenue in accordance with asc topic 606 , revenue from contracts with customers ( “ asc 606 ” ) , which was adopted on january 1 , 2018 , using the modified retrospective method , which was elected to apply to all active contracts as of the adoption date . application of the modified retrospective method did not impact amounts previously reported by the company , nor did it require a cumulative effect adjustment upon adoption , as the company 's method of recognizing revenue under asc 606 yielded similar results to the method utilized immediately prior to adoption . accordingly , there was no effect to each financial statement line item as a result of applying the new revenue standard . 75 practical expedients , elections , and exemptions we recognize revenue in accordance with the core principal of asc 606 or when there is a transfer of control of promised goods or services to customers in an amount that reflects the consideration that we expect to be entitled to in exchange for those goods or services . we used a practical expedient available under asc 606‑10‑65‑1 ( f ) 4 that permits us to consider the aggregate effect of all contract modifications that occurred before the beginning of the earliest period presented when identifying satisfied and unsatisfied performance obligations , transaction price , and allocating the transaction price to the satisfied and unsatisfied performance obligations . we also used a practical expedient available under asc 606‑10‑32‑18 that permits us not to adjust the amount of consideration for the effects of a significant financing component if , at contract inception , the expected period between the transfer of promised goods or services and customer payment is one year or less . we have elected to treat shipping and handling activities as fulfillment costs . additionally , we have elected to record revenue net of sales and other similar taxes . contracts napo entered into a marketing and distribution agreement ( “ m & d agreement ” ) with bexr logistix , llc ( “ bexr ” or “ mission pharmacal ” or “ mission ” ) , in april 2016 to appoint bexr as its distributor with the right to market and sell , and the exclusive right to distribute mytesi ( formerly fulyzaq ) in the us . story_separator_special_tag napo sells mytesi through mission , who then sells mytesi to its distributors and wholesalers — mckesson , cardinal health , amerisourcebergen drug corporation ( “ abc ” ) , hd smith , smith drug and publix ( together “ distributors ” ) . mission sells mytesi to their distributors , on behalf of napo , under agreements executed by mission with these distributors and napo abides by the terms and conditions of sales agreed to between mission and their distributors . health care providers order mytesi through pharmacies who obtain mytesi through mission 's distributors . napo considers mission as the sales agent and the distributors of mission as its customers . napo retains control of mytesi held at mission . mission 's distributors are our customers with respect to purchase of mytesi . the m & d agreement with mission , mission 's agreement with the distributors and the related purchase order will together meet the contract existence criteria under asc 606‑10‑25‑1 . this m & d agreement with mission was amended on august 15 , 2018 , with a termination date of january 31 , 2019. mission agreed to continue to serve as the exclusive distributor for mytesi on a transition basis until this date . effective january 31 , 2019 , the company entered into a distribution agreement with cardinal health to replace mission as the sales agent . our neonorm and botanical extract products are primarily sold to distributors , who then sell the products to the end customers . since 2014 , we entered into several distribution agreements with established distributors such as animart , vedco , vpi , rj matthews , henry schein , and stockmen supply to distribute the company 's products in the united states , japan , and china . the distribution agreements and the related purchase order together meet the contract existence criteria under asc 606‑10‑25‑1 . jaguar sells directly to its customers without the use of an agent . performance obligations for the products sold by each of napo and jaguar , the single performance obligation identified above is our promise to transfer our mytesi product to distributors based on specified payment and shipping terms in the arrangement . product warranties are assurance type warranties that do not represent a performance obligation . 76 transaction price for both jaguar and our napo subsidiary , the transaction price is the amount of consideration to which we expect to collect in exchange for transferring promised goods or services to a customer . the transaction price of mytesi and neonorm is the wholesaler acquisition cost ( “ wac ” ) , net of estimated discounts , returns , and price adjustments . allocate transaction price for both jaguar and our napo subsidiary , the entire transaction price is allocated to the single performance obligation contained in each contract . point in time recognition for both jaguar and our napo subsidiary , a single performance obligation is satisfied at a point in time , upon the fob terms of each contract when control , including title and all risks , has transferred to the customer . goodwill and indefinite-lived intangible assets goodwill goodwill is tested for impairment on an annual basis and in-between annual tests if events or circumstances indicate that an impairment loss may have occurred . the test is based on a comparison of the reporting unit 's book value to its estimated fair market value . we perform the annual impairment test during the fourth quarter of each fiscal year using the opening consolidated balance sheet as of the first day of the fourth quarter , with any resulting impairment recorded in the fourth quarter of the fiscal year . if the carrying value of a reporting unit 's net assets exceeds its fair value , the goodwill would be considered impaired and would be reduced to its fair value . in the june 2017 napo merger , goodwill was allocated entirely to the human health reporting unit . the goodwill impairment analysis performed in the fourth quarter of fiscal year 2018. the decline in market capitalization during fiscal year 2018 was determined to be a triggering event for potential goodwill impairment . accordingly , the company performed the goodwill impairment analysis and determined that the company 's entire goodwill balance was impaired , and consequently the company wrote-off the entire balance . the company recorded impairment charges of $ 5.2 million and $ 16.8 million during the years ended december 31 , 2018 and 2017 , respectively . the conditions that gave rise to the fiscal year 2018 impairment charge were due to the total of the fair value of total invested capital and non-interest bearing liabilities being less than the book value of total assets . indefinite-lived intangible assets acquired in-process research and development ( ipr & d ) are intangible assets initially recognized at fair value and classified as indefinite-lived assets until the successful completion or abandonment of the associated research and development efforts . during the development period , these assets will not be amortized as charges to earnings ; instead these assets will be tested for impairment on an annual basis or more frequently if impairment indicators are identified . based on the results of our impairment test , the company recorded an impairment charge of zero and $ 2.3 million during the years ended december 31 , 2018 and 2017 , respectively . in connection with each annual impairment assessment and any interim impairment assessment in which indicators of impairment have been identified , we compare the fair value of the asset as of the date of the assessment with the carrying value of the asset on the consolidated balance sheet . if impairment is indicated by this test , the intangible asset is written down by the amount by which the discounted cash flows expected from the intangible asset exceeds its carrying value . accrued research and development expenses as part of the process of preparing our financial statements , we are required to estimate accrued research and development expenses .
| cost of product revenue replace_table_token_2_th the increase in cost of product revenue of $ 1.9 million for the year ended december 31 , 2018 compared to 2017 was primarily due to increased sales of mytesi due to 2017 only including five months of cost of product revenue post the napo merger completion effective july 31 , 2017 , while 2018 had twelve months of costs of product revenue . 79 research and development expense the following table presents the components of research and development ( r & d ) expense for the years ended december 31 , 2018 and 2017 : replace_table_token_3_th the increase in research and development expense of $ 885,293 for the year ended december 31 , 2018 compared to the same period in 2017 was due primarily to : an increase in contract manufacturing costs due to the completion of sp‑303 api manufacturing readiness work , for costs associated with the implementation and maintenance of serialization , and for costs for in-process mytesi drug product readiness work in 2018. clinical trial work decreased due to the temporary termination of canalevia studies . in addition , stock-based compensation increased $ 362,709 primarily due to an increase in the number of option grants . sales and marketing expense the following table presents the components of sales and marketing ( s & m ) expense for the years ended december 31 , 2018 and 2017 together with the change in such components in dollars and as a percentage : replace_table_token_4_th the increase sales and marketing expense of $ 6,747,837 for the year ended december 31 , 2018 compared to the same period in 2017 was due primarily to ( i ) an increase in personnel and related benefit costs associated with the expansion of our sales and marketing headcount from zero to 19 in support of mytesi ; ( ii ) an increase in direct marketing and sales expense due to the increase in marketing programs to promote the napo mytesi product ; and ( iii ) an increase in other miscellaneous costs . 80 general and administrative expense the following table presents the components of general and administrative ( g & a ) expense for the years ended december 31 , 2018 and 2017 : replace_table_token_5_th the increase in general and administrative expenses of $
| 14,360 |
leasing & services margin increased to 57.3 % for 2015 compared to 47.5 % for 2014 which was primarily the result of a higher average volume of rent-producing leased railcars for syndication as compared to the prior year and lower transportation costs . the $ 80.9 million increase in net earnings for the year ended august 31 , 2015 as compared to the year ended august 31 , 2014 was primarily attributable to an increase in margin . this was partially offset by an increase in selling and administrative expense as compared to the prior year and a gain on contribution to joint venture in 2014. the greenbrier companies 2015 annual report 35 replace_table_token_4_th * not meaningful the 25.5 % increase in revenue for the year ended august 31 , 2014 as compared to the year ended august 31 , 2013 was primarily due to a 33.7 % increase in manufacturing revenue which accounted for 91 % of the total revenue increase . the increase in manufacturing revenue was primarily due to a higher volume of deliveries due to strong demand in the freight car market and our increased product diversification . growth in revenues in wheels & parts and leasing & services of approximately 5.6 % and 16.7 % respectively also contributed to the year-over-year increase in consolidated revenue . the 21.4 % increase in cost of revenue for the year ended august 31 , 2014 as compared to the year ended august 31 , 2013 was primarily due to an increase in manufacturing cost of revenue which represented 88 % of the total increase . cost of revenue for manufacturing increased 26.9 % , primarily due to a 40 % increase in railcar deliveries with a mix which had a lower average labor and material content partially offset by improved production efficiencies . costs of revenue also increased by approximately 7.5 % and 22.8 % in wheels & parts and leasing & services , respectively primarily due to higher volumes . margin as a percentage of revenue was 14.6 % and 11.7 % for the years ended august 31 , 2014 and 2013 , respectively . the overall 2.9 % increase in margin percentage was driven principally by manufacturing margin which increased from 10.9 % to 15.4 % primarily due to a favorable change in product mix and improved production efficiencies . offsetting improved margin in manufacturing was a decline in margin in wheels & parts to 6.4 % in 2014 from 8.0 % in 2013 and a decline in margin in leasing & services to 47.5 % in 2014 from 50.1 % in 2013. the $ 123.0 million increase in net earnings for the year ended august 31 , 2014 as compared to the year ended august 31 , 2013 was primarily attributable to a non-cash goodwill impairment charge of $ 71.8 million , net of tax in 2013 and an increase in manufacturing gross margin and a non-cash gain on contribution to joint venture of $ 13.6 million , net of tax both in 2014. manufacturing segment replace_table_token_5_th * not meaningful manufacturing revenue was $ 2.136 billion , $ 1.625 billion and $ 1.216 billion for the years ended august 31 , 2015 , 2014 and 2013. manufacturing revenue increased $ 511.1 million or 31.5 % in 2015 compared to 2014 primarily due to a 30 % increase in the volume of deliveries in response to strong demand in the freight car market and an increase in marine activity as compared to the prior comparable period . manufacturing revenue increased $ 409.2 million or 33.7 % in 2014 compared to 2013 primarily due to a 40 % increase in the volume of deliveries with a mix that had a lower average selling price as compared to 2013. these higher deliveries were a result of improved efficiencies and an increase in capacity in response to higher demand in the freight car market and our increased product diversification compared to 2013 . 36 the greenbrier companies 2015 annual report manufacturing cost of revenue was $ 1.691 billion , $ 1.374 billion and $ 1.083 billion for the years ended august 31 , 2015 , 2014 and 2013. cost of revenue increased $ 317.4 million or 23.1 % in 2015 compared to 2014 primarily due to an increase of 30 % in the volume of railcar deliveries with a mix that had a lower average labor and material content . this was partially offset by improved production efficiencies and favorable foreign currency exchange rates . in addition , the increase in manufacturing cost of revenue was attributed to an increase in marine activity as compared to the prior comparable period . cost of revenue increased $ 291.1 million or 26.9 % in 2014 compared to 2013 , primarily due to an increase of 40 % in the volume of railcar deliveries with a mix that had a lower average labor and material content partially offset by improved production efficiencies . manufacturing margin as a percentage of revenue was 20.8 % in 2015 , 15.4 % in 2014 and 10.9 % in 2013. the 5.4 % increase in margin in 2015 compared to 2014 was primarily due to favorable pricing , improved production efficiencies and favorable foreign currency exchange rates . in addition , 2015 had higher volumes of new railcar sales with leases attached which typically result in higher sales prices and margins . the 4.5 % increase in margin in 2014 compared to 2013 was primarily the result of a favorable change in product mix and pricing , higher volumes of new railcars syndicated with leases attached and improved production efficiencies and overhead absorption . story_separator_special_tag manufacturing operating profit was $ 396.9 million and 18.6 % of revenue for the year ended august 31 , 2015 , $ 202.6 million and 12.5 % of revenue for the year ended august 31 , 2014 and $ 88.8 million and 7.3 % of revenue for the year ended august 31 , 2013. the $ 194.4 million or 96.0 % increase in operating profit in 2015 compared to 2014 and the $ 113.7 million or 128.0 % increase in operating profit in 2014 compared to 2013 were both primarily attributed to higher margins . wheels & parts segment this segment included the results of operations for our repair operations through july 18 , 2014. on july 18 , 2014 we and watco , our joint venture partner , contributed our respective repair operations to gbw , an unconsolidated 50/50 joint venture . after july 18 , 2014 , the results of gbw were included as part of earnings ( loss ) from unconsolidated affiliates as we account for our interest in gbw under the equity method of accounting . replace_table_token_6_th * not meaningful wheels & parts revenue was $ 371.2 million , $ 495.6 million and $ 469.2 million for the years ended august 31 , 2015 , 2014 and 2013. the $ 124.4 million or 25.1 % decrease in revenue in 2015 compared to 2014 was primarily due to 2015 excluding repair revenue as a result of contributing our repair business to gbw , while 2014 included $ 138.4 million of repair revenue . the decrease in revenue was also attributed to a decrease in scrap metal pricing . the $ 26.4 million or 5.6 % increase in revenue in 2014 compared to 2013 was primarily the result of an 11 % increase in wheel set and component volumes as a result of increased demand , and a change in wheel set and component product mix resulting in a higher average selling price . these were partially offset by an 18 % decrease in repair volume primarily due to the closure of facilities as part of our previously disclosed restructuring plan to sell or close certain wheels , repair and parts facilities to enhance margins and improve capital efficiency and the contribution of our repair operations to gbw which reduced the number of working days in which we consolidated the repair operations during 2014 by approximately 12 % compared to 2013. wheels & parts cost of revenue was $ 334.7 million , $ 463.9 million and $ 431.5 million for the years ended august 31 , 2015 , 2014 and 2013. cost of revenue decreased $ 129.3 million or 27.9 % in 2015 compared to 2014 primarily due to 2015 excluding repair cost of revenue as a result of contributing our repair business to gbw , the greenbrier companies 2015 annual report 37 while 2014 included repair cost of revenue . cost of revenue increased $ 32.4 million or 7.5 % in 2014 compared to 2013 , primarily due to an 11 % increase in wheel set and component volumes as a result of increased demand and operating inefficiencies at certain of our repair facilities . this was partially offset by a decrease of 18 % in repair volumes primarily due to the closure of facilities as part of our previously disclosed restructuring plan and the contribution of our repair operations to gbw which reduced the number of working days in which we consolidated the repair operations during 2014 by approximately 12 % compared to 2013. wheels & parts margin as a percentage of revenue was 9.8 % for 2015 , 6.4 % for 2014 and 8.0 % for 2013. the 3.4 % increase in margin as a percentage of revenue in 2015 compared to 2014 was primarily the result of 2015 excluding the results of our repair operations which in the recent past have had lower margins as a percentage of revenue than the rest of the segment . in addition , the increase in margin was due to a favorable change in wheel pricing and a more favorable parts product mix . these were partially offset by the adverse effect of a decline in scrap metal pricing on wheel margins during 2015. the 1.6 % decrease in margin as a percentage of revenue in 2014 compared to 2013 was primarily the result of operating inefficiencies at certain of our repair facilities and a less favorable parts product mix . wheels & parts operating profit was $ 27.6 million and 7.4 % of revenue for the year ended august 31 , 2015 , operating profit was $ 40.6 million and 8.2 % of revenue for the year ended august 31 , 2014 and an operating loss was $ 61.0 million for the year ended august 31 , 2013. the $ 13.0 million or 32.1 % decrease in operating profit in 2015 compared to 2014 was primarily attributed to a $ 29.0 million pre-tax non-cash gain on contribution to joint venture in 2014. this was partially offset by repair selling and administrative expense being excluded in 2015 as a result of contributing our repair business to gbw and an increase in margin in the current year . the $ 101.6 million increase in operating profit in 2014 compared to 2013 was primarily attributed to a pre-tax non-cash goodwill impairment charge of $ 76.9 million in 2013 and a $ 29.0 million pre-tax non-cash gain on contribution to joint venture in 2014. leasing & services segment replace_table_token_7_th * not meaningful leasing & services revenue was $ 98.0 million , $ 83.4 million and $ 71.5 million for the years ended august 31 , 2015 , 2014 and 2013. the $ 14.6 million or 17.5 % increase in revenue in 2015 compared to 2014 was primarily the result of a higher average volume of rent-producing leased railcars for syndication , which is classified as leased railcars for syndication on our consolidated balance sheet , held short-term .
| backlog as of august 31 , 2014 was 31,500 units with an estimated value of $ 3.33 billion . currently no orders in our backlog are intended to be placed into our owned lease fleet . multi-year supply agreements are a part of rail industry practice . a portion of the orders included in backlog reflects an assumed product mix . under terms of the orders , the exact mix will be determined in the future which may impact the dollar amount of backlog . marine backlog as of august 31 , 2015 was $ 52 million compared to $ 112 million as of august 31 , 2014. our backlog of railcar units and marine vessels is not necessarily indicative of future results of operations . certain orders in backlog are subject to customary documentation and completion of terms . customer orders contain terms and conditions customary in the industry . customers may attempt to cancel or modify orders in backlog . in most cases , little variation has been experienced between the quantity ordered and the quantity actually delivered , though the timing of deliveries may be modified from time to time . the greenbrier companies 2015 annual report 33 overview revenue , cost of revenue , margin and operating profit presented below , include amounts from external parties and exclude intersegment activity that is eliminated in consolidation . ( in thousands ) 2015 2014 2013 revenue : manufacturing $ 2,136,051 $ 1,624,916 $ 1,215,734 wheels & parts 371,237 495,627 469,222 leasing & services 97,990 83,419 71,462 2,605,278 2,203,962 1,756,418 cost of revenue : manufacturing 1,691,414 1,374,008 1,082,889 wheels & parts 334,680 463,938 431,501 leasing & services 41,831 43,796 35,655 2,067,925 1,881,742 1,550,045 margin : manufacturing 444,637 250,908 132,845 wheels & parts 36,557 31,689 37,721 leasing & services 56,159 39,623 35,807 537,353 322,220 206,373 selling and administrative 151,791 125,270 103,175 net gain on disposition of equipment ( 1,330 ) ( 15,039 ) ( 18,072 ) gain on contribution to joint venture ( 29,006 ) goodwill impairment
| 14,361 |
furthermore , if we issue equity or debt securities to raise additional funds , our existing stockholders may experience dilution and the new equity or debt securities we issue may have rights , preferences and privileges senior to those of our existing stockholders . in addition , if we raise additional funds through collaboration , licensing or other similar arrangements , it may be necessary to relinquish valuable rights to our products or proprietary technologies , or to grant licenses on terms that are not favorable to us . if we can not raise funds on acceptable terms , we may not be able to develop or enhance our products , obtain the required regulatory clearances or approvals , achieve long term strategic objectives , take advantage of future opportunities , or respond to competitive pressures or unanticipated customer requirements . any of these events could adversely affect our ability to achieve our development and commercialization goals , which could have a material and adverse effect on our business , results of operations and financial condition . if we are unable to establish small to medium scale production capabilities through our own plant or though collaboration we may be unable to fulfill our customers ' requirements . this may cause a loss of future revenue streams as well as require us to look for third party vendors to provide these services . these vendors may not be available , or charge fees that prevent us from pricing competitively within our markets . we have licensed to opko health , inc. ( “ opko ” ) , a multi-national biopharmaceutical and diagnostics company , certain new product offerings and health care technologies for distribution and business development throughout latin america . the initial product to be commercialized is our proprietary ingredient pterostilbene . we believe that partnering with opko provides a unique opportunity to enter the latin american market and we see its market a as potentially offering the company significant long-term economic prospects . some of our operations are subject to regulation by various state and federal agencies . in addition , we expect a significant increase in the regulation of our target markets . dietary supplements are subject to fda , ftc and u.s. department of agriculture ( “ usda ” ) regulations relating to composition , labeling and advertising claims . these regulations may in some cases , particularly with respect to those applicable to new ingredients , require a notification that must be submitted to the fda along with evidence of safety . there are similar regulations related to food additives . recent developments on march 28 , 2013 , we entered into an asset purchase and sale agreement with neutrisci international inc. and consummated the sale of bluscience consumer product line to neutrisci . the total sale transaction value is estimated at approximately $ 6.2 million and consists of following : ( a ) a $ 250,000 cash payment , which neutrisci paid as a deposit in february 2013 ; ( b ) an additional $ 250,000 cash payment , which was paid at the closing of the sale ; ( c ) an additional cash payment of $ 500,000 due no later than 60 days after the closing of the sale ; ( d ) $ 2,500,000 senior convertible secured note ( convertible into 625,000 shares series i preferred stock as described below ) payable in quarterly installments of $ 416,667 beginning august 15 , 2013 ; and ( e ) 669,708 shares of series i preferred shares that are convertible into 2,678,832 class “ a ” common shares of neutrisci , representing an aggregate of 19 % of the neutrisci shares at a deemed price for each class a common share of $ 1.00 per share . the transaction documents contain certain equity blockers that preclude our ownership in neutrisci in excess of 9.99 % and 19 % without obtaining a waiver from neutrisci . on march 7 , 2013 , we entered into an exclusive license agreement ( the `` agreement '' ) with washington university , located in saint louis , missouri ( `` wu '' ) . under the terms of the agreement , wu granted to chromadex a worldwide , exclusive , sublicensable right and license to use certain patent rights relating to the use of the vitamin known as nicotinamide riboside ( “ nr ” ) in a specified field of use . nr is found naturally in trace amounts in milk and other foods and is a more potent version of niacin ( vitamin b3 ) . in consideration of the license granted , we will pay to wu earned royalties on net sales of all licensed products ( including sales by sublicensees and affiliates ) , as well as a percentage of attributed income from sublicensing agreements . we are subject to minimum annual maintenance or royalty payments to wu of $ 25,000 during the term of the agreement . we have agreed upon a commercialization plan to develop , commercialize and market licensed products under that agreement and will make certain payments to wu in connection with the achievement of certain milestone events relating to product development and regulatory approvals in accordance with the terms of the agreement . -27- story_separator_special_tag period ended december 29 , 2012 , increased to $ 2,227,934 compared to $ 1,748,360 for the twelve-month period ended december 31 , 2011. the increase was largely due to our increased efforts of marketing and promoting public awareness of one of our proprietary ingredients , pterostilbene . story_separator_special_tag for the retail dietary supplement products segment , sales and marketing expenses for the twelve-month period ended december 29 , 2012 , increased to $ 3,292,207 as compared to $ 790,892 for the twelve-month period ended december 31 , 2011. this increase was mainly due to our national advertising campaign through television and radio media as well as co-op advertising with retailers in support of marketing bluscience products . operating expenses - general and administrative general and administrative expenses consist of research and development , general company administration , it , accounting and executive management . general and administrative expenses for the twelve-month period ended december 29 , 2012 increased to $ 8,391,730 as compared to $ 7,796,806 for the twelve-month period ended december 31 , 2011. one of the factors that contributed to this increase was certain one-time severance payments made due to the terminations of certain officers of the company . severance expenses incurred due to the terminations of certain officers for the twelve-month period ended december 29 , 2012 were approximately $ 671,000. another factor that contributed to the increase in general and administrative expenses was the increase in investor relations expenses for the purpose of increasing market and shareholder awareness . our investor relations expenses for the twelve-month period ended december 29 , 2012 were $ 987,399 as compared to $ 517,891 for the twelve-month period ended december 31 , 2011. lastly , we had additional executive management and administrative staff during the first six months of 2012 , to support the launch of bluscience , which led to an increase in general and administrative expenses . nonoperating - interest income interest income consists of interest earned on money market accounts . interest income for the twelve-month period ended december 29 , 2012 , was $ 3,014 as compared to $ 1,397 for the twelve-month period ended december 31 , 2011. nonoperating - interest expense interest expense consists of interest on capital leases . interest expense for the twelve-month period ended december 29 , 2012 , was $ 29,006 as compared to $ 32,142 for the twelve-month period ended december 31 , 2011 . -29- depreciation and amortization for the twelve-month period ended december 29 , 2012 , we recorded approximately $ 328,099 in depreciation compared to approximately $ 328,632 for the twelve-month period ended december 31 , 2011. we depreciate our assets on a straight-line basis , based on the estimated useful lives of the respective assets . we amortize intangible assets using a straight-line method over 10 years . in the twelve month period ended december 29 , 2012 , we recorded amortization on intangible assets of approximately $ 15,934 compared to approximately $ 70,249 for the twelve month period ended december 31 , 2011. income taxes at december 29 , 2012 and december 31 , 2011 , the company maintained a full valuation allowance against the entire deferred income tax balance which resulted in an effective tax rate of zero for 2012 and 2011. liquidity and capital resources from inception and through december 29 , 2012 , we have incurred aggregate losses of approximately $ 30 million . these losses are primarily due to expenses associated with the development and expansion of our operations . these operations have been financed through capital contributions and the issuance of common stock and warrants through private placements and through our registered direct offering . our board of directors periodically reviews our capital requirements in light of our proposed business plan . our future capital requirements will remain dependent upon a variety of factors , including cash flow from operations , the ability to increase sales , increasing our gross profits from current levels , reducing sales and administrative expenses as a percentage of net sales , continued development of customer relationships , and our ability to market our new products successfully . however , based on our results from operations , we may determine that we need additional financing to implement our business plan . there can be no assurance that any such financing will be available on terms favorable to us or at all . without adequate financing we may have to further delay or terminate product or service expansion plans . any inability to raise additional financing would have a material adverse effect on us . during the twelve-month period ended december 29 , 2012 , we sold 9,966,666 shares of our common stock at a price per share of $ 0.75 for gross proceeds of $ 7,475,000 , or $ 6,739,498 after deducting offering costs in a registered direct offering of these shares . we also sold 4,933,329 restricted shares of our common stock at a price per share of $ 0.75 for gross proceeds of $ 3,699,997 , or $ 3,330,740 after deducting offering costs . subsequent to the period ended december 29 , 2012 , we entered into an asset purchase and sale agreement with neutrisci international inc. and consummated the sale of bluscience consumer product line to neutrisci . the total sale transaction value is estimated at approximately $ 6.2 million and consists of following : ( a ) a $ 250,000 cash payment , which neutrisci paid as a deposit in february 2013 ; ( b ) an additional $ 250,000 cash payment , which was paid at the closing of the sale ; ( c ) an additional cash payment of $ 500,000 due no later than 60 days after the closing of the sale ; ( d ) $ 2,500,000 senior convertible secured note ( convertible into 625,000 shares series i preferred stock as described below ) payable in quarterly installments of $ 416,667 beginning august 15 , 2013 ; and ( e ) 669,708 shares of series i preferred shares that are convertible into 2,678,832 class “ a ” common shares of neutrisci , representing an aggregate of 19 % of the neutrisci shares at a deemed price for each class a common
| net sales increased by 43 % to $ 11,610,494 for the twelve-month period ended december 29 , 2012 as compared to $ 8,112,610 for the twelve-month period ended december 31 , 2011. the core standards , contract services and ingredients segment generated net sales of $ 8,527,800 for the twelve-month period ended december 29 , 2012. this is an increase of 6 % , compared to $ 8,079,960 for the twelve-month period ended december 31 , 2011. this increase was largely due to increased sales of our proprietary ingredients and other bulk dietary supplement grade raw materials . the retail dietary supplement products segment generated net sales of $ 3,082,694 for the twelve-month period ended december 29 , 2012. the gross sales for this segment was $ 6,861,035 , however , sales deductions for promotions discounts and returns totaled $ 3,778,341. for the twelve-month period ended december 31 , 2011 , the retail dietary supplement products segment only had net sales of $ 32,650 as we had just begun generating initial sales for our bluscience product line . cost of sales costs of sales include raw materials , labor , overhead , and delivery costs . cost of sales for the twelve-month period ended december 29 , 2012 was $ 9,335,057 as compared with $ 5,640,791 for the twelve-month period ended december 31 , 2011. as a percentage of net sales , this represented 11 % increase for the twelve-month period ended december 29 , 2012 compared to the twelve-month period ended december 31 , 2011. the cost of sales as a percentage of net sales for the core standards contract services and ingredients segment for the twelve-month period ended december 29 , 2012 was 72 % compared to 67 % for the twelve-month period ended december 31 , 2011. this percentage increase in cost of sales is largely due to an increase in sales of proprietary ingredients and other bulk dietary supplement grade raw materials . these proprietary ingredients and bulk dietary supplement grade raw materials have significantly higher costs than other products . we expect to see an increase in the sales of these proprietary ingredients and bulk dietary supplement grade raw materials over the next twelve months . the cost of sales for the retail dietary supplement products segment for the twelve-month period ended december 29 , 2012 was $ 3,234,278 despite net sales of $ 3,082,694. this is due to gross sales of $
| 14,362 |
research and development expenses consist of expenses incurred in performing research and development activities , including compensation , share-based compensation expense and benefits for research and development employees and consultants , facilities expenses , overhead expenses , cost of laboratory supplies , manufacturing expenses , fees paid to third parties and other outside expenses . research and development costs are expensed as incurred . clinical trial and other development costs incurred by third parties are expensed as the contracted work is performed . we accrue for costs incurred as the services are being provided by monitoring the status of the clinical trial or project and the invoices received from our external service providers . we adjust our accrual as actual costs become known . where contingent milestone payments are due to third parties under research and development arrangements , the milestone payment obligations are expensed when the milestone events are achieved . see the discussion of “ research and development ” expenses contained within note 3 to the audited financial statements contained within item 8 of this annual report . we utilize our research and development personnel and infrastructure resources across several programs , and many of our costs are not specifically attributable to a single program . accordingly , we can not state precisely our total costs incurred on a program-by-program basis . research and development activities are central to our business model . product candidates in later stages of clinical development generally have higher development costs than those in earlier stages of clinical development , primarily due to the increased size and duration of later-stage clinical trials . thus , it is difficult to determine with certainty the duration and completion costs of our current or future preclinical programs and clinical trials of our product candidates . the duration , costs and timing of clinical trials and development of our product candidates will depend on a variety of factors that include , but are not limited to , the following : per patient clinical trial costs ; the number of patients that participate in the clinical trials ; the number of sites included in the clinical trials ; the process of collection , differentiation , selection and expansion of immune cells for our cellular immuno-therapies ; the countries in which the clinical trials are conducted ; the outcomes of our clinical trials ; the length of time required to enroll eligible patients ; the number of doses that patients receive ; the drop-out or discontinuation rates of patients ; potential additional safety monitoring or other studies requested by regulatory agencies ; the duration of patient follow-up ; the efficacy and safety profile of the product candidates ; and the ability to successfully manufacture patient doses 63 in addition , the potential for success of each product candidate will depend on numerous factors , including clinical trial outcomes , acceptance by regulatory authorities , competition , manufacturing capability and commercial viability . we determine which programs to pursue and how much to fund each program in response to ongoing scientific assessments , competitive developments , clinical trial results , as well as an assessment of each product candidate 's commercial potential . we expect our research and development expenses to increase over the next several years as we progress our business plan which includes conducting ongoing and new clinical trials for bpx-501 , bpx-601 and bpx-701 , and advancing additional product candidates into clinical development , manufacturing clinical trial and preclinical study materials , expanding our research and development and process development and optimization efforts , seeking regulatory approvals for our product candidates that successfully complete clinical trials , and hiring additional personnel . the following table indicates our research and development expense by project/category for the periods indicated : replace_table_token_4_th general and administrative expenses general and administrative expenses consist primarily of salaries and other related costs , including share-based compensation , for personnel in executive , finance , accounting , business development , legal and human resources functions . other significant costs include facility costs not otherwise included in research and development expenses , legal fees relating to patent and corporate matters , insurance costs and professional fees for consultancy , accounting , audit and investor relations . we anticipate that our general and administrative expenses will increase in the future to support our continued research and development activities , and the potential commercialization of our product candidates . additionally , if and when we believe a regulatory approval for the first product candidate appears likely , we anticipate an increase in payroll and related expenses as a result of our preparation for commercial operations , especially as it relates to the sales and marketing of our product candidates . income taxes we did not recognize any income tax expense for the years ended december 31 , 2017 , 2016 and 2015. other income ( expense ) other income ( expense ) , net consists of interest income , interest expense , gain or ( loss ) on the disposition of fixed assets and loss on the extinguishment of debt . 64 story_separator_special_tag compared to $ 0.6 million of license fees in the same period of 2016. the $ 0.3 million increase in license fees was primarily due to clinical milestones achieved for bpx-601 and bpx-701 . general and administrative expenses general and administrative expenses were $ 21.0 million and $ 16.9 million for the years ended december 31 , 2017 and 2016 , respectively . the increase of $ 4.1 million in 2017 was primarily due to our overall growth , including an increase in personnel related costs , primarily due to hiring additional employees and severance costs , higher facility costs and increased legal , accounting and travel expenses . we believe our future general and administrative expenses will continue to increase as the company continues to grow and expand its operations . other expense other expense was $ 4.4 million and $ 0.9 million in the years ended december 31 , 2017 and 2016 , respectively . story_separator_special_tag the increase of $ 3.5 million is primarily due to the $ 1.8 million loss on the extinguishment of debt and the increase of $ 1.9 million in interest expense resulting from the additional funds borrowed in 2017. see note 8 to the audited financial statements , included herein , for additional information about long-term debt . comparison of the years ended december 31 , 2016 and 2015 the following table sets forth our results of operations for the years ended december 31 , 2016 and 2015 : replace_table_token_6_th grant revenues grant revenues were comparable in the years ended december 31 , 2016 and 2015 , and were comprised of our grant from the nih . 66 research and development expenses research and development expenses were $ 51.3 million and $ 33.6 million for the years ended december 31 , 2016 and 2015 , respectively . during 2016 , enrollment in our clinical trials for bpx-501 increased , compared with the previous year , resulting in additional clinical trials and manufacturing expenses . in addition , we conducted process development and optimization work on bpx-501 in preparation of manufacturing start-up activities in our u.s. facility . the $ 17.7 million increase in research and development expenses for the twelve months ended december 31 , 2016 , was primarily due to an increase in costs related to bpx-501 of approximately $ 12.5 million . the increased costs related to bpx-501 include increases of approximately $ 1.3 million in clinical development activities due to increased patient enrollment in our clinical trials , increases of approximately $ 7.5 million in manufacturing costs as a result of increased patient enrollment in our clinical trials and process development and optimization costs related to the startup of manufacturing in our internal manufacturing facility , approximately $ 2.3 million in regulatory and product characterization related studies of rimiducid and approximately $ 1.4 million in other costs , primarily salaries and wages , related to the bpx-501 program . the increase in research and development expenses also included an increase of $ 3.5 million in regulatory and other costs related to our preclinical product candidates , bpx-701 and bpx-601 , primarily related to ind enabling activities ; and an increase of approximately $ 1.7 million in general research and development costs . license fees license fees were $ 0.6 million and $ 3.2 million for the years ended december 31 , 2016 and 2015 , respectively . the 2015 license fees included the license agreement with agensys , as consideration for the rights granted to us under the agreement , whereby we paid agensys a non-refundable upfront fee of $ 3.0 million . if we are successful in our development activities under our existing and future licenses , we expect that our license fee expenses will increase in future years . general and administrative expenses general and administrative expenses were $ 16.9 million and $ 12.7 million for the years ended december 31 , 2016 and 2015 , respectively . the increase of $ 4.2 million in 2016 was due to our overall growth and public company related costs . share-based compensation expense increased approximately $ 1.8 million , and other personnel-related expenses increased approximately $ 1.0 million due to increases in personnel . other costs , including legal and accounting expenses and costs related to facilities , insurance and travel increased approximately $ 1.4 million . other income ( expense ) other income ( expense ) was $ ( 0.9 ) million and $ 0.6 million for the years ended december 31 , 2016 and 2015 , respectively . the $ 1.5 million of additional expense in 2016 was primarily due to $ 1.8 million of interest expense related to the debt financing . liquidity and capital resources sources of liquidity we are a clinical stage biopharmaceutical company with a limited operating history . to date , we have financed our operations primarily through equity and debt financings and grants . we have not generated any revenue from the sale of any products . we had cash , cash equivalents , restricted cash and investment securities of $ 106.5 million and $ 113.4 million as of december 31 , 2017 and 2016 , respectively . cash in excess of immediate requirements is invested in accordance with our investment policy , primarily with a view to liquidity and capital preservation . on march 10 , 2016 , we entered into a loan and security agreement with hercules capital , inc. , hercules technology ii , l.p. and hercules technology iii , l.p. , or hercules and borrowed $ 15 million in a term loan . we borrowed an additional $ 5 million and $ 10 million from hercules on september 15 , 2016 and march 8 , 2017 , respectively . the loan from hercules incurred interest at a rate equal to the greater of either ( i ) 9.35 % plus the prime rate as reported in the wall street journal minus 3.5 % , or ( ii ) 9.35 % . payments on the loan from hercules were interest only for 18 months from march 10 , 2016 , which was extended to 24 months upon the achievement of certain milestones . the interest only period was to be followed by equal monthly payments of principal and interest beginning april 1 , 2019 and amortized over the remaining months through the maturity date of march 1 , 2020. in addition to any remaining principal balance and accrued interest , a final payment was due upon the earlier of march 1 , 2020 or the repayment of the loan . in addition , if we prepaid the amount borrowed on the loan from hercules prior to march 1 , 2020 , we were obligated to pay a prepayment charge up to 2 % of the amount prepaid . on december 21 , 2017 , we entered into a loan and security agreement with oxford finance llc , or oxford , under which we borrowed $ 35 million in single term loan .
| expenses related to bpx-601 decreased approximately $ 1.8 million in year ended december 31 , 2017 , compared with the same period in 2016. expenses related to bpx-601 in the year ended december 31 , 2016 included clinical trial start-up costs , manufacturing start-up costs primarily comprised of virus production , and other related costs associated with advancing the program into clinical development . expenses related to bpx-701 increased approximately $ 0.2 million in year ended december 31 , 2017 , compared with the same period in 2016. clinical development activities and manufacturing activities for bpx-701 increased approximately $ 0.2 million and $ 0.1 million , respectively , due to increased patient enrollment in clinical trials , while other costs , primarily related to pre-clinical activities , decreased by approximately $ 0.1 million . general research and development costs increased approximately $ 8.5 million in the year ended december 31 , 2017 as compared with the same period in 2016.the increases in general research and development expenses were primarily comprised of $ 1.5 million in 65 increased personnel costs , $ 1.5 million in increased consulting expenses , $ 1.2 million increase in non-cash charges for depreciation and share-based compensation , $ 2.8 million in increased expenditures for earlier stage research and development , and increases of other costs of approximately $ 1.2 million . the increase in general research and development expenses also resulted from increased expenses related to our collaborative programs , primarily the collaboration with opbg , which increased approximately $ 0.3 million in the year ended december 31 , 2017 , compared with the same period in 2016. during 2016 , we began the build-out of an in-house cell manufacturing and vector production capabilities at our headquarters facility in houston , texas which we expect will meet our u.s. clinical trial and early commercialization requirements . in the first quarter of 2017 , the initial phase of
| 14,363 |
our commitment of resources to the continuing development , regulatory and commercialization activities for adcetris and the research , continued development and manufacturing of our product candidates may require us to raise substantial amounts of additional capital and our operating expenses will fluctuate as a result of such activities . in addition , we may incur significant milestone payment obligations to certain of our licensors as our product candidates progress through clinical trials towards potential commercialization . we recognize revenue from adcetris product sales in the united states and canada . our future adcetris product sales will be difficult to accurately predict from period to period . in this regard , our product sales have varied , and may continue to vary , significantly from period to period and may be affected by a variety of factors . such factors include the incidence rate of new patients in adcetris ' approved indications , customer ordering patterns , the overall level of demand for adcetris , the duration of therapy for patients receiving adcetris , and the extent to which coverage and reimbursement for adcetris is available from government and other third-party payers . this is likely to become an increasingly challenging environment due to , among other things , the attention being paid to healthcare cost containment and other austerity measures in the u.s. and worldwide , including with respect to the recent negative publicity being paid to drug-pricing strategies by pharmaceutical companies . we believe that the level of our current adcetris sales in the united states has been attributable to the incidence flow of patients eligible for treatment with adcetris , which can vary significantly from period to period . moreover , we believe that the incidence rate in adcetris ' approved indications is relatively low , particularly when compared to many other oncology indications . in addition , we expect only modest sales growth in the near term as a result of the recent fda approval of adcetris for post-autologous hematopoietic stem cell transplantation , or auto-hsct , consolidation treatment in classical hodgkin lymphoma patients with high risk of relapse or progression , subject to our ability to effectively commercialize adcetris in this indication . for these and other reasons , we expect that our ability to accelerate adcetris sales growth , if at all , will depend primarily on our ability to continue to expand adcetris ' labeled indications of use . our efforts to continue to expand adcetris ' labeled indications of use will continue to require additional time and investment in clinical trials to complete and we may not be successful . our ability to successfully commercialize adcetris and to continue to expand its labeled indications of use are subject to a number of risks and uncertainties , including those discussed in part i , item 1a of this annual report on form 10-k. we also expect that amounts earned from our collaboration agreements , including royalties , will continue to be an important source of our revenues and cash flows . these revenues will be impacted by future development funding and the achievement of development , clinical and commercial success by our collaborators under our existing collaboration and license agreements , including , in particular , our adcetris collaboration with takeda , as well as entering into new collaboration and license agreements . our results of operations may vary 62 substantially from year to year and from quarter to quarter and , as a result , we believe that period to period comparisons of our operating results may not be meaningful and should not be relied upon as being indicative of our future performance . story_separator_special_tag us . our collaboration and license agreements include contractual milestones . generally , the milestone events contained in our collaboration and license agreements coincide with the progression of the collaborators ' product candidates from development to regulatory approval and then to commercialization . development milestones in our collaborations may include the following types of events : designation of a product candidate or initiation of pre-clinical studies . our collaborators must undertake significant pre-clinical research and studies to make a determination of the suitability of a product candidate and the time from those studies or designation to initiation of a clinical trial may take several years . initiation of a phase 1 clinical trial . generally , phase 1 clinical trials may take one to two years to complete . initiation of a phase 2 clinical trial . generally , phase 2 clinical trials may take one to three years to complete . initiation of a phase 3 clinical trial . generally , phase 3 clinical trials may take two to six years to complete . 64 regulatory milestones in our collaborations may include the following types of events : filing of regulatory applications for marketing approval such as a bla in the united states or a marketing authorization application in europe . generally , it may take up to twelve months to prepare and submit regulatory filings . receiving marketing approval in a major market , such as in the united states , europe , japan or other significant countries . generally it may take up to three years after a marketing application is submitted to obtain approval for marketing and pricing from the applicable regulatory agency . commercialization milestones in our collaborations may include the following types of events : first commercial sale in a particular market , such as in the united states , europe , japan or other significant countries . product sales in excess of a pre-specified threshold . the amount of time to achieve this type of milestone depends on several factors , including , but not limited to , the dollar amount of the threshold , the pricing of the product , market penetration of the product and the rate at which customers begin using the product . our adc collaborators are solely responsible for the development of their product candidates and the achievement of milestones in any of the categories identified above is based solely on the collaborators ' efforts . story_separator_special_tag in the case of our adcetris collaboration with takeda , we may be involved in certain development activities ; however , the achievement of development , regulatory and commercial milestone events under the agreement is primarily based on activities undertaken by takeda . the process of successfully developing a product candidate , obtaining regulatory approval and ultimately commercializing a product candidate is highly uncertain and the attainment of any milestones is therefore uncertain and difficult to predict . in addition , since we do not take a substantive role or control the research , development or commercialization of any products generated by our adc collaborators , we are not able to reasonably estimate when , if at all , any milestone payments or royalties may be payable to us by our adc collaborators . as such , the milestone payments associated with our adc collaborations involve a substantial degree of uncertainty and risk that they may never be received . similarly , even in those collaborations where we may have an active role in the development of the product candidate , such as our adcetris collaboration with takeda , the attainment of a milestone is based on the collaborator 's activities and is generally outside our direction and control . we generally invoice our collaborators and licensees on a monthly or quarterly basis , or upon the completion of the effort or achievement of a milestone , based on the terms of each agreement . any deferred revenue arising from amounts received in advance of the culmination of the earnings process is recognized as revenue in future periods when the applicable revenue recognition criteria have been met . deferred revenue expected to be recognized within the next twelve months is classified as a current liability . royalty revenues and cost of royalty revenues royalty revenues primarily reflect amounts earned under the adcetris collaboration with takeda . these royalties include sales-based royalties , which are calculated as a percentage of takeda 's net sales at rates that range from the mid-teens to the mid-twenties depending on sales volume . royalty revenues also reflect milestones from takeda that are based on its achievement of commercial sales-based milestones . takeda bears a portion of third-party royalty costs owed on its sales of adcetris . this amount is included in royalty revenue in our consolidated financial statements . cost of royalty revenues reflects amounts owed to our third-party licensors related to takeda 's sales of adcetris . these amounts are recognized in the quarter in which takeda reports its sales activity to us , which is the quarter following the related sales . royalty revenues also include certain amounts earned in connection with our adc collaborations . 65 investments . we have investments in debt securities in accordance with our investment policy . we classify our investments as available-for-sale , which are reported at estimated fair value with the related unrealized gains and losses included in accumulated other comprehensive loss in stockholders ' equity . realized gains and losses and declines in value of investments judged to be other-than-temporary are included in investment and other income , net . the fair value of our investments is subject to volatility . declines in the fair value of our investments judged to be other-than-temporary could adversely affect our future operating results . we estimate fair values in accordance with a hierarchy prescribed by gaap . this hierarchy prioritizes the inputs and assumptions used , and the valuation techniques used to measure fair value . accrued liabilities . as part of the process of preparing financial statements , we are required to estimate accrued liabilities . this process involves identifying services that have been performed on our behalf and estimating the level of services performed and the associated costs incurred for such services where we have not yet been invoiced or otherwise notified of actual cost . we record these estimates in our consolidated financial statements as of each balance sheet date . examples of estimated accrued liabilities include fees due to contract research organizations and other costs in conjunction with clinical trials , fees due in conjunction with manufacturing adcetris and our product candidates , third-party royalties that accrue on our sales of adcetris and professional service fees , among other items . in accruing service fees , we estimate the time period over which services will be provided and the level of effort in each period . if the actual timing of the provision of services or the level of effort varies from the estimate , we will adjust the accrual accordingly . in the event that we do not identify costs that have been incurred or we under or overestimate the level of services performed or the costs of such services , our actual liabilities would differ from such estimates . the date on which some services commence , the level of services performed on or before a given date and the cost of such services are often subjective determinations . we make judgments based upon the facts and circumstances known to us at the time and in accordance with gaap . research and development . research and development expenses consist of salaries , benefits and other headcount related costs of our research and development staff , preclinical activities , clinical trials , lab supplies , drug manufacturing costs for our product candidates and for adcetris when used in research and clinical trials , contract and outside service fees , and facilities and overhead expenses . clinical trial expenses are a significant component of research and development expenses , and we outsource a significant portion of these costs to third parties . our third-party clinical trial expenses include investigator fees , site costs , clinical research organization costs , and costs for central laboratory testing and data management . research and development activities are expensed as incurred . costs associated with activities performed under research and development co-development collaborations are reflected in research and development expense .
| customers order adcetris through these distributors and we typically ship product directly to the customer . we record product sales when title and risk of loss pass , which generally occurs upon delivery of the product to the customer . product sales are recorded net of estimated government-mandated rebates and chargebacks , distribution fees , estimated product returns and other deductions . these are generally referred to as gross-to-net deductions . accruals are established for these deductions and actual amounts incurred are offset against applicable accruals . we reflect these accruals as either a reduction in the related account receivable from the distributor , or as an accrued liability depending on the nature of the sales deduction . sales deductions are based on our estimates that consider payer mix in target markets and our experience to date . these estimates involve a substantial degree of judgment . government-mandated rebates and chargebacks : we have entered into a medicaid drug rebate agreement with the centers for medicare & medicaid services . this agreement provides for a rebate to participating states based on covered purchases of adcetris . medicaid rebates are invoiced to us by the various state medicaid programs . we estimate medicaid rebates based on a variety of factors , including our experience to date . we also have completed our federal supply schedule , or fss , agreement under which certain u.s. government purchasers receive a discount on eligible purchases of adcetris . we have entered into a pharmaceutical pricing agreement with the secretary of health and human services which enables certain entities that qualify for government pricing under the public health services act , or phs , to receive discounts on their qualified purchases of adcetris . under these agreements , distributors process a chargeback to us for the difference between wholesale acquisition cost and the applicable discounted price . as a result of our direct-ship distribution model , we can identify the entities purchasing adcetris and this information enables us to estimate expected chargebacks for fss and phs purchases based on
| 14,364 |
the nymex natural gas price per million british thermal units ( mmbtu ) averaged $ 3.73 in 2013 , $ 2.83 in 2012 and $ 4.03 in 2011. while the wti index saw a 4 % increase in 2013 , dated brent fell back by 3 % compared to 2012. during 2013 the discount for wti crude compared to dated brent narrowed a bit compared to the two prior years . the wti to dated brent discount was $ 10.61 per barrel during 2013 , compared to $ 17.52 per barrel in 2012 and $ 16.15 per barrel in 2011. during 2012 the price of wti fell slightly compared to 2011 , however , certain other benchmark oil prices , including dated brent , experienced small increases in 2012 versus the prior year . nymex natural gas prices increased 32 % in 2013 compared to 2012 generally due to more extreme weather conditions in north america in the later year which created more demand by gas consumers . natural gas prices fell in 2012 from 2011 levels primarily due to expansion of north american gas supply and a warmer than normal winter season in 2012 in the u.s. and canada . on an energy equivalent basis , the market continued to discount north american natural gas compared to crude oil in 2013. however , compared to 2012 , this natural gas to oil price discount narrowed a bit during 2013. u.s. crude oil prices in early 2014 have been similar to 2013 average prices , while natural gas prices in north america in 2014 have thus far been above the 2013 levels due to cold temperatures across much of the northern u.s. during the early winter season . story_separator_special_tag refineries ( meraux , louisiana and superior , wisconsin ) and associated marketing assets which were sold in 2011. additionally , weaker results for u.s. retail marketing operations in 2012 compared to 2011 were somewhat offset by improved results for u.k. refining and marketing operations during 2012. sales and other operating revenues grew $ 386.0 million in 2012 compared to 2011 primarily due to higher crude oil sales volumes for the e & p business . gain ( loss ) on sale of assets was $ 23.1 million less in 2012 than 2011 because the earlier year included a $ 23.1 million gain on sale of natural gas storage assets in spain . interest and other operating income was lower by $ 22.0 million in 2012 compared to 2011 mostly due to an $ 18.4 million unfavorable pretax variance from the effects of transactions denominated in foreign currencies , plus interest income in 2011 of $ 2.7 million associated with a recovery of federal royalties for certain deepwater gulf of mexico fields . operating expenses were $ 104.6 million more in 2012 than 2011 due to higher oil and natural gas production costs caused mostly by higher production volumes in the later year . exploration expenses were $ 108.4 million lower in 2012 compared to 2011 due to more drilling success in 2012 , plus lower geophysical expense in the gulf of mexico , malaysia , brunei and the kurdistan region of iraq compared to 2011. selling and general expenses were $ 40.7 million more in 2012 than in 2011 primarily due to higher employee compensation and professional services costs in the later year . depreciation , depletion and amortization expense rose $ 288.4 million in 2012 versus 2011 due to higher crude oil and natural gas sales volumes in 2012 and higher e & p per-unit depreciation rates . impairment of properties was $ 168.6 million lower in 2012 than in 2011 due to a smaller impairment charge in republic of the congo in 2012. accretion of asset retirement obligations was $ 4.5 million more in 2012 than 2011 primarily due to higher discounted abandonment liabilities for wells drilled in 2012 in malaysia , higher estimated abandonment costs for wells in the gulf of mexico , and higher future reclamation costs for synthetic oil operations at syncrude . redetermination of working interest at the terra nova field was a $ 5.4 million benefit in 2011 due to nonrecurring income achieved upon final settlement of the redetermination process in early 2011. interest expense in 2012 was $ 1.7 million less than 2011 primarily due to lower average interest rates paid on borrowed funds in the later year , partially offset by the effects of higher average outstanding debt levels in 2012. the benefit from capitalized interest was $ 24.0 million higher in 2012 than the prior year due to larger levels of financing costs allocated to ongoing oil development projects in the later year . income tax expense in 2012 was $ 67.2 million less than 2011 primarily due to u.s. income tax benefits of $ 108.3 million recognized in 2012 associated with investments in upstream operations in republic of the congo and suriname . the consolidated effective tax rate was 41.0 % in 2012 compared to 53.8 % in 2011 , with the lower rate in the later year caused by the u.s. tax benefits for republic of the congo and suriname , a lower percentage of earnings in higher tax jurisdictions in 2012 , and lower current year exploration and other expenses in foreign jurisdictions where no income tax benefit can presently be recognized due to no assurance that these expenses will be realized in 2012 or future years to reduce taxes owed . the tax rates in both 2012 and 2011 were higher than the u.s. federal statutory tax rate of 35.0 % due to foreign tax rates that exceeded the u.s. 28 federal tax rate in certain areas , and certain exploration and other expenses in foreign taxing jurisdictions for which no income tax benefit is currently being recognized because of the company 's uncertain ability to obtain tax benefits for these costs in 2012 or future years . story_separator_special_tag segment results in the following table , the company 's results of operations for the three years ended december 31 , 2013 , are presented by segment . more detailed reviews of operating results for the company 's exploration and production and other activities follow the table . replace_table_token_11_th exploration and production earnings from exploration and production ( e & p ) continuing operations were $ 1,028.8 million in 2013 , $ 905.0 million in 2012 and $ 614.2 million in 2011. e & p income in 2013 was $ 123.8 million higher than in 2012 primarily due to higher crude oil sales volumes in 2013 and lower impairment charges in the current year . the 2013 period also had higher north american natural gas sales prices and higher u.s. income tax benefits for investments in foreign upstream operations where the company is exiting . the 2013 e & p results included lower crude oil sales realizations and higher expenses for oil and gas extraction , exploration and administrative activities . crude oil sales volumes for continuing operations in 2013 were 23 % higher than 2012. the most significant increase occurred in the u.s. where ongoing development operations during the year led to larger oil production in the eagle ford shale area of south texas . oil sales volumes also increased in the heavy oil area of canada following an acquisition of properties in this area in late 2012. sales volumes were higher offshore eastern canada due to increased production at the terra nova field , which had more downtime for maintenance in 2012. sales volumes of synthetic crude oil were lower in 2013 due to more downtime for maintenance during the current year . the average realized sales price for crude oil , condensate and gas liquids declined 2 % in 2013 to an average of $ 93.60 per barrel . natural gas sales volumes for continuing operations decreased 13 % in 2013 and the reduction was primarily attributable to lower gas volumes produced during the current year at the tupper and tupper west areas in western canada . the company has voluntarily curtailed drilling activities in this area during the last few years due to low north american gas sales prices . natural gas sales volumes were also lower during 2013 in malaysia due to reduced customer demand and a lower entitlement percentage allocable to the company from fields offshore sarawak . e & p production expenses were $ 225.4 million higher in 2013 primarily due to more volumes produced in the eagle ford shale and $ 82.5 million of costs associated with abandonment activities at the azurite field , offshore republic of the congo . depreciation , depletion and amortization increased $ 299.2 million due to both higher overall production and a higher per-unit depreciation rate on new production volumes . exploration expense rose $ 121.3 million in 2013 due to higher costs for both unsuccessful exploratory drilling and geophysical data acquisitions , but these were partially offset by lower amortization expense for unproved oil and gas leases . the prior year included a $ 200.0 million impairment charge to reduce the carrying value of the azurite oil field in republic of the congo . this field went off production in october 2013 and field abandonment operations were underway at year-end 2013. income tax benefits associated with investments in foreign upstream operations where the company is exiting were $ 25.2 million higher in 2013 than 2012. these larger tax benefits were primarily related to u.s. tax deductions associated with investments in republic of the congo . 29 income for e & p continuing operations in 2012 was $ 290.8 million more than in 2011. the increase was primarily attributable to lower impairment charges of $ 168.6 million in republic of the congo in 2012 , favorable tax benefits of $ 108.3 million in 2012 for investments in upstream operations in republic of the congo and suriname , plus higher crude oil and natural gas sales volumes and stronger crude oil sales prices in the later year . the company 's average realized sales price for crude oil , condensate and gas liquids in 2012 for continuing operations increased $ 1.40 per barrel over 2011. the company 's average natural gas sales prices in sarawak , malaysia were also higher in 2012 than 2011 , but natural gas sales prices in 2012 in north america were significantly below 2011 levels . crude oil and liquids sales volumes for continuing operations increased 11 % in 2012 while natural gas sales volumes rose 7 % . the increase in hydrocarbon sales volumes in 2012 led to higher expenses for production and depreciation of $ 104.5 million and $ 288.4 million , respectively . the 2012 year had less exploration expenses of $ 108.5 million compared to 2011 , essentially due to lower expenses related to unsuccessful exploratory drilling and geophysical activities . crude oil sales volumes increased in 2012 in the u.s. primarily due to higher volumes produced in the eagle ford shale area of south texas . conventional oil sales volumes in canada in 2012 were less than 2011 primarily due to lower gross production at the terra nova field , where more downtime for maintenance occurred in 2012. synthetic oil sales volumes at syncrude increased in 2012 due to higher gross production compared to 2011. sales volumes for crude oil produced in malaysia were higher in 2012 primarily due to new wells brought on production at the kikeh field offshore sabah . crude oil sales volumes decreased in 2012 in republic of the congo due to field decline and a well failure at the azurite field . natural gas sales volumes in 2012 increased compared to the prior year principally due to more wells producing for a longer period in the tupper area in western canada and higher gas volumes produced in the eagle ford shale .
| these were partially offset by higher extraction and exploration expenses , lower average oil sales prices , and higher costs associated with borrowed funds and company administration . income from discontinued operations was $ 235.4 million ( $ 1.25 per diluted share ) in 2013 , up from $ 164.4 million ( $ 0.85 per diluted share ) in 2012. income from discontinued operations in both years included results for refining and marketing ( r & m or downstream ) operations in the u.s. and u.k. and for oil and gas production operations in the u.k. the improvement in discontinued operations in 2013 was attributable to a gain on disposal of all u.k. oil and gas assets during the year , coupled with stronger income contributions from the separated u.s. retail marketing business in 2013. these favorable factors were partially offset by unfavorable results for u.k. r & m operations caused by both significantly weaker operating margins and a $ 73.0 million charge to writedown the carrying value of these operating assets . sales and other operating revenues grew $ 704.1 million in 2013 compared to the prior year . sales rose in 2013 primarily due to higher oil sales volumes associated with a 20 % increase in oil production volumes . sales also benefited from higher realized north american natural gas sales prices , which increased $ 0.61 per thousand cubic feet ( mcf ) in 2013 compared to the prior year . however , prices for worldwide average realized oil sales and sarawak , malaysia natural gas sales fell $ 1.98 per barrel and $ 0.84 per mcf , respectively , which had a detrimental effect on sales revenue . additionally , natural gas sales volumes fell during 2013 due to both well decline in western canada caused by voluntary curtailment of drilling operations and lower net gas sales volumes offshore malaysia caused by lower third party demand and a lower revenue share allocable to the company for sarawak gas sold compared to the prior year . interest and other income was $ 66.5 million higher in
| 14,365 |
for the year ended december 31 , 2014 , property operating revenues in our core portfolio , excluding deferrals , were up 3.6 % and property operating expenses in our core portfolio , excluding deferrals and property management , were up 2.5 % , resulting in an increase in core net operating income before property management and deferrals of 4.5 % . a significant portion of our rental agreements on community sites have rent increases that are directly or indirectly connected to published cpi statistics that are issued from june through september of the year prior to the increase effective date . twenty seven properties , including 19 of our 49 california properties , our seven delaware properties and one of our five massachusetts properties are affected by state and local rent control regulations . the impact of the rent control regulations is to 31 limit our ability to implement rent increases based on prevailing market conditions . the regulations generally permit us to increase rates by a percentage of the increase in the cpi . the limit on rent increases may range from 60 % to 100 % of cpi with certain maximum limits depending on the jurisdiction . in the years following the disruption in the site-built housing market , our home sales business was negatively affected by our customers ' inability to sell their existing site-built homes and relocate to their retirement destination . as a result , we focused on home rental rather than sales as our primary source of occupancy upon turnover . as we managed and expanded our portfolio of rental homes , we placed homes in communities where we believed we could successfully sell homes as the market improved . we continue to allocate capital to home purchases based on our assessment of market conditions and emphasize home sales in that assessment . we continue to see population growth in our key markets , increased access to distribution channels for our products and a renewed willingness by our customers to commit to us for a longer period of time . also , we have seen a decrease in homes coming back to us , which generally means that our residents have the opportunity to resell their homes . we continue to focus on the quality of occupancy growth by increasing the number of home owners in our portfolio . as of december 31 , 2014 , we increased occupancy by 214 sites with an increase in home owner occupancy of 464 sites compared with occupancy at december 31 , 2013. by comparison , as of december 31 , 2013 , our occupancy increased by 312 sites with a decrease in home owner occupancy of 95 sites compared with occupancy at december 31 , 2012. beginning in 2013 , we have experienced an increase in the sales volume of new and used homes in our communities . we attribute this increase to various factors including management ' s focus on increasing the number of homeowners within our communities , changes to incentive structures for our on-site personnel to emphasize home sales rather than rentals , and willingness of an increasing number of customers to commit their capital to purchase a home in one of our communities . new home sales in the manufactured home communities in our core portfolio increased more than double over the prior year . the recent new home sales have been primarily in our california , colorado and florida communities . used home sales in the manufactured home communities in our core portfolio during 2014 decreased 4.5 % over the prior year , and increased 23.3 % since 2012. during 2013 we formed a joint venture , echo financing , llc ( the “ echo jv ” ) , with a home manufacturer to buy and sell homes , as well as to offer another financing option to purchasers of homes at our properties . under certain circumstances , the echo jv may also rent homes to customers in our communities . in the mh industry , chattel financing options available today include community owner funded programs or third party lender programs that provide subsidized financing to customers and require the community owner to guarantee customer defaults . third party lender programs have stringent underwriting criteria , sizable down payment requirements , short loan amortization and high interest rates . as of december 31 , 2014 , we had 5,221 occupied home rentals in our mh communities . for the years ended december 31 , 2014 and 2013 , home rental program net operating income was approximately $ 35.8 million and $ 39.0 million , respectively , net of rental asset depreciation expense of approximately $ 10.9 million and $ 6.5 million , respectively . the net operating income and rental asset depreciation expense does not include the revenue and expense associated with our echo jv . the increase in rental asset depreciation expense is due to the 2014 change in depreciable life ( see note 2 ( d ) in the notes to consolidated financial statements contained in this form 10-k ) . approximately $ 39.3 million and $ 38.7 million of home rental operations revenue was included in community base rental income for the year ended december 31 , 2014 and 2013 , respectively . we believe that at this time we compete effectively with other types of rentals ( i.e. , apartments ) . we continue to evaluate home rental operations and expect to continue to invest in additional units . in our rv resorts , we are focused on engaging with our existing customers and providing them the lifestyle they seek as well as attracting additional customers interested in our properties . we continue to experience growth in our annual revenues as a result of our ability to increase rental rates and occupancy . our 2014 core portfolio annual revenues were 5.5 % higher than in 2013. our customer base is loyal and engaged in the lifestyle we offer at our properties . story_separator_special_tag we have annual customers who have stayed ten years with us and our member base includes members who have camped with us for more than twenty years . our social media presence has increased within this member base . in the spring of 2010 , we introduced low-cost membership products that focus on the installed base of approximately nine million rv owners . such products include right-to-use contracts that entitle the customer to use certain properties . we are offering a thousand trails camping pass ( “ ttc ” ) ( formerly zone park pass ) , which can be purchased for one to five geographic areas of the united states and requires an annual payment . in 2014 , the required annual payment was $ 545. the ttc replaces high cost products that were typically entered into at properties after tours and lengthy sales presentations . prior to 2010 , we incurred significant costs to generate leads , conduct tours and make sales presentations . a single zone ttc requires no additional upfront payment while additional zones may be purchased for modest additional upfront payments . since inception we have entered into approximately 55,900 ttcs . in 2014 , we entered into approximately 18,200 ttcs , or a 16.7 % increase from approximately 15,600 ttcs in 2013. of the 18,200 ttc 's activated during 2014,10,000 were sold to dues paying members and the remainder were activated through select rv dealers . 32 in 2012 , we initiated a program with rv dealers to feature our ttc as part of the dealers ' sales and marketing efforts . we provide the dealer with a ttc membership to give to their customers in connection with the purchase of an rv . no cash is received from the member during the first year of membership for memberships activated through the rv dealer program . since inception , we have activated 15,780 ttcs through the rv dealer program . our renewal rate for these rv dealer memberships is approximately 18 % . existing customers are eligible to upgrade their right-to-use contract from time-to-time . an upgrade is currently distinguishable from a new right-to-use contract that a customer would enter by , depending on the type of upgrade , offering ( 1 ) increased length of consecutive stay by 50 % ( i.e. , up to 21 days ) ; ( 2 ) ability to make earlier advance reservations ; ( 3 ) discounts on rental units ; ( 4 ) access to additional properties , which may include use of sites at non-membership rv resorts and ( 5 ) membership in discount travel programs . each upgrade contract requires a nonrefundable upfront payment . we may finance the nonrefundable upfront payment . we are actively seeking to acquire and are engaged at any time in various stages of negotiations relating to the possible acquisition of additional properties , which may include contracts outstanding to acquire such properties that are subject to the satisfactory completion of our due diligence review . property acquisitions , joint ventures and dispositions the following chart lists the properties or portfolios acquired , invested in , or sold since january 1 , 2013 through december 31 , 2014 . replace_table_token_16_th the gross investment in real estate has increased approximately $ 160 million to $ 4,388 million as of december 31 , 2014 from $ 4,228 million as of december 31 , 2013 primarily due to the aforementioned acquisitions of properties during the period . 33 markets the following table identifies our largest markets by number of sites and provides information regarding our properties ( excluding five properties owned through joint ventures ) . replace_table_token_17_th _ ( 1 ) property operating revenues for this calculation excludes approximately $ 14.4 million of property operating revenue not allocated to properties , which consists primarily of upfront payments from right-to-use contracts . qualification as a reit we believe that we have qualified for taxation as a real estate investment trust ( “ reit ” ) for u.s. federal income tax purposes since our taxable year ended december 31 , 1993. we plan to continue to meet the requirements for taxation as a reit . many of these requirements , however , are highly technical and complex . for example , to qualify as a reit , at least 95 % of our gross income must come from sources that are itemized in the reit tax laws . we are also required to distribute to stockholders at least 90 % of our reit taxable income computed without regard to our deduction for dividends paid and our net capital gain . the fact that we hold our assets through our operating partnership and our subsidiaries further complicates the application of the reit requirements . if we fail to qualify as a reit , we would be subject to u.s. federal income tax at regular corporate rates . also , unless the irs granted us relief under certain statutory provisions , we would remain disqualified as a reit for four years following the year we first failed to qualify . even if we qualify for taxation as a reit , we are subject to certain foreign , state and local taxes on our income and property and u.s. federal income and excise taxes on our undistributed income . supplemental measures management 's discussion and analysis of financial condition and results of operations include certain non-gaap financial measures that in management 's view of the business we believe are meaningful as they allow the investor the ability to understand key operating details of our business both with and without regard to certain accounting conventions or items that may not always be indicative of recurring annual cash flow of the portfolio . these non-gaap financial measures as determined and presented by us may not be comparable to related or similarly titled measures reported by other companies , and include income from property operations , funds from operations ( “ ffo ” ) and normalized funds from operations ( “ normalized ffo ” ) .
| rental home operating and maintenance expenses have remained consistent in the current year . resort base rental income is comprised of the following ( amounts in thousands ) : replace_table_token_20_th right-to-use annual payments decreased 6.5 % partly due to memberships activated through the rv dealer program in 2013 for which we recorded approximately $ 2.0 million of non-cash revenues and expenses , and partly due to a decrease in member count . during the year ending december 31 , 2014 , our member count decreased by 2,147 members compared to the same period in 2013 . right-to-use contracts current period , gross , net of sales and marketing , gross , increased primarily due to higher upgrade sales . the following table summarizes the growth rate percentages excluding pr operty management expense ( amounts in thousands ) : replace_table_token_21_th the increase in total portfolio income from property operations is primarily due to increases in core community base rental income , core resort base rental income and the additional income from property operations related to the 2013 and 2014 acquisitions , partially offset by increases in repair and maintenance , payroll and utility expenses . 36 home sales operations the following table summarizes certain financial and statistical data for our home sales operations for the years ended december 31 , 2014 and 2013 ( amounts in thousands , except home sales volumes ) . replace_table_token_22_th _ ( 1 ) new home sales gross revenues and costs of new home sales does not include the revenues and costs associated with our echo jv . ( 2 ) total new home sales volume includes home sales from our echo jv for the years ended december 31 , 2014 and 2013 , respectively . includes one third-party dealer sale for the year ended december 31 , 2013 . the increase in income from home sales operations and other is primarily due to an increase in new home sales and gross profits from new home sales , partially offset by a decrease in ancillary services revenues , an increase
| 14,366 |
product portfolio our approved and marketed products include three approved autologous cell therapy products : carticel ( autologous cultured chondrocytes ) , a first-generation product for autologous chondrocyte implantation ( aci ) currently marketed in the u.s. , epicel ( cultured epidermal autografts ) , a permanent skin replacement for full thickness burns in adults and pediatrics with greater than or equal to 30 % of total body surface area ( tbsa ) also currently marketed in the u.s , and maci ( matrix-applied characterized autologous cultured chondrocytes ) , a third-generation aci product approved in europe and for which a bla is under review by the fda . our product candidate portfolio also includes ixmyelocel-t , a patient-specific multicellular therapy currently in development for the treatment of advanced heart failure due to ischemic dilated cardiomyopathy ( dcm ) . we completed enrolling and treating patients in our phase 2b ixcell-dcm study in february 2015 and on march 10 , 2016 announced the trial had met its primary endpoint of reduction in clinical cardiac events and that incidence of adverse events , including serious adverse events , in patients treated with ixmyelocel-t was comparable to patients in the placebo group . carticel 51 carticel , a first-generation aci product for the treatment and repair of cartilage defects in the knee , is the first and currently the only fda-approved autologous cartilage repair product . carticel is indicated for the repair of symptomatic cartilage defects of the femoral condyle ( medial , lateral or trochlea ) caused by acute or repetitive trauma , in patients who have had an inadequate response to a prior arthroscopic or other surgical repair procedure such as debridement , microfracture , drilling/abrasion arthroplasty , or osteochondral allograft/autograft . carticel received a biologics license application ( bla ) approval in 1997 and is currently marketed in the u.s. it is generally used on patients with larger lesions ( greater than 3 cm 2 ) . in the u.s. , we focus net sales of carticel on the sports-injury-targeted orthopedic physician target audience , which is very concentrated , with 60 % of the current carticel business originating from 25 % of this audience , or approximately 110 physicians . we currently have a 21-person field force calling on this sports-injury targeted orthopedic physician audience . in the year ended december 31 , 2015 , net revenues were $ 35.2 million for carticel . epicel epicel ( cultured epidermal autografts ) is a permanent skin replacement for full thickness burns greater than or equal to 30 % of tbsa . epicel is regulated by the cber under medical device authorities , and is the only fda-approved autologous epidermal product available for large total surface area burns . epicel was designated as a hud in 1998 and an hde application for the product was submitted in 1999. huds are devices that are intended for diseases or conditions that affect fewer than 4,000 individuals annually in the united states . under an hde approval , a hud can not be sold for an amount that exceeds the cost of research and development , fabrication and distribution unless certain conditions are met . currently , fewer than 100 patients are treated with epicel in the u.s. each year . in the year ended december 31 , 2015 , net revenues were $ 15.2 million for epicel . a hud is eligible to be sold for profit after receiving hde approval if the device meets certain eligibility criteria , including where the device is intended for the treatment of a disease or condition that occurs in pediatric patients and such device is labeled for use in pediatric patients . if the fda determines that a hud meets the eligibility criteria , the hud is permitted to be sold for profit as long as the number of devices distributed in any calendar year does not exceed the annual distribution number ( adn ) . the adn is defined as the number of devices reasonably needed to treat a population of 4,000 individuals per year in the united states . on february 18 , 2016 , the fda approved the company 's hde supplement to revise the labeled indications of use to specifically include pediatric patients and to add pediatric labeling . the revised product label also now specifies that the probable benefit of epicel , mainly related to survival , was demonstrated in two epicel clinical experience databases and a physician-sponsored study comparing outcomes in patients with massive burns treated with epicel relative to standard care . due to the change in the label to include use in pediatric patients , epicel is no longer subject to the hde profit restrictions . in conjunction with meeting the pediatric eligibility criteria , the fda has determined the the adn number for epicel is 360,400. we currently have a 4-person field force calling upon dedicated burn centers . maci maci is a third-generation aci product for the treatment of focal chondral cartilage defects in the knee . maci received marketing authorization in europe in july 2013 by meeting the requirements of the advanced therapy and medicinal product ( atmp ) guidelines . maci had been commercially available in the european union ( eu ) since 1998. as part of the june 2014 restructuring we temporarily suspended sales of maci in august 2014 , primarily due to low utilization and an unfavorable pricing environment . we believe that maci has significant revenue potential in the u.s. , if approved and reimbursed . on march 4 , 2016 , the fda accepted our bla seeking approval to market maci as an autologous cellular treatment for symptomatic cartilage defects of the knee . the fda provided a pdufa ( prescription drug user fee act ) goal date of january 3 , 2017. in addition , the fda communicated that it is not currently planning to hold an advisory committee meeting to discuss the application . story_separator_special_tag maci was obtained by sanofi by acquiring verigen ag ( verigen ) in 2005. as part of sanofi 's acquisition of verigen , sanofi agreed to make cash payments to verigen upon the achievement of developmental milestones relating to regulatory and commercialization of maci in the united states . in connection with our acquisition of the ctrm business , we agreed that if we further developed maci in the u.s. , we would be obligated to pay these milestone payments . during the third quarter of 2014 , at our request , sanofi entered into a settlement agreement with the former shareholders of verigen whereby these shareholders agreed to discharge all obligations related to these maci milestone payments in exchange for a one-time cash payment of 2.5 million ( approximately $ 3.2 million ) . we paid this amount in full in 2014 . 52 ixmyelocel-t our preapproval stage portfolio includes ixmyelocel-t , a unique patient-specific multicellular therapy derived from an adult patient 's own bone marrow which utilizes our proprietary , highly automated and scalable manufacturing system . our proprietary cell manufacturing process significantly expands the mesenchymal stromal cells ( mscs ) and m2-like anti-inflammatory macrophages in the patient 's bone marrow mononuclear cells while retaining many of the hematopoietic cells . these cell types are known to regulate the immune response and play a key role in tissue repair and regeneration by resolving pathologic inflammation , promoting angiogenesis , and remodeling ischemic tissue . the novelty and advantage of using ixmyelocel-t is the expansion of a unique combination of cell populations , including mscs and m2-like macrophages , which secrete a distinct combination of angiogenic and regenerative factors , and possess the ability to remain anti-inflammatory in the face of inflammatory challenge . our lead clinical development program for ixmyelocel-t is focused on severe , chronic ischemic cardiovascular diseases . we are currently conducting the open label extension portion of the phase 2b ixcell-dcm study , which is a randomized , double-blind , placebo-controlled clinical trial for patients with advanced heart failure due to ischemic dcm . ixmyelocel-t has been granted a u.s. orphan drug designation by the fda for the treatment of dcm . we also have an ongoing ixmyelocel-t clinical program for the treatment of craniofacial reconstruction and have conducted clinical studies for the treatment of critical limb ischemia . the ongoing phase 2b ixcell-dcm clinical study has treated 114 patients at 28 sites in the u.s. and canada . we completed enrolling and treating patients in february , 2015. patients were followed for 12 months for the primary efficacy endpoint of major adverse cardiovascular events , defined as all-cause deaths , all-cause hospitalizations , and unplanned outpatient or emergency department visits for iv treatment of acute worsening heart failure . secondary endpoints include clinical , functional , structural , symptomatic , quality of life , and biomarker measures at 3 , 6 and 9 months . on march 10 , 2016 , we announced the trial had met its primary endpoint of reduction in clinical cardiac events and that incidence of adverse events , including serious adverse events , in patients treated with ixmyelocel-t was comparable to patients in the placebo group . because the trial met the primary endpoint , patients who had been assigned to the placebo group or randomized to ixmyelocel-t in the double-blind portion of the trial but did not receive ixmyelocel-t will be offered the option to receive treatment . story_separator_special_tag the following table summarizes the approximate allocation of cost for our research and development projects : replace_table_token_7_th research and development expenses for the year ended december 31 , 2015 were $ 18.9 million compared to $ 21.3 million for the year ended december 31 , 2014. the decrease in research and development expenses is due to lower costs incurred for the ixcell-dcm study , which completed enrollment in january 2015 ; a $ 3.2 million payment in 2014 to the former shareholders of verigen whereby these shareholders agreed to discharge all obligations related to these maci milestone payments in exchange for a one-time cash payment ; and the canceled critical limb ischemia study . the decrease was offset by additional research , development and regulatory costs incurred for the maci bla submission which included a filing fee of $ 2.4 million paid in 2015 to the fda and other regulatory consulting expenses in addition to expenses incurred for the hde supplement submission to obtain an exemption from the profit prohibition and to revise the labeled indications for use of epicel . research and development expenses for the year ended december 31 , 2014 were $ 21.3 million versus $ 15.1 million for the same period in 2013. the increase in research and development expenses resulted from $ 7.2 million in increased expenses for the ixcell-dcm clinical trial , $ 3.8 million expenses for maci ( including $ 3.2 million for the verigen agreement ) , $ 0.6 million of expenses for epicel , and $ 1.0 million of expenses for carticel , all of which are offset by a $ 6.4 million reduction in the cli clinical trial expenses . dcm trial expenses increased in the year ended december 31 , 2014 versus 2013 since most patients were enrolled and treated in 2014. with respect to cli , we completed the trial in early 2014 and as a result , expenses declined . selling , general and administrative costs replace_table_token_8_th selling , general and administrative expenses for the years ended december 31 , 2015 and 2014 were $ 22.5 million and $ 13.8 million , respectively . the increase is primarily due to an increase in sales and marketing expenses of $ 6.6 million for the full year in 2015 compared to 2014 which reflects only seven months of selling and marketing expenses from commercial operations of the ctrm business . in addition , an increase of $ 2.0 million for general and administration expenses was due to higher personnel related expenses offset by lower consulting expenses .
| over the last five years , the percentage of annual sales by quarter has ranged as follows : first quarter , 20 % to 24 % ; second quarter , 24 % to 26 % ; third quarter , 21 % to 23 % ; and fourth quarter , 29 % to 33 % . during 2015 , the percentage of annual sales by quarter was as follows : 20.2 % in the first quarter ; 25.7 % in the second quarter ; 22.0 % in the third quarter ; and 32.1 % in the fourth quarter . epicel revenue is also subject to seasonal fluctuations mostly associated with the use of heating elements during the colder months , with stronger sales occurring in the winter months of the first and fourth quarters , and weaker sales occurring in the hot summer months of the third quarter . however , in any single year , this trend can be absent due to the extreme variability inherent with epicel 's low patient volume of fewer than 100 patients per year . over the last five years , the percentage of annual sales by quarter has ranged as follows : first quarter , 27 % ; second quarter , 25 % ; third quarter , 20 % ; and fourth quarter , 28 % . the variability between the same quarters in consecutive years has been as high as 10 % of the annual volume . while the number of patients treated per year remains low , we expect these large swings in revenue in some quarters to continue . these seasonal trends have caused and will likely continue to cause , fluctuations in our quarterly results , including fluctuations in sequential revenue growth rates . gross profit and gross profit ratio replace_table_token_5_th gross profit increased for the year ended december 31 , 2015 compared to 2014 primarily due to $ 2.5 million of restructuring expenses recognized in 2014 as a result of the ctrm business acquired in may 2014. we did not have commercial operations for the year ended december 31 , 2013 as it was a development stage entity and
| 14,367 |
the following table sets forth arpu by distribution channel for the periods stated : replace_table_token_13_th while arpu for similar services and distribution channels is indicative of changes in monthly charges and the revenue rate applicable to new subscribers , this measurement on a consolidated basis is affected by several factors , including the mix of units in service and the pricing of the various components of our services . we expect future sequential annual revenues to decline in line with recent trends . the change in arpu in the direct distribution channel is the most significant indicator of rate-related changes in our revenue . the decrease in consolidated arpu during the years 2011 through 2013 was due to the change in composition of our customer base as the percentage of units in service attributable to larger customers continues to increase . these larger customers benefit from lower pricing associated with their larger number of units-in-service . we believe that without further price adjustments , arpu would trend lower for both the direct and indirect distribution channels in 2014 and that price increases could mitigate , but not completely offset , the expected declines in both arpu and revenue . the following table sets forth information on direct arpu by account size for the periods stated : replace_table_token_14_th software operations our primary business in the software operations is the sale of software , professional services ( primarily installation and training ) , equipment ( to be used in conjunction with the software ) , and maintenance support ( post-contract support ) . the software is licensed to end-users under an industry standard software license agreement . 23 revenue from software operations is included in software revenue and other in the consolidated statements of income . for purposes of md & a , we break out revenue from software operations into two primary components : operations revenue and maintenance revenue . operations revenue in software operations consists of software license revenue , professional services revenue , and equipment sales . in most instances , we recognize equipment revenue when it is delivered to the customer , and software license revenue and professional services revenue when the application is ready for use at the customer location and all service obligations are satisfied under such arrangements . maintenance revenue in software operations is for ongoing support of a software application or equipment and is recognized ratably over the period of coverage , typically one year . the maintenance renewal rates for the years ended december 31 , 2013 , 2012 and 2011 were 99.1 % , 99.0 % and 99.4 % , respectively . the breakout of revenue by component from software operations was as follows for the periods stated : replace_table_token_15_th ( 1 ) revenue reflects results from march 3 , 2011 ( the acquisition date ) to december 31 , 2011 and is net of maintenance revenue reductions of $ 6.1 million required by purchase accounting to reflect fair value . on a regular basis , our software operations engage in contractual arrangements with our customers to provide software licenses , professional services , and equipment sales . in addition , we enter into contractual arrangements for maintenance with our customers on new solutions or renewals on existing solutions . these contractual arrangements are reported as bookings and represent future revenue . bookings increased by 3.5 % for the year ended december 31 , 2013 compared to 2012. the increase reflects the continuing success of our expanding software sales force , in both the americas and international theaters , in closing business and expanding market penetration with new customers , as well as selling additional solutions to our installed customer base . the following table summarizes total bookings for the periods stated : replace_table_token_16_th ( 1 ) bookings reflects results from march 3 , 2011 ( the acquisition date ) to december 31 , 2011 . 24 software operations reported a backlog of $ 40.2 million for the year ended december 31 , 2013 , which represented all purchase orders received from customers not yet recognized as revenue . the following table reconciles the company 's reported backlog at december 31 , 2013 : backlog december 31 , 2013 ( dollars in thousands ) beginning balance at january 1 , 2013 $ 40,626 operations bookings for the year 35,130 maintenance renewals for the year 28,322 available backlog $ 104,078 operations revenue for the year ( 32,446 ) maintenance revenue for the year ( 27,858 ) other ( 1 ) ( 3,563 ) total backlog at december 31 , 2013 $ 40,211 decrease in backlog from january 1 , 2013 1.0 % ( 1 ) other reflects cancellations and adjustments to backlog . operations — consolidated our operating expenses are presented in functional categories . certain of our functional categories are especially important to overall expense control and management ; these operating expenses are categorized as follows : cost of revenue . these are expenses primarily for systems and pagers costs for the wireless operations and hardware , third-party software , payroll and related expenses for our professional services , customer support and maintenance staff , and various other expenses associated with the software operations for professional services and post contract support . service , rental , and maintenance . these are expenses associated with the operation of our networks and the provision of messaging services . expenses consist largely of site rent expenses for transmitter locations , telecommunication expenses to deliver messages over our networks , and payroll and related expenses for our engineering and pager repair functions . expenses related to the development and maintenance of our software products are included in this category . selling and marketing . these are expenses associated with our direct sales force and indirect sales channel and marketing expenses in support of those sales groups . this classification consists primarily of payroll and related expenses and commission expenses . general and administrative . story_separator_special_tag these are expenses associated with customer service for wireless operations , inventory management , billing , collections , bad debt , and other administrative functions . this classification consists primarily of payroll and related expenses , outside service expenses , taxes , licenses and permit expenses , and facility rent expenses . we review the percentages of these operating expenses to revenue on a regular basis . even though the operating expenses are classified as described above , expense control and management are also performed by expense category . approximately 70 % of the operating expenses referred to above were incurred in payroll and related expenses , site and facility rent expenses and telecommunication expenses for each of the years ended december 31 , 2013 , 2012 and 2011. payroll and related expenses for the year ended december 31 , 2012 for software operations included a benefit of $ 0.3 million for forfeitures under the 2012 stip associated with the departure of two former executives . payroll and related expenses include wages , incentives , employee benefits and related taxes . on a monthly basis , we review the number of employees in major functional categories such as professional services , product development , direct sales , engineering and technical staff , customer service and inventory . we also review the design and physical locations of functional groups to continuously improve efficiency , to simplify organizational structures , and to minimize the number of physical locations for the wireless operations . we have reduced our wireless employee base by approximately 9.8 % to 341 full-time equivalent employees ( “ ftes ” ) at december 31 , 2013 from 378 ftes at december 31 , 2012. we anticipate continued staffing reductions in 2014 for wireless operations , consistent with the declining subscriber and revenue trends , and we have accrued post-employment benefits for these anticipated staffing reductions . for our software operations , we expect staffing increases in 2014 to support our revenue growth . the software operations had 290 ftes at december 31 , 2013 , an increase of 1.0 % from 287 ftes at december 31 , 2012 . 25 site rent expenses for transmitter locations are largely dependent on our paging networks . we operate local , regional , and nationwide one-way and two-way paging networks . these networks each require locations on which to place transmitters , receivers , and antennae . site rent expenses for transmitter locations are highly dependent on the number of transmitters , which in turn is dependent on the number of networks . in addition , these expenses generally do not vary directly with the number of subscribers or units in service , which is detrimental to our operating margins as revenue declines . in order to reduce these expenses , we have an active program to consolidate the number of networks , and thus transmitter locations , which we refer to as network rationalization . we have reduced the number of active transmitters by 4.4 % to 4,538 active transmitters at december 31 , 2013 from 4,749 active transmitters at december 31 , 2012. telecommunication expenses are incurred to interconnect our paging networks and to provide telephone numbers for customer use , points of contact for customer service , and connectivity among our offices . these expenses for wireless operations are dependent on the number of units in service and the number of office and network locations that we maintain . the dependence on units in service is related to the number of telephone numbers provided to customers and the number of telephone calls made to our call centers , though this is not always a direct dependency . for example , the number or duration of telephone calls to call centers may vary from period to period based on factors other than the number of units in service , which could cause telecommunication expenses to vary regardless of the number of units in service . in addition , certain phone numbers we provide to our customers may have a usage component based on the number and duration of calls to the subscriber 's messaging device . telecommunication expenses do not necessarily vary in direct relationship to units in service . therefore , based on the factors discussed above , efforts are underway to review and reduce telephone circuit inventories for wireless operations . telecommunication expenses are also incurred for our offices and call centers for software operations . statements of income comparison of the statements of income for the years ended december 31 , 2013 and 2012 replace_table_token_17_th revenue — wireless our total revenue was $ 149.4 million and $ 168.4 million for the years ended december 31 , 2013 and 2012 , respectively . the decrease in total revenue reflected the decrease in demand for our wireless services . service , rental and maintenance revenue , net of $ 143.6 million and $ 161.9 million for the years ended december 31 , 2013 and 2012 , respectively , consist primarily of recurring fees associated with the provision of messaging services and rental of leased units and is net of a provision for service credits . included in software revenue and other , net was $ 5.8 million and $ 6.5 million for the years ended december 31 , 2013 and 2012 , respectively , of revenue associated with system sales , the sale of devices and charges for leased devices that are not returned and are net of anticipated credits . the table below details total service , rental and maintenance revenue , net for the periods stated : 26 replace_table_token_18_th the table below sets forth units in service and service revenue , the changes in each between 2013 and 2012 and the changes in revenue associated with differences in arpu and the number of units in service : replace_table_token_19_th ( 1 ) amounts shown exclude non-paging and product and related sales .
| stock based compensation expenses increased by $ 1.8 million due to higher amortization of compensation expense of $ 1.1 million related to the 2011 ltip for the wireless operations during the year ended december 31 , 2013 compared to the same period in 2012 since the 2011 ltip award was effective on january 1 , 2013 while 2012 included amortization of compensation expense for the 2009 ltip . stock based compensation expenses increased by $ 0.7 million for the software operations for the year ended december 31 , 2013 compared to the same period in 2012 primarily due to the benefit of stock based compensation in 2012 related to the forfeitures under the 2011 ltip associated with the departure of former executives in the software operations and the benefit related to the modification of the 2011 ltip in 2012. facility rent — the decrease of $ 0.2 million in facility rent expenses was primarily due to lower facility rent expenses for our wireless operations related to the closure of office facilities , as we continue to rationalize our operating requirements to meet lower revenue and customer demand for the wireless operations . telecommunications — the decrease of $ 0.1 million in telecommunication expenses reflected continued office and staffing reductions as we continue to streamline our operations and reduce our telecommunication requirements for the wireless operations . outside services — outside service expenses consisted primarily of costs associated with printing and mailing invoices , outsourced customer service and various professional fees . the increase of $ 0.2 million in outside services expenses was due primarily to higher professional services fees for external accounting services , partially offset by lower costs for outsourced customer service support . taxes , licenses and permits — taxes , licenses and permit expenses consist of property , franchise , gross receipts and transactional taxes . the decrease in taxes , licenses and permit expenses of $ 0.6 million was primarily due to lower universal service fund expenses of $ 0.6 million and lower transactional taxes of $ 0.2 million due to the resolution of various state and local tax audits at amounts lower than the originally estimated liabilities , partially offset by
| 14,368 |
we anticipate that our expenses will increase significantly in connection with our ongoing activities , as we : advance neo-pv-01 into later-stage clinical development ; 88 advance our development programs into and through preclinical and clinical development ; seek regulatory approvals for any product candidates that successfully complete clinical trials ; hire additional clinical , quality assurance and scientific 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 ; maintain , expand and protect our intellectual property portfolio ; establish a sales , marketing , medical affairs and distribution infrastructure to commercialize any products for which we may obtain marketing approval and intend to commercialize on our own or jointly with third parties ; and acquire or in-license other product candidates and technologies . as a result , we will need substantial additional funding to support our continuing operations and pursue our growth strategy . until such time as we can generate significant revenue from product sales , if ever , we expect to finance our operations through the sale of equity , debt financings or other capital sources , including collaborations with other companies or other strategic transactions . we may be unable to raise additional funds or enter into such other agreements or arrangements when needed on favorable terms , or at all . if we fail to raise capital or enter into such agreements as , and when , needed , we may have to significantly delay , scale back or discontinue the development and commercialization of one or more of our product candidates or delay our pursuit of potential in-licenses or acquisitions . because of the numerous risks and uncertainties associated with product development , we are unable to predict the timing or amount of increased expenses or the timing of when or if we will be able to achieve or maintain profitability . even if we are able to generate product sales , we may not become profitable . if we fail to become profitable or are unable to sustain profitability on a continuing basis , then we may be unable to continue our operations at planned levels and be forced to reduce or terminate our operations . as of december 31 , 2018 , we had cash , cash equivalents and marketable securities of $ 103.3 million . we believe that , based on our current operating plan , our existing cash , cash equivalents and marketable securities will enable us to fund our operating expenses and capital expenditure requirements into at least the second quarter of 2020. we have based this estimate on assumptions that may prove to be wrong and we could exhaust our available capital resources sooner than we expect . see “ —liquidity and capital resources. ” components of results of operations revenue we have not generated any revenue from product sales and do not expect to generate any revenue from the sale of products for several years , if at all . if our development efforts for our current or future product candidates are successful and result in marketing approval or collaboration or license agreements with third parties , we may generate revenue in the future from a combination of product sales or payments from collaboration or license agreements that we may enter into with third parties . operating expenses research and development expenses research and development expenses represent costs incurred by us for the discovery , development and manufacture of our product candidates and include : expenses incurred under agreements with third parties , including cros , cmos and suppliers ; license fees to acquire and maintain in-process technology and data ; costs associated with the development of our recon bioinformatics engine ; personnel-related costs , including salaries , benefits and non-cash stock-based compensation expense , for personnel engaged in research and development functions ; costs of outside consultants , including their fees , related travel expenses and stock-based compensation expense ; the costs of laboratory supplies and acquiring , developing and manufacturing preclinical study and clinical trial materials ; costs related to compliance with regulatory requirements ; and facility-related expenses , which include direct depreciation costs and allocated expenses for rent and maintenance of facilities and general support services . 89 we expense research and development costs as incurred . we recognize costs for certain development activities , such as clinical trials and manufacturing costs , based on an evaluation of the progress to completion of specific tasks using data such as patient enrollment or other information provided to us by our vendors . payments for these activities are based on the terms of the individual agreements , which may differ from the pattern of costs incurred , and are reflected in our financial statements as prepaid or accrued external research and development expenses . nonrefundable advance payments for goods or services to be received in the future for use in research and development activities are recorded as prepaid expenses . these amounts are recognized as an expense as the goods are delivered or the related services are performed , or until it is no longer expected that the goods will be delivered or the services rendered . we use our employee and infrastructure resources across our multiple research and development programs directed toward developing our neon / one and neon / select approaches , as well as identifying and developing product candidates . we track outsourced development and manufacturing costs , including external clinical and regulatory costs , by development product candidates , but we do not allocate costs such as personnel costs or other internal costs to specific development of product candidates . these external and unallocated research and development expenses are summarized in the table below : replace_table_token_3_th at this time , we can not reasonably estimate or know the nature , timing , and estimated costs of the efforts that will be necessary to complete the development of our product candidates . story_separator_special_tag we are also unable to predict when , if ever , material net cash inflows will commence from sales of our products , if approved . this is due to the numerous risks and uncertainties associated with developing our product candidates , including the uncertainty related to : the addition and retention of key research and development personnel ; successful enrollment in and completion of our current clinical trials for neo-pv-01 , as well as the cost of future clinical trials for neo-pv-01 , neo-ptc-01 and neo-sv-01 ; costs associated with the preclinical development and clinical trials for our early discovery product candidates ; maintaining agreements with third-party manufacturers for clinical supply for our clinical trials and commercial manufacturing , if our product candidates are approved ; receipt of marketing approvals from applicable regulatory authorities ; commercializing products , if and when approved , whether alone or in collaboration with others ; the terms and timing of any collaboration , license or other arrangement , including the terms and timing of any milestone payments thereunder ; obtaining and maintaining patent and trade secret protection and regulatory exclusivity for our products if and when approved ; and continued acceptable safety profiles of our products following approval . a change in the outcome of any of these variables with respect to the development of any of our product candidates would significantly change the costs , timing and viability associated with the development of that product candidate . research and development activities account for a significant portion of our operating expenses . we expect our research and development expenses to increase over the next several years as we continue to implement our business strategy , which includes advancing clinical development of neo-pv-01 and progressing neo-ptc-01 and neo-sv-01 into clinical development , expanding our research and development efforts , seeking regulatory approvals for any product candidates that successfully complete clinical trials , accessing and developing additional product candidates and hiring additional personnel to support our research and development efforts . in addition , product candidates in later stages of clinical development generally incur higher development costs than those in earlier stages of clinical development , primarily due to the increased size and duration of later-stage clinical trials . as a result , we expect our research and development expenses to increase as our product candidates advance into later stages of clinical development . 90 general and administrative expenses general and administrative expenses consist of personnel-related costs , including salaries , benefits and non-cash stock-based compensation expense , for our personnel in executive , legal , finance and accounting , human resources , business operations and other administrative functions , legal fees related to patent , intellectual property and corporate matters , fees paid for accounting , regulatory and tax services , insurance costs , consulting fees and facility-related costs not otherwise included in research and development expenses . we anticipate that our general and administrative expenses will increase in the future to support our continued research and development activities and the increased costs of operating as a public company , including costs of accounting , audit , legal , regulatory and tax-related services associated with maintaining compliance with exchange listing and sec requirements , additional insurance costs , investor and public relations costs and other administration and professional services . other income , net other income , net consists primarily of interest income related to our investments in cash equivalents and marketable securities . story_separator_special_tag style= '' width:48px ; '' > $ 1.6 million for increased personnel-related costs , primarily due to increased general and administrative headcount to support the growth of our research and development organization , including $ 0.5 million of increased stock-based compensation expense ; $ 1.2 million for increased consulting and professional fees , including for accounting , tax and legal services ; and $ 0.2 million in increased facility-related costs , including rent and other costs related to our new facility lease that commenced in september 2016 , depreciation and other utility and maintenance costs . other income ( expense ) , net other income increased by $ 0.6 million from other expense of an insignificant amount for the year ended december 31 , 2016 to other income of $ 0.6 million for the year ended december 31 , 2017. the increase in other income was primarily attributable to interest income on our investments in cash equivalents and marketable securities . liquidity and capital resources sources of liquidity since our inception , we have incurred significant losses in each period and on an aggregate basis . we have not yet commercialized any of our product candidates , which are in various phases of preclinical and clinical development , and we do not expect to generate revenue from sales of any products for several years , if at all . we have funded our operations through december 31 , 2018 with aggregate net proceeds of $ 89.9 million from our ipo , as well as an aggregate of $ 161.1 million of net proceeds from sales of our preferred stock and convertible debt . as of december 31 , 2018 , we had cash , cash equivalents and marketable securities of $ 103.3 million . historical cash flows the following table provides information regarding our cash flows for each of the periods presented ( in thousands ) : replace_table_token_6_th cash used in operating activities the cash used in operating activities resulted primarily from our net losses adjusted for non-cash charges and changes in components of working capital , which are primarily the result of increased expenses and timing of vendor payments . during the year ended december 31 , 2018 , operating activities used $ 63.4 million of cash , primarily resulting from our net loss of $ 76.9 million , partially offset by net non-cash charges of $ 7.7 million and changes in our operating assets and liabilities of $ 5.8 million .
| general and administrative general and administrative expenses increased by $ 7.4 million from $ 10.9 million for the year ended december 31 , 2017 to $ 18.3 million for the year ended december 31 , 2018. the increase in general and administrative expenses was primarily attributable to the following : $ 3.3 million for increased personnel-related costs , including $ 1.5 million of increased non-cash stock-based compensation expense primarily due to increased general and administrative headcount to support the growth of our organization ; $ 2.4 million for increased patent related legal fees , including expenses associated with obtaining and maintaining intellectual property protection ; $ 1.7 million of increased other general and administrative costs primarily due to the increased costs of being a public company , as well as additional professional fees , insurance and tax related expenditures . other income ( expense ) , net other income increased by $ 1.2 million from $ 0.6 million for the year ended december 31 , 2017 to $ 1.8 million for the year ended december 31 , 2018 due primarily to increased interest and investment income on our cash , cash equivalents and marketable securities as a result of the investment of the net proceeds received from our ipo . comparison of the years ended december 31 , 2017 and 2016 the following table summarizes our results of operations for the years ended december 31 , 2017 and 2016 , along with the changes in those items in dollars : replace_table_token_5_th research and development research and development expenses increased by $ 17.5 million from $ 19.7 million for the year ended december 31 , 2016 to $ 37.2 million for the year ended december 31 , 2017. the increase in research and development expenses was primarily attributable to the following : $ 5.1 million for increased external manufacturing costs related to the clinical supply of neo-pv-01 ; $ 4.5 million for increased personnel-related costs due to increased headcount , including $ 1.2 million
| 14,369 |
recent developments on september 9 , 2016 , we entered into an asset purchase agreement to acquire substantially all of the assets of china mist brands , inc. , for an aggregate purchase price of $ 11.3 million , with $ 10.8 million to be paid in cash at closing and $ 0.5 million to be paid as earnout if certain sales levels are achieved in the calendar years of 2017 and 2018. the transaction is expected to close during the second quarter of fiscal 2017. we anticipate that the acquisition of china mist will give us a greater presence in the high-growth premium tea industry . see note 24 , subsequent events , of the notes to consolidated financial statements included in part ii , item 8 of this report . important factors affecting our results of operations we have identified factors that affect our industry and business which we expect to also play an important role in our future growth and profitability . some of these factors include : demographic and channel trends . our success is dependent upon our ability to develop new products in response to demographic and other trends to better compete in areas such as premium coffee and tea , including expansion of our product portfolio by investing resources in what we believe to be key growth categories , including the launch of our metropolitan single cup coffee , expanded seasonal coffee and specialty beverages , new shelf-stable coffee products , new hot teas , the introduction of collaborative coffee branded products into the retail grocery channel , and the packaging redesign and product portfolio optimization of our un momento ® retail branded product line . fluctuations in green coffee prices . our primary raw material is green coffee , an agricultural commodity traded on the commodities and futures exchange that is subject to price fluctuations . over the past five years , coffee “ c ” market price per pound ranged from approximately $ 1.02 to $ 2.90. the coffee “ c ” market price as of june 30 , 2016 and 2015 was $ 1.46 and $ 1.32 per pound , respectively . the price and availability of green coffee directly impacts our results of operations . for additional details , see risk factors in part i , item 1a of this report . 26 hedging strategy . we are exposed to market risk of losses due to changes in coffee commodity prices . our business model strives to reduce the impact of green coffee price fluctuations on our financial results and to protect and stabilize our margins , principally through customer arrangements and derivative instruments , as further explained in note 7 , derivative instruments , of the notes to consolidated financial statements included in part ii , item 8 of this report . in each of fiscal 2016 and fiscal 2015 , a lower percentage of our roast and ground coffee volume was based on a price schedule and a higher percentage was sold to customers under commodity-based pricing arrangements as compared to fiscal 2014. sustainability . with an increasing focus on sustainability across the coffee and foodservice industry , and particularly from the customers we serve , it is important for us to embrace sustainability across our operations , in the quality of our products , as well as , how we treat our coffee growers . we believe that our collective efforts in measuring our social and environmental impact , creating programs for waste , water and energy reduction , promoting partnerships in our supply chain that aim at supply chain stability and food security , and focusing on employee engagement place us in a unique position to help retailers and foodservice operators create differentiated coffee programs that can include sustainable supply chains , direct trade purchasing , training and technical assistance , recycling and composting networks , and packaging material reductions . supply chain efficiencies and competition . in order to compete effectively and capitalize on growth opportunities , we must continue to evaluate and undertake initiatives to reduce costs and streamline our supply chain . we undertook the corporate relocation plan , in part , to pursue improved production efficiency to allow us to provide a more cost-competitive offering of high-quality products . we continue to look for ways to deploy our personnel , systems , assets and infrastructure to create or enhance stockholder value . areas of focus have included corporate staffing and structure , methods of procurement , logistics , inventory management , supporting technology , and real estate assets . market opportunities . we have invested and in the future may invest in acquisitions that we believe will enhance long-term stockholder value and complement or enhance our product , equipment , service and or distribution offerings to existing and new customer bases . for example , subsequent to the fiscal year end , on september 9 , 2016 , we entered into an asset purchase agreement to acquire substantially all of the assets of china mist as described in note 24 , subsequent events , of the notes to consolidated financial statements included in part ii , item 8 of this report . we anticipate that the acquisition of china mist will give us a greater presence in the high-growth premium tea industry . additionally , in the first quarter of fiscal 2015 we acquired substantially all of the assets of rae ' launo corporation ( “ rlc ” ) as described in note 2 , acquisition , of the notes to consolidated financial statements included in part ii , item 8 of this report . capacity utilization . story_separator_special_tag we calculate our utilization for all of our production facilities on an aggregate basis based on the number of product pounds manufactured during the actual number of production shifts worked during an average week , compared to the number of product pounds that could be manufactured based on the maximum number of production shifts that could be operated during the week ( assuming three shifts per day , seven days per week ) , in each case , based on our current product mix . utilization rates for our production facilities were approximately 90 % , 66 % and 65 % during the fiscal years ended june 30 , 2016 , 2015 and 2014 , respectively . the higher utilization rate in fiscal 2016 was due to the wind-down of production at our torrance facility and the addition of those production volumes to our portland and houston production facilities . since most of our customers do not commit to long-term firm production schedules , we are unable to forecast the level of customer orders with certainty to maximize utilization of manufacturing capacity . as a result , our production facility capacity utilization generally remains less than 100 % . 27 results of operations fiscal years ended june 30 , 2016 and 2015 story_separator_special_tag other than coffee and tea . cost of goods sold cost of goods sold in fiscal 2016 decreased $ 12.9 million , or 3.7 % , to $ 335.9 million , or 61.7 % of net sales , from $ 348.8 million , or 63.9 % of net sales , in fiscal 2015. the decrease in cost of goods sold as a percentage of net sales in fiscal 2016 was primarily due to lower coffee commodity costs compared to the same period in the prior fiscal year , supply chain efficiencies realized primarily through the consolidation of our former torrance coffee production volumes into our houston manufacturing facility , and other supply chain improvements . the average arabica `` c ” market price of green coffee decreased 24.8 % in fiscal 2016. inventories decreased at the end of fiscal 2016 compared to fiscal 2015 primarily due to production consolidation and the sale of processed and unprocessed inventories to harris at cost upon conclusion of the transition services provided by the company in connection with the sale of spice assets . as a result , a beneficial effect of liquidation of lifo inventory quantities in the amount of $ 4.2 million was recorded in cost of goods sold in fiscal 2016 reducing cost of goods sold by the same amount . in fiscal 2015 $ 4.9 million in beneficial effect of liquidation of lifo inventory quantities was recorded . 29 gross profit gross profit in fiscal 2016 increased $ 11.4 million , or 5.8 % , to $ 208.5 million from $ 197.0 million in the prior fiscal year and gross margin increased to 38.3 % in fiscal 2016 from 36.1 % in the prior fiscal year . the increase in gross profit was primarily due to lower coffee commodity costs compared to the same period in the prior fiscal year , supply chain efficiencies realized primarily through the consolidation of our former torrance coffee production volumes into our houston manufacturing facility and other supply chain improvements . gross profit in fiscal 2016 and 2015 included the beneficial effect of the liquidation of lifo inventory quantities in the amount of $ 4.2 million and $ 4.9 million , respectively . operating expenses in fiscal 2016 , operating expenses increased $ 6.5 million , or 3.4 % , to $ 200.3 million or 36.8 % of net sales , from $ 193.8 million , or 35.5 % of net sales , in fiscal 2015 , primarily due to higher general and administrative expenses and restructuring and other transition expenses associated with the corporate relocation plan as compared to the prior fiscal year . general and administrative expenses and restructuring and other transition expenses increased $ 10.8 million and $ 6.1 million , respectively , in fiscal 2016 , as compared to the prior fiscal year , partially offset by a $ 1.6 million decrease in selling expenses . the increase in general and administrative expenses in fiscal 2016 as compared to fiscal 2015 was primarily due to higher accruals for incentive compensation to eligible employees as compared to a reduction in accrual for incentive compensation to eligible employees in the prior fiscal year , an increase in employee and retiree medical costs , workers ' compensation expense and the write-off of a long-term loan receivable that was deemed uncollectible . the increase in general and administrative expenses was partially offset by $ 5.6 million in net gains from sale of spice assets and $ 2.8 million in net gains from sales of assets , primarily real estate , as compared to $ ( 0.4 ) million in net losses from sales of assets , primarily vehicles , in fiscal 2015. the decrease in selling expenses in fiscal 2016 as compared to fiscal 2015 was primarily due to lower depreciation and amortization expense and lower vehicle , fuel and freight expenses , partially offset by higher accruals for incentive compensation for eligible employees as compared to a reduction in accrual for incentive compensation to eligible employees in the prior fiscal year . income from operations income from operations in fiscal 2016 was $ 8.2 million as compared to $ 3.3 million in fiscal 2015 primarily due to higher gross profit , net gains from the sale of spice assets and certain real estate assets and lower selling expenses , partially offset by higher restructuring and other transition expenses associated with the corporate relocation plan and general and administrative expenses .
| during the second half of fiscal 2016 , we began to realign our dsd organization by undertaking initiatives intended to streamline communication and decision making , enhance branch organizational structure , and improve customer focus , including toward a comprehensive training program for all dsd team members to strengthen customer engagement . in fiscal 2016 , we executed a regional test of our first advertising and lead generation campaign designed to improve our new customer acquisition rate within our dsd network . branch consolidation and property sales . in an effort to streamline our branch operations , in the fourth quarter of fiscal 2016 we sold two northern california branch properties , with a third northern california property under contract for sale , and we acquired a new branch facility in hayward , california . introduction of collaborative coffee and redesign of un momento ® branded retail products . in an effort to address what we believe to be unmet consumer needs and improve margin within the retail grocery environment , in fiscal 2016 , we launched collaborative coffee , a new brand of ethically sourced , whole bean direct trade coffees into the retail grocery channel . in addition , we completed a packaging redesign and product portfolio optimization of our un momento® retail branded product line . net sales net sales in fiscal 2016 decreased $ 1.5 million , or 0.3 % , to $ 544.4 million from $ 545.9 million in fiscal 2015 primarily due to a decrease in net sales of coffee and tea products , partially offset by an increase in net sales of spice products and other beverages . net sales in fiscal 2016 included $ 9.7 million in price decreases to customers utilizing commodity-based pricing arrangements , where the changes in the green coffee commodity costs are passed on to the customer , as compared to $ 9.7 million in price increases to customers utilizing such arrangements in fiscal 2015 . 28 the change in net sales in fiscal
| 14,370 |
as a result , the reporting of our total company comparable sales may not be comparable to sales data made available by other companies . number of stores reflects all stores open at the end of a reporting period . in connection with opening new stores , we incur pre-opening costs . pre-opening costs include expenses incurred prior to opening a new store and primarily consist of payroll , travel , training , marketing , initial opening supplies and costs of transporting initial inventory and fixtures to store locations , as well as occupancy costs incurred from the time of possession of a store site to the opening of that store . these pre-opening costs are included in selling , general and administrative expenses and are generally incurred and expensed within 30 days of opening a new store . gross profit is equal to our net sales less costs of goods sold . gross profit as a percentage of our net sales is referred to as gross margin . costs of goods sold includes the direct costs of sold merchandise , inventory shrinkage , and adjustments and reserves for excess , aged and obsolete inventory . we review our inventory levels on an ongoing basis to identify slow-moving merchandise and use product markdowns to liquidate these products . changes in the assortment of our products may also impact our gross profit . the timing and level of markdowns are driven by customer acceptance of our merchandise . certain of our competitors and other retailers may report costs of goods sold differently than we do . as a result , the reporting of our gross profit and gross margin may not be comparable to other companies . the primary drivers of the costs of goods sold are raw materials , which fluctuate based on certain factors beyond our control , including labor conditions , transportation or freight costs , energy prices , currency fluctuations and commodity prices . we place orders with merchandise suppliers in united states dollars and , as a result , are not exposed to significant foreign currency exchange risk . selling , general and administrative expenses include all operating costs not included in costs of goods sold . these expenses include all payroll and related expenses , occupancy costs , information systems costs and other operating expenses related to our stores and to our operations at our headquarters , including utilities , depreciation and amortization . these expenses also include marketing expense , including catalog production and mailing costs , warehousing , distribution and shipping costs , customer service operations , consulting and software services , professional services and other administrative costs . our historical revenue growth has been accompanied by increased selling , general and administrative expenses . the most significant increases were in occupancy costs associated with retail store expansion , and in marketing and payroll investments . adjusted ebitda and adjusted ebitda margin . adjusted ebitda , represents net income plus net interest expense , provision ( benefit ) for income taxes , depreciation and amortization , equity-based compensation expense , write-off of property and equipment , and other non-recurring expenses , primarily consisting of outside legal and professional fees associated with certain non-recurring transactions and events . we present adjusted ebitda on a consolidated basis because management uses it as a supplemental measure in assessing our operating performance , and we believe that it is helpful to investors , securities analysts and other interested parties as a measure of our comparative operating performance from period to period . we also use adjusted ebitda as one of the primary methods for planning and forecasting overall expected performance of our business and for evaluating on a quarterly and annual basis actual results against such expectations . further , we recognize adjusted ebitda as a commonly used measure in determining business value and as such , use it internally to report results . adjusted ebitda margin represents , for any period , adjusted ebitda as a percentage of net sales . while we believe that adjusted ebitda is useful in evaluating our business , adjusted ebitda is a non-gaap financial measure that has limitations as an analytical tool . adjusted ebitda should not be considered an alternative to , or substitute for , net income ( loss ) , which is calculated in accordance with gaap . in addition , other companies , including companies in our industry , may calculate adjusted ebitda differently or not at all , which reduces the usefulness of adjusted ebitda as a tool for comparison . we recommend that you review the reconciliation and calculation of adjusted ebitda and adjusted ebitda margin to net income , the most directly comparable gaap financial measure , below and not rely solely on adjusted ebitda or any single financial measure to evaluate our business . reconciliation of net income to adjusted ebitda and calculation of adjusted ebitda margin 34 the following table provides a reconciliation of net income to adjusted ebitda and the calculation of adjusted ebitda margin for the periods presented : replace_table_token_6_th ( a ) represents the net gain or loss on the disposal of fixed assets . ( b ) represents the impairment of assets taken in fiscal year 2017 associated with three underperforming retail locations . ( c ) represents items management believes are not indicative of ongoing operating performance . these expenses are primarily composed of legal and professional fees associated with the initial public offering completed march 14 , 2017 and subsequent transition to a public company . for the fiscal year ended february 2 , 2019 , these expenses include costs related to a ceo transition . story_separator_special_tag ( d ) represents the prior period correction to recognize lease incentives as reductions of rental expense by the lessee on a straight-line basis over the term of the new lease , in accordance with asc 840. factors affecting the comparability of our results of operations on february 24 , 2017 , we completed a conversion from a delaware limited liability company named jill intermediate llc into a delaware corporation and changed our name to j.jill , inc. in conjunction with the conversion , all of our outstanding equity interests converted into shares of common stock . accordingly , all historical earnings per share amounts presented in the accompanying consolidated statements of operations and comprehensive income and the related notes to the consolidated financial statements have been adjusted retroactively to reflect our conversion from a limited liability company to a corporation . following our conversion from a limited liability company to a corporation , j.jill , inc. merged with and into its direct parent company , jjill holdings , on february 24 , 2017 , with j.jill , inc. continuing as the surviving entity . jjill holdings did not have operations of its own , except for buyer transaction costs of $ 8.6 million incurred to execute the acquisition . on may 27 , 2016 , we entered into an agreement to amend our term loan to borrow an additional $ 40.0 million . the other terms and conditions of the term loan remained substantially unchanged , as discussed in “ liquidity and capital resources—credit facilities. ” we used the additional loan proceeds , along with cash on hand , to fund a $ 70.0 million dividend to the partners of jjill topco holdings , which was approved by the members of jill intermediate llc and the board of directors of jjill topco holdings on may 27 , 2016. on january 18 , 2017 and june 1 , 2017 , we made voluntary prepayments of $ 10.1 million and $ 20.2 million , including accrued interest , on our term loan . on december 15 , 2017 , we repurchased $ 5.0 million of our term loan on the open market at 98 % of par value . 35 story_separator_special_tag style= '' margin-top:12pt ; margin-bottom:0pt ; text-indent:4.86 % ; font-size:10pt ; font-family : times new roman ; font-weight : normal ; font-style : normal ; text-transform : none ; font-variant : normal ; '' > selling , general and administrative expenses for fiscal year 2017 increased $ 26.4 million , or 7.2 % , to $ 394.9 million from $ 368.5 million for fiscal year 2016. as a percentage of net sales , selling , general and administrative expenses for fiscal year 2017 were 56.6 % as compared to 57.7 % for fiscal year 2016. the increase was primarily due to higher sales related expenses of $ 16.1 million , increased marketing costs of $ 7.9 million and increased corporate payroll and other expenses of $ 6.5 million to support business initiatives , costs associated with our transition to a public company and one-time costs resulting from the impairment of retail store assets . this increase was offset by decreases related to depreciation and amortization expense of $ 2.0 million and a decrease in incentive compensation expense of $ 2.1 million . 37 interest expense , net interest expense , net for fiscal year 2017 increased by $ 0.6 million , or 3.2 % , to $ 19.3 million from $ 18.7 million for fiscal year 2016. the increase in interest expense was due to higher interest rates , and higher amortization of deferred financing costs resulting from voluntary term loan prepayments totaling $ 25.0 million during fiscal year 2017. provision for income taxes the income tax benefit for fiscal year 2017 was $ 5.4 million compared to an income tax provision of $ 16.7 million for fiscal year 2016. on december 22 , 2017 , the tcja legislation was signed . the new u.s. tax legislation is subject to a number of provisions , including a reduction of the u.s. federal corporate income tax rate from 35.0 % to 21.0 % ( effective january 1 , 2018 ) and a change in certain business deductions , including allowing for immediate expensing of certain qualified capital expenditures . as a result of tcja , the company recognized a tax benefit of $ 24.0 million related to the remeasurement of deferred tax assets and liabilities . the company 's effective tax benefit rate for fiscal year 2017 was 10.9 % . the company 's effective tax rate for fiscal year 2017 , after excluding the $ 24.0 million impact of revaluing deferred tax liabilities , was 37.2 % . the company 's effective tax rate for fiscal year 2016 was 40.9 % . liquidity and capital resources general our primary sources of liquidity and capital resources are cash generated from operating activities and availability under our abl credit agreement , dated as of may 8 , 2015 , by and among jill holdings llc , jill acquisition llc , certain subsidiaries from time to time party thereto , the lenders party thereto and cit finance llc as the administrative agent and collateral agent , as amended on may 27 , 2016 by amendment no . 1 thereto ( the “ abl facility ” ) . our primary requirements for liquidity and capital are working capital and general corporate needs , including merchandise inventories , marketing , including catalog production and distribution , payroll , store occupancy costs and capital expenditures associated with opening new stores , remodeling existing stores and upgrading information systems and the costs of operating as a public company . we believe that our current sources of liquidity and capital will be sufficient to finance our continued operations for at least the next 12 months .
| this is partially offset by savings of $ 2.4 million in compensation and $ 1.1 million in sales related expenses . as a percentage of net sales , selling , general and administrative expenses were 56.5 % for fiscal year 2018 compared to 56.6 % for fiscal year 2017. interest expense , net interest expense , net consists of interest expense on the term loan , partially offset by interest earned on cash . interest expense for fiscal year 2018 decreased by $ 0.2 million , or 1.0 % , to $ 19.1 from $ 19.3 million for fiscal year 2017. the decrease was driven by the lower balance of the term loan due to a voluntary prepayments totaling $ 25.0 million during fiscal year 2017 , and interest earned on cash which were partially offset by higher interest rates . 36 provision for income taxes the provision for income taxes was $ 11.6 million for fiscal year 2018 compared to an income tax benefit of $ 5.4 million for fiscal year 2017. our effective tax rates were 27.6 % and ( 10.9 % ) , respectively . the u.s. tax cuts and jobs act ( “ tcja ” ) enacted in december 2017 , significantly reduced the federal corporate income tax rate and required the company to revalue its deferred income tax liabilities based on the lower enacted federal corporate income tax rate , resulting in a one-time benefit of $ 24.0 million recorded in the fourth quarter of fiscal year 2017. fiscal year ended february 3 , 2018 , which is comprised of 53 weeks , compared to the 52 week period ended january 28 , 2017. the following table summarizes our consolidated results of operations for the periods indicated : replace_table_token_8_th net sales fiscal year 2017 increased $ 59.1 million , or 9.2 % , to $ 698.1 million , from $ 639.1 million for fiscal year ended january 28 , 2017 ( “ fiscal year 2016 ” ) . this increase was primarily due to an increase in total comparable company sales of 6.4 % , which was substantially
| 14,371 |
throughout the year , henry hub natural gas spot prices ranged from a high of $ 4.25/mmbtu in march 2019 to a low of $ 1.75/mmbtu in december 2019. according to the u.s. department of energy ( doe ) , working natural gas in storage at the end of 2019 was 3,192 billion cubic feet ( bcf ) , which was 15.3 % , or 487 bcf , above the corresponding week in 2018. baker hughes rig count the baker hughes rig counts are an important business barometer for the drilling industry and its suppliers . when drilling rigs are active they consume products and services produced by the oil service industry . rig count trends are driven by the exploration and development spending by oil and natural gas companies , which in turn is influenced by current and future price expectations for oil and natural gas . the counts may reflect the relative strength and stability of energy prices and overall market activity , however , these counts should not be solely relied on as other specific and pervasive conditions may exist that affect overall energy prices and market activity . we have been providing rig counts to the public since 1944. we gather all relevant data through our field service personnel , who obtain the necessary data from routine visits to the various rigs , customers , contractors and bhge llc 2019 form 10-k | 24 other outside sources as necessary . we base the classification of a well as either oil or natural gas primarily upon filings made by operators in the relevant jurisdiction . this data is then compiled and distributed to various wire services and trade associations and is published on our website . we believe the counting process and resulting data is reliable , however , it is subject to our ability to obtain accurate and timely information . rig counts are compiled weekly for the u.s. and canada and monthly for all international rigs . published international rig counts do not include rigs drilling in certain locations , such as russia , the caspian region and onshore china because this information is not readily available . beginning in the second quarter of 2019 , ukraine was added to the baker hughes international rig count . the company will continue tracking active drilling rigs in the country going forward . historical periods will not be updated . rigs in the u.s. and canada are counted as active if , on the day the count is taken , the well being drilled has been started but drilling has not been completed and the well is anticipated to be of sufficient depth to be a potential consumer of our drill bits . in international areas , rigs are counted on a weekly basis and deemed active if drilling activities occurred during the majority of the week . the weekly results are then averaged for the month and published accordingly . the rig count does not include rigs that are in transit from one location to another , rigging up , being used in non-drilling activities including production testing , completion and workover , and are not expected to be significant consumers of drill bits . the rig counts are summarized in the table below as averages for each of the periods indicated . replace_table_token_3_th 2019 compared to 2018 overall the rig count was 2,174 in 2019 , a decrease of 2 % as compared to 2018 due primarily to north american activity . the rig count in north america decreased 12 % in 2019 compared to 2018 , as a result of lower commodity prices and exploration and production capital expenditure reductions . internationally , the rig count increased 11 % in 2019 as compared to the same period last year . excluding ukraine , the international rig count was up 6 % when compared to the same period last year . within north america , the decrease was primarily driven by the canadian rig count , which was down 30 % on average when compared to the same period last year , and a decrease in the u.s. rig count , which was down 9 % on average . internationally , the improvement in the rig count was driven primarily by increases in the europe region of 72 % , primarily related to the addition of ukraine during the second quarter of 2019. excluding ukraine , the rig count in the europe region was up 15 % . the africa region and middle east region , were also up by 19 % and 5 % , respectively . results of operations the discussions below relating to significant line items from our consolidated and combined statements of income ( loss ) are based on available information and represent our analysis of significant changes or events that impact the comparability of reported amounts . where appropriate , we have identified specific events and changes that affect comparability or trends and , where reasonably practicable , have quantified the impact of such items . in addition , the discussions below for revenue and cost of revenue are on a total basis as the business drivers for product sales and services are similar . all dollar amounts in tabulations in this section are in millions of dollars , unless otherwise stated . certain columns and rows may not add due to the use of rounded numbers . bhge llc 2019 form 10-k | 25 our results of operations are evaluated by the chief executive officer on a consolidated basis as well as at the segment level . the performance of our operating segments is evaluated based on segment operating income ( loss ) , which is defined as income ( loss ) before income taxes and equity in loss of affiliate and before the following : net interest expense , net other non operating income , corporate expenses , restructuring , impairment and other charges , inventory impairment , separation and merger related costs , and certain gains and losses not allocated to the operating segments . story_separator_special_tag in evaluating the segment performance , the company uses the following : volume : volume is the increase or decrease in products and or services sold period-over-period excluding the impact of foreign exchange and price . the volume impact on profit is calculated by multiplying the prior period profit rate by the change in revenue volume between the current and prior period . it also includes price , defined as the change in sales price for a comparable product or service period-over-period and is calculated as the period-over-period change in sales prices of comparable products and services . foreign exchange ( fx ) : fx measures the translational foreign exchange impact , or the translation impact of the period-over-period change on sales and costs directly attributable to change in the foreign exchange rate compared to the u.s. dollar . fx impact is calculated by multiplying the functional currency amounts ( revenue or profit ) with the period-over-period fx rate variance , using the average exchange rate for the respective period . ( inflation ) /deflation : ( inflation ) /deflation is defined as the increase or decrease in direct and indirect costs of the same type for an equal amount of volume . it is calculated as the year-over-year change in cost ( i.e . price paid ) of direct material , compensation & benefits and overhead costs . productivity : productivity is measured by the remaining variance in profit , after adjusting for the period-over-period impact of volume & price , foreign exchange and ( inflation ) /deflation as defined above . improved or lower period-over-period cost productivity is the result of cost efficiencies or inefficiencies , such as cost decreasing or increasing more than volume , or cost increasing or decreasing less than volume , or changes in sales mix among segments . this also includes the period-over-period variance of transactional foreign exchange , aside from those foreign currency devaluations that are reported separately for business evaluation purposes . orders and remaining performance obligations our statement of income ( loss ) displays sales and costs of sales in accordance with sec regulations under which “ goods ” is required to include all sales of tangible products and “ services ” must include all other sales , including other services activities . for the amounts shown below , we distinguish between “ equipment ” and “ product services , ” where product services refers to sales under product services agreements , including sales of both goods ( such as spare parts and equipment upgrades ) and related services ( such as monitoring , maintenance and repairs ) , which is an important part of our operations . we refer to “ product services ” simply as “ services ” within management 's discussion and analysis of financial condition and results of operations . orders : we recognized orders of $ 26,973 million and $ 23,904 million in 2019 and 2018 , respectively . in 2019 , equipment orders were up 26 % and service orders were up 3 % , compared to 2018 . remaining performance obligations ( rpo ) : as of december 31 , 2019 and 2018 , the aggregate amount of the transaction price allocated to the unsatisfied ( or partially unsatisfied ) performance obligations was $ 22.9 billion and $ 21.0 billion , respectively . bhge llc 2019 form 10-k | 26 revenue and segment operating income before tax revenue and segment operating income for each of our four operating segments is provided below . replace_table_token_4_th replace_table_token_5_th ( 1 ) inventory impairments and related charges are reported in the `` cost of goods sold '' caption of the consolidated and combined statements of income ( loss ) . fiscal year 2019 to fiscal year 2018 revenue in 2019 was $ 23,838 million , an increase of $ 961 million , or 4 % , from 2018 . this increase in revenue was largely a result of increased activity in ofs and ofe partially offset by declines in tps and ds . ofs increased $ 1,272 million , ofe increased $ 280 million , tps decreased $ 479 million and ds decreased $ 112 million . total segment operating income in 2019 was $ 2,035 million , an increase of $ 239 million , or 13 % , from 2018 . the increase was primarily driven by ofs , which increased $ 132 million , ofe , which increased $ 55 million and tps , which increased $ 98 million , partially offset by ds , which decreased $ 47 million . oilfield services ofs 2019 revenue was $ 12,889 million , an increase of $ 1,272 million from 2018 , primarily as a result of increased international activity in 2019 compared to 2018. international revenue was $ 8,293 million in 2019 , an increase of $ 1,386 million from 2018 , with faster growth than the international rig count driven by activity in the bhge llc 2019 form 10-k | 27 middle east , asia pacific , and latin america . north america revenue was $ 4,596 million in 2019 , a decrease of $ 114 million from 2018 driven by declining rig counts in north america . ofs 2019 segment operating income was $ 917 million , compared to $ 785 million in 2018 . the increase was primarily driven by higher volume and increased cost productivity . oilfield equipment ofe 2019 revenue was $ 2,921 million , an increase of $ 280 million , or 11 % , from 2018 . the increase was primarily driven by higher volume in the subsea production systems business and subsea services business . these increases were partially offset by lower volume in the flexible pipe business . ofe 2019 segment operating income was $ 55 million , compared to breakeven in 2018 . the increase was primarily driven by higher volume and increased cost productivity . turbomachinery & process solutions tps 2019 revenue was $ 5,536 million , a decrease of $ 479 million , or 8 % , from 2018 .
| in june 2018 , ge announced their intention to pursue an orderly separation from baker hughes over time . in the fourth quarter of 2018 , we entered into a master agreement framework which includes a series of related ancillary agreements and binding term sheets ( which were later negotiated into definitive agreements ) designed to further solidify the commercial and technological collaboration between us and ge . the master agreement framework focuses on areas where we work most closely with ge on developing leading technology and executing for customers . first , we defined the parameters for long-term collaboration and partnership with ge on critical rotating equipment technology . second , for our digital software and technology business we agreed to maintain the status quo as the exclusive supplier of ge digital oil and-gas applications , although this commercial arrangement was modified pursuant to the omnibus agreement , discussed below , including by rendering the relationship with ge digital to be nonexclusive with respect to digital offerings in the oil and gas space . finally , we reached agreements on a number of other areas including our controls business , pension , taxes , and intercompany services . all agreements within the master agreement framework were finalized by the first quarter of 2019. on july 31 , 2019 , we also entered into an omnibus agreement , a general framework agreement that addresses certain outstanding matters under existing long-term commercial agreements between us and ge . the omnibus agreement contains provisions regarding , among other things , ( i ) the repayment of certain outstanding amounts mutually owed by the parties , ( ii ) certain employee and assets transfers ( including the allocation of costs and expenses associated therewith ) , and ( iii ) certain matters related to three international joint ventures . modifications to the commercial arrangements between us and ge included , among other things , modification of the relationship between bhge llc and ge digital to be nonexclusive with respect to digital offerings in the oil and gas space . for
| 14,372 |
for arrangements with multiple performance obligations , the company allocates revenue to each performance obligation based on its relative standalone selling price . the company generally determines standalone selling prices based on the prices charged to customers when each of the products and services are sold separately . if the standalone selling price of a product or service is not observable through past transactions , the company estimates the standalone selling price taking into account available information such as market conditions and internally approved pricing guidelines related to the performance obligations . the company 's hardware is generally highly dependent on , and interrelated with , the underlying software and the software is considered essential to the functionality of the product . in these cases , the hardware and software license are accounted for as a single performance obligation and revenue is recognized at the point in time when ownership is transferred to the customer . components of certain fixed fee service contracts are accounted for as a lease in accordance with asc 840 , leases ( asc 840 ) . taxes assessed by a governmental authority that are both imposed on and concurrent with a specific revenue-producing transaction , that are collected by the company from a customer , are excluded from revenue . shipping and handling costs associated with outbound freight after control of a product has transferred to a customer are accounted for as fulfillment costs and are included in cost of revenue . 53 the company also recognizes an asset for the incremental costs of obtaining a contract with a customer if we expect the benefit of those costs to be longer than one year , in accordance with asc topic 340-40 , other assets and deferred costs : contracts with customers. the company has determined that certain commissions programs meet the requirements to be capitalized . revenue recognition prior to the adoption of asc 606 prior to the adoption of topic 606 , revenue was recognized when delivery occurred , persuasive evidence of an arrangement existed , fees were fixed or determinable and collectability of the related receivable was probable , in accordance with topic 605. for product revenue , delivery was considered to occur upon shipment provided title and risk of loss had passed to the customer . services and supplies revenue was considered to be delivered as the services were performed or over the estimated life of the supply agreement . the company recognized revenue from the sale of its digital , film-based cad and cancer therapy products and services in accordance with asc update no . 2009-13 , multiple-deliverable revenue arrangements ( asu 2009-13 ) , asc update no . 2009-14 , certain arrangements that contain software elements ( asu 2009-14 ) and asc 985-605 , software ( asc 985-605 ) . revenue from the sale of certain cad products was recognized in accordance with asc 840 leases ( asc 840 ) . for multiple element arrangements , revenue was allocated to all deliverables based on their relative selling prices . in such circumstances , a hierarchy was used to determine the selling price to be used for allocating revenue to deliverables as follows : ( i ) vendor-specific objective evidence of fair value ( vsoe ) , ( ii ) third-party evidence of selling price ( tpe ) and ( iii ) best estimate of the selling price ( besp ) . vsoe generally existed only when the deliverable was sold separately and was the price actually charged for that deliverable . the process for determining besp for deliverables without vsoe or tpe considered multiple factors depending upon the unique facts and circumstances related to each deliverable including relative selling prices , competitive prices in the marketplace and management judgment . the company uses customer purchase orders that are subject to the company 's terms and conditions or , in the case of an original equipment manufacturer ( oem ) are governed by distribution agreements . in accordance with the company 's distribution agreements , the oem does not have a right of return , and title and risk of loss passes to the oem upon shipment . the company generally ships free on board shipping point and uses shipping documents and third-party proof of delivery to verify delivery and transfer of title . in addition , the company assessed whether collection was probable by considering a number of factors , including past transaction history with the customer and the creditworthiness of the customer , as obtained from third party credit references . if the terms of the sale included customer acceptance provisions and compliance with those provisions could not be demonstrated , all revenue was deferred and not recognized until such acceptance occurred . the company considered all relevant facts and circumstances in determining when to recognize revenue , including contractual obligations to the customer , the customer 's post-delivery acceptance provisions , if any , and the installation process . 54 the company had determined that icad 's digital and film based sales generally follow the guidance of fasb asc topic 605 revenue recognition ( asc 605 ) as the software has been considered essential to the functionality of the product per the guidance of asu 2009-14. typically , the responsibility for the installation process lies with the oem partner . on occasion , when icad is responsible for product installation , the installation element was considered a separate unit of accounting because the delivered product has stand-alone value to the customer . revenue from certain cad products was recognized in accordance with asc 985-605. sales of this product includes training , and the company had established vsoe for this element . product revenue was determined based on the residual value in the arrangement and was recognized when delivered . revenue for training was deferred and recognized when the training had been completed . sales of the company 's therapy segment products typically include a controller , accessories , source agreements and services . story_separator_special_tag the company allocated revenue to the deliverables in the arrangement based on the besp in accordance with asu 2009-13. product revenue was generally recognized when the product had been delivered and service and source revenue was typically recognized over the life of the service and source agreements . the company includes the following in service and supplies revenue : the sale of physics and management services , the lease of electronic brachytherapy equipment , development fees , supplies and the right to use the company 's axxenthub software . physics and management services revenue and development fees were considered to be delivered as the services are performed or over the estimated life of the agreement . the company typically bills items monthly over the life of the agreement except for development fees , which are generally billed in advance or over a 12 month period and the fee for treatment supplies which is generally billed in advance . the company deferred revenue from the sale of certain service contracts and recognized the related revenue on a straight-line basis in accordance with asc topic 605-20 , services . the company provided for estimated warranty costs on original product warranties at the time of sale . see note 1 for details of the company 's adoption of topic 606 and accounting policies related to revenue recognition . allowance for doubtful accounts the company 's policy is to maintain allowances for estimated losses from the inability of its customers to make required payments . credit limits are established through a process of reviewing the financial results , stability and payment history of each customer . where appropriate , the company obtains credit rating reports and financial statements of customers when determining or modifying credit limits . the company 's senior management reviews accounts receivable on a periodic basis to determine if any receivables may potentially be uncollectible . the company includes any accounts receivable balances that it determines may likely be uncollectible , along with a general reserve for estimated probable losses based on historical experience , in its overall allowance for doubtful accounts . an amount would be written off against the allowance after all attempts to collect the receivable had failed . based on the information available to the company , it believes the allowance for doubtful accounts as of december 31 , 2018 is adequate . 55 inventory inventory is valued at the lower of cost or net realizable value , with cost determined by the first-in , first-out method . the company regularly reviews inventory quantities on hand and records a provision for excess and or obsolete inventory primarily based upon historical usage of its inventory as well as other factors . goodwill in accordance with fasb asc topic 350-20 , intangiblesgoodwill and other , ( asc 350-20 ) , the company tests goodwill for impairment on an annual basis and between annual tests if events and circumstances indicate it is more likely than not that the fair value of the company is less than the carrying value of the company . factors the company considers important , which could trigger an impairment of such asset , include the following : significant underperformance relative to historical or projected future operating results ; significant changes in the manner or use of the assets or the strategy for the company 's overall business ; significant negative industry or economic trends ; significant decline in the company 's stock price for a sustained period ; and a decline in the company 's market capitalization below net book value . the company 's chief operating decision maker ( codm ) is the chief executive officer ( ceo ) . the company determined that it has two reporting units and two reportable segments based on the information that is provided to the codm . the two segments and reporting units are cancer detection ( detection ) and cancer therapy ( therapy ) . each reportable segment generates revenue from the sale of medical equipment and related services and or sale of supplies . upon initial adoption , goodwill was allocated to the reporting units based on the relative fair value of the reporting units . the company records an impairment charge if such an assessment were to indicate that the fair value of a reporting unit was less than the carrying value . when the company evaluates potential impairments outside of its annual measurement date , judgment is required in determining whether an event has occurred that may impair the value of goodwill or intangible assets . the company utilizes either discounted cash flow models or other valuation models , such as comparative transactions and market multiples , to determine the fair value of its reporting units . the company makes assumptions about future cash flows , future operating plans , discount rates , comparable companies , market multiples , purchase price premiums and other factors in those models . different assumptions and judgment determinations could yield different conclusions that would result in an impairment charge to income in the period that such change or determination was made . 56 the company determines the fair value of reporting units based on the present value of estimated future cash flows , discounted at an appropriate risk adjusted rate . this approach was selected as it measures the income producing assets , primarily technology and customer relationships . this method estimates the fair value based upon the ability to generate future cash flows , which is particularly applicable when future profit margins and growth are expected to vary significantly from historical operating results . fair values for the reporting units are based on a weighting of the income approach and the market approach . for purposes of the income approach , fair value is determined based on the present value of estimated future cash flows , discounted at an appropriate risk adjusted rate . the company uses internal forecasts to estimate future cash flows and includes estimates of long-term future growth rates based on our most recent views of the long-term forecast for each segment .
| the company will continue to offer its capital sales model for both skin cancer treatment and iort , which provides a brachytherapy system and related source and service agreements . the discontinuance of the subscription service model reduced radiation therapy professional services delivery costs , decreased our cash burn , and re-focused the company on the higher margin capital product and service offerings . based on the decision to discontinue offering radiation therapy professional services within the cancer therapy segment , the company revised its forecasts related to the therapy segment , which we deemed to be a triggering event . as a result , the company recorded a goodwill and long-lived asset impairment charge of approximately $ 2.0 million for the period ended december 31 , 2017 ( see note h and note i to the consolidated financial statements for additional discussion ) . in connection with the preparation of the financial statements for the third quarter ended september 30 , 2017 , the company evaluated the therapy reporting unit for both long-lived asset and goodwill impairment . as a result of this assessment , the company recorded a material impairment charge in the therapy reporting unit ( see note h and note i to the consolidated financial statements for additional discussion ) . 50 on january 30 , 2017 , the company completed the sale of certain intellectual property relating to the versavue software and the dynacad product and related assets to invivo for $ 3,200,000 in cash with a holdback amount of $ 350,000. the company is currently involved in litigation with a third-party relating to this transaction , as further described in item 3legal proceedings. the company 's headquarters are located in nashua , new hampshire , with manufacturing facilities in nashua , new hampshire and , an operations , research , development , manufacturing and warehousing facility in san jose , california . critical accounting policies the company 's discussion and analysis of its financial condition , results of operations , and cash flows are based on its consolidated financial statements , which have been prepared in accordance with accounting principles generally accepted
| 14,373 |
all of our 31 season pass products , including the epic season pass , are sold predominately prior to the start of the ski season . season pass revenue , although primarily collected prior to the ski season , is recognized in the consolidated statement of operations ratably over the ski season . for the 2010/2011 , 2009/2010 and 2008/2009 ski seasons approximately 35 % , 35 % and 34 % , respectively , of total lift revenue recognized was comprised of season pass revenue . the cost structure of our ski resort operations has a significant fixed component with variable expenses including , but not limited to , forest service fees , credit card fees , retail/rental cost of sales and labor , ski school labor and dining operations ; as such , profit margins can fluctuate greatly based on the level of revenues . lodging segment operations within the lodging segment include ( i ) ownership/management of a group of luxury hotels through the rockresorts brand , including several proximate to our ski resorts ; ( ii ) ownership/management of non-rockresorts branded hotels and condominiums proximate to our ski resorts ; ( iii ) gtlc ; ( iv ) cme , a resort ground transportation company ; and ( v ) golf courses . the performance of lodging properties ( including managed condominium rooms ) at or around our ski resorts , and cme , is closely aligned with the performance of the mountain segment and generally experiences similar seasonal trends , particularly with respect to visitation by destination guests , and represented approximately 69 % , 67 % and 68 % of lodging segment revenue ( excluding lodging segment revenue associated with reimbursement of payroll costs ) for fiscal 2011 , fiscal 2010 and fiscal 2009 , respectively . management primarily focuses on lodging net revenue excluding payroll cost reimbursement and lodging operating expense excluding reimbursed payroll costs ( which are not measures of financial performance under gaap ) as the reimbursements are made based upon the costs incurred with no added margin , as such the revenue and corresponding expense have no effect on our lodging reported ebitda which we use to evaluate lodging segment performance . revenue of the lodging segment during our first and fourth fiscal quarters is generated primarily by the operations of gtlc ( as gtlc 's operating season generally occurs from mid-may to mid-october ) , golf operations and seasonally low operations from our other owned and managed properties and businesses . real estate segment the real estate segment owns and develops real estate in and around our resort communities and primarily engages in vertical development of projects . currently , the principal activities of our real estate segment include the marketing and selling of remaining condominium units that are available for sale , planning for future real estate development projects , including zoning and acquisition of applicable permits , and the purchase of selected strategic land parcels for future development . revenue from vertical development projects is not recognized until closing of individual units within a project , which occurs after substantial completion of the project . we attempt to mitigate the risk of vertical development by often utilizing guaranteed maximum price construction contracts ( although certain construction costs may not be covered by contractual limitations ) , pre-selling a portion of the project , requiring significant non-refundable deposits , and potentially obtaining non-recourse financing for certain projects ( although our last two major vertical development projects have not incurred any such direct third party financing ) . additionally , our real estate development projects most often result in the creation of certain resort assets that provide additional benefit to the mountain and lodging segments . our revenue from the real estate segment , and associated expense , can fluctuate significantly based upon the timing of closings and the type of real estate being sold , causing volatility in the real estate segment 's operating results from period to period . recent trends , risks and uncertainties the data provided in this section should be read in conjunction with the risk factors identified in item 1a and elsewhere in this form 10-k. we have identified the following important factors ( as well as uncertainties associated with such factors ) that could impact our future financial performance : although we experienced improved operating results for fiscal 2011 compared to fiscal 2010 and 2009 in our mountain and lodging segments in part due to increased pricing and increased visitation for the 2010/2011 ski season , as well as an increase in overall guest spend on ancillary services , uncertainties still exist around the current general economic environment . conditions currently present or recently present in the economic environment including high unemployment , relatively low consumer confidence , financial instability in the global markets , including any impact from the downgrade of credit ratings assigned to obligations of the united states , and weakness in the overall real estate market could potentially have negative effects on the travel and leisure industry . given the current uncertainties around global economic trends , we can not predict what impact this will have on overall travel and leisure or more specifically , on our guest visitation , guest spending or other related trends for the upcoming 2011/2012 ski season . during the most recent recession , our 2008/2009 ski season was impacted by lower visitation , reduced guest spend on ancillary services and closer in booking trends for guest reservations . 32 the timing and amount of snowfall can have an impact on mountain and lodging revenue particularly in regards to skier visits and the duration and frequency of guest visitation . to help mitigate this impact , we sell a variety of season pass products prior to the beginning of the season to in-state guests and destination guests . additionally , we have invested in snowmaking upgrades in an effort to address the inconsistency of early season snowfall where possible . story_separator_special_tag for the 2010/2011 ski season we experienced significantly above average early season snowfall compared to significantly below average early season snowfall for the previous two ski seasons , which we believe had a positive impact on early season visitation . our season pass products provide a value option to our guests which in turn creates a guest commitment predominantly prior to the start of the ski season , resulting in a more stabilized stream of lift revenue for us . in march 2011 , we began our pre-season pass sales program for the 2011/2012 ski season . through september 20 , 2011 our season pass sales for the 2011/2012 ski season were up approximately 9 % in sales dollars and 1 % in units as compared to season pass sales through the similar period of the 2010/2011 ski season , including northstar-at-tahoe season pass sales for both periods . we can not predict if this trend will continue through the fall 2011 season pass sales campaign or the impact that season pass sales may have on total lift revenue or etp for the 2011/2012 ski season . in fiscal 2011 , our lift ticket revenue was favorably impacted by price increases that were implemented during the 2010/2011 ski season . prices for the 2011/2012 ski season have not yet been finalized ; and as such , there can be no assurances as to the level of price increases , if any , which will occur and the impact that pricing may have on visitation or revenue . real estate reported ebitda is highly dependent on , among other things , the timing of closings on real estate held for sale , which determines when revenue and associated cost of sales is recognized . changes to the anticipated timing or mix of closing on one or more real estate projects , or unit closings within a real estate project , could materially impact real estate reported ebitda for a particular quarter or fiscal year . during the first quarter of fiscal 2011 , we received a certificate of occupancy for the ritz-carlton residences , vail and we have closed on 71 units in fiscal 2011 ( with two additional units having closed subsequent to july 31 , 2011 ) . additionally , we have closed on four units at one ski hill place ( which was completed in the fourth quarter of fiscal 2010 ) in fiscal 2011 ( 40 units closed in total including 36 units that closed in fiscal 2010 ) . we currently have on a combined basis 92 units available for sale at the ritz-carlton residences , vail , one ski hill place in breckenridge and crystal peak lodge at breckenridge . we have increased risk associated with selling and closing units in these projects as a result of the continued instability in the credit markets and a slowdown in the overall real estate market . buyers have been or may be unable to close on units in part due to a reduction in funds available to buyers and or decreases in mortgage availability . we can not predict the ultimate number of units that we will sell , the ultimate price we will receive , or when the units will sell , although we currently believe the selling process will take multiple years . additionally , if a prolonged weakness in the real estate market or general economic conditions were to occur we may have to adjust our anticipated selling prices in an effort to sell and close on units available for sale . however , our risk associated with adjusting selling prices to levels that may not be acceptable to us is partially mitigated by the fact that do generate cash flow from placing unsold units into our rental program until such time selling prices are at acceptable levels to us . furthermore , if the current weakness in the real estate market were to persist for multiple years thus requiring us to sell remaining units below recent pricing levels ( including any sales concessions and discounts ) for the remaining inventory of units at the ritz-carlton residences , vail or one ski hill place in breckenridge , it may result in an impairment charge on one or both projects ( see critical accounting policies in this section of this form 10-k ) . we had $ 70.1 million in cash and cash equivalents as of july 31 , 2011 as well as $ 332.9 million available under the revolver component of our credit agreement ( which represents the total commitment of $ 400.0 million less certain letters of credit outstanding of $ 67.1 million ) , which was amended and restated on january 25 , 2011. key modifications to the credit agreement included , among other things , the extension of the maturity on the revolving credit agreement from february 2012 to january 2016 ; the expansion of baskets for improved flexibility in our ability to incur debt and make acquisitions , investments and distributions ; and the elimination of certain financial covenants . in addition , on april 25 , 2011 , we completed an offering for $ 390 million of 6.50 % senior subordinated notes due 2019 ( the 6.50 % notes ) , the proceeds of which , along with available cash resources , were used to purchase the outstanding $ 390 million principal amount of 6.75 % senior subordinated notes due 2014 ( the 6.75 % notes ) and pay related premiums , fees and expenses . the 6.50 % notes have a fixed annual interest rate of 6.50 % and will mature may 1 , 2019 with no principal payments due until maturity . additionally , we believe the 6.50 % notes will allow for substantially increased flexibility in our ability to make acquisitions , investments and distributions and incur debt .
| total skier visitation was up 16.3 % and excluding northstar-at-tahoe , skier visitation was up 4.1 % , which significantly exceeded skier visitation growth for the u.s. ski industry as a whole , which was up 0.6 % , and visitation for all resorts in the rocky mountain and pacific southwest regions , which were up 1.7 % and down 7.1 % , respectively , despite all regions in the u.s. generally having strong snowfall in the current year , including at our resorts . vail mountain and keystone in particular showed large increases in visitation in fiscal 2011 , vail mountain benefiting from recent capital investments made both on vail mountain and in base areas , including an improved lodging bed base , and keystone benefiting from a broadened family focused marketing initiative . all resorts were unfavorably impacted by the timing of the easter holiday which was in late april in the current fiscal year , versus early april in the prior fiscal year . in addition , our heavenly resort was impacted by higher than average resort closures due to severe weather in the current fiscal year . etp , excluding season pass holders and northstar-at-tahoe , increased $ 5.31 , or 8.3 % , due primarily to price increases implemented during the current fiscal year . total etp , excluding northstar-at-tahoe , increased $ 1.70 , or 3.5 % , also due primarily to price increases implemented during the current fiscal year , partially offset by higher average visitation by our season pass holders in the current fiscal year . ski school revenue increased $ 13.1 million , or 18.6 % , in fiscal 2011 compared to fiscal 2010 with the current year benefiting from the acquisition of northstar-at-tahoe . excluding northstar-at-tahoe , ski school revenue increased $ 5.5 million , or 7.8 % , which benefited from a 4.1 % increase in skier visitation and a 3.6 % increase in yield per skier visit due to higher guest spend . dining revenue increased $ 14.7 million , or 27.6 % , which also benefited from the acquisition of northstar-at-tahoe in fiscal 2011. excluding northstar-at-tahoe , dining revenues increased $ 6.1 million , or 11.5 % , which is primarily attributable to the increased skier visitation and a 5.8 % increase in yield per skier visit for on-mountain dining , as well as the addition of two new on-mountain dining venues . the increases in both ski school and dining revenue were achieved despite the negative
| 14,374 |
the company also reclassified the related assets and liabilities as current and non-current assets and liabilities of discontinued operations on the accompanying consolidated balance sheets as of december 31 , 2016 and december 26 , 2015. cash flows from the company 's discontinued operations are presented in the consolidated statements of cash flows for all periods presented . refer to note 3 . discontinued operations , in notes to the consolidated financial statements for additional information . merger on november 5 , 2013 , the company finalized its merger with officemax . through the end of 2016 , substantial progress has been made on merger integration activity . during 2016 , we completed the store closure program announced under the real estate strategy ; store closures under this program were 51 , 181 , and 168 in 2016 , 2015 and 2014 , respectively . through the end of 2016 , we have closed 14 distribution centers and cross dock facilities . supply chain integration is expected to be complete before the end of 2017. since the merger date , all retail stores have been converted to common point of sale systems , we successfully launched the co-branded public website ( www.officedepot.com ) , combined operating support functions , transitioned certain contract customers from the officemax to the office depot platform , and made significant progress on identifying customer preferences and developing methods to service their needs . the north american business solutions customer migrations follow completion of the supply chain integration and are anticipated to be substantially complete by the end of 2017 , with some activity in 2018. we estimate we have achieved over $ 700 million in annual run rate synergy benefits from the officemax integration through the end of 2016 . 28 continuing operations a summary of certain factors impacting operating results from continuing operations for the 53-week period ended december 31 , 2016 ( also referred to as 2016 ) and the 52-week period ended december 26 , 2015 ( also referred to as 2015 ) is provided below . sales reported for 2016 compared to the prior year were significantly affected by the retail store closures in the north american retail division and the prolonged staples acquisition attempt in the contract channel of the north american business solutions division . the 53 rd week in 2016 increased total company sales by approximately $ 143 million and increased operating income by approximately $ 15 million . replace_table_token_7_th other significant factors impacting total company results and liquidity gross margin increased 16 basis points in 2016 compared to 2015 , with increases in both the north american retail division and the north american business solution division . total company selling , general and administrative expenses decreased in 2016 compared to 2015 , reflecting the closure of stores in north america , lower payroll and advertising expenses , operational efficiencies and synergies . as a percentage of sales , total selling , general and administrative expenses decreased in 2016 compared to 2015 by 34 basis points . merger , restructuring and other operating ( income ) expense , net in 2016 , amounted to income of $ ( 80 ) million compared to expenses of $ 242 million in 2015. in 2016 , this line item includes $ 64 million of expenses related to merger activities , a net credit of $ ( 192 ) million related to the staples acquisition , reflecting the $ 250 million termination fee payment received from staples , and $ 48 million of expenses associated with the comprehensive business review that was initiated in august 2016. additional integration and restructuring expenses are expected to be incurred through 2017. refer to note 2 . merger , acquisition termination , and restructuring activity in the notes to the consolidated financial statements for additional information . the effective tax rate for 2016 was ( 48 ) % , primarily impacted by the reversal of a substantial portion of our u.s. federal and state valuation allowance as we concluded that it was more likely than not that a benefit from the related deferred tax assets would be realizable . this conclusion was based on a detailed evaluation of all available positive and negative evidence , and the weight of such evidence , the current financial position and results of operations for the current and preceding years , and the expectation of continued earnings . we determined that approximately $ 382 million of our u.s. federal and state valuation allowance should be reversed in 2016. diluted earnings per share from continuing operations was $ 1.24 in 2016 compared to $ 0.16 in 2015. diluted earnings per share from discontinued operations was a loss of $ 0.27 in 2016 compared to a loss of $ 0.15 in 2015. net diluted earnings per share was $ 0.96 in 2016 compared to $ 0.01 in 2015 . 29 at december 31 , 2016 , we had $ 763 million in cash and cash equivalents and $ 1.0 billion available under the amended credit agreement . cash provided by operating activities of continuing operations was $ 492 million for 2016 compared to $ 138 million for 2015. during 2016 , we paid a cash dividend on our common stock of $ 0.025 per share in both the third and fourth quarters of 2016 , resulting in an aggregate cash payment during 2016 of $ 26 million . during 2016 , we redeemed the $ 250 million , 9.75 % senior secured notes due 2019 at a price equal to 104.875 % of the principal amount for a total consideration of $ 262 million plus accrued interest of $ 12 million . the premium paid , along with the expensing of remaining unamortized issue costs , resulted in a $ 15 million loss on extinguishment of debt . during 2016 , we purchased 37 million shares of office depot common stock under our share repurchase program , resulting in returning $ 132 million to shareholders . fiscal year 2016 is a 53-week year under our retail calendar . story_separator_special_tag our fourth quarter included 14 weeks and ended on december 31 , 2016. story_separator_special_tag prolonged staples acquisition attempt , as well as competitive pressures in certain supplies and technology categories . changes to the sales model and future product offerings expansion are aimed at reducing the rate of sales decline , but the impact of the staples acquisition attempt disruption will continue to affect prior year comparisons until lost accounts are replaced . additionally , new customers typically require an integration period before reaching their buying potential and having a positive impact on sales trends . in the direct channel , the ongoing reduction in catalog and call center sales contributed to the division 's overall decline . also , the decommissioning of legacy officemax e-commerce sites contributed to the direct channel decline but had a positive impact on overall operating income . sales placed online but picked up in stores continued to increase in 2016 and are reported as sales in the north american retail division . on a product category basis for the north american business solutions division , sales increased in cleaning/breakroom , were essentially flat in copy and print , and decreased in furniture and across the other primary product categories . sales of paper , toner , and ink continued to trend lower over the three years . sales in 2014 increased in the contract and direct channels and were primarily due to the addition of officemax sales . direct channel sales also increased during 2014 , reflecting efforts to enhance the internet shopping offering and experience . the increased online sales were partially offset by reduced call center sales . sales in the merged business in canada declined in the second half of 2014 compared to the first half of 2014 , in part reflecting the closing of grand & toy retail stores during the second quarter of 2014. division operating income was $ 265 million in 2016 , $ 226 million in 2015 , and $ 232 million in 2014. division operating income as a percentage of sales was 5 % in 2016 and 4 % in 2015 and 2014. the increase in operating income was primarily the result of lower selling , general and administrative expenses , including payroll and integration synergy benefits , which , together with an increased gross margin rate , more than offset the negative flow through impact of the decline in sales . the 53 rd week also positively impacted division results by approximately $ 4 million . in 2014 , the company closed 19 grand & toy stores in canada that were added as part of the merger . these locations primarily serviced small business customers and , accordingly , were included in results of the north america business solutions division . other replace_table_token_11_th 32 global sourcing operations of the asia/pacific region did not meet the held for sale criteria at december 31 , 2016 , and are presented as continuing operations . the operations primarily relate to the sale of products to former joint venture partners . intercompany transactions are eliminated . the future prospects and reporting of this business are being evaluated . corporate the line items in our consolidated statements of operations impacted by these corporate activities are presented in the table below , followed by a narrative discussion of the significant matters . these activities are managed at the corporate level and , accordingly , are not included in the determination of division income for management reporting or external disclosures . replace_table_token_12_th in addition to these charges and credits , certain selling , general and administrative expenses are not allocated to the divisions and are managed at the corporate level . those expenses are addressed in the section unallocated costs below . asset impairments , merger , restructuring , other charges and credits in recent years , we have taken actions to adapt to changing and competitive conditions . these actions include closing stores and distribution centers , consolidating functional activities , eliminating redundant positions , disposing of businesses and assets , and taking actions to improve process efficiencies . these actions have resulted in significant charges associated with the merger , real estate strategy , the staples acquisition and the comprehensive business review . certain of these activities are expected to continue in future periods and result in additional charges . asset impairments asset impairment charges are comprised of following : replace_table_token_13_th north america stores the impairment of store assets reflects the impact of shortening the anticipated use periods of certain retail store locations in accordance with the comprehensive business review , as well as lower anticipated cash flows , primarily from lower future sales projections . as a result of declining sales in recent periods and adoption of our real estate strategy in 2014 and the comprehensive business review in 2016 , the company has regularly conducted a detailed store impairment analysis . the analysis includes estimates of store-level sales , gross margins , direct expenses , exercise of future 33 lease renewal options where applicable , and resulting cash flows and , by their nature , include judgments about how current initiatives will impact future performance . if the anticipated cash flows of a store can not support the carrying value of its assets , the assets are impaired and written down to estimated fair value . the projections prepared for the 2016 analysis assumed declining sales over the forecast period . gross margin and operating cost assumptions have been held at levels consistent with recent actual results and planned activities . estimated cash flows were discounted at 13 % in 2016 , 12 % in 2015 and 13 % in 2014. the impairment charges include amounts to bring the location 's assets to estimated fair value based on projected operating cash flows or residual value , as appropriate . the company continues to capitalize additions to previously-impaired operating stores and tests for subsequent impairment . the 2014 store impairment charge also includes $ 1 million related to the closure of stores in canada .
| comparable store sales decreased in ink , toner , computers and technology products . sales increased in furniture , copy and print services , 30 and cleaning/breakroom products . the north american retail division continued to benefit from the increasing trend of omni-channel transactions where customers order online for pick up in the stores . the buy online-pickup in store sales increased over 50 % to approximately $ 115 million in 2016 compared to the prior year . during 2016 , the company also began offering buy online-ship from store . these sales are included the north american retail division sales , including our comparable store calculations , as they are fulfilled with store inventory and serviced by retail division employees . we expect these activities and trends to continue in 2017. additionally , comparable store sales calculations continue to be positively affected from customers transferring from closed to nearby stores which remained open , although the impact decreases after the one year anniversary of the store closure . the average sales transfer rate achieved to date under the store closure programs is estimated to be over 30 % . future store closures under the comprehensive business review may have lower sales transfer rates as the distance between stores being closed to stores remaining open increases . comparable store sales in 2015 were flat . as we implemented the real estate strategy , comparable store sales calculations were positively affected from customers transferring from closed to nearby stores which remained open . the 2015 results reflected increases in supplies , furniture , copy and print services , ink and toner and declines in computer and related technology products . in 2015 , transaction counts increased and average order values decreased compared to prior year . the increase in transaction counts resulted from increased traffic in the stores due to sales transfers resulting from store closures and improvements in customer in-store experience . additionally 2015 sales include an increase in online sales picked up by customers in
| 14,375 |
during 2016 , the company purchased the remaining 51 % of invesco asset management ( india ) private limited ( formerly our joint venture , religare invesco asset management company ) , increasing our interest to 100 % , replacing the equity method investment with a fully consolidated subsidiary , and also purchased jemstep . the business optimization savings have helped offset acquisition-related increases in operating expenses . during 2015 , the company acquired deutsche bank 's u.s. commodity u.s. etf business for a purchase price composed of contingent consideration payable in future periods . during 2016 , changes in the fair value of the contingent consideration liability generated a loss of $ 7.4 million , which was recorded in other gains and losses , net . the investment management industry is subject to extensive levels of ongoing regulatory oversight and examination . in the u.s. , u.k. , and other jurisdictions in which the company operates , governmental authorities regularly make inquiries , conduct investigations and administer examinations with respect to compliance with applicable laws and regulations . presentation of management 's discussion and analysis of financial condition and results of operations -- impact of consolidated investment products the company provides investment management services to , and has transactions with , various private equity , real estate , fund-of-funds , collateralized loan obligation products ( clos ) , and other investment entities sponsored by the company for the investment of client assets in the normal course of business . the company serves as the investment manager , making day-to-day investment decisions concerning the assets of the products . the company is required to consolidate certain managed funds from time-to-time , as discussed more fully in item 8 , financial statements and supplementary data , note 1 -- `` accounting policies -- basis of accounting and consolidation . '' investment products that are consolidated are referred to in this report as either consolidated sponsored investment products ( csip ) or consolidated investment products ( cip ) . the majority of the company 's cip balances are clo-related . the collateral assets of the clos are held solely to satisfy the obligations of the clos . the company has no right to the benefits from , nor does it bear the risks associated with , the collateral assets held by the clos , beyond the company 's direct investments in , and management and performance fees generated from , the clos . if the company were to liquidate , the collateral assets would not be available to the general creditors of the company , and as a result , the company does not consider them to be company assets . likewise , the investors in the clos have no recourse to the general credit of the company for the notes issued by the clos . the company therefore does not consider this debt to be a company liability . the impact of cip is so significant to the presentation of the company 's consolidated financial statements that the company has elected to deconsolidate these products in its non-gaap disclosures . this management 's discussion and analysis of financial condition and results of operations contains four distinct sections , which follow after the assets under management discussion : results of operations ( years ended december 31 , 2016 compared to december 31 , 2015 compared to december 31 , 2014 ) ; schedule of non-gaap information ; balance sheet discussion ; and liquidity and capital resources . to assess the impact of cip on the company 's results of operations and balance sheet discussion , refer to part ii , item 8 , financial statements , note 20 , `` consolidated investment products . '' the impact is illustrated by a column which shows the dollar-value change in the consolidated figures caused by the consolidation of cip . for example , the impact of cip on operating revenues for the year ended december 31 , 2016 was a reduction of $ 22.3 million . this indicates that their consolidation reduced consolidated revenues by this amount , reflecting the elimination upon their consolidation of the operating revenues earned by invesco for managing these investment products . wherever a non-gaap measure is referenced , a disclosure will follow in the narrative or in the note referring the reader to the schedule of non-gaap information , where additional details regarding the use of the non-gaap measure by the company are disclosed , along with reconciliations of the most directly comparable u.s. gaap measures to the non-gaap measures . to further 31 enhance the readability of the results of operations section , separate tables for each of the revenue , expense , and other income and expenses ( non-operating income/expense ) sections of the income statement introduce the narrative that follows , providing a section-by-section review of the company 's income statements for the periods presented . summary operating information summary operating information for 2016 , 2015 and 2014 is presented in the table below . replace_table_token_6_th _ ( 1 ) on december 31 , 2013 , the company completed the sale of atlantic trust . the company has adopted a discontinued operations presentation for atlantic trust . amounts for the year ended december 31 , 2014 represent continuing operations and exclude atlantic trust , with the exception of net income attributable to invesco ltd. and diluted earnings per share . ( 2 ) net revenues is a non-gaap financial measure . net revenues are operating revenues plus our proportional share of the net revenues of our joint venture investments , less third-party distribution , service and advisory expenses , plus management and performance fees earned from cip , less other revenue recorded by cip , plus other reconciling items . see `` schedule of non-gaap information '' for the reconciliation of operating revenues to net revenues . ( 3 ) adjusted operating income and adjusted operating margin are non-gaap financial measures . adjusted operating margin is adjusted operating income divided by net revenues . story_separator_special_tag adjusted operating income includes operating income plus our proportional share of the net operating income of our joint venture investments , the operating income impact of the consolidation of investment products , acquisition/disposition related adjustments , compensation expense related to market valuation changes in deferred compensation plans , and other reconciling items . see `` schedule of non-gaap information , '' for the reconciliation of operating income to adjusted operating income . ( 4 ) adjusted net income attributable to invesco ltd. and adjusted diluted eps are non-gaap financial measures . adjusted net income attributable to invesco ltd. is net income attributable to invesco ltd. adjusted to exclude the net income of cip , add back acquisition/disposition related adjustments , the net income impact of deferred compensation plans and other reconciling items . adjustments made to net income attributable to invesco ltd. are tax-effected in arriving at adjusted net income attributable to invesco ltd. by calculation , adjusted diluted eps is adjusted net income attributable to invesco ltd. divided by the weighted average number of shares outstanding ( for diluted eps ) . see `` schedule of non-gaap information , '' for the reconciliation of net income attributable to invesco ltd. to adjusted net income attributable to invesco ltd .. 32 investment capabilities performance overview invesco 's first strategic objective is to achieve strong investment performance over the long-term for our clients . as of december 31 , 2016 , 66 % , 72 % and 75 % of measured ranked actively managed assets performed in the top half of peer groups on a one-year , three-year and five-year basis respectively . the table below presents the one- , three- and five-year performance of our measured ranked actively managed investment products measured by the percentage of aum ahead of benchmark and aum in the top half of peer group . ( 1 ) replace_table_token_7_th ( 1 ) aum measured in the one- , three- , and five-year peer group rankings represents 58 % , 57 % , and 55 % of total invesco aum , respectively , and aum measured versus benchmark on a one- , three- , and five-year basis represents 70 % , 68 % , and 64 % of total invesco aum , respectively , as of december 31 , 2016 . peer group rankings are sourced from a widely-used third party ranking agency in each fund 's market ( lipper , morningstar , ia , russell , mercer , evestment alliance , sitca , value research ) and are asset-weighted in usd . rankings are as of prior quarter-end for most institutional products and preceding month-end for australian retail funds due to their late release by third parties . rankings for the most representative fund in each global investment performance standard ( gips ) composite are applied to all products within each gips composite . excludes passive products , closed-end funds , private equity limited partnerships , non-discretionary direct real estate , unit investment trusts fund-of-funds with component funds managed by invesco , stable value building block funds and clos . certain funds and products were excluded from the analysis because of limited benchmark or peer group data . had these been available , results may have been different . these results are preliminary and subject to revision . performance assumes the reinvestment of dividends . past performance is not indicative of future results and may not reflect an investor 's experience . 33 foreign exchange impact on balance sheet , assets under management and results of operations a significant portion of our business is based outside of the u.s. the strengthening or weakening of the u.s. dollar against other currencies , primarily the pound sterling , canadian dollar , euro and japanese yen will impact our assets , liabilities , aum and reported revenues and expenses from period to period . the assets , liabilities and aum of foreign subsidiaries are translated at period end spot foreign currency exchange rates . the income statements of foreign currency subsidiaries are translated into u.s. dollars , the reporting currency of the company , using average foreign exchange rates . the table below sets forth the spot foreign exchange rates used for translation of non-u.s. dollar denominated asset , liabilities and aum into u.s. dollars : replace_table_token_8_th the table below sets forth the average foreign exchange rates used for translation of non-u.s. dollar denominated income , including revenues and expenses , into u.s. dollars : replace_table_token_9_th a comparison of period end spot rates between december 31 , 2016 and december 31 , 2015 shows a weakening of the pound sterling and the euro relative to the u.s. dollar , which is reflected in the translation of our pound sterling-based and euro assets , liabilities and aum into u.s. dollars . over the same period , the canadian dollar and japanese yen have strengthened relative to the u.s. dollar , which is reflected in the translation of our canadian dollar-based and japanese yen-based assets , liabilities and aum into u.s. dollars , respectively . a comparison of period end spot rates between december 31 , 2015 and december 31 , 2014 shows a weakening of the pound sterling , the euro , the canadian dollar and the japanese yen relative to the u.s. dollar , which is reflected in the translation of the respective currency-based assets , liabilities and aum into u.s. dollars . a comparison of the average foreign exchange rates used for the year ended december 31 , 2016 when compared to the year ended december 31 , 2015 shows a significant weakening of the pound sterling relative to the u.s. dollar , together with a weakening of the canadian dollar relative to the u.s. dollar which is reflected in the translation of our pound sterling-based and canadian dollar-based revenue and expenses into u.s. dollars . over the same period , the japanese yen strengthened significantly relative to the u.s. dollar , which was reflected in the translation of our japanese yen-based revenue and expenses into u.s. dollars , respectively .
| therefore , total u.s. and foreign income before taxes in item 8. financial statements and supplementary data , note 15 , `` taxation , '' , which includes income/losses from cip , and u.s. and foreign operating revenues in item 8. financial statements and supplementary data , note 17 , `` geographic information. , '' in which cip has been eliminated , may not correlate . the table included in the taxation footnote is formatted such that the income of cip is separately stated so that the impact of cip is evident . total u.s. income before taxes decreased $ 148.0 million during the year ended december 31 , 2016 to $ 539.9 million from $ 687.9 million for the year ended december 31 , 2015 and includes u.s. income of cip of $ 2.4 million ( december 31 , 2015 : $ 26.0 million ) . u.s. income from cip decreased $ 23.6 million ( 90.8 % ) from 2015 due primarily to the impact of private equity partnerships that were deconsolidated upon the adoption of asu 2015-02. excluding cip , u.s. income before taxes in 2016 decreased $ 124.4 million ( 18.8 % ) from december 31 , 2015 due to a larger decrease in u.s. operating revenues than operating expenses . total foreign income before taxes decreased $ 7.5 million during the year ended december 31 , 2016 to $ 666.7 million from $ 674.2 million during the year ended december 31 , 2015 and includes foreign income of cip of $ 14.7 million ( december 31 , 52 2015 : foreign losses of cip of $ 72.1 million ) . foreign income from cip increased $ 86.8 million due primarily to gains on consolidated clos and partnerships compared to losses in the prior period and the impact of newly consolidated funds in 2016 . excluding cip , foreign income decreased by $ 94.3 million ( 12.6 % ) from 2015 due to a larger decrease in foreign operating revenues and other income than operating expenses . total u.s. income before taxes decreased $ 34.7 million to $ 687.9 million during the year
| 14,376 |
income ( loss ) from continuing operations for fiscal 2012 decreased $ 566 million as compared to fiscal 2011 primarily due to decreased operating income of $ 636 million and increased interest expense of $ 35 million resulting from the december 2010 debt issuance partially offset by a decrease in the provision for income taxes of $ 99 million . diluted earnings ( loss ) per share from continuing operations for fiscal 2012 decreased $ 1.50 per share to $ ( 0.02 ) per share as compared to fiscal 2011 primarily due to a $ 566 million decrease in income ( loss ) from continuing operations . cash and cash equivalents increased $ 225 million during fiscal 2012 , reflecting $ 772 million generated from operations and net proceeds of $ 167 million received from the sale of components of our business and $ 78 million from the sale of real estate partially offset by cash used to acquire two businesses totaling $ 218 million and cash used for stock repurchases totaling $ 471 million . net bookings ( as defined in key financial metricsbookings and backlog ) were approximately $ 11.8 billion for fiscal 2012 , as compared to $ 12.6 billion in the prior year . total backlog was $ 18.0 billion at january 31 , 2012 , an increase of approximately $ 883 million from january 31 , 2011. subsequent to fiscal 2012 , our board of directors approved the initiation of a quarterly dividend . business environment and trends in fiscal 2012 , we generated over 90 % of our total revenues from contracts with the u.s. government , either as a prime contractor or a subcontractor to other contractors engaged in work for the u.s. government . revenues under contracts with the dod , including subcontracts under which the dod is the ultimate purchaser , represented approximately 75 % of our total revenues in fiscal 2012. accordingly , our business performance is subject to changes in the overall level of u.s. government spending , especially national security , including defense , homeland security , and intelligence spending , and the alignment of our service and product offerings and capabilities with current and future budget priorities of the u.s. government . while we believe that national security , including defense , homeland security , and intelligence spending will continue to be a priority , the u.s. government deficit and budget situation has created increasing pressure to examine and reduce spending in these areas . in august 2011 , president obama signed into law the budget control act of 2011 , which increased the u.s. government 's debt ceiling and enacted 10-year discretionary spending caps which are expected to generate over $ 1 trillion in savings for the u.s. government . according to the office of management and budget , these savings include $ 487 billion in dod baseline spending reductions over the next 10 years . the budget control act also established a joint bipartisan committee of congress responsible to recommend at least $ 1.2 trillion in additional savings by november 23 , 2011. the joint committee did not meet the november 23 , 2011 deadline for proposing recommended legislation . due to that failure , unless congress passes and the president signs legislation amending the budget control act , additional automatic spending cuts ( referred to as sequestration ) totaling $ 1.2 trillion over 10 years will be triggered . these spending cuts are expected to further reduce dod and homeland security spending by approximately $ 500 billion and other federal agency spending by approximately $ 700 billion over that timeframe , beginning in the government fiscal year ending september 30 , 2013 ( gfy13 ) . we are evaluating the potential impacts of this legislation on our business , and while the ultimate effect on our business is uncertain , the amount and nature of these federal budget spending reductions could adversely impact our future revenues and growth prospects in those markets . in january 2012 , the dod issued strategic guidance on the u.s. defense priorities for the next ten years , which identified the primary missions of the u.s. armed forces and the capabilities expected to be critical to future success , including intelligence , surveillance and reconnaissance and cybersecurity . although the impact of implementation of the strategic guidance on the dod budget and our business is uncertain , we believe that we are well positioned to support many of these critical capabilities . in february 2012 , the office of management and budget released the president 's gfy13 budget request . the budget request included a variety of tax proposals aimed at boosting the economy while collecting more revenue from high-income taxpayers , and as expected , it also included discretionary spending reductions stipulated by the budget control act of 2011. ultimately , we believe we will likely see delayed federal appropriation bills for gfy13 , with continuing resolutions required to fund government into early gfy13 ( late calendar year 2012 ) , as well as the continued threat of possible additional spending cuts through sequestration . competition for contracts with the u.s. government continues to be intense . the u.s. government has increasingly used contracting processes that give it the ability to select multiple winners or pre-qualify certain contractors to provide various services or products at established general terms and conditions . such processes include purchasing services and solutions saic , inc. annual report 27 part ii using indefinite-delivery/indefinite-quantity ( idiq ) and u.s. general services administration ( gsa ) contract vehicles . this trend has served to increase competition for u.s. government contracts . for more information on these risks and uncertainties , see risk factors in part i of this annual report on form 10-k. reportable segments our business is aligned into four reportable segments : defense solutions ; health , energy and civil solutions ; intelligence and cybersecurity solutions ; and corporate and other . story_separator_special_tag except with respect to results of operationsdiscontinued operations and net income , and diluted eps , all amounts in this management 's discussion and analysis of financial condition and results of operations are presented for our continuing operations . for additional information regarding our reportable segments , see business in part i and note 15 of the combined notes to consolidated financial statements contained within this annual report on form 10-k. key financial metrics bookings and backlog . we received net bookings worth an estimated $ 11.8 billion and $ 12.6 billion during fiscal 2012 and 2011 , respectively . net bookings represent the estimated amount of revenue to be earned in the future from funded and unfunded contract awards that were received during the year , net of any adjustments to previously awarded backlog amounts . we calculate net bookings as the year 's ending backlog plus the year 's revenues ( excluding the portion of the citytime loss provision of $ 410 million recorded against revenues during fiscal 2012 because such loss did not impact net bookings ) less the prior year 's ending backlog and less the backlog obtained in acquisitions during the year . backlog represents the estimated amount of future revenues to be recognized under negotiated contracts as work is performed . we segregate our backlog into two categories as follows : funded backlog . funded backlog for contracts with government agencies primarily represents contracts for which funding is appropriated less revenues previously recognized on these contracts , and does not include the unfunded portion of contracts where funding is incrementally appropriated or authorized on a quarterly or annual basis by the u.s. government and other customers , even though the contract may call for performance over a number of years . funded backlog for contracts with non-government agencies represents the estimated value on contracts , which may cover multiple future years , under which we are obligated to perform , less revenues previously recognized on these contracts . negotiated unfunded backlog . negotiated unfunded backlog represents estimated amounts of revenue to be earned in the future from ( 1 ) negotiated contracts for which funding has not been appropriated or otherwise authorized and ( 2 ) unexercised priced contract options . negotiated unfunded backlog does not include any estimate of future potential task orders expected to be awarded under idiq , gsa schedule , or other master agreement contract vehicles . the estimated value of our total backlog as of the end of the last two fiscal years was as follows : replace_table_token_8_th total backlog fluctuates from period to period depending on our success rate in winning contracts and the timing of contract awards , renewals , modifications and cancellations . while backlog increased during fiscal 2012 , contract awards continue to be negatively impacted by ongoing industry-wide delays in procurement decisions , which have resulted in an increase in the value of our submitted proposals awaiting decision . 28 saic , inc. annual report part ii we expect to recognize a substantial portion of our funded backlog as revenues within the next 12 months . however , the u.s. government may cancel any contract at any time . in addition , certain contracts with commercial customers include provisions that allow the customer to cancel at any time . most of our contracts have cancellation terms that would permit us to recover all or a portion of our incurred costs and fees for work performed . contract types . our earnings and profitability may vary materially depending on changes in the proportionate amount of revenues derived from each type of contract . for a discussion of the types of contracts under which we generate revenue , see businesscontract types in part i of this annual report on form 10-k. the following table summarizes revenues by contract type as a percentage of total revenues for the last three fiscal years : replace_table_token_9_th the percentage for t & m and fp-loe for fiscal 2012 includes the portion of the citytime loss provision of $ 410 million recorded against revenues . the increase in the percentage of revenues generated from ffp contracts for fiscal 2012 and 2011 as compared to 2010 was primarily due to increased deliveries of logistics , readiness and sustainment products and proprietary products in addition to a $ 56 million royalty payment received in fiscal 2011 , which is included in the ffp category . revenue mix . we generate revenues under our contracts from ( 1 ) the efforts of our technical staff , which we refer to as labor-related revenues , and ( 2 ) the materials provided on a contract and efforts of our subcontractors , which we refer to as m & s revenues . m & s revenues are generated primarily from large , multi-year systems integration contracts and contracts in our logistics , readiness and sustainment business area , as well as through sales of our proprietary products , such as our border , port and mobile security products and our checked baggage explosive detection systems . while our proprietary products are more profitable , these products represent a small percentage of our m & s revenues and the majority of our m & s revenues generally have lower margins than our labor-related revenues . the following table presents changes in labor-related revenues and m & s revenues for the last three fiscal years : replace_table_token_10_th labor-related revenues for the last three fiscal years have remained consistent . in fiscal 2012 , m & s revenues declined primarily due to the portion of the citytime loss provision recorded against revenues during the year ended january 31 , 2012 ( $ 410 million ) described in note 17 of the combined notes to the consolidated financial statements .
| defense solutions revenues increased $ 139 million , or 3 % , including internal revenue growth of 3 % , in fiscal 2011 as compared to fiscal 2010. fiscal 2011 internal revenue growth was driven by increased activity on our systems integration and logistics programs for tactical and mine resistant ambush protected vehicles ( $ 175 million ) , a systems and software 30 saic , inc. annual report part ii maintenance and upgrades program with the u.s. army ( $ 78 million ) , and a systems engineering solutions program for the u.s. navy ( $ 65 million ) . these increases were partially offset by revenue declines on certain programs including fewer deliveries of emergency responder equipment ( $ 99 million ) , and a reduction in scope under the u.s. army brigade combat team modernization program ( $ 62 million ) . defense solutions operating income decreased $ 551 million in fiscal 2012 as compared to fiscal 2011. this includes the entire citytime loss provision ( $ 540 million ) described in note 17 of the combined notes to the consolidated financial statements . operating income declines were also due to the decline in revenues , lower contract fees resulting from completion of the citytime workforce management systems development and implementation contract in the second quarter of fiscal 2012 ( $ 25 million ) and a reduction in estimated fees related to work on our u.s. army brigade combat team modernization contract ( $ 6 million ) partially offset by the impact of more effective cost management ( $ 17 million ) and a gain on the sale of certain assets previously used in developing guidance and navigation control systems for precision munitions ( $ 5 million ) . defense solutions operating income increased $ 25 million in fiscal 2011 as compared to fiscal 2010 primarily due to increased cost recovery on cost reimbursement contracts and increased fees related to a specific contract partially offset by increased bid and proposal expenses . the level of bid and proposal activities fluctuates depending on the timing of bidding opportunities . the following table summarizes changes in health , energy and civil solutions revenues and operating income for the last three fiscal years : replace_table_token_13_th health , energy and civil solutions revenues increased $ 66 million , or 2 % , including internal revenue contraction of 2 % for fiscal 2012 as compared to fiscal 2011. internal revenue contraction
| 14,377 |
overview description of business general information eos inc. ( “ we , ” “ us , ” “ our , ” or the “ company ” ) was incorporated in the state of nevada on april 3 , 2015. on or about november 18 , 2016 , the company caused to be formed eos inc. taiwan branch , a taiwanese corporation ( “ eitb ” ) . to date , eitb has no shareholders . during the year ended december 31 , 2016 , the company paid the expenses of eitb , and the amount of those expenses is $ 1,870. additionally , the company will continue to pay the expenses of eitb . the principal executive office of eitb is located at room 519 , 5f , no . 372 , linsen n. road , zhongshan district , taipei city , 104 , taiwan ( republic of china ) . the company reimburses eitb for the rent for that office , the amount of which is $ 500 per month . yu-cheng yang , the company 's sole director , is the sole director of eitb . yu-hsiang chia is the branch manager of eitb . mr. chia , also , holds 2,700,000 shares of the company 's common stock . we have never been a party to any bankruptcy , receivership or similar proceeding , nor have we undergone any material reclassification , merger , consolidation , purchase or sale of a significant amount of assets not in the ordinary course of business . we plan to market and distribute in taiwan skin care products manufactured by a.c. ( usa ) , inc. , which is located in the city of industry , california ( “ a.c. ” ) . we intend to market and distribute those skin care products to resellers who will recognize the needs of their targeted customers and who identify with those customers . our strategy will be to target spas , department stores and specialty stores that sell similar skin products . 9 the skin care products that we will distribute are designed to address various skin care needs . those products include moisturizers , serums , cleansers , toners , body care , exfoliators , acne and oil correctors , facial masks , cleansing devices and sun care products . a number of those products are developed for use on particular areas of the body , such as the face or hands or around the eyes . as of the date of this annual report , we , have had only limited start-up operations and have not generated revenues . we will not be profitable until we derive sufficient revenues and cash flows from sales of the various skin care products . we anticipate that we will receive revenue from the sale of those skin care products . as of the date of this annual report , the amounts of the prices for those skin care products have not been determined . going concern the accompanying consolidated financial statements have been prepared assuming the company will continue as a going concern . for the period ended december 31 , 2016 , the company had limited operations . as of december 31 , 2016 , the company has not emerged from the development stage . in view of these matters , the company 's ability to continue as a going concern is dependent upon its ability to obtain financing and upon future profitable operations from the development of its planned business . the company is currently addressing its liquidity issue by continually seeking investment capital through private placements of common stock and debt . the financial statements of the company do not include any adjustments relating to the recoverability and classification of recorded assets , or the amounts and classifications of liabilities that might be necessary should the company be unable to continue as a going concern . as shown in the accompanying consolidated financial statements , the company has incurred an accumulated deficit of $ 307,654 and $ 149,991 for the year ended december 31 , 2016 and for the period from april 3 , 2015 ( date of inception ) to december 31 , 2015 , respectively . these conditions raise substantial doubt about the company 's ability to continue as a going concern . critical accounting policies and estimates the preparation of consolidated financial statements in conformity with generally accepted accounting principles 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 consolidated financial statements and the reported amounts of revenue and expenses during the reporting period . actual results could differ from those estimates . cash and cash equivalents cash and cash equivalents include cash and all highly liquid instruments with original maturities of three months or less . net income ( loss ) per share basic income ( loss ) per share is computed by dividing net income by weighted average number of shares of common stock outstanding during each period . diluted income per share is computed by dividing net loss by the weighted average number of shares of common stock , common stock equivalents and potentially dilutive securities outstanding during each period . at december 31 , 2016 and 2015 , the company does not have any outstanding common stock equivalents ; therefore , a separate computation of diluted loss per share is not presented . income taxes the company accounts for income taxes in accordance with asc 740 , income taxes , which requires that the company recognize deferred tax liabilities and assets based on the differences between the financial statement carrying amounts and the tax basis of assets and liabilities , using enacted tax rates in effect in the years the differences are expected to reverse . deferred income tax benefit ( expense ) results from the change in story_separator_special_tag overview description of business general information eos inc. ( “ we , ” “ us , ” “ our , ” or the “ company ” ) was incorporated in the state of nevada on april 3 , 2015. on or about november 18 , 2016 , the company caused to be formed eos inc. taiwan branch , a taiwanese corporation ( “ eitb ” ) . to date , eitb has no shareholders . during the year ended december 31 , 2016 , the company paid the expenses of eitb , and the amount of those expenses is $ 1,870. additionally , the company will continue to pay the expenses of eitb . the principal executive office of eitb is located at room 519 , 5f , no . 372 , linsen n. road , zhongshan district , taipei city , 104 , taiwan ( republic of china ) . the company reimburses eitb for the rent for that office , the amount of which is $ 500 per month . yu-cheng yang , the company 's sole director , is the sole director of eitb . yu-hsiang chia is the branch manager of eitb . mr. chia , also , holds 2,700,000 shares of the company 's common stock . we have never been a party to any bankruptcy , receivership or similar proceeding , nor have we undergone any material reclassification , merger , consolidation , purchase or sale of a significant amount of assets not in the ordinary course of business . we plan to market and distribute in taiwan skin care products manufactured by a.c. ( usa ) , inc. , which is located in the city of industry , california ( “ a.c. ” ) . we intend to market and distribute those skin care products to resellers who will recognize the needs of their targeted customers and who identify with those customers . our strategy will be to target spas , department stores and specialty stores that sell similar skin products . 9 the skin care products that we will distribute are designed to address various skin care needs . those products include moisturizers , serums , cleansers , toners , body care , exfoliators , acne and oil correctors , facial masks , cleansing devices and sun care products . a number of those products are developed for use on particular areas of the body , such as the face or hands or around the eyes . as of the date of this annual report , we , have had only limited start-up operations and have not generated revenues . we will not be profitable until we derive sufficient revenues and cash flows from sales of the various skin care products . we anticipate that we will receive revenue from the sale of those skin care products . as of the date of this annual report , the amounts of the prices for those skin care products have not been determined . going concern the accompanying consolidated financial statements have been prepared assuming the company will continue as a going concern . for the period ended december 31 , 2016 , the company had limited operations . as of december 31 , 2016 , the company has not emerged from the development stage . in view of these matters , the company 's ability to continue as a going concern is dependent upon its ability to obtain financing and upon future profitable operations from the development of its planned business . the company is currently addressing its liquidity issue by continually seeking investment capital through private placements of common stock and debt . the financial statements of the company do not include any adjustments relating to the recoverability and classification of recorded assets , or the amounts and classifications of liabilities that might be necessary should the company be unable to continue as a going concern . as shown in the accompanying consolidated financial statements , the company has incurred an accumulated deficit of $ 307,654 and $ 149,991 for the year ended december 31 , 2016 and for the period from april 3 , 2015 ( date of inception ) to december 31 , 2015 , respectively . these conditions raise substantial doubt about the company 's ability to continue as a going concern . critical accounting policies and estimates the preparation of consolidated financial statements in conformity with generally accepted accounting principles 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 consolidated financial statements and the reported amounts of revenue and expenses during the reporting period . actual results could differ from those estimates . cash and cash equivalents cash and cash equivalents include cash and all highly liquid instruments with original maturities of three months or less . net income ( loss ) per share basic income ( loss ) per share is computed by dividing net income by weighted average number of shares of common stock outstanding during each period . diluted income per share is computed by dividing net loss by the weighted average number of shares of common stock , common stock equivalents and potentially dilutive securities outstanding during each period . at december 31 , 2016 and 2015 , the company does not have any outstanding common stock equivalents ; therefore , a separate computation of diluted loss per share is not presented . income taxes the company accounts for income taxes in accordance with asc 740 , income taxes , which requires that the company recognize deferred tax liabilities and assets based on the differences between the financial statement carrying amounts and the tax basis of assets and liabilities , using enacted tax rates in effect in the years the differences are expected to reverse . deferred income tax benefit ( expense ) results from the change in
| our cash and cash equivalent at december 31 , 2016 and december 31 , 2015 were $ 35,696 and $ 54,132 , respectively . net cash flow from operating activities in the year ended december 31 , 2016 and in the period from april 3 , 2015 ( date of inception ) to december 31 , 2015 was $ ( 144,228 ) and $ ( 149,991 ) , respectively . net cash flow used in operating activities in the year ended december 31 , 2016 was mainly due to our net loss of $ 157,663 and the increase in other current assets , partially offset by the increase in accounts payable . net cash flow provided by financing activities in the year ended december 31 , 2016 and in the period from april 3 , 2015 ( date of inception ) to december 31 , 2015 was $ 125,912 and $ 204,123 , respectively . the cash flow provided by financing activity was from loan from officers and proceeds from the sale of our common stock . capital expenditures total capital expenditures during the year ended december 31 , 2016 , and the period from april 3 , 2015 ( date of inception ) to december 31 , 2015 were $ 0 and $ 0 , respectively . inflation our opinion is that inflation has not had , and is not expected to have , a material effect on our operations . 11 climate change our opinion is that neither climate change , nor governmental regulations related to climate change , have had , or are expected to have , any material effect on our operations . off-balance sheet arrangements we do not have any off-balance sheet arrangements as of december 31 ,
| 14,378 |
our most critical estimates include those related to revenue recognition , inventories and reserves for excess and obsolescence , self-insured liabilities , accounting for stock-based awards , and income taxes . we base our estimates and judgments on historical experience and on various other factors that we believe to be reasonable under the circumstances , the results of which form the basis for our judgments about the carrying values of assets and liabilities that are not readily apparent from other sources . our actual results may differ from these estimates under different assumptions or conditions . 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 . 53 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 . 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 . story_separator_special_tag 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 , 2014 , 2013 and 2012 , changes in accounting estimates on fixed-price contracts recognized using the percentage of completion method of accounting are presented below . amounts representing contract change orders or claims are included in revenue only when they can be reliably estimated and their realization is probable . 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 . 54 for the years ended april 30 , 2014 , 2013 and 2012 , favorable and unfavorable cumulative catch-up adjustments included in cost of sales were as follows ( in thousands ) : replace_table_token_6_th for the year ended april 30 , 2014 , favorable cumulative catch-up adjustments of $ 0.7 million were primarily due to final cost adjustments on 274 contracts , which individually were not material . for the same period , unfavorable cumulative catch-up adjustments of $ 0.3 million were primarily related to higher than expected costs on eight contracts , which individually were not material . for the year ended april 30 , 2013 , favorable cumulative catch-up adjustments of $ 1.9 million were due to final cost adjustments on 12 contracts , which individually were not material . for the same period , unfavorable cumulative catch-up adjustments of $ 0.1 million were primarily related to higher than expected costs on six contracts , which individually were not material . for the year ended april 30 , 2012 , favorable cumulative catch-up adjustments of $ 6.1 million were due to final cost adjustments on 204 contracts relating to our uas segment . of the 204 contracts , four contracts accounted for $ 3.3 million of the favorable cumulative catch-up adjustments as a result of realized operational improvements . for the same period , unfavorable cumulative catch-up adjustments of $ 3.1 million were primarily due to higher than expected costs on 21 contracts . of the 21 contracts , two ees development contracts accounted for $ 2.8 million of the unfavorable cumulative catch-up adjustments due to cost-overruns . 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 . 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 . 55 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 .
| cost of sales for the fiscal year ended april 30 , 2014 was $ 158.1 million , as compared to $ 147.6 million for the fiscal year ended april 30 , 2013 , representing an increase of $ 10.5 million , or 7 % . as a percentage of revenue , cost of sales increased from 61 % to 63 % . the increase in cost of sales was a result of higher product costs of $ 33.5 million due to higher product deliveries including transition costs related to new products entering low-rate production , offset by lower cost of services of $ 23.0 million due to a reduction in logistic services and lower customer-funded r & d work as products transitioned into low-rate production . uas cost of sales increased $ 12.8 million , or 11 % , to $ 128.0 million for the fiscal year ended april 30 , 2014 , primarily due to an increase in sales volume . as a percentage of revenue , cost of sales for uas increased from 59 % to 61 % . ees cost of sales decreased $ 2.3 million , or 7 % , to $ 30.1 million for the fiscal year ended april 30 , 2014 due to lower sales volume . as a percentage of revenue , cost of sales for ees decreased from 71 % to 70 % . gross margin . gross margin for the fiscal year ended april 30 , 2014 was $ 93.6 million , as compared to $ 92.5 million for the fiscal year ended april 30 , 2013 , representing an increase of $ 1.1 million , or 1 % . the increase in gross margin was due to higher product margins of $ 21.7 million offset by lower service revenue margins of $ 20.6 million . as a percentage of revenue , gross margin decreased from 39 % to 37 % . uas gross margin increased $ 1.7 million , or 2 % , to $ 80.8 million for the fiscal year ended april 30 , 2014 , primarily due to an increase in
| 14,379 |
Subsets and Splits
No community queries yet
The top public SQL queries from the community will appear here once available.