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duke energy 's 2020 net income available to duke energy corporation ( gaap reported earnings ) were impacted by : regulatory settlements related to coal ash cost recovery in electric utilities and infrastructure ; the cancellation of the acp pipeline in gas utilities and infrastructure ; and growth in project investments in commercial renewables . see “ results of operations ” below for a detailed discussion of the consolidated results of operations and a detailed discussion of financial results for each of duke energy 's reportable business segments , as well as other . 2020 areas of focus and accomplishments clean energy transformation . our industry has been undergoing an incredible transformation and 2020 was a milestone year for our company where we articulated a clear vision for the future and outlined investments to achieve a clean energy future for our customers . we continue to transform the customer experience by generating cleaner energy , modernizing the energy grid , and expanding natural gas infrastructure . generating cleaner energy in october 2020 , we held our first-ever environmental , social , and governance ( esg ) day for investors , successfully outlining our climate strategy and highlighting our strong progress to date in reducing carbon ( a greater than 40 % reduction from 2005 ) and our commitment to do more ( at least 50 % reduction by 2030 and net-zero by 2050 ) . in the carolinas , we participated in extensive stakeholder processes focused on carbon reduction and regulatory reform and filed comprehensive irp consistent with that strategy . our planned coal retirements and transition to cleaner energy sources in the carolinas are some of the largest in the industry . we also committed to an all-electric light-duty fleet and 50 % of all medium- and heavy-duty vehicles by 2030 – a pledge that also leads our industry . our commitment for 2030 includes retiring plants , operating our existing carbon-free resources and investing in renewables , our energy delivery system , and natural gas infrastructure . as we look beyond 2030 , we will need additional tools to continue our progress . we will work actively to advocate for research and development of carbon-free , dispatchable resources . that includes longer-duration energy storage , advanced nuclear technologies , carbon capture and zero-carbon fuels . modernizing the power grid our grid improvement programs continue to be a key component of our growth strategy . modernization of the electric grid , including smart meters , storm hardening , self-healing and targeted undergrounding , helps to ensure the system is better prepared for severe weather , improves the system 's reliability and flexibility , and provides better information and services for customers . in 2020 , 98 % of our jurisdictions were equipped with smart meters and we remain on track to be fully deployed across all regions by the end of this year . we continue to expand our self-optimizing grid capabilities , and in 2020 , smart , self-healing technologies helped to avoid more than 800,000 extended customer outages across our six-state electric service area , saving customers more than 1.8 million hours of lost outage time . duke energy also has a demonstrated track record of driving efficiencies and productivity into the business and we continue to leverage new technology , digital tools and data analytics across the business in response to a transforming landscape . expanding natural gas infrastructure in july 2020 , duke energy and dominion announced the cancellation of the acp pipeline . litigation risks and delays presented too much uncertainty on our ability to economically complete the project on schedule to meet our customers ' needs . additionally , dominion reached a decision to exit their natural gas transmission business , further impeding our ability to consider ongoing investment in the project . the company remains committed to pursuing natural gas infrastructure investments and continues to explore additional resources in eastern north carolina for the piedmont system and securing more transport capacity to support power generation . construction is expected to be completed this year on a liquefied natural gas facility in robeson county , north carolina , on property piedmont owns . this investment will help piedmont provide a reliable gas supply to customers during peak usage periods and protect customers from price volatility when there is a higher-than-normal demand for natural gas . in the fall of 2020 , recognizing the continued importance of natural gas to our plans , we announced a net-zero methane emission goal by 2030 related to our gas distribution business , as well as our commitment to lead on reduction of upstream methane emissions through work with our natural gas supply chain . constructive regulatory and legislative outcomes . one of our long-term strategic goals is to achieve modernized regulatory constructs in our jurisdictions . modernized constructs provide benefits , which include improved earnings and cash flows through more timely recovery of investments , as well as stable pricing for customers . in 2020 , we conducted the bulk of proceedings related to our north carolina rate cases for both duke energy carolinas and duke energy progress and achieved a partial settlement with the north carolina public staff and ten other intervening parties . in january 2021 , duke energy carolinas and duke energy progress reached an important settlement agreement , which subject to ncuc approval , resolves historical coal ash prudence and cost recovery issues and provides clarity on coal ash cost recovery for the next decade . in 2020 , we also achieved constructive rate case outcomes in indiana ( our first rate base request in 15 years ) and kentucky ( electric ) . we have a multiyear rate plan in florida and in january 2021 reached a constructive settlement agreement with key consumer groups , subject to fpsc approval , to bring additional certainty to rates through 2024 , in addition , grid investment riders in the midwest enable more timely cost recovery and earnings growth . customer satisfaction . story_separator_special_tag duke energy continues to transform the customer experience through our use of customer data to better inform operational priorities and performance levels . this data-driven approach allows us to identify the investments that are the most important to the customer experience . our work has been recognized by our customers with external measures showing duke energy is improving customer satisfaction at a rate greater than the utility industry . additionally , in 2020 , we surpassed our internal target that measures customer satisfaction by approximately 14 % . 43 md & a duke energy operational excellence , safety and reliability . the reliable and safe operation of our power plants , electric distribution system and natural gas infrastructure in our communities is foundational to our customers , our financial results and our credibility with stakeholders . our regulated generation fleet and nuclear sites had strong performance throughout the year and our electric distribution system performed well . the safety of our workforce is a core value . our employees delivered strong safety results in 2020 , and we are at or near the top of our industry . additionally , the 2020 atlantic hurricane season was incredibly active and marked the fifth consecutive year of above-average damaging storms . our ability to effectively handle all facets of the 2020 storm response efforts , including navigating covid-19 protocols , is a testament to our team 's extensive preparation and coordination , applying lessons learned from previous storms , and to on-the-ground management throughout the restoration efforts . leading through covid-19 . covid-19 impacted all that we accomplished in 2020 and demonstrated our resiliency and agility : as the pandemic spread , stay-at-home orders coupled with recessionary economic conditions caused overall retail electric sales to decline by approximately 2 % . to offset this challenge , as well as mild weather and other covid-related costs , we successfully achieved the high end of our goal of $ 400 million to $ 450 million of broad-based o & m reductions and other mitigating actions . the company 's results were within its adjusted eps guidance range and we expect to sustain approximately $ 200 million of the 2020 o & m cost mitigation into 2021 forward . duke energy kept electricity and gas flowing while voluntarily making significant accommodations for our customers . we led the way in our sector nationally , suspending all nonpay disconnects in all jurisdictions and waiving late payment fees and other fees until the national state of emergency was lifted . in the fall , we began returning to normal business practices , ensuring diligent communication with our customers and providing flexible payment arrangements . we ensured the physical safety of our workers and provided support for our employees . as cases spiked nationally , we deployed covid-19 safety protocols for our front-line essential workers and moved 18,000 colleagues to remote work . our covid-19 case management team managed exposures of our workforce and it ensured our networks could handle the remote work while strengthening cyber protection . under our covid-19 protocols , our front-line employees completed 150 fossil and nuclear outages , executed large major projects , restored service from storms and hurricanes , and managed high-water events . overall , our operations continued , and our team completed their work with excellence . duke energy objectives – 2021 and beyond duke energy will continue to deliver exceptional value to customers , be an integral part of the communities in which we do business and provide attractive returns to investors . we have an achievable , long-term strategy in place , and it is producing tangible results , yet the industry in which we operate is becoming more and more dynamic . we are adjusting , where necessary , and accelerating our focus in key areas to ensure the company is well positioned to be successful for many decades into the future . as we look ahead to 2021 , our plans include : continuing to place the customer at the center of all that we do , which includes providing customized products and solutions strengthening our relationships with all our vast stakeholders in the communities in which we operate and invest generating cleaner energy and working to achieve net-zero carbon emissions by 2050 and net zero methane emissions by 2030 modernizing and strengthening a green-enabled energy grid expanding our natural gas infrastructure maintaining the safety of our communities and employees deploying digital tools across our business matters impacting future results the matters discussed herein could materially impact the future operating results , financial condition and cash flows of the duke energy registrants and business segments . regulatory matters coal ash costs as a result of the ncdeq settlement on december 31 , 2019 , duke energy carolinas and duke energy progress agreed to excavate seven of the nine remaining coal ash basins in north carolina with ash moved to on-site lined landfills . at the two remaining basins , uncapped basin ash will be excavated and moved to lined landfills . the majority of spend is expected to occur over the next 15-20 years . in january 2021 , duke energy carolinas and duke energy progress reached a settlement agreement on recovery of coal ash costs as outlined in note 3 , `` regulatory matters , '' which is subject to review and approval of the ncuc . the company agreed not to seek recovery of approximately $ 1 billion of deferred coal ash expenditures and duke energy carolinas and duke energy progress took a charge of approximately $ 500 million each . in 2019 , duke energy carolinas and duke energy progress received orders from the pscsc denying recovery of certain coal ash costs . duke energy carolinas and duke energy progress have appealed these decisions to the south carolina supreme court and those appeals are pending . an order from regulatory or judicial authorities that rejects our proposed settlement or disallows recovery of costs related to closure of these ash basins could have an adverse impact on future results .
| the variance was driven primarily by : a $ 275 million decrease in fuel used in electric generation and purchased power primarily due to lower fuel costs ; and an $ 11 million decrease in property and other taxes driven by lower gross receipts taxes due to decreased fuel revenues . 56 md & a duke energy florida partially offset by : a $ 97 million increase in operation , maintenance and other expense primarily due to storm cost amortizations ; and a $ 32 million increase in impairment charges primarily due to the prior year 's impairment reduction related to citrus county cc . income tax expense . the increase in tax expense was primarily due to an increase in pretax income and a decrease in the amortization of excess deferred taxes . duke energy ohio results of operations replace_table_token_22_th the following table shows the percent changes in gwh sales of electricity , mcf of natural gas delivered and average number of electric and natural gas customers for duke energy ohio . the below percentages for retail customer classes represent billed sales only . total sales includes billed and unbilled retail sales and wholesale sales to incorporated municipalities , public and private utilities and power marketers . amounts are not weather-normalized . replace_table_token_23_th year ended december 31 , 2020 , as compared to 2019 operating revenues . the variance was driven primarily by : a $ 61 million decrease in fuel related revenues primarily due to lower prices and decreased volumes ; a $ 22 million decrease in retail revenue riders , primarily due to lower ee program revenues , volume impacts of the distribution decoupling rider , suspension of the mgp rider and higher taxes returned to customers via the tax cuts and job acts rider , partially offset by an increase in the distribution capital investment rider due to increased capital investment ; a $ 15 million decrease in revenues due to unfavorable weather in the current year ; an $ 11 million decrease in other revenues due to lower ovec sales into pjm ; 57 md & a duke energy ohio a $ 5
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45 employment contracts and termination of employment and change-in-control arrangements gunther than - executive employment agreement mr. than is our only executive officer and had a written employment agreement which expired on january 1 , 2018. on january 1 , 2014 , our board of directors authorized the execution of that certain executive employment agreement ( the “ executive agreement ” ) with our president/chief executive officer , secretary , treasurer/chief financial officer , gunther than ( the “ executive ” ) . in accordance with the terms and provisions of the executive agreement : ( i ) the executive shall provide services and perform all duties typical of the offices held by the executive ; ( ii ) we shall pay to the executive a base salary of $ 10,000 per month , payable in form of cash or shares of our common stock as agreed upon , ( ii ) we shall pay to the executive an incentive bonus to be determined by the board of directors based upon our performance and the results achieved by the executive in his job performance ; ( iii ) we shall issue stock options to the executive to purchase shares of our common stock , such stock options to accrue and vest in accordance with a set schedule to be decided by the board of directors ; ( iv ) we shall pay to the executive a per annum payment of at least 1,600,000 shares of common stock and additionally whatever the board of directors may give as a bonus at their discretion in exchange for the non-compete provisions contained therein ; and ( v ) in the event of a change in control of the board of directors or a buyout or a takeover or substantial change of management , we shall pay to the executive a minimum of three years salary plus 4,800,000 shares of s-8 common stock or the equivalent in cash at the executive 's discretion . in further accordance with the terms and provisions of the executive agreement , in consideration of the payment specified above story_separator_special_tag the following analysis of our consolidated financial condition and results of operations for the years ended december 31 , 2018 and 2017 should be read in conjunction with the consolidated financial statements and other information presented elsewhere in this annual report . overview we have decided to include in our sales efforts other products aside the concealed weapons detection system . currently , customers can purchase extended warranties , which provide for replacement or repair of the unit beyond the period provided by the unconditional warranty . warranties can be purchased for various periods but generally they are for a one year period that begins after any other warranties expire . in the short term , management plans to self fund through personal investment of time and money . then the next phase of our business plan will be to raise additional funds through common stock offerings to provide working capital to finance several acquisitions . in the past , when possible we have conserved our cash by paying employees , consultants , and independent contractors with our common stock . on june 1 , 2010 , by majority shareholder consent , we adopted our 2010 service provider stock compensation plan . reserved for equity issuances under the service provider stock compensation plan are 50,000,000 shares of our common stock . on july 21 , 2010 , we registered the common stock issuable under the 2010 equity incentive plan and the 2010 service provider stock compensation plan . a total of 100,000,000 shares are reserved for issuances under the two plans . merger or acquisitions in 2018 as of this date , there are no pending acquisitions at the time of this filing . manufacturing we no longer manufacture the viewscan ( original ) since we have licensed it to a company called ipvideo corporation since we have determined a new and enhanced wider opening model is needed to continue in continue in the walk through portal security market . until we patent the new enhanced unit we are quiescent in our manufacturing activities . 20 results of operations for fiscal years ended december 31 , 2018 and december 31 , 2017 the following discussions are based on the consolidated financial statements of view systems and its subsidiaries . these charts and discussions summarize our financial statements for the years ended december 31 , 2018 and 2017 and should be read in conjunction with the financial statements , and notes thereto , included with this annual report . story_separator_special_tag serif ; margin : 0pt 0 ; text-align : justify '' > we share an office at 7833 walker dr. , greenbelt , maryland 20770. we rent on a quarter to quarter basis . our total current liabilities decreased to $ 953,885 at fiscal year ended december 31 , 2018 compared to $ 2,022,346 at fiscal year ended december 31 , 2017. as of december 31 , 2018 , our short and long term notes payable consist of the following : stockholder demand loan payable with interest at 5 % per month dated september 18 , 2009. the loan is secured by the company 's accounts receivable . the note was payable in full on december 17 , 2009 and is currently in default . 50,000 50,000 convertible promissory note with interest at 12 % per year dated january 24 , 2018 , convertible into the company 's common stock 50 % discount to the lowest trading price during the 25 trading days immediately preceding conversion . the note was due october 24 , 2018 and is currently in default 53,000 - convertible promissory note with interest at 12 % per year dated july 2 , 2018 , convertible into the company 's common stock 50 % discount to the lowest trading price during the 25 trading days immediately preceding conversion . the note is due april 2 , 2019 story_separator_special_tag 45 employment contracts and termination of employment and change-in-control arrangements gunther than - executive employment agreement mr. than is our only executive officer and had a written employment agreement which expired on january 1 , 2018. on january 1 , 2014 , our board of directors authorized the execution of that certain executive employment agreement ( the “ executive agreement ” ) with our president/chief executive officer , secretary , treasurer/chief financial officer , gunther than ( the “ executive ” ) . in accordance with the terms and provisions of the executive agreement : ( i ) the executive shall provide services and perform all duties typical of the offices held by the executive ; ( ii ) we shall pay to the executive a base salary of $ 10,000 per month , payable in form of cash or shares of our common stock as agreed upon , ( ii ) we shall pay to the executive an incentive bonus to be determined by the board of directors based upon our performance and the results achieved by the executive in his job performance ; ( iii ) we shall issue stock options to the executive to purchase shares of our common stock , such stock options to accrue and vest in accordance with a set schedule to be decided by the board of directors ; ( iv ) we shall pay to the executive a per annum payment of at least 1,600,000 shares of common stock and additionally whatever the board of directors may give as a bonus at their discretion in exchange for the non-compete provisions contained therein ; and ( v ) in the event of a change in control of the board of directors or a buyout or a takeover or substantial change of management , we shall pay to the executive a minimum of three years salary plus 4,800,000 shares of s-8 common stock or the equivalent in cash at the executive 's discretion . in further accordance with the terms and provisions of the executive agreement , in consideration of the payment specified above story_separator_special_tag the following analysis of our consolidated financial condition and results of operations for the years ended december 31 , 2018 and 2017 should be read in conjunction with the consolidated financial statements and other information presented elsewhere in this annual report . overview we have decided to include in our sales efforts other products aside the concealed weapons detection system . currently , customers can purchase extended warranties , which provide for replacement or repair of the unit beyond the period provided by the unconditional warranty . warranties can be purchased for various periods but generally they are for a one year period that begins after any other warranties expire . in the short term , management plans to self fund through personal investment of time and money . then the next phase of our business plan will be to raise additional funds through common stock offerings to provide working capital to finance several acquisitions . in the past , when possible we have conserved our cash by paying employees , consultants , and independent contractors with our common stock . on june 1 , 2010 , by majority shareholder consent , we adopted our 2010 service provider stock compensation plan . reserved for equity issuances under the service provider stock compensation plan are 50,000,000 shares of our common stock . on july 21 , 2010 , we registered the common stock issuable under the 2010 equity incentive plan and the 2010 service provider stock compensation plan . a total of 100,000,000 shares are reserved for issuances under the two plans . merger or acquisitions in 2018 as of this date , there are no pending acquisitions at the time of this filing . manufacturing we no longer manufacture the viewscan ( original ) since we have licensed it to a company called ipvideo corporation since we have determined a new and enhanced wider opening model is needed to continue in continue in the walk through portal security market . until we patent the new enhanced unit we are quiescent in our manufacturing activities . 20 results of operations for fiscal years ended december 31 , 2018 and december 31 , 2017 the following discussions are based on the consolidated financial statements of view systems and its subsidiaries . these charts and discussions summarize our financial statements for the years ended december 31 , 2018 and 2017 and should be read in conjunction with the financial statements , and notes thereto , included with this annual report . story_separator_special_tag serif ; margin : 0pt 0 ; text-align : justify '' > we share an office at 7833 walker dr. , greenbelt , maryland 20770. we rent on a quarter to quarter basis . our total current liabilities decreased to $ 953,885 at fiscal year ended december 31 , 2018 compared to $ 2,022,346 at fiscal year ended december 31 , 2017. as of december 31 , 2018 , our short and long term notes payable consist of the following : stockholder demand loan payable with interest at 5 % per month dated september 18 , 2009. the loan is secured by the company 's accounts receivable . the note was payable in full on december 17 , 2009 and is currently in default . 50,000 50,000 convertible promissory note with interest at 12 % per year dated january 24 , 2018 , convertible into the company 's common stock 50 % discount to the lowest trading price during the 25 trading days immediately preceding conversion . the note was due october 24 , 2018 and is currently in default 53,000 - convertible promissory note with interest at 12 % per year dated july 2 , 2018 , convertible into the company 's common stock 50 % discount to the lowest trading price during the 25 trading days immediately preceding conversion . the note is due april 2 , 2019
| -0- in accrued royalties payable ; ( vi ) $ 266,512 in loans from stockholders ; ( vii ) $ 129,667 in notes payable ; ( viii ) deferred revenue of $ 1,400 ( ix ) derivative liability of $ 244,004 ; . 21 the decrease in total assets during fiscal year ended december 31 , 2018 from fiscal year ended december 31 , 2017 was primarily due to the substantial decrease in cash and receivables . as of december 31 , 2018 , our total liabilities were $ 953,885 comprised of current liabilities . the decrease in liabilities during fiscal year ended december 31 , 2018 from fiscal year ended december 31 , 2017 was primarily due to the decrease in accounts payable and accrued expenses and loans from stockholders . stockholders ' deficit decreased from ( $ 2,020,867 ) for fiscal year ended december 31 , 2017 to ( $ 953,885 ) for fiscal year ended december 31 , 2018. cash flows from operating activities we have not generated positive cash flows from operating activities . cash flows from investing activities for fiscal year ended december 31 , 2018 , net cash flows used in investing activities was $ 0 compared to $ 0 for fiscal year ended december 31 , 2017. cash flows from financing activities for the fiscal year ended december 31 , 2018 , net cash flows provided from financing activities was $ 76,804 compared to $ 45,826 for fiscal year ended december 31 , 2017 , which primarily consisted of proceeds from convertible notes . plan of operation and funding we have incurred losses from operations for the past two fiscal years and had a net operating loss of $ 41,659 at fiscal year ended december 31 , 2018. our revenues from product sales have ceased and are not sufficient to cover all of our operating expenses . our auditors have expressed substantial doubt that we can continue as a going concern . we are continuing to push sales and control costs . management intends to finance our 2019 operations
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cash flows from operations in 2020 , decreased to $ 120.3 ( from $ 130.1 in 2019 ) , primarily as a result of reduced cash flows from lower segment income , due partially to the effects of the covid-19 pandemic as previously noted . in 2019 , increased to $ 130.1 ( from $ 28.0 in 2018 ) , primarily as a result of ( i ) a reduced investment in inventories and other components of working capital , reflective of lower order intake in 2019 , compared to 2018 , and lower backlog levels as of december 31 , 2019 , compared to december 31 , 2018 and ( ii ) reduced payments for incentive compensation . results of continuing operations cyclicality of end markets , seasonality and competition - the financial results of many of our businesses closely follow changes in the industries and end markets they serve . in our food and beverage reportable segment , system revenues are highly correlated to timing on capital projects , which may cause significant fluctuations in our financial performance from period to period . fluctuations in dairy commodity prices and production of dairy related products , particularly those aimed at serving the china market , can influence the timing of capital spending by many end customers in our food and beverage reportable segment . although our businesses operate in highly competitive markets , our competitive position can not be determined accurately in the aggregate or by segment since our competitors do not offer all the same product lines or serve all the same markets . in addition , specific reliable comparative figures are not available for many of our competitors . in most product groups , competition comes from numerous concerns , both large and small . the principal methods of competition are service , product performance , technical innovation and price . these methods vary with the type of product sold . we believe we compete effectively on the basis of each of these factors . see “ business ” for a discussion of our competitors . non-gaap measures - organic revenue growth ( decline ) presented herein is defined as revenue growth ( decline ) excluding the effects of foreign currency fluctuations , a business acquisition which occurred in the third quarter of 2020 , and a business disposal which occurred in the fourth quarter of 2020. we believe this metric is a useful financial measure for investors in evaluating our operating performance for the periods presented , as , when read in conjunction with our revenues , it presents a tool to evaluate our ongoing operations and provides investors with a metric they can use to evaluate our management of assets held from period to period . in addition , organic revenue growth ( decline ) is one of the factors we use in internal evaluations of the overall performance of our business . this metric , however , is not a measure of financial performance under accounting principles generally accepted in the united states ( “ gaap ” ) , should not be considered a substitute for net revenue growth ( decline ) as determined in accordance with gaap and may not be comparable to similarly titled measures reported by other companies . 24 years ended december 31 , 2020 , 2019 and 2018 the following table provides selected financial information for the years ended december 31 , 2020 , 2019 and 2018 , including the reconciliation of organic revenue decline to net revenue decline : replace_table_token_4_th revenues - for 2020 , the decrease in revenues , compared to 2019 , was primarily due to a decrease in organic revenue and , to a modest extent , a strengthening of the u.s. dollar during the period against various foreign currencies . the decrease in organic revenue was due to ( i ) a lower level of systems revenue in our food and beverage segment , including large dry-dairy systems revenues , as anticipated , as well as lower components and aftermarket service revenues , and ( ii ) reduced demand and shipments across the majority of our short-cycle industrial segment product lines and end markets , primarily associated with global macroeconomic conditions resulting from the effects of the covid-19 pandemic . additionally , the industrial segment had lower opening shippable backlog in 2020 than in 2019. for 2019 , the decrease in revenues , compared to 2018 , was due to an organic decline and a strengthening of the u.s. dollar against various foreign currencies during the period . the decrease in organic revenue was due primarily to ( i ) a decline in revenue from large dry-dairy systems projects in the food and beverage segment , consistent with the company 's strategy to methodically reduce its exposure to that market and ( ii ) a lower level of capital project revenue in our industrial segment and , reflective of a broad , global slowdown in the demand for industrial products , reductions in shipments of dehydration equipment and industrial pumps which experienced such declines primarily in the fourth quarter of 2019 relative to the comparable period of 2018. partially offsetting these declines were organic growth in process component shipments and aftermarket sales in the food and beverage segment as well as an increase in shipments of mixers in the industrial segment . see “ results of reportable segm ents ” for additional details . gross profit - for 2020 , the decrease in gross profit , compared to 2019 , was due primarily to the decrease in organic revenue discussed above . the effects of the reduction in volumes in both segments on margin in 2020 , compared to 2019 , were more than offset by strong operational and project execution on an improved mix of revenue , savings from cost reduction actions and net price benefits . story_separator_special_tag the increase in gross profit and margin for 2019 , compared to 2018 , was attributable primarily to a higher margin mix of revenue as well as net pricing benefits , improved operational execution , savings from cost reduction initiatives and costs 25 associated with the repair of a large mixer incurred in our industrial segment in the 2018 period that did not recur in the current period . see “ results of reportable segments ” for additional details . selling , general and administrative ( “ sg & a ” ) expense - for 2020 , the decrease in sg & a expense , compared to 2019 , was due primarily to lower variable selling costs , resulting from the decline in organic revenue volumes discussed above , as well as savings from cost reduction actions and reductions in discretionary spending . such reductions in sg & a expense were partially offset by an increase in variable incentive compensation . for 2019 , the increase in sg & a expense , compared to 2018 , was due primarily to ( i ) an increase in professional fees related to the further development of the company 's enterprise strategy and long-term growth plans , partially offset by ( i ) savings from cost reduction initiatives within the food and beverage segment and ( ii ) the effects of a strengthening of the u.s. dollar during the period against various currencies . intangible amortization - for 2020 , the increase in intangible amortization , compared to 2019 , was primarily due to the effects of amortization recognized on intangibles acquired in connection with the posi-lock acquisition , which occurred in the third quarter of 2020. for 2019 , the decrease in intangible amortization , compared to 2018 , was due primarily to ( i ) a reduction in intangible assets subject to amortization that resulted from the impairment of certain such assets of a business associated with the execution of large dry-dairy systems projects within our food and beverage reportable segment during the fourth quarter of 2018 and ( ii ) a strengthening of the u.s. dollar during the periods against various foreign currencies . asset impairment charges - during 2020 , we recorded an asset impairment charge of $ 3.2 , of which ( i ) $ 1.9 resulted from management 's decision during the first quarter of 2020 to discontinue a product line within the industrial reportable segment , and ( ii ) $ 1.3 resulted from management 's decision during the second quarter of 2020 to consolidate and relocate the operations of a u.s. manufacturing facility within the industrial reportable segment to existing facilities in the u.s. as well as in our emea and asia pacific regions . during 2019 , we recorded an asset impairment charge of $ 10.8 that resulted from management 's decision to market a corporate asset for sale . to a lesser extent , we recorded charges in our industrial reportable segment of $ 0.2 related to the impairment of a right-of-use lease asset , resulting from the decision to close a sales and service facility , and of $ 0.2 related to the impairment of a tangible long-lived asset . during 2018 , we recorded an impairment charge of $ 9.7 related to certain intangible assets of a business associated with the execution of large dry-dairy systems projects within our food and beverage reportable segment in conjunction with our annual intangible asset impairment test and , concurrently during the fourth quarter of 2018 , with management 's decision to rationalize this business and reduce the company 's exposure to this market . in addition , we recorded tangible long-lived asset impairment charges of ( i ) $ 4.5 associated with the rationalization of the business and ( ii ) $ 0.2 related to certain assets of the industrial segment . see note 10 to our consolidated financial statements for further discussion of asset impairment charges . restructuring and other related charges - restructuring and other related charges for 2020 related primarily to the consolidation and relocation of the operations of a u.s. manufacturing facility to existing facilities in the u.s. as well as in our emea and asia pacific regions and , more broadly , reductions in force of certain engineering , commercial , operations and other functional support employees within our segments , across all regions in which the segments operate , and the rationalization and outsourcing of certain corporate support functions . restructuring and other related charges for 2019 and 2018 included severance and other costs associated with the rationalization of a business primarily associated with the execution of large dry-dairy systems projects in the food and beverage segment , initiated during the fourth quarter of 2018 and then subsequently broadened during 2019 , in order to reduce the company 's exposure to this market . restructuring and other related charges for 2019 also included severance and other costs associated primarily with ( i ) the closure of a food and beverage segment facility in south america , ( ii ) the closure of an industrial segment manufacturing facility in the u.s. and consolidation and relocation of that facility into an existing manufacturing facility in the u.s. , ( iii ) certain industrial segment operations personnel in the emea region , and ( iv ) the closure of an industrial segment sales office and service center in north america . 26 restructuring and other related charges for 2018 also included costs associated primarily with other employee terminations and , to a lesser extent , facility consolidation , across both segments .
| results of discontinued operations we report business or asset groups as discontinued operations when , among other things , we commit to a plan to divest the business or asset group , we actively begin marketing the business or asset group , and when the sale of the business or asset group is deemed probable of occurrence within the next twelve months . 30 the following table provides selected financial information of our discontinued operations for the years ended december 31 , 2020 , 2019 and 2018 , including the reconciliation of organic revenue growth ( decline ) to net revenue growth ( decline ) : year ended december 31 , 2020 2019 2018 2020 vs. 2019 % 2019 vs. 2018 % backlog $ — $ 382.6 $ 375.4 * 1.9 orders 102.9 496.7 519.8 * ( 4.4 ) revenues $ 112.7 $ 489.7 $ 496.2 * ( 1.3 ) operating income ( loss ) ( 7.4 ) ( 171.6 ) 56.4 * * % of revenues ( 6.6 ) % ( 35.0 ) % 11.4 % other income ( expense ) , net ( 0.3 ) ( 1.6 ) 0.4 * * interest expense , net ( 1.6 ) ( 11.8 ) ( 12.8 ) * ( 7.8 ) income tax benefit ( provision ) ( 27.5 ) 35.3 ( 9.8 ) * * income ( loss ) from discontinued operations , net of tax ( 36.8 ) ( 149.7 ) 34.2 * * components of consolidated revenue growth ( decline ) : organic growth * 0.7 foreign currency * ( 2.0 ) net revenue decline < span style= '' color : # 000000 ; font-family : 'times new
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we believe reasonably dependable estimates of revenue and costs and progress applicable to various stages of a contract can be made . at times , we perform additional and or non-contractual services for little to no incremental fee to satisfy customer expectations . if changes occur in delivery , productivity or other factors used in developing our estimates of expected costs or revenues , we revise our cost and revenue estimates , and any revisions are charged to income in the period in which the facts that give rise to that revision first become known . in connection with these and certain other contracts , we may perform the work prior to when the services are billable and or payable pursuant to the contract . the termination clauses in most of our contracts provide for the payment for the value of products delivered and services performed in the event of an early termination . for saas arrangements , we evaluate whether the customer has the contractual right to take possession of our software at any time during the hosting period without significant penalty and whether the customer can feasibly maintain the software on the customer 's hardware or enter into another arrangement with a third party to host the software . if we determine that the customer has the contractual right to take possession of our software at any time during the hosting period without significant penalty and can feasibly maintain the software on the customer 's hardware or enter into another arrangement with a third party to host the software , we recognize the license , professional services and hosting services revenues pursuant to asc 985-605 , software revenue recognition . for saas arrangements that do not meet the criteria for recognition under asc 985-605 , we account for the elements under asc 605-25 , multiple element arrangements using all applicable facts and circumstances , including whether ( i ) the element has stand-alone value , ( ii ) there is a general right of return and ( iii ) the revenue is contingent on delivery of other elements . we allocate the contract value to each element of the arrangement that qualifies for treatment as a separate element based on vendor-specific objective evidence of fair value ( vsoe ) , and if vsoe is not available , third party evidence , and if third party evidence is unavailable , estimated selling price . for professional services associated with saas arrangements that we determine do not have stand-alone value to the customer or are contingent on delivery of other elements , we recognize the services revenue ratably over the remaining contractual period once hosting has gone live and we may begin billing for the hosting services . we record amounts that have been invoiced in accounts receivable and in deferred revenue or revenues , depending on whether the revenue recognition criteria have been met . in connection with certain of our contracts , we have recorded retentions receivable or unbilled receivables consisting of costs and estimated profit in excess of billings as of the balance sheet date . many of the contracts which give rise to unbilled receivables at a given balance sheet date are subject to billings in the subsequent accounting period . we review unbilled receivables and related contract provisions to ensure we are justified in recognizing revenue prior to billing the customer and that we have objective evidence which allows us to recognize such revenue . in addition , we have a sizable amount of deferred revenue which represents billings in excess of revenue earned . the majority of this liability consists of maintenance billings for which payments are made in advance and the revenue is ratably earned over the maintenance period , generally one year . we also have deferred revenue for those contracts in which we receive a deposit and the conditions in which to record revenue for the service or product has not been met . on a periodic basis , we review by customer the detail components of our deferred revenue to ensure our accounting remains appropriate . 24 intangible assets and goodwill . our business acquisitions typically result in the creation of goodwill and other intangible asset balances , and these balances affect the amount and timing of future period amortization expense , as well as expense we could possibly incur as a result of an impairment charge . the cost of acquired companies is allocated to identifiable tangible and intangible assets based on estimated fair value , with the excess allocated to goodwill . accordingly , we have a significant balance of acquisition date intangible assets , including software , customer related intangibles , trade name and goodwill . these intangible assets ( other than goodwill ) are amortized over their estimated useful lives . we currently have no intangible assets with indefinite lives other than goodwill . when testing goodwill for impairment quantitatively , we first compare the fair value of each reporting unit with its carrying amount . if the carrying amount of a reporting unit exceeds its fair value , a second step is performed to measure the amount of potential impairment . in the second step , we compare the implied fair value of reporting unit goodwill with the carrying amount of the reporting unit 's goodwill . if the carrying amount of reporting unit goodwill exceeds the implied fair value of that goodwill , an impairment loss is recognized . the fair values calculated in our impairment tests are determined using discounted cash flow models involving several assumptions . the assumptions that are used are based upon what we believe a hypothetical marketplace participant would use in estimating fair value . we base our fair value estimates on assumptions we believe to be reasonable but that are unpredictable and inherently uncertain . we evaluate the reasonableness of the fair value calculations of our reporting units by comparing the total of the fair value of all of our reporting units to our total market capitalization . story_separator_special_tag our annual goodwill impairment analysis , which we performed quantitatively during the second quarter of 2013 , did not result in an impairment charge . during 2013 , we did not identify any triggering events which would require an update to our annual impairment review . all intangible assets ( other than goodwill ) are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable . recoverability of other intangible assets is measured by comparison of the carrying amount to estimated undiscounted future cash flows . the assessment of recoverability or of the estimated useful life for amortization purposes will be affected if the timing or the amount of estimated future operating cash flows is not achieved . such indicators may include , among others : a significant decline in expected future cash flows ; a sustained , significant decline in stock price and market capitalization ; a significant adverse change in legal factors or in the business climate ; unanticipated competition ; and reductions in growth rates . in addition , products , capabilities , or technologies developed by others may render our software products obsolete or non-competitive . any adverse change in these factors could have a significant impact on the recoverability of goodwill or other intangible assets . share-based compensation . we have a stock option plan that provides for the grant of stock options to key employees , directors and non-employee consultants . we estimate the fair value of share-based awards on the date of grant using the black-scholes option valuation model . share-based compensation expense includes the estimated effects of forfeitures , which will be adjusted over the requisite service period to the extent actual forfeitures differ , or are expected to differ from such estimates . changes in estimated forfeitures are recognized in the period of change and will also impact the amount of expense to be recognized in future periods . forfeiture rate assumptions are derived from historical data . we estimate stock price volatility at the date of grant based on the historical volatility of our common stock . estimated option life is determined using the weighted-average period the stock options are expected to be outstanding based primarily on the options ' vesting terms , remaining contractual life and the employees ' expected exercise based on historical patterns . determining the appropriate fair-value model and calculating the fair value of share-based awards at the grant date requires considerable judgment , including estimating stock price volatility , expected option life and forfeiture rates . 25 analysis of results of operations and other the following discussion compares the historical results of operations on a basis consistent with gaap for the years ended december 31 , 2013 , 2012 and 2011. replace_table_token_4_th 26 2013 compared to 2012 revenues software licenses and royalties . the following table sets forth a comparison of our software licenses and royalties revenues for the years ended december 31 : replace_table_token_5_th since march 2012 , we have acquired two companies which provide financial and human capital management software solutions to the k-12 education market and one company that provides enterprise permitting , land management , licensing and regulatory software solutions to governmental agencies . the results of these acquisitions are included in our ess segment from the dates of their acquisitions . excluding the impact of acquisitions , total software licenses and royalties revenue increased 12 % compared to 2012. approximately half of the growth was due to an increase of $ 2.3 million in royalties on sales of microsoft dynamics ax by other microsoft partners compared to the prior year . we record royalty revenue when the fees are fixed or determinable , which is known when we receive notice of the amounts earned pursuant to our royalty arrangements which are generally 30 to 60 days after each quarterly reporting period . royalty revenue is dependent upon sales volume from microsoft partners , as well as the timing of maintenance renewals , and can vary substantially from period to period . excluding the impact of acquisitions , software licenses grew 5 % mainly due to increased investments in product development over the past few years . however , software license growth was reduced somewhat because of a growing number of customers choosing our subscription-based options , rather than purchasing the software under a traditional perpetual software license arrangement . subscription-based arrangements result in no software license revenues in the initial year as compared to traditional perpetual software license arrangements but generate higher overall subscription-based services revenue over the term of the contract . we had 100 new customers that entered into subscription-based arrangements in 2013 compared to 76 new customers in 2012. subscriptions . the following table sets forth a comparison of our subscription revenues for the years ended december 31 : replace_table_token_6_th subscription-based services revenue primarily consists of revenues derived from our saas arrangements , which utilize the tyler private cloud . as part of our subscription-based services , we also provide e-filing that simplify the filing and management of court related documents for courts and law offices . revenues for e-filing are derived from transaction fees or in some cases fixed fee arrangements . the contract term for saas arrangements range from one to 10 years but are typically for a period of three to six years . excluding the impact of acquisitions , subscription-based services revenue increased 37 % compared to 2012. new saas customers as well as existing customers who converted to our saas model provided the majority of the subscription-based revenue increase . in 2013 , we added 100 new customers and 63 existing customers elected to convert to our saas model . e-filing services also contributed approximately $ 5.0 million of the subscription revenue increase .
| property appraisal outsourcing services include : the physical inspection of commercial and residential properties ; data collection and processing ; computer analysis for property valuation ; preparation of tax rolls ; community education ; and arbitration between taxpayers and the assessing jurisdiction . 22 we monitor and analyze several key performance indicators in order to manage our business and evaluate our financial and operating performance . these indicators include the following : revenues we derive our revenues from five primary sources : sale of software licenses and royalties ; subscription-based arrangements ; software services ; maintenance and appraisal services . subscriptions and maintenance are considered recurring revenue sources and comprised approximately 61 % of our revenue in 2013. the number of new saas customers and the number of existing customers who convert from our traditional software arrangements to our saas model are a significant driver to our business , together with new software license sales and maintenance rate increases . in addition , we also monitor our customer base and churn as we historically have experienced very low customer turnover . during 2013 , our customer turnover was approximately 2 % . cost of revenues and gross margins our primary cost component is personnel expenses in connection with providing software implementation , subscription-based services , maintenance and support , and appraisal services to our customers . we can improve gross margins by controlling headcount and related costs and by expanding our revenue base , especially from those products and services that produce incremental revenue with minimal incremental cost , such as software licenses and royalties , subscription-based services , and maintenance and support . our appraisal projects are cyclical in nature , and we often employ appraisal personnel on a short-term basis to coincide with the life of a project . as of december 31 , 2013 , our total employee count increased to 2,573 from 2,388 at december 31 , 2012. selling , general and administrative ( sg & a ) expenses the primary components of sg & a expenses are administrative and sales personnel salaries and commissions , share-based compensation expense , marketing expense , rent and professional fees . sales commissions typically fluctuate with revenues and share-based compensation expense generally increases when the market price of our stock increases . other
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if we fail to complete the development of any of our drug candidates or obtain regulatory approval for them , our ability to generate future revenue will be adversely affected . research and development expenses research and development expenses consist of costs associated with our research activities , including the development of our drug candidates . our research and development expenses consist of : · expenses related to research and development personnel , including salaries and benefits , travel and stock-based compensation ; · external research and development expenses incurred under arrangements with third parties , such as contract research organizations , clinical investigative sites , laboratories , manufacturing organizations and consultants ; · license fees , including maintenance fees and patent expense paid to md anderson in connection with the license agreement ; and · costs of materials used during research and development activities . costs and expenses that can be clearly identified as research and development are charged to expense as incurred in accordance with generally accepted accounting policies ( “ gaap ” ) . advance payments , including nonrefundable amounts , for goods or services that will be used or rendered for future research and development activities are deferred and capitalized . such amounts will be recognized as an expense as the related goods are delivered or the related services are performed . if the goods will not be delivered , or services will not be rendered , then the capitalized advance payment is charged to expense . we expect research and development expenses associated with the completion of the associated clinical trials to be substantial and to increase over time . the successful development of our drug 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 drug candidates or the period , if any , in which material net cash inflows from our drug candidates may commence . this is due to the numerous risks and uncertainties associated with developing drugs , including the uncertainty of : · the rate of progress , results and costs of completion of ongoing clinical trials of our drug candidates ; · the size , scope , rate of progress , results and costs of completion of any potential future clinical trials and preclinical trials of our drug candidates that we may initiate ; · competing technological and market developments ; · the performance of third-party manufacturers and suppliers ; 48 · the ability of our drug candidates , if they receive regulatory approval , to achieve market success ; and · disputes or other developments relating to proprietary rights , including patents , litigation matters and our ability to obtain patent protection for our drug candidates . a change in the outcome of any of these variables with respect to the development of a drug candidate could mean a significant change in the costs and timing associated with the development of that drug candidate . for example , if the fda or other regulatory authority were to require us to conduct clinical trials beyond those which we currently anticipate will be required for the completion of clinical development of a drug 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 . general and administrative expenses our general and administrative expenses consist primarily of salaries and benefits for management and administrative personnel , professional fees for legal , accounting and other services , travel costs and facility-related costs such as rent , utilities and other general office expenses . story_separator_special_tag times new roman , times , serif ; margin : 0pt 0 ; text-indent : 0.5in '' > financing activities . net cash provided by financing activities for the year ended december 31 , 2017 was $ 5.1 million . net cash provided by financing activities consisted of $ 3.6 million from the 2017 registered direct offering and $ 1.5 million from the warrant exercises , both as described below . for the year ended december 31 , 2016 operating activities . net cash used in operating activities for the year ended december 31 , 2016 was $ 8.1 million . net cash used in operating activities consisted primarily of the net loss for the period of $ 6.8 million , an increase in other current assets of $ 0.7 million and a decrease in current liabilities of $ 0.1 million . these were partially offset by non-cash stock-based compensation expense of $ 0.8 million , a decrease in prepaid drug product for testing of $ 0.2 million and technology license amortization expense of $ 0.2 million . the change in fair value of the warrant liability of $ 1.7 million did not have an impact on net cash used in operating activities during the period . 50 investing activities . net cash used in investing activities for the year ended december 31 , 2016 consisted of capital expenditures totaling $ 0.3 million which were primarily related to equipment purchases for our new research and development laboratory . financing activities . net cash provided by financing activities for the year ended december 31 , 2016 was $ 9.0 million . net cash provided by financing activities consisted of net proceeds of $ 9.3 million from the registered direct offering described below , which closed on july 5 , 2016. these proceeds were partially offset by additional financing costs incurred during the period of $ 0.3 million . 2017 shelf registration statement on december 20 , 2016 , we filed a shelf registration on form s-3 with the sec , which was declared effective by the sec on january 9 , 2017 ( file no . story_separator_special_tag 333-215205 ) ( the “ 2017 shelf registration statement ” ) , at which time the offering of unsold securities under a previous shelf registration statement on form s-3 filed with the sec , which was declared effective by the sec on january 13 , 2014 ( file no . 333-192102 ) ( the “ 2014 shelf registration statement ” ) , was deemed terminated pursuant to rule 415 ( a ) ( 6 ) under the securities act . the 2017 registration statement was filed to register the offering , issuance and sale of ( i ) up to $ 125.0 million of our common stock , preferred stock , warrants to purchase common stock or preferred stock or any combination thereof , either individually or in units , including offers and sales of our common stock under the controlled equity offering sm sales agreement ( the “ sales agreement ” ) with cantor fitzgerald & co. ( “ cantor fitzgerald ” ) described below and ( ii ) up to 544,178 shares of our common stock pursuant to the exercise of warrants that were issued in a registered direct offering in 2014 and in the 2016 registered direct offering , described below . the foregoing does not constitute an offer to sell or the solicitation of an offer to buy securities , and shall not constitute an offer , solicitation or sale in any jurisdiction in which such offer , solicitation or sale would be unlawful prior to registration or qualification under the securities laws of that jurisdiction . “ at the market ” offering on june 24 , 2015 , we entered into the sales agreement with cantor fitzgerald , as sales agent , pursuant to which we may offer and sell , from time to time , through cantor fitzgerald shares of our common stock . sales of shares of common stock under the sales agreement will be made pursuant to the 2017 shelf registration statement and a related prospectus filed with the sec on january 10 , 2017 , for an aggregate offering price of up to $ 25.0 million . under the sales agreement , cantor fitzgerald may sell shares by any method deemed to be an “ at the market ” offering as defined in rule 415 under the securities act . we will pay cantor fitzgerald a commission of 3.4 % of the aggregate gross proceeds from each sale of shares under the sales agreement and have agreed to provide cantor fitzgerald with customary indemnification and contribution rights . we have also agreed to reimburse cantor fitzgerald for certain specified expenses . pursuant to the securities purchase agreement described below , we are subject to certain restrictions on our ability to offer and sell shares of our common stock under the sales agreement . as of december 31 , 2017 , we have not offered or sold any shares of common stock under the sales agreement . 2016 registered direct offering on june 29 , 2016 , we entered into a securities purchase agreement ( the “ securities purchase agreement ” ) with certain healthcare focused institutional investors pursuant to which we agreed to sell an aggregate of 588,235 shares of our common stock and warrants to purchase up to 294,118 shares of our common stock for gross proceeds of approximately $ 10.0 million under the 2014 registration statement ( the “ 2016 registered direct offering ” ) . we also issued warrants to purchase up to 25,000 shares of common stock in a private placement to h.c. wainwright & co. , llc and its designees as compensation for its services as a placement agent in connection with the 2016 registered direct offering ( together with the warrants to purchase up to 294,118 shares , the “ 2016 warrants ” ) . the 2016 registered direct offering closed on july 5 , 2016. the net proceeds to the company from the 2016 registered direct offering , after deducting the placement agent 's fees and expenses and our offering expenses , and excluding the proceeds , if any , from the exercise of the warrants issued in the offering , were approximately $ 9.3 million . for more information , see note 1 to the consolidated financial statements included herein . 51 warrant exercises on may 21 , 2017 , the company entered into warrant exercise agreements ( the “ exercise agreements ” ) with certain holders ( the “ exercising holders ” ) of the 2016 warrants and warrants to purchase up to 250,000 shares of common stock that we issued in january 2014 ( the “ 2014 warrants , ” and together with the 2016 warrants , the “ original warrants ” ) . the exercising holders owned , in the aggregate , original warrants exercisable for 441,176 shares of our common stock . pursuant to the exercise agreements , the exercising holders and the company agreed that the exercising holders would exercise their original warrants with respect to 430,000 shares of our common stock underlying such original warrants for a reduced exercise price equal to $ 3.80 per share ( the “ reduced exercise price ” ) . the exercising holders also subsequently exercised their original warrants for the remaining 11,176 shares of our common stock underlying such original warrants for the reduced exercise price . in connection with the execution of the exercise agreements , we issued to each exercising holder a new warrant ( each , a “ new warrant ” ) to purchase shares of our common stock equal to the number of shares of our common stock received by such exercising holder upon exercise of such exercising holder 's original warrants .
| 49 loss on extinguishment of warrant liability . the loss on extinguishment of the warrant liability for the year ended december 31 , 2017 resulted in a non-cash loss of $ 0.4 million . there was no gain or loss on extinguishment of the warrant liability for the year ended december 31 , 2016. net loss . our net loss for the year ended december 31 , 2017 was $ 7.0 million , an increase of $ 0.3 million compared to the year ended december 31 , 2016. deemed dividend related to warrant conversion . the deemed dividend related to the warrant conversion was $ 1.0 million for the year ended december 31 , 2017. the company did not have a deemed dividend for the year ended december 31 , 2016. net loss attributable to common stockholders . our net loss attributable to common stockholders for the year ended december 31 , 2017 was $ 8.1 million , an increase of $ 1.3 million compared to the year ended december 31 , 2016. net loss per share . net loss per share , both basic and diluted , was $ 0.80 per share for the year ended december 31 , 2017 , compared to $ 0.73 per share for the year ended december 31 , 2016. net loss per share is calculated using the weighted average number of shares of common stock outstanding during the applicable periods and excludes stock options and warrants because they are antidilutive . liquidity and capital resources overview we have not generated significant revenues to date . since our inception , we have funded our operations primarily through public and private offerings of our capital stock and other securities . we expect to finance our foreseeable cash requirements through cash on hand , cash from operations , debt financings and public or private equity offerings . additionally , we may seek collaborations and license arrangements for our drug candidates . we may seek
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impairment loss impairment loss for the year ended 2019 was $ 3,765. the impairment losses related to a write-off of goodwill and intangible assets due to the fair value being less than its carrying value within our hearing help express reporting unit . there were no impairment losses identified for the prior year periods . interest income ( expense ) , net interest income for 2019 was $ 920 compared to expense of $ 314 in 2018. the change was primarily due to the full debt repayment during the second half of 2018 with the proceeds from our august 2018 public offering and our investment of proceeds into investment securities in 2019. other expense , net in 2019 , other expense , net was $ 743 compared to $ 815 in 2018. the change in other expense , net primarily related to reduced losses incurred in our signison partnership accounted for under the equity method . 25 income tax expense income taxes were as follows : replace_table_token_6_th the expense in 2019 and 2018 was primarily due to foreign taxes on international operations . the company is in a net operating loss ( “ nol ” ) position for us federal and state income tax purposes , but our deferred tax asset related to the nol carry forwards have been largely offset by a full valuation allowance . we incur minimal income tax expense for the current period domestic operations . we have approximately $ 30,871 of gross nol carry forwards available to offset future u.s. federal income taxes that begin to expire in 2023. loss on disposal of discontinued operations loss on disposal of discontinued operations was $ 1,116 and $ 0 for the years ended december 31 , 2019 and december 31 , 2018 due to the disposal of assets of our united kingdom subsidiary in 2019. loss from discontinued operations loss from discontinued operations , net of income taxes , was $ 597 and $ 1,215 for the years ended december 31 , 2019 and december 31 , 2018 , respectively , due to the operations of our united kingdom subsidiary . results of operations : 2018 compared with 2017 consolidated net revenue below is a summary of our revenue by main markets for the years ended december 31 , 2018 and 2017 : replace_table_token_7_th 26 in 2018 , we experienced a 41.5 percent increase in medical revenue primarily driven by higher sales to medtronic while the rest of the medical market remained relatively stable . net revenue in our hearing health business for the year ended december 31 , 2018 , excluding our hearing health direct-to-end-consumer business , increased 16.1 percent over the same period in 2017. the increase was primarily due to gains in our value-based hearing healthcare markets . net revenue in our hearing health direct-to-end-consumer business for the year ended december 31 , 2018 increased 5.6 percent over the same period in 2017 , primarily due to an increase in advertising , which drove sales . net revenue to the professional audio device sector increased 17.4 percent in 2018 compared to the same period in 2017. intricon will continue to leverage its core technology in professional audio to support existing customers . gross profit gross profit , both in dollars and as a percent of revenue , for the years ended december 31 , 2018 and 2017 , were as follows : replace_table_token_8_th the 2018 gross profit increase as a percentage of revenue over the prior year was primarily due to higher overall sales volumes slightly offset by ramp-up costs associated with the new manufacturing facility . sales and marketing , general and administrative and research and development expenses sales and marketing , general and administrative and research and development expenses for the years ended december 31 , 2018 and 2017 were : replace_table_token_9_th sales and marketing expenses increased over the prior year due to increased hearing health direct-to-end-consumer advertising spending , bad debt expense , other outsider services and support costs . general and administrative and research and development expenses were greater than the prior year period primarily due to increased other external services and support costs to drive business growth . interest expense interest expense for 2018 was $ 314 , a decrease of $ 402 from $ 716 in 2017. the decrease in interest expense was primarily due to lower average outstanding debt balances during the year due to the full debt repayment during the second half of 2018 with the proceeds from our august 2018 public offering . other expense , net in 2018 , other expense , net was $ 815 compared to $ 406 in 2017. the change in other expense primarily related to additional losses incurred in our partnerships accounted for under the equity method during the current period . 27 income tax expense income taxes were as follows : replace_table_token_10_th the expense in 2018 and 2017 was primarily due to foreign taxes on international operations . the company is in a net operating loss ( “ nol ” ) position for us federal and state income tax purposes , but our deferred tax asset related to the nol carry forwards have been largely offset by a full valuation allowance . we incur minimal income tax expense for the current period domestic operations . as of december 31 , 2018 , we had approximately $ 38,432 of nol carry forwards available to offset future u.s. federal income taxes that begin to expire in 2023. loss on disposal of discontinued operations loss on disposal of discontinued operations was $ 0 and $ 164 for the years ended december 31 , 2018 and december 31 , 2017 due to the sale of the company 's cardiac diagnostic monitoring business in 2017. loss from discontinued operations loss from discontinued operations was $ 1,215 and $ 1,170 for the story_separator_special_tag years ended december 31 , 2018 and december 31 , 2017 , respectively , due to the operations of the united kingdom subsidiary and the company 's cardiac diagnostic monitoring business . loss allocated to non-controlling interest loss allocated to non-controlling interest of $ 0 and $ 938 for the years ended december 31 , 2018 and december 31 , 2017 was primarily due to losses within hhe . in december 2017 , we obtained 100 % ownership of hhe , therefore a non-controlling interest no longer existed in 2018. liquidity and capital resources our primary sources of cash have been cash flows from operations , bank borrowings , investment income and sales of equity . for the last three years , cash has been used for repayments of bank borrowings , the acquisition of hhe and other assets , as well as purchases of equipment and working capital to support growth . as of december 31 , 2019 , we had approximately $ 9,162 of cash , cash equivalents and restricted cash on hand . sources of our cash for the year ended december 31 , 2019 have been from our operating and investing activities , as described below . consolidated net working capital decreased to $ 53,349 at december 31 , 2019 from $ 62,897 at december 31 , 2018. our cash flows from operating , investing and financing activities , as reflected in the statement of cash flows for the years ended december 31 , are summarized as follows : replace_table_token_11_th 28 operating activities . in 2019 , the most significant items that contributed to the $ 1,525 provided by operating activities were add backs for non-cash depreciation and amortization , impairment losses , and stock-based compensation , as well as decreases in accounts receivable , and inventory , partially offset by increases in contract assets as well as decreases in accounts payable and accrued expenses . days sales in inventory decreased from 79 at december 31 , 2018 to 73 at december 31 , 2019. days payables outstanding decreased from 65 days at december 31 , 2018 to 52 days at december 31 , 2019. day sales outstanding decreased from 34 days at december 31 , 2018 to 29 days at december 31 , 2019. cash generated from operations may be affected by a number of factors . see “ forward looking statements ” and “ item 1a risk factors ” contained in this form 10-k for a discussion of some of the factors that can negatively impact the amount of cash we generate from our operations . investing activities . in 2019 , net cash used in investing activities of $ 227 consisted of $ 4,593 in purchases of machinery and equipment , $ 818 for the acquisition of other assets and $ 609 for the investment in several of the company 's joint ventures , including signison and others , partially offset by $ 5,793 net proceeds derived from investment securities . financing activities . in 2019 , net cash used in financing activities of $ 109 was comprised primarily of payments for financing leases and withholding of common stock upon vesting of restricted stock units for payment of withholding taxes , partially offset by the exercise of stock options and employee stock purchase plan shares . we had the following bank arrangements at december 31 : 2019 2018 total borrowing capacity under existing facilities $ 9,589 $ 13,884 facility borrowings : domestic revolving credit facility — — capital expenditure loan facility — — domestic term loan — — foreign overdraft and letter of credit facility — — total borrowings and commitments — — remaining availability under existing facilities $ 9,589 $ 13,884 during the second half of 2018 , we utilized proceeds from our public offering and repaid all of our domestic and foreign bank debt . during 2019 , we did not borrow on any of our available facilities . domestic credit facilities the company and its domestic subsidiaries are parties to a credit facility with cibc bank usa . the credit facility , as amended through december 31 , 2019 , provides for a $ 7,000 revolving credit facility , with a $ 200 sub facility for letters of credit . under the revolving credit facility , the availability of funds depends on a borrowing base composed of stated percentages of the company 's eligible trade receivables and eligible inventory , and eligible equipment less a reserve . the credit facility matures on december 15 , 2022 . 29 on april 17 , 2019 , the company entered into a thirteenth amendment to the loan and security agreement with cibc bank usa which : reduced our borrowing capacity to its current $ 7,000 level ; lessened restrictions surrounding acquisitions , business investments , distributions and disposition of assets ; eliminated the mandatory prepayment requirement with respect to proceeds from asset sales and capital and debt financings ; and eliminated the annual capital expenditure covenant . the company was in compliance with all applicable covenants under the credit facility as of december 31 , 2019. foreign credit facility in addition to its domestic credit facilities , the company 's wholly-owned subsidiary , intricon , pte ltd. , entered into an international senior secured credit agreement with oversea-chinese banking corporation ltd. that provides for an asset-based line of credit . borrowings bear interest at a rate of .75 % to 2.5 % over the lender 's prevailing prime lending rate . capital adequacy we believe that funds expected to be generated from operations , funds maintained in liquid investments and funds available under our revolving credit loan facility will be sufficient to meet our anticipated cash requirements for operating needs for at least the next 12 months .
| 23 results of operations : 2019 compared with 2018 consolidated net revenue our net revenue is comprised of two segments : our body-worn device segment ( consisting of three markets : medical , hearing health , and professional audio ) and our hearing health direct-to-end-consumer ( dtec ) segment . below is a summary of our revenue by main markets for the years ended december 31 , 2019 and 2018 : replace_table_token_3_th in 2019 , we experienced an 8.5 percent increase in medical revenue driven by higher sales to medtronic within the diabetes business as well as growth within our medical coils business within the other medical business . intricon currently serves the market by offering medical manufacturers the capabilities to design , develop and manufacture medical devices that are easier to use , are more miniature , use less power , and are lighter . intricon has a strong presence in the diabetes market with its medtronic partnership . the company believes there are growth opportunities in this market as well other emerging home care markets that could benefit from its capabilities to develop devices that are more technologically advanced , smaller and lightweight . in addition to the diabetes growth , the company experienced strong sales growth in medical coils , increasing 82 percent from the prior year . net revenue in our hearing health business for the year ended december 31 , 2019 decreased 19.8 percent over the same period in 2018. the decrease was primarily within the value based indirect-to-end-consumer business due to restructuring activities within a large insurance customer 's hearing health business , as they pivot towards a more traditional “ brick-and-mortar ” approach that no longer aligns with our partnership strategy to reach the end customer . in addition , net revenue in our hearing health direct-to-end-consumer business decreased due to lower advertising spend in 2019 in an effort to reduce costs . the company is optimistic about the progress that has been made and the long-term prospects of the value-based hearing healthcare market . market dynamics , such as low penetration rates , an aging population , regulatory scrutiny , and the need
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however , we believe that there are opportunities to increase the number of visits to our media properties from direct visits , social media and search engine referrals by building high-quality products that provide a better user experience and lead to increased engagement . for example , livestrong.com has seen sustained growth in traffic over the last two years after experiencing a decline in visits following algorithm changes in 2013. we have also seen promising increases in traffic when we moved category-specific content from ehow.com to new vertically focused media properties , including cuteness.com , techwalla.com , leaf.tv and sapling.com , and we will continue to consider migrating content to additional category-specific properties to most effectively leverage our content library . in order to improve the quality of our products , we have redesigned our websites ; refined our content library ; rationalized ad unit density ; and developed a greater variety of content formats , particularly video content and formats better suited for mobile devices and consumption on other platforms . we are also working with a network of contributors and influencers to create more authoritative and engaging content and we are focused on building strong followings on various social media platforms such as facebook and pinterest , where we also publish our content . although these changes resulted in certain increased operating expenses and lower revenue initially , we believe that by providing consumers with an improved user and content experience , we will be able to continue to increase the number of visits and revenue in a sustained fashion over the long-term . we also believe that there are opportunities to increase our advertising revenue by continuing to optimize our ad product stack , increasing branded ad sales through direct sellers and offering more innovative products such as native advertisements and sponsored content in order to increase the overall ad unit rates we receive . during the three months ended december 31 , 2016 , we began to see the positive impact of these efforts as revenue per visit , or rpv , increased slightly as compared to the three months ended september 30 , 2016. historically , the majority of our advertising revenue has been generated by our relationship with google . while google continues to be our primary advertising vendor for advertising monetization , we have been significantly diversifying our monetization partners since 2015 and expect to continue to do so in the future . google also serves as one of our primary technology platform partners in connection with our programmatic advertising sales offering . any change in the type of services that google provides to us , or to the terms of our agreements with google , could adversely impact our results of operations . separation on august 1 , 2014 , we completed the separation of rightside from the company , resulting in two independent , publicly traded companies ( the “ separation ” ) . following the separation , rightside operates our former domain name services business , while we continue to own and operate our marketplaces and media businesses . the separation was structured as a pro rata tax-free dividend involving the distribution of all outstanding shares of rightside common stock to holders of our common stock as of the august 1 , 2014 record date ( the “ distribution ” ) . immediately following the distribution , we completed a 1-for-5 reverse stock split of our outstanding and treasury shares of common stock . the financial results of rightside are presented as discontinued operations in our consolidated statements of operations for all periods prior to fiscal year 2015 in this annual report on form 10-k. unless it is disclosed , all financial results represent continuing operations . 40 sale of cracked business in april 2016 , we completed the sale of substantially all of the assets relating to our cracked business , including the cracked.com humor website , to scripps media , inc. , a subsidiary of the e.w . scripps company , for a cash purchase price of $ 39.0 million . a portion of the purchase price equal to $ 3.9 million was placed into escrow at closing to cover certain of our post-closing indemnification obligations . any remaining portion of the escrow amount that is not subject to then-pending claims will be paid to us in july 2017 , on the 15-month anniversary of the closing date of the sale . revenue for the cracked business for the 2016 period through the sale date of april 12 , 2016 was $ 1.8 million . the cracked business had a pretax loss of $ 1.9 million for the 2016 period through the sale date of april 12 , 2016 , excluding allocations for corporate costs , but including stock-based compensation expense resulting from the sale . revenue for the cracked business for the years ended december 31 , 2015 and 2014 was $ 10.9 million and $ 9.2 million , respectively . the cracked business had pretax income of $ 3.1 million and $ 3.3 million for the years ended december 31 , 2015 and 2014 , respectively , excluding allocations for corporate costs . content studio realignment in june 2016 , we took certain actions to streamline our content publishing studio business ( formerly known as studiod ) and better integrate the business into our broader media service offering . as part of this realignment , we reduced the staffing within this business by 35 full-time employees and integrated the remaining employees into our other media businesses . following this realignment , we are continuing to create content for third party publishers and for brands using a more integrated approach . we expect these actions to result in annualized savings of approximately $ 8.0 million . revenue for the years ended december 31 , 2016 , 2015 and 2014 , we reported revenue of $ 113.5 million , $ 126.0 million and $ 172.4 million , respectively . story_separator_special_tag for the years ended december 31 , 2016 , 2015 and 2014 , our marketplaces revenue accounted for 58 % , 41 % and 21 % of our total revenue , respectively , and our media revenue accounted for 42 % , 59 % and 79 % of our total revenue , respectively . the revenue generated by our marketplaces service offering has higher costs associated with it as compared to our media service offering due to variable product costs , including outsourced product manufacturing costs , artist royalties , marketing costs , and shipping and handling costs . during the year ended december 31 , 2016 , a higher percentage of our total revenue was generated by our marketplaces service offering as compared to the prior year . if our revenue sources continue to shift from our media service offering to our marketplaces service offering , our total costs relative to our revenue will be negatively impacted . key business metrics we regularly review a number of business metrics , including the following key metrics , to evaluate our business , measure the performance of our business model , identify trends impacting our business , determine resource allocations , formulate financial projections and make strategic business decisions . measures which we believe are the primary indicators of our performance are described below . while we believe that the number of transactions , average revenue per transaction , number of visits and revenue per visit are currently the key metrics for understanding our results of operations , in the third quarter of 2016 we also began reporting video views for our media properties and social media followers for all properties as key metrics . we believe that video views and social media followers have become key metrics because we believe that these are key areas of growth in digital media , and that we can expand our audience and grow traffic by increasing our followers on social media platforms and creating highly sharable content such as videos . furthermore , as users increasingly consume content in video form or on social media platforms , we believe that there will be increasing ability to monetize this content more effectively so it is important that we grow our audiences in these channels . 41 marketplaces metrics · number of transactions : we define transactions as the total number of society6 and saatchi art transactions successfully completed online by a customer during the applicable period . · average revenue per transaction : we calculate average revenue per transaction by dividing marketplaces revenue for a period ( not including revenue generated by the other art fair ) by the number of transactions initiated in that period . media metrics · visits : we define visits as the total number of times users access our content across ( a ) one of our owned and operated media properties and or ( b ) one of our partners ' media properties , to the extent that the visited partner web pages are hosted by our content services . in each case , breaks of access of at least 30 minutes constitute a unique visit . · revenue per visit ( “ rpv ” ) : we define rpv as media revenue per one thousand visits . · video views : we define video views as the total number of views of all of our media videos on facebook and youtube , or on leaf group sites or third party sites via youtube or any other embedded video player , during the applicable period . we include in this metric ( i ) views of videos published by any of our media properties , including livestrong.com , ehow , category-specific sites and international sites ; and ( ii ) videos viewed on multiple youtube channels affiliated with certain of our properties . social media metrics · social media followers : we define social media followers as the sum of all facebook , pinterest , instagram and twitter followers , as well as all youtube subscribers , across our media or marketplaces properties , as applicable , as of the last day of the relevant period . social media followers includes subscribers for multiple youtube channels affiliated with certain leaf group properties . individuals are counted more than once if they follow multiple properties or the same property on multiple platforms , or if they subscribe to multiple youtube channels . the following table sets forth our key business metrics for the periods presented : replace_table_token_7_th ( 1 ) for a discussion of these period-to-period changes in the number of transactions , average revenue per transaction , number of visits and rpv and how they impacted our financial results , see “ results of operations ” below . ( 2 ) marketplaces metrics do not include revenue or transactions related to the other art fair business acquired in july 2016 . ( 3 ) media metrics include visits and revenue generated by cracked.com and other non-core media properties prior to their respective disposition dates and are not adjusted to be shown on a pro forma basis . 42 ( 4 ) video views for the years ended december 31 , 2015 and 2014 are not available because we did not start formally tracking this metric for all media properties until the third quarter of 2015 . ( 5 ) we did not track social media followers across all platforms prior to the third quarter of 2016. as of december 31 , 2015 , our marketplaces properties had 0.8 million total social media followers on facebook and youtube , respectively , and our media properties had 10.3 million total social media followers on facebook and youtube , respectively . social media followers was not tracked for the year ended december 31 , 2014. basis of presentation revenue our revenue is primarily derived from products and services sold through our art and design marketplaces and from sales of advertising .
| for the year ended december 31 , 2016 , marketplaces average revenue per transaction was $ 55.37 , which excludes revenue generated through transactions consummated by the other art fair , decreasing from $ 56.38 in the prior year period due to increased promotional discounts . marketplaces revenue increased by $ 16.8 million , or 47 % , to $ 52.2 million for the year ended december 31 , 2015 , as compared to $ 35.4 million for the year ended december 31 , 2014. the number of transactions increased 29 % to 925,111 in the year ended december 31 , 2015 from 715,343 in the prior year period , driven primarily by new product introductions , higher conversion rates , and increased traffic on society6 . for the year ended december 31 , 2015 , marketplaces average revenue per transaction was $ 56.38 , increasing 14 % from $ 49.47 in the prior year period due 48 primarily to a shift towards higher priced items on society6 , as well as the addition of saatchi art in august 2014 , which has significantly higher average revenue per transaction . media revenue media revenue decreased by $ 26.5 million , or 36 % , to $ 47.3 million for the year ended december 31 , 2016 , as compared to $ 73.8 million for the year ended december 31 , 2015. visits decreased by 19 % to 2,730 million visits in the year ended december 31 , 2016 from 3,374 million visits in the year ended december 31 , 2015 primarily due to the divestitures of certain media properties , including cracked , as well as continued search and related traffic declines on ehow . rpv decreased by 21 % , to $ 17.33 in the year ended december 31 , 2016 from $ 21.87 in the year ended december 31 , 2015 , as a result of lower ad monetization yields primarily due to a shift to a higher mix of mobile traffic with lower rpv than desktop visits and our mid-year strategic shift to launch several category-specific media properties leveraging topics and content from ehow . media revenue decreased by $ 63.2 million , or 46 % , to $ 73.8 million for the year ended december 31 , 2015 , as compared to
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the end customers for border protection systems are typically government agencies , many of which are in oil-based economies and war zones . in 2015 , we saw a significant decline in demand for border protection systems due to the volatility of oil prices with moderate increases in demand in the following years . the non-destructive testing market utilizes x-ray imaging to scan items for inspection of manufacturing defects and product integrity in a wide range of industries including aerospace , automotive , food packaging , metal castings and 3d printing . we provide x-ray sources , digital flat panel detectors , high voltage connectors and image processing software to oem customers , system integrators and manufacturers . in addition , new applications for x-ray sources are being developed , such as sterilization of food and its packaging . story_separator_special_tag style= '' padding-left:0px ; text-indent:0px ; line-height : normal ; padding-top:10px ; '' > replace_table_token_11_th ( 1 ) research and development expenses include $ 1.2 million and $ 1.4 million allocated to us by varian in fiscal years 2016 and 2015 , respectively . ( 2 ) selling , general and administrative expenses include $ 37.7 million and $ 38.0 million of corporate costs allocated to us by varian in fiscal years 2016 and 2015 , respectively . research and development research and development expenses increased in fiscal year 2016 over fiscal year 2015 primarily due to $ 7.1 million in additional expenses from our acquisitions completed in the second half of fiscal year 2015 , partially offset by a reduction in spending on our current projects . selling , general and administrative selling , general and administrative expenses increased in fiscal year 2016 over fiscal year 2015 due to $ 10.2 million in additional operating expenses from our acquisitions completed in the second half of fiscal year 2015. interest and other income ( expense ) , net the following table summarizes our interest and other income ( expense ) , net : replace_table_token_12_th the change in interest and other income ( expense ) , net in fiscal year 2016 compared to fiscal year 2015 was primarily due to a loss from our equity method investments in fiscal year 2016 , compared to income in the year-ago period , and higher interest expense allocated to us as a result of varian 's increased borrowings in fiscal year 2016. taxes on earnings replace_table_token_13_th our effective tax rate decreased in fiscal year 2016 over fiscal year 2015 primarily due to the retroactive reinstatement of the federal research and development credit . due to the timing of the prior lapse and the retroactive reinstatement of the federal research and development credit , the company received seven quarters of benefit in fiscal year 2016 , but only four quarters of benefit in fiscal year 2015. liquidity and capital resources 43 prior to the separation , varian provided financing , cash management and other treasury services to us . as part of varian , we were dependent upon varian for all of our working capital and financing requirements , as varian uses a centralized approach to cash management and financing of its operations . cash transferred to and from varian is reflected in net parent investment in the accompanying historical condensed consolidated financial statements . accordingly , none of varian 's cash , cash equivalents or debt at the corporate level has been assigned to us in the condensed consolidated financial statements . cash and cash equivalents included in the condensed consolidated balance sheets primarily reflect cash and cash equivalents from acquired entities that are specifically attributable to us . we assess our liquidity in terms of our ability to generate cash to fund our operating and investing activities . we continue to generate substantial cash from operating activities and believe that our operating cash flow , credit facility , and other sources of liquidity will be sufficient to allow us to continue to invest in our existing businesses , consummate strategic acquisitions and manage our capital structure on a short and long-term basis . although we believe that our future cash from operations , together with our access to banking and capital markets , will provide adequate resources to fund our operating and financing needs , our access to , and the availability of , financing on acceptable terms in the future will be affected by many factors , including : ( i ) the liquidity of the overall capital markets and ( ii ) the current state of the economy . there can be no assurances that we will continue to have access to these markets on terms acceptable to us . see “ risk factors ” for a further discussion . at september 29 , 2017 we had $ 463.9 million in long-term debt and $ 20.0 million of current maturities of long-term debt , net of deferred issuance costs of $ 10.1 million . cash and cash equivalents the following table summarizes our cash and cash equivalents : ( in millions ) september 29 , 2017 september 30 , 2016 $ change % change cash and cash equivalents $ 83.3 $ 36.5 $ 46.8 128 % in accordance with the separation and distribution agreement , we transferred $ 27.1 million of cash during the twelve months ended september 29 , 2017 , which represented all cash and cash equivalents in excess of $ 5 million to varian , other than any cash and cash equivalents held by mevis on january 28 , 2017 and held by any varex entities in order to complete the transfer of certain assets and subsidiaries from varian . funds held to complete these asset and subsidiary transfers was approximately $ 7.9 million as of september 29 , 2017. cash flows replace_table_token_14_th net cash provided by operating activities . cash from operating activities consists primarily of net earnings adjusted for certain non-cash items , including share-based compensation , depreciation , amortization of intangible assets , deferred income taxes , income and loss from equity investments and the effect of changes in operating assets and liabilities . story_separator_special_tag for fiscal year 2017 , net cash provided by operating activities was $ 74.6 million and consisted of net earnings of $ 52.0 million , increases from non-cash items of $ 29.2 million and decreases from operating assets and liabilities activities of $ 6.6 million . operating assets and liabilities activity primarily consisted of increases in accounts receivables of $ 23.1 million and increases in inventories of $ 4.2 million , partially offset by increases in accounts payable and accrued liabilities of $ 33.0 million . for fiscal year 2016 , net cash provided by operating activities was $ 74.2 million and consisted of net earnings of $ 69.0 million , non-cash items of $ 31.4 million and decreases from operating assets and liabilities activities of $ 26.2 million . operating assets and liabilities activity included increases in inventories of $ 23.5 million and increases in accounts receivable of $ 4.6 million . 44 for fiscal year 2015 , net cash provided by operating activities was $ 85.2 million and consisted of net earnings of $ 80.8 million , non-cash items of $ 19.5 million and decreases from operating assets and liabilities activities of $ 15.1 million . operating assets and liabilities activity included increases in inventories of $ 25.9 million , decreases in accrued liabilities of $ 7.2 million and decreases in accounts receivable of $ 19.3 million . net cash used in investing activities . net cash used in investing activities was $ 292.0 million , $ 21.6 million , and $ 102.1 million for the fiscal years 2017 , 2016 and 2015 , respectively . net cash used in investing activities for fiscal year 2017 related to the acquired detector business for $ 271.8 million and capital expenditures for property plant and equipment of $ 20.2 million . net cash used in investing activities for fiscal year 2016 related to capital expenditures for property plant and equipment of $ 28.9 million offset by sales of available-for-sale securities of $ 8.6 million . net cash used in investing activities for fiscal year 2015 related to capital expenditures for property plant and equipment of $ 34.3 million and acquisitions for $ 67.9 million . net cash provided by ( used in ) financing activities . financing activities for the fiscal year 2017 primarily consisted of borrowings under our credit agreements of $ 749.0 million and net transfers from varian of $ 5.0 million , partially offset by distributions to varian of $ 227.1 million , repayments of borrowings of $ 255.0 million and payment of debt issuance costs of $ 11.9 million . financing activities for the fiscal years 2016 and 2015 primarily consisted of transfers to varian of $ 36.7 million and from varian of $ 35.8 million , respectively . days sales outstanding trade accounts receivable days sales outstanding ( “ dso ” ) was 66 days at september 29 , 2017 and september 30 , 2016. our accounts receivable and dso are impacted by a number of factors , primarily including the timing of product shipments , collections performance , payment terms , the mix of revenues from different regions and the effects of economic instability . contractual obligations in october 2013 , we entered into an amended agreement with dpix and other parties that , among other things , provides us with the right to 50 % of dpix 's total manufacturing capacity produced after january 1 , 2014. the amended agreement requires us to pay for 50 % of the fixed costs ( as defined in the amended agreement ) , as determined at the beginning of each calendar year . for the remainder of calendar year 2017 , we estimate that we have fixed cost commitments of $ 4.1 million related to this amended agreement . the fixed cost commitment for future periods will be determined and approved by the dpix board of directors at the beginning of each calendar year . the amended agreement will continue unless the ownership structure of dpix changes ( as defined in the amended agreement ) . in october 2015 , we committed to grant the noncontrolling shareholders of mevis : ( 1 ) an annual recurring net compensation of 0.95 per mevis share ; and , ( 2 ) a put right for their mevis shares at 19.77 per mevis share . as of september 29 , 2017 , noncontrolling shareholders together held approximately 0.5 million shares of mevis , representing 26.3 % of the outstanding shares . the following table summarizes , as of september 29 , 2017 , the total amount of future payments due in various future periods : replace_table_token_15_th we lease office space under non-cancelable operating leases . the leases expire at various dates through 2025 , excluding extensions at our option , and contain provisions for rental adjustments , including in certain cases , adjustments based on increases in the consumer price index . the leases generally contain renewal provisions for varying periods of time . for further discussion regarding our borrowings , see note 7 , `` borrowings '' of the notes to the consolidated financial statements . 45 contingencies from time to time , we are a party to or otherwise involved in legal proceedings , claims and government inspections or investigations and other legal matters both inside and outside the united states , arising in the ordinary course of our business or otherwise . such matters are subject to many uncertainties and outcomes are not predictable with assurance . see note 10 “ commitments and contingencies ” in the notes to the consolidated financial statements , which discussion is incorporated herein by reference . off-balance sheet arrangements in conjunction with the sale of our products in the ordinary course of business , we provide standard indemnification of business partners and customers for losses suffered or incurred for property damages , death and injury and for patent , copyright or any other intellectual property infringement claims by any third parties with respect to our products . the terms of these indemnification arrangements are generally perpetual .
| the decrease in medical gross margin percentage was primarily due to the reasons stated above and higher sales of ct tubes in the prior-year . the decrease in industrial gross margin percentage was primarily due to the reasons stated above and a change in product mix . operating expenses replace_table_token_5_th ( 1 ) research and development expenses included $ 0.0 million and $ 1.2 million allocated to us by varian in fiscal years 2017 and 2016 , respectively . ( 2 ) selling , general and administrative expenses include $ 12.4 million and $ 37.7 million of corporate costs allocated to us by varian in fiscal years 2017 and 2016 , respectively . research and development the increase in research and development expenses in fiscal year 2017 was due to acceleration and development of ct x-ray tubes and digital detectors , and includes approximately $ 7.2 million related to the acquired detector business . we are committed to investing in the business to support long-term growth and believe long-term research and development expenses of approximately 8 % to 10 % of annual revenues is the appropriate range that will allow us to continue to innovate and bring new products to market for our global oem customers . selling , general and administrative selling , general and administrative expenses in fiscal year 2017 increased due to approximately $ 5.0 million of acquisition and integration related costs , increased marketing personnel expenses , partially offset by lower corporate and administration expenses as the prior year included costs allocated from varian . selling , general and administrative expenses includes approximately $ 7.7 million related to the acquired detector business . interest and other income ( expense ) , net 40 the following table summarizes our interest and other income ( expense ) , net : replace_table_token_6_th the increase in interest and other income ( expense ) , net was due to increases in interest expense as a result of borrowings under our credit agreement ,
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revenues for the same period were $ 3,745,290 while gross profit from operations was $ 862,103 . during the three months ended december 31 , 2018 , our refining and marketing cost of revenues were $ 5,972,018 , which included the processing costs at kmtex of $ 650,481 . revenues for the same period were $ 5,553,741 , while gross deficit from operations was $ 418,277 . commodity prices decreased approximately 34 % for the three months ended december 31 , 2019 , compared to the same period in 2018 . the average posting ( u.s. gulfcoast residual fuel no . 6 3 % ) for the three months ended december 31 , 2019 decreased $ 21.02 per barrel from a three month average of $ 61.59 per barrel during the three months ended december 31 , 2018 to $ 40.57 per barrel during the three months ended december 31 , 2019 . overall gross profit increased 135 % and our margin per barrel increased approximately 91 % for the three months ended december 31 , 2019 , compared to the same period in 2018 . in our street collections and third party purchasing we were focused on lowering the prices paid to generators and suppliers for used motor oil during 2019 . additionally , our street collections operations had to quickly shift its services model where we implemented service fees for the handling of used motor oil , the managing of used oil filters , and various other services performed by our collection division during the period compared to this being a cost and us paying for these services to be completed in certain prior periods . volumes in our street collections were up 19 % for the three months ended december 31 , 2019 as compared to the same period in 2018. one of our key initiatives continues to be a focus on growing our own volumes of collected material and displacing the third party oil processed in our facilities . we had selling , general and administrative expenses of $ 6,652,623 for the three months ended december 31 , 2019 , compared to $ 5,258,572 from the prior year 's period , an increase of $ 1,394,051 or 27 % from the prior period . this increase is primarily due to the additional selling , general and administrative expenses incurred during the period as a result of increased personnel costs , legal expenses , and insurance expenses related to our expansion of trucks and facilities through organic growth , as well as increased accounting , legal and consulting expenses related to our tensile transaction . we had total other expense of $ 1,671,958 for the three months ended december 31 , 2019 , compared to total other income of $ 2,049,633 for the three months ended december 31 , 2018. the main reason for the change in other expense during 2019 was the loss of $ 819,239 during 2019 , compared to the gain of $ 2,888,687 during 2018 , on change in value of derivative liability , in connection with certain warrants granted in june 2015 and may 2016 , as described in greater detail in `` note 14. preferred stock and temporary equity `` to the consolidated financial statements included herein under `` part ii '' - '' item 8- financial statements and supplementary data '' . we had income before income taxes of $ 1,372,090 for the three months ended december 31 , 2019 compared to a loss before income taxes of $ 43,450 for the three months ended december 31 , 2018 . the increase in income was mainly due to the decrease in costs of revenues as discussed above , partially offset by a $ 3,707,926 increase in loss on change in derivative warrant liability related to the non-cash adjustment relating to the value of the june 2015 and may 2016 warrants , as discussed above . we had net income attributable to vertex energy , inc. of $ 1,434,202 for the three months ended december 31 , 2019 , compared to a net loss attributable to vertex energy , inc. of $ 201,333 for the three months ended december 31 , 2018 . the increase in net income was primarily due to increased direct collection volumes of product into our facilities during the current year and increased finished product volumes , coupled with the decrease in cost of revenues as discussed above . 64 results of operations for the fiscal year ended december 31 , 2019 compared to the fiscal year ended december 31 , 2018 replace_table_token_5_th 65 each of our segment 's gross profit during these periods was as follows : replace_table_token_6_th our revenues and cost of revenues are significantly impacted by fluctuations in commodity prices . increases in commodity prices typically result in increases in revenue and cost of revenues . our gross profit is to a large extent a function of the market discount we are able to obtain in purchasing feedstock , as well as how efficiently management conducts operations . total revenues decreased 10 % for the year ended december 31 , 2019 , compared to the year ended december 31 , 2018 , due primarily to decreases in commodity prices during the period of approximately 10 % . the average posting ( u.s. gulfcoast residual fuel no . 6 3 % ) for 2019 decreased $ 7.31 per barrel from a 2018 average of $ 61.21 per barrel to an average of $ 53.90 per barrel during 2019 . on average , prices we received for our products decreased 10 % for the year ended december 31 , 2019 , compared to the year ended december 31 , 2018 . volume for our black oil segment increased 5 % during fiscal 2019 compared to 2018 . story_separator_special_tag this volume increase is attributable to the increased amount of product which was processed through our facilities in columbus , ohio , the ownership of 65 % of which was transferred to tensile in connection with the heartland spv ( discussed above under “ part i ” - “ item 1. business ” - “ recent material transactions ” ) , effective january 1 , 2020 , and marrero , louisiana during the period ended december 31 , 2019 , as compared to the same period in 2018 . our per barrel margin in the black oil segment decreased approximately 10 % for the year ended december 31 , 2019 from the same period in 2018 . the decrease in margins was due to the issues experienced during the first half of the year at our refining facilities relating to weather events , extended turnarounds and overall operational challenges which caused an increase in operating expenses . our black oil segment , which includes our tcep facility , the marrero facility and the heartland facility ( of which we own 35 % effective january 1 , 2020 ) , generated revenues of $ 139,269,164 for the year ended december 31 , 2019 , with cost of revenues of $ 113,196,583 , producing a gross profit of $ 26,072,581 . during the year ended december 31 , 2018 , these revenues were $ 143,836,981 with cost of revenues of $ 116,524,465 , producing a gross profit of $ 27,312,516 . gross profit decreased for the year ended december 31 , 2019 , compared to 2018 , as a result of increased operating expenses through our various facilities offset by diligent management of our street collections and pricing . total volume company-wide was up 5 % during fiscal 2019 compared to 2018 , and our total per barrel margin decreased approximately 8 % for fiscal 2019 , compared to 2018 . this decrease was a result of increased operating expenses experienced at our facilities during 2019 . we experienced increased turnaround costs during the year as a result of hurricane/weather delays as well as substantially increased transportation expenses due to weather and fog along the gulf coast and mississippi river . our refining and marketing segment experienced a decrease in production of 63 % for its fuel oil cutterstock product for the year ended december 31 , 2019 , compared to the same period in 2018 , as a result of a focus on the production of higher quality finished products , which in turn has decreased the amount of volume being produced , and our fuel oil cutterstock commodity prices decreased approximately 12 % over the same period . the average posting ( u.s. gulfcoast no . 2 waterborne ) during 2019 decreased $ 7.18 per barrel from $ 61.08 per barrel for the year ended december 31 , 2018 to $ 53.90 per barrel for the year ended december 31 , 2019 . 66 our pygas production decreased 3 % for the year ended december 31 , 2019 , compared to the same period in 2018 and commodity prices decreased approximately 10 % for our pygas finished product for 2019 , compared to the same period in 2018 . our gasoline blendstock volumes decreased 100 % for the year ended december 31 , 2019 as compared to 2018 . this was a result of no longer processing gasoline blendstocks in our refining and marketing division as the processing margins were no longer economically feasible . the lower margins were a result of decreases in available feedstock volumes . we have also had to assess the volume of fuel oil cutterstocks that we manage due to enhanced quality of products being demanded in the marketplace . overall volume for the refining and marketing segment decreased 34 % during the year ended december 31 , 2019 , compared to the year ended december 31 , 2018 . margins per barrel increased in the refining and marketing segment as a result of changes we have made in the products being managed and processed as well as the pricing of these products . during the year ended december 31 , 2019 , our refining and marketing cost of revenues were $ 10,651,069 , of which the processing costs for our refining and marketing business located at kmtex were $ 2,007,295. revenues for the same period were $ 12,957,767 , while gross profit from operations was $ 2,306,698 . during the year ended december 31 , 2018 , our refining and marketing cost of revenues were $ 22,290,277 , which included the processing costs at kmtex of $ 2,223,633. revenues for the same period were $ 22,935,482 , while gross profit was $ 645,205 . our recovery segment includes the business operations of vertex recovery management as well as our group iii base oil business . vertex acts as penthol 's exclusive agent to provide marketing , sales , and logistical duties of group iii base oil from the united arab emirates to the united states . revenues for this segment decreased during 2019 , as compared to the same period in 2018 . this segment periodically participates in project work that is not ongoing , thus we expect to see fluctuations in revenue and gross profit from period to period . these projects are typically bid related and can take time to line out and get started ; however we believe these are very good projects for the company and we anticipate more in the upcoming periods . revenues for this division decreased 20 % as a result of a significant decrease in steel volumes and prices during 2019 , as compared to 2018. volumes of petroleum products acquired in our recovery business were up 36 % during the twelve months ended december 31 , 2019 , as compared to the same period in 2018. we are continuing to focus on volume growth in this division . prevailing prices of certain commodity products can significantly impact our revenues and cash flows .
| 60 refining and marketing - the refining and marketing segment generates revenues relating to the sales of finished products . the refining and marketing segment gathers hydrocarbon streams in the form of petroleum distillates , transmix and other chemical products that have become off-specification during the transportation or refining process . these feedstock streams are purchased from pipeline operators , refineries , chemical processing facilities and third-party providers , and then processed at a third-party facility under our direction . the end products are typically three distillate petroleum streams ( gasoline blendstock , pygas and fuel oil cutterstock ) , which are sold to major oil companies or to large petroleum trading and blending companies . the end products are delivered by barge and truck to customers . recovery - the recovery segment is a generator solutions company for the proper recovery and management of hydrocarbon streams . we own and operate a fleet of trucks and other vehicles used for shipping and handling equipment and scrap materials . our revenues are affected by changes in various commodity prices including crude oil , natural gas , # 6 oil and metals . cost of revenues black oil - cost of revenues for our black oil segment are comprised primarily of feedstock purchases from a network of providers . other cost of revenues include processing costs , transportation costs , purchasing and receiving costs , analytical assessments , brokerage fees and commissions , and surveying and storage costs . refining and marketing - the refining and marketing segment incurs cost of revenues relating to the purchase of feedstock , purchasing and receiving costs , and inspection and processing of the feedstock into gasoline blendstock , pygas and fuel oil cutter by a third party . cost of revenues also includes broker 's fees , inspection and transportation costs . recovery - the recovery segment incurs cost of revenues relating to the purchase of hydrocarbon products , purchasing and receiving costs , and inspection . cost of revenues also includes broker 's fees , inspection
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our inventory levels were up by 21.8 percent as of the end of fiscal 2015 compared to the end of fiscal 2014 mainly due to incremental inventory from the acquisition of the boss business , higher snow thrower product inventory , and increased inventory levels of certain residential segment and landscape contractor equipment products . additionally , average inventory levels during fiscal 2015 compared to fiscal 2014 were up as we built inventory in anticipation of strong demand for new products , including products impacted by the continued phase-in of applicable tier 4 diesel engine emission requirements and other regulations in europe , as well as incremental inventory from the acquisition of the boss business . average net working capital ( accounts receivable plus inventory less trade payables ) as a percent of net sales was 16.0 percent as of the end of fiscal 2015 compared to 15.1 percent as of the end of fiscal 2014. our domestic field inventory levels were up as of the end of fiscal 2015 compared to the end of fiscal 2014 due , in part , to strong shipments of new products and anticipated retail demand for our products in fiscal 2016. we continued our history of paying quarterly cash dividends in fiscal 2015. we increased our fiscal 2015 quarterly cash dividend by 25 percent to $ 0.25 per share compared to our quarterly cash dividend in fiscal 2014 of $ 0.20 per share . our stock repurchase program returned $ 107 million to our shareholders during fiscal 2015 , which reduced our number of shares outstanding . this reduction resulted in a benefit to our diluted net earnings per share of $ 0.05 per share in fiscal 2015 compared to fiscal 2014 . 29 destination prime our current multi-year initiative , `` destination prime , '' began our journey into our second century . similar to our previous destination 2014 initiative , this three-year initiative is intended to help us drive revenue and earnings growth and further improve productivity , while also continuing our century-long commitment to innovation , relationships , and excellence . through our destination prime initiative , we will strive to achieve our goals by pursuing a progression of milestones for organic revenue growth , operating earnings , and working capital . organic revenue growth . we intend to pursue strategic growth of our existing businesses and product categories with an annual organic revenue growth goal . the organic revenue growth goal of our destination prime initiative is to achieve at least five percent organic revenue growth each fiscal year of this initiative . we define organic revenue growth as the increase in net sales , less net sales from acquisitions that occurred in the prior twelve-month period . in fiscal 2015 , we fell short of this goal by achieving 4.1 percent organic revenue growth . operating earnings growth . the operating earnings goal is to raise operating earnings as a percentage of net sales to 13 percent or higher by the end of fiscal 2017. in fiscal 2015 , we made progress towards this goal as we realized 12.5 percent of operating earnings as a percentage of net sales . working capital . the working capital goal of our destination prime initiative is to drive down average net working capital as a percentage of net sales to 13 percent or lower by the end of fiscal 2017. in fiscal 2015 , our average net working capital as a percentage of net sales was 16.0 percent . outlook for fiscal 2016 as we move into fiscal 2016 , we intend to build on the positive momentum from fiscal 2015 and continue with our commitment to providing an array of innovative products and services to customers around the world . we expect to focus on capitalizing market opportunities and driving profitability with investments aimed at generating customer demand and gaining market share . we believe our fiscal 2016 financial performance will include , among many others , the following main factors : we anticipate fiscal 2016 net sales in our professional segment to increase compared to fiscal 2015 due , in part , to the momentum of demand generated by the positive reception of our landscape contractor equipment products introduced in fiscal 2015 , as well as continued growth in the landscape contractor market . we also expect continued growth in the rental equipment market and strong demand for new rental and specialty construction equipment products . sales in the golf and grounds and irrigation markets are expected to slightly increase in fiscal 2016 as compared to fiscal 2015 , as we also anticipate continued positive customer response generated from new products . precision irrigation products remain a long-term focus for us as continued market growth and demand for efficient watering solutions is expected to drive demand for our products . we expect our increased manufacturing capacity and infrastructure that expanded our market presence for micro-irrigation products to contribute to our anticipated sales growth of micro-irrigation products in fiscal 2016. we also expect our residential segment net sales in fiscal 2016 to be similar to our sales volumes in fiscal 2015 as we anticipate positive momentum to continue in fiscal 2016 from new products released in fiscal 2015. we intend to continue to focus on our international markets to grow revenues , and our long-term goal is for our international sales to comprise a larger percentage of our total consolidated net sales . we plan to continue investing in new products with a worldwide focus and leverage our infrastructure around the world , connecting us more closely to our customers and increasing our global presence . however , uncertainty with the economies of key international markets is expected to linger into fiscal 2016 , which may hamper our international net sales growth . story_separator_special_tag we expect international net sales to be slightly up in fiscal 2016 compared to fiscal 2015 unless foreign currency exchange rates further decline , which could adversely affect our international net sales in fiscal 2016. we expect net earnings and diluted net earnings per share to be up in fiscal 2016 compared to fiscal 2015 , driven mainly by our anticipated sales growth , improvement in our gross margin rate , and continued leveraging of our sg & a costs . additionally , we anticipate a further reduction in our diluted shares outstanding due to anticipated continued repurchases of our common stock . as announced on december 3 , 2015 , our board of directors increased our fiscal 2016 first quarter cash dividend by 20 percent to $ 0.30 per share compared to the quarterly cash dividend paid in the first quarter of fiscal 2015 and authorized the repurchase of up to an additional 4,000,000 shares of our common stock in open-market or in privately negotiated transactions . in fiscal 2015 , our average net working capital was higher than our expectations . therefore , in fiscal 2016 , we plan to place increased emphasis on improving asset utilization with a focus on reducing the amount of working capital in the supply chain . we anticipate our average net working capital as a percentage of net sales in fiscal 2016 to decrease as compared to fiscal 2015 , in part , as we continue to transition certain receivables to our red iron joint venture . additionally , we also anticipate average inventory levels to be lower in fiscal 2016 compared to fiscal 2015 . 30 story_separator_special_tag net sales . worldwide net sales in fiscal 2014 were $ 2,172.7 million compared to $ 2,041.4 million in fiscal 2013 , an increase of 6.4 percent . this net sales improvement was attributable to the following factors : increased sales of professional segment products due to strong demand for landscape contractor equipment , demand for our drip irrigation solutions in agricultural markets , and the successful introduction of new and enhanced products that were well received by customers , including products in the golf market and rental and specialty construction equipment market . additionally , improved price realization , as well as incremental sales from acquisitions of $ 2.8 million , contributed to our net sales growth in fiscal 2014. increased sales of residential segment products due to strong shipments and demand for snow thrower products and parts as a result of heavy snow falls during the 2013-2014 snow season in key markets and strong preseason demand for the 2014-2015 snow season . additionally , higher shipments and demand for our zero-turn radius riding mowers and increased sales of electric trimmers and blowers contributed to our sales growth . however , residential segment net sales in australia were down due to unfavorable weather conditions and foreign currency exchange rate changes . our overall net sales in international markets slightly increased by 1.2 percent in fiscal 2014 compared to fiscal 2013. however , changes in foreign currency exchange rates reduced our total net sales by approximately $ 5 million in fiscal 2014. gross margin . gross margin slightly increased by 10 basis points to 35.6 percent in fiscal 2014 from 35.5 percent in fiscal 2013. this improvement was mainly the result of the following factors : improved price realization . cost reduction efforts from productivity and process improvement initiatives . somewhat offsetting those positive factors were : lower proportion of professional segment sales that carry higher average gross margins than our residential segment . unfavorable foreign currency exchange rate movements . slightly higher prices paid for commodities in fiscal 2014 compared to fiscal 2013 , mainly for steel and resins . costs for a supplier component rework issue that impacted certain walk power mowers . selling , general , and administrative expense . sg & a expense increased $ 16.0 million , or 3.2 percent , in fiscal 2014 compared to fiscal 2013. sg & a expense rate in fiscal 2014 decreased 70 basis points to 23.5 percent compared to 24.2 percent in fiscal 2013 due to fixed sg & a costs spread over higher sales volumes . however , the increase in sg & a expense of $ 16.0 million was driven mainly by the following factors : increased sales and marketing expense of $ 6 million . investments in engineering and new product development that resulted in higher expense of $ 5 million . higher incentive compensation expense of $ 4 million as a result of improved financial performance . incremental costs from acquisitions of approximately $ 2 million . somewhat offsetting those increases in sg & a expense was a decline in product liability expense of $ 2 million from favorable claims experience . interest expense . interest expense for fiscal 2014 decreased by 4.8 percent compared to fiscal 2013 as a result of higher capitalized interest from capital projects . other income , net . other income for fiscal 2014 was $ 8.7 million compared to $ 12.3 million in fiscal 2013 , a decrease of $ 3.5 million . this decrease in other income , net was primarily due to recovery for a litigation settlement of $ 3 million in fiscal 2013 that was not duplicated in fiscal 2014 and higher foreign currency exchange rate losses of $ 0.3 million in fiscal 2014 compared to fiscal 2013. provision for income taxes . the effective tax rate for fiscal 2014 was 32.2 percent compared to 31.7 percent in fiscal 2013. the increase in the effective tax rate was attributable to the benefit in fiscal 2013 for the retroactive reenactment of the domestic research tax credit , which expired on december 31 , 2013. this 32 increase was partially offset by a discrete benefit relating to the change in tax accounting method filed that allowed us to recoup basis for previously disposed assets and changes in the mix of international earnings .
| worldwide net sales in fiscal 2015 were $ 2,390.9 million compared to $ 2,172.7 million in fiscal 2014 , an increase of 10.0 percent . this net sales change was attributable to the following factors : increased sales of professional segment products driven by the acquisition of the boss business resulted in incremental net sales of $ 128.5 million for fiscal 2015. in addition , our professional segment net sales were positively impacted by higher shipments of landscape contractor and specialty equipment products due to continued market growth and increased demand for our innovative product offerings and newly introduced products . however , sales of irrigation products were down primarily due to unfavorable weather conditions in key markets , and sales of micro-irrigation products were lower due to unfavorable foreign currency exchange rates and continued adverse political and economic conditions in key international markets . increased sales of residential segment products due to strong shipments and demand for our newly introduced zero-turn radius riding and walk power mower products and expanded product placement . however , residential segment net sales in australia were down due to unfavorable foreign currency exchange rate changes . our overall net sales in international markets slightly decreased by 1.9 percent in fiscal 2015 compared to fiscal 2014 due to unfavorable foreign currency exchange rate fluctuations that reduced our total net sales by approximately $ 47 million in fiscal 2015. gross margin . gross margin represents gross profit ( net sales less cost of sales ) as a percentage of net sales . see note 1 of the notes to consolidated financial statements , in the section entitled `` cost of sales , '' for a description of expenses included in cost of sales . gross margin decreased by 60 basis points to 35.0 percent in fiscal 2015 from 35.6 percent in fiscal 2014. this decline was mainly the result of the following factors : unfavorable foreign currency exchange rate movements . purchase accounting impact of the incremental charge for the sale of inventory that was written-up to fair
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in may 2014 , march 2016 , april 2016 , and december 2016 , the financial accounting standards board ( fasb ) issued accounting standards update ( asu ) 2014-09 , revenue from contracts with customers , asu 2016-08 , revenue from contracts with customers , principal versus agent considerations , asu 2016-10 , revenue from contracts with customers , identifying performance obligations and licensing , asu 2016-12 , revenue from contracts with customers , narrow scope improvements and practical expedients , and asu 2016-20 , technical corrections and improvements to topic 606 , revenue from contracts with customer ( collectively the standards ) , respectively , which supersede most of the current revenue recognition requirements ( asc 606 ) . the core principle of the new guidance is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services . we implemented the new standards beginning january 1 , 2018 using a modified retrospective transition method . the principal change relates to how the new standard requires healthcare providers to estimate the amount of variable consideration to be included in the transaction price up to an amount which is probable that a significant reversal will not occur . the most common forms of variable consideration we experience are amounts for services provided that are ultimately not realizable from a customer . there were no changes to revenues or other revenues upon implementation . under the new standards , our estimate for unrealizable amounts will continue to be recognized as a reduction to revenue . the bad debt expense historically reported will not materially change . 27 for asc 606 , there is an implied contract between us and the patient upon each patient visit . separate contractual arrangements exist between us and third party payors ( e.g . insurers , managed care programs , government programs , workers ' compensation programs which establish the amounts the third parties pay on behalf of the patients for covered services rendered . while these agreements are not considered contracts with the customer , they are used for determining the transaction price for services provided to the patients covered by the third party payors . the payor contracts do not indicate performance obligations for us , but indicate reimbursement rates for patients who are covered by those payors when the services are provided . at that time , we are obligated to provide services for the reimbursement rates stipulated in the payor contracts . the execution of the contract alone does not indicate a performance obligation . for self-paying customers , the performance obligation exists when we provide the services at established rates . the difference between our established rate and the anticipated reimbursement rate is accounted for as an offset to revenue – contractual allowance . we determine allowances for doubtful accounts based on the specific agings and payor classifications at each clinic . the provision for doubtful accounts is included in clinic operating costs in the statements of net income . patient accounts receivable , which are stated at the historical carrying amount net of contractual allowances , write-offs and allowance for doubtful accounts , includes only those amounts we estimate to be collectible . the following table details the revenue related to the various categories . replace_table_token_7_th contractual allowances . contractual allowances result from the differences between the rates charged for services performed and expected reimbursements by both insurance companies and government sponsored healthcare programs for such services . medicare regulations and the various third party payors and managed care contracts are often complex and may include multiple reimbursement mechanisms payable for the services provided in our clinics . we estimate contractual allowances based on our interpretation of the applicable regulations , payor contracts and historical calculations . each month we estimate our contractual allowance for each clinic based on payor contracts and the historical collection experience of the clinic and applies an appropriate contractual allowance reserve percentage to the gross accounts receivable balances for each payor of the clinic . based on our historical experience , calculating the contractual allowance reserve percentage at the payor level is sufficient to allow us to provide the necessary detail and accuracy with our collectability estimates . however , the services authorized and provided and related reimbursement are subject to interpretation that could result in payments that differ from our estimates . payor terms are periodically revised necessitating continual review and assessment of the estimates made by management . our billing systems may not capture the exact change in our contractual allowance reserve estimate from period to period . therefore , in order to assess the accuracy of our revenues and hence our contractual allowance reserves , our management regularly compares its cash collections to corresponding net revenues measured both in the aggregate and on a clinic-by-clinic basis . in the aggregate , the historical difference between net revenues and corresponding cash collections has generally reflected a difference within approximately 1 % of net revenues . additionally , analysis of subsequent period 's contractual write-offs on a payor basis reflects a difference within approximately 1 % between the actual aggregate contractual reserve percentage as compared to the estimated contractual allowance reserve percentage associated with the same period end balance . as a result , we believe that a reasonable likely change in the contractual allowance reserve estimate would not be more than 1 % at december 31 , 2019. for purposes of demonstrating the sensitivity of this estimate on our company 's financial condition , a one percent increase or decrease in our aggregate contractual allowance reserve percentage would decrease or increase , respectively , net patient revenue by approximately $ 1.2 million for the year ended december 31 , 2019. management believes the changes in the estimate of the contractual allowance reserve for the periods ended december 31 , 2019 , 2018 and 2017 have not been material to the statement of income . story_separator_special_tag 28 the following table sets forth information regarding our patient accounts receivable as of the dates indicated ( in thousands ) : replace_table_token_8_th the following table presents our patient accounts receivable aging by payor class as of the dates indicated ( in thousands ) : replace_table_token_9_th * workers compensation is paid by state administrators or their designated agents . * * other includes primarily litigation claims and , to a lesser extent , vehicular insurance claims . reimbursement for medicare beneficiaries is based upon a fee schedule published by hhs . for a more complete description of our third party revenue sources , see business—sources of revenue in item 1. provision for doubtful accounts . we determine our provision for doubtful accounts based on the specific agings and payor classifications at each clinic . we review the accounts receivable aging and rely on prior experience with particular payors to determine an appropriate reserve for doubtful accounts . historically , clinics that have a large number of aged accounts generally have less favorable collection experience , and thus , require a higher provision . accounts that are ultimately determined to be uncollectible are written off against our bad debt provision . the amount of our aggregate provision for doubtful accounts is regularly reviewed for adequacy in light of current and historical experience . accounting for income taxes . we account for income taxes under the asset and liability method . deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and operating loss and tax credit carryforwards . 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 . we recognize the financial statement benefit of a tax position only after determining that the relevant tax authority would more likely than not sustain the position following an audit . for tax positions meeting the more-likely-than-not threshold , the amount to be recognized in the financial statements is the largest benefit that has a greater than 50 percent likelihood of being realized upon ultimate settlement with the relevant tax authority . the tax cuts and jobs act of 2017 ( the tcja ) was passed by congress on december 20 , 2017 and signed into law by president trump on december 22 , 2017. the tcja made significant changes to u.s. corporate income tax laws including a decrease in the corporate income tax rate to 21 % effective january 1 , 29 2018. as a result , we revalued our deferred tax assets and liabilities . based on a review and analysis as of december 31 , 2017 , we recorded a reduction in our net deferred tax liabilities of $ 4.3 million thereby reducing our provision for income taxes by such amount for the 2017 year . we do not believe that we have any significant uncertain tax positions at december 31 , 2019 , nor is this expected to change within the next twelve months due to the settlement and expiration of statutes of limitation . we did not have any accrued interest or penalties associated with any unrecognized tax benefits nor was any interest expense recognized during the twelve months ended december 31 , 2019 and 2018. carrying value of long-lived assets . our property and equipment , intangible assets and goodwill ( collectively , our long-lived assets ) comprise a significant portion of our total assets . the accounting standards require that we periodically , and upon the occurrence of certain events , assess the recoverability of our long-lived assets . if the carrying value of our property and equipment exceeds their undiscounted cash flows , we are required to write the carrying value down to estimated fair value . goodwill . the fair value of goodwill and other intangible assets with indefinite lives are tested for impairment annually and upon the occurrence of certain events , and are written down to fair value if considered impaired . we evaluate goodwill for impairment on at least an annual basis ( in the third quarter ) by comparing the fair value of its reporting units to the carrying value of each reporting unit including related goodwill . we evaluate indefinite lived tradenames using the relief from royalty method in conjunction with its annual goodwill impairment test . we operate a one segment business which is made up of various clinics within partnerships . the partnerships are components of regions and are aggregated to that operating segment level for the purpose of determining reporting units when performing the annual goodwill impairment test . in 2019 , 2018 and 2017 , we had six regions . in addition to the six regions , in 2018 and 2019 , the impairment test included a separate analysis for the industrial injury prevention business . an impairment loss generally would be recognized when the carrying amount of the net assets of a reporting unit , inclusive of goodwill and other intangible assets , exceeds the estimated fair value of the reporting unit . the estimated fair value of a reporting unit is determined using two factors : ( i ) earnings prior to taxes , depreciation and amortization for the reporting unit multiplied by a price/earnings ratio used in the industry and ( ii ) a discounted cash flow analysis . a weight is assigned to each factor and the sum of each weight times the factor is considered the estimated fair value . for 2019 , the factors ( i.e. , price/earnings ratio , discount rate and residual capitalization rate ) were updated to reflect current market conditions . the evaluation of goodwill in 2019 , 2018 and 2017 did not result in any goodwill amounts that were deemed impaired .
| see table below for a detailed computation ( in thousands , except per share data ) : replace_table_token_11_th for the year ended december 31 , 2019 , our net income attributable to its shareholders , in accordance with gaap , was $ 40.0 million as compared to $ 34.9 million for the comparable period of 2018. for both periods of 2019 , in accordance with current accounting guidance , the revaluation of redeemable non-controlling interest , net of tax , is not included in net income but rather charged directly to retained earnings ; however , the chare or credit for this change is included in the earnings per basic and diluted share calculation . see table below ( in thousands , except per share data ) . replace_table_token_12_th 32 for 2019 , our adjusted ebitda increased by 8.5 % to $ 67.3 million from $ 62.1 million in 2018. adjusted ebitda is defined as earnings before gain on derecognition of debt , gain on sale of partnership interest , interest income , interest expense – debt and other , taxes , depreciation , amortization and equity-based awards compensation expense . see reconciliation of adjusted ebitda to net income attributable to our shareholders in the following table ( in thousands ) : replace_table_token_13_th the above tables reconcile net income attributable to our shareholders calculated in accordance with gaap to adjusted ebitda and operating results , non-gaap measures defined above . we believe providing operating results and adjusted ebitda are useful information to our investors for the purposes of comparing our period-to-period results . in addition , we believe that providing operating results , which eliminates certain items described above that can be subject to volatility and unusual costs , as one of the principal measures to evaluate and monitor financial performance period over period . we believe that operating results is useful information for investors to use in comparing the company 's period-to-period results as well as for comparing with other similar businesses . we believe reporting adjusted ebitda is useful information for investors in comparing the company 's period-to-period results as well as comparing with similar businesses which report adjusted ebitda as defined by their company . operating results and adjusted ebitda are not measures of financial performance under gaap . operating results and adjusted ebitda should not be considered in isolation or as an alternative to , or substitute for , net income attributable to usph shareholders presented in the consolidated financial statements . net patient revenues net patient revenues from physical therapy
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▪ public safety forensics – provides solutions to public safety officials and professionals to capture environmental or situational scenes in 2d and 3d for crime , crash and fire scene investigations and environmental safety evaluations . ▪ 3d solutions – provides solutions to customers who require customized 3d measurement and realization solutions not otherwise addressed by our off-the-shelf product offerings . the prior period presentations throughout this annual report on form 10-k have been restated to reflect the change in reporting segments . product innovation – in 2016 , we launched several new products including : ◦ faro focus s laser scanner – this new laser scanner includes an increased measurement range and an accessory bay for customer add-on devices , and features safeguards against intrusions such as dirt , dust and other outdoor elements . ◦ faro cobalt array imager – the faro cobalt array imager is our next generation faro imager product offering , replacing the faro 3d imager amp . the faro cobalt array imager is a metrology-grade non-contact scanner that utilizes blue light technology to capture millions of high resolution 3d coordinate measurements in seconds . faro cobalt 's versatility supports a variety of deployment options including rotary table , robot , industrial inspection cells and multiple imager arrays . this technology is used in quality control to improve product quality and reduce scrap , as well as for reverse engineering and rapid manufacturing . ◦ faro vantage e – this addition to the vantage laser tracker product line includes well-proven features and capabilities such as high-speed dynamic measurement , with an affordable price for customers who demand high performance while working with short-to-medium range applications . acquisitions – during 2016 , we acquired : ◦ buildit software & solutions ltd. ( “ buildit ” ) – located in montreal , canada , buildit specializes in process-configurable 3d metrology software solutions with hardware agnostic interfaces . the acquisition 25 enhances our factory metrology portfolio , providing customers greater software options to use in a variety of applications to reduce inspection and assembly times and increase productivity . ◦ laser projection technologies , inc. ( “ lpt ” ) – located in londonderry , new hampshire , lpt specializes in laser projection and measurement systems used throughout manufacturing environments around the globe to maximize productivity and efficiency . the acquisition enhances our portfolio of 3d measurement solutions and supports our long-term strategy to expand our presence in key markets . ◦ mwf-technology gmbh ( “ mwf ” ) – located near frankfurt , germany , mwf is an innovator in mobile augmented reality solutions , with breakthrough technology that enables large , complex 3d cad data to be transferred to a tablet device and then used for mobile visualization and comparison to real world conditions . this enables real time , actionable manufacturing insight for in-process inspection , assembly , guidance and positioning . sales modernization – to support our future growth , we modernized our sales process by leveraging our current direct sales approach of on-site demonstrations with multimedia , web-based demonstrations and cloud-based customer relations development . global harmonization – we reorganized all functions , processes and people to a harmonized global mindset from our historically regional business structure . the reorganization is expected to increase operating efficiency by harmonizing our global manufacturing and business support functions , including among other items , the implementation of uniform sales terms and conditions , global demonstration and service loaner inventory management , and a global human resources information system ( hris ) . we will continue to drive these initiatives though the 2017 fiscal year to achieve long-term growth and profitability . our ability to fully implement these initiatives to reorganize our business around certain vertical markets , modernize our sales processes to improve the efficiency of our sales organization , accelerate and maintain a consistent schedule of new product introductions , and harmonize our global functions to improve operational effectiveness is dependent upon a number of factors , including the continued improvements to our new erp system , continued development of our products to maintain our technological advantage , and retention of key employees . 26 results of operations 2016 compared to 2015 replace_table_token_4_th consolidated results sales . total sales increased $ 8.1 million , or 2.5 % , to $ 325.6 million for the year ended december 31 , 2016 from $ 317.5 million for the year ended december 31 , 2015 . our sales increase was primarily driven by higher service revenue and a modest increase in average selling prices , partially offset by a decrease in product sales . total product sales decreased by $ 3.8 million , or 1.5 % , to $ 256.0 million for the year ended december 31 , 2016 from $ 259.8 million for the year ended december 31 , 2015 . our product sales decrease reflected a decline in unit sales partially offset by an increase in average selling prices in our products . service revenue increased by $ 11.9 million , or 20.6 % , to $ 69.6 million for the year ended december 31 , 2016 from $ 57.7 million for the year ended december 31 , 2015 , primarily due to an increase in warranty and customer service revenue driven by the growth of our installed , serviceable base and focused sales initiatives . foreign exchange rates had a slightly negative impact on sales of $ 1.8 million , decreasing our overall sales growth by 0.6 percentage points , primarily due to the decline of the british pound sterling and the chinese yuan renminbi relative to the u.s. dollar . gross profit . gross profit increased by $ 10.8 million , or 6.4 % , to $ 178.0 million for the year ended december 31 , 2016 from $ 167.2 million for the year ended december 31 , 2015 . gross margin increased to 54.7 % for the year ended december 31 , 2016 from 52.7 % in the prior year period . story_separator_special_tag gross margin from product revenue increased by 1.8 percentage points to 57.8 % for the year ended december 31 , 2016 from 56.0 % in the prior year period . this increase was primarily due to higher average selling prices in our products and a lower write-down of inventory , partially offset by increased sales of service and demonstration inventory which results in lower gross margins . gross margin from service revenue increased by 5.5 percentage points to 43.0 % for the year ended december 31 , 2016 from 37.5 % for the prior year period , primarily due to higher warranty and customer service revenue . selling and marketing expenses . selling and marketing expenses were virtually flat year-over-year as a result of increased compensation expenses reflecting higher headcount , higher incentive compensation , and higher base salaries from a change in our commission structure as well as higher recruiting-related expense , almost entirely offset by lower costs resulting from not holding our annual sales meeting in 2016 and a decrease in commissions due to lower product sales and the change in 27 our commission structure . selling and marketing expenses as a percentage of sales were 24.5 % for the year ended december 31 , 2016 compared with 25.1 % for the year ended december 31 , 2015 . selling headcount is a key driver of our sales growth . we look at selling headcount from two perspectives : actual period-ending headcount and a time-weighted average experienced headcount , which we refer to as full time experienced ( “ fte ” ) headcount , over the trailing four quarters . to determine selling fte headcount , we discount the first year of a new employee by an experience factor to better correlate sales effectiveness with headcount , and we weight the number of months employed on a full-time or part-time basis . our worldwide selling actual period-ending headcount increased by 85 , or 18.8 % , to 536 at december 31 , 2016 from 451 at december 31 , 2015 . selling fte headcount increased by 29 , or 6.3 % , to 486 at december 31 , 2016 from 457 at december 31 , 2015 . general and administrative expenses . general and administrative expenses increased by $ 4.4 million , or 12.2 % , to $ 40.8 million , for the year ended december 31 , 2016 from $ 36.4 million for the year ended december 31 , 2015 . the increase in general and administrative expenses was primarily driven by higher compensation expense due to higher headcount , higher incentive compensation , increased recruiting costs and higher costs related to businesses acquired , partially offset by lower year-over-year consulting fees . general and administrative expenses were 12.5 % of sales for the year ended december 31 , 2016 compared to 11.5 % of sales in the prior year . depreciation and amortization expenses . depreciation and amortization expenses increased by $ 2.7 million , or 23.6 % , to $ 13.9 million for the year ended december 31 , 2016 from $ 11.2 million for the year ended december 31 , 2015 , primarily due to increased depreciation for our new erp system and service inventory that was transferred to fixed assets , as well as increased amortization of intangibles related to our prior and current year acquisitions . research and development expenses . research and development expenses increased $ 3.4 million , or 12.9 % , to $ 30.1 million for the year ended december 31 , 2016 from $ 26.7 million for the year ended december 31 , 2015 . this increase was mainly due to higher project material costs and higher compensation expense resulting from increased engineering headcount in connection with our initiative to accelerate new product development and introductions , and an overall increase in incentive compensation . research and development expenses as a percentage of sales increased to 9.2 % for the year ended december 31 , 2016 from 8.4 % for the year ended december 31 , 2015 . other expense ( income ) . other expense increased by $ 0.4 million to $ 0.7 million for the year ended december 31 , 2016 compared with $ 0.3 million for the year ended december 31 , 2015 . the increase was primarily driven by foreign exchange transaction losses resulting from the negative impact of changes in foreign exchange rates on the value of the current intercompany account balances of our subsidiaries denominated in other currencies . income tax ( benefit ) expense . income tax expense for the year ended december 31 , 2016 was $ 1.5 million compared with income tax benefit of $ 7,000 for the year ended december 31 , 2015 . this change was primarily the result of a shift in the distribution of profits and losses among our tax jurisdictions . our effective tax rate was 12.0 % for the year ended december 31 , 2016 compared with ( 0.1 % ) in the prior year . our effective tax rate continues to be lower than the statutory tax rate in the united states reflecting primarily our global footprint in foreign jurisdictions with lower tax rates . our effective tax rate could be impacted positively or negatively by geographic changes in the manufacturing or sales of our products and a change in statutory tax rates in a jurisdiction , as well as the resulting effect on taxable income in each jurisdiction . net income . net income was $ 11.1 million for the year ended december 31 , 2016 compared with $ 12.8 million for the year ended december 31 , 2015 reflecting the impact of the factors described above . segment results we use segment profit to evaluate the performance of our reportable segments , which are factory metrology , construction bim-cim and other . segment profit is calculated as gross profit , net of selling and marketing expenses , for the reporting segment .
| gross margin from product sales was 56.0 % for the year ended december 31 , 2015 compared with 59.4 % in the prior year . this decrease was primarily the result of an increase in the inventory reserve and higher manufacturing costs as a percent of sales consistent with lower sales volume , partially offset by higher average selling prices . gross margin from service revenue increased by 3.5 percentage points to 37.5 % for the year ended december 31 , 2015 from 34.0 % for the year ended december 31 , 2014 , primarily reflecting higher warranty revenue and lower service costs . selling and marketing expenses . selling and marketing expenses were $ 79.8 million for the year ended december 31 , 2015 compared with $ 80.8 million for the year ended december 31 , 2014. the lower selling and marketing 30 expenses of $ 1.0 million , or 1.2 % , primarily reflected lower sales commissions , partially offset by an increase in headcount driven by our two acquisitions completed in 2015. selling and marketing expenses as a percentage of sales increased to 25.1 % for the year ended december 31 , 2015 compared with 23.6 % for the year ended december 31 , 2014 primarily due to lower net sales . our worldwide selling actual period-ending headcount increased by 17 , or 3.9 % , to 451 at december 31 , 2015 from 434 at december 31 , 2014 . selling fte headcount increased by 44 , or 10.6 % , to 457 at december 31 , 2015 from 413 at december 31 , 2014 . general and administrative expenses . general and administrative expenses were $ 36.4 million for the year ended december 31 , 2015 compared with $ 35.4 million for the year ended december 31 , 2014 . the increase in general and administrative expenses reflected primarily severance costs relating to cost reduction initiatives , as well as higher advisory and consulting fees to support our erp implementation , acquisition expenses and other professional
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there were no other items within other income or other expense that were individually significant at december 31 , 2020 or 2019. see notes 6 , 7 and 18 to the consolidated financial statements in item 8 for additional information related to debt , pensions and other expense - net , respectively . the following tables presents income before income taxes by segment and as a percentage of net sales by segment : replace_table_token_16_th income tax expense the effective income tax rate for 2020 was 19.4 % compared to 22.2 % in 2019. the decrease in the effective rate was primarily due to the recognition of a $ 74.3 million tax credit investment loss in 2019 related to the reversal of certain partnership tax credits , partially offset by a reduction in research and development credits . the tax credit investment loss negatively impacted the 2019 effective tax rate by 370 basis points . see note 19 to the consolidated financial statements in item 8 for additional information . net income per share diluted net income per share for 2020 increased to $ 22.08 per share from $ 16.49 per share for 2019. diluted net income per share in 2020 included charges for acquisition-related amortization expense of $ 2.50 per share . currency translation rate changes decreased diluted net income per share in the year by $ 0.07 per share . diluted net income per share in 2019 included charges for acquisition-related costs of $ 3.21 per share and other adjustments totaling $ 1.42 per share . acquisition-related costs include integration costs ( which primarily consist of professional service 29 expenses , salaries and other employee-related expenses dedicated directly to the integration effort , and severance expenses all of which are included in selling , general and administrative and other expenses and cost of goods sold ) and amortization of intangible assets recognized in the june 2017 acquisition of valspar ( included in amortization ) . total other adjustments in 2019 included charges of $ 1.00 per share for non-cash trademark impairment charges , a tax credit investment loss of $ 0.79 per share and pension plan settlement expense of $ 0.27 per share , partially offset by a brazil indirect tax credit of $ 0.36 per share and a benefit from the resolution of the california litigation of $ 0.28 per share . financial condition , liquidity and cash flow overview the company 's financial condition , liquidity and cash flow continued to be strong in 2020 as net operating cash increased to a record $ 3.409 billion primarily due to improved operating results as consolidated income before income taxes increased to $ 2.519 billion or 13.7 % of net sales . strong net operating cash provided the funds necessary for the company to invest $ 303.8 million in capital expenditures , reduce total debt by $ 410.3 million and return $ 2.934 billion to shareholders in the form of cash dividends and share buybacks during the year . during 2020 , the company generated ebitda of $ 3.441 billion . see the non-gaap financial measures section in item 6 for definition and calculation of ebitda . as of december 31 , 2020 , the company had cash and cash equivalents of $ 226.6 million and total debt outstanding of $ 8.292 billion . total debt , net of cash and cash equivalents , was $ 8.066 billion and was 2.4 times the company 's ebitda in 2020. net working capital total current assets less total current liabilities ( net working capital ) decreased $ 112.8 million to a deficit of $ 3.0 million at december 31 , 2020 from a surplus of $ 109.8 million at december 31 , 2019. the net working capital decrease is due to both a decrease in current assets and an increase in current liabilities . accounts receivable decreased $ 10.8 million , inventories decreased $ 85.5 million , and other current assets decreased $ 8.8 million primarily related to refundable income taxes . current liabilities excluding short-term borrowings and the current portion of long-term debt increased $ 681.8 million primarily due to the timing of payments and higher incentive compensation , partially offset by a $ 609.3 million decrease in short-term borrowings and the current portion of long-term debt . as a result of the net effect of these changes , the company 's current ratio decreased to 1.00 at december 31 , 2020 from 1.02 at december 31 , 2019. accounts receivable as a percent of net sales decreased to 11.3 % in 2020 from 11.7 % in 2019. accounts receivable days outstanding decreased to 57 days in 2020 from 61 days in 2019. in 2020 , provisions for allowance for doubtful collection of accounts increased $ 17.0 million , or 46.6 % . inventories as a percent of net sales decreased to 9.8 % in 2020 from 10.6 % in 2019. inventory days outstanding decreased to 74 days in 2020 from 81 days in 2019. the company has sufficient total available borrowing capacity to fund its current operating needs . property , plant and equipment net property , plant and equipment decreased $ 0.7 million to $ 1.835 billion at december 31 , 2020 due primarily to depreciation expense of $ 268.0 million and sale or disposition of assets with remaining net book value of $ 46.9 million , partially offset by capital expenditures of $ 303.8 million and currency translation and other adjustments of $ 10.4 million . capital expenditures during 2020 in the americas group were primarily attributable to the opening of new paint stores and renovation and improvements in existing stores . in the consumer brands group and the performance coatings group , capital expenditures during 2020 were primarily attributable to improvements and normal equipment replacements in manufacturing and distribution facilities . the administrative segment incurred capital expenditures primarily to acquire the land for the new global headquarters ( new headquarters ) in downtown cleveland , ohio and a new research and development ( r & d ) center in the cleveland suburb of brecksville . story_separator_special_tag the company expects to invest a minimum of $ 600 million of capital expenditures to build both the new headquarters and r & d center . construction on the new headquarters and r & d center is expected to commence in 2021 , with completion in 2024 at the earliest . the company has not made any decisions regarding the disposition of the company 's current cleveland-area headquarters and r & d centers , which are all owned by the company . in 2021 , the company expects to spend more than 2020 for capital expenditures . the predominant share of the capital expenditures in 2021 is expected to be for various productivity improvement and maintenance projects at existing manufacturing , distribution and research and development facilities , new store openings , new or upgraded information systems hardware and the new global headquarters and r & d center in ohio . the company does not anticipate the need for any specific long-term external financing to support these capital expenditures . 30 goodwill and intangible assets goodwill , which represents the excess of cost over the fair value of net assets acquired in purchase business combinations , increased $ 44.3 million in 2020 due to foreign currency translation rate fluctuations . intangible assets decreased $ 263.3 million in 2020 primarily due to amortization of finite-lived intangible assets of $ 313.4 million , impairment of indefinite-lived trademarks of $ 2.3 million , partially offset by foreign currency translation rate fluctuations of $ 51.5 million . see note 5 to the consolidated financial statements in item 8 for a description of goodwill , identifiable intangible assets and asset impairments recognized in accordance with the goodwill and other intangibles topic of the asc and summaries of the remaining carrying values of goodwill and intangible assets . deferred pension and other assets deferred pension assets of $ 53.1 million at december 31 , 2020 represent the excess of the fair value of assets over the actuarially determined projected benefit obligations . see note 7 to the consolidated financial statements in item 8 and the defined benefit pension and other postretirement benefit plans section below . other assets increased $ 79.8 million to $ 641.2 million at december 31 , 2020. the increase was primarily due to incremental securities purchased with the proceeds generated from the sale of treasury shares to fund future contributions to the company 's qualified replacement plan . see notes 7 and 11 to the consolidated financial statements in item 8 for additional information related to the qualified replacement plan and the sale of treasury stock , respectively . debt total debt including short-term borrowings decreased by $ 393.1 million to $ 8.292 billion in 2020. this was primarily attributable to the repayment of short-term borrowings and a net reduction in long-term debt . in march 2020 , the company issued $ 500.0 million of 2.30 % senior notes due may 2030 and $ 500.0 million of 3.30 % senior notes due may 2050 in a public offering . the net proceeds from the issuance of these notes were used to repurchase a portion of the 2.75 % senior notes due 2022 and redeem the 2.25 % senior notes due may 2020. the repurchase of the 2.75 % senior notes due 2022 during the first quarter of 2020 resulted in a loss of $ 21.3 million recorded in other expense - net . on july 19 , 2018 , the company entered into a new five-year $ 2.000 billion credit agreement . this credit agreement may be used for general corporate purposes , including the financing of working capital requirements . this credit agreement allows the company to extend the maturity of the facility with two one-year extension options and the borrowers to increase the aggregate amount of the facility to $ 2.750 billion , both of which are subject to the discretion of each lender . in addition , the borrowers may request letters of credit in an amount of up to $ 250.0 million . on october 8 , 2019 , the company amended this credit agreement to , among other things , extend the maturity date to october 8 , 2024. at december 31 , 2020 and 2019 , there were no short-term borrowings under this credit agreement . on may 6 , 2016 , the company entered into a five-year credit agreement , subsequently amended on multiple dates to extend the maturity of the agreement . this credit agreement gives the company the right to borrow and to obtain the issuance , renewal , extension and increase of a letter of credit up to an aggregate availability of $ 875.0 million at december 31 , 2020. in september 2017 , the company entered into an additional five-year letter of credit agreement , subsequently amended on multiple dates to extend the maturity of the agreement , with an aggregate availability of $ 625.0 million at december 31 , 2020. both of these credit agreements are being used for general corporate purposes . at december 31 , 2020 and 2019 , there were no borrowings outstanding under these credit agreements . there were no borrowings outstanding under the company 's domestic commercial paper program at december 31 , 2020. borrowings outstanding under the company 's domestic commercial paper program at december 31 , 2019 were $ 191.9 million with a weighted average interest rate of 2.1 % . borrowings outstanding under various foreign programs were $ 0.1 million and $ 12.8 million at december 31 , 2020 and 2019 , respectively with a weighted average interest rate of 0.2 % and 4.3 % , respectively . at december 31 , 2020 , the company had unused capacity under its various credit agreements of $ 3.500 billion . see note 6 to the consolidated financial statements in item 8 for a detailed description and summary of the company 's outstanding debt and other available financing programs .
| currency translation rate changes reduced net sales by 1.1 % compared to 2019. during 2020 , the americas group opened 56 new stores and closed 40 redundant locations for a net increase of 16 stores , with a net increase of 38 new stores in the u.s. and canada . the total number of stores in operation at december 31 , 2020 was 4,774 in the united states , canada , latin america and the caribbean . the americas group 's objective is to expand its store base an average of 2 % each year , primarily through internal growth . sales of products other than paint decreased approximately 2.0 % over last year . a discussion of changes in volume versus pricing for sales of products other than paint is not pertinent due to the wide assortment of general merchandise sold . net sales of the consumer brands group increased in 2020 primarily due to higher volume sales to most of the group 's north american and european retail customers from strong diy demand . in 2021 , the consumer brands group plans to expand its customer base and product assortment at existing customers . the performance coatings group 's net sales in 2020 decreased due primarily to softer end market demand in most businesses , mostly due to the impacts of covid-19 , and unfavorable currency translation rate changes , partially offset by increased sales in the packaging and coil divisions in all regions . currency translation rate changes decreased net sales 1.6 % compared to 2019. in 2020 , the performance coatings group opened 1 new location , increasing the total to 282 branches open in the united states , canada , mexico , south america , europe and asia at december 31 , 2020. in 2021 , the performance coatings group plans to continue expanding its worldwide presence , including improving its customer base and product offering . net sales in the administrative segment , which primarily consists of external leasing revenue of excess headquarters space and leasing of facilities no longer used by the
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we recognize financial services revenue associated with our title operations as homes are delivered , closing services are rendered , and title policies are issued , all of which generally occur simultaneously as each home is delivered . all of the underwriting risk associated with title insurance policies is transferred to third-party insurers . see note 1 to our consolidated financial statements for additional information related to our revenues disaggregated by geography and revenue source . inventory . inventory includes the costs of land acquisition , land development and home construction , capitalized interest , real estate taxes , direct overhead costs incurred during development and home construction , and common costs that benefit the entire community , less impairments , if any . land acquisition , land development and common costs ( both incurred and estimated to be incurred ) are typically allocated to individual lots based on the total number of lots expected to be closed in each community or phase , or based on the relative fair value , the relative sales value or the front footage method of each lot . any changes to the estimated total development costs of a community or phase are allocated proportionately to the homes remaining in the community or phase and homes previously closed . the cost of individual lots is transferred to homes under construction when home construction begins . home construction costs are accumulated on a specific identification basis . costs of home deliveries include the specific construction cost of the home and the allocated lot costs . such costs are charged to cost of sales simultaneously with revenue recognition , as discussed above . when a home is closed , we typically have not yet paid all incurred costs necessary to complete the home . as homes close , we compare the home construction budget to actual recorded costs to date to estimate the additional costs to be incurred from our subcontractors related to the home . we record a liability and a corresponding charge to cost of sales for the amount we estimate will ultimately be paid related to that home . we monitor the accuracy of such estimates by comparing actual costs incurred in subsequent months to the estimate . although actual costs to complete a home in the future could differ from our estimates , our method has historically produced consistently accurate estimates of actual costs to complete closed homes . inventory is recorded at cost , unless events and circumstances indicate that the carrying value of the land is impaired , at which point the inventory is written down to fair value as required by accounting standards codification ( “ asc ” ) 360-10 , property , plant and equipment ( “ asc 360 ” ) . the company assesses inventory for recoverability on a quarterly basis if events or changes in local or national economic conditions indicate that the carrying amount of an asset may not be recoverable . in conducting our quarterly review for indicators of impairment on a community level , we evaluate , among other things , margins on sales contracts in backlog , the margins on homes that have been delivered , expected changes in margins with regard to future home sales over the life of the community , expected changes in margins with regard to future land sales , the value of the land itself as well as any results from third-party appraisals . from the review of all of these factors , we identify communities whose carrying values may exceed their estimated undiscounted future cash flows and run a test for recoverability . for those communities whose carrying values exceed the estimated undiscounted future cash flows and which are deemed to be impaired , the impairment recognized is measured by the amount by which the carrying amount of the communities exceeds the estimated fair value . due to the fact that the company 's cash flow models and estimates of fair values are based upon management estimates and assumptions , unexpected changes in market conditions and or changes in management 's intentions with respect to the inventory may lead the company to incur additional impairment charges in the future . because each inventory asset is unique , there are numerous inputs and assumptions used in our valuation techniques , including estimated average selling price , construction and development costs , absorption pace ( reflecting any product mix change strategies implemented or to be implemented ) , selling strategies , alternative land uses ( including disposition of all or a portion of the land owned ) , or discount rates , which could materially impact future cash flow and fair value estimates . 27 as of december 31 , 2020 , our projections generally assume a gradual improvement in market conditions . if communities are not recoverable based on estimated future undiscounted cash flows , the impairment to be recognized is measured as the amount by which the carrying amount of the assets exceeds the estimated fair value of the assets . the fair value of a community is estimated by discounting management 's cash flow projections using an appropriate risk-adjusted interest rate . as of december 31 , 2020 , we utilized discount rates ranging from 13 % to 16 % in our valuations . the discount rate used in determining each asset 's estimated fair value reflects the inherent risks associated with the related estimated cash flow stream , as well as current risk-free rates available in the market and estimated market risk premiums . our quarterly assessments reflect management 's best estimates . due to the inherent uncertainties in management 's estimates and uncertainties related to our operations and our industry as a whole as further discussed in “ item 1a . risk factors ” in part i of this annual report on form 10-k , we are unable to determine at this time if and to what extent continuing future impairments will occur . story_separator_special_tag additionally , due to the volume of possible outcomes that can be generated from changes in the various model inputs for each community , we do not believe it is possible to create a sensitivity analysis that can provide meaningful information for the users of our financial statements . warranty reserves . we record warranty reserves to cover our exposure to the costs for materials and labor not expected to be covered by our subcontractors to the extent they relate to warranty-type claims . warranty reserves are established by charging cost of sales and crediting a warranty reserve for each home delivered . the warranty reserves for the company 's home builder 's limited warranty ( “ hblw ” ) are established as a percentage of average sales price and adjusted based on historical payment patterns determined , generally , by geographic area and recent trends . factors that are given consideration in determining the hblw reserves include : ( 1 ) the historical range of amounts paid per average sales price on a home ; ( 2 ) type and mix of amenity packages added to the home ; ( 3 ) any warranty expenditures not considered to be normal and recurring ; ( 4 ) timing of payments ; ( 5 ) improvements in quality of construction expected to impact future warranty expenditures ; and ( 6 ) conditions that may affect certain projects and require a different percentage of average sales price for those specific projects . changes in estimates for warranties occur due to changes in the historical payment experience and differences between the actual payment pattern experienced during the period and the historical payment pattern used in our evaluation of the warranty reserve balance at the end of each quarter . actual future warranty costs could differ from our current estimated amount . our warranty reserves for our 30-year ( offered on all homes sold after april 25 , 1998 and on or before december 1 , 2015 in all of our markets except our texas markets ) , 15-year ( offered on all homes sold after december 1 , 2015 in all of our markets except our texas markets ) and 10-year ( offered on all homes sold in our texas markets ) transferable structural warranty programs are established on a per-unit basis . while the structural warranty reserve is recorded as each house is delivered , the sufficiency of the structural warranty per unit charge and total reserve is reevaluated on an annual basis , with the assistance of an actuary , using our own historical data and trends , industry-wide historical data and trends , and other project specific factors . the reserves are also evaluated quarterly and adjusted if we encounter activity that is inconsistent with the historical experience used in the annual analysis . these reserves are subject to variability due to uncertainties regarding structural defect claims for products we build , the markets in which we build , claim settlement history , insurance and legal interpretations , among other factors . our warranty reserve amounts are based upon historical experience and geographic location . while we believe that our warranty reserves are sufficient to cover our projected costs , there can be no assurances that historical data and trends will accurately predict our actual warranty costs . see note 1 and note 8 to our consolidated financial statements for additional information related to our warranty reserves . story_separator_special_tag 2019. in 2020 , we recorded record total revenue of $ 3.05 billion , of which $ 2.94 billion was from homes delivered , $ 19.2 million was from land sales , and $ 87.0 million was from our financial services operations . revenue from homes delivered increased 21 % from 2019 driven primarily by the 1,413 additional homes delivered in 2020 ( a 22 % increase ) , offset , in part , by a 1 % decrease in the average sales price of homes delivered ( $ 3,000 per home delivered ) , which was primarily the result of the mix of homes delivered . revenue from land sales decreased $ 5.4 million from 2019 due primarily to fewer land sales in the current year compared to the prior year . revenue from our financial services segment increased 57 % to $ 87.0 million in 2020 as a result of an increase in loans closed and sold during the year , in addition to higher margins on loans sold during the period compared to the prior year . 29 total gross margin ( total revenue less total land and housing costs ) increased $ 186.9 million in 2020 compared to 2019 as a result of a $ 155.2 million improvement in the gross margin of our homebuilding operations ( the sum of housing gross margin and land gross margin ) and a $ 31.7 million improvement in the gross margin of our financial services operations . with respect to our homebuilding gross margin , our gross margin on homes delivered ( housing gross margin ) improved $ 154.7 million , due to the 22 % increase in the number of homes delivered , offset partially by an increase of $ 3.4 million in asset impairment charges . our housing gross margin percentage improved 210 basis points from 17.9 % in the prior year to 20.0 % in 2020. exclusive of the asset impairment charges and stucco-related repair charges in 2020 , and the asset impairment charges and acquisition-related charges in 2019 , our adjusted housing gross margin percentage improved from 18.1 % in 2019 to 20.3 % in 2020 as a result of the mix of homes delivered during the period . our gross margin on land sales ( land gross margin ) improved $ 0.5 million in 2020 compared to 2019 as a result of the mix of lots sold in the current year compared to the prior year .
| billion - a year-end record for our company revenue increased 22 % to $ 3.05 billion - a record high for our company income before income taxes increased 87 % to $ 310.0 million - a record high for our company in addition to the record results described above , our number of homes in backlog increased 64 % , and we achieved net income of $ 239.9 million in 2020 , an 88 % increase from the prior year . our financial services operations also achieved record income before income taxes in 2020 , benefiting from an increase in homes closed , the number of mortgages originated and higher margins , as well as technology enabled efficiencies . our company-wide absorption pace of sales per community in 2020 improved to 3.7 per month compared to 2.6 per month in 2019. partially as a result of this accelerated sales pace , we sold out of some communities earlier and our number of active communities declined to 202 at the end of 2020 from 225 at the end of 2019. we continued to place additional land under contract for communities that will be brought online in future periods , and controlled approximately 39,500 lots at december 31 , 2020. our ability to timely replace existing communities could further impact our number of active communities . we continue to work to open new communities , and we are also actively managing sales pace , in part by selectively increasing prices , to better match our availability of lots and production schedule . summary of company financial results in 2020 the calculations of adjusted income before income taxes , adjusted net income , and adjusted housing gross margin , each of which is a non-gaap measure , are described and reconciled to income before income taxes , net income , and housing gross margin , respectively , which represent the most directly comparable financial measures calculated in accordance with gaap , below
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moffat is included in the drilling & subsea segment ; and the joint purchase of global tubing with an equal partner , with management retaining a small interest . global tubing is a dayton , texas based provider of coiled tubing strings and related services . our equity investment is reported in the production & infrastructure segment and is accounted for using the equity method of accounting . none of these transactions included potential future payments contingent on financial performance . we completed four acquisitions in the fourth quarter 2012 , syntech technology , incorporated , wireline solutions , llc , dynacon , inc. and merrimac manufacturing , inc. , all of which are included in the drilling & subsea segment . we paid aggregate cash consideration of approximately $ 139.7 million for these acquisitions in 2012. we completed eight acquisitions in 2011 , three of which are included in the production & infrastructure segment and five in the drilling & subsea segment . there are factors related to the businesses we have acquired that may result in lower net profit margins on a going-forward basis , primarily the federal income tax status of the legal entity and the level of depreciation and amortization charges arising out of the accounting for the purchase . for additional information regarding our 2013 , 2012 and 2011 acquisitions , please read note 3 and note 4 of the notes to the consolidated financial statements in part ii , item 8 `` financial statements and supplementary data '' of this annual report on form 10-k. evaluation of operations we manage our operations through the two business segments described above . we have focused on implementing financial reporting and controls at all of our operations to accelerate the availability of critical information necessary to support informed decision making . we use a number of financial and non-financial measures to routinely analyze and evaluate , on a segment and corporate level , the performance of our business . as an example of a non-financial measure , we measure our safety by tracking the total recordable incident rate and we consider this as an indication of the quality of our products . financial measures include the following : revenue growth . we compare actual revenue achieved each month to the most recent estimate for that month and to the annual plan for the month established at the beginning of the year . we monitor our revenue to analyze trends in the relative performance of each of our product lines as compared to standard revenue drivers or market metrics applicable to that product . we are particularly interested in identifying positive or negative trends and investigating to understand the root causes . in addition , we review these metrics on a quarterly basis . we also evaluate changes in the mix of products sold and the resultant impact on reported gross margins . gross margin percentage . we define gross margin percentage as our gross margin , or net sales minus cost of sales , divided by our net sales . our management continually evaluates our consolidated gross margin percentage and our gross margin percentage by segment to determine how each segment is performing . this metric aids management in capital resource allocation and pricing decisions . selling , general and administrative expenses as a percentage of total revenue . selling , general and administrative expenses include payroll related costs for sales , marketing , administrative , accounting , information technology , certain engineering and human resources functions ; audit , legal and other professional fees ; insurance ; franchise taxes not based on income ; travel and entertainment ; advertising and promotions ; bad debt expense ; and other office and administrative related costs . our management continually evaluates the level of our selling , general and administrative expenses in relation to our revenue and makes appropriate changes in light of activity levels to preserve and improve our profitability while meeting the on-going support and regulatory requirements of the business . operating income and operating margin percentage . we define operating income as revenue less cost of goods sold less selling , general and administrative expenses . we define our operating margin percentage as operating income divided by revenue . these metrics assist management in evaluating the performance of each segment as a whole , especially to determine whether the amount of administrative burden is appropriate to support current business activity levels . earnings per share . we calculate fully-diluted earnings per share as prescribed under generally accepted accounting principles ( `` gaap '' ) , that is net income divided by common shares outstanding , giving effect for the assumed exercise 37 of all outstanding options and warrants with a strike price less than the average fair value of the shares over the period covered for the calculation . we believe this measure is important as it reflects the sum total of operating results and all attendant capital decisions , showing in one number the amount earned for the stockholders of our company . free cash flow . we define free cash flow as net income , increased by non-cash charges included in net income ( e.g. , depreciation and amortization and deferred income taxes ) , increased or decreased by changes in net working capital , less capital expenditures . we believe that this measure is important because it encompasses both profitability and capital management in evaluating results . free cash flow represents the business ' contribution in the generation of funds available to pay debt outstanding , invest in other areas , or return funds to our stockholders . story_separator_special_tag factors affecting the comparability of our future results of operations to our historical results of operations our future results of operations may not be comparable to our historical results of operations for the periods presented , primarily for the following reasons : on april 17 , 2012 , we sold 13,889,470 shares of common stock in the ipo and 2,666,666 shares of common stock in a private placement to a private equity fund ( not affiliated with the original sponsor ) for aggregate net proceeds of approximately $ 256.4 million and $ 50 million , respectively . we used all of the net proceeds to repay a portion of the outstanding borrowings under the revolving portion of the credit facility . since 2011 , we have grown our business both organically and through strategic acquisitions . we have expanded and diversified our product portfolio and business lines with the acquisition of two businesses and our joint venture investment in 2013 , four businesses in 2012 and eight businesses in 2011. the historical financial data for periods prior to the acquisitions does not include the results of any of the acquired companies for the periods presented and , as such , does not provide an accurate indication of our future results . as we integrate acquired companies and further implement internal controls , processes and infrastructure to operate in compliance with the regulatory requirements applicable to companies with publicly traded shares , it is likely that we will incur incremental selling , general and administrative expenses relative to historical periods . our future results will depend on our ability to efficiently manage our combined operations and execute our business strategy . 38 story_separator_special_tag purposes at the beginning and end of the respective periods . the effective tax rate , calculated by dividing total tax expense by income before income taxes , was 30.4 % and 32.0 % for the years ended december 31 , 2013 and 2012 , respectively . the effective tax rate for the year ended december 31 , 2013 is lower than the comparable period in 2012 primarily due to a higher proportion of our earnings being generated outside the united states in jurisdictions subject to lower tax rates and due to a reduction in the tax provision from the finalization of certain prior year tax returns . 41 year ended december 31 , 2012 compared to year ended december 31 , 2011 replace_table_token_10_th 42 revenue our revenue for the year ended december 31 , 2012 increased $ 286.8 million , or 25.4 % , to $ 1,414.9 million compared to the year ended december 31 , 2011. for the year ended december 31 , 2012 , our drilling & subsea segment and our production & infrastructure segment comprised 58.4 % and 41.6 % of our total revenue , respectively , which was consistent with the year ended december 31 , 2011. all of our product lines had increased revenue in the year ended december 31 , 2012 compared to the prior year . the revenue increase by operating segment consisted of the following : drilling & subsea segment — revenue increased $ 167.1 million , or 25.3 % , to $ 826.5 million during the year ended december 31 , 2012 compared to the year ended december 31 , 2011. of the increase , $ 55.1 million , or 33 % , was attributable to organic initiatives . the organic growth contributions arose primarily from increased sales of hydraulic catwalk units and blowout preventers in the drilling technologies product line , and increased sales of work-class remotely operated vehicles in the subsea technologies product line . of the increase , $ 112.0 million , or 67 % , was primarily attributable to operations acquired in 2011. the operations acquired in 2011 that were not owned for the full year ended december 31 , 2011 included drilling products from amc global group , ltd. ( `` amc '' ) and p-quip , ltd. ( `` p-quip '' ) and downhole products from davis-lynch , llc ( `` davis-lynch '' ) and cannon services ( `` cannon '' ) . additionally , four operations were acquired during the fourth quarter of 2012 and these acquisitions relate to all three product lines within drilling & subsea . production & infrastructure segment — revenue increased $ 120.5 million , or 25.7 % , to $ 589.2 million during the year ended december 31 , 2012 compared to the year ended december 31 , 2011. of the increase , $ 85.6 million , or 71 % , was attributable to organic initiatives attributable to higher market demand in both production equipment and valve solutions products and orders from new customers . the higher shipments were made possible for production equipment by the expansion of existing facilities and the addition of new facilities in pennsylvania , each completed throughout 2011. of the increase , $ 34.9 million , or 29 % , was attributable to operations acquired in 2011 that were not owned for the full year ended december 31 , 2011 including the three acquisitions that make up the flow equipment product line . segment operating income and segment operating margin percentage segment operating income for the year ended december 31 , 2012 increased $ 62.1 million , or 35.3 % , to $ 237.8 million compared to the year ended december 31 , 2011.the segment operating margin percentage is calculated by dividing segment operating income by revenue .
| segment operating income and segment operating margin percentage segment operating income for the year ended december 31 , 2013 increased $ 24.9 million , or 10.5 % , to $ 212.9 million compared to the year ended december 31 , 2012 .the segment operating margin percentage is calculated by dividing segment operating income by revenue . for the year ended december 31 , 2013 , the segment operating margin percentage of 14.0 % represents a decline of 280 basis points from the 16.8 % operating margin percentage for the year ended december 31 , 2012 . as discussed further below , the decrease in operating margin percentage arose on drilling and well stimulation products as reduced activity levels in these areas resulted in higher fixed cost per unit sold . the company undertook several actions during the third and fourth quarter 2013 to adjust its cost structure in line with lower north american activity levels . segment operating income for the year ended december 31 , 2013 included $ 7.7 million in principally non-cash charges for severance and facility closures . in addition , equity in earnings from the company 's investment in global tubing included a $ 0.8 million charge for transaction expenses related to the initial investment . the change in operating margin percentage for each segment is explained as follows : drilling & subsea segment — the operating margin percentage declined 290 basis points to 16.6 % for the year ended december 31 , 2013 , from 19.5 % for the year ended december 31 , 2012 . excluding the severance and facility closure charges , the adjusted operating margin percentage of 17.3 % is down 220 basis points compared to the year earlier period . the decline in operating margin percentage is primarily attributable to drilling products , with most of that decline occurring in the first half of the year . international orders for drilling products received in the first half of 2013 had longer lead times compared to our historical experience , with delivery in late 2013 and early 2014. we carried a higher cost base into 2013 on the expectation of improving drilling activity levels ; however , as revenue declined in the first half of
| 15,894 |
the technology is based upon biocompatible , highly porous polymer sorbent beads that are capable of extracting unwanted substances from blood and other bodily fluids . the technology is protected by 32 issued u.s. patents with multiple applications pending . there are three major components of our business . the first is the manufacturing and sale of our flagship product , cytosorb , now approved and available for commercial sale throughout the entire european union ( e.u. ) . the second is the research and development of new products and technologies , partially funded through government contracts . the third is business development and out-licensing of our product pipeline and technology portfolio . commercialization of cytosorb® in march 2011 , we received e.u . regulatory approval under the ce mark and medical devices directive for our flagship product , cytosorb ® , as an extracorporeal cytokine filter indicated for use in clinical situations where cytokines are elevated . the goal of the cytosorb® is to prevent or treat organ failure by reducing cytokine storm and the potentially deadly systemic inflammatory response syndrome in diseases such as sepsis , trauma , burn injury , acute respiratory distress syndrome , pancreatitis , liver failure , and many others . organ failure is the leading cause of death in the intensive care unit , and remains a major unmet medical need , with little more than supportive care therapy ( e.g . mechanical ventilation , dialysis , vasopressors , fluid support , etc ) as treatment options . by potentially preventing or treating organ failure , cytosorb® may improve clinical outcome , including survival , while reducing the need for costly intensive care unit treatment , thereby potentially saving significant healthcare costs . our ce mark enables cytosorb ® to be sold throughout the entire european union . many countries outside the e.u . accept ce mark approval for medical devices , but may also require registration with or without additional clinical studies . the broad approved indication enables cytosorb® to be used “ on-label ” in diseases where cytokines are elevated including , but not limited to , critical illnesses such as those mentioned above , autoimmune disease flares , and many other conditions where cytokine-induced inflammation plays a detrimental role . as part of the ce mark approval process , we completed our randomized , controlled , european sepsis trial amongst fourteen trial sites in germany in 2011 , with enrollment of one hundred ( 100 ) patients with sepsis and respiratory failure . the trial established that cytosorb® was safe in this critically-ill population , and that it was able to control cytokine storm , and broadly reduce key cytokines . in a post-hoc subgroup analysis , cytosorb® was associated with a statistically significant reduction in mortality in patients at high risk of death in sepsis , specifically in patients with : · very high cytokine levels ( il-6 ≥ 1,000 pg/ml and or il-1ra ≥ 16,000 pg/ml ) where 28-day mortality was 0 % treated vs 63 % control , p=0.03 , n=14 , and · age ≥ 65 ( 14-day mortality : 0 % treated vs 36 % control , p=0.04 , n=21 ) . the company plans to do larger , prospective studies in septic patients in the future to confirm these findings . in addition to ce mark approval , cytosorbents also achieved iso 13485:2003 full quality systems certification , an internationally recognized quality standard designed to ensure that medical device manufacturers have the necessary comprehensive management systems in place to safely design , develop , manufacture and distribute medical devices in the european union . cytosorbents manufactures cytosorb® at its manufacturing facilities in new jersey for sale in the e.u . and for additional clinical studies . the company also established a reimbursement path for cytosorb® in germany and austria . from september 2011 through june 2012 , the company began a controlled market release of cytosorb® in select geographic territories in germany with the primary goal of preparing for commercialization of cytosorb in germany in terms of manufacturing , reimbursement , logistics , infrastructure , marketing , contacts , and other key issues . 50 in late june 2012 , following the establishment of our european subsidiary , cytosorbents europe gmbh , cytosorbents began the commercial launch of cytosorb® for the treatment of critical care illnesses such as sepsis , burn injury , trauma , acute respiratory distress syndrome , pancreatitis and other conditions where inflammation plays a detrimental role , such as cardiac surgery . we hired dr. christian steiner as vice president of sales and marketing and three additional sales representatives who joined the company and completed their sales training in q3 2012. q4 2012 represented the first quarter of direct sales with the full sales team in place . during this period , we expanded our direct sales efforts to include both austria and switzerland and have established reimbursement in austria . at the end of fiscal 2012 , we had more than 60 key opinion leaders ( kols ) in critical care and blood purification who were either using cytosorb® or committed to using cytosorb® in the near future . we seek to complement our direct sales efforts with sales to distributors or corporate partners . we are currently evaluating potential distributor networks in other major countries where we are approved to market the device . we are currently conducting a dose ranging trial in germany amongst seven clinical trial sites to evaluate the safety and efficacy of cytosorb® when used for longer periods of time . story_separator_special_tag data from this dosing study are intended to help clinicians with additional treatment options for cytosorb® , help support the positive clinical data from the company 's first european sepsis trial , and help shape the trial protocol for a u.s. based pivotal study . in the event we are able to successfully commercialize our products in the european market , we will review our plans for the united states to determine whether to conduct clinical trials in support of 510 ( k ) or pma registration . no assurance can be given that our cytosorb ® product will work as intended or that we will be able to obtain fda approval to sell cytosorb ® in the united states . research and development of new products and technologies the company 's proprietary hemocompatible porous polymer bead technology forms the basis of a broad technology portfolio . some of our products include : · cytosorb® - an extracorporeal hemoperfusion cartridge approved in the e.u . for cytokine removal , with the goal of reducing sirs and preventing or treating organ failure . · hemodefend – a development-stage blood purification technology designed to remove contaminants in blood transfusion products . goal is to reduce transfusion reactions and improve the safety of older blood · contrastsorb – a development-stage extracorporeal hemoperfusion cartridge designed to remove iv contrast from the blood of high risk patients undergoing ct imaging with contrast , or interventional radiology procedures such as cardiac catheterization . the goal is to prevent contrast-induced nephropathy · drugsorb – a development-stage extracorporeal hemoperfusion cartridge designed to remove toxic chemicals from the blood ( e.g . drug overdose , high dose regional chemotherapy , etc ) · betasorb – a development-stage extracorporeal hemoperfusion cartridge designed to remove mid-molecular weight toxins , such as b 2-microglobulin , that standard high-flux dialysis can not remove effectively . the goal is to improve the efficacy of dialysis or hemofiltration the company has been successful in obtaining technology development contracts from agencies in the u.s. department of defense , including darpa and the u.s. army . in august 2012 , darpa awarded cytosorbents a five-year technology development contract valued at $ 3.8 million as part of its “ dialysis-like therapeutics ” ( dlt ) program to treat sepsis . darpa is funding cytosorbents to further develop its technologies to remove both cytokines and a variety of toxins . in 2012 , cytosorbents recognized approximately $ 1.1 million in grant income following the successful completion of milestones under its contract . in december 2011 and september 2012 , the us army medical research and materiel command awarded cytosorbents a $ 100,000 phase i sbir ( small business innovation research ) , and a $ 1 million phase ii sbir contract , respectively , to develop our technologies for the treatment of trauma and burn injury . during 2012 , we received the full amount of the phase i sbir contract and are in the process of finalizing the phase ii sbir contract with the granting agency . because of the limited studies we have conducted , we are subject to substantial risk that our technology will have little or no effect on the treatment of any indications that we have targeted . business development we seek strategic partnerships or distributorships to help further develop or commercialize our technology portfolio . because of the breadth of clinical applications that we attempt to address , the types of corporate partners are many . examples of potential partners include companies focused on : medical devices , renal/dialysis , pharmaceuticals and biotechnology , critical-care , blood purification , advanced biomaterials , and others . no assurance can be given that we will be successful in our business development activities . 51 story_separator_special_tag significantly extend the time that we may be able to fund our operations . we will continue to seek funding for the long term needs of the company . there can be no assurance that financing will be available on acceptable terms or at all . if adequate funds are unavailable , we may have to suspend , delay or eliminate one or more of our research and development programs or product launches or marketing efforts or cease operations . 52 this annual report has been prepared assuming we will continue as a going concern , and the auditors ' report on the financial statements expresses substantial doubt about our ability to continue as a going concern . effects of recent accounting pronouncements there have been no recently issued accounting standards which would have an impact on the company 's financial statements . critical accounting policies the preparation of financial statements in conformity with accounting principles generally accepted in the united states requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period . actual results could differ from those estimates . we believe the following critical accounting policies have significant effect in the preparation of our consolidated financial statements . development stage corporation the company 's consolidated financial statements have been prepared in accordance with the provisions of accounting and reporting by development stage enterprises . patents legal costs incurred to establish patents are capitalized . when patents are issued , capitalized costs are amortized on the straight-line method over the related patent term . in the event a patent is abandoned , the net book value of the patent is written off . revenue recognition the company recognizes revenue when it is earned . delivery of the goods generally completes the criteria for revenue recognition . research and development all research and development costs , payments to laboratories and research consultants are expensed when incurred . stock based-compensation the company accounts for its stock-based compensation under the recognition requirements of accounting standards for accounting for stock-based compensation
| this represents a decrease of approximately 12.3 % or approximately $ 356,000 for the year ended december 31 , 2012 compared to the same time period in 2011. this decrease is primarily due to net decreases in expenditures related to our completed sepsis study and clinical and research programs of approximately $ 393,000 , lab supplies of approximately $ 180,000 and non-cash stock option expense of approximately $ 425,000 , that were partially offset by increases in patent related expenses of approximately $ 84,000 , salaries of approximately $ 198,000 , rent of approximately $ 84,000 , lab tests of approximately $ 97,000 and r & d costs of approximately $ 136,000. legal , financial and other consulting expenses our legal , financial and other consulting costs were , approximately $ 627,000 and $ 343,000 , for the years ended december 31 , 2012 and 2011 respectively . this represents an increase of approximately 83.1 % , or approximately $ 285,000 for the year ended december 31 , 2012 compared to the same time period in 2011. this is primarily comprised of an increase in legal fees of approximately $ 137,000 associated with patent review related costs , contract related legal fees of approximately $ 43,000 , approximately $ 46,000 in accounting fees which were associated with annual audit and s-1 registration related fees and approximately $ 57,000 in employment related fees . general and administrative expenses our general and administrative costs were $ 1,355,000 and $ 1,230,000 , for the years ended december 31 , 2012 and 2011 respectively . this represents an increase of approximately 10.1 % , or approximately $ 125,000 for the year ended december 31 , 2012 compared to the same time period in 2011. this is primarily due to a decrease in non-cash stock option expense of approximately $ 370,000 which was primarily offset by increases in sales and marketing expenses of approximately $ 80,000 , an increase in salaries and payroll taxes of approximately $ 290,000 and increases in insurance , travel and rent totaling approximately $ 137,000. interest expenses our net interest expenses were $ 564,000 and $ 1,045,000 for the years ended december 31 , 2012 and 2011 respectively . this represents a decrease of approximately 46.0 % or $ 481,000 for the year ended december 31 , 2012 compared to the same time period in 2011. the decrease is primarily due to a decrease of approximately $ 540,000 in non-cash related charges
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management fees were calculated as 1.575 % of committed capital and was $ 4.8 million for the year ended december 31 , 2018 . there was no management fee in 2017 as the company had not called capital . other operating expenses for the year were $ 0.1 million and $ 0 for the year ended december 31 , 2018 and the period ended december 31 , 2017 , respectively . operating expense increased in 2018 because the fund started investment operations in may 2018. net decrease in net assets from operations for the year ended december 31 , 2018 and the period ended december 31 , 2017 were $ 1.0 million and $ 0.2 million , respectively . on a per share basis , the net decrease in net assets resulting from operations was $ 9.64 and $ 1.84 , respectively . liquidity and capital resources -- december 31 , 2018 the fund is owned entirely by the company . the company is expected , but not required , to make further contributions to the capital of the fund to the extent of the company 's members ' capital commitment to the company and excess cash balances of the company . committed capital to the company as of december 31 , 2018 and 2017 was $ 460.0 million and $ 450.0 million , respectively , of which $ 96.6 million and $ 25,000 had been called and received . as of december 31 , 2018 , $ 363.4 million of capital remains uncalled and expires on the fund 's fifth anniversary of its first investment . however , the manager is permitted to extend the fund 's investment period by up two ( 2 ) additional calendar quarters in its sole and absolute discretion . the change in cash for the year ended december 31 , 2018 and the period ended december 31 , 2017 was : 2018 2017 net cash used in operating activities $ ( 86,387,259 ) — net cash provided by financing activities 87,195,074 25,000 net increase in cash and cash equivalents $ 807,815 25,000 as of december 31 , 2018 and the period ended december 31 , 2017 , 1.0 % and 100.0 % , respectively , of the fund 's assets consisted of cash and cash equivalents . on december 20 , 2018 , the fund entered into a syndicated loan agreement led by mufg union bank , n.a. , wells fargo securities , llc and ing capital llc , with participation from zions bancorporation , n.a. , doing business as california bank & trust , bank leumi usa , umpqua bank , hsbc bank usa , n.a. , and first bank , that established a secured revolving loan facility in an initial amount of up to $ 200,000,000 with the option to request that borrowing availability be increased up to $ 400,000,000 , subject to further negotiation and credit approval . all of the assets of the fund collateralize borrowings by the fund . loans under the facility may be , at the option of the fund , a reference rate loan , a libor loan , or a libor market index rate loan . the fund will pay interest on its borrowings upon each maturity date . the facility terminates on december 20 , 2021 , but can be accelerated in the event of default , such as the failure by the fund to make timely interest or principal payments . as of december 31 , 2018 , $ 6.0 million was outstanding under the facility . the fund invested its assets in venture loans during the year ended december 31 , 2018 . amounts disbursed under the fund 's loan commitments were $ 87.1 million . net loan amounts outstanding after amortization and valuation adjustments as of december 31 , 2018 were approximately $ 79.0 million . no loan commitments or loan fundings were made in 2017. year ended cumulative amount disbursed principal amortization and fair market adjustments balance outstanding - fair value unexpired unfunded commitments december 31 , 2018 $ 87.1 million $ 8.1 million $ 79.0 million $ 31.0 million 20 unexpired unfunded commitments for the year ended december 31 , 2018 were $ 31.0 million . there were no unexpired unfunded commitments for the period from june 28 , 2017 , sale of capital stock , through december 31 , 2017 , because the fund had not commenced investment operations . the following table shows the unfunded commitments by borrowers as of december 31 , 2018 : replace_table_token_2_th because venture loans are privately negotiated transactions , investments in these assets are relatively illiquid . it has been the experience of the manager that not all unfunded commitments will be used by the borrowers . many credit agreements with the borrowers contain provisions which are milestone dependent and not all borrowers will achieve these milestones . finally , the fund 's credit agreements contain provisions that give relief from funding obligations in the event the borrower has a material adverse change to its financial condition . therefore , the unfunded commitments do not necessarily reflect future cash requirements or future investment income for the fund . the fund will seek to meet the requirements to qualify for the special pass-through status available to rics under the code , and thus to be relieved of federal income tax on that part of its net investment income and realized capital gains that it distributes to its shareholder . to qualify as a ric , the fund must distribute to its shareholder for each taxable year at least 90 % of its investment company taxable income ( consisting generally of net investment income and net short-term capital gain ) ( the “ distribution requirement ” ) . to the extent that the terms of the fund 's venture loans provide for the receipt by the fund of additional interest at the end of the loan term or provide for the receipt by story_separator_special_tag management fees were calculated as 1.575 % of committed capital and was $ 4.8 million for the year ended december 31 , 2018 . there was no management fee in 2017 as the company had not called capital . other operating expenses for the year were $ 0.1 million and $ 0 for the year ended december 31 , 2018 and the period ended december 31 , 2017 , respectively . operating expense increased in 2018 because the fund started investment operations in may 2018. net decrease in net assets from operations for the year ended december 31 , 2018 and the period ended december 31 , 2017 were $ 1.0 million and $ 0.2 million , respectively . on a per share basis , the net decrease in net assets resulting from operations was $ 9.64 and $ 1.84 , respectively . liquidity and capital resources -- december 31 , 2018 the fund is owned entirely by the company . the company is expected , but not required , to make further contributions to the capital of the fund to the extent of the company 's members ' capital commitment to the company and excess cash balances of the company . committed capital to the company as of december 31 , 2018 and 2017 was $ 460.0 million and $ 450.0 million , respectively , of which $ 96.6 million and $ 25,000 had been called and received . as of december 31 , 2018 , $ 363.4 million of capital remains uncalled and expires on the fund 's fifth anniversary of its first investment . however , the manager is permitted to extend the fund 's investment period by up two ( 2 ) additional calendar quarters in its sole and absolute discretion . the change in cash for the year ended december 31 , 2018 and the period ended december 31 , 2017 was : 2018 2017 net cash used in operating activities $ ( 86,387,259 ) — net cash provided by financing activities 87,195,074 25,000 net increase in cash and cash equivalents $ 807,815 25,000 as of december 31 , 2018 and the period ended december 31 , 2017 , 1.0 % and 100.0 % , respectively , of the fund 's assets consisted of cash and cash equivalents . on december 20 , 2018 , the fund entered into a syndicated loan agreement led by mufg union bank , n.a. , wells fargo securities , llc and ing capital llc , with participation from zions bancorporation , n.a. , doing business as california bank & trust , bank leumi usa , umpqua bank , hsbc bank usa , n.a. , and first bank , that established a secured revolving loan facility in an initial amount of up to $ 200,000,000 with the option to request that borrowing availability be increased up to $ 400,000,000 , subject to further negotiation and credit approval . all of the assets of the fund collateralize borrowings by the fund . loans under the facility may be , at the option of the fund , a reference rate loan , a libor loan , or a libor market index rate loan . the fund will pay interest on its borrowings upon each maturity date . the facility terminates on december 20 , 2021 , but can be accelerated in the event of default , such as the failure by the fund to make timely interest or principal payments . as of december 31 , 2018 , $ 6.0 million was outstanding under the facility . the fund invested its assets in venture loans during the year ended december 31 , 2018 . amounts disbursed under the fund 's loan commitments were $ 87.1 million . net loan amounts outstanding after amortization and valuation adjustments as of december 31 , 2018 were approximately $ 79.0 million . no loan commitments or loan fundings were made in 2017. year ended cumulative amount disbursed principal amortization and fair market adjustments balance outstanding - fair value unexpired unfunded commitments december 31 , 2018 $ 87.1 million $ 8.1 million $ 79.0 million $ 31.0 million 20 unexpired unfunded commitments for the year ended december 31 , 2018 were $ 31.0 million . there were no unexpired unfunded commitments for the period from june 28 , 2017 , sale of capital stock , through december 31 , 2017 , because the fund had not commenced investment operations . the following table shows the unfunded commitments by borrowers as of december 31 , 2018 : replace_table_token_2_th because venture loans are privately negotiated transactions , investments in these assets are relatively illiquid . it has been the experience of the manager that not all unfunded commitments will be used by the borrowers . many credit agreements with the borrowers contain provisions which are milestone dependent and not all borrowers will achieve these milestones . finally , the fund 's credit agreements contain provisions that give relief from funding obligations in the event the borrower has a material adverse change to its financial condition . therefore , the unfunded commitments do not necessarily reflect future cash requirements or future investment income for the fund . the fund will seek to meet the requirements to qualify for the special pass-through status available to rics under the code , and thus to be relieved of federal income tax on that part of its net investment income and realized capital gains that it distributes to its shareholder . to qualify as a ric , the fund must distribute to its shareholder for each taxable year at least 90 % of its investment company taxable income ( consisting generally of net investment income and net short-term capital gain ) ( the “ distribution requirement ” ) . to the extent that the terms of the fund 's venture loans provide for the receipt by the fund of additional interest at the end of the loan term or provide for the receipt by
| if the fund fails to meet these requirements , it will be taxed as an ordinary corporation on its taxable income for that year ( even if that income is distributed to the company ) and all distributions out of its earnings and profits will be taxable to the members of the company as ordinary income ; thus , such income will be subject to a double layer of tax . there is no assurance that the fund will meet the ongoing requirements to qualify as a ric for tax purposes . the fund 's investment objective is to achieve superior risk adjusted investment returns by providing debt financing to venture-backed companies . the fund 's investing activities have focused primarily on private debt securities . the fund generally receive warrants to acquire equity securities in connection with its portfolio investments . the fund generally distribute these warrants to its shareholder upon receipt , or soon thereafter . the fund also has guidelines for the percentages of total assets which will be invested in different types of assets . the portfolio investments of the fund will primarily consist of debt financing to venture-backed companies in the technology sector . the borrowers ' ability to repay their loans may be adversely impacted by several factors , and as a result , the loan may not fully be repaid . furthermore , the fund 's security interest in any collateral over borrowers ' assets may be insufficient to make up any shortfall in payments . critical accounting policies , practices and estimates critical accounting policies and practices are those accounting policies and practices that are both the most important to the portrayal of the fund 's net assets and results of operations and require the most difficult , subjective or complex judgments , often as a result of the need to make estimates about the effect of matters that are inherently uncertain . critical accounting estimates are accounting estimates where the nature of the estimates is material due to the levels of subjectivity and judgment necessary to account for highly uncertain matters or the susceptibility of such matters to change and the impact of the estimates of the on net assets or operating performance is material . in evaluating the most critical accounting policies and estimates , the manager has identified the estimation of fair value of the fund 's loan investments as the
| 15,896 |
on january 15 , 2020 , the united states and china signed a phase one trade agreement in which the u.s. agreed not to proceed with tariffs that had been scheduled to take effect december 15 , 2019 and cut section 301 duties related to tariffs imposed on september 1 , 2019 on $ 120 billion in chinese goods in half , from 15 % to 7.5 % , effective february 14 , 2020. in return , china has agreed to increase its purchases of u.s. manufactured goods , agricultural products , energy , and services by a total of $ 200 billion over 2017 levels in the two years through december 2021. however , negotiations with china are ongoing and the u.s. will maintain 25 % tariffs on another $ 250 billion of chinese products while china maintains retaliatory tariffs on some u.s. goods . on january 29 , 2020 , president trump signed the u.s.-mexico-canada-agreement ( “ usmca ” ) , which is designed to replace the north american free trade agreement . once approved by the canadian parliament , the usmca would be implemented . ryerson expects that passage of the usmca will support demand for north american steel through strengthening of rules of origin for steel-intensive goods as well as continue to provide tariff-free trade access in north american markets . acquisitions on april 2 , 2018 , we acquired fanello industries ( “ fanello ” ) , a privately-owned metal service company located in lavonia , georgia . fanello is a processor and service provider that supplies blanking , stamping , laser cutting , bending , and machining metal solutions to a diverse group of industries in the southeastern united states . on july 2 , 2018 , jt ryerson acquired cs & w . cs & w is a leading metal service center with locations across the central and eastern united states offering a wide selection of products and capabilities , with a commercial portfolio centered on bar , tube , plate , and steel products . our combined commercial , operational , and processing strengths will provide a broader and deeper array of products to our customers in the midwest and northeast united states . the fair value of the consideration totaled $ 163.5 million . included in the 2019 financial results is $ 576.3 million of revenue and a net loss of $ 13.1 million . included in the 2018 financial results is $ 347.5 million of revenue and $ 58.3 million , including a $ 70.0 million bargain purchase gain , of net income from cs & w since the acquisition date . please refer to note 2 — “ acquisitions ” of part ii , item 8 `` financial statements and supplementary data '' for further information on our 2018 acquisition of cs & w . while the integration progressed in 2019 with approximately $ 35 million achieved in annualized expense take-outs and $ 12 million realized in cumulative proceeds from real estate sales for operations that were consolidated into existing facilities , this was masked by hot-rolled coil price deflation , which incurred out-sized inventory holding losses at cs & w compared to the legacy service centers due to cs & w 's eighty-five percent carbon steel product mix , which effectively amplified the persistent and acute gross margin compression . components of results of operations we generate substantially all of our revenue from sales of our metals products . the majority of revenue is recognized upon delivery of product to customers . the timing of shipment is substantially the same as the timing of delivery to customers given the proximity of our distribution sites to our customers . revenues associated with products which we believe have no alternative use , and where the company has an enforceable right to payment , are recognized on an over-time basis . over-time revenues are recorded in proportion with the progress made toward completing the performance obligation . 31 sales , cost of materials sold , gross profit , and operating expense control are the principal factors that impact our profitability : net sales . our sales volume and pricing are driven by market demand , which is largely determined by overall industrial production and conditions in specific industries in which our customers operate . sales prices are also primarily driven by market factors such as overall demand and availability of product . our net sales include revenue from product sales , net of returns , allowances , customer discounts , and incentives . cost of materials sold . cost of materials sold includes metal purchase and in-bound freight costs , third-party processing costs , and direct and indirect internal processing costs . the cost of materials sold fluctuates with our sales volume and our ability to purchase metals at competitive prices . increases in sales volume generally enable us both to improve purchasing leverage with suppliers , as we buy larger quantities of metals inventories . gross profit . gross profit is the difference between net sales and the cost of materials sold . our sales prices to our customers are subject to market competition . achieving acceptable levels of gross profit is dependent on our acquiring metals at competitive prices , our ability to manage the impact of changing prices , and efficiently managing our internal and external processing costs . operating expenses . optimizing business processes and asset utilization to lower fixed expenses such as employee , facility , and truck fleet costs , which can not be rapidly reduced in times of declining volume , and maintaining low fixed cost structure in times of increasing sales volume , have a significant impact on our profitability . operating expenses include costs related to warehousing and distributing our products as well as selling , general , and administrative expenses . story_separator_special_tag story_separator_special_tag style= '' margin-bottom:0pt ; margin-top:2pt ; text-indent:4.54 % ; font-size:10pt ; font-family : times new roman ; font-weight : normal ; font-style : normal ; text-transform : none ; font-variant : normal ; '' > the company had cash and cash equivalents at december 31 , 2019 of $ 11.0 million , compared to $ 23.2 million at december 31 , 2018 , and $ 77.4 million at december 31 , 2017. the company had $ 982 million , $ 1,153 million , and $ 1,046 million of total debt outstanding , a debt-to-capitalization ratio of 85 % , 94 % , and 101 % , and $ 348 million , $ 392 million , and $ 264 million available under the ryerson credit facility at december 31 , 2019 , 2018 , and 2017 , respectively . the company had total liquidity ( defined as cash and cash equivalents , restricted cash from sales of property , plant , and equipment , marketable securities , and availability under the ryerson credit facility and foreign debt facilities ) of $ 439 million , $ 441 million , and $ 338 million at december 31 , 2019 , 2018 , and 2017 , respectively . total liquidity is not a u.s. generally accepted accounting principles ( “ gaap ” ) financial measure . we believe that total liquidity provides additional information for measuring our ability to fund our operations . total liquidity does not represent , and should not be used as a substitute for , net income or cash flows from operations as determined in accordance with gaap and total liquidity is not necessarily an indication of whether cash flow will be sufficient to fund our cash requirements . below is a reconciliation of cash and cash equivalents to total liquidity : replace_table_token_15_th of the total cash and cash equivalents as of december 31 , 2019 , $ 6 million was held in subsidiaries outside the united states which is deemed to be permanently reinvested . ryerson does not currently foresee a need to repatriate funds from its non-u.s. subsidiaries . although the company has historically satisfied needs for more capital in the u.s. through debt or equity issuances , it could elect to repatriate funds held in foreign jurisdictions which could result in higher effective tax rates . the company has not recorded a deferred tax liability for the effect of a possible repatriation of these assets as management intends to permanently reinvest these assets outside of the u.s. specific plans for reinvestment include funding for future international acquisitions and funding of existing international operations . 36 net cash provided by operating activities was $ 193.1 million in 2019 compared to net cash provided by operating activities of $ 57.4 million in 2018 , and net cash used in operating activities of $ 2.5 million in 2017 . net income was $ 82.7 million , $ 106.4 million , and $ 18.0 million in 2019 , 2018 , and 2017 , respectively . cash provided by operating activities of $ 193.1 million during the year ended december 31 , 2019 was primarily due to the net income of $ 82.7 million , a decrease in accounts receivable of $ 92.5 million resulting from lower sales levels at year-end 2019 compared to year-end 2018 , a decrease in inventory of $ 65.9 million as we reduced inventory levels as metal pricing weakened during the year , and non-cash depreciation and amortization expense of $ 58.4 million , partially offset by a decrease in accounts payable of $ 78.2 million reflecting a lower cost of materials purchased at year-end 2019 compared to year-end 2018 , and pension contributions of $ 25.7 million . cash provided by operating activities of $ 57.4 million during the year ended december 31 , 2018 was primarily due to an increase in accounts payable of $ 58.4 million reflecting a higher cost of materials purchased at year-end 2018 compared to year-end 2017 , and non-cash depreciation and amortization expense of $ 52.9 million , partially offset by a non-cash gain on the bargain purchase of cs & w of $ 70.0 million , an increase in accounts receivable of $ 64.8 million resulting from higher sales levels at year-end 2018 compared to year-end 2017 , and pension contributions of $ 27.0 million . cash used in operating activities of $ 2.5 million during the year ended december 31 , 2017 was primarily due to an increase in accounts receivable $ 44.0 million resulting from higher sales levels at year-end 2017 compared to year-end 2016 , an increase in inventory of $ 42.9 million reflecting higher costs of materials purchased at year-end 2017 compared to year-end 2016 , pension contributions of $ 21.7 million , an increase in deferred income taxes of $ 9.2 million , and the payment of $ 7.9 million of retiree medical costs , partially offset by an increase in accounts payable of $ 58.1 million reflecting a higher cost of materials purchased at year-end 2017 compared to year-end 2016 , non-cash depreciation and amortization expense of $ 47.1 million and net income of $ 18.0 million . net cash provided by investing activities was $ 26.4 million in 2019 , and net cash used in investing activities was $ 200.2 million and $ 70.3 million in 2018 and 2017 , respectively . in december 2019 , we sold and leased back a group of properties for net proceeds of approximately $ 61.5 million . during 2018 , we paid $ 169.7 million , net of cash acquired , to purchase cs & w and fanello industries . during 2017 , the company paid $ 49.2 million , net of cash acquired , to acquire all of the issued and outstanding capital stock of the laserflex corporation and guy metals , inc. capital expenditures for the years ended december 31 , 2019 , 2018 , and 2017 , were $ 45.8 million , $ 38.4 million , and $ 25.1 million , respectively .
| the average cost of materials sold decreased during 2019 for our carbon flat , carbon plate , and stainless plate product lines , offset by increases in the average cost of materials sold for our aluminum flat and aluminum plate products lines . during 2019 , lifo income was $ 69 million related to decreases in pricing for all product lines . during 2018 , lifo expense was $ 90 million related to increases in pricing for all product lines . gross profit replace_table_token_10_th gross profit dollars increased in 2019 compared to 2018 due to the increase in tons sold due to the acquisition of cs & w . while our revenue per ton decreased during 2019 , our cost of materials sold decreased at a faster pace resulting in higher gross margins compared to the prior year . operating expenses replace_table_token_11_th 34 total operating expenses in 2019 were $ 1.8 million lower than in 2018. the inclusion of a full year of cs & w expenses after the acquisition of cs & w on july 2 , 2018 increased operating expenses $ 50.7 million . excluding cs & w , operating expenses decreased $ 52.5 million in 2019 primarily due to lower incentive compensation expense of $ 33.0 million , a gain on the sale of assets in 2019 of $ 20.6 million related to a sale and leaseback transaction for nine of our service center real estate assets , and a reduction of $ 11.0 million in accrued vacation expense after changes to our vacation policy were adopted in 2019 such that vacation is accrued as it is earned instead of in advance of work performed as under the prior policy . in addition , expenses were impacted by changes in the following categories : higher facility expenses , primarily depreciation and rent expense , of $ 5.9 million ; higher consultant fees of $ 5.7 million ; a restructuring charge of $ 2.4 million in 2019 compared to a charge of $ 4.2 million in 2018. charges in both periods included severance costs for corporate staff reductions while the 2018 charge also included costs for two facility
| 15,897 |
pooled data ( eculizumab switch and inadequate responder cohorts ) in transfusion-independent patients switching from eculizumab to ra101495 sc , pooled from both the switch cohort and the u.s.-based inadequate responder cohort ( collectively , n=7 ) , mean ldh and hemoglobin levels have remained stable in patients enrolled in the long-term extension study through the data cut-off date of february 7 , 2018. across all cohorts , no major safety or tolerability concerns have been reported after more than 500 patient weeks of cumulative exposure across all cohorts . no meningococcal infections or thromboembolic events have been observed . out of more than 3,500 doses administered to date , only nine mild ( grade 1 ) injection site reactions have occurred in a total of five patients . as of february 7 , 2018 , full compliance with once daily sc self-administration of ra101495 sc has been observed . we are also developing ra101495 , administered sc , to treat other debilitating complement mediated diseases such as generalized myasthenia gravis ( `` gmg '' ) atypical hemolytic uremic syndrome ( `` ahus '' ) and lupus nephritis ( `` ln '' ) . we initiated a phase 2 clinical trial with ra101495 sc for gmg in the fourth quarter of 2017 and a phase 1b clinical trial evaluating ra101495 sc in patients with 105 renal impairment , supporting development in ahus and ln , in the first quarter of 2018. we also have preclinical programs targeting selective inhibition of other complement factors for diseases with no approved therapies , including a factor d program for ocular and renal diseases , an oral small molecule c5 inhibitor and other complement inhibitors for certain autoimmune and central nervous system ( `` cns '' ) diseases . in addition to our focus on developing novel therapeutics to treat complement mediated diseases , we have validated our extreme diversity platform by successfully identifying and delivering orally available cyclic peptides for a non-complement cardiovascular target with a large market opportunity in a collaboration with merck & co. , inc. ( `` merck '' ) . since our inception in june 2008 , we have devoted substantially all of our resources to organizing and staffing our company , business planning , raising capital , acquiring and developing our proprietary chemistry technology , identifying potential product candidates and conducting preclinical studies of our product candidates and a clinical trial of our lead product candidate , ra101495 sc . to date , we have not generated any product revenue and have financed our operations primarily through the public offering and the private placement of our securities and revenue from our collaboration with merck . as of december 31 , 2017 , we had received an aggregate of $ 181.0 million in net proceeds from the issuance of equity and debt securities and $ 17.5 million in payments in connection with our collaboration and license agreement with merck ( the `` merck agreement '' ) . as of december 31 , 2017 , our principal source of liquidity was cash and cash equivalents , which totaled $ 70.4 million . on october 31 , 2016 , we completed an initial public offering ( `` ipo '' ) , in which we issued and sold 7,049,230 shares of our common stock at a public offering price of $ 13.00 per share , resulting in net proceeds to us of $ 82.8 million after deducting $ 6.4 million of underwriting discounts and commissions and offering costs of $ 2.4 million . on november 29 , 2016 , we completed the sale of an additional 1,057,385 shares of common stock to the underwriters under the underwriters ' option in the ipo to purchase additional shares of common stock at the public offering price of $ 13.00 per share , resulting in additional net proceeds to us of $ 12.8 million after deducting underwriting discounts and commissions of $ 1.0 million . in february 2018 , we completed a follow-on public offering of 9,660,000 shares of our common stock , including the full exercise of the underwriter 's over-allotment of 1,260,000 shares , at $ 6.00 per share and received aggregate net proceeds of $ 54.1 million , after deducting $ 3.5 million of underwriting discounts and commissions and approximately $ 0.4 million of offering expenses . as of december 31 , 2017 , we had an accumulated deficit of $ 123.2 million . our net losses were $ 54.4 million , $ 28.9 million and $ 13.9 million for the years ended december 31 , 2017 , 2016 and 2015 , respectively . we have incurred significant net operating losses in every year since our inception and expect to continue to incur increasing net operating losses and significant expenses for the foreseeable future . our net losses may fluctuate significantly from quarter to quarter and year to year . we anticipate that our expenses will increase significantly as we : continue to advance our lead program , ra101495 sc , through clinical development by establishing clinical proof-of-concept activity using convenient sc administration in pnh , gmg , and patients in complement-mediated renal diseases , such as ahus and ln ; continue our current research programs and development activities ; seek to identify additional research programs and additional product candidates ; initiate preclinical testing and clinical trials for any product candidates we identify and develop , maintain , expand and protect our intellectual property portfolio ; hire additional research , clinical and scientific personnel ; and incur additional costs associated with operating as a public company , including expanding our operational , finance and management teams . story_separator_special_tag 106 we believe that our available cash and cash equivalents as of december 31 , 2017 , and the net proceeds of $ 54.1 million from the equity offering closed in february 2018 , will enable us to fund our operating expenses and capital expenditure requirements through the end of 2019. we do not expect to generate revenue from product sales unless and until we successfully complete development and obtain regulatory approval for a product candidate , which we expect will take a number of years and is subject to significant uncertainty . additionally , we believe that our available funds as of december 31 , 2017 , and the net proceeds of $ 54.1 million from the equity offering closed in february 2018 , will be sufficient to enable us to prepare and plan for the initiation of our phase 3 clinical trials of ra101495 sc for the treatment of pnh , obtain top line data from our ongoing phase 2 clinical trial in gmg , complete the phase 1b clinical trial clinical trial evaluating ra101495 sc in patients with renal impairment , supporting further development in ahus and ln , and advance our other preclinical pipeline programs . we expect that these funds will not , however , be sufficient to enable us to complete our phase 3 clinical study in pnh . it is also possible that we will not achieve the progress that we expect with respect to ra101495 sc because the actual costs and timing of clinical development activities are difficult to predict and are subject to substantial risks and delays . we will be required to obtain further funding through public or private equity offerings , debt financings , collaborations and licensing arrangements or other sources . adequate additional financing may not be available to us on acceptable terms , or at all . our failure to raise capital as and when needed would have a negative impact on our financial condition and our ability to pursue our business strategy . financial overview revenue we have derived all of our revenue to date from the merck agreement , which we entered into in april 2013. under the merck agreement , we collaborated with merck and used our proprietary drug discovery technology platform to identify orally available cyclic peptides for non-complement targets nominated by merck and provided specific research and development services . at the signing , merck paid us an upfront , non-refundable , license fee payment of $ 4.5 million . in addition , during the research term , which ended in april 2016 , merck reimbursed us for research and development services provided by us in accordance with a pre-specified number of our full-time equivalent employees ( `` ftes '' ) working under the merck agreement . at the conclusion of the research term , merck elected to continue the development of a non-complement cardiovascular program target with a large market opportunity , for which we had received $ 3.5 million in preclinical milestone payments as of december 31 , 2017. we are also entitled to receive future aggregate milestone payments of up to $ 61.5 million and low-to-mid single digit percentage royalties on any future sales for this program target . for additional information about the merck agreement , see item 8 , `` financial statements and supplementary data '' within this annual report on form 10-k. to date , we have not generated any revenue from product sales and do not expect to do so in the near future . we expect that our revenue will be less than our expenses for the foreseeable future and that we will experience increasing losses as we continue our development of , and seek regulatory approvals for , our product candidates and begin to commercialize any approved products . our ability to generate revenue for each product candidate for which we receive regulatory approval will depend on numerous factors , including competition , commercial manufacturing capability and market acceptance of our products . 107 research and development expenses research and development expenses consist primarily of costs incurred for our research activities , including development of our proprietary chemistry technology platform , and our preclinical and clinical candidates , which include : employee-related expenses , including salaries , benefits , and stock-based compensation expense ; expenses incurred under agreements with contract research organizations ( `` cros '' ) , contract manufacturing organizations ( `` cmos '' ) , and independent contractors that conduct research and development , preclinical and clinical activities on our behalf ; costs of purchasing lab supplies and non-capital equipment used in our preclinical activities and in manufacturing preclinical study and clinical trial materials ; consulting , licensing and professional fees related to research and development activities : and ; facility costs , depreciation , and other expenses , which include direct and allocated expenses for rent and maintenance of facilities , insurance , and other supplies . we expense research and development costs as incurred . we recognize costs for certain development activities , such as preclinical studies and clinical trials , based on an evaluation of the progress to completion of specific tasks using information provided to us by our vendors such as patient enrollment or clinical site activations for services received and efforts expended . research and development activities are central to our business model . we expect research and development costs to increase significantly for the foreseeable future as our current development programs progress and new programs are added . the following table sets forth our research and development expenses related to our product pipeline : replace_table_token_7_th the expenses allocated to our product pipeline in the table above relate to cro and cmo costs associated with our pre-clinical studies and clinical trials . we do not allocate compensation , benefits and other employee-related expenses , costs related to facilities , depreciation , share-based compensation , research and development support services , laboratory supplies and certain other costs directly to programs .
| general and administrative expenses general and administrative expenses increased by $ 4.8 million to $ 9.8 million for the year ended december 31 , 2017 , from $ 5.0 million for the year ended december 31 , 2016. this increase was primarily attributable to $ 3.1 million increase in employee-related costs associated compensation , benefits , non-cash stock-based compensation for executive and administrative personnel , including costs for additional personnel to support our increased activities ; a $ 0.9 million increase in insurance , legal and audit costs , primarily due to operating as a public company ; a $ 0.4 million increase in patent costs ; and a $ 0.4 million net increase in other expenses . other income ( expense ) , net other income ( expense ) , net increased by $ 1.4 million to $ 0.6 million in other income , net during the year ended december 31 , 2017 , from approximately $ 0.8 million in other expense , net for the year ended december 31 , 2016. this increase was due primarily to the series b-2 preferred stock tranche rights fair value adjustment of $ 1.0 million recognized during the year ended december 31 , 2016 and a $ 0.5 million increase in interest income ; partially offset by $ 0.1 million net increase in other expenses . 114 comparison of the years ended december 31 , 2016 and 2015 the following table summarizes our results of operations : replace_table_token_9_th revenue revenue increased by $ 0.8 million to $ 4.9 million for the year ended december 31 , 2016 , from $ 4.1 million for the year ended december 31 , 2015. this increase is primarily attributable to the recognition of a $ 3.0 million milestone payment from merck in june 2016 and an increase of $ 0.2 million in connection with recognition of the remaining deferred revenue related to the upfront non-refundable license fee earned at the expiration of the research term of the merck agreement on march 31 , 2016. these increases were offset in part by $ 2.2 million decrease in fte revenue related to a decrease in the number of ftes providing research and development services under the merck agreement and $ 0.2 million decrease related to lower reimbursable lab supply and reagent expenses for the year ended december 31 , 2016. research and development expenses research
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income tax provision replace_table_token_11_th the effective tax rate differs from the u.s. statutory rate of 35 % in fiscal years 2017 , 2016 and 2015 primarily due to earnings being taxed at lower statutory rates in foreign jurisdictions , the benefit of various investment credits claimed in a foreign jurisdiction , and valuation allowances in jurisdictions with historical and continuing losses . the increase in effective income tax rate in 2017 compared with 2016 was primarily due to recognition of $ 1.0 million of previously unrecognized tax benefits , the result of audit settlements and expirations of assessment period statutes of limitations . those effects were partially offset by 2016 benefit factors , including : the recognition of $ 2.5 million of previously unrecognized deferred tax assets , the story_separator_special_tag activities increased to $ 52.3 million provided in fiscal year 2016 from $ 104.3 used in fiscal year 2015 , primarily due to proceeds of $ 101.9 million received from the sale of our investments in the mp mask joint venture and an interest we held in a foreign entity , as well as decreased expenditures for capital equipment . net cash used in investing activities in fiscal 2015 was $ 104.3 million primarily due to capital expenditure payments . capital expenditure payments for the 2017 , 2016 , and 2015 fiscal years were $ 92.0 , $ 50.1 million , and $ 104.0 million , respectively . we expect capital expenditure payments in fiscal 2018 to be approximately $ 250 million . net cash used in financing activities was $ 10.9 million in fiscal 2017 , which primarily comprised repayments of long-term borrowings and a dividend paid to the noncontrolling interest in a subsidiary , partially offset by proceeds received from employee share-based arrangements . net cash used in financing activities was $ 67.0 million in fiscal 2016 , primarily comprised of repayments of long-term borrowings ( including $ 50.1 million to retire our 3.25 % convertible senior notes which matured in april 2016 ) and $ 11.9 million dividend paid to the noncontrolling interest in a subsidiary , partially offset by proceeds received from employee share-based arrangements . net cash used in financing activities was $ 7.1 million in fiscal 2015 , primarily comprised of repayments of borrowings , offset , in part , by proceeds from share-based arrangements . our liquidity , as we operate in a high fixed cost environment , is highly dependent on our revenue , cash conversion cycle , and the timing of our capital expenditures ( which can vary significantly from period to period ) . depending on conditions in the semiconductor and fpd markets , our cash flows from operations and current holdings of cash may not be adequate to meet our current and long-term needs for capital expenditures , operations and debt repayments . historically , in certain years , we have used external financing to fund these needs . due to conditions in the credit markets and covenant restrictions on our existing debt , some financing instruments we have used in the past may not be available to us when required . although we continue to evaluate further cost reduction initiatives , we can not assure that additional sources of financing would be available to us on commercially favorable terms , should our cash requirements exceed our existing cash and cash available under our credit facility . at october 29 , 2017 , we had outstanding purchase commitments of $ 168 million , which included $ 162 million related to capital expenditures . we intend to finance our capital expenditures with our working capital , cash generated from operations , and , if necessary , with additional borrowings . we have agreed to enter into a joint venture that is constructing an ic facility in china with an estimated total investment of $ 160 million . our funding commitment for the joint venture is approximately $ 80 million in the form of a combination of cash and transferred capital over the next several years . we have also entered into an agreement to construct an fpd facility in china in which we will invest $ 160 million over that same period . cash requirements our cash requirements in fiscal 2018 will be primarily to : fund our operations ; capital spending , including the construction of an ic research and development and manufacturing facility in xiamen , china and an fpd manufacturing facility in hefei , china ; and service our debt . we believe that our cash on hand , cash generated from operations and amounts available to borrow will be sufficient to meet our cash requirements for the next twelve months . we regularly review the availability and terms at which we might issue additional equity or debt securities in the public or private markets . however , we can not assure that additional sources of financing would be available to us on commercially favorable terms , should our cash requirements exceed our existing cash and cash available under our credit facility . 25 contractual obligations the following table presents our contractual obligations as of october 29 , 2017 : replace_table_token_13_th long-term borrowings of $ 57.5 million in the table above represent our obligation under our 3.25 % senior convertible notes which , at the option of the note holders , may be settled either in cash or by conversion into our common stock . see note 6 to the consolidated financial statements for additional information . as of october 29 , 2017 , the company had recorded accruals for uncertain tax positions of $ 3.4 million which were not included in the above table due to the high degree of uncertainty regarding the timing of future payments related to such liabilities . off-balance sheet arrangements we own a 50.01 % ( controlling interest ) of pdmc , our ic manufacturing facility located in taiwan . under the pdmc operating agreement , the shareholders of pdmc may story_separator_special_tag income tax provision replace_table_token_11_th the effective tax rate differs from the u.s. statutory rate of 35 % in fiscal years 2017 , 2016 and 2015 primarily due to earnings being taxed at lower statutory rates in foreign jurisdictions , the benefit of various investment credits claimed in a foreign jurisdiction , and valuation allowances in jurisdictions with historical and continuing losses . the increase in effective income tax rate in 2017 compared with 2016 was primarily due to recognition of $ 1.0 million of previously unrecognized tax benefits , the result of audit settlements and expirations of assessment period statutes of limitations . those effects were partially offset by 2016 benefit factors , including : the recognition of $ 2.5 million of previously unrecognized deferred tax assets , the story_separator_special_tag activities increased to $ 52.3 million provided in fiscal year 2016 from $ 104.3 used in fiscal year 2015 , primarily due to proceeds of $ 101.9 million received from the sale of our investments in the mp mask joint venture and an interest we held in a foreign entity , as well as decreased expenditures for capital equipment . net cash used in investing activities in fiscal 2015 was $ 104.3 million primarily due to capital expenditure payments . capital expenditure payments for the 2017 , 2016 , and 2015 fiscal years were $ 92.0 , $ 50.1 million , and $ 104.0 million , respectively . we expect capital expenditure payments in fiscal 2018 to be approximately $ 250 million . net cash used in financing activities was $ 10.9 million in fiscal 2017 , which primarily comprised repayments of long-term borrowings and a dividend paid to the noncontrolling interest in a subsidiary , partially offset by proceeds received from employee share-based arrangements . net cash used in financing activities was $ 67.0 million in fiscal 2016 , primarily comprised of repayments of long-term borrowings ( including $ 50.1 million to retire our 3.25 % convertible senior notes which matured in april 2016 ) and $ 11.9 million dividend paid to the noncontrolling interest in a subsidiary , partially offset by proceeds received from employee share-based arrangements . net cash used in financing activities was $ 7.1 million in fiscal 2015 , primarily comprised of repayments of borrowings , offset , in part , by proceeds from share-based arrangements . our liquidity , as we operate in a high fixed cost environment , is highly dependent on our revenue , cash conversion cycle , and the timing of our capital expenditures ( which can vary significantly from period to period ) . depending on conditions in the semiconductor and fpd markets , our cash flows from operations and current holdings of cash may not be adequate to meet our current and long-term needs for capital expenditures , operations and debt repayments . historically , in certain years , we have used external financing to fund these needs . due to conditions in the credit markets and covenant restrictions on our existing debt , some financing instruments we have used in the past may not be available to us when required . although we continue to evaluate further cost reduction initiatives , we can not assure that additional sources of financing would be available to us on commercially favorable terms , should our cash requirements exceed our existing cash and cash available under our credit facility . at october 29 , 2017 , we had outstanding purchase commitments of $ 168 million , which included $ 162 million related to capital expenditures . we intend to finance our capital expenditures with our working capital , cash generated from operations , and , if necessary , with additional borrowings . we have agreed to enter into a joint venture that is constructing an ic facility in china with an estimated total investment of $ 160 million . our funding commitment for the joint venture is approximately $ 80 million in the form of a combination of cash and transferred capital over the next several years . we have also entered into an agreement to construct an fpd facility in china in which we will invest $ 160 million over that same period . cash requirements our cash requirements in fiscal 2018 will be primarily to : fund our operations ; capital spending , including the construction of an ic research and development and manufacturing facility in xiamen , china and an fpd manufacturing facility in hefei , china ; and service our debt . we believe that our cash on hand , cash generated from operations and amounts available to borrow will be sufficient to meet our cash requirements for the next twelve months . we regularly review the availability and terms at which we might issue additional equity or debt securities in the public or private markets . however , we can not assure that additional sources of financing would be available to us on commercially favorable terms , should our cash requirements exceed our existing cash and cash available under our credit facility . 25 contractual obligations the following table presents our contractual obligations as of october 29 , 2017 : replace_table_token_13_th long-term borrowings of $ 57.5 million in the table above represent our obligation under our 3.25 % senior convertible notes which , at the option of the note holders , may be settled either in cash or by conversion into our common stock . see note 6 to the consolidated financial statements for additional information . as of october 29 , 2017 , the company had recorded accruals for uncertain tax positions of $ 3.4 million which were not included in the above table due to the high degree of uncertainty regarding the timing of future payments related to such liabilities . off-balance sheet arrangements we own a 50.01 % ( controlling interest ) of pdmc , our ic manufacturing facility located in taiwan . under the pdmc operating agreement , the shareholders of pdmc may
| included in the balance of unrecognized tax benefits as of october 29 , 2017 , october 30 , 2016 and november 1 , 2015 , are $ 3.4 million , $ 4.6 million and $ 4.1 million recorded in other liabilities in the consolidated balance sheets that , if recognized , would impact the effective tax rate . net income attributable to noncontrolling interests net income attributable to noncontrolling interests decreased $ 1.3 million to $ 8.2 million in 2017 compared with $ 9.5 million in 2016 due to decreased net income at our ic manufacturing facility in taiwan , and decreased $ 2.7 million to $ 9.5 million in 2016 compared with $ 12.2 million in 2015 as a result of decreased net income at that same facility . liquidity and capital resources replace_table_token_12_th as of october 29 , 2017 , we had cash and cash equivalents of $ 308.0 million compared with $ 314.1 million as of october 30 , 2016. our working capital increased $ 7.1 million to $ 367.3 million at october 29 , 2017 , compared with $ 360.3 million at october 30 , 2016. we may use our available cash on hand for operations , capital expenditures , debt repayments , strategic opportunities , stock repurchases or other corporate uses , any of which may be material . as of october 30 , 2016 , we had cash and cash equivalents of $ 314.1 million compared with $ 205.9 million as of november 1 , 2015. our working capital increased $ 192.2 million to $ 360.3 million at october 30 , 2016 , compared with $ 168.1 million ( as retrospectively adjusted to reflect our adoption of asu 2015-17 in the fourth quarter of fiscal year 2016 ) at november 1 , 2015. the increase in cash and cash equivalents in 2016 was primarily attributable to the sale of our 49.99 % interest in the mp mask joint venture for $ 93.1 million and proceeds from the sale of an investment in a foreign entity of $
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these capitalized costs are subject to a ceiling test that limits such pooled costs to the aggregate of the present value of future net revenues attributable to proved oil and natural gas reserves discounted at 10 % plus the lower of cost or market value of unproved properties . our partnership did not assign any book or market value to unproved properties , including nonproducing royalty , mineral and leasehold interests . the full cost ceiling is evaluated at the end of each quarter and when events indicate possible impairment . no impairments have been recorded since 2003. the discounted present value of our proved oil and natural gas reserves is a major component of the ceiling test calculation and requires many subjective judgments . estimates of reserves are forecasts based on engineering and geological analyses . different reserve engineers could reach different conclusions as to estimated quantities of natural gas or crude oil reserves based on the same information . our reserve estimates are prepared by independent consultants . the passage of time provides more qualitative information regarding reserve estimates , and revisions are made to prior estimates based on updated information . however , there can be no assurance that more significant revisions will not be necessary in the future . significant downward revisions could result in an impairment representing a non-cash charge to income . in addition to the impact on calculation of the ceiling test , estimates of proved reserves are also a major component of the calculation of depletion . while the quantities of proved reserves require substantial judgment , the associated prices of oil and natural gas reserves that are included in the discounted present value of our reserves are objectively determined . the ceiling test calculation requires use of the unweighted arithmetic average of the first day of the month price during the 12-month period ending on the balance sheet date and costs in effect as of the last day of the accounting period , which are generally held constant for the life of the properties . as a result , the present value is not necessarily an indication of the fair value of the reserves . oil and natural gas prices have historically been volatile , and the prevailing prices at any given time may not reflect our partnership 's or the industry 's forecast of future prices . the preparation of financial statements in conformity with accounting principles generally accepted in the united states of america requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period . for example , estimates of uncollected revenues and unpaid expenses from royalty properties and npis operated by non-affiliated entities are particularly subjective due to the inability to gain accurate and timely information . therefore , actual results could differ from those estimates . please see “ item 1. business—customers and pricing ” and “ item 2. properties—royalty properties ” for additional discussion . contractual obligations our office lease in dallas , texas comprises our contractual obligations . payments due by period contractual obligations total less than 1 year 1-3 years 3-5 years more than 5 years operating lease obligations $ 721,000 $ 270,000 $ 451,000 - - 23 story_separator_special_tag 0pt ; line-height : 1.25 ; text-indent : 18pt '' > general and administrative ( “ g & a ” ) costs increased 10.0 % from $ 3,815,000 in 2012 to $ 4,196,000 in 2013 , primarily due to costs related to the bakken trend and the fayetteville shale . those same costs increased 22.4 % to $ 5,137,000 in 2014 compared to 2013 primarily due to increased activity in our properties in the bakken trend , midland basin and costs associated with added compensation expense for new hires , and merit and retention bonuses for all employees . other income of $ 712,000 during 2014 was related to a first quarter 2014 settlement of a dispute on leases in north dakota . net cash provided by operating activities was about the same at $ 56,424,000 during 2012 compared to $ 56,398,000 during 2013. during 2014 net cash provided by operating activities was up 2.2 % at $ 57,660,000 due to increased oil production and natural gas prices , partially offset by reduced natural gas production and oil prices and lower lease bonus income . climate change climate change has become the subject of an important public policy debate . in response to climate change concerns , many foreign countries are adopting climate change legislation and regulations . although the united states congress has considered adopting climate change legislation , it has yet to enact such legislation and or regulations at the federal level . several states have adopted or are considering adopting climate change legislation , including greenhouse gas emissions limits and cap-and-trade programs . further , the environmental protection agency ( “ epa ” ) issued greenhouse gas monitoring and reporting regulations that went into effect january 1 , 2010. those regulations required that regulated facilities begin reporting greenhouse gas emissions beginning in september 2012 , and annually thereafter . the epa has also issued final regulations requiring petroleum and natural gas operators meeting a certain emission threshold to report their greenhouse gas emissions to the epa . in addition to the measuring and reporting requirements , the epa issued an `` endangerment finding '' under section 202 ( a ) of the clean air act , concluding greenhouse gas pollution threatens the public health and welfare of future generations . story_separator_special_tag epa has issued final regulations requiring the owners and operators of certain large stationary sources to obtain greenhouse gas emissions permits . epa has indicated that additional sources may be subject to greenhouse gas permitting requirements in the future , and that it will use data collected through the reporting rules to decide whether to promulgate future greenhouse gas emission limits . the current state of development of many state and federal climate change regulatory initiatives makes it difficult to predict with certainty the future impact on us , including accurately estimating the related compliance costs that the operating partnership and oil and natural gas operators that develop our properties may incur . see item 1a . risk factors – “ environmental costs and liabilities and changing environmental regulation could affect our cash flow ” and “ the adoption of climate change legislation by congress or executive orders or regulations could result in increased operating costs and reduced demand for the oil and natural gas production from our properties. ” texas margin tax texas imposes a franchise tax ( commonly referred to as the texas margin tax ) at a rate of 1 % on gross revenues less certain deductions , as specifically set forth in the texas margin tax statute . the texas margin tax applies to corporations and limited liability companies , general and limited partnerships ( unless otherwise exempt ) , limited liability partnerships , trusts ( unless otherwise exempt ) , business trusts , business associations , professional associations , joint stock companies , holding companies , joint ventures and certain other business entities having limited liability protection . limited partnerships that receive at least 90 % of their gross income from designated passive sources , including royalties from mineral properties and other non-operated mineral interest income , and do not receive more than 10 % of their income from operating an active trade or business , are generally exempt from the texas margin tax as “ passive entities. ” we believe our partnership meets the requirements for being considered a “ passive entity ” for texas margin tax purposes and , therefore , it is exempt from the texas margin tax . if the partnership is exempt from texas margin tax as a passive entity , each unitholder that is considered a taxable entity under the texas margin tax would generally be required to include its portion of partnership revenues in its own texas margin tax computation . the texas administrative code provides such income is sourced according to the principal place of business of the partnership , which would be the state of texas . each unitholder is urged to consult an independent tax advisor regarding the requirements for filing state income , franchise and texas margin tax returns . 25 l iquidity and capital resources capital resources our primary sources of capital are our cash flow from the royalty properties and the npis . we are not directly liable for the payment of any exploration , development or production costs . we do not have any transactions , arrangements or other relationships that could materially affect our liquidity or the sustainability of capital resources . pursuant to the terms of our partnership agreement , we can not incur indebtedness , other than trade payables , ( i ) in excess of $ 50,000 in the aggregate at any given time or ( ii ) which would constitute `` acquisition indebtedness '' ( as defined in section 514 of the internal revenue code of 1986 , as amended ) . our only cash requirements are the distributions of all our net cash flow to our unitholders , the payment of oil and natural gas production and property taxes not otherwise deducted from gross production revenues and general and administrative expenses incurred on our behalf and allocated in accordance with our partnership agreement . since the distributions to our unitholders are , by definition , determined after the payment of all expenses actually paid by us , the only cash requirements that may create liquidity concerns for us are the payments of expenses . since many of these expenses vary directly with oil and natural gas prices and sales volumes , such as production taxes , we anticipate that sufficient funds will be available at all times for payment of these expenses . of the expenses that do not vary with oil and natural gas prices and sales volumes , most are reimbursements to our general partner for allocable general and administrative costs including home office rent , salaries , and employee benefit plans . such reimbursements are generally limited to 5 % of an amount primarily based on annual distributions to our limited partners . historically , all such reimbursements have been substantially below the 5 % limit established by the partnership agreement . consequently , even during the 2008 economic downturn , our business risks were essentially limited to distribution amount decreases . see “ item 1. business – credit facilities and financing plans. ” see “ item 1a . risk factors – risks related to our business – cash distributions are affected by production and other costs , some of which are outside of our control. ” see “ item 1a . risk factors – risks inherent in an investment in our common units – cost reimbursement due our general partner may be substantial and reduce our cash available to distribute to our unitholders . '' see `` notes to consolidated financial statements – note 3 – related party transactions . ''
| per bbl in 2014. royalty properties ' weighted average gas sales prices increased 22.0 % from $ 2.82 per mcf during 2012 to $ 3.44 per mcf during 2013 and then increased 22.4 % to $ 4.21 per mcf during 2014. all such fluctuations resulted from changing market prices . weighted average npi properties ' gas sales prices increased 24.6 % from $ 3.33 per mcf during 2012 to $ 4.15 per mcf during 2013 and then increased 21.0 % to $ 5.02 per mcf in 2014. npi properties ' weighted average oil sales prices increased 4.8 % from $ 87.67 per bbl during 2012 to $ 91.85 per bbl during 2013 and subsequently decreased 12.0 % to $ 80.83 per bbl in 2014. all such fluctuations resulted from changing market prices . additionally , 2013 natural gas prices include a natural gas liquids payment accrual of $ 0.63/mcf related to 2013 production compared to $ 0.71/mcf in 2012. the accrued 2014 natural gas liquids payment of $ 0.57/mcf is included in the $ 5.02/mcf average gas sales price for 2014. the natural gas liquids payments are based on an oklahoma guymon-hugoton field 1994 gas delivery and processing agreement that is in effect through 2015. under the terms of the agreement , when the market price of natural gas liquids increases sufficiently disproportionately to natural gas market prices , the operating partnership receives a portion of that increase in an annual payment . in the event the evaluation at the end of the annual contract period shows the payment to be determinable and collectable , the revenue is accrued . generally , we receive payment in the first quarter of the following year . lease bonus income decreased from $ 4,538,000 in 2012 to $ 2,319,000 in 2013 , and then decreased to $ 1,590,000 in 2014. in 2012 we received proceeds of approximately $ 2,807,000 from two leasing transactions in lycoming county , pennsylvania and
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clih produces cut and sewn mattress covers , and its operations are located in a modern industrial park on the northeast border of haiti , which borders the dominican republic . clih commenced production in the second quarter of fiscal 2018 and complements our mattress fabric operations with a mirrored platform that enhances our ability to meet customer demand while adding a lower cost operation to our platform ( see note 7 located in the notes to the consolidated financial statements for further details ) . 31 segment assets segment assets consist of accounts receivable , inventory , property , plant and equipment , investment in an unconsolidated joint venture , goodwill , a non-compete agreement and customer relationships associated with an acquisition . replace_table_token_9_th accounts receivable & inventory as of april 29 , 2018 , accounts receivable and inventory decreased $ 3.1 million or 6.6 % , compared with april 30 , 2017. this decrease is primarily due to the decrease in sales volume during the fourth quarter of fiscal 2018 compared with the fourth quarter of fiscal 2017 noted above . property , plant & equipment the $ 48.8 million at april 29 , 2018 , represents property , plant and equipment of $ 35.4 million and $ 13.4 million located in the u.s. and canada , respectively . the $ 48.9 million at april 30 , 2017 , represents property , plant , and equipment of $ 34.0 million and $ 14.9 million located in the u.s. and canada , respectively . as of april 29 , 2018 , property , plant , and equipment was flat compared with april 30 , 2017. the mattress fabric segment incurred depreciation expense of $ 6.8 million and had capital spending of $ 6.7 million in fiscal 2018. investment in unconsolidated joint venture our investment in unconsolidated joint venture represents our fifty percent ownership of clih noted above . non-compete agreement and customer relationships the decreases in carrying values of our non-compete agreement and customer relationships at april 29 , 2018 , compared with april 30 , 2017 , are primarily due to amortization expense in fiscal 2018 . 32 upholstery fabrics segment net sales replace_table_token_10_th the increase in upholstery fabric net sales reflects our product-driven strategy with a sustained focus on innovation and creative designs , supported by our manufacturing platform located in china . our ability to provide a diverse product offering has allowed us to reach new market segments . our results reflect the success of this strategy , highlighted by expanded sales of livesmart® , our popular “ performance ” line of highly durable stain-resistant fabric . we have recently launched a new website specifically to promote this innovative product line , along with a more aggressive marketing campaign . also , we achieved continued sales growth in fabrics designed for the hospitality market . in order to take advantage of the growth opportunities in the hospitality market , we completed the acquisition of read window products , llc during the fourth quarter of fiscal 2018 ( see below for further details ) . gross profit and operating income replace_table_token_11_th despite the increase in net sales noted above , our profitability in upholstery fabrics decreased in fiscal 2018 compared with the same period a year ago . the decrease in profitability was primarily due to higher operating costs associated with our operations located in china resulting from unfavorable foreign exchange rates experienced in the second half of fiscal 2018 , and a decline in profitability associated with our u.s. upholstery fabric operation located in anderson , south carolina , resulting from changing consumer style preferences and reduced customer demand for products made in this facility . ( see below for further details regarding closure of our anderson , south carolina plant facility ) . business combination - read window products , llc effective april 1 , 2018 , we entered into an asset purchase agreement ( agreement ) to acquire certain assets and assume certain liabilities of read window products , inc. ( read ) , a source of custom window treatments for the hospitality and commercial industries . based in knoxville , tennessee , read is a turn-key provider of window treatments offering measuring , sourcing , fabrication and installation services . read 's custom product line includes motorization , shades , drapery , upholstered headboards and shower curtains . in addition , read supplies soft goods such as decorative top sheets , coverlets , duvet covers , bed skirts , bolsters and pillows , for leading hospitality brands worldwide . the addition of window treatments and other soft goods to our product line will allow us to be a more complete source of fabrics for the hospitality market , in which we believe there are significant growth opportunities . 33 the purchase price for the net assets acquired was $ 5.7 million , of which $ 4.5 million was paid at closing on apri1 1 , 2018 , $ 375,000 was paid in may 2018 , and $ 763,000 is to be paid in june in 2019 , subject to certain conditions as defined in the agreement . the agreement contains a contingent consideration arrangement that requires us to pay the former shareholder of read based on adjusted ebitda as defined in the agreement for calendar year 2018 in excess of fifty percent of a pre-established adjusted ebitda target . based on historical and projected financial results in relation to the pre-established adjusted ebitda target , we currently believe a contingent payment will not be made , and therefore , no contingent liability has been recorded . the following table presents the final allocation of the acquisition cost to the assets acquired and liabilities assumed based on their fair values . replace_table_token_12_th we recorded customer relationships at fair market value based on a multi-period excess earnings valuation model . these customer relationships will be amortized on a straight-line basis over their nine-year useful life . we recorded the tradename at fair market based on the relief from royalty method . story_separator_special_tag this tradename was determined to have an indefinite useful life and , therefore , is not being amortized . equipment will be depreciated on a straight-line basis over useful lives ranging from three to ten years . goodwill is deductible for income tax purposes over the statutory period of fifteen years . acquisition costs totaling $ 339,000 were included in selling , general , and administrative expenses in our fiscal 2018 consolidated statement of net income . 34 the following unaudited pro forma consolidated results of operations for the years ending april 29 , 2018 and april 30 , 2017 have been prepared as if the acquisition of read had occurred at may 2 , 2016. replace_table_token_13_th the unaudited pro forma information is presented for informational purposes only and is not necessarily indicative of the results of operations that actually would have been achieved had the acquisition been consummated as of that time , nor is it intended to be a projection of future results . actual revenue and net income for the month of april 2018 were included in our consolidated statement of net income and totaled $ 880,000 and $ 5,000 , respectively . exit and disposal activity on june 12 , 2018 , our board of directors decided to close our upholstery fabrics manufacturing facility in anderson , south carolina . this closure is due to a continued decline in demand for the products manufactured at this facility , reflecting a change in consumer style preferences . we expect to close the facility by october 30 , 2018. this action is expected to result in estimated cash charges of approximately $ 450,000 for employee termination costs , and an undetermined non-cash charge associated with write-downs of inventory . during this transition period , we will be working with our customers to fulfill any outstanding and future orders , and through this process we will be able to determine a good faith estimate of any write-downs of inventory . currently , management estimates that the fair market value of the long-lived assets at this facility exceeds their carrying amount of approximately $ 400,000 , and for this reason no charge for impairment of long-lived assets is expected to be recorded in connection with this decision . segment assets consist of accounts receivable , inventory , property , plant , and equipment , and goodwill , customer relationships , and tradename in connection with the acquisition of read . replace_table_token_14_th accounts receivable & inventory as of april 29 , 2018 , accounts receivable and inventory increased $ 6.8 million , or 23 % , or compared with april 30 , 2017. this increase is primarily due to the increased sales volume during the fourth quarter of fiscal 2018 compared with the fourth quarter of fiscal 2017 and accounts receivable and inventory totaling $ 2.0 million that was acquired from read as noted above . 35 property , plant & equipment the $ 2.4 million at april 29 , 2018 , represents property , plant , and equipment located in the u.s. of $ 1.8 million and located in china of $ 661,000. the $ 1.9 million at april 30 , 2017 , represents property , plant , and equipment located in the u.s. of $ 1.2 million and located in china of $ 655,000. customer relationships , goodwill , and tradenname our customer relationships , goodwill , and tradename intangible assets were acquired in connection with the acquisition of read as noted above . other income statement categories replace_table_token_15_th selling , general and administrative expenses sg & a expenses for fiscal 2018 compared with the fiscal 2017 included lower incentive compensation expense reflecting weaker financial results in relation to pre-established financial targets , partially offset by the following items that increased sg & a expenses : · non-recurring charges associated with the consolidation of our mattress production facilities that were primarily incurred during the first half of fiscal 2018 . · non-recurring legal and other professional fees incurred that relate to acquisition activity . interest expense interest costs incurred were $ 194,000 during fiscal 2018 compared with $ 158,000 for the same period a year ago . our interest costs during fiscal 2018 and 2017 pertain to borrowings associated with our u.s. revolving line of credit and with the construction of a new building associated with our mattress fabrics segment ( refer to notes 11 and 12 located in the notes to the consolidated financial statements for further details ) . the interest costs incurred during fiscal 2018 were partially offset by interest costs totaling $ 100,000 for the construction of qualifying fixed assets that were capitalized through the second quarter . interest costs incurred during fiscal 2017 were fully offset by interest costs for the construction of qualifying fixed assets that were capitalized . interest costs that have been capitalized will be amortized over the related assets ' useful lives . 36 interest income interest income increased during fiscal 2018 compared with the same period a year ago . the increase in interest income was due to management 's decision at the end of the second quarter of fiscal 2017 to invest approximately $ 31.0 million in investment grade u.s. corporate bonds with maturities that primarily ranged from 2 to 2.5 years . the purpose of this investment was to earn a higher rate of return on our excess cash located in the cayman islands . other expense other expense increased during fiscal 2018 compared with the same period a year ago . this increase was mostly due to unfavorable foreign currency exchange rates associated with our operations located in china .
| income taxes we recorded income tax expense of $ 5.7 million , or 21.4 % of income before income tax expense , in fiscal 2018 compared with income tax expense of $ 7.3 million , or 24.7 % of income before income tax expense , in fiscal 2017. our income tax expense of $ 5.7 million in fiscal 2018 includes an income tax benefit totaling $ 2.1 million associated with the 2017 tax cuts and jobs act , which represents an income tax benefit of $ 4.3 million that pertains to the one-time mandatory repatriation tax , partially offset by a $ 2.2 million income tax charge for the re-measurement of our u.s. deferred income taxes resulting from the reduction in the u.s. federal corporate income tax rate . our income tax expense of $ 7.3 million in fiscal 2017 included an income tax benefit totaling $ 3.4 million pertaining to the reversal of an uncertain income tax position associated with a foreign jurisdiction in which the statute of limitations expired . see the segment analysis section located in the results of operations for further details . liquidity at april 29 , 2018 , our cash and cash equivalents , short-term investments ( available for sale ) , and short-term and long-term investments ( held-to-maturity ) totaled $ 54.5 million compared with $ 54.2 million at april 30 , 2017. the slight increase from the end of fiscal 2017 was primarily due to net cash provided by operating activities of $ 27.5 million , mostly offset by $ 11.8 million in capital expenditures ( of which $ 3.8 million was vendor financed ) that were mostly associated with our mattress fabric segment , $ 4.5 million used for the acquisition of read window products , llc , and $ 661,000 for our investment in a joint venture located in haiti , $ 6.8 million to our shareholders in the form of regular quarterly and special dividend payments , $ 1.9 million in contributions to our rabbi trust that funds our deferred compensation plan , and $ 1.5 million in employee withholding tax payments associated with the vesting of certain stock-based compensation awards . our net cash provided by operating activities of $ 27.5 million in fiscal 2018 decreased $ 6.6 million compared with $ 34.1 million in fiscal 2017. the decrease is primarily due to decreased income from operations noted above . at april 29 , 2018 , we did not have any borrowings outstanding under our revolving credit agreements . dividend program on june 13 , 2018 , we announced that our board of directors
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refinancing of our senior notes in june 2014 , comprised of call premiums of $ 4.0 million , the write-off of existing deferred financing fees of $ 1.4 million and the $ 1.5 million write-off of the original issue discount on our 8 % senior notes . income tax expense income tax expense for the year ended december 31 , 2014 of $ 73.9 million increased $ 30.6 million compared to $ 43.3 million in 2013. the income tax expense increase in 2014 when compared to 2013 was primarily due to higher pre-tax income in 2014. our income tax provision also differs from the u.s. statutory federal income tax rate primarily due to u.s. statutory depletion , domestic manufacturing deductions , state income taxes ( net of federal benefit ) , foreign income , mining and withholding taxes ( net of u.s. deductions ) and interest expense recognition differences for tax and financial reporting purposes . year ended december 31 , 2013 compared to the year ended december 31 , 2012 sales sales for the year ended december 31 , 2013 of $ 1,129.6 million increased $ 187.7 million , or 20 % compared to $ 941.9 million for the year ended december 31 , 2012. sales primarily include revenues from the sale of our products , or “ product sales , ” and the impact on pricing of shipping and handling costs incurred to deliver salt and plant nutrition fertilizer products to our customers . shipping and handling costs for salt and plant nutrition fertilizer products were $ 301.7 million during the year ended december 31 , 2013 , an increase of $ 63.6 million , or 27 % compared to $ 238.1 million for the year ended december 31 , 2012. the increase in shipping and handling costs was primarily due to a 38 % increase in salt sales volumes in 2013 when compared to 2012 , which was partially offset by lower plant nutrition sales volumes and lower per-unit shipping and handling costs in 2013 . 32 product sales for salt and plant nutrition for the year ended december 31 , 2013 of $ 817.4 million increased $ 125.9 million , or 18 % compared to $ 691.5 million for 2012. salt product sales for the year ended december 31 , 2013 of $ 639.8 million increased $ 148.3 million , or 30 % compared to $ 491.5 million in 2012 while plant nutrition product sales of $ 177.6 million decreased $ 22.4 million , or 11 % compared to $ 200.0 million in 2012. the increase in salt product sales of $ 148.3 million was due to higher salt sales volumes , which contributed approximately $ 173 million to the increase in salt product sales and was partially offset by a decline in combined salt average selling prices due to changes in product mix as a higher proportion of our sales related to deicing products which have a lower average selling price . salt sales volumes in 2013 increased by approximately 3,640,000 tons or 38 % from 2012 levels due to higher highway sales of rock salt and specialty deicing products and higher consumer and industrial volumes principally from packaged deicing products which was partially offset by lower sales volumes to our chemical customers . the increase in volumes was due to the near average winter weather experienced in the first quarter of 2013 and more severe winter weather in fourth quarter of 2013 when compared to the significantly milder than average winter weather experienced in both the first and fourth quarters of 2012 in the markets we serve . the decrease in plant nutrition product sales of $ 22.4 million was due primarily to a decrease in plant nutrition sales volumes from 367,000 tons in 2012 to 315,000 tons in 2013 , a decrease of 52,000 tons , or 14 % . the decline in sales volumes comprised substantially all of the decrease in plant nutrition product sales . our average market price increased slightly from $ 616 per ton in 2012 to $ 630 in 2013 as we have focused our sales efforts principally in those domestic markets which yield higher average selling prices and higher margins . gross profit gross profit for the year ended december 31 , 2013 of $ 286.0 million increased $ 58.9 million , or 26 % compared to $ 227.1 million for 2012. as a percent of sales , gross profit increased 1 % from 24 % in 2012 to 25 % in 2013. the gross profit for the salt segment contributed approximately $ 60 million to the increase in gross profit due to higher salt deicing volumes , which were partially offset by the impact of lower combined salt average selling prices in 2013 due to product mix and a charge of $ 4.7 million recorded in the fourth quarter of 2013 resulting from a ruling related to a labor matter . in 2013 , salt gross profit was favorably impacted by higher salt production volumes which contributed to lower per-unit costs of salt produced in 2013. the increase in salt gross profit was partially offset by higher per-unit costs due to sales in 2013 of salt inventory produced in 2012 resulting from lower production volumes in 2012 relating to the significantly milder than normal 2012 winter season and the strike by miners at our goderich , ontario , mine in the third quarter of 2012. we estimate that the effects from the tornado were immaterial in 2013 and unfavorably impacted 2012 by approximately $ 21 million . the insurance recoveries related to business interruption and any gains related to recoveries for the replacement of damaged and destroyed property , plant and equipment were deferred and recognized as a reduction to product cost in the consolidated statements of operations when the insurance claim was settled in 2014. we recorded $ 1.2 million and $ 11.1 million of asset impairment charges and clean-up and restoration costs in 2013 story_separator_special_tag refinancing of our senior notes in june 2014 , comprised of call premiums of $ 4.0 million , the write-off of existing deferred financing fees of $ 1.4 million and the $ 1.5 million write-off of the original issue discount on our 8 % senior notes . income tax expense income tax expense for the year ended december 31 , 2014 of $ 73.9 million increased $ 30.6 million compared to $ 43.3 million in 2013. the income tax expense increase in 2014 when compared to 2013 was primarily due to higher pre-tax income in 2014. our income tax provision also differs from the u.s. statutory federal income tax rate primarily due to u.s. statutory depletion , domestic manufacturing deductions , state income taxes ( net of federal benefit ) , foreign income , mining and withholding taxes ( net of u.s. deductions ) and interest expense recognition differences for tax and financial reporting purposes . year ended december 31 , 2013 compared to the year ended december 31 , 2012 sales sales for the year ended december 31 , 2013 of $ 1,129.6 million increased $ 187.7 million , or 20 % compared to $ 941.9 million for the year ended december 31 , 2012. sales primarily include revenues from the sale of our products , or “ product sales , ” and the impact on pricing of shipping and handling costs incurred to deliver salt and plant nutrition fertilizer products to our customers . shipping and handling costs for salt and plant nutrition fertilizer products were $ 301.7 million during the year ended december 31 , 2013 , an increase of $ 63.6 million , or 27 % compared to $ 238.1 million for the year ended december 31 , 2012. the increase in shipping and handling costs was primarily due to a 38 % increase in salt sales volumes in 2013 when compared to 2012 , which was partially offset by lower plant nutrition sales volumes and lower per-unit shipping and handling costs in 2013 . 32 product sales for salt and plant nutrition for the year ended december 31 , 2013 of $ 817.4 million increased $ 125.9 million , or 18 % compared to $ 691.5 million for 2012. salt product sales for the year ended december 31 , 2013 of $ 639.8 million increased $ 148.3 million , or 30 % compared to $ 491.5 million in 2012 while plant nutrition product sales of $ 177.6 million decreased $ 22.4 million , or 11 % compared to $ 200.0 million in 2012. the increase in salt product sales of $ 148.3 million was due to higher salt sales volumes , which contributed approximately $ 173 million to the increase in salt product sales and was partially offset by a decline in combined salt average selling prices due to changes in product mix as a higher proportion of our sales related to deicing products which have a lower average selling price . salt sales volumes in 2013 increased by approximately 3,640,000 tons or 38 % from 2012 levels due to higher highway sales of rock salt and specialty deicing products and higher consumer and industrial volumes principally from packaged deicing products which was partially offset by lower sales volumes to our chemical customers . the increase in volumes was due to the near average winter weather experienced in the first quarter of 2013 and more severe winter weather in fourth quarter of 2013 when compared to the significantly milder than average winter weather experienced in both the first and fourth quarters of 2012 in the markets we serve . the decrease in plant nutrition product sales of $ 22.4 million was due primarily to a decrease in plant nutrition sales volumes from 367,000 tons in 2012 to 315,000 tons in 2013 , a decrease of 52,000 tons , or 14 % . the decline in sales volumes comprised substantially all of the decrease in plant nutrition product sales . our average market price increased slightly from $ 616 per ton in 2012 to $ 630 in 2013 as we have focused our sales efforts principally in those domestic markets which yield higher average selling prices and higher margins . gross profit gross profit for the year ended december 31 , 2013 of $ 286.0 million increased $ 58.9 million , or 26 % compared to $ 227.1 million for 2012. as a percent of sales , gross profit increased 1 % from 24 % in 2012 to 25 % in 2013. the gross profit for the salt segment contributed approximately $ 60 million to the increase in gross profit due to higher salt deicing volumes , which were partially offset by the impact of lower combined salt average selling prices in 2013 due to product mix and a charge of $ 4.7 million recorded in the fourth quarter of 2013 resulting from a ruling related to a labor matter . in 2013 , salt gross profit was favorably impacted by higher salt production volumes which contributed to lower per-unit costs of salt produced in 2013. the increase in salt gross profit was partially offset by higher per-unit costs due to sales in 2013 of salt inventory produced in 2012 resulting from lower production volumes in 2012 relating to the significantly milder than normal 2012 winter season and the strike by miners at our goderich , ontario , mine in the third quarter of 2012. we estimate that the effects from the tornado were immaterial in 2013 and unfavorably impacted 2012 by approximately $ 21 million . the insurance recoveries related to business interruption and any gains related to recoveries for the replacement of damaged and destroyed property , plant and equipment were deferred and recognized as a reduction to product cost in the consolidated statements of operations when the insurance claim was settled in 2014. we recorded $ 1.2 million and $ 11.1 million of asset impairment charges and clean-up and restoration costs in 2013
| million , or 14 % compared to $ 817.4 million for 2013. salt product sales for the year ended december 31 , 2014 of $ 693.3 million increased $ 53.5 million , or 8 % compared to $ 639.8 million in 2013 , while plant nutrition product sales of $ 241.8 million increased $ 64.2 million , or 36 % compared to $ 177.6 million in 2013. the increase in salt product sales of $ 53.5 million was due to higher sales volumes for our consumer and industrial products , which contributed approximately $ 49 million to the increase in salt product sales , and higher deicing average selling prices realized in the last half of 2014 compared to the prior year . salt sales volumes in 2014 increased by 25,000 tons from 2013 levels consisting of higher highway and consumer deicing sales volumes principally due to the more severe winter weather experienced in the first quarter of 2014 in north america when compared to the winter weather experienced in the first quarter of 2013 in the markets we serve , which was partially offset by lower salt sales volumes in the u.k. due to the mild winter in that region . in addition , an increase in highway salt deicing average selling prices contributed approximately $ 23 million to the increase in salt product sales due primarily to higher contract sales prices experienced in the latter half of 2014. the increase in salt product sales was partially offset by the difference in exchange rates used to translate our operations denominated in foreign currencies into u.s. dollars in 2014 when compared to 2013 , which unfavorably impacted salt product sales by approximately $ 13 million and an unfavorable impact on product sales for our consumer and industrial products due to the loss of a contract with a supplier . the increase in plant nutrition product sales of $ 64.2 million was
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the number of warehouse clubs in operation as of august 31 , 2016 for each country or territory are as follows : replace_table_token_8_th in fiscal year 2014 , we purchased land in pereira and medellin , colombia and leased land in the city of bogota , colombia . we built new warehouse clubs on these three sites . during fiscal year 2015 we opened the bogota location in october 2014 and the pereira and medellin locations in november 2014. together with the three warehouse clubs that were already operating in colombia ( one in barranquilla and two in cali ) , these three new clubs brought the number of operating pricesmart warehouse clubs in colombia to six at the end of fiscal year 2015. we constructed a new warehouse club on land acquired in may 2015 in chia , colombia that opened in september 2016 , fiscal year 2017 , bringing the total of warehouse clubs operating in colombia to seven . in september 2014 , we acquired land in la chorrera ( `` costa verde '' ) , west of panama city , panama , on which we opened our fifth pricesmart warehouse club in panama in june 2015. in april 2015 , we acquired land in managua , nicaragua . we constructed and then opened a warehouse club on this site in november 2015. on december 4 , 2015 we signed an option to acquire two properties and then swap them for 59,353 square feet of land adjacent to our san pedro sula warehouse club in honduras . we exercised this option and completed the swap during may 2016. we will use the acquired land to expand the parking lot for the san pedro sula warehouse club . our warehouse clubs and local distribution centers are located in latin america and the caribbean , and our corporate headquarters , u.s. buying operations and regional distribution centers are located primarily in the united states . during the second quarter of fiscal year 2015 , the company created a new reportable segment comprised of its colombia operations and separated the colombia operations from the latin america operations , renaming that reportable segment central america operations . the company has made this change as a result of the information that the company 's chief operating decision maker regularly reviews for purposes of allocating resources and assessing performance and the growing level of investment and sales activity in colombia . therefore , beginning in the second quarter of fiscal year 2015 , the company has reported its financial performance based on these new segments and retrospectively adopted this change for the disclosure of financial information presented by segment . the company 's operating segments are the united states , central america , the caribbean and colombia . general market factors our sales and profits vary from market to market depending on general economic factors , including gdp growth ; consumer spending patterns ; foreign currency exchange rates ; political policies and social conditions ; local demographic characteristics ( such as population growth ) ; the number of years pricesmart has operated in a particular market ; and the level of retail and wholesale competition in that market . our consolidated results of operations during the past two fiscal years were adversely affected by events in colombia , resulting largely from a major decline in the value of the colombian peso ( cop ) relative to the u.s. dollar beginning in august 2014 which negatively impacted sales and margins in that market . over the course of fiscal year 2016 , the devaluation of the colombian peso against the u.s. dollar resulted in decreased u.s. dollar reported warehouse clubs sales , after translation by approximately 26 % when compared to fiscal year 2015. however , by the end of the fiscal year , the value of the colombian peso was approximately 5.4 % higher than at the end of fiscal year 2015 , following the approximately 60 % overall devaluation that 4 occurred in fiscal year 2015. a devaluation of the cop not only reduces the value of sales and membership income that is generated in colombia when translated to u.s. dollars for our consolidated results , but also increases the local currency price of imported merchandise , which impacts demand for a significant portion of the company 's merchandise offering . this , along with the fact that we are still relatively new in the colombia market , and the sophisticated level of competition in that market , impacted overall business performance resulting in an operating loss in colombia . certain of our central american and caribbean markets have experienced some slowing of overall economic activity during the fiscal year which may continue to impact the level of consumer spending in the coming months . in particular , trinidad 's economy , with its dependence on oil and gas exports as a major source of income and resulting government policy to manage its foreign exchange reserves , has been experiencing overall difficult economic conditions with a corresponding impact on consumer spending . our capture of retail and wholesale sales can vary from market to market due to competition and the availability of other retail options for the consumer . in larger , more developed countries , such as costa rica , panama and colombia , customers have many alternatives available to them to satisfy their shopping needs , and therefore , our market share is less than in other smaller countries , such as jamaica and nicaragua , where consumers have a limited number of shopping options . demographic characteristics within each of our markets can also affect both the overall level of sales and also future sales growth opportunities . island countries such as aruba , barbados and the u.s. virgin islands offer us limited upside for sales growth given their overall market size . story_separator_special_tag countries with a smaller upper and middle class consumer population , such as honduras , el salvador , jamaica and nicaragua , also have a more limited potential opportunity for sales growth as compared to more developed countries with a larger upper and middle class consumer population . political and other factors in each of our markets may have significant effects on our business . for example , when national elections are being held , the political situation can introduce uncertainty about how the leadership change may impact the economy and affect near-term consumer spending . the need for increased tax revenue in certain countries can cause changes in tax policies affecting consumer 's personal tax rates , and or added consumption taxes , such as vat ( value-added taxes ) effectively raising the prices of various products . in addition , if a major employer in a market reduces its work force , as has happened in the past in aruba and costa rica , overall consumer spending can suffer . currency fluctuations can be the largest variable affecting our overall sales and profit performance , as we experienced in fiscal year 2015 and 2016 , as many of our markets are susceptible to foreign currency exchange rate volatility . currency exchange rate changes either increase or decrease the cost to our subsidiaries of imported products purchased in u.s. dollars and priced in local currency . in fiscal year 2016 , approximately 77.3 % of our net warehouse sales were in currencies other than the u.s . dollar . meanwhile , approximately 52 % of net warehouse sales were comprised of sales of products we purchased in u.s. dollars that w ere sold in countries whose currencies were other than the u.s. dollar . currency exchange rate fluctuations also affect our consolidated sales and membership income as local-currency-denominated sales are translated to u.s. dollars , which can impact year over year growth when measured in u.s. dollars compared to local currency growth rates . in addition , we revalue on a monthly basis all u.s. dollar-denominated monetary assets and liabilities within our markets that do not use the u.s. dollar as their functional currency . these monetary assets and liabilities include , but are not limited to , excess cash permanently reinvested offshore , u.s. dollar-denominated long-term debt used to finance land acquisitions and the construction of warehouse clubs , and u.s. dollar-denominated accounts payable related to the purchase of merchandise . we report the gains or losses associated with the revaluation of these monetary assets and liabilities on our consolidated statements of income under the heading “ other income ( expense ) , net. ” where possible , we seek to minimize the impact of negative foreign exchange fluctuations on our results by utilizing from time to time one or more of the following strategies : ( 1 ) adjusting prices on goods acquired in u.s. dollars on a periodic basis to maintain our target margins after taking into account changes in exchange rates and our competition ; ( 2 ) obtaining local currency loans from banks within certain markets where it is economical to do so and where management believes the risk of devaluation and the level of u.s. dollar denominated liabilities warrants this action ; ( 3 ) reducing the time between the acquisition of product in u.s. dollars and the settlement of that purchase in local currency ; ( 4 ) maintaining a balance between assets held in local currency and in u.s. dollars ; and ( 5 ) entering into cross-currency interest rate swaps and non-deliverable forward contracts . we have local-currency-denominated long-term loans in honduras and guatemala and have employed cross-currency interest rate swaps in colombia , costa rica and honduras and non-deliverable forward contracts in costa rica and colombia . future volatility regarding currencies could have a material impact on our operations in future periods ; however , there is no way to accurately forecast the impact of the change in rates on our future demand for imported products , reported sales or financial results . from time to time we have experienced a lack of availability of u.s. dollars in certain markets ( u.s. dollar illiquidity ) . this impedes our ability to convert local currencies obtained through warehouse sales into u.s. dollars to settle the u.s. dollar liabilities associated with our imported products . in the second half of fiscal year 2016 and continuing into fiscal year 2017 , we are experiencing this situation in trinidad ( “ tt ” ) . we are limited in our ability to convert tt dollars that we generate through sales of merchandise into u.s. dollars to settle u.s. dollar liabilities , increasing our foreign exchange exposure to any devaluation 5 of the tt dollar . the june 2016 international monetary fund country report for trinidad and tobago suggests that the tt dollar could be overvalued , in the range of 20 % -50 % per u.s. dollar . we are working with our banks to source other tradeable currencies ( such as euros and canadian dollars ) , but until the central bank makes more u.s. dollars available , this condition will continue . as of august 31 , 2016 , we have net u.s. dollar denominated liabilities of approximately $ 18.9 million that would be exposed to a potential devaluation of trinidad dollars . if for example , a hypothetical 20 % devaluation of the tt currency occurred , the net effect on other expense would be approximately $ 3.8 million . t o the extent we are unable to exchange tt dollars for u.s. dollars , this causes delays in payments owed to us by our trinidad subsidiary . this , in turn , reduces our ability to deploy that cash for corporate purposes . the trinidad government is aware that having limited tradable currency poses challenges to u.s. companies doing business in trinidad , including pricesmart .
| net cash provided by ( used in ) financing activities for the period presented is summarized below : replace_table_token_43_th net cash provided by long term and short term loan activities decreased approximately $ 27.1 million in fiscal year 2016 over fiscal year 2015. we received cash during fiscal year 2016 from short-term borrowings for approximately $ 28.9 million and cash from additional long-term loans entered into by our subsidies of approximately $ 14.4 million . this increase in cash was offset by repayments of long-term loans of approximately $ 2.8 million and regularly scheduled loan payments of $ 13.7 million . additional payments for approximately $ 19.3 million on the short-term loans were recorded . this activity accounted for an overall increase in cash provided by long term and short term loan activities of approximately $ 7.5 million . during fiscal year 2015 , we received cash from seven additional loans entered into by our panama , guatemala , honduras ( three loans in honduras ) , trinidad and colombia subsidiaries for approximately $ 10.0 million , $ 7.5 million , $ 16.9 million , $ 3.6 million and $ 15.0 million , respectively . additionally , during fiscal year 2015 , $ 2.9 million in restricted cash was released back to us due to the repayment of one of the loans borrowed by our honduras subsidiary and $ 24.0 million in restricted cash was released back to us due to the repayment of four loans by our colombia subsidiary . these increases were offset by repayments of long-term loans of approximately $ 3.2 million and $ 13.3 million by our honduras subsidiary and $ 3.2 million by our trinidad subsidiary , the payment of approximately $ 24.0 million in derivative obligations associated with our colombia subsidiary loans , and regularly scheduled loan payments of $ 11.2 million . additionally we received cash from short-term borrowings for 24 approximately $ 51.7 million , offset by payments for approximately $ 42.1 million on the short-term loans were recorded . this activity accounted for an overall increase in cash provided by loan activities of approximately $ 34.5 million . for the twelve-months ended august 31 , 2015 , net cash provided by loan activities increased approximately $ 8.3 million over the same period in fiscal year 2014 .
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our budgeted amounts exclude expenditures attributable to a one-third noncontrolling interest in egypt . our capital budget for 2016 has been , and will be , allocated on a prioritized basis as follows : ( i ) maintain assets and keeping them running efficiently and preserve mineral rights and leases , ( ii ) further optimize and build high quality inventory for the future , ( iii ) conduct certain medium-cycle , high impact exploration activities , and ( iv ) conduct limited-scale development activities that remain economically robust at these low prices . in addition , we will continue our overhead and lease operating expenses cost reduction efforts in order to position apache for an extended low commodity price environment . given the further curtailment of capital spending , we are projecting a production decline of 7 percent to 11 percent in 2016 compared to 2015 production levels after adjusting for divestitures and volumes associated with egypt 's noncontrolling interest and tax impacts . however , we believe that if commodity prices improve from current market levels , we will be able to increase our capital plan accordingly with a greater focus on growth in our onshore north america assets . 31 operational highlights operational highlights for the year include : north america north america onshore liquids averaged 193,483 barrels per day , with crude oil representing 69 percent of the liquids production . when adjusted for asset divestitures , this represents an increase of 4 percent compared to 2014. north america onshore liquids production represented 56 percent of our worldwide liquids production and 36 percent of our overall production . the permian region averaged 12 operated rigs during the year , drilling 378 gross wells , 241 net wells . drilling activity in the region resulted in a production increase of 6 percent relative to the prior year . over half of the region 's production is crude oil and 20 percent is ngls . combined , this represents more than a third of apache 's total liquids production for 2015. the region averaged 168 mboe/d during 2015. the midcontinent/gulf coast region averaged 5 operated rigs during the year , drilling 127 gross wells , 76 net wells . the region focused its drilling activities in the canyon lime , eagleford , marmaton , and woodford formations during 2015. apache is active in the scoop play in central oklahoma targeting the woodford formation , where we drilled or participated in drilling 33 wells . the region averaged 73 mboe/d during 2015. the canada region averaged 2 operated rigs during the year , drilling 38 gross wells , 21 net wells . canada primarily focused on advancing growth plays in the duvernay and montney formations , with a goal of reducing drilling and completion costs . in the duvernay , we brought on-line our first seven-well pad under budget and at production levels that are exceeding our initial expectations . the region averaged 68 mboe/d during 2015. international and offshore the egypt region significantly reduced its drilling program throughout the year , averaging 14 rigs and drilling 122 gross wells , 107 net wells . despite the reduction , gross production , which is subject to the terms of production sharing contracts , increased 1 percent . egypt 's net production decreased 3 percent from 2014. development of the ptah and berenice oil fields continued to deliver excellent results , with nine new wells brought on-line and combined gross field production exceeding 26,000 b/d at its peak . the region averaged 145 net mboe/d during 2015. the north sea region averaged 6 rigs , drilling 26 gross wells , 22 net wells . during the year , the region averaged production of 71 mboe/d . apache was able to maintain relatively flat production year over year despite a 21 percent reduction in capital expenditures . the 2015 drilling program was extremely successful and sets up excellent growth and profitability opportunities over the next five years . during the fourth quarter of 2015 , apache announced five significant wells in the north sea : three exploration discoveries and two notable development wells . exploration discoveries the k discovery , in the beryl area , is a significant oil discovery with multiple commercial zones across three distinct fault blocks , including one fault block with over 1,500 feet of net pay . apache is the operator of this discovery with a 55 percent working interest . the corona discovery , also located in the beryl area , logged 225 feet total vertical depth net pay in excellent reservoir-quality sandstone . apache has a 100 percent working interest in this discovery . 32 the seagull discovery confirmed 672 feet of net oil pay over a 1,092-foot column in triassic-age sands . the well was flow tested with a facility-constrained rate of 8.7 mb/d of oil and 16 million cubic feet of natural gas per day ( mmcf/d ) with a very low pressure drawdown . further appraisal work will continue following the recent acquisition of a multi-azimuth 3-d survey . apache has a 35 percent working interest in this project and is now operator of this license . notable development wells apache drilled two significant development wells in the beryl area , which apache operates . apache owns a 60.55 percent working interest in both wells . the acn development well came online in october at a test rate of 11 mb/d of oil and 30.4 mmcf/d of natural gas . the l4s pilot well started production in july and had an initial production rate of 2 mb/d of oil and 45 mmcf/d of natural gas . for a more detailed discussion related to our various geographic regions , please refer to the geographic area overviews section set forth in part i , item 1 and 2 of this form 10-k. acquisition and divestiture activity over apache 's 60-year history , we have repeatedly demonstrated our ability to capitalize quickly and decisively on changes in our industry and economic conditions . story_separator_special_tag a key component of this strategy is to continuously review and optimize our portfolio of assets in response to changes . most recently and prior to the precipitous decline of commodity prices beginning in 2014 , apache closed , or had agreements executed , on a series of divestitures designed to monetize nonstrategic assets and enhance our portfolio . these divestments comprised primarily capital intensive projects and assets that were not accretive to earnings in the near-term , and included all of our operations in australia and argentina . these divestments include : australia operations on june 5 , 2015 , apache 's subsidiaries completed the sale of the company 's australian subsidiary apache energy limited to a consortium of private equity funds managed by macquarie capital group limited and brookfield asset management inc. for total proceeds of $ 1.9 billion ( net of $ 225 million in customary , post-closing adjustments for the period between the effective date , october 1 , 2014 , and closing ) . additionally , in october 2015 , apache 's subsidiaries completed the sale of its 49 percent interest in yara pilbara holdings pty ltd ( yphpl ) , to yara international for total proceeds of $ 391 million . the effective date of the transaction was january 1 , 2015. lng projects on april 2 , 2015 and april 10 , 2015 , apache subsidiaries completed the sale of its interest in the wheatstone lng and kitimat lng projects , respectively , along with accompanying upstream oil and gas reserves to woodside petroleum limited for a total cash consideration of $ 3.7 billion . nonstrategic assets in the anadarko basin and in southern louisiana on december 31 , 2014 , apache completed the sale of certain anadarko basin and southern louisiana oil and gas assets for approximately $ 1.3 billion in two separate transactions . in the anadarko basin , apache sold approximately 115,000 net acres in wheeler county , texas , and western oklahoma . in southern louisiana , the company sold working interests in approximately 90,000 net acres . the effective date of both of these transactions was october 1 , 2014. certain gulf of mexico deepwater assets on june 30 , 2014 , apache completed the sale of non-operated interests in the lucius and heidelberg development projects and 11 primary term deepwater exploration blocks in the gulf of mexico for $ 1.4 billion . the effective date of the transaction was may 1 , 2014 . 33 nonstrategic canadian assets on april 30 , 2014 , apache completed the sale of primarily dry gas producing hydrocarbon assets in the deep basin area of western alberta and british columbia , canada , for $ 374 million . the assets comprise 328,400 net acres in the ojay , noel , and wapiti areas . apache retained 100 percent of its working interest in horizons below the cretaceous in the wapiti area , including rights to the liquids-rich montney and other deeper horizons . the effective date of the transaction was january 1 , 2014. argentina operations on march 12 , 2014 , apache 's subsidiaries completed the sale of all of the company 's operations in argentina to ypf sociedad anónima for $ 800 million ( subject to customary closing adjustments ) plus the assumption of $ 52 million of bank debt as of june 30 , 2013. egypt sinopec partnership on november 14 , 2013 , apache completed the sale of a one-third minority participation in its egypt oil and gas business to a subsidiary of sinopec international petroleum exploration and production corporation ( sinopec ) . apache received cash consideration of $ 2.95 billion . this noncontrolling interest is recorded separately in the company 's financial statements . gulf of mexico shelf operations on september 30 , 2013 , apache completed the sale of its gulf of mexico shelf operations and properties to fieldwood energy llc ( fieldwood ) , an affiliate of riverstone holdings . under the terms of the agreement , apache received cash consideration of $ 3.7 billion , and fieldwood assumed $ 1.5 billion of discounted asset abandonment liabilities . in respect of such abandonment liabilities , fieldwood has posted letters of credit in the amount of $ 500 million and has established a trust account funded by a net profits interest , which contains approximately $ 140 million as of december 31 , 2015. additionally , apache retained 50 percent of its ownership interest in both exploration blocks and in horizons below production in developed blocks , and access to existing infrastructure . the effective date of the transaction was july 1 , 2013. for detailed information regarding our acquisitions and divestitures , please refer to note 2acquisitions and divestitures in the notes to consolidated financial statements set forth in part iv , item 15 of this form 10-k. 34 story_separator_special_tag font-size:10pt ; font-family : times new roman '' > the table below presents a comparison of our expenses on an absolute dollar basis and an equivalent unit of production ( boe ) basis . our discussion may reference expenses on a boe basis , on an absolute dollar basis or both , depending on context . all operating expenses include costs attributable to a noncontrolling interest in egypt . operating expenses for all periods exclude discontinued operations in argentina and australia . replace_table_token_16_th recurring depreciation , depletion and amortization ( dd & a ) 2015 vs. 2014 oil and gas property recurring dd & a expense of $ 3.5 billion in 2015 decreased $ 857 million compared to 2014. the company 's oil and gas property recurring dd & a rate decreased $ 2.28 per boe in 2015 compared to 2014. the primary factor driving both lower absolute dollar expense and lower dd & a per boe rates was the reduction in the company 's oil and gas property carrying values resulting from significant property write-downs incurred during 2015 .
| while the market price received for natural gas varies among geographic areas , crude oil tends to trade within a tighter global range . price movements for all types and grades of crude oil generally move in the same direction . crude oil prices realized in 2015 averaged $ 48.17 per barrel . natural gas prices natural gas , which currently has a limited global transportation system , is subject to price variances based on local supply and demand conditions . our primary markets include north america , egypt , and the u.k. an overview of the market conditions in our primary gas-producing regions follows : north america has a common market ; most of our gas is sold on a monthly or daily basis at either monthly or daily market prices . our north american regions averaged $ 2.39 per mcf in 2015 , down from $ 4.24 per mcf in 2014. in egypt , our gas is sold to egpc , primarily under an industry pricing formula indexed to dated brent crude oil with a minimum gas price of $ 1.50 per mmbtu and a maximum gas price of $ 2.65 per mmbtu , plus an upward adjustment for liquids content . overall , the region averaged $ 2.92 per mcf in 2015 , down 1 percent from the prior year . natural gas from the north sea beryl field is processed through the sage gas plant operated by apache . the gas is sold to a third party at the st. fergus entry point of the national grid on a national balancing point index price basis . the region averaged $ 6.73 per mcf in 2015 , a 19 percent decrease from an average of $ 8.29 per mcf in 2014. ngl prices apache 's ngl production is sold under contracts with prices at market indices based on local supply and demand conditions , less the costs for transportation and fractionation , or on a weighted-average sales price received by the purchaser . crude oil revenues
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future outlook we intend to continue our strategic plans for long-term improvement and growth of the business , which comprise these key initiatives : ( 1 ) developing powerful product stories supported with effective marketing , ( 2 ) driving global cohesive brand positioning , ( 3 ) increasing working marketing spend , ( 4 ) enhancing engagement with key wholesale accounts , ( 5 ) gaining greater strategic and economic leverage from our direct-to-consumer assets , ( 6 ) prioritizing investment in larger-scale geographies , ( 7 ) streamlining the cost structure by reducing duplication & complexity across regional offices & the corporate center , and ( 8 ) investing to drive supply chain effectiveness and reliability . we believe these changes will better position crocs to adapt to changing consumer demands and global economic developments . we are focusing on our core molded footwear heritage by narrowing our product line with an emphasis on higher margin units , as well as developing innovative new casual lifestyle footwear platforms . by streamlining the product portfolio and reducing non-core product development , we believe we will create a more powerful consumer connection to the brand . we are refining our business model around the world , prioritizing direct investment in larger-scale geographies to focus our resources on the markets with the largest growth prospects , moving away from direct investment in the retail and wholesale businesses in smaller markets and transferring significant commercial responsibilities to distributors and third party agents . further , we intend to expand our engagement with leading wholesale accounts in select markets to drive sales growth , optimize product placement and enhance brand reputation . 29 additionally , we addressed the declining collection rates we experienced in 2015 from our china operations by limiting or terminating our relationship with distributors who we have identified as being a significant credit risk . in 2015 , we recorded bad debts expense of $ 23.2 million associated with our china operations . as of december 31 , 2016 , we have terminated our relationship with multiple distributors in china and we expanded our relationship with existing business partners who are in a stronger financial position and who have a proven track record . we have also implemented a more restrictive credit policy for several china distributors to reduce our exposure in that market . for the year ended december 31 , 2016 , our bad debt expense related to our china operations was lower by $ 22.1 million compared to the year ended december 31 , 2015 . we are unable to predict future economic conditions in china , but if economic conditions in china continue to decline , we may experience further declines in consumer demand in our china markets . as our china operations represents 7 % of our total revenues , the net impact of declining sales volumes in china could have a material adverse impact on our financial results in future periods . 30 story_separator_special_tag settlements . ( 5 ) represents certain bad debt and impairment expenses in 2015 related to the sales of operations in south africa . restructuring charges . during 2015 , we incurred $ 8.7 million of restructuring charges related to the 2014 plan to create efficiencies and close global retail locations . the company concluded its restructuring efforts on december 31 , 2015 . 32 asset impairment charges . during the years ended december 31 , 2016 and 2015 , we incurred $ 2.7 million and $ 15.3 million , respectively , in retail asset impairment charges related to certain underperforming retail locations , primarily in our americas segment , that were unlikely to generate sufficient cash flows to fully recover the carrying value of the stores ' assets over their remaining economic life . in addition , we incurred $ 0.4 million in goodwill impairment charges . foreign currency loss , net . ‘ foreign currency loss , net ' consists of foreign currency gains and losses from the re-measurement and settlement of monetary assets and liabilities denominated in non-functional currencies and foreign currency derivative instruments . during the year december 31 , 2016 , we recognized a net loss of $ 2.5 million compared to a net loss of $ 3.3 million on foreign currency transactions during the year ended december 31 , 2015 . income tax expense . during the year ended december 31 , 2016 , we recognized income tax expense of $ 9.3 million on pre-tax book loss of $ 7.2 million , representing an effective tax rate of ( 128.7 ) % , compared to income tax expense of $ 8.5 million on pre-tax book loss of $ 74.7 million in 2015 , which represented an effective tax rate of ( 11.3 ) % . generally , our effective tax rate has varied dramatically during 2016 and in recent years due to differences in our profitability level and relative operating earnings across multiple jurisdictions , and is most notably impacted by the significant amount of operating losses that can not be benefitted for tax purposes . the following are some of our key jurisdictions and the income tax expense for each in 2016 and 2015 , respectively : replace_table_token_9_th replace_table_token_10_th the differences in total tax expense and effective rate variances in the table above resulted primarily from the following factors . we incurred significant changes in many of the key jurisdictions in book income/loss ( u.s. losses of $ 55.6 million in 2016 versus $ 83.5 million in 2015 , netherlands income of $ 39.2 million in 2016 versus $ 26.0 million in 2015 , japanese losses of $ 5.2 million in 2016 versus $ 0.1 million in 2015 , chinese income of $ 0.8 million in 2016 versus losses of $ 21.6 million in 2015 ) . additionally , differences in the netherlands income tax rate relates to consistent withholding tax expense year over year , compared with increased operating income in that jurisdiction during the same period . story_separator_special_tag in 2016 , the company recorded a taxable loss position in japan with no corresponding tax benefit realized as a result of a valuation allowance . in 2015 , the total tax provision in japan was impacted by the settlement of uncertain tax positions which resulted in a benefit of approximately $ 3.6 million which was more than offset by the accrual of expense for an increased valuation allowance of $ 4.8 million . while there are effective tax rate differences in china related to differences in operating losses , we also incurred additional tax expense in 2015 of approximately $ 9.5 million due to increased valuation allowances established during 2015 which are unlikely to recur . the tax effect of non-deductible/non-taxable items changed from a $ 2.2 million tax benefit in 2015 , which is a favorable rate impact of 2.9 % , to a $ 2.7 million tax expense in 2016 , which is an unfavorable rate impact of 37.4 % . the expense recognized in 2016 primarily relates to non-deductible executive and foreign share-based compensation . we anticipate that these expenses will recur in the foreseeable future . 33 the change in the 'effect of rate differences ' line of the rate reconciliation table in note 13 — income taxes is principally driven by differences in pre-tax book income between the periods compared , and the source of this income , which is subject to different jurisdictional tax rates . during 2016 , the effect of rate differences resulted in a $ 12.6 million tax benefit compared to a $ 3.7 million tax benefit in 2015. the primary reason for this incremental benefit results from increased foreign book earnings included in consolidated results . during 2016 , foreign book income before taxes was $ 48.4 million as compared with $ 8.8 million in 2015 , all of which is subject to tax at rates lower than the u.s. statutory rate . further , we employ a tax planning strategy that directly impacts the total tax expense directly attributable to the level of foreign earnings in the specific jurisdictions . however , we note that the impact on the effective tax rate is different due to higher book earnings recorded in 2016 compared to 2015. the relative impact of this has existed in the recent past ; however , there is no assurance that this circumstance will be recurring beyond 2019. through at least 2019 , we will continue to have an equivalent favorable impact on the tax provision and effective tax rate based on the specific foreign earnings . we currently do not anticipate significant near-term changes to our overall tax strategies , meaning that relative income tax benefits provided from the expected u.s. federal tax rate are anticipated to recur in the foreseeable future . the amount of this tax benefit , if any , is subject to continued profitability in various foreign jurisdictions . the impact of the ' u.s . tax on foreign earnings ' line of the rate reconciliation table includes the impact of foreign inclusions and the tax expense accrued on undistributed foreign earnings net of the related foreign tax credits . during 2016 , inclusions for these items resulted in $ 23.1 million of tax expense , reflecting an unfavorable impact of 320.6 % on the total provision . during 2015 , inclusions for these items resulted in $ 82.3 million of tax expense , reflecting an unfavorable impact of 110.0 % on the total provision . foreign inclusions are primarily related to business results and cash repatriations during a specific period as well as the accrual on foreign earnings . during 2016 , we provided for u.s. income taxes on an additional $ 50 million of current year undistributed foreign earnings , for a combined total of $ 178 million of undistributed foreign earnings for which u.s. tax has been accrued , representing a total deferred tax liability of approximately $ 32.4 million . we further note that actual cash repatriations decreased from approximately $ 127.3 million in 2015 to approximately $ 37 million in 2016 ( and note that no withholding tax is due with respect to the repatriation of these earnings to the u.s. and none has been provided for ) . furthermore during 2015 , there was a $ 24.6 million tax charge recognized for the accrual of unremitted foreign earnings as compared to a $ 7.9 million tax charge in 2016 for unremitted foreign earnings . as of 2016 , we anticipate continued repatriation of foreign earnings to the extent of the $ 178 million currently accrued . we will also continue to assess various cash needs in the u.s. and abroad , which could result in the prospective accrual and repatriation of some or all future current year earnings on an annual basis . we continue to evaluate the realizability of our deferred tax assets . as such , additional valuation allowances of $ 34.3 million were recorded on deferred tax assets are not anticipated to be realized . this is in addition to the $ 56.6 million accrued on deferred tax assets during 2015. furthermore , the change in the valuation allowance reflected on the cumulative schedule of deferred tax assets includes $ 18.3 million , which does not impact the tax provision because this amount reflects the cumulative impact of unrecorded tax attributes related to the adoption in 2016 of new us gaap guidance related to income tax effect of share-based compensation and changes in cumulative translation adjustment . the specific circumstances regarding management 's assertion of the realizability of certain deferred tax assets is discussed as part of the disclosures in note 13 — income taxes . we maintain total valuation allowances of approximately $ 90.9 million as of december 31 , 2016 , which may be reduced in the future depending upon the achieved or sustained profitability of certain entities . during both 2015 and 2016 , we recorded tax expense for audits settled during the year of $ 1.2 million and $ 0.3 million , respectively .
| our e-commerce sales totaled approximately 12.6 % and 11.1 % of our consolidated net sales during the year ended december 31 , 2016 and 2015 , respectively . we continue to 31 benefit from our online presence through e-commerce sites worldwide enabling us to have increased access to our consumers in a low cost , attractive manner and providing us with an opportunity to educate them about our products and brand . cost of sales . during the year ended december 31 , 2016 , cost of sales decreased $ 43.7 million , or 7.5 % , compared to the same period in 2015 . the decrease in cost of sales was primarily due to the net impact of : ( i ) a $ 24.6 million , or 4.2 % decrease , due to lower sales volumes , ( ii ) an $ 18.6 million , or 3.2 % , decrease due to a lower average cost per unit sold , and ( iii ) a $ 0.5 million , or 0.1 % , decrease due to the impact of foreign currency translation . the impact of sales volumes on cost of sales was reduced by approximately $ 1.6 million as a result of the sale of our south africa operations , which was completed on april 15 , 2016. gross profit . during the year ended december 31 , 2016 , gross profit decreased $ 10.6 million , or 2.1 % , and gross margin increased 143 basis points to 48.3 % compared to the same period in 2015 . the decrease in gross profit is primarily due to the net impact of : ( i ) a $ 21.6 million , or 4.2 % , decrease due to lower sales volumes , ( ii ) a $ 14.0 million , or 2.7 % , increase due to the combined impact of a lower average cost of sales per unit partially offset by a lower average selling price , and ( iii ) a $ 3.0 million , or 0.6 % , decrease due to the unfavorable impact of foreign
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among other things : ● we have filed final nonprovisional patent applications for portio and carpx and entered into a licensing agreement with a group of academic centers securing the worldwide rights in perpetuity to a family of patents and patent applications underlying our disappear product . ● we have advanced , in partnership with our design and contract manufacturing partners , our carpx product from concept to working prototypes , completed successful benchtop and cadaver testing confirming the device consistently cuts the transverse carpal ligament , as well as commercial design and development , and performed pre-submission verification and validation testing . on november 27 , 2017 we filed a 510 ( k ) premarket notification submission with the federal food and drug administration ( “ fda ” ) for carpx using a commercially available carpal tunnel release device as a predicate . we have received promising initial feedback from the fda and we are working to provide additional non-clinical support for our application . in addition , we are preparing to submit for ce mark clearance in europe and a first-in-man clinical series outside of the united states . we are exploring commercialization strategies in the united states and commercialization partnerships worldwide . ● we have advanced , in partnership with our design and contract manufacturing partners , our portio product from concept to working prototypes , benchtop , animal , and cadaver testing , commercial design and development , verification and validation testing , and an initial submission to the fda for 510 ( k ) market clearance for use in patients requiring 24-hour emergency type vascular access . after further discussion with the fda , we decided to pursue a broader clearance for use in patients with a need for vascular access up to seven days under section 513 ( f ) 2 of the federal food , drug and cosmetic act , also referred to as de novo classification . we filed with a de novo pre-submission package with the fda which was followed by an in-person meeting on january 9 , 2018 to discuss the risk assessment and proposed mitigation testing for the de novo application . based on their recommendations are about to initiate a seven-day animal study , having successfully completed a pilot animal study which showed excellent function of the device over the seven-day implant period and on explant . in anticipation of having to follow up the animal study with a human clinical safety trial , we have accelerated our strategic partnership efforts to include the pre-clearance phase . ● we have advanced , in partnership with our design and contract manufacturing partners and our academic partners at tufts university and harvard medical school , our disappear . our efforts have focused on sourcing commercially ready aqueous silk and optimizing manufacturing processes consistent with the necessary cost of good for the commercial product . ● although we have focused the majority of our resources on our lead products , we have additional products in our pipeline which are currently in different stages of development . we have completed initial design work on the first product in the nextcath product line , completed head-to-head testing of retention forces , comparing our working prototype to several competing products , which has validated our approach and advanced the commercial design and development process focusing on optimizing the self-anchoring helical portion as well as cost of materials and manufacturing processes . we have advanced the design and development of the nextflo device , including a redesign which dramatically simplifies the product , lowers the projected cost of goods and expands its application to routine inpatient infusion sets . we have , completed benchtop testing of a working prototype demonstrating constant flows across the range of pressures encountered in clinical situations . we will be able to quickly move nextcath and nextflo into the commercial and regulatory pathway when resources become available . finally , we are evaluating which initial applications for our caldus disposable tissue ablation technology to pursue from a clinical and commercial point-of-view and will reinitiate development activity on this product once resources are available . 45 overview ( continued ) ● we remain actively engaged with our full-service regulatory consulting partner who is working closely with our contract design , engineering and manufacturing partners as our products advance towards regulatory submission , clearance , and commercialization . ● we are evaluating a number of product opportunities and intellectual property covering a spectrum of clinical conditions , which have been presented to us by clinician innovators and academic medical centers , for consideration of a partnership to develop and commercialize these products ; we are also exploring opportunities to partner with larger medical device companies to commercialize our lead products as they move towards regulatory clearance and commercialization ; we are evaluating strategic merger and acquisition opportunities which synergize with our growth strategy . ● we are exploring other opportunities to grow our business and enhance shareholder value through the acquisition of pre-commercial or commercial stage products and /or companies with potential strategic corporate and commercial synergies . we have proprietary rights to the trademarks used herein , including , among others , pavmed , portio , caldus , carpx , disappear , nextcath , nextflo , and “ innovating at the speed of life , among others . solely as a matter of convenience , trademarks and trade names referred to herein may or may not be accompanied with the requisite marks of “ ” and /or “ ® ” , however , the absence of such marks is not intended to indicate , in any way , we will not assert , to the fullest extent possible under applicable law , our rights or the rights to such trademarks and trade names . recent developments regulatory events on november 27 , 2017 we filed a 510 ( k ) premarket notification submission with the fda for our carpx minimally invasive device designed to treat carpal tunnel syndrome . using a commercially available carpal tunnel release device as a predicate . story_separator_special_tag we have received promising initial feedback from the fda and are working to provide additional non-clinical support for our application . on december 17 , 2016 , we filed a 510 ( k ) premarket notification submission with the fda for our first product , the portio intraosseous infusion system relying upon substantial equivalence to a previously approved predicate device with an indication for use for up to 24 hours . the company engaged with the fda on the issue of substantial equivalence , including an in-person meeting in july 2017 , and had submitted a response based on the fda 's feedback which included narrower indications and inclusion of a needle in the kit . after further discussion with the fda , we decided to pursue a broader clearance for use in patients with a need for vascular access up to seven days under section 513 ( f ) 2 of the federal food , drug and cosmetic act , also referred to as de novo classification . we filed a de novo pre-submission package with the fda which was followed by an in-person meeting on january 9 , 2018 to discuss the risk assessment and proposed mitigation testing for the de novo application . based on their recommendations we are about to initiate a seven-day animal study , having successfully completed a pilot animal study which showed excellent function of the device over the seven-day implant period and on explant . in anticipation of having to follow up the animal study with a human clinical safety trial , we have accelerated our strategic partnership efforts to include the pre-clearance phase . financing transactions shareholders ' rights offering subsequently , on january 17 , 2018 , the company filed an initial registration statement on form s-1 ( file no . 333-222581 ) , currently under sec review , related to a proposed offering wherein , as currently proposed , the company will distribute one transferable equity subscription right for each issued and outstanding share of common stock of the company as of a record date to be determined by the company 's board of directors ( “ equity subscription rights offering ” or “ rights offering ” ) . as currently proposed , the equity subscription rights offering is to commence upon an effective registration statement . further , as currently proposed , for a period of 30 days from their distribution date , the transferable equity subscription right may be exercised for $ 2.25 per unit to purchase a common stock unit comprised of one share of common stock of the company and one series z warrant . as currently proposed , the common stock unit will trade for up to 90 days , after which it will separate into its underlying components of one share of common stock of the company and one series z warrant . the series z warrant may be exercised for one share of common stock of the company at an exercise price of $ 3.00 per share , with such exercise price not subject to further adjustment , except for the effect of stock dividends , stock splits or similar events affecting the common stock , and will expire after the close of business on april 30 , 2024. the series z warrants are redeemable by the company under certain conditions . see our consolidated financial statements note 13 , series a convertible preferred stock , stockholders ' deficit , and warrants , for a further discussion of the series z warrants . 46 recent developments ( continued ) financing ( continued ) issue of common stock - underwritten public offering - january 2018 subsequently , in january 2018 , we conducted an underwritten public offering pursuant to a previously filed and effective shelf registration statement on sec form s-3 ( file no . 333-220549 ) , declared effective october 6 , 2017 , along with a corresponding prospectus supplement dated january 19 , 2018. on january 19 , 2018 , we entered into an underwriting agreement with dawson james securities , inc. , as sole underwriter , under which we agreed to issue to the underwriter at $ 1.80 per share , 2,415,278 shares of common stock of the company on a firm commitment basis and up to an additional 362,292 shares solely to cover underwriter over-allotments , if any , at the option of the underwriter , exercisable within 45 calendar days from january 19 , 2018. the company issued the 2,415,278 of such shares on january 23 , 2018 , and on january 25 , 2018 , issued 234,540 of such shares , under the underwriter 's over-allotment , resulting in net cash proceeds of $ 4,263,099 , after deduction of both underwriting discounts of $ 381,574 and estimated offering costs . series a and series a-1 exchange offer - series b convertible preferred stock and series z warrants subsequently , on february 14 , 2018 the company initiated an exchange offer to the holders of both the series a convertible preferred stock and series a warrants , and the series a-1 convertible preferred stock and series a-1 warrants ( “ series a and series a-1 exchange offer ” ) , as follows : ( i ) one share of series a convertible preferred stock exchanged for two shares of series b convertible preferred stock , and one series a warrant exchanged for five series z warrants ; and ( ii ) one share of series a-1 convertible preferred stock exchanged for 1.33 shares of series b convertible preferred stock , and one series a-1 warrant exchanged for five series z warrants . a condition of the series a and series a-1 exchange offer is for all outstanding shares of series a convertible preferred stock and all series a warrants , and all shares of series a-1 convertible preferred stock and all series a-1 warrants , must be tendered . if not all are tendered , then the company reserves the right to not accept any tenders .
| series a exchange offer - series a convertible preferred stock exchanged for series a-1 convertible preferred stock the fair value of the consideration given in the form of the issue of 232,259 shares of series a-1 convertible preferred stock , with such fair value recognized as the carrying value of such issued shares of series a-1 convertible preferred stock , as compared to the extinguishment of both : the carrying value of the series a convertible preferred stock and the fair value of the corresponding conversion option derivative liability , resulted in an excess of fair value of $ 504,007 recognized as a deemed dividend charged to accumulated deficit in the consolidated balance sheet on the november 17 , 2017 exchange date , with such deemed dividend included as a component of net loss attributable to attributable to common stockholders , summarized as follows : series a-1 convertible preferred stock issued series a convertible preferred stock and conversion option derivative liability extinguished deemed dividend charged to accumulated deficit series a exchange offer november 17 , 2017 exchange date fair value - 232,259 shares of series a-1 convertible preferred stock issued $ 843,100 less : fair value - series a convertible preferred stock conversion option derivative liability extinguished 339,093 less : carrying value - 154,837 shares of series a convertible preferred stock exchanged — deemed dividend charged to accumulated deficit $ 504,007 ● the november 17 , 2017 exchange date fair value of $ 843,100 for the 232,259 shares of series a-1 convertible preferred stock issued in the series a exchange offer , was estimated using a combination of the present value of its cash flows using a synthetic credit rating analysis required rate of return and the black-scholes option pricing model , using the company 's common stock price , the company 's dividend yield , the risk-free rates based on u.s. treasury security yields , estimated volatility in the value of the company 's common stock , and certain other level-3 inputs . ● the november 17 , 2017 exchange date fair value of $ 339,093 for the 154,837 shares of series a convertible preferred stock conversion option derivative liability extinguished , was estimated using a monte carlo simulation valuation model using the company 's common stock price , the company 's dividend yield , the risk-free rates based on u.s. treasury security yields , and certain other level-3 inputs including , assumptions regarding the estimated volatility in the value of the company 's common stock price and probabilities associated with the likelihood and timing of future dilutive transactions . ● the series a convertible preferred stock is classified in temporary equity in the consolidated balance sheet and has a carrying value
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we used such proceeds for the payment of the cash portion of the merger consideration ( as defined below ) , the repayment of pinnacle debt acquired , the refinancing of certain conagra brands debt , and the payment of related fees and expenses . the integration of pinnacle is continuing and on-track . we expect to achieve cost synergies of $ 285 million per year when the integration is concluded . fiscal 2019 results fiscal 2019 performance compared to fiscal 2018 reflected an increase in net sales , including the impact of recent acquisitions , with organic ( excludes the impact of foreign exchange and divested businesses , as well as acquisitions until the anniversary date of the acquisition ) increases in our refrigerated & frozen and international operating segments , in each case compared to fiscal 2018. overall gross margin increased as the addition of pinnacle 's gross profit , along with supply chain realized productivity and improved pricing , more than offset higher transportation costs , inflation , and increased investments in retailer marketing . overall segment operating profit increased primarily due to the pinnacle acquisition . corporate expenses were primarily flat due to items impacting comparability , as discussed below , as well as increased costs in connection with the pinnacle acquisition . we experienced a decrease in equity method investment earnings and increases in both interest expense and income tax expense , in each case compared to fiscal 2018. diluted earnings per share in fiscal 2019 were $ 1.52 , including earnings of $ 1.53 per diluted share from continuing operations and a loss of $ 0.01 per diluted share from discontinued operations . diluted earnings per share in fiscal 2018 were $ 1.98 , including earnings of $ 1.95 per diluted share from continuing operations and $ 0.03 per diluted share from discontinued operations . several significant items affect the comparability of year-over-year results of continuing operations ( see `` items impacting comparability '' below ) . on december 22 , 2017 , the u.s. tax cuts and jobs act ( the `` tax act '' ) was signed into law . the tax act reduced tax rates and modified certain policies , credits , and deductions and has certain international tax consequences . the tax act reduced the federal corporate tax rate from a maximum of 35 % to a flat 21 % rate . the tax act 's corporate rate reduction became effective january 1 , 2018 , in the middle of our third quarter of fiscal 2018. given our off-calendar fiscal year-end , our fiscal 2018 federal statutory tax rate was a blended rate . our federal statutory rate was 21 % in fiscal 2019. items impacting comparability items of note impacting comparability of results from continuing operations for fiscal 2019 included the following : charges totaling $ 180.8 million ( $ 138.9 million after-tax ) in connection with our restructuring plans , charges totaling $ 118.1 million ( $ 94.8 million after-tax ) associated with costs incurred for acquisitions and divestitures , 21 charges totaling $ 89.6 million ( $ 66.9 million after-tax and net of non-controlling interest ) related to the impairment of other intangible assets , gains of $ 69.4 million ( $ 35.1 million after-tax ) from the sales of the del monte ® canada business , the wesson ® oil business , and the gelit pasta business , incremental cost of goods sold of $ 53.0 million ( $ 39.5 million after-tax ) due to the fair value adjustment to inventory resulting from acquisition accounting for the pinnacle acquisition , a gain of $ 39.1 million ( $ 29.1 million after-tax ) related to legal matters , an income tax benefit of $ 32.4 million associated with a change in a valuation allowance on a deferred tax asset due to the divestitures of the wesson ® oil business and the gelit pasta business , a gain of $ 27.3 million ( $ 27.3 million after-tax ) related to the novation of a legacy guarantee , a gain of $ 15.1 million ( $ 12.2 million after-tax ) related to the fair value adjustment of cash settleable equity awards issued in connection with , and included in the acquisition consideration of , the pinnacle acquisition , a gain of $ 15.1 million ( $ 11.6 million after-tax ) related to the sale of an asset within the ardent mills joint venture , an income tax charge of $ 10.4 million associated with unusual tax items primarily related to legal entity restructuring activity , charges totaling $ 8.9 million ( $ 6.6 million after-tax ) associated with costs incurred for integration activities related to the pinnacle acquisition , and charges totaling $ 4.3 million ( $ 3.2 million after-tax ) related to pension plan lump-sum settlements and a remeasurement of our salaried and non-qualified pension plan liability . items of note impacting comparability of results from continuing operations for fiscal 2018 included the following : an income tax benefit of $ 233.3 million related to the enactment of the tax act , charges totaling $ 151.0 million ( $ 113.3 million after-tax ) related to certain litigation matters , an income tax expense of $ 78.6 million associated with a change in a valuation allowance on a deferred tax asset due to the termination of the initial agreement for the proposed sale of our wesson ® oil business , an income tax charge of $ 42.1 million associated with unusual tax items related to the repatriation of cash during the second quarter from foreign subsidiaries , the tax expense related to the earnings of foreign subsidiaries previously deemed to be permanently invested , a pension contribution , and the effect of a law change in mexico requiring deconsolidation for tax reporting purposes , charges totaling $ 34.9 million ( $ 25.6 million after-tax ) related to the early termination of an unfavorable lease contract by purchasing the property subject to the lease , charges totaling $ 38.0 million ( $ 27.0 million after-tax ) in connection with our scae plan ( as defined below ) story_separator_special_tag , charges totaling $ 15.7 million ( $ 10.9 million after-tax ) associated with costs incurred for acquisitions and divestitures , charges totaling $ 5.4 million ( $ 3.7 million after-tax ) related to pension plan lump-sum settlements and a remeasurement of our salaried and non-qualified pension plan liability , charges totaling $ 4.8 million ( $ 3.7 million after-tax ) related to the impairment of other intangible assets , and a benefit of $ 4.3 million ( $ 2.9 million after-tax ) related to the substantial liquidation of an international joint venture ( recorded in equity method investment earnings ) . segment presentation of gains and losses from derivatives used for economic hedging of anticipated commodity input costs and economic hedging of foreign currency exchange rate risks of anticipated transactions are discussed in the segment review below . 22 acquisitions on october 26 , 2018 , we completed the pinnacle acquisition . as a result of the pinnacle acquisition , pinnacle became a wholly owned subsidiary of the company . pursuant to the agreement and plan of merger , dated as of june 26 , 2018 ( the `` merger agreement '' ) , among the company , pinnacle , and patriot merger sub inc. , a wholly-owned subsidiary of the company that ceased to exist at the effective time of the merger , each outstanding share of pinnacle common stock was converted into the right to receive $ 43.11 per share in cash and 0.6494 shares of common stock , par value $ 5.00 per share , of the company ( `` company shares '' ) ( together , the `` merger consideration '' ) , with cash payable in lieu of fractional shares of company shares . the total amount of consideration paid in connection with the acquisition was approximately $ 8.03 billion and consisted of : ( 1 ) cash of $ 5.17 billion ( $ 5.12 billion , net of cash acquired ) ; ( 2 ) 77.5 million company shares , with an approximate value of $ 2.82 billion , issued out of the company 's treasury to former holders of pinnacle stock ; and ( 3 ) replacement awards issued to former pinnacle employees representing the fair value attributable to pre-combination service of $ 51.1 million . approximately $ 7.02 billion of the purchase price has been allocated to goodwill , pending determination of the final purchase price allocation . approximately $ 3.52 billion has been allocated to brands , trademarks and other intangibles . of the total goodwill , $ 236.7 million is deductible for tax purposes . amortizable brands , trademarks and other intangibles totaled $ 668.7 million . indefinite lived brands , trademarks and other intangibles totaled $ 2.85 billion . this business is reflected in the pinnacle foods segment . in february 2018 , we acquired the sandwich bros. of wisconsin ® business , maker of frozen breakfast and entree flatbread pocket sandwiches , for a cash purchase price of $ 87.3 million , net of cash acquired . approximately $ 57.8 million has been classified as goodwill , and $ 9.7 million and $ 7.1 million have been classified as non-amortizing and amortizing intangible assets , respectively . the amount of goodwill allocated is deductible for tax purposes . the business is included in the refrigerated & frozen segment . in october 2017 , we acquired angie 's artisan treats , llc , maker of angie 's ® boomchickapop ® ready-to-eat popcorn , for a cash purchase price of $ 249.8 million , net of cash acquired . approximately $ 156.7 million has been classified as goodwill , of which $ 95.4 million is deductible for income tax purposes . approximately $ 73.8 million and $ 10.3 million of the purchase price have been allocated to non-amortizing and amortizing intangible assets , respectively . the business is primarily included in the grocery & snacks segment , and to a lesser extent in the international segment . in april 2017 , we acquired protein-based snacking businesses thanasi foods llc , maker of duke 's ® meat snacks , and bigs llc , maker of bigs ® seeds , for $ 217.6 million in cash , net of cash acquired ( the `` thanasi acquisition '' ) . approximately $ 133.3 million has been classified as goodwill , of which $ 70.5 million is deductible for income tax purposes . approximately $ 65.1 million and $ 16.1 million of the purchase price have been allocated to non-amortizing and amortizing intangible assets , respectively . these businesses are primarily included in the grocery & snacks segment . in september 2016 , we acquired the operating assets of frontera foods , inc. and red fork llc , including the frontera ® , red fork ® , and salpica ® brands ( the `` frontera acquisition '' ) . these businesses make authentic , gourmet mexican food products and contemporary american cooking sauces . we acquired the businesses for $ 108.1 million in cash , net of cash acquired . approximately $ 39.5 million has been classified as goodwill and $ 59.5 million and $ 7.2 million have been classified as non-amortizing and amortizing intangible assets , respectively . the amount allocated to goodwill is deductible for tax purposes . these businesses are included primarily in the grocery & snacks and the refrigerated & frozen segments , and to a lesser extent within the international segment . divestitures on may 24 , 2019 , we completed the sale of our italian-based frozen pasta business , gelit , for proceeds net of cash divested of $ 77.5 million , subject to final working capital adjustments . the results of operations of the divested gelit business are primarily included in our refrigerated & frozen segment for the periods preceding the completion of the transaction . during the fourth quarter of fiscal 2019 , we also completed the sale of our wesson ® oil business for net proceeds of $ 171.8 million , subject to final working capital adjustments .
| at may 26 , 2019 , we had a revolving credit facility ( the `` revolving credit facility '' ) with a syndicate of financial institutions providing for a maximum aggregate principal amount outstanding at any one time of $ 1.6 billion ( subject to increase to a maximum aggregate principal amount of $ 2.1 billion with the consent of the lenders ) . we have historically used a credit facility principally as a back-up for our commercial paper program . as of may 26 , 2019 , there were no outstanding borrowings under the revolving credit facility . at may 26 , 2019 , we had no amounts outstanding under our commercial paper program . the highest level of borrowings during fiscal 2019 was $ 408.7 million . as of may 27 , 2018 , we had $ 277.0 million outstanding under our commercial paper program . on october 22 , 2018 , in connection with the pinnacle acquisition , we issued senior unsecured notes in the aggregate principal amount of $ 7.025 billion . these notes were issued in seven tranches : floating rate senior notes due october 22 , 2020 in an aggregate principal amount of $ 525.0 million with an interest equal to three-month libor plus 0.75 % ; 3.8 % senior notes due october 22 , 2021 in an aggregate principal amount of $ 1.2 billion ; 4.3 % senior notes due may 1 , 2024 in an aggregate principal amount of $ 1.0 billion ; 4.6 % senior notes due november 1 , 2025 in an aggregate principal amount of $ 1.0 billion ; 4.85 % senior notes due november 1 , 2028 in an aggregate principal amount of $ 1.3 billion ; 5.3 % senior notes due november 1 , 2038 in an aggregate principal amount of $ 1.0 billion ; and 5.4 % senior notes due november 1 , 2048 in an aggregate principal amount of $ 1.0 billion . on october 26 , 2018 , in connection with the pinnacle acquisition , we borrowed $ 1.3 billion under our term loan agreement . the three-year tranche loans mature on october 26 , 2021 , and the five-year tranche loans mature on
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it requires significant estimates , including the amounts and timing of expected future cash flows on impaired loans , appraisal values of underlying collateral for collateralized loans , and the amount of estimated losses on pools of homogeneous loans which is based on historical loss experience , expected duration and consideration of current economic trends , all of which may be susceptible to significant change . 25 · investment securities – investment securities can be classified as held-to-maturity , available-for-sale or trading . the appropriate classification is based partially on the company 's ability to hold the securities to maturity and largely on management 's intentions with respect to either holding or selling the securities . the classification of investment securities is significant since it directly impacts the accounting for unrealized gains and losses on securities . unrealized gains and losses on available-for-sale securities are recorded in accumulated other comprehensive income or loss , as a separate component of shareholders ' equity , and do not affect earnings until realized . the fair values of investment securities are generally determined by reference to quoted market prices , where available . if quoted market prices are not available , fair values are based on quoted market prices of comparable instruments , or a discounted cash flow model using market estimates of interest rates and volatility . investment securities with significant declines in fair value are evaluated to determine whether they should be considered other-than-temporarily impaired ( “ otti ” ) . an unrealized loss is generally deemed to be other-than-temporary and a credit loss is deemed to exist if the present value of the expected future cash flows is less than the amortized cost basis of the debt security . the credit loss component of an other-than-temporary impairment write-down is recorded in current earnings , while the remaining portion of the impairment loss is recognized in other comprehensive income ( loss ) , provided the company does not intend to sell the underlying debt security , and it is not likely that the company will be required to sell the debt security prior to recovery of the full value of its amortized cost basis . during 2013 , the company sold certain held-to-maturity securities and consequently did not use the held-to-maturity classification in 2014 , 2015 , 2016 or 2017 . · retirement benefits – the company provides defined benefit pension benefits to eligible employees and retirees and post-retirement health and life insurance benefits to certain eligible retirees . the company also provides deferred compensation and supplemental executive retirement plans for selected current and former employees . expense under these plans is charged to current operations and consists of several components of net periodic ( benefit ) cost based on various actuarial assumptions regarding future experience under the plans , including , but not limited to , discount rate , rate of future compensation increases , mortality rates , future health care costs and the expected return on plan assets . · provision for income taxes – the company is subject to examinations from various taxing authorities . such examinations may result in challenges to the tax return treatment applied by the company to specific transactions . management believes that the assumptions and judgments used to record tax-related assets or liabilities have been appropriate . should tax laws change or the taxing authorities determine that management 's assumptions were inappropriate , an adjustment may be required which could have a material effect on the company 's results of operations . · intangible assets – as a result of acquisitions , the company carries goodwill and identifiable intangible assets . goodwill represents the cost of acquired companies in excess of the fair value of net assets at the acquisition date . goodwill is evaluated at least annually , or when business conditions suggest impairment may have occurred . should impairment occur , goodwill will be reduced to its revised carrying value through a charge to earnings . core deposits and other identifiable intangible assets are amortized to expense over their estimated useful lives . the determination of whether or not impairment exists is based upon discounted cash flow modeling techniques that require management to make estimates regarding the amount and timing of expected future cash flows . it also requires them to select a discount rate that reflects the current return requirements of the market in relation to present risk-free interest rates , required equity market premiums , and company-specific performance and risk metrics , all of which are susceptible to change based on changes in economic and market conditions and other factors . future events or changes in the estimates used to determine the carrying value of goodwill and identifiable intangible assets could have a material impact on the company 's results of operations . a summary of the accounting policies used by management is disclosed in note a , “ summary of significant accounting policies ” , starting on page 63. supplemental reporting of non-gaap results of operations the company also provides supplemental reporting of its results on a “ net adjusted ” or “ tangible ” basis , from which it excludes the after-tax effect of amortization of core deposit and other intangible assets ( and the related goodwill , core deposit intangible and other intangible asset balances , net of applicable deferred tax amounts ) , accretion on non-impaired purchased loans , and expenses associated with acquisitions . although “ adjusted net income ” as defined by the company is a non-gaap measure , the company 's management believes this information helps investors understand the effect of acquisition activity in its reported results . reconciliations of gaap amounts with corresponding non-gaap amounts are presented in table 20 . 26 story_separator_special_tag font-family : 'times new roman ' ; text-align : left ; margin-right : 12.25pt '' > asset quality in 2017 remained stable and favorable in comparison to averages for peer financial organizations . story_separator_special_tag as compared to the end of 2016 , loan nonperforming ratios and the delinquency ratio at december 31 , 2017 were improved while the full year loan net charge-off ratio was up a modest amount year-over-year . net income and profitability net income for 2017 was $ 150.7 million , an increase of $ 46.9 million , or 45.2 % , from 2016 's earnings . earnings per share for 2017 was $ 3.03 , up $ 0.71 , or 30.6 % , from 2016 's results . the 2017 results included $ 26.0 million , or $ 0.37 per share , of acquisition expenses primarily related to the merchants and nrs acquisitions . the 2016 results included $ 1.7 million , or $ 0.03 per share , of acquisition expenses related to the merchants and nrs acquisitions . net income adjusted to exclude acquisition expenses , amortization of intangibles , acquired non-impaired loan accretion and the impact of the tax cuts and jobs act , increased $ 32.1 million , or 30.1 % , compared to the prior year . earnings per share adjusted to exclude acquisition expenses , amortization of intangibles , acquired non-impaired loan accretion and the impact of the tax cuts and jobs act , of $ 2.80 increased $ 0.41 , or 17 % , compared to the prior year . see table 20 for reconciliation of gaap to non-gaap measures . net income for 2016 was $ 103.8 million , an increase of $ 12.6 million , or 13.8 % , from 2015 's earnings , while earnings per share for 2016 was $ 2.32 , up $ 0.13 , or 5.9 % , from 2015 's results due primarily to the acquisition of oneida in december 2015. the 2016 results included the aforementioned acquisition expenses . table 1 : condensed income statements replace_table_token_5_th 28 the company operates in three business segments : banking , employee benefit services and all other . the banking segment provides a wide array of lending and depository-related products and services to individuals , businesses and municipal enterprises . in addition to these general intermediation services , the banking segment provides treasury management solutions , capital financing products and payment processing services . employee benefit services , consisting of bpas and its subsidiaries , provides the following on a national basis : employee benefit trust services ; collective investment fund ; fund administration , transfer agency ; retirement plan and veba/hra and health savings account plan administration services ; actuarial services ; and healthcare consulting services . bpas services approximately 3,800 retirement plans and more than 400,000 plan participants . in addition , bpas employs nearly 350 professionals , and operates from 11 offices located in boston , new york , new jersey , pennsylvania , texas and puerto rico . the all other segment is comprised of wealth management and insurance services . wealth management activities include trust services provided by the personal trust unit of cbna , investment products and services provided by cisi and the carta group , and asset advisory services provided by nottingham . the insurance services activities include the offerings of personal and commercial property insurance and other risk management products and services provided by onegroup . for additional financial information on the company 's segments , refer to note u – segment information in the notes to consolidated financial statements . the primary factors explaining 2017 earnings performance are discussed in the remaining sections of this document and are summarized as follows : banking · net interest income increased $ 41.5 million , or 15.2 % . this was the result of a $ 1.16 billion increase in average interest earning assets , partially offset by a $ 647.8 million increase in average interest-bearing liabilities and a two basis point increase in the average rate on interest-bearing liabilities . average loans grew $ 936.5 million driven by the merchants acquisition . also contributing to the growth in interest income was a $ 219.5 million increase in the average book value of investments , including cash equivalents , primarily due to investments acquired in the merchants transaction , partially offset by a 20 basis-point decrease in the average yield on investments . average interest-bearing deposits increased $ 539.8 million due to the merchants acquisition and organic core deposit growth , partially offset by the continued trend of declining time deposit balances . borrowing interest expense increased year-over-year as a result of an increase in average balances of $ 108.0 million , or 39.7 % , due to external borrowings acquired with merchants , and a blended rate that was five basis points higher than the prior year . · the loan loss provision of $ 11.0 million increased $ 2.9 million , or 36.0 % , from the prior year level . net charge‑offs of $ 10.6 million were $ 4.4 million more than 2016 , primarily due to a $ 3.1 million partial charge-off of a single commercial relationship in the fourth quarter of 2017. this resulted in an annual net charge-off ratio ( net charge-offs / total average loans ) of 0.18 % , which was five basis points higher than the prior year . year-end nonperforming loans as a percentage of total loans decreased four basis points and nonperforming assets as a percentage of loans and other real estate owned decreased five basis points compared to december 31 , 2016 levels . additional information on trends and policy related to asset quality is provided in the asset quality section on pages 43 through 47 . · banking noninterest income for 2017 of $ 73.3 million increased by $ 7.3 million from 2016 's level , primarily due to new deposit relationships from both acquired and organic sources , increased debit card-related revenues and higher deposit service fees , partially offset by a decrease in other banking revenues related to a nonrecurring insurance-related gain recognized in 2016 .
| the company paid $ 1.2 million in cash to acquire the assets of bas and recorded intangible assets of $ 1.2 million in conjunction with the acquisition . on february 3 , 2017 , the company completed its acquisition of northeast retirement services , inc. ( “ nrs ” ) and its subsidiary global trust company , inc. ( “ gtc ” ) , headquartered in woburn , massachusetts , for $ 148.6 million in company stock and cash . nrs was a privately held corporation focused on providing institutional transfer agency , master recordkeeping services , custom target date fund administration , trust product administration and customized reporting services to institutional clients . its wholly-owned subsidiary , gtc , is chartered in the state of maine as a non-depository trust company and provides fiduciary services for collective investment trusts and other products . the acquisition of nrs and gtc , hereafter referred to collectively as nrs , will strengthen and complement the company 's existing employee benefit services businesses . upon the completion of the merger , nrs became a wholly-owned subsidiary of bpas and operates as northeast retirement services , llc , a delaware limited liability company . this transaction resulted in the acquisition of $ 36.1 million in net tangible assets , principally cash and certificates of deposit , $ 60.2 million in customer list intangibles that will be amortized over 10 years , the creation of a $ 24.2 million deferred tax liability associated with the customer list intangible and $ 76.5 million in goodwill . on march 1 , 2017 , the company , through its subsidiary , onegroup , completed its acquisition of certain assets of dryfoos insurance agency , inc. ( “ dryfoos ” ) , an insurance agency headquartered in hazleton , pennsylvania . the company paid $ 3.0 million in cash to acquire the assets of dryfoos , and recorded goodwill in the amount of $ 1.7 million and other intangible assets of $ 1.7 million in conjunction with the acquisition . on may 12 , 2017 , the company completed its acquisition of merchants bancshares , inc. ( “ merchants ” ) , parent company of merchants bank , headquartered in south burlington , vermont , for $ 345.2 million in company stock and cash , comprised of $ 82.9 million
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during the quarter ended september 30 , 2020 , we completed a reduction in force of approximately 15 % of our corporate headquarters employees . credit facility : we fully drew down our $ 75.0 million variable funding notes in march to provide additional liquidity and flexibility . share repurchase : we suspended share repurchases in march 2020 to preserve liquidity and flexibility . although we expect the covid-19 pandemic to continue to negatively impact the company 's operations and cash flows , based on management 's current expectations and currently available information , the company believes current cash and cash from operations will be sufficient to meet its operating cash requirements , planned capital expenditures and interest and principal payments for at least the next twelve months . composition of revenues , expenses and cash flows revenues we generate revenue from three primary sources : franchise segment revenue : franchise segment revenue relates to services we provide to support our franchisees and includes royalty revenue , naf revenue , franchise fees , placement revenue , other fees and commission income associated with our franchisee-owned stores . franchise segment revenue does not include the sale of tangible products by us to our franchisees . our franchise segment revenue comprised 51 % , 40 % and 39 % of our total revenue for the years ended december 31 , 2020 , 2019 and 2018 , respectively . corporate-owned store segment revenue : includes monthly membership dues , enrollment fees , annual fees and prepaid fees paid by our members as well as retail sales . this source of revenue comprised 29 % , 23 % , and 24 % of our total revenue for the years ended december 31 , 2020 , 2019 and 2018 , respectively . as of december 31 , 2020 , over 90 % of our members paid their monthly dues by eft , while the remainder prepaid annually in advance . equipment segment revenue : includes equipment revenue for new u.s. franchisee-owned stores as well as replacement equipment for u.s. existing franchisee-owned stores . franchisee-owned stores are generally required to replace their equipment every five to seven years . this source of revenue comprised 20 % , 37 % and 37 % of our total revenue for the years ended december 31 , 2020 , 2019 and 2018 , respectively . see item 7 : critical accounting policies and use of estimates for further discussion on our revenue streams and revenue recognition policies . expenses we primarily incur the following expenses : cost of revenue : primarily includes the direct costs associated with equipment sales to new and existing franchisee-owned stores in the u.s. and canada as well as direct costs related to our point-of-sale system . cost of revenue also includes the cost of retail sales at our corporate-owned stores , which is immaterial . our cost of revenue changes primarily based on equipment sales volume . store operations : includes the direct costs associated with our corporate-owned stores , primarily rent , utilities , payroll , marketing , maintenance and supplies . the components of store operations remain relatively stable for each store and change primarily based on the number of corporate-owned stores . our statements of operations do not include , and we are not responsible for , any costs associated with operating franchisee-owned stores . selling , general and administrative expenses : consists of costs associated with administrative and franchisee support functions related to our existing business as well as growth and development activities , including costs to support equipment placement and assembly services . these costs primarily consist of payroll , it-related , marketing , legal and accounting expenses . naf expense : consists of expenses incurred on behalf of the naf . the use of amounts received by the naf is restricted to advertising , product development , public relations , merchandising , and administrative expenses and programs to increase sales and further enhance the public reputation of the planet fitness brand . 45 cash flows we generate a significant portion of our cash flows from monthly membership dues , royalties , naf revenue and various fees and commissions related to transactions involving our franchisee-owned stores . we oversee the membership billing process , as well as the collection of our royalties , naf revenue and certain other fees , through our third-party hosted point-of-sale systems . we collect monthly dues from our corporate-owned store members on or around the 17 th of each month , while annual fees are collected on or around the 1 st day of the second month following the month in which the membership agreement was signed , provided our stores are open . through our point-of-sale system , we oversee the processing of membership billings for franchisee-owned stores . our royalties and certain other fees are deducted on or around the 17 th of each month from these membership billings by the processor prior to the net billings being remitted to the franchisees . our franchisees are responsible for maintaining the membership billing records and collection of member dues for their respective stores through the point-of-sale system . our royalties are based on monthly and annual membership billings for the franchisee-owned stores without regard to the collections of those billings by our franchisees . the amount and timing of the collection of royalties and membership dues and fees at corporate-owned stores is , therefore , generally fairly predictable . our corporate-owned stores also historically generate strong operating margins and cash flows , as a significant portion of our costs are fixed or semi-fixed such as rent and labor . equipment sales to new and existing franchisee-owned stores also generate significant cash flows . franchisees either pay in advance or provide evidence of a committed financing arrangement for such equipment . each of these cash flows have been negatively impacted , we believe temporarily , by the covid-19 pandemic . story_separator_special_tag recent transactions on march 20 , 2020 , we drew down on the full $ 75.0 million of borrowing capacity under our variable funding notes in order to increase the cash on our balance sheet during temporary store closures as a result of the covid-19 pandemic . seasonality our results are subject to seasonality fluctuations in that member joins are typically higher in january as compared to other months of the year . in addition , our quarterly results may fluctuate significantly because of several factors , including the timing of store openings , timing of price increases for enrollment fees and monthly membership dues and general economic conditions . see note 21 to our consolidated financial statements included elsewhere in this form 10-k for our total revenues , income from operations and net income for each of the quarters during the years ended december 31 , 2020 and 2019. our segments we operate and manage our business in three business segments : franchise , corporate-owned stores and equipment . our franchise segment includes operations related to our franchising business in the united states , puerto rico , canada , panama , mexico and australia . our corporate-owned stores segment includes operations with respect to all corporate-owned stores throughout the united states and canada . the equipment segment includes the sale of equipment to franchisee-owned stores in the u.s. we evaluate the performance of our segments and allocate resources to them based on revenue and earnings before interest , taxes , depreciation and amortization , referred to as segment ebitda . revenue and segment ebitda for all operating segments include only transactions with unaffiliated customers and do not include intersegment transactions . the tables below summarize the financial information for our segments for the years ended december 31 , 2020 , 2019 and 2018 . “ corporate and other , ” as it relates to segment ebitda , primarily includes corporate overhead costs , such as payroll and related benefit costs and professional services that are not directly attributable to any individual segment . 46 replace_table_token_3_th ( 1 ) total segment ebitda is equal to ebitda , which is a metric that is not presented in accordance with gaap . refer to “ —non-gaap financial measures ” for a definition of ebitda and a reconciliation to net income , the most directly comparable gaap measure . a reconciliation of income from operations to segment ebitda is set forth below : replace_table_token_4_th ( 1 ) total segment ebitda is equal to ebitda , which is a metric that is not presented in accordance with gaap . refer to “ —non-gaap financial measures ” for a definition of ebitda and a reconciliation to net income , the most directly comparable gaap measure . 47 how we assess the performance of our business in assessing the performance of our business , we consider a variety of performance and financial measures . the key measures for determining how our business is performing include total monthly dues and annual fees from members ( which we refer to as system-wide sales ) , the number of new store openings , same store sales for both corporate-owned and franchisee-owned stores , average royalty fee percentages for franchisee-owned stores , monthly pf black card membership penetration percentage , ebitda , adjusted ebitda , segment ebitda , four-wall ebitda , royalty adjusted four-wall ebitda , adjusted net income , and adjusted net income per share , diluted . see “ —non-gaap financial measures ” below for our definition of ebitda , adjusted ebitda , four-wall ebitda , royalty adjusted four-wall ebitda , adjusted net income , and adjusted net income per share , diluted and why we present ebitda , adjusted ebitda , four-wall ebitda , royalty-adjusted four-wall ebitda , adjusted net income , and adjusted net income per share , diluted , and for a reconciliation of our ebitda , adjusted ebitda , and adjusted net income to net income , the most directly comparable financial measure calculated and presented in accordance with gaap , and a reconciliation of adjusted net income per share , diluted to net income per share , diluted , the most directly comparable financial measure calculated in accordance with gaap . total monthly dues and annual fees from members ( system-wide sales ) we review the total amount of dues we collect from our members on a monthly basis , which allows us to assess changes in the performance of our corporate-owned and franchisee-owned stores from period to period , any competitive pressures , local or regional membership traffic patterns and general market conditions that might impact our store performance . system-wide sales is an operating measure that includes sales by franchisees that are not revenue realized by the company in accordance with gaap , as well as sales by the company 's corporate-owned stores . while the company does not record sales by franchisees as revenue , and such sales are not included in the company 's consolidated financial statements , the company believes that this operating measure aids in understanding how the company derives its royalty revenue and is important in evaluating its performance . provided our stores are open , we collect monthly dues on or around the 17 th of every month and collect annual fees once per year from each member based upon when the member signed his or her membership agreement . system-wide sales were $ 2.4 billion , $ 3.2 billion and $ 2.8 billion , during the years ended december 31 , 2020 , 2019 and 2018 , respectively . number of new store openings the number of new store openings reflects stores opened during a particular reporting period for both corporate-owned and franchisee-owned stores . opening new stores is an important part of our growth strategy and we expect the majority of our future new stores will be franchisee-owned . before we obtain the certificate of occupancy or report any revenue for new corporate-owned stores , we incur pre-opening costs , such as rent expense , labor expense and other operating expenses .
| the decrease was driven by lower equipment sales to new and existing franchisee-owned stores in the year ended december 31 , 2020 compared to the year ended december 31 , 2019 primarily as a result of covid-19 related closures beginning in march 2020 , the 12-month and 18-month extensions we gave to franchisees for all new store development and re-equipment investment obligations , respectively , and the 15 % discount offered to franchisees on equipment purchased in 2020. depreciation and amortization was $ 5.0 million for both the years ended december 31 , 2020 and december 31 , 2019. comparison of the years ended december 31 , 2019 and december 31 , 2018 revenue total revenues were $ 688.8 million in 2019 , compared to $ 572.9 million in 2018 , an increase of $ 115.9 million , or 20.2 % . franchise segment revenue was $ 277.6 million in the year ended december 31 , 2019 compared to $ 224.1 million in the year ended december 31 , 2018 , an increase of $ 53.4 million , or 23.8 % . 59 franchise revenue was $ 223.1 million in the year ended december 31 , 2019 compared to $ 175.3 million in the year ended december 31 , 2018 , an increase of $ 47.8 million or 27.3 % . included in franchise revenue is royalty revenue of $ 188.0 million , franchise and other fees of $ 17.1 million , and placement revenue of $ 17.8 million for the year ended december 31 , 2019 , compared to royalty revenue of $ 147.2 million , franchise and other fees of $ 16.6 million , and placement revenue of $ 11.5 million for the year ended december 31 , 2018. the $ 40.9 million increase in royalty revenue was primarily driven by $ 14.6 million attributable to a same store sales increase of 9.0 % in franchisee-owned stores , and $ 12.7 million was attributable to royalties from new stores in 2019 , as well as those that opened in 2018 that were not included in the same store sales base . additionally , $ 9.5 million of the increase was due to higher royalty rates on monthly dues and $ 4.0 million was due to higher royalty rates on
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we believe the size and the composition of our student loan inventory at any point provides us with a significant degree of revenue visibility for our student loan revenues . based on data compiled from over two decades of experience with the recovery of defaulted student loans , at the time we receive a placement of student loans , we are able to make a reasonably accurate estimate of the recovery outcomes likely to be derived from such placement and the revenues we are likely able to generate based on the anticipated recovery outcomes . there are five potential outcomes to the student loan recovery process from which we generate revenues . these outcomes include : full repayment , recurring payments , rehabilitation , loan restructuring and wage garnishment . of these five potential outcomes , our ability to rehabilitate defaulted student loans is the most significant component of our revenues in this market . generally , a loan is considered successfully rehabilitated after the student loan borrower has made nine consecutive qualifying monthly payments and our client has notified us that it is recalling the loan . once we have structured and implemented a repayment program for a defaulted borrower , we ( i ) earn a percentage of each periodic payment collected up to and including the final periodic payment prior to the loan being considered “ rehabilitated ” by our clients , and ( ii ) if the loan is “ rehabilitated , ” then we are paid a one-time percentage of the total amount of the remaining unpaid balance . as stated above , effective july 2015 , our contract with the department of education will provide for a fixed fee of $ 1,710 for each rehabilitated loan . the fees we are paid vary by recovery outcome as well as by contract . for non-government-supported student loans we are generally only paid contingency fees on two outcomes : full repayment or recurring repayments . the table below describes our typical fee structure for each of these five outcomes . student loan recovery outcomes full repayment recurring payments rehabilitation loan restructuring wage garnishment repayment in full of the loan regular structured payments , typically according to a renegotiated payment plan after a defaulted borrower has made nine consecutive recurring payments , the loan is eligible for rehabilitation restructure and consolidate a number of outstanding loans into a single loan , typically with one monthly payment and an extended maturity if we are unable to obtain voluntary repayment , payments may be obtained through wage garnishment after certain administrative requirements are met we are paid a percentage of the full payment that is made we are paid a percentage of each payment we are paid based on a percentage of the overall value of the rehabilitated loan or for the department of education , a fixed fee we are paid based on a percentage of overall value of the restructured loan we are paid a percentage of each payment for certain guaranty agency , or ga , clients , we have entered into master service agreements , or msas . under these agreements , clients provide their entire inventory of outsourced loans or receivables to us for recovery on an exclusive basis , rather than just a portion , as with traditional contracts that are split among various service providers . in certain circumstances , we engage subcontractors to assist in the recovery of a portion of the client 's portfolio . we also receive success fees for the recovery of loans under msas and our revenues under msa arrangements include fees earned by the activities of our subcontractors . as of december 31 , 2014 , we had three msa clients in the student loan market . in october 2014 , the department of education announced a change in the structure for the payment of fees to recovery contractors upon rehabilitation of student loans under the existing recovery contract . the new fee structure provides for a fixed fee of $ 1,710 for each loan that is rehabilitated . previously , the fee had been based on a percentage of the principal amount of the rehabilitated loan . the change to the fee structure will be effective for student loans that are rehabilitated on or following july 1 , 2015. further , the bipartisan budget act of 2013 , which was signed into law by president obama on december 26 , 2013 , reduced the compensation paid to gas for the rehabilitation of student loans , effective july 1 , 2014. this “ revenue enhancement ” measure reduced from 18.5 % to 16.0 % of the outstanding loan balance , the amount that gas can charge borrowers when a rehabilitated loan is sold by the ga and eliminated entirely the gas retention of 18.5 % of the outstanding loan balance as a fee for rehabilitation services . the reduction in compensation the gas receive resulted in a decrease in the contingency fee percentage that we receive from the gas for assisting in the rehabilitation of defaulted student loans . 29 we expect that our revenues from student lending in 2015 will be approximately 20 % lower than in 2014. the fee reductions from the department of education and the gas discussed above contribute to this expected decrease . other contributing factors include an increase in the number of student loans eligible for rehabilitation due to income based repayment , which has the effect of reducing the number of loan consolidations which have a shorter payment cycle , and continuing delays in the recognition of some revenues due to additional documentation requirements for income based repayment first imposed during the third quarter of 2014. healthcare we derive revenues from the healthcare market primarily from our rac contract , under which we are the prime contractor responsible for detecting improperly paid part a and part b medicare claims in 12 states in the northeastern united states . story_separator_special_tag revenues earned under the rac contract are driven by the identification of improperly paid medicare claims through both automated and manual review of such claims . 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 involved in a competitive rebidding process for four new rac contracts with cms . the timing of new rac contract awards remains uncertain . the bidding process has been delayed , at least in part , by pre‑award protests and , following the denial of those protests , by ongoing litigation . the plaintiffs in the litigation are seeking the elimination of payment terms under the proposed new rac contracts that would prohibit racs from being compensated for improper claims until a second level of appeal has been exhausted . a decision in favor of cms was subject to appeal in which the appellate court recently remanded the case back to lower court to rule on the merits of the case . there is a related injunction barring the award of three of the four new rac contracts pending resolution of this litigation . a fifth rac contract , which is a new type of rac contract covering the identification and recovery of improper claims for durable medical equipment , prosthetics , orthotics and supplies and home health and hospice claims , was not covered by the injunction and was awarded to another party in january 2015. the company is not a party to this litigation . cms has stated that the injunction will delay the award of the three contracts until the judge 's ruling on the injunction , which is not expected to occur until late summer 2015. it is uncertain whether cms will award the rac contract not covered by the injunction in the interim period or will wait to award all of the new rac contracts at the same time . in anticipation of the award of new rac contracts , beginning in 2013 cms has adopted a series of contract transition procedures that have restricted our ability to request medical records for audit , thus adversely affected our revenues under this contract . no records requests were permitted in july 2013 and then from november 15 , 2013 through year end . in january 2014 , records requests were again permitted through february 21 , 2014 and claim activity was permitted through june 1 , 2014 , when work under the contract stopped . in addition to these periods of suspended activity , the contract transition rules have limited scope of our permitted audit activities as cms has generally not permitted audits of pip providers and has also placed additional restrictions on the types of claims we are permitted to audit and number of medical records we are permitted to request . cms began to permit claim reviews again in august 2014 for an unspecified period , but has restricted the type of reviews and the types of claims subject to audit . cms also recently announced that it extended our existing rac contract through december 31 , 2015 , with the same audit limitations continuing during this extended period . cms has further indicated they may , at their discretion , approve additional issues that we will be permitted to review and audit during the rac contract extension period . absent a significant change in the scope of the permitted audit activities , we expect that our revenues from the rac contract will be significantly lower in 2015 as compared to 2014. in connection with our rac contract , cms has announced a settlement offer to pay hospitals 68 % of what they have billed medicare to settle a backlog of pending appeals challenging medicare 's denials of reimbursement for certain types of short-term care . the implication of this settlement offer related to claims for which fees have already been paid to recovery auditors under existing rac contracts is unclear at this time , but we may be obligated to repay certain amounts that we previously received from cms depending on the final terms of any such settlement . we accrue an estimated liability for appeals based on the amount of commissions received which are subject to appeal and which we estimate are probable of being returned to providers following successful appeal . the $ 18.6 million balance as of december 31 , 2014 , represents our best estimate of the probable amount of we may be required to refund related to appeals of claims for which commissions were previously collected . we estimate that it is reasonably possible that we could be required to pay an additional amount up to approximately $ 5.4 million as a result of potentially successful appeals in excess of the amount we accrued as of december 31 , 2014. 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 30 revenues generated by the claims recovered through these subcontractor relationships , and we recognize the fees that we pay to these subcontractors in our expenses . our business strategy is focused on utilizing our technology-enabled services platform to provide audit , recovery and analytical services for private healthcare payors . we have entered into contracts with several private payors , although these contracts are in the early stage of implementation .
| salaries and benefits 35 salaries and benefits expense was $ 93.7 million for the year ended december 31 , 2014 , a decrease of $ 3.1 million , or 3 % , compared to salaries and benefits expense of $ 96.8 million for the year ended december 31 , 2013. the decrease in salaries and benefits expense was primarily due to lower bonus expense . other operating expense other operating expense was $ 74.4 million for the year ended december 31 , 2014 , a decrease of $ 11.2 million , or 13 % , compared to other operating expense of $ 85.7 million for the year ended december 31 , 2013. the decrease in other operating expenses was primarily due to lower third party collection fees and lower communication and postage expense resulting from the wind-down of our current rac contract . income from operations as a result of the factors described above , income from operations was $ 27.3 million for the year ended december 31 , 2014 , compared to $ 72.9 million for the year ended december 31 , 2013 , representing a decrease of $ 45.6 million , or 63 % . interest expense interest expense was $ 10.2 million for the year ended december 31 , 2014 compared to $ 11.6 million for the year ended december 31 , 2013 , representing a decrease of 12 % . interest expense decreased due to repayments of principal under our credit agreement , resulting in a lower outstanding balance during 2014. income taxes income tax expense was $ 7.7 million for the year ended december 31 , 2014 compared to $ 25.0 million for the year ended december 31 , 2013 , representing a decrease of 69 % , consistent with the decrease in income before provision for income taxes in 2014. our effective income tax rate increased to 45 % for the year ended december 31 , 2014 from 41 % for the year ended december 31 , 2013. the increase in the effective tax rate is primarily the result of an approximately 5.5 % increase in the state tax rate . the 2013 effective tax rate includes a one-time tax expense due to the non-deductible expenses associated with the follow on offerings of approximately 1.7 % . net income as
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our cost of services as a percentage of services revenues is affected by the utilization rates of our professionals ( defined as the percentage of our professionals ' time billed to clients divided by the total available hours in the respective period ) , the salaries we pay our professionals , and the average billing rate we receive from our clients . if a project ends earlier than scheduled , we retain professionals in advance of receiving project assignments , or demand for our services declines , our utilization rate will decline and adversely affect our cost of services as a percentage of services revenues . selling , general , and administrative expenses selling , general and administrative ( “ sg & a ” ) expenses are primarily composed of sales-related costs , general and administrative salaries , stock compensation expense , office costs , recruiting expense , variable compensation costs , marketing costs and other miscellaneous expenses . we have access to sales leads generated by our software vendors , most notably ibm , oracle and microsoft , whose products we use to design and implement solutions for our clients . these relationships enable us to optimize our selling costs and sales cycle times and increase win rates through leveraging our partners ' marketing efforts and endorsements . plans for growth and acquisitions our goal is to continue to build one of the leading information technology consulting firms by expanding our relationships with existing and new clients and through the continuation of our disciplined acquisition strategy . our future growth plan includes expanding our business with a primary focus on customers in the united states , both organically and through acquisitions . we also intend to further leverage our existing offshore capabilities to support our future growth and provide our clients flexible options for project delivery . when analyzing revenue growth by base business compared to acquired companies in the results of operations section below , revenue attributable to base business includes revenue from an acquired company that has been owned for a full four quarters after the date of acquisition . united states tax reform the tax cuts and jobs act of 2017 ( the “ 2017 tax act ” ) was signed into law on december 22 , 2017. the law included significant changes to the u.s. corporate income tax system , including a federal corporate tax rate reduction from 35 % to 21 % , limitations on the deductibility of interest expense and executive compensation , and the transition of u.s. international taxation from a worldwide tax system to a territorial tax system . this change may result in a u.s. tax liability on those earnings which have not previously been repatriated to the u.s. , with future foreign earnings potentially not subject to u.s. income taxes when repatriated . the majority of the provisions had an impact on the company beginning in fiscal year 2018. however , there were certain transitional impacts of the 2017 tax act which affected the company 's tax provision during the fourth quarter of 2017. as part of the transition to the new territorial tax system , the 2017 tax act imposed a one-time repatriation tax on deemed repatriation of historical earnings of foreign subsidiaries , which produced a $ 1.1 million tax expense payable over eight years . as a result , a $ 0.1 million current liability and a $ 1.0 million non-current liability were recorded in the company 's consolidated financial statements during the fourth quarter of 2017. the reduction of the federal corporate tax rate caused the company to adjust its u.s. deferred tax assets and liabilities to the lower federal base rate of 21 % . the reduction in the corporate tax rate resulted in a provisional net tax credit of $ 3.3 million for the fourth quarter of 2017. see note 13 , income taxes , in the notes to consolidated financial statements for further information regarding the impact of the 2017 tax act . the sec issued rules that would allow for a measurement period of up to one year after the enactment date of the 2017 tax act to finalize the recording of the related tax impacts . during the third quarter of 2018 , the company finalized and filed its 2017 income tax return . there were no material changes to the original estimate , and the one-year measurement period is now closed . lease accounting standard adopted january 1 , 2019 in february 2016 , the financial accounting standards board ( the “ fasb ” ) issued asu no . 2016-02 , leases , which supersedes asc topic 840 , leases , and creates a new topic , asc topic 842 , leases . during the year end december 31 , 2018 , the fasb issued asu no . 2018-10 , codification improvements to topic 842 , leases , asu no . 2018-11 , leases – targeted improvement , and asu no . 2018-20 , leases ( topic 842 ) : narrow scope improvements for lessors which further amended asu 22 no . 2016-02. these updates require lessees to recognize lease liabilities and right of use ( “ rou ” ) assets for all leases , including operating leases , with a term greater than 12 months on its balance sheet . the company adopted the standard on january 1 , 2019 using the modified retrospective method , and will be fully presented in the company 's quarterly report on form 10-q for the three months ended march 31 , 2019. on january 1 , 2019 , the company recognized rou assets of approximately $ 22 million and lease liabilities of approximately $ 23 million related to its existing operating leases on the date of adoption . the difference between the rou assets and lease liabilities primarily represents the existing deferred rent liabilities balance , resulting from historical straight-lining of operating leases , which was effectively reclassified upon adoption to reduce the measurement of the rou assets . as the company adopted asu no . story_separator_special_tag 2016-02 using the modified retrospective method , the recognition of the rou assets and lease liabilities will not impact the comparative period consolidated balance sheet . the impact from the adoption of asu no . 2016-02 on the company 's consolidated statement of operations was immaterial . the adoption of asu no . 2016-02 and its amendments will also result in additional disclosures around weighted average remaining lease terms , weighted average discount rates , variable lease payments and significant judgments and practical expedients used by the company . current minimum commitments under noncancellable operating leases are disclosed in note 16 , commitments and contingencies , in the notes to consolidated financial statements . results of operations the following table summarizes our results of operations as a percentage of total revenues : replace_table_token_4_th year ended december 31 , 2018 compared to year ended december 31 , 2017 revenues . total revenues increased 3 % to $ 498.4 million for the year ended december 31 , 2018 from $ 485.3 million for the year ended december 31 , 2017 . 23 financial results ( in thousands ) explanation for increases ( decreases ) over prior year period ( in thousands ) for the year ended december 31 , 2018 for the year ended december 31 , 2017 total increase ( decrease ) over prior year period increase attributable to acquired companies increase ( decrease ) attributable to base business services revenues $ 494,001 $ 446,619 $ 47,382 $ 34,929 $ 12,453 software and hardware revenues 4,374 38,642 ( 34,268 ) 4 ( 34,272 ) total revenues $ 498,375 $ 485,261 $ 13,114 $ 34,933 $ ( 21,819 ) services revenues increased 11 % to $ 494.0 million for the year ended december 31 , 2018 from $ 446.6 million for the year ended december 31 , 2017 . the increase in services revenues was due to acquisitions as well as an increase in our base business . services revenues attributable to our base business increased $ 12.5 million while services revenues attributable to acquired companies was $ 34.9 million , resulting in a total increase of $ 47.4 million . software and hardware revenues decreased 89 % to $ 4.4 million for the year ended december 31 , 2018 from $ 38.6 million for the year ended december 31 , 2017 as a result of the net presentation of third-party software and hardware sales upon adoption of asc topic 606. cost of revenues ( exclusive of depreciation and amortization , discussed separately below ) . total cost of revenues decreased 1 % to $ 319.8 million for the year ended december 31 , 2018 from $ 323.7 million for the year ended december 31 , 2017 . cost of services increased 10 % to $ 319.8 million for the year ended december 31 , 2018 from $ 290.5 million for the year ended december 31 , 2017 primarily due to higher headcount in response to higher services revenues and acquisitions . services costs as a percentage of services revenues decreased to 64.7 % for the year ended december 31 , 2018 from 65.0 % for the year ended december 31 , 2017 primarily driven by an increase in utilization . the average bill rate for our professionals decreased to $ 124 per hour for the year ended december 31 , 2018 from $ 126 per hour for the year ended december 31 , 2017 . selling , general and administrative . sg & a expenses increased 10 % to $ 118.5 million for the year ended december 31 , 2018 from $ 108.2 million for the year ended december 31 , 2017 primarily due to acquisitions completed during 2018 , increased variable compensation expense related to bonus costs and the fluctuations in expenses as detailed in the following table . sg & a expenses , as a percentage of services revenues , decreased to 24.0 % for the year ended december 31 , 2018 from 24.2 % for the year ended december 31 , 2017 . replace_table_token_5_th depreciation . depreciation expense decreased 14 % to $ 4.1 million for the year ended december 31 , 2018 from $ 4.7 million for the year ended december 31 , 2017 . the decrease in depreciation expense is primarily attributable to certain property and equipment becoming fully depreciated . depreciation expense as a percentage of total revenues was 0.8 % for the year ended december 31 , 2018 and 1.0 % for the year ended december 31 , 2017 . 24 amortization . amortization expense increased 9 % to $ 16.4 million for the year ended december 31 , 2018 from $ 15.0 million for the year ended december 31 , 2017 . the increase in amortization expense was due to the addition of intangible assets from the 2018 and 2017 acquisitions , partially offset by intangible assets from previous acquisitions becoming fully amortized . amortization expense as a percentage of total revenues was 3.3 % for the year ended december 31 , 2018 and 3.1 % for the year ended december 31 , 2017 . acquisition costs . acquisition-related costs of $ 1.9 million were incurred during 2018 compared to $ 1.4 million during 2017 . costs were incurred for legal , accounting , tax , investment bank and advisor fees , and valuation services performed by third parties in connection with merger and acquisition-related activities . adjustment to fair value of contingent consideration . an adjustment of $ 1.8 million was recorded during the year ended december 31 , 2018 which represents the net impact of the fair market value adjustments to the clarity consulting , inc. and truth labs , llc ( together , “ clarity ” ) and southport revenue and earnings-based contingent consideration liabilities based on favorable performance compared to the original estimates in addition to the accretion of the fair value estimate for the revenue and earnings-based contingent consideration related to the acquisitions of clarity , southport , stone temple and elixiter .
| software and hardware costs as a percentage of software and hardware revenues was 86.2 % for the year ended december 31 , 2017 and 87.2 % for the year ended december 31 , 2016. cost of services decreased 1 % to $ 290.5 million for the year ended december 31 , 2017 from $ 292.1 million for the year ended december 31 , 2016 . services costs as a percentage of services revenues 25 decreased to 65.0 % for the year ended december 31 , 2017 from 66.8 % for the year ended december 31 , 2016 primarily driven by improvements in the north american average bill rate and utilization , as well as a $ 1.0 million cost reduction related to labor incentives earned by the company 's louisiana and china operations . the average bill rate for our professionals decreased to $ 126 per hour for the year ended december 31 , 2017 from $ 127 per hour for the year ended december 31 , 2016 primarily due to the impact of a higher mix of lower bill rate offshore resources . selling , general and administrative . sg & a expenses increased 7 % to $ 108.2 million for the year ended december 31 , 2017 from $ 101.3 million for the year ended december 31 , 2016 primarily due to acquisitions completed during the first half of 2017 and the fluctuations in expenses as detailed in the following table . sg & a expenses , as a percentage of services revenues , increased to 24.2 % for the year ended december 31 , 2017 from 23.2 % for the year ended december 31 , 2016 . replace_table_token_6_th depreciation . depreciation expense decreased 3 % to $ 4.7 million for the year ended december 31 , 2017 from $ 4.9 million for the year ended december 31 , 2016 . the decrease in depreciation expense is primarily attributable to certain property and equipment becoming fully depreciated . depreciation expense as a percentage of total revenues was 1.0 % for each of the years ended december 31 , 2017 and 2016 . amortization . amortization expense increased
| 15,911 |
white mountains reported adjusted comprehensive income of $ 136 million in 2014 compared to adjusted comprehensive income of $ 340 million in 2013. the decrease was driven by $ 87 million of after-tax foreign currency exchange losses , $ 58 million of after-tax adverse prior year loss reserve development at onebeacon and lower investment returns . onebeacon 's book value per share increased 2.1 % during 2014 , including dividends , compared to an increase of 17.2 % during 2013 , including dividends . onebeacon 's gaap combined ratio was 102 % for 2014 compared to 92 % for 2013. onebeacon 's 2014 results reflect a $ 109 million pre-tax increase to loss reserves in the fourth quarter of 2014 , of which $ 75 million is related to prior accident years and $ 34 million related to the current accident year . full year 2014 results reflect a $ 90 million pre-tax increase to prior accident year reserves . the reserve increases were driven primarily by professional liability ( including lawyers ' professional liability ) and management liability within professional insurance , and to a lesser extent the entertainment and government risks businesses . in 2015 , professional insurance was reorganized into other professional lines , management liability , financial services and healthcare . onebeacon 's net written premiums increased 12 % to $ 1.2 billion in 2014 , primarily related to onebeacon 's newer businesses , particularly crop , programs and surety . sirius group 's gaap combined ratio was 76 % for 2014 compared to 82 % for 2013. the improvement in the combined ratio for 2014 was driven by lower catastrophe losses and higher favorable loss reserve development , partially offset by higher acquisition expenses . sirius group 's combined ratio includes 7 points of catastrophe losses in 2014 compared to 10 points in 2013 and includes 11 points of favorable loss reserve development in 2014 compared to 6 points in 2013. white mountains 's gaap pre-tax total return on invested assets was 1.9 % for 2014 , compared to 4.1 % for 2013 . 2014 included 1.9 % of foreign currency losses , while foreign currency translation did not meaningfully impact investment returns in 2013. in local currencies , the fixed income portfolio was up 2.7 % for 2014 , a decent absolute result for the year but behind the longer duration barclays intermediate aggregate index as interest rates fell . in local currencies , the fixed income portfolio was up 0.5 % for 2013. in local currencies , the equity portfolio ( common equity securities and other long-term investments ) was up 8.0 % for 2014 , a strong absolute result for the year but mixed against benchmarks , underperforming the s & p 500 and outperforming the small-cap russell 2000. in local currencies , the equity portfolio was up 19.0 % for 2013. during 2014 , white mountains completed the acquisitions of four insurance service businesses : ( i ) tranzact , a provider of end-to-end direct-to-consumer customer acquisition solutions to leading insurance carriers , ( ii ) mediaalpha , an advertising technology company that develops platforms for the buying and selling of insurance and other vertical-specific performance media , ( iii ) wobi , the only price comparison/aggregation business in israel , and ( iv ) star & shield , which includes the attorney-in-fact for ssie , a florida-domiciled reciprocal insurance exchange providing private passenger auto insurance to members of the public safety community and their families . in 2014 , white mountains deployed almost $ 400 million of capital , including approximately $ 235 million through the purchase of insurance service businesses and $ 134 million through share repurchases . adjusted book value per share the following table presents white mountains 's adjusted book value per share , a non-gaap financial measure , for the years ended december 31 , 2015 , 2014 and 2013 and reconciles this non-gaap measure to the most comparable gaap measure . ( see “ non-gaap financial measures ” on page 75 . ) replace_table_token_22_th ( 1 ) excludes stock options , which are anti-dilutive to book value . 43 the following table presents the estimated net gain from the sale of sirius group as of december 31 , 2015 : millions , except per share amounts assets held for sale $ 4,407.0 liabilities held for sale ( 2,884.0 ) net assets held for sale 1,523.0 assets to be contributed in exchange for december 31 , 2015 carrying value of symetra and other amounts to be retained by white mountains 702.8 assets to be contributed to reflect symetra at transaction value 3.7 ( 1 ) less : sig preference shares ( 250.0 ) total net assets 1,979.5 transaction multiple above total net assets 27.3 % 540.4 additional consideration 10.0 gain from the sale of sirius group 550.4 estimated compensation expense , transaction costs and other , net of applicable tax ( 80.0 ) net gain from the sale of sirius group $ 470.4 net gain from the sale of sirius group per share $ 84.02 ( 1 ) the is amount reflects the after-tax increase from the market value of symetra at december 31 , 2015 of $ 31.77 per share to the transaction value of symetra of $ 32.00 per share . the following table is a summary of goodwill and intangible assets that are included in white mountains 's adjusted book value as of december 31 , 2015 , 2014 and 2013 : replace_table_token_23_th ( 1 ) see note 6 - “ goodwill and other intangible assets ” for details of other intangible assets . 44 review of consolidated results a summary of white mountains 's consolidated financial results for the years ended december 31 , 2015 , 2014 and 2013 follows : replace_table_token_24_th ( 1 ) adjusted comprehensive income is a non-gaap measure . for a description of the most comparable gaap measure ( see non-gaap financial measures on page 75 ) . story_separator_special_tag 45 consolidated results—year ended december 31 , 2015 versus year ended december 31 , 2014 white mountains 's total revenues increased 24 % to $ 1.8 billion in 2015 , which was driven by the $ 259 million unrealized investment gain from symetra and increases in other revenues from the recently-acquired insurance service businesses . earned insurance premiums in 2015 were in line with 2014. net investment income increased 2 % to $ 61 million , as lower investment expenses were mostly offset by lower common stock dividends . white mountains reported net realized and unrealized investment gains of $ 225 million in 2015 , which included $ 259 million from symetra , compared to $ 79 million of gains in 2014. see “ story_separator_special_tag style= '' line-height:120 % ; text-indent:24px ; font-size:10pt ; '' > white mountains conducts its operations through three segments : ( 1 ) onebeacon , ( 2 ) hg global/bam and ( 3 ) other operations . while investment results are included in these segments , because white mountains manages the majority of its investments through its wholly-owned subsidiary , wm advisors , a discussion of white mountains 's consolidated investment operations is included after the discussion of operations by segment . white mountains 's segment information is presented in note 16 — “ segment information ” to the consolidated financial statements . as a result of the sirius group sale , the results of operations for sirius group have been classified as discontinued operations and are now presented separately , net of related income taxes , in the statement of comprehensive income . prior year amounts have been reclassified to conform to the current period 's presentation ( see note 22 - “ discontinued operations ” . ) onebeacon financial results and gaap combined ratios for onebeacon for the years ended december 31 , 2015 , 2014 and 2013 follow : replace_table_token_25_th 47 the following table presents onebeacon 's book value per share . replace_table_token_26_th onebeacon results—year ended december 31 , 2015 versus year ended december 31 , 2014 onebeacon ended 2015 with a book value per share of $ 10.53 , an increase of 3.8 % during 2015 , including dividends , compared to an increase of 2.1 % during 2014 , including dividends . improved underwriting results drove the increase in onebeacon 's book value per share growth for 2015. onebeacon 's gaap combined ratio decreased to 96 % for 2015 from 102 % for 2014. the decrease was primarily driven by a 9 point decrease in the loss ratio from non-recurrence of adverse prior accident year loss reserve development in 2015 , partially offset by an increase in the expense ratio and the impact of increasingly competitive markets on the current year accident loss ratio . there was no net loss reserve development in 2015 , primarily attributable to favorable net loss reserve development from the technology , collector cars and boats , specialty property and financial services lines of business , offset by unfavorable net loss reserve development from the entertainment and ocean marine lines of business . in 2014 , there was $ 90 million , or 8 points , of unfavorable net prior accident year adverse loss reserve development ( described below in “ 2014 fourth quarter loss and lae reserve increase . ” ) . the increase in the expense ratio for 2015 was primarily due to higher incentive compensation expense , higher acquisition costs due to changes in business mix and the impact of exiting the crop business . during 2015 , onebeacon recognized a loss of $ 4 million in other revenues in connection with an assessment from the michigan catastrophic claims association payable to markel corporation pursuant to the indemnification provisions in the stock purchase agreement governing the sale of essentia . onebeacon previously recognized a pretax gain of $ 23 million in 2013 on its sale of essentia , an indirect wholly-owned subsidiary which wrote legacy collector cars and boats business , to markel corporation . onebeacon 's net written premiums decreased 7 % in 2015 to $ 1.1 billion , primarily due to the exit from crop ( $ 44 million ) and lawyers liability ( $ 28 million ) businesses , a decrease in the healthcare business ( $ 33 million ) and the termination of an affiliated reinsurance treaty ( $ 20 million ) , partially offset by increases in onebeacon 's newer programs and surety businesses ( $ 67 million ) . excluding the impact of onebeacon 's exit from the crop and lawyers liability businesses and the affiliated reinsurance treaty termination , consolidated net written premiums increased $ 13 million , or 1.1 % . reinsurance protection . onebeacon purchases reinsurance in order to minimize the loss from large risks or catastrophic events . onebeacon also purchases individual property reinsurance coverage for certain risks to reduce large loss volatility through property-per-risk excess of loss reinsurance programs and individual risk facultative reinsurance . onebeacon also maintains excess of loss casualty reinsurance programs that provide protection for individual risk or catastrophe losses involving workers compensation , general liability , automobile liability , professional liability or umbrella liability . the availability and cost of reinsurance protection is subject to market conditions , which are outside of management 's control . limiting risk of loss through reinsurance arrangements serves to mitigate the impact of large losses ; however , the cost of this protection in an individual period may exceed the benefit . for 2015 and 2014 , onebeacon 's net combined ratio was higher than the gross combined ratio by 1 point and 2 points as a result of the cost of the reinsurance programs more than offsetting the benefits from ceded losses . 48 onebeacon results—year ended december 31 , 2014 versus year ended december 31 , 2013 onebeacon ended 2014 with a book value per share of $ 10.97 , an increase of 2.1 % during 2014 , including dividends , compared to an increase of 17.2 % during 2013 , including dividends .
| general and administrative expenses in 2015 included $ 167 million from tranzact and $ 99 million from mediaalpha compared to $ 37 million from tranzact and $ 61 million from mediaalpha in 2014. consolidated results—year ended december 31 , 2014 versus year ended december 31 , 2013 white mountains 's total revenues increased 7 % to $ 1.5 billion in 2014 , which was driven by other revenues from the newly-acquired insurance services businesses , offset by a decrease in net unrealized gains from the investment portfolio . earned insurance premiums increased 6 % , driven by an increase from onebeacon 's newer businesses , particularly onebeacon crop insurance , onebeacon program group and onebeacon surety group . net investment income was in line with 2013 while net realized and unrealized investment gains decreased to $ 79 million in 2014 from $ 134 million in 2013. see “ summary of investment results ” on page 58 for a discussion and analysis of white mountains 's investment returns . other revenue increased to $ 131 million in 2014 from $ 47 million in 2013. other revenue in 2014 included $ 65 million from mediaalpha and $ 43 million from tranzact . other revenue in 2013 included transaction gains of $ 27 million , composed of a $ 23 million gain on onebeacon 's sale of essentia and a $ 4 million gain from the extension of the transition service agreement for services provided by onebeacon on business sold to tower in the personal lines transaction in 2010. in addition , 2013 included $ 11 million of mark-to-market gains on the symetra warrants , which were exercised in june 2013. other revenue included $ 4 million of wm life re 's losses in 2014 compared to $ 13 million of wm life re 's losses in 2013. see note 9 — “ derivatives ” for details regarding wm life re 's total impact on white mountains 's statement of operations . other revenues in 2014 also included third-party investment management fee income at wm advisors of $ 17 million , compared to $ 16 million in 2013. white mountains 's total expenses
| 15,912 |
also included are professional service fees related to audit and tax , legal , outsourced information technology functions , transportation planning , headquarters and other office sites and insurance costs , as well as the depreciation and amortization of corporate assets . non-controlling interest during the years ended december 31 , 2020 and 2019 , mr. metropoulos and the metropoulos entities held equity investment in us primarily through class b limited partnership units in the company 's subsidiary , hostess holdings ( “ class b units ” ) , and an equal number of shares of the company 's class b common stock ( “ class b stock ” ) . our class b stock had voting , but no economic rights , while hostess holdings ' class b units had economic , but no voting rights . each class b unit , together with a share of class b stock held by the metropoulos entities , was exchangeable for a share of the company 's class a common stock ( or at the option of the company , the cash equivalent thereof ) . the company holds 100 % of the general partnership interest in hostess holdings and , since the final exchange described below , all of the limited partnership interests and consolidates hostess holdings in the company 's consolidated financial statements . the interest of the metropoulos entities in hostess holdings ' class b units prior to the final exchange is reflected in our consolidated financial statements as a non-controlling interest . the metropoulos entities have eliminated their ownership through a series of exchanges of shares of class b stock and class b units for an equal number of class a shares . as part of the final exchange , we repurchased 0.4 million shares of class a common stock from the metropoulos entities . the remaining shares were purchased by third parties . at december 31 , 2020 , there were no outstanding shares of class b common stock . factors impacting recent results covid-19 the acute and far-reaching impact of the covid-19 pandemic and actions taken by governments to contain the spread of the virus have impacted our operations during the year ended december 31 , 2020. as consumers prepared for extended stays at home , we experienced an increase in consumption during the first and second quarters , particularly in our multi-pack products sold through grocery and mass retailer channels . conversely , we experienced lower consumption of single-serve products , often consumed away from home . this trend has moderated during the remainder of the year ; however , we can not predict if these trends will sustain or reverse in future periods . we have established a covid-19 task force to monitor the rapidly evolving situation and recommend risk mitigation actions as deemed necessary . to date , we have experienced minimal disruption to our supply chain or distribution network , including the supply of our ingredients , and packaging or other sourced materials , though it is possible that more significant disruptions could occur if the covid-19 pandemic continues to impact markets around the world . we are also working closely with all of our contract manufacturers , distributors and other external business partners . as a food producer , we are an essential service and our production and distribution facilities continue to operate . to protect our employees and ensure continuity of operations , we have implemented additional safety and sanitation measures in all of our facilities . we are monitoring our employees ' health and providing additional resources and protocols to enable effective social distancing and adherence to our stringent internal food safety guidelines , industry best practices and evolving cdc and other governmental guidelines . although our corporate headquarters and other offices have remained open with additional safety and sanitation protocols , many non-production and warehouse team members , including sales , marketing and corporate employees , are adhering to social distancing guidelines by working from home and reducing person-to-person contact while supporting our ability to bring products to consumers . 30 we have adequate liquidity to pay for the costs associated with these additional measures while servicing our on-going operating and capital needs . however , we continue to actively monitor and will take action , as necessary , to preserve adequate liquidity and ensure that our business can continue to operate in this dynamic environment . on march 27 , 2020 , the coronavirus aid , relief , and economic security ( “ cares ” ) act was signed into law . the cares act provided a substantial stimulus and assistance package intended to address the impact of the covid-19 pandemic , including tax relief and government loans , grants and investments . under the provisions of this act , we were able to defer the payment of $ 5.6 million of 2020 employer payroll taxes until 2021. apart from this deferral and their impact on the general economy , including the labor market and consumer demand , neither the cares act nor any other government program intended to address covid-19 had any material impact on our consolidated financial statements for the year ended december 31 , 2020. we continue to monitor any effects that may result from the cares act and other stimulus programs . acquisition on january 3 , 2020 , we completed the acquisition of all of the shares of the parent company of voortman cookies limited ( “ voortman ” ) , a manufacturer of premium , branded wafers and cookies as well as sugar-free products . by adding the voortman® brand , we believe we have greater growth opportunities provided by a more diverse portfolio of brands and products . story_separator_special_tag our consolidated statement of operations includes the operation of these assets from january 3 , 2020 through december 31 , 2020. in december 2020 , we asserted claims for indemnification against the sellers under the terms of the share purchase agreement pursuant to which we acquired voortman for an aggregate of approximately $ 90 million canadian dollar ( “ cad ” ) in damages arising out of alleged breaches by the sellers of certain representations , warranties and covenants contained in such agreement relating to periods prior to the closing of the acquisition . we have also submitted claims relating to these alleged breaches under the representation and warranty insurance policy we purchased in connection with the acquisition . such insurance policy has a coverage limit of $ 42.5 million cad . although we strongly believe that our claims are meritorious , no assurance can be given as to whether we will recover all , or any part , of the amounts for which we have made such claims . no gains or receivables have been recognized related to these claims as of december 31 , 2020. disposition on august 30 , 2019 , we sold the in-store bakery operations , including relevant trademarks and licensing agreements , to an unrelated party . the in-store bakery operations provided products that were primarily sold in the in-store bakery section of the u.s. retail channels under the superior on main® brand or store-branded . we divested the operations to focus more on future investment in areas of our business that better leverage our core competencies . 31 story_separator_special_tag roman ' , sans-serif ; font-size:10pt ; font-style : italic ; font-weight:700 ; line-height:120 % '' > segments we have one reportable segment : snacking ( formerly referred to as sweet baked goods , or “ sbg ” ) . the snacking segment consists of sweet baked goods , cookies , bread and buns retail products that are sold under the hostess® , dolly madison® , cloverhill® , big texas® , and voortman® brands . through august 30 , 2019 , we operated in two reportable segments : sbg and in-store bakery . the in-store bakery segment consisted of superior on main® and private label products sold through the in-store bakery section of grocery and club stores . the company divested its in-store bakery segment 's operations on august 30 , 2019. we evaluate performance and allocate resources based on net revenue and gross profit . information regarding the operations of these reportable segments is as follows : replace_table_token_4_th ( 1 ) for all periods presented , capital expenditures consists of purchases of property and equipment and acquisition and development of software assets paid in cash or acquired through accounts payable . 33 reconciliation of non-gaap financial measures adjusted net revenue , adjusted gross profit , adjusted operating income , adjusted net income , adjusted class a net income , adjusted ebitda and adjusted eps collectively referred to as “ non-gaap financial measures , ” are commonly used in our industry and should not be construed as an alternative to net revenue , gross profit , operating income , net income , net income attributed to class a stockholders or earnings per share as indicators of operating performance ( as determined in accordance with gaap ) . these non-gaap financial measures may not be comparable to similarly titled measures reported by other companies . we included these non-gaap financial measures because we believe the measures provide management and investors with additional information to measure the company 's performance , estimate the company 's value and evaluate the company 's ability to service debt . non-gaap financial measures are adjusted to exclude certain items that affect comparability . the adjustments are itemized in the tables below . you are encouraged to evaluate these adjustments and the reason we consider them appropriate for supplemental analysis . in evaluating adjustments , you should be aware that in the future the company may incur expenses that are the same as or similar to some of the adjustments set forth below . the presentation of non-gaap financial measures should not be construed as an inference that future results will be unaffected by unusual or recurring items . for example , we define adjusted ebitda as net income adjusted to exclude ( i ) interest expense , net , ( ii ) depreciation and amortization ( iii ) income taxes and ( iv ) share-based compensation , as further adjusted to eliminate the impact of certain items that the company does not consider indicative of its ongoing operating performance . adjusted ebitda has limitations as an analytical tool , and you should not consider it in isolation , or as a substitute for analysis of the company 's results as reported under gaap . for example , adjusted ebitda : does not reflect the company 's capital expenditures , future requirements for capital expenditures or contractual commitments ; does not reflect changes in , or cash requirements for , the company 's working capital needs ; does not reflect the significant interest expense , or the cash requirements necessary to service interest or principal payments , on the company 's debt ; and does not reflect payments related to income taxes , the tax receivable agreement or distributions to the non-controlling interest to reimburse its tax liability . 34 replace_table_token_5_th ( 1 ) adjustments to net revenue represent initial slotting fees paid to to customers to obtain space in customer warehouses for the voortman transition . adjustments to operating costs included $ 8.0 million of selling expense , $ 8.9 million of general and administrative expenses and $ 4.3 million of business combination transaction costs on the consolidated statement of operations . ( 2 ) facility transition operating costs are included in general and administrative expenses on the consolidated statement of operations . ( 3 ) covid-19 operating costs are included in general and administrative expenses on the consolidated statement of operations .
| 2019 operating costs reflect a $ 7.1 million gain on the valuation of a foreign currency contract originated to hedge the january 2020 purchase of voortman in canadian dollars . operating income operating income for the year ended december 31 , 2020 was $ 135.3 million compared to $ 136.1 million for the year ended december 31 , 2019. the additional profits from voortman 's operations and higher hostess® branded sales volume were offset by transition costs to shift voortman to a warehouse model and lapping the prior year gain on remeasurement of the foreign currency contract . 32 other expense for the years ended december 31 , 2020 and 2019 , interest expense related to our term loan was $ 41.8 million and $ 43.3 million , respectively . during the year ended december 31 , 2020 we also recognized unrealized losses related to the remeasurement of certain cad denominated liabilities . income taxes our effective tax rate was 23.0 % for the year ended december 31 , 2020 compared to 17.9 % for the year ended december 31 , 2019. the increase in the effective tax rate was primarily due to the class b for class a share exchanges during 2019 and 2020. subsequent to these exchanges , more income from hostess holdings , l.p was allocated to hostess brands , inc. this increase was partially offset by state tax credits generated in 2020. net income for the year ended december 31 , 2020 , net income was $ 68.4 million compared to $ 77.6 million for the year ended december 31 , 2019 . higher gross margin due to the accretion of voortman and the benefit of higher hostess ® branded sales volume was offset by costs incurred to transition voortman dsd to warehouse distribution . in 2020 , we also lapped the $ 7.1 million foreign currency contract remeasurement gain in 2019. earnings per share our earnings per class a share was $ 0.52 ( basic ) and $ 0.51 ( dilutive ) for the year ended december 31 , 2020 ,
| 15,913 |
the company has three wholly owned subsidiaries : tristate capital bank ( the “ bank ” ) , a pennsylvania chartered bank ; chartwell investment partners , llc ( “ chartwell ” ) , an sec registered investment advisor ; and chartwell tsc securities corp. ( “ ctsc securities ” ) , a registered broker/dealer with the sec and finra . through our bank subsidiary , we serve middle-market businesses in our primary markets throughout the states of pennsylvania , ohio , new jersey and new york . we also serve high-net-worth individuals on a national basis through our private banking channel . we market and distribute our products and services through a scalable , branchless banking model , which creates significant operating leverage throughout our business as we continue to grow . through our investment management subsidiary , we provide investment management services primarily to institutional investors , mutual funds and individual investors on a national basis . assets under management were $ 8.31 billion as of december 31 , 2017 . our broker/dealer subsidiary supports marketing efforts for chartwell 's proprietary investment products that require sec or finra licensing . 2017 compared to 2016 operating performance for the year ended december 31 , 2017 , our net income was $ 38.0 million compared to $ 28.6 million for the same period in 2016 , an increase of $ 9.3 million , or 32.6 % . this increase was primarily due to the net impact of ( 1 ) a $ 16.5 million , or 22.1 % , increase in our net interest income due largely to our continued loan growth ; ( 2 ) a decrease in provision for loan losses of $ 1.5 million ; ( 3 ) an increase of $ 458,000 in non-interest income largely related to higher swap revenue ; and ( 4 ) a $ 3.6 million decrease in income taxes largely due to the enactment of the tax cuts and jobs act in december 2017 ; partially offset by ( 5 ) an increase of $ 12.7 million in our non-interest expense largely due to a full year of expenses related to the tkg acquisition as well as higher compensation and fdic insurance expenses ; our diluted eps was $ 1.32 for the year ended december 31 , 2017 , compared to $ 1.01 for the same period in 2016 . the increase is a result of an increase of $ 9.3 million , or 32.6 % , in our net income in 2017 which included a $ 2.4 million , or $ 0.08 per diluted share , one-time tax adjustment as a result of the enactment of the tax cuts and jobs act in december 2017. for the year ended december 31 , 2017 , total revenue increased $ 16.8 million , or 13.8 % , to $ 138.0 million from $ 121.2 million for the same period in 2016 , driven by higher net interest income and swap fees . our net interest margin was 2.25 % for the year ended december 31 , 2017 , as compared to 2.23 % for the same period in 2016 . the increase in net interest margin for the year ended december 31 , 2017 , was driven by an increase in the yield on loans offset by an increase in the cost of funds . for the year ended december 31 , 2017 , the bank 's efficiency ratio was 57.39 % , as compared to 61.17 % for the same period in 2016 , primarily as a result of higher total revenue partially offset by higher compensation and fdic insurance expenses for the bank during the year ended december 31 , 2017 . our non-interest expense to average assets for the year ended december 31 , 2017 , was 2.15 % , compared to 2.23 % for the same period in 2016 . 49 our return on average assets was 0.89 % for the year ended december 31 , 2017 , as compared to 0.81 % for the same period in 2016 . our return on average equity was 10.30 % for the year ended december 31 , 2017 , as compared to 8.48 % for the same period in 2016 . the increase in these ratios is due to continued growth in earnings . total assets of $ 4.78 billion as of december 31 , 2017 , increased $ 847.4 million , or 21.6 % , from december 31 , 2016 . loans held-for-investment grew by $ 783.2 million to $ 4.18 billion as of december 31 , 2017 , an increase of 23.0 % from december 31 , 2016 , as a result of growth in both our commercial and private banking loan portfolios . total deposits increased $ 700.8 million , or 21.3 % , to $ 3.99 billion as of december 31 , 2017 , from $ 3.29 billion , as of december 31 , 2016 . adverse-rated credits to total loans declined to 0.71 % at december 31 , 2017 , from 1.25 % at december 31 , 2016 . the allowance for loan losses to loans decreased to 0.34 % as of december 31 , 2017 , from 0.55 % as of december 31 , 2016 . the trend of our allowance for loan losses reflects the change in composition of our loan portfolio over recent years with a continued decrease in adverse-rated credits and a much larger percentage of the portfolio in loans secured by marketable securities . our book value per common share increased $ 1.23 , or 9.9 % , to $ 13.61 as of december 31 , 2017 , from $ 12.38 as of december 31 , 2016 , largely as a result of an increase in our net income , partially offset by the issuance of restricted stock and the purchase of treasury shares during year ended december 31 , 2017 . story_separator_special_tag 2016 compared to 2015 operating performance for the year ended december 31 , 2016 , our net income was $ 28.6 million compared to $ 22.5 million for the same period in 2015 , an increase of $ 6.2 million , or 27.4 % . this increase was primarily due to the net impact of ( 1 ) a $ 6.9 million , or 10.1 % , increase in our net interest income due largely to our continued loan growth ; and ( 2 ) an increase of $ 11.0 million in non-interest income largely related to higher investment management fees due to the tkg acquisition and higher swap revenue ; partially offset by ( 3 ) an increase in provision for loan losses of $ 825,000 ; ( 4 ) an increase of $ 8.8 million in our non-interest expense largely related to the tkg acquisition as well as higher compensation and fdic insurance expenses ; and ( 5 ) a $ 2.2 million increase in income taxes due to higher pre-tax income . our diluted eps was $ 1.01 for the year ended december 31 , 2016 , compared to $ 0.80 for the same period in 2015 . the increase is a result of an increase of $ 6.2 million , or 27.4 % , in our net income . for the year ended december 31 , 2016 , total revenue increased $ 17.8 million , or 17.3 % , to $ 121.2 million from $ 103.4 million for the same period in 2015 , driven by higher net interest income for the bank , higher investment management fees and higher swap fees . our net interest margin was 2.23 % for the year ended december 31 , 2016 , as compared to 2.36 % for the same period in 2015 . the most significant factor driving net interest margin compression was our shift toward lower-risk assets , notably the marketable-securities-backed private banking margin loan portfolio , as well as an increase in the cost of funds . for the year ended december 31 , 2016 , the bank 's efficiency ratio was 61.17 % , as compared to 62.30 % for the same period in 2015 , primarily as a result of higher total revenue partially offset by higher compensation and fdic insurance expenses for the bank during the year ended december 31 , 2016 . our non-interest expense to average assets for the year ended december 31 , 2016 , was 2.23 % , compared to 2.32 % for the same period in 2015 . our return on average assets was 0.81 % for the year ended december 31 , 2016 , as compared to 0.74 % for the same period in 2015 . our return on average equity was 8.48 % for the year ended december 31 , 2016 , as compared to 7.13 % for the same period in 2015 . the increase in these ratios is due to growth in earnings from both the banking and investment management segments . total assets of $ 3.93 billion as of december 31 , 2016 , increased $ 628.3 million , or 19.0 % , from december 31 , 2015 . loans held-for-investment grew by $ 559.8 million to $ 3.40 billion as of december 31 , 2016 , an increase of 19.7 % from december 31 , 2015 , as a result of growth in our commercial and private banking loan portfolios . total deposits increased $ 596.9 million , or 22.2 % , to $ 3.29 billion as of december 31 , 2016 , from $ 2.69 billion , as of december 31 , 2015 . adverse-rated credits to total loans declined to 1.25 % at december 31 , 2016 , from 1.92 % at december 31 , 2015. the allowance for loan losses to loans decreased to 0.55 % as of december 31 , 2016 , from 0.63 % as of december 31 , 2015. the trend of our allowance for loan losses reflects the change in composition of our loan portfolio over recent years with a decrease in adverse-rated credits and a much larger percentage of the portfolio in loans secured by marketable securities . our book value per common share increased $ 0.76 , or 6.5 % , to $ 12.38 as of december 31 , 2016 , from $ 11.62 as of december 31 , 2015 , largely as a result of an increase in our net income , partially offset by the issuance of restricted stock and the cancellation of stock options during year ended december 31 , 2016 . 50 story_separator_special_tag style= '' font-family : inherit ; font-size:10pt ; color : # 231f20 ; '' > , from $ 68.2 million for the same period in 2015 . the increase in net interest income for the year ended december 31 , 2016 , was primarily attributable to a $ 479.1 million , or 16.6 % , increase in average interest-earning assets driven largely by loan growth . the increase in net interest income reflects an increase of $ 14.7 million , or 17.6 % , in interest income , partially offset by an increase of $ 7.9 million , or 50.2 % , in interest expense . net interest margin decreased to 2.23 % for the year ended december 31 , 2016 , as compared to 2.36 % for the same period in 2015 , driven primarily by an overall lower yield on the loan portfolio and higher interest expense associated with the higher deposit volumes and associated costs of deposits as well as increased fhlb borrowings . the increase in interest income was primarily the result of an increase in average total loans of $ 444.4 million , or 17.3 % , which is our primary earning asset and the bank 's core business , as well as higher average balances and yields on investment securities , partially offset by a decrease of two basis points in yield on our loans .
| net interest income , calculated on a fully taxable equivalent basis , increased $ 16.5 million , or 22.0 % , to $ 91.6 million for the year ended december 31 , 2017 , from $ 75.1 million for the same period in 2016 . the increase in net interest income for the year ended december 31 , 2017 , was primarily attributable to a $ 700.5 million , or 52 20.8 % , increase in average interest-earning assets driven primarily by loan growth . the increase in net interest income reflects an increase of $ 36.0 million , or 36.5 % , in interest income , partially offset by an increase of $ 19.4 million , or 82.7 % , in interest expense . net interest margin increased to 2.25 % for the year ended december 31 , 2017 , as compared to 2.23 % for the same period in 2016 , driven primarily by a higher yield on the loan portfolio , partially offset by higher interest expense associated with the higher volumes and costs of deposits and fhlb borrowings . the increase in interest income on interest-earning assets was primarily the result of an increase in average total loans of $ 697.1 million , or 23.1 % , which is our primary earning asset and the bank 's core business , and an increase of 35 basis points in yield on our loans . the most significant factors driving the yield on our loan portfolio was the effect of the federal reserve 's increases in the target federal funds rate on our floating-rate loans , partially offset by the shift toward lower-risk marketable-securities-backed private banking loans . the overall yield on interest-earning assets increased 38 basis points to 3.30 % for the year ended december 31 , 2017 , as compared to 2.92 % for the same period in 2016 , primarily from higher loan yields . the increase in interest expense on interest-bearing liabilities was primarily the result of an increase of 39 basis points in the average rate paid on our average interest-bearing
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on may 8 , 2020 , the company entered into a sales agreement related to an at-the-market equity offering program pursuant to which the company may sell , from time to time , common stock with an aggregate offering price of up to $ 40 million through a.g.p./alliance global partners , as sales agent , for general corporate purposes . on july 30 , 2020 , the company entered into a purchase agreement with lincoln park capital fund , llc ( “ lincoln park ” ) . over the 36-month term of the purchase agreement , the company has the right , but not the obligation , from time to time , in its sole discretion and subject to certain conditions , to direct lincoln park to purchase up to an aggregate amount of $ 20,000,000 of its common stock , subject to certain limitations . due to the current state of the company 's stock price and general market conditions , these programs have not been utilized to their fullest extent , thereby resulting in lower capital availability than anticipated . management 's plans to mitigate an expected shortfall of capital and to support future operations include obtaining additional funds through partnerships or strategic or financing investors . cash flows operating activities net cash used in operating activities was approximately $ 21.9 million for the fiscal year ended october 31 , 2020 compared to $ 36.1 million for the fiscal year ended october 31 , 2019. net cash used in operating activities includes reduced spending associated with our clinical trial programs and general and administrative activities . the decrease was due to measures to control costs for non-essential items in areas that did not support our strategic direction , and as a result , we have continued to reduce non-strategic operating expenditures over the past several quarters . investing activities net cash used in investing activities was approximately $ 0.7 million for the fiscal year ended october 31 , 2020 compared to $ 1.2 million for the nine months ended july 31 , 2019. the reduction is a result of the abandonment of certain non-strategic intellectual property . financing activities net cash provided by financing activities was approximately $ 15.5 million for the fiscal year ended october 31 , 2020 as compared to $ 24.6 million for the fiscal year ended october 31 , 2019. in january 2020 , we completed a public offering of 10,000,000 shares of our common stock , which resulted in net proceeds of approximately $ 9.7 million . additionally , during the year end october 31 , 2020 , we sold 2,489,104 shares under the atm program for net proceeds of $ 1.531 million , and we sold 11,242,048 shares of common stock under the lincoln park purchase agreement for net proceeds of approximately $ 5.1 million . in fiscal year 2019 , we received net proceeds of approximately $ 24.5 million from the sales of 13,150,000 shares of our common stock and 13,656,000 pre-funded warrants in public offerings . on november 27 , 2020 , the company completed an underwritten public offering of 26,666,666 shares of common stock and common stock warrants to purchase up to 13,333,333 shares of common stock ( the “ november 2020 offering ” ) . on november 24 , 2020 , the underwriters notified us that they had exercised their option to purchase an additional 3,999,999 shares of common stock and 1,999,999 warrants in full . after giving effect to the full exercise of the underwriters ' option , we issued and sold an aggregate 30,666,665 shares of common stock and warrants to purchase up to 15,333,332 shares of common stock pursuant to our existing shelf registration statement on form s-3 ( file no . 333-226988 ) . we received gross proceeds of approximately $ 9.2 million , before deducting the underwriting discounts and commissions and fees and expenses payable by us in connection with the november 2020 offering . 51 off-balance sheet arrangements as of october 31 , 2020 , we had no off-balance sheet arrangements . critical accounting policies revenue recognition effective november 1 , 2018 , the company adopted asc topic 606 , revenue form contracts with customers ( asc 606 ) , using the modified retrospective transition method . under this method , results for reporting periods beginning on november 1 , 2018 are presented under asc 606 , while prior period amounts are not adjusted and continue to be reported in accordance with asc topic 605 , revenue recognition ( asc 605 ) . the company only applied the modified retrospective transition method to contracts that were not completed as of november 1 , 2018 , the effective date of adoption for asc 606. this standard applies to all contracts with customers , except for contracts that are within the scope of other standards . under asc 606 , an entity recognizes revenue when its customer obtains control of promised goods or services , in an amount that reflects the consideration which the entity expects to receive in exchange for those goods or services . to determine revenue recognition for arrangements that an entity determines are within the scope of asc 606 , the entity performs the following five steps : ( i ) identify the contract ( s ) with a customer ; ( ii ) identify the performance obligations in the contract ; ( iii ) determine the transaction price ; ( iv ) allocate the transaction price to the performance obligations in the contract ; and ( v ) recognize revenue when ( or as ) the entity satisfies a performance obligation . the company only applies the five-step model to contracts when it is probable that the entity will collect the consideration it is entitled to in exchange for the goods or services it transfers to the customer . story_separator_special_tag at contract inception , once the contract is determined to be within the scope of asc 606 , the company assesses the goods or services promised within each contract , determines those that are performance obligations and assesses whether each promised good or service is distinct . the company then recognizes as revenue the amount of the transaction price that is allocated to the respective performance obligation when ( or as ) the performance obligation is satisfied . the company enters into licensing agreements that are within the scope of asc 606 , under which it may exclusively license rights to research , develop , manufacture and commercialize its product candidates to third parties . the terms of these arrangements typically include payment to the company of one or more of the following : non-refundable , upfront license fees ; reimbursement of certain costs ; customer option exercise fees ; development , regulatory and commercial milestone payments ; and royalties on net sales of licensed products . in determining the appropriate amount of revenue to be recognized as it fulfills its obligations under its agreements , the company performs the following steps : ( i ) identification of the promised goods or services in the contract ; ( ii ) determination of whether the promised goods or services are performance obligations including whether they are distinct in the context of the contract ; ( iii ) measurement of the transaction price , including the constraint on variable consideration ; ( iv ) allocation of the transaction price to the performance obligations ; and ( v ) recognition of revenue when ( or as ) the company satisfies each performance obligation . as part of the accounting for these arrangements , the company must use significant judgment to determine : ( a ) the number of performance obligations based on the determination under step ( ii ) above ; ( b ) the transaction price under step ( iii ) above ; and ( c ) the stand-alone selling price for each performance obligation identified in the contract for the allocation of transaction price in step ( iv ) above . the company uses judgment to determine whether milestones or other variable consideration , except for royalties , should be included in the transaction price as described further below . the transaction price is allocated to each performance obligation on a relative stand-alone selling price basis , for which the company recognizes revenue as or when the performance obligations under the contract are satisfied . 52 amounts received prior to revenue recognition are recorded as deferred revenue . amounts expected to be recognized as revenue within the 12 months following the balance sheet date are classified as current portion of deferred revenue in the accompanying balance sheets . amounts not expected to be recognized as revenue within the 12 months following the balance sheet date are classified as deferred revenue , net of current portion . exclusive licenses . if the license to the company 's intellectual property is determined to be distinct from the other performance obligations identified in the arrangement , the company recognizes revenue from non-refundable , upfront fees allocated to the license when the license is transferred to the customer and the customer is able to use and benefit from the license . in assessing whether a performance obligation is distinct from the other performance obligations , the company considers factors such as the research , development , manufacturing and commercialization capabilities of the collaboration partner and the availability of the associated expertise in the general marketplace . in addition , the company considers whether the collaboration partner can benefit from a performance obligation for its intended purpose without the receipt of the remaining performance obligation , whether the value of the performance obligation is dependent on the unsatisfied performance obligation , whether there are other vendors that could provide the remaining performance obligation , and whether it is separately identifiable from the remaining performance obligation . for licenses that are combined with other performance obligation , the company utilizes judgment to assess the nature of the combined performance obligation to determine whether the combined performance obligation is satisfied over time or at a point in time and , if over time , the appropriate method of measuring progress for purposes of recognizing revenue . the company evaluates the measure of progress each reporting period and , if necessary , adjusts the measure of performance and related revenue recognition . the measure of progress , and thereby periods over which revenue should be recognized , are subject to estimates by management and may change over the course of the research and development and licensing agreement . such a change could have a material impact on the amount of revenue the company records in future periods . research and development services . the performance obligations under the company 's collaboration agreements may include research and development services to be performed by the company on behalf of the partner . payments or reimbursements resulting from the company 's research and development efforts are recognized as the services are performed and presented on a gross basis because the company is the principal for such efforts . milestone payments . at the inception of each arrangement that includes research or development milestone payments , the company evaluates whether the milestones are considered probable of being achieved and estimates the amount to be included in the transaction price using the most likely amount method . if it is probable that a significant revenue reversal would not occur , the associated milestone value is included in the transaction price . an output method is generally used to measure progress toward complete satisfaction of a milestone . milestone payments that are not within the control of the company or the licensee , such as regulatory approvals , are not considered probable of being achieved until those approvals are received .
| while we are currently winding down clinical studies of lm technology immunotherapies in these three program areas , our license agreements continue with os therapies , llc for adxs-her2 and with global biopharma , or gbp , for the exclusive license for the development and commercialization of axal in asia , africa , and the former ussr territory , exclusive of india and certain other countries . results of operations for the fiscal year ended october 31 , 2020 compared to the fiscal year ended october 31 , 2019 revenue revenue decreased $ 20.6 million to $ 0.3 million for the fiscal year ended october 31 , 2020 compared to $ 20.9 million for the fiscal year ended october 31 , 2019. the decrease was due to the fact that the company did not have another large collaboration in current year after the amgen agreement was terminated . on december 10 , 2018 , we received a written notice of termination from amgen with respect to the global agreement with amgen ( the “ amgen agreement ” ) . the termination was effective as of february 8 , 2019. as of the notification date , we adjusted revenue on a cumulative catch-up basis considering the revised measure of progress for the combined performance obligation based on the modified service period up to and through the contract termination date of february 8 , 2019 resulting in total revenue of $ 18.7 million in the prior period . in addition , the reimbursement of research and development costs of approximately $ 2.0 million by amgen was included in revenue in the prior period . research and development expenses we invest in research and development to advance our lm technology through our preclinical and clinical development programs . research and development expenses for the years ended october 31 , 2020 and 2019 were categorized as follows ( in thousands ) : replace_table_token_0_th 48 hotspot/off-the-shelf therapies ( adxs-hot ) research and development costs associated with our hotspot mutation-based therapy for the fiscal year ended october 31 , 2020 increased approximately 9 % to $ 3.5 million compared to the same period in 2019. the increase is attributable to the costs associated with
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we generally invoice the greater of the minimum fee or the percentage of advertising spend on our platform . the implementation process for new advertisers is typically four to six weeks ; however , we generally do not charge a separate implementation fee under our subscription contracts . the majority of our revenues are derived from our customers in the united states . customers from outside of the united states represented 32 % , 27 % and 26 % of total revenues for 2013 , 2012 and 2011 , respectively . key metrics we regularly review a number of metrics to evaluate growth trends , measure our performance , establish budgets and make strategic decisions . our selected key metrics include revenue , gross margin , operating expenses , active advertisers , annualized advertising spend on our platform and revenue retention rate . we discuss revenue , gross margin and operating expenses below under components of results of operations. we monitor our key metrics to measure our success . our revenues are generally based on the amount of advertising spend our customers manage on our platform in a period . as a result , revenues are an important metric to understanding the overall health of our business , and we use revenue trends to formulate financial projections and make strategic business decisions . number of active advertisers we define an active advertiser as an advertiser from whom we recognized revenues in excess of $ 2,000 in at least one month in a period . we believe the $ 2,000 threshold best identifies advertisers who are actively using our platform . we focus on revenue in at least one month in a period to account for seasonality in advertising spend by our customers , some of whom may not run digital advertising campaigns in every month of a year but still represent an active advertiser on our platform . we count organizations within the same corporate structure as one advertiser , even if they have signed separate contracts with us for different brands or divisions , whether they are a direct advertiser or an advertiser through an agency . when our subscription contract is with an advertising agency , we include each advertiser whose advertising spend is managed by the agency through our platform as a different advertiser . advertisers who have advertising spend managed by multiple agencies on our platform are counted as one advertiser . we believe that our ability to increase the number of active advertisers using our platform is a leading indicator of our ability to grow revenues . we had 673 , 531 and 390 active advertisers in the quarters ending december 31 , 2013 , 2012 and 2011 , respectively . while our active advertiser count has increased over time , this metric can also fluctuate from quarter to quarter due to seasonality and timing and amount of revenue contribution from new active advertisers and therefore , there is not necessarily a direct correlation between the amount of increased revenues and the change in active advertisers in a particular period . annualized advertising spend on our platform we calculate annualized advertising spend as advertising spend in the last month of a period multiplied by 12. we believe that increases in annualized advertising spend on our platform have a strong correlation to our 33 index to financial statements ability to increase revenues . our customers collectively managed $ 6.0 billion , $ 4.7 billion and $ 3.2 billion in annualized advertising spend on our platform in december 2013 , 2012 and 2011 , respectively . we believe that increases in annualized advertising spend generally lead to increases in revenues over time . however , we believe that other factors related to the terms of customer agreements and seasonality can make it difficult to directly correlate annual advertising spend to changes in revenues in a particular period . revenue retention rate we believe our ability to retain and grow revenues from our existing advertisers is an indicator of the stability of our revenue base and the long-term value of our advertiser relationships . we assess our ability to retain and grow subscription revenues using a metric we refer to as revenue retention rate . we calculate our revenue retention rate metric by dividing retained revenues by retention base revenues . we define retention base revenues as revenues from all advertisers in the corresponding prior period , and we define retained revenues as revenues from all advertisers from the prior period that remain advertisers in the current period . this metric is calculated on a quarterly basis , and for annual periods , we use an average of the quarterly metrics . although we have lost individual advertisers over time , advertisers who have remained on our platform have generally , in the aggregate , increased their advertising spend on our platform . at the same time , advertising spend on our platform may vary quarter to quarter , and as a result , quarterly revenue retention rates may fluctuate quarter to quarter . our annual revenue retention rates were 97 % , 114 % and 109 % in 2013 , 2012 and 2011 , respectively . components of results of operations revenues we generate revenues principally from subscription contracts under which we provide advertisers with access to our platform , either directly or through the advertiser 's relationship with an agency with whom we have a contract . under our subscription contracts with most direct advertisers and some of our agency customers , customers contractually commit to a monthly minimum fee , which is generally greater than one-half of our estimated monthly revenues from these customers , at the time the contract is signed . however , most of our subscription contracts with our advertising agency customers do not include a committed monthly minimum fee . additionally , advertisers we serve through our arrangements with our advertising agencies generally do not have a minimum commitment to continue using our services . story_separator_special_tag our subscription fee under most contracts is variable based upon the value of advertising spend that our customers manage through our platform , although some customers pay a flat monthly rate over the term of their subscription contract . our deferred revenues consist of the unearned portion of billed subscription fees . cost of revenues cost of revenues primarily includes personnel costs , consisting of salaries , benefits , bonuses and stock-based compensation , for employees associated with our cloud infrastructure and global services for implementation and ongoing customer service organizations . other costs of revenues include fees paid to contractors who supplement our support and data center personnel , expenses related to the use of a third-party data center , depreciation of data center equipment , amortization of capitalized internal-use software development costs and allocated overhead . we intend to continue to invest additional resources in our global services teams and in the capacity of our hosting service infrastructure . as we continue to invest in technology innovation through our research and development organization , we expect to have increased amortization of capitalized internal-use software development costs . we expect that this investment in technology should not only expand the breadth and depth of our revenue acquisition management platform but also increase the efficiency of how we deliver these solutions , enabling us to improve our gross margin over time . the level and timing of investment in these areas could affect our cost of revenues in the future . 34 index to financial statements sales and marketing expenses sales and marketing expenses include personnel costs , sales commissions and other costs including travel and entertainment , marketing and promotional events , public relations , marketing activities , professional fees and allocated overhead . all of these costs are expensed as incurred , including sales commissions . our commission plans provide that payment of commissions to our sales representatives are paid based on the actual amounts we invoice customers over a period that is generally between five to seven months following the execution of the applicable customer contract . we plan to continue investing in sales and marketing by increasing the number of sales and account management employees , expanding our domestic and international sales and marketing activities , building brand awareness and sponsoring additional marketing events , which we believe will enable us to add new customers and increase penetration within our existing customer base . we expect that , in the future , sales and marketing expenses will increase in absolute dollars and continue to be our largest operating expense category . research and development expenses research and development expenses consist primarily of personnel costs for our product development and engineering employees and executives , including salaries , benefits , stock-based compensation expense and bonuses . also included are non-personnel costs such as professional fees payable to third-party development resources and allocated overhead . our research and development efforts are focused on enhancing our software architecture , adding new features and functionality to our platform and improving the efficiency with which we deliver these services to our customers . we expect that , in the future , research and development expenses will increase in absolute dollars , partially offset by the amount of capitalized internal-use software development costs . we believe that these investments are necessary to maintain and improve our competitive position . general and administrative expenses general and administrative expenses consist primarily of personnel costs , including salaries , benefits , stock-based compensation expense and bonuses , for our administrative , legal , human resources , finance and accounting employees and executives . also included are non-personnel costs , such as travel-related expenses , audit fees , tax services and legal fees , as well as professional fees , insurance and other corporate expenses , along with allocated overhead . we expect to incur incremental costs associated with supporting the growth of our business , both in terms of size and geographic expansion , and to meet the increased compliance requirements associated with our continued operation as a public company . such costs include increases in our accounting and legal personnel , additional consulting , legal and audit fees , insurance costs , board of directors ' compensation and the costs of achieving and maintaining compliance with the sarbanes-oxley act . as a result , we expect our general and administrative expenses to increase in absolute dollars in future periods but to decrease as a percentage of revenues over time . total other expenses , net other expenses , net primarily consists of foreign currency transaction gains and losses and interest expense , net . interest expense , net , consists primarily of interest income earned on our cash equivalents offset by the interest expense for our capital lease payments and borrowings under our equipment advances and revolving line of credit . 35 index to financial statements provision for income taxes the provision for income taxes consists of federal , state and foreign income taxes . due to recent losses , we maintain a valuation allowance against our deferred tax assets as of december 31 , 2013. we consider all available evidence , both positive and negative , in assessing the extent to which a valuation allowance should be applied against our deferred tax assets . story_separator_special_tag taxes increased $ 0.2 million as we became a public company . banking fees also increased $ 0.2 million as we continued our international expansion . 40 index to financial statements total other expenses , net replace_table_token_16_th other expenses , net primarily consists of foreign currency transaction gains and losses and interest expense . interest expense decreased $ 0.1 million in 2013 , as we paid off the balance on our revolving line of credit . foreign currency transaction losses increased $ 0.1 million due to the growth of our international operations . provision for income taxes replace_table_token_17_th provision for income increased $ 0.3 million as a result of increased profits generated in foreign jurisdictions by our wholly-owned subsidiaries .
| communications with our board of directors concerning our financial performance ; and adjusted ebitda provides consistency and comparability with our past financial performance , facilitates period-to-period comparisons of operations and also facilitates comparisons with other peer companies , many of which use similar non-gaap financial measures to supplement their gaap results . we understand that , although adjusted ebitda is frequently used by investors and securities analysts in their evaluations of companies , 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 of operations as reported under gaap . these limitations include : depreciation and amortization are non-cash charges , and the assets being depreciated or amortized will often have to be replaced in the future ; adjusted ebitda does not reflect any cash requirements for these replacements ; adjusted ebitda does not reflect changes in , or cash requirements for , our working capital needs or contractual commitments ; adjusted ebitda does not reflect cash requirements for income taxes and the cash impact of other income or expense ; and other companies may calculate adjusted ebitda differently than we do , limiting its usefulness as a comparative measure . the following table presents a reconciliation of net loss , the most comparable gaap measure , to adjusted ebitda for each of the periods indicated : replace_table_token_11_th 38 index to financial statements comparison of the years ended december 31 , 2013 and 2012 revenues years ended december 31 , change 2013 2012 $ % ( dollars in thousands ) total revenues , net $ 77,315 $ 59,558 $ 17,757 30 % revenues increased $ 17.8 million , or 30 % , for 2013 as compared to 2012. this increase was driven by growth in revenues from both new and existing advertisers in all geographies as our ongoing investment in sales and marketing resources resulted in increased demand for our platform worldwide . during 2013 , we generated
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net sales in 2012 decreased $ 4.7 , million or 1.2 % , compared to 2011. foreign currency translation decreased net sales in 2012 by $ 10.6 million , or 2.8 % , compared to 2011 , impacting the thermal/acoustical metals segment 's net sales by $ 7.5 million , or 4.8 % , and the performance materials segment 's net sales by $ 3.1 million , or 2.3 % . in the performance materials segment , lower sales volumes , lower sales due to the sale of a product line in 2010 , and the unfavorable foreign currency translation resulted in lower net sales of $ 16.0 million in 2012 compared to 2011. in the thermal/acoustical metals segment , unfavorable foreign currency translation resulted in lower net sales of $ 2.0 million compared to 2011. the decrease in net sales in the performance materials and thermal/acoustical metals segments were partially offset by thermal/acoustical fibers segment and ops increases in net sales . in the thermal/acoustical fibers segment , net sales increased $ 12.7 million , or 15.5 % , compared with 2011 , primarily due to increased sales volume . in ops , net sales increased $ 2.2 million , or 14.9 % , primarily due to volume . gross profit replace_table_token_5_th the increase in gross margin by 90 basis points in 2013 compared to 2012 was attributable to the thermal/acoustical fibers segment due to lower raw material costs , improved absorption of fixed overhead costs as a result of higher net sales , labor efficiencies and other cost savings . small changes in gross margin for the thermal/acoustical metals and performance materials segments and ops had minimal impact on the company 's consolidated gross margin . the increase in gross margin in 2012 compared to 2011 was primarily attributable to the thermal/acoustical fibers segment , which reported improved gross margin realized from increased sales and manufacturing efficiency improvements . partially offsetting the thermal/acoustical fibers gross margin improvement was the performance materials segment , which reported lower gross margin due to lower net sales and unfavorable absorption of fixed costs due to lower production . the thermal/acoustical metals segment reported essentially flat gross margin in 2012 compared to 2011 , while gross margin for ops was higher in 2012 compared to 2011 due to an increase in net sales and favorable mix of products . selling , product development and administrative expenses replace_table_token_6_th selling , product development and administrative expenses decreased by $ 0.7 million , or 1.3 % , in 2013 compared to 2012. the decrease was primarily due to a $ 1.8 million asset impairment charge incurred in 2012 due to the abandonment of an erp project as well as lower 20 severance and recruiting costs in 2013 of approximately $ 1.0 million , primarily at the corporate office . also , lower sales commissions of $ 0.5 million , due to reduced commission rates particularly in our thermal/acoustical fibers segment , and lower professional services expenses and other costs of $ 0.4 million contributed to lower expense in 2013. these decreased expenses were partially offset by an increase of $ 2.7 million associated with higher salaries , benefits and incentive compensation expense in 2013 , due to increased headcount , annual salary increases and higher accruals related to the targets achieved in the company 's incentive bonus program . administrative expenses included strategic initiative costs of approximately $ 1.2 million in both 2013 and 2012. the strategic initiative costs incurred in 2013 were primarily associated with the industrial filtration acquisition completed on february 20 , 2014. selling , product development and administrative expenses increased by $ 4.3 million , or 8.1 % , in 2012 compared to 2011. the increase was primarily due to higher expenses incurred by the corporate office and , to a lesser extent , higher salaries and wages . during the fourth quarter of 2012 , the company recorded a $ 1.8 million asset impairment charge due to the abandonment of an erp project . also contributing to the increase in selling , product development and administrative expenses in 2012 were higher strategic initiative costs of $ 1.2 million , severance and recruiting costs of $ 1.0 million , primarily associated with the departure of the company 's chief financial officer and hiring of the company 's new chief financial officer , and salaries and wages of $ 0.7 million . higher salaries and wages expense in 2012 was primarily caused by annual salary increases . partially offsetting the increase was $ 0.2 million in lower sales commission expense . the decrease in net sales in 2012 , compared to 2011 , caused the decrease in sales commission expense in 2012. foreign currency translation decreased selling , product development and administrative expenses by $ 1.1 million , or 2.0 % , for 2012 compared to 2011. gain on sale of product line replace_table_token_7_th on june 30 , 2010 , the company divested its electrical papers product line business , included in the performance materials segment , for total consideration of $ 5.8 million , of which $ 4.8 million was paid on june 30 , 2010 , with the remaining $ 1.0 million paid in accordance with a license agreement on july 2 , 2012. this transaction contained multiple deliverables , some of which were delivered on june 30 , 2010 , and recognized in income , while others were delivered in subsequent periods . the company deferred $ 3.2 million of the gain from this sale related to undelivered elements of the transaction at june 30 , 2010. as part of the sale transaction , the company entered into a license agreement with the buyer . pursuant to the license agreement , treated as a separate unit of accounting , the company granted the buyer the right to use certain process technology and provided certain services to the buyer to facilitate the transfer of know-how for the manufacture of electrical paper products . story_separator_special_tag the deferred gain amount was recognized as income as services under the license agreement were delivered in periods subsequent to the sale , including $ 1.6 million recognized in 2011 and $ 0.8 million in 2012. as of june 30 , 2012 , the company satisfied its obligations under the license agreement . discontinued operations , net of tax on june 29 , 2011 , the company sold its affinity business for $ 15.2 million in cash . affinity designed and manufactured high precision , specialty engineered temperature-control equipment for semiconductor , pharmaceutical , life sciences and industrial applications . the company recorded a gain on sale , net of transaction costs and income taxes of $ 3.9 million for the year ended december 31 , 2011. replace_table_token_8_th 21 interest expense replace_table_token_9_th interest expense was lower in 2013 compared to 2012 due to lower average principal balances on capital lease obligations . interest expense was lower in 2012 compared to 2011 due to decreased amortization of debt financing costs associated with the company 's domestic revolving credit facility entered into in june 2011 and decreases in unused borrowing fees , as well as lower average principal balances on capital lease obligations . other income and expense replace_table_token_10_th the amounts included in other expense ( income ) , net , in all years presented are primarily related to insignificant activity related to foreign currency transaction gains and losses and interest income . income taxes from continuing operations replace_table_token_11_th the company 's effective tax rate from continuing operations for 2013 was 32.4 % compared to 19.9 % in 2012 and 41.3 % in 2011. for 2013 , the difference between the company 's effective tax rate from continuing operations and the statutory federal income tax rate was primarily caused by the release of valuation allowances against state tax credit carryovers of $ 1.1 million , $ 0.8 million of permanent benefit relating to domestic production activities deduction , and a tax benefit of $ 0.5 million related to the conclusion of certain u.s. federal income tax matters through the year ended december 31 , 2009. these favorable tax adjustments are partially offset by an increase in valuation allowance established against a foreign net deferred tax asset . the $ 1.1 million reversal of valuation allowances against state tax credit carryovers included $ 0.3 million of state tax credits expected to offset 2013 state income taxes and $ 0.8 million expected to benefit future periods . the company currently maintains a full valuation allowance against a foreign deferred tax asset in the netherlands as future realization of the asset is not reasonably assured due to consistent historical losses since 2008. during 2013 , the company increased this valuation allowance by $ 0.6 million in order to reserve against additional loss carryforwards that were generated in the netherlands during the current year . for 2012 , the difference between the company 's effective tax rate from continuing operations and the statutory federal income tax rate was primarily caused by the release of valuation allowances against foreign tax credit carryovers of $ 3.9 million and state net operating loss carryovers , partially offset by an increase in valuation allowance established against a foreign net deferred tax asset . the company 's state income taxes in 2012 were offset by the reversal of valuation allowances against state net operating loss carryovers of $ 0.5 million as the company used certain state net operating loss carryovers to offset 2012 state income taxes . during 2012 , the company increased its valuation allowance against a foreign deferred tax asset in the netherlands by $ 0.7 million as future realization of such tax benefit was not reasonably assured . for 2011 , the difference between the company 's effective tax rate from continuing operations and the statutory federal income tax rate was primarily caused by valuation allowances against foreign tax credit carryovers , a valuation allowance against a foreign net deferred tax asset , and dividends from a foreign subsidiary . the company maintains valuation allowances against certain deferred tax assets where realization is not reasonably assured . the company evaluates the likelihood of the realization of deferred tax assets and reduces the carrying amount to the extent it believes a portion will not be realized . the company 's effective tax rates in future periods could be affected by earnings being lower or higher than anticipated in countries 22 where tax rates differ from the united states federal rate , the relative impact of permanent tax adjustments on higher or lower earnings from domestic operations , changes in net deferred tax asset valuation allowances , completion of acquisitions or divestitures , changes in tax rates or tax laws and the completion of tax audits . the company has been relying on proposed regulations that were issued in 2008 for its tax accounting policy regarding deduction versus capitalization of repairs related to tangible property . on december 23 , 2011 , the irs issued temporary regulations that would go into effect for years beginning on or after january 1 , 2012 to replace the proposed regulations . on december 14 , 2012 , the regulations were amended to allow a taxpayer to choose to delay the effective date to tax years beginning on or after january 1 , 2014. the irs released the final tangible property regulations on september 13 , 2013. all taxpayers must comply with the final repair regulations beginning with the first tax year beginning on or after january 1 , 2014. the company has performed a preliminary analysis of the potential impact of the final regulations and determined they will not have a significant impact on the company 's consolidated financial statements . the company and its subsidiaries file a consolidated federal income tax return , as well as returns required by various state and foreign jurisdictions . in the normal course of business , the company is subject to examination by taxing authorities , including such major jurisdictions as the united states , france , germany and the netherlands .
| 2012 also included approximately $ 1.2 million of strategic initiative costs included in administrative expenses ; operating income was $ 28.7 million , or 7.2 % of net sales , compared to $ 21.4 million , or 5.6 % of net sales ; º operating income in 2012 included an asset impairment charge of $ 1.8 million associated with the abandonment of an erp project and income from services provided under the license agreement of $ 0.8 million which expired in june 2012 ; 17 income tax expense was $ 9.2 million , or an effective tax rate of 32.4 % , compared to income tax expense of $ 4.2 million , or an effective tax rate of 19.9 % in 2012 ; º the effective tax rate in 2013 was positively impacted by the reversal of valuation allowances associated with state tax credit carryovers of $ 1.1 million , or $ 0.07 per share , and a discrete tax benefit of $ 0.5 million , or $ 0.03 per share , as the company concluded certain u.s. federal income tax matters through the year ended december 31 , 2009. º the effective tax rate in 2012 was positively impacted by the reversal of valuation allowances , associated with foreign tax credit carryovers , of $ 3.9 million , or $ 0.23 per share ; net income was $ 19.2 million , or $ 1.14 per diluted share , compared to $ 16.8 million , or $ 0.99 per diluted share in 2012 ; cash generated from operations was $ 30.3 million in 2013 compared to $ 34.4 million in 2012 , the decrease primarily a result of working capital requirements ; and during 2013 , cash of $ 6.1 million was used to purchase approximately 423,000 shares of the company 's common stock under a share repurchase program compared to 2012 when the company used $ 3.8 million of cash to purchase approximately 310,000 shares . consolidated net sales for 2013 were $ 398.0 million , an increase of $ 19.0 million , or 5.0 % , compared to 2012 , primarily from higher net sales of $ 19.9 million in the thermal/acoustical fibers segment . the thermal/acoustical fibers segment continued to benefit from increased production of vehicles on lydall 's platforms in north america resulting in greater parts net sales of $ 12.4 million , or 13.2 % , as well as increased tooling revenues of $ 7.5 million to support the launch of new vehicle platforms . higher net
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for historical periods through december 31 , 2019 , our dollar-based net expansion rate compares the revenue from active customer accounts , other than variable customer accounts , in a quarter to the same quarter in the prior year . for reporting periods starting with the three months ending march 31 , 2020 , twilio 's dollar-based net expansion rate will compare the revenue from all active customer accounts , including variable customer accounts , in a quarter to the same quarter in the prior year . to calculate the dollar-based net expansion rate , we first identify the cohort of active customer accounts ( other than variable customer accounts through december 31 , 2019 ) that were active customer accounts in the same quarter of the prior year . the dollar-based net expansion rate is the quotient obtained by dividing the revenue generated from that cohort in a quarter , by the revenue generated from that same cohort in the corresponding quarter in the prior year . when we calculate dollar-based net expansion rate for periods longer than one quarter , it uses the average of the applicable 55 quarterly dollar-based net expansion rates for each of the quarters in such period . given that we will no longer disclose base revenue as an operating metric for reporting periods starting with the three months ending march 31 , 2020 , our dollar-based net expansion rate will compare the revenue from all active customer accounts , including variable customer accounts , in a quarter to the same quarter in the prior year . net loss carryforwards at december 31 , 2019 , we had federal , state and foreign net operating loss carryforwards of approximately $ 1,159.3 million , $ 630.2 million and $ 13.8 million respectively , and federal and state tax credits of approximately $ 58.4 million and $ 38.8 million , respectively . if not utilized , the federal and state loss carryforwards will expire at various dates beginning in 2029 and 2025 , respectively , and the federal tax credits will expire at various dates beginning in 2029 . the state tax credits can be carried forward indefinitely . at present , we believe that it is more likely than not that the federal and state net operating loss and credit carryforwards will not be realized . accordingly , a full valuation allowance has been established for these tax attributes , as well as the rest of the federal and state deferred tax assets . key components of statements of operations revenue . we derive our revenue primarily from usage‑based fees earned from customers using the software products within our solutions apis and channel apis . these usage‑based software products include offerings , such as programmable voice , programmable messaging and programmable video . some examples of the usage‑based fees for which we charge include minutes of call duration activity for our programmable voice products , number of text messages sent or received using our programmable messaging products and number of authentications for our account security products . in the years ended december 31 , 2019 , 2018 , and 2017 , we generated 75 % , 84 % , and 83 % of our revenue , respectively , from usage‑based fees . we also earn monthly flat fees from certain fee‑based products , such as our email api , marketing campaigns , flex seats , telephone numbers , short codes and customer support . customers typically pay upfront via credit card in monthly prepaid amounts and draw down their balances as they purchase or use our products . as customers grow their usage of our products , they automatically receive tiered usage discounts . our larger customers often enter into contracts , for at least 12 months that contain minimum revenue commitments , which may contain more favorable pricing . customers on such contracts typically are invoiced monthly in arrears for products used . amounts that have been charged via credit card or invoiced are recorded in accounts receivable and in revenue , deferred revenue or customer deposits , depending on whether the revenue recognition criteria have been met . our deferred revenue and customer deposits liability balance is not a meaningful indicator of our future revenue at any point in time because very few of our contracts with invoiced customers contain terms requiring any form of prepayment . we define u.s. revenue as revenue from customers with ip addresses or mailing addresses at the time of registration in the united states , and we define international revenue as revenue from customers with ip addresses or mailing addresses at the time of registration outside of the united states . cost of revenue and gross margin . cost of revenue consists primarily of fees paid to network service providers . cost of revenue also includes cloud infrastructure fees , direct costs of personnel , such as salaries and stock‑based compensation for our customer support employees , and non‑personnel costs , such as depreciation and amortization expense related to data centers and hosting equipment , amortization of capitalized internal use software development costs and amortization of acquired intangibles . our arrangements with network service providers require us to pay fees based on the volume of phone calls initiated or text messages sent , as well as the number of telephone numbers acquired by us to service our customers . our arrangements with our cloud infrastructure provider require us to pay fees based on our server capacity consumption . our gross margin has been and will continue to be affected by a number of factors , including the timing and extent of our investments in our operations , our product mix , our ability to manage our network service provider and cloud infrastructure‑related fees , the mix of u.s. revenue compared to international revenue , changes in foreign exchange rates and the timing of amortization of capitalized software development costs and acquired intangibles and the extent to which story_separator_special_tag for historical periods through december 31 , 2019 , our dollar-based net expansion rate compares the revenue from active customer accounts , other than variable customer accounts , in a quarter to the same quarter in the prior year . for reporting periods starting with the three months ending march 31 , 2020 , twilio 's dollar-based net expansion rate will compare the revenue from all active customer accounts , including variable customer accounts , in a quarter to the same quarter in the prior year . to calculate the dollar-based net expansion rate , we first identify the cohort of active customer accounts ( other than variable customer accounts through december 31 , 2019 ) that were active customer accounts in the same quarter of the prior year . the dollar-based net expansion rate is the quotient obtained by dividing the revenue generated from that cohort in a quarter , by the revenue generated from that same cohort in the corresponding quarter in the prior year . when we calculate dollar-based net expansion rate for periods longer than one quarter , it uses the average of the applicable 55 quarterly dollar-based net expansion rates for each of the quarters in such period . given that we will no longer disclose base revenue as an operating metric for reporting periods starting with the three months ending march 31 , 2020 , our dollar-based net expansion rate will compare the revenue from all active customer accounts , including variable customer accounts , in a quarter to the same quarter in the prior year . net loss carryforwards at december 31 , 2019 , we had federal , state and foreign net operating loss carryforwards of approximately $ 1,159.3 million , $ 630.2 million and $ 13.8 million respectively , and federal and state tax credits of approximately $ 58.4 million and $ 38.8 million , respectively . if not utilized , the federal and state loss carryforwards will expire at various dates beginning in 2029 and 2025 , respectively , and the federal tax credits will expire at various dates beginning in 2029 . the state tax credits can be carried forward indefinitely . at present , we believe that it is more likely than not that the federal and state net operating loss and credit carryforwards will not be realized . accordingly , a full valuation allowance has been established for these tax attributes , as well as the rest of the federal and state deferred tax assets . key components of statements of operations revenue . we derive our revenue primarily from usage‑based fees earned from customers using the software products within our solutions apis and channel apis . these usage‑based software products include offerings , such as programmable voice , programmable messaging and programmable video . some examples of the usage‑based fees for which we charge include minutes of call duration activity for our programmable voice products , number of text messages sent or received using our programmable messaging products and number of authentications for our account security products . in the years ended december 31 , 2019 , 2018 , and 2017 , we generated 75 % , 84 % , and 83 % of our revenue , respectively , from usage‑based fees . we also earn monthly flat fees from certain fee‑based products , such as our email api , marketing campaigns , flex seats , telephone numbers , short codes and customer support . customers typically pay upfront via credit card in monthly prepaid amounts and draw down their balances as they purchase or use our products . as customers grow their usage of our products , they automatically receive tiered usage discounts . our larger customers often enter into contracts , for at least 12 months that contain minimum revenue commitments , which may contain more favorable pricing . customers on such contracts typically are invoiced monthly in arrears for products used . amounts that have been charged via credit card or invoiced are recorded in accounts receivable and in revenue , deferred revenue or customer deposits , depending on whether the revenue recognition criteria have been met . our deferred revenue and customer deposits liability balance is not a meaningful indicator of our future revenue at any point in time because very few of our contracts with invoiced customers contain terms requiring any form of prepayment . we define u.s. revenue as revenue from customers with ip addresses or mailing addresses at the time of registration in the united states , and we define international revenue as revenue from customers with ip addresses or mailing addresses at the time of registration outside of the united states . cost of revenue and gross margin . cost of revenue consists primarily of fees paid to network service providers . cost of revenue also includes cloud infrastructure fees , direct costs of personnel , such as salaries and stock‑based compensation for our customer support employees , and non‑personnel costs , such as depreciation and amortization expense related to data centers and hosting equipment , amortization of capitalized internal use software development costs and amortization of acquired intangibles . our arrangements with network service providers require us to pay fees based on the volume of phone calls initiated or text messages sent , as well as the number of telephone numbers acquired by us to service our customers . our arrangements with our cloud infrastructure provider require us to pay fees based on our server capacity consumption . our gross margin has been and will continue to be affected by a number of factors , including the timing and extent of our investments in our operations , our product mix , our ability to manage our network service provider and cloud infrastructure‑related fees , the mix of u.s. revenue compared to international revenue , changes in foreign exchange rates and the timing of amortization of capitalized software development costs and acquired intangibles and the extent to which
| the increase in usage was also attributable to a 178 % increase in the number of active customer accounts , from 64,286 as of december 31 , 2018 , to over 179,000 as of december 31 , 2019 , which was also positively impacted by the customer accounts added through our acquisition of the twilio sendgrid business . in 2019 , variable revenue increased by $ 17.6 million , or 31 % , compared to the same period last year , and represented 7 % and 9 % of total revenue in the years ended december 31 , 2019 and 2018 , respectively . this increase was primarily attributable to the increase in the usage of products by our existing variable customer accounts . in 2019 , u.s. revenue and international revenue represented $ 808.9 million or 71 % , and $ 325.6 million , or 29 % , respectively , of total revenue . in 2018 , u.s. revenue and international revenue represented $ 484.8 million , or 75 % , and $ 165.3 million , or 25 % , respectively , of total revenue . the increase in international revenue was attributable to the growth in usage of 59 our products , particularly our programmable messaging products and programmable voice products , by our existing international active customer accounts ; a 167 % increase in the number of international active customer accounts driven in part by our focus on expanding our sales to customers outside of the united states ; and revenue contribution from our acquisition of the twilio sendgrid business . 2018 compared to 2017 in 2018 , base revenue increased by $ 227.5 million , or 62 % , compared to the same period last year , and represented 91 % and 92 % of total revenue in 2018 and 2017 , respectively . this increase was primarily attributable to an increase in the usage of our products , particularly our programmable messaging products and programmable voice products , and the adoption of additional products by our existing customers . this increase was partially offset by pricing decreases that we have implemented over time in the form of lower usage prices , in an effort to increase the reach and scale of our platform . the changes in usage and price in 2018 were reflected in our dollar-based
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we believe the following critical accounting policies require us to make significant judgments and estimates in the preparation of our consolidated financial statements : revenue recognition we recognize revenue when all of the following criteria are met : persuasive evidence of an arrangement exists ; delivery has occurred or services have been rendered ; our price to the buyer is fixed or determinable ; and collectability is reasonably assured . establishing accruals for product returns and pricing adjustments requires the use of judgment and estimates that impact the amount and timing of revenue recognition . when product revenue is recognized , we establish an estimated allowance for future product returns based primarily on historical returns experience . we also record reductions of revenue for pricing adjustments , such as competitive pricing programs and rebates , in the same period that the related revenue is recognized , based on approved pricing adjustments and historical experience . actual product returns or pricing adjustments that differ from our estimates could result in increases or decreases to our net revenue . 19 a significant portion of our sales are made to distributors under agreements which contain limited rights to return unsold products and price adjustment provisions . given these provisions , we have concluded the price to these distributors is not fixed and determinable at the time we deliver products to them . accordingly , revenue and the related cost of revenue from sales to these distributors is not recognized until the distributor resells the product . these distributors provide us with periodic data regarding product , price , quantity and customers when products are shipped to their customers , as well as quantities of our products that they still have in stock . from time to time , we may enter into arrangements with customers that provide for multiple deliverables that generally include the sale of products , professional engineering services and other product qualification or certification services , which we refer to collectively as deliverables . pursuant to the applicable accounting guidance , when multiple deliverables in an arrangement are separated into different units of accounting , the arrangement consideration is allocated to the identified separate units that have stand-alone value at the inception of the contract based on a relative selling price hierarchy . we determine the relative selling price for a deliverable based on its vendor-specific objective evidence of selling price , or vsoe , if available , third-party evidence , or tpe , if vsoe is not available , and our best estimate of selling price , or besp , if neither vsoe nor tpe is available . determining the besp for a deliverable requires significant judgment and consideration of various factors including market conditions , items contemplated during negotiation of customer arrangements , as well as internally-developed pricing models . significant judgment is also required in determining whether an arrangement includes multiple elements , and if so , whether vsoe or tpe of fair value exists for those elements . we recognize the relative fair value of the deliverables as they are delivered assuming all other revenue recognition criteria are met . in any period , a portion of revenue may be recorded as unearned due to elements of an arrangement that are undelivered . changes to the elements in an arrangement , the ability to identify vsoe , tpe or besp for those elements , and the fair value of the respective elements could materially impact the amounts of earned and unearned revenue we record . allowance for doubtful accounts we maintain an allowance for doubtful accounts for estimated losses resulting from the inability of our customers to make required payments . our evaluation of the collectability of customer accounts receivable is based on various factors . in cases where we are aware of circumstances that may impair a specific customer 's ability to meet its financial obligations subsequent to the original sale , we will record an allowance against amounts due based on those particular circumstances . for all other customers , we estimate an allowance for doubtful accounts based on the length of time the receivables are past due , our bad debt collection experience and general industry conditions . if a major customer 's credit-worthiness deteriorates , or our customers ' actual defaults exceed our estimates , our financial results could be impacted . inventory valuation we value inventories at the lower of cost ( on a first-in , first-out basis ) or net realizable value , whereby we make estimates regarding the market value of our inventories , including an assessment of excess and obsolete inventories . we determine excess and obsolete inventories based on an estimate of the future sales demand for our products within a specified time horizon , which is generally 12 months . the estimates we use for demand are also used for near-term capacity planning and inventory purchasing . in addition , specific reserves are recorded to cover risks for end-of-life products , inventory located at our contract manufacturers , deferred inventory in our sales channel and warranty replacement stock . if actual product demand or market conditions are less favorable than our estimates , additional inventory write-downs could be required , which would increase our cost of revenue and reduce our gross margins . warranty reserve the standard warranty periods we provide for our products typically range from one to five years . we establish reserves for estimated product warranty costs at the time revenue is recognized based upon our historical warranty experience , and for any known or anticipated product warranty issues . our warranty obligations are impacted by a number of factors , including historical warranty costs , actual product failure rates , service delivery costs , and the use of materials . if our actual results are different from our assumptions , increases or decreases to warranty reserves could be required , which could impact our cost of revenue and gross margins . story_separator_special_tag 20 valuation of deferred income taxes we have recorded a valuation allowance to reduce our net deferred tax assets to zero , primarily due to historical net operating losses , or nols , and uncertainty of generating future taxable income . we consider estimated future taxable income and ongoing prudent and feasible tax planning strategies in assessing the need for a valuation allowance . if we determine that it is more likely than not that we will realize a deferred tax asset that currently has a valuation allowance , we would be required to reverse the valuation allowance , which would be reflected as an income tax benefit in our consolidated statements of operations at that time . goodwill impairment testing we evaluate goodwill for impairment on an annual basis in our fourth fiscal quarter or more frequently if we believe indicators of impairment exist that would more likely than not reduce the fair value of our single reporting unit below its carrying amount . we begin our evaluation of goodwill for impairment by assessing qualitative factors to determine whether it is more likely than not that the fair value of our single reporting unit is less than its carrying value . based on that qualitative assessment , if we conclude that it is more likely than not that the fair value of our single reporting unit is less than its carrying value , we conduct a quantitative goodwill impairment test , which involves comparing the estimated fair value of our single reporting unit with its carrying value , including goodwill . we estimate the fair value of our single reporting unit using a combination of the income and market approach . if the carrying value of the reporting unit exceeds its estimated fair value , we recognize an impairment loss for the difference . significant management judgment is required in estimating the reporting unit 's fair value and in the creation of the forecasts of future operating results that are used in the discounted cash flow method of valuation , including ( i ) estimation of future cash flows , which is dependent on internal forecasts , ( ii ) estimation of the long-term rate of growth of our business , ( iii ) estimation of the period during which cash flows will be generated and ( iv ) the determination of our weighted-average cost of capital , which is a factor in determining the discount rate . our estimate of the reporting unit 's fair value would also generally include the consideration of a control premium , which is the amount that a buyer is willing to pay over the current market price of a company as indicated by the traded price per share ( i.e. , market capitalization ) to acquire a controlling interest . if our actual financial results are not consistent with our assumptions and judgments used in estimating the fair value of our reporting unit , we may be exposed to goodwill impairment losses . during the fourth quarter of fiscal 2018 , we made a qualitative assessment of whether goodwill impairment existed . since our assessment of the qualitative factors did not result in a determination that it was more likely than not that the fair value of our single reporting unit is less than its carrying value , we were not required to perform the quantitative goodwill impairment test . as of june 30 , 2018 , the carrying value was $ 23,813,000 while our market capitalization was $ 53,699,000. we concluded that no goodwill impairment existed as of june 30 , 2018. share-based compensation we record share-based compensation in our consolidated statements of operations as an expense , based on the estimated grant date fair value of our share-based awards , with such fair values amortized to expense over the requisite service period . our share-based awards are currently comprised of restricted stock units , stock options , and common stock purchase rights granted under our 2013 employee stock purchase plan , or our espp . the fair value of our restricted stock units is based on the closing market price of our common stock on the grant date . 21 the fair value of our stock options and common stock purchase rights is generally estimated on the grant date using the black-scholes-merton , or bsm , option-pricing formula . while utilizing the bsm model meets established requirements , the estimated fair values generated by the model may not be indicative of the actual fair values of our share-based awards as the model does not consider certain factors important to those awards to employees , such as continued employment and periodic vesting requirements as well as limited transferability . the determination of the fair value of share-based awards utilizing the bsm model is affected by our stock price and various assumptions , including the expected term , expected volatility , risk-free interest rate and expected dividend yields . the expected term of our stock options is generally estimated using the simplified method , as permitted by guidance issued by the securities and exchange commission , or sec . we use the simplified method because we believe we are unable to rely on our limited historical exercise data or alternative information as a reasonable basis upon which to estimate the expected term of such options . the expected volatility is based on the historical volatility of our stock price . the risk-free interest rate assumption is based on the u.s. treasury interest rates appropriate for the expected term of our stock options and common stock purchase rights . if factors change and we employ different assumptions , share-based compensation expense may differ significantly from what we have recorded in the past . if there are any modifications or cancellations of the underlying unvested share-based awards , we may be required to accelerate , increase or cancel any remaining unearned share-based compensation expense .
| as a result , we have reclassified the net revenues from this product family for both fiscal 2018 and fiscal 2017 from the iot product line to the other product line in the table above . gross profit gross profit represents net revenue less cost of revenue . cost of revenue consists of the cost of raw material components , subcontract labor assembly by contract manufacturers , manufacturing overhead , inventory reserves for excess and obsolete products or raw materials , warranty costs , royalties and share-based compensation . the following table presents our gross profit : replace_table_token_4_th gross profit as a percentage of net revenue ( referred to as “ gross margin ” ) for fiscal 2018 improved compared to fiscal 2017 primarily due to a combination of improved pricing , product mix and cost reductions , as well as lower charges for excess and obsolete inventories . selling , general and administrative selling , general and administrative expenses consisted of personnel-related expenses including salaries and commissions , share-based compensation , facility expenses , information technology , advertising and marketing expenses and professional legal and accounting fees . 23 the following table presents our selling , general and administrative expenses : replace_table_token_5_th selling , general and administrative expenses increased in fiscal 2018 primarily due to ( i ) higher headcount-related expenses , as we added personnel to our sales and marketing teams and ( ii ) higher share-based compensation expenses , primarily attributable to stock awards being granted with a higher estimated fair value as a result of an increase in the market value of our stock price , along with increased participation in our espp . for fiscal 2018 , the “ other ” line item in the table above includes a bad debt charge of $ 134,000 related to recent financial difficulties of one of our long-time customers which was unable to fully repay its account receivable to us . from july 2017 through september 2017 , we realigned certain personnel resources throughout our organization , primarily to optimize our operations and engineering efforts . these activities
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, replacing its previous credit facility that was set to expire on august 31 , 2014. this new facility expires in three years and provides for up to $ 20 million of credit , subject to a borrowing base and commitment reductions and mandatory prepayments , as described in the loan agreement filed as exhibit 10.1 to the company 's current report on form 8-k , filed with the sec on july 17 , 2014. for additional information regarding this new credit facility see note 4 credit facility to the consolidated financial statements included in item 8 herein . on october 22 , 2014 , the company 's board of directors agreed to extend the duration of the company 's existing share repurchase program for an additional two years , through december 22 , 2016. results of continuing operations below is a tabular presentation of revenues and gross profit margins by sales channel for the periods discussed : revenues & gross margin by sales channel ( amounts in millions ) replace_table_token_4_th * permanent placement / fees are generated from clients within both of our existing sales channels . in order to minimize the impact of the industry trends mentioned above on our gross margins , the company will need to continue to lower its operating cost structure as a percentage of revenues through innovation and greater efficiencies . investments in our global recruitment centers , aimed at improving operational effectiveness , and costs rationalization efforts throughout our entire organization , are examples of past actions that have resulted in lower operating costs as a percentage to total revenues . 22 below is a tabular presentation of operating expenses by sales , operations and general and administrative categories for the periods discussed : selling , general & administrative ( s , g & a ) expense details ( amounts in millions ) replace_table_token_5_th 2014 compared to 2013 revenues revenues for the year ended december 31 , 2014 totaled $ 113.5 million , compared to $ 106.9 million for the year ended december 31 , 2013. this 6 % increase was due to a higher average billable consultant-base employed during 2014 compared to one-year earlier . however , billable consultant headcount at december 31 , 2014 totaled 731-consultants versus 742-consultants at year-end 2013 and reflected a high level of assignment ends during the month of december 2014. additionally , our average bill rate in 2014 declined slightly to $ 74.00 from $ 74.25 in 2013. revenues from our wholesale channel increased 6 % in 2014 compared to 2013. higher revenue levels from staffing clients ( up 10 % ) were driven by strong demand for our it staffing services . revenues from our integrator clients were up 3 % over 2013 levels , as our growth rate was muted by the early termination of a sizable integrator assignment in the second quarter of 2014. retail channel revenues increased by 7 % in 2014 compared to a year earlier . this increase reflected higher revenues from msp clients , partially offset by revenue declines at direct end-user clients . permanent placement / fee revenues increased in 2014 by approximately $ 0.2 million from 2013 levels . with the closure of several branch offices in late 2011 , permanent placement opportunities have been more sporadic over the last several years given our primary focus is on contract staffing . in 2014 , we had one client that represented more than 10 % of total revenues ( accenture = 11.7 % ) . in 2013 , the same client represented 11.4 % of our total revenues . our top ten clients represented 59 % of total revenues in 2014 compared to 57 % of total revenues in 2013. gross margin gross profit increased to $ 20.8 million in 2014 compared to $ 20.1 million in 2013. this improvement in gross profit was due to revenue growth during the 2014 period and a higher level of permanent placement fees than in the 2013 period . gross profit as a percentage of revenue was 18.3 % in 2014 compared to 18.8 % in 2013. the 50 basis point decline in gross margin largely reflected consultant compensation increases on existing assignments that have out-paced bill rate increases , mitigated by higher permanent placement fees . wholesale channel gross margins decreased by 110 basis points in 2014 compared to 2013. this decline was largely due to lower margins on new assignments with integrator clients and consultant compensation increases on existing assignments that out-paced bill rate increases during 2014. in our retail channel , gross margins increased by 80 basis points from 2013 levels . this increase reflected higher margins on new assignments , primarily with msp clients . 23 selling , general and administrative ( s , g & a ) expenses s , g & a expenses in 2014 totaled $ 15.2 million and represented 13.4 % of revenues , compared to $ 14.8 million or 13.9 % of revenues in 2013. below is a variance analysis by expense category related to s , g & a expense in 2014 compared to 2013 : sales expenses increased by $ 0.1 million in 2014 and reflected staff increases related to our new business development efforts , partially offset by lower bonus expense . recruiting expenses were flat in 2014 compare to 2013 , as higher visa processing fees were offset by lower bonus expense . during 2014 , staff increases at our offshore recruitment centers offset some staff declines domestically . general and administrative expenses increased by $ 0.3 million in 2014. higher travel , facility costs and corporate related expenses ( legal / outside services ) were partially offset by lower bonus expense . lower bonus expense in all three of the s , g & a areas reflected the company 's financial performance being below target levels for 2014. these financial targets are established by the board of directors each year and are the basis for management 's variable component of compensation . story_separator_special_tag other income / ( expense ) components in 2014 , other income / ( expense ) consisted of interest expense of $ 84,000 , a $ 9,000 loss on the disposal of fixed assets and foreign exchange gains of $ 61,000. in 2013 , other income / ( expense ) consisted of $ 93,000 of interest expense and foreign exchange gains of $ 16,000. higher interest expense in 2013 was due to higher average borrowings during 2013 compared to 2014. net foreign exchange gains in 2014 and 2013 reflected exchange rate variations between the indian rupee and the u.s. dollar . income tax expense income tax expense for 2014 was $ 2.1 million and represented an effective tax rate on pre-tax income of 37.9 % compared to $ 2.0 million for 2013 , which represented an effective tax rate on pre-tax income of 37.4 % . the higher effective tax rate in 2014 was largely due to a higher aggregate state income tax rate . 2013 compared to 2012 revenues revenues for the year ended december 31 , 2013 totaled $ 106.9 million , compared to $ 90.8 million for the year ended december 31 , 2012. this 18 % increase was due to higher demand for the company 's staffing services during 2013. billable consultant headcount at december 31 , 2013 totaled 742-consultants compared to 632-consultants one-year earlier . additionally , our average bill rate in 2013 increased to $ 74.25 from $ 73.58 in 2012. revenues from our wholesale channel increased 29 % in 2013 compared to 2012. higher revenue levels from staffing clients ( up 23 % ) were driven by strong demand for our it staffing services . revenue from our integrator clients were up 35 % over 2012 levels , as we participated in more larger-scale project assignments with several of our strategic partners . retail it channel revenues declined by 10 % in 2013 compared to a year earlier . this decline reflected lower revenues from direct end-user clients . revenues from msp clients were largely flat in 2013 , after a significant run-up in revenues during 2012. the 2013 decision to wind down business activities with a low-margin msp client impacted revenues in this channel during the year . permanent placement / fee revenues declined in 2013 by approximately $ 0.1 million from 2012. with the closure of several branch offices in late 2011 , permanent placement opportunities have been less prevalent over the last two years . 24 in 2013 , we had one client that represented more than 10 % of total revenues ( accenture = 11.4 % ) . in 2012 , we had three clients that represented more than 10 % of revenues ( ibm = 13.3 % , tek systems = 12.0 % ; and kaiser permanente = 11.8 % ) . our top ten clients represented 57 % of total revenues in 2013 compared to 60 % of total revenues in 2012. gross margin gross profit increased to $ 20.1 million in 2013 compared to $ 17.2 million in 2012. this improvement in gross profit was due to strong revenue growth during the 2013 period . gross profit as a percentage of revenue was 18.8 % in 2013 compared to 18.9 % in 2012. the 10 basis point decline in gross margin reflected lower levels of permanent placement / fee revenues , as higher margins in our retail channel essentially offset slightly lower gross margins from our wholesale channel . wholesale channel gross margins decreased by 20 basis points in 2013 compared to 2012. this slight decline was largely due to consultant compensation increases on existing assignments that out-paced bill rate increases during 2013. with assignment durations increasing over the last several years , this issue continues to have a greater impact on our overall gross margin performance . in our retail channel , gross margins increased by 120 basis points from 2012 levels . this increase reflected higher margins on new assignments and the wind-down of business with a low-margin msp client . selling , general and administrative ( s , g & a ) expenses s , g & a expenses in 2013 totaled $ 14.8 million and represented 13.9 % of revenues , compared to $ 13.8 million or 15.2 % of revenues in 2012. below is a variance analysis by expense category related to s , g & a expense in 2013 compared to 2012 : sales expense increased by $ 0.4 million and reflected staff increases of $ 0.2 million and higher travel and variable compensation expenses of $ 0.2 million . recruiting expenses increased by $ 0.3 million due to increases in our recruiting staff of $ 0.1 million ; higher activity-base expenses of $ 0.1 million ( visa processing fees , job board access fees and background check expenses ) ; and higher variable compensation expenses of $ 0.1 million . general and administrative expenses increased by $ 0.3 million . higher equity-based compensation expense of $ 0.3 million and higher bonus expense of $ 0.1 million in 2013 were partially offset by lower severance expense of $ 0.1 million . other income / ( expense ) components in 2013 , other income / ( expense ) consisted of interest expense of $ 93,000 and foreign exchange gains of $ 16,000. in 2012 , other income / ( expense ) consisted of $ 68,000 of interest expense and foreign exchange gains of $ 36,000. higher interest expense in 2013 was due to higher average borrowings during 2013 compared to 2012. net foreign exchange gains in 2013 and 2012 reflected exchange rate variations between the indian rupee and the u.s. dollar . income tax expense income tax expense for 2013 was $ 2.0 million and represented an effective tax rate on pre-tax income of 37.4 % compared to $ 1.3 million for 2012 , which represented an effective tax rate on pre-tax income of 38.4 % .
| factors contributing to cash flows during the 2014 period included net income of $ 3.4 million and non-cash charges of $ 0.6 million , partially offset by an increase in operating working capital of $ 0.7 million . in 2013 , cash flows from operating activities included net income of $ 3.3 million and non-cash charges of $ 0.6 million , partially offset by an increase in operating working capital of $ 2.0 million . in 2012 , cash flows from operating activities included net income of $ 2.1 million and non-cash charges of $ 0.5 million , partially offset by an increase in operating working capital of $ 1.7 million . the increases in operating working capital during 2014 , 2013 and 2012 were largely in support of higher activity levels and revenue expansion during the respective years . we would expect operating working capital levels to increase should revenue growth continue in 2015. similar to previous years , such an increase would have a negative impact on cash generated from operating activities . we believe that dso 's are likely to remain in the 48 to 52-day range during 2015. investing activities cash used in investing activities for the years ended december 31 , 2014 , 2013 and 2012 totaled approximately $ 0.7 million , $ 0.1 million and $ 0.2 million , respectively . in 2014 , both capital expenditures and 26 the increase in non-current deposits were largely related to the company 's move to its new corporate headquarters . in 2013 and 2012 capital expenditures largely accounted for all uses of cash in investing activities . we believe that investments in capital expenditures and facility lease deposits should approximate $ 0.4 million in 2015. financing activities in 2014 , cash used in financing activities totaled $ 0.4 million and included $ 0.8 million of share repurchases , partially offset by excess tax benefits related to the exercising of stock options and the vesting of restricted shares . in 2013 , cash
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cost of sales for wuhu was $ 24.5 million for the year ended december 31 , 2013 , compared with $ 28.8 million for the year ended december 31 , 2012 , representing a decrease of $ 4.3 million , or 14.9 % . the decrease in cost of sales was mainly due to a decrease in sales volumes resulting in a cost of sales decrease of $ 4.7 million and a decrease in unit cost resulting in a cost of sales decrease of $ 0.3 million , which were offset by the effect of foreign currency translation of the rmb against the u.s. dollar resulting in a cost of sales increase of $ 0.7 million . cost of sales for hubei henglong was $ 39.2 million for the year ended december 31 , 2013 , compared with $ 35.5 million for the year ended december 31 , 2012 , representing an increase of $ 3.7 million , or 10.6 % . the net increase in cost of sales was mainly due to an increase in sales volumes resulting in a cost of sales increase of $ 4.1 million , a de crease in unit cost resulting in a cost of sales de crease of $ 1.2 million and the appreciation of the rmb against u.s. dollar resulting in a cost of sales increase of $ 0.8 million . cost of sales for other sectors was $ 30.6 million for the year ended december 31 , 2013 , compared with $ 43.4 million for the year ended december 31 , 2012 , representing a de crease of $ 12.8 million , or 29.3 % . the de crease in cost of sales was mainly due to a decrease in sales volumes resulting in a cost of sales decrease of $ 7.6 million and a de crease in unit cost resulting in a cost of sales de crease of $ 6.1 million , which were offset by the effect of foreign currency translation of the rmb against the u.s. dollar resulting in a cost of sales increase of $ 0.9 million . gross margin was 18.5 % for the year ended december 31 , 2013 , representing a 0.4 % in crease from 18.1 % for the year ended december 31 , 2012 , which was primarily due to an increase in sales volume of high gross margin products . gain on other sales gain on other sales mainly consisted of net amount retained from sales of materials and scraps . for the year ended december 31 , 2013 , gain on other sales amounted to $ 7.6 million , while it amounted to $ 4.4 million for the year ended december 31 , 2012. the s ignificant increase of $ 3.2 million , or 72.7 % , was mainly due to the company 's sale of part of its land use rights in the third quarter of 2013 , which resulted in a recognition of a gain of $ 4.1 million ( before tax ) during the year ended december 31 , 2013 , representing the difference between the total selling price of $ 4.6 million and the net book value of the land use rights of $ 0.5 million . selling expenses for the years ended december 31 , 2013 and 2012 , selling expenses are summarized as follows ( figures are in thousands of usd ) : replace_table_token_8_th 29 selling expenses were $ 13.3 million for the year ended december 31 , 2013. as compared to $ 9.6 million for the year ended december 31 , 2012 , there was an increase of $ 3.7 million , or 39.5 % , which was mainly due to : · an increase in salaries and wages for the company 's salesmen , as a result of higher sales commsions paid for their improved sales performance in 2013 ; · an increase in office expenses ( including office supplies , travel expenses and meeting expenses ) , as a result of an increase in marketing activities ; · an increase in transportation expenses due to an increase in sales activities and expansion of the company 's domestic and international markets , which are located farther away from the company 's production bases ; and · an increase in rent expense due to the increase of product warehouse rental space for the expansion of sales and commercial networks . general and administrative expenses for the years ended december 31 , 2013 and 2012 , general and administrative expenses are summarized as follows ( figures are in thousands of usd ) : replace_table_token_9_th ( 1 ) listing expenses consisted of the costs associated with legal , accounting and auditing fees for operating a public company . the expenses also included share-based compensation expense for options granted to members of the audit committee . general and administrative expenses were $ 13.3 million for the year ended december 31 , 2013 , compared with $ 12.9 million for the year ended december 31 , 2012 , representing an increase of $ 0.3 million , or 2.5 % . the analysis of expense items with significant fluctuation is as follows : · an increase in salaries and wages mainly due to the increase in management 's performance bonus in 2013 as the company achieved the performance targets as pre-determined by the board of directors , while the company did not achieve its performance targets for 2012 ; · an increase in labor insurance expenses mainly because of the company 's improvement in welfare benefits for the management and improvement of certain labor protection facilities . · there was a decrease in maintenance and repair expenses in 2013 , which was mainly due to the scale down of repair and maintenance projects on the company 's office facilities in 2013 . 30 · there was an increase in property tax and other taxes in 2013 , which was mainly due to the company 's housing property increase in 2013 . story_separator_special_tag · there was an increase in office expense which was mainly due to the company 's replacement of office appliances . · there was a decrease in depreciation and amortization expense , which was mainly due to certain office equipment that continued to be utilized in 2013 having been fully depreciated at the beginning of the year . research and development expenses research and development expenses , “ r & d ” expenses , were $ 20.9 million for the year ended december 31 , 2013 as compared to $ 14.9 million for the year ended december 31 , 2012 , an increase of $ 6.0 million , or 40.3 % , which was mainly due to the development and trial production of eps . expenses for mold improvement increased by $ 1.0 million , external technical support fees increased by $ 0.9 million and the salaries and wages expenses of research and development related staff increased by $ 4.1 million . the global automotive parts industry is highly competitive ; winning and maintaining new business requires suppliers to rapidly produce new and innovative products on a cost-competitive basis . in 2013 , foreign oems significantly increased their demand for eps , but the related technology in china was still in the research and development and testing stage . in order to expand into the market for eps , the company increased its investment in the research and development of eps in 2013 , including assigning the company 's senior technicians and advanced manufacturing equipment to eps , establishing the eps trail-production department , hiring technologists and purchasing advanced technology and testing equipment . at present , the company has developed several types of epss suitable for small-engine cars , and has sold certain quantities of eps . income from operations income from operations was $ 36.7 million for the year ended december 31 , 2013 as compared to $ 27.8 million for the year ended december 31 , 2012 , an increase of $ 8.9 million , or 32.0 % , which mainly consisted of an increase of $ 15.8 million , or 26.0 % , in gross profit and an increase of $ 3.2 million , or 72.7 % , in gain on other sales ( such as raw materials and property , plant and equipment sales ) , offset by an increase in operating expenses of $ 10.1 million , or 27.0 % . other income , net other income , net was $ 1.1 million for the year ended december 31 , 2013 as compared to $ 0.5 million for the year ended december 31 , 2012 , an increase of $ 0.6 million , or 120.0 % , primarily as a result of an increase in the unspecific purpose subsidies being recognized in 2013. the company 's government subsidies consisted of specific subsidies and other subsidies . specific subsidies are the subsidies that the chinese government has specified its purpose for , such as product development and renewal of production facilities . other subsidies are the subsidies that the chinese government has not specified its purpose for and are not tied to future trends or performance of the company ; receipt of such subsidy income is not contingent upon any further actions or performance of the company and the amounts do not have to be refunded under any circumstances . the company recorded specific purpose subsidies as advances payable when received . for specific purpose subsidies , upon government acceptance of the related project development or asset acquisition , the specific purpose subsidies will be recognized to reduce related r & d expenses or cost of asset acquisition . the unspecific purpose subsidies are recognized as other income upon receipt as future performance by the company is not required . 31 financial income/ ( expenses ) , net financial income , net was $ 0.4 million for the year ended december 31 , 2013 as compared to financial expenses , net of $ 2.2 million for the year ended december 31 , 2012 , a decrease of $ 2.6 million , or 118.2 % , primarily as a result of : ( a ) the redemption of all outstanding convertible notes on may 25 , 2012 , the “ redemption , ” which led to a decrease in financial expenses of $ 1.6 million ; and ( b ) an increase in interest income of $ 1.4 million that was generated from the higher balance of time deposits during 2013. loss on change in fair value of derivatives loss on change in fair value of derivatives was $ 0.5 million for the year ended december 31 , 2012. due to the redemption , there was no gain or loss on change of fair value of derivative associated with convertible notes for the year ended december 31 , 2013. estimating fair values of derivative financial instruments requires the development of significant and subjective estimates that may , and are likely to , change over the duration of the instrument with related changes in internal and external market factors . in addition , option-based techniques are highly volatile and sensitive to changes in the trading market price of the company 's common stock , which has a high estimated volatility . derivative financial instruments are initially and subsequently carried at fair values and gain or loss on change in fair value of derivative liabilities is equal to the difference between the beginning and ending balances of the company 's derivative liabilities ( see note 23 to the consolidated financial statements in this report ) . as of january 1 , 2012 and december 31 , 2012 , the company calculated the fair value of derivative liabilities at $ 0.5 million and $ 0 , respectively . therefore , the company recorded a loss on change in fair value of derivative of $ 0.5 million for the year ended december 31 , 2012. gain on redemption of convertible notes for the year ended december 31 , 2012 , the company recorded a gain of $ 1.4 million for the redemption .
| to compete with joint-brands ' cars and address the over-capacity issue , the domestic brands ' car manufacturers , which are the company 's main customers , had to lower their products ' price to attract end customers . the price pressure was passed on from the domestic brands ' car manufacturers to the company , which led to continuing price decreases for the company 's main products . the company had an increase in sales volume leading to a sales increase of $ 78.4 million , a decrease in selling price leading to a sales decrease of $ 8.1 million , and the effect of foreign currency translation of the rmb against the u.s. dollar resulting in a sales increase of $ 8.9 million . 27 further analysis is as follows : net sales for henglong were $ 260.6 million for the year ended december 31 , 2013 , compared with $ 187.1 million for the year ended december 31 , 2012 , representing an increase of $ 73.5 million , or 39.3 % , which was mainly due to an increase in sales volume with a sales increase of $ 76.6 million to the joint-brands auto companies and the effect of foreign currency translation of the rmb against the u.s. dollar resulting in a sales increase of $ 4.2 million , offset by a decrease in selling prices , which led to a sales decrease of $ 7.3 million . net sales for jiulong were $ 77.7 million for the year ended december 31 , 2013 , compared with $ 71.1 million for the year ended december 31 , 2012 , representing an increase of $ 6.6 million , or 9.2 % , which was mainly due to an increase in sales volume with a sales increase of $ 6.6 million due to an increase in the demand for commercial vehicles in the chinese market and the effect of foreign currency translation of the rmb against the u.s. dollar , which led to a sales increase of $ 1.5 million , which was offset by a decrease in selling prices , which led to a
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other important factors that have an impact on our profitability are both the competitive pricing environment and market conditions . with respect to pricing , there is a tradeoff between sustaining or increasing underwriting margins versus increasing enrollment . with respect to market conditions , economies of scale have an impact on our administrative overhead . as a result of a decline in preference for more closely managed dental hmo products , dental costs have become increasingly comparable among our larger competitors . product design and consumer involvement have become more important drivers of dental services consumption , and administrative expense efficiency is becoming a more significant driver of margin sustainability . consequently , we continually evaluate our administrative expense structure and attempt to realize administrative expense savings principally through technology improvements . highlights ● we had net income of approximately $ 1,829,000 for the year ended december 31 , 2017 compared to net income of approximately $ 1,989,000 for the year ended december 31 , 2016. this decrease in net income is primarily the result of higher deferred tax expense as a result of the u. s. government enacted comprehensive tax legislation commonly referred to as the tax cuts and jobs act ( “ tax act ” ) which accounted for an approximate $ 692,000 increase in taxes , an increase in premium revenue of approximately $ 1,995,000 offset by an increase in healthcare services expense of approximately $ 1,108,000 in 2017. the increase in gross margin of approximately $ 887,000 was offset by an increase in insurance expenses of $ 552,000 in 2017. our ratio of insurance expense to total premium revenue ( “ insurance expense ratio ” ) increased to 21.1 % in 2017 from 21.0 % in 2016 . ● our ratio of healthcare services expense to premium revenue ( “ loss ratio ” ) decreased by approximately 0.3 % from 76.2 % in 2016 to 75.9 % in 2017. the improved loss ratio impacted 2017 by approximately $ 26,000 in gross margin . the fully-insured dental hmo/ind and fully-insured dental ppo segments together represent approximately 71.9 % of our total dental business . ● our dental and vision products grew by approximately 4,500 members , or 1.2 % , from 382,100 members at december 31 , 2016 to 386,600 members at december 31 , 2017. this membership increase from december 31 , 2016 is due to an increase in fully-insured dental ppo membership of approximately 10,300 members , an increase in self-insured dental membership of approximately 1,500 members and an increase in corporate , all other membership of approximately 200 members . this was offset by a decrease in fully-insured dental hmo/ind membership of approximately 7,500 members . 18 comparison of results of operations for 2017 and 2016 the following table shows membership totals and revenues and expenses for our four business segments for the years ended december 31 , 2017 and 2016 ( dollars in thousands ) : replace_table_token_8_th summary net income was approximately $ 1,829,000 and $ 1,989,000 for 2017 and 2016 , respectively . this decrease in net income is primarily the result of higher deferred tax expense as a result of the tax act which accounted for an approximate $ 692,000 increase in taxes , an increase in premium revenue of approximately $ 1,995,000 offset by an increase in healthcare services expense of approximately $ 1,108,000 in 2017. the increase in gross margin of approximately $ 887,000 was offset by an increase in insurance expenses of $ 552,000 in 2017. our ratio of insurance expense to total premium revenue ( “ insurance expense ratio ” ) increased to 21.1 % in 2017 from 21.0 % in 2016. membership our fully-insured dental hmo/ind membership decreased by approximately 7,500 in 2017. this membership decrease is attributable to the reduction of approximately 10,000 fully-insured dental hmo members due to the conversion of one employer group from our fully-insured dental hmo/ind product to our self-insured dental product effective january 1 , 2017. in addition , a decrease of approximately 9,900 members is the result of employer groups that did not renew with the company or reduced employee counts of retained employer groups . these decreases were offset by an increase of 10,100 members from new sales with employer groups and 2,300 members from new sales of individual hmo products in 2017. some of our fully-insured dental hmo/ind membership losses were the result of corporate consolidations and employer groups moving to medical carriers to take advantage of medical/dental packaged savings . 19 our fully-insured dental ppo membership increased by approximately 10,300 members in 2017. this membership increase is due to new sales in the dayton and central ohio markets , the southern kentucky market and the indiana market of approximately 11,600 members during 2017 , offset by the loss of approximately 6,900 members with employer groups that did not renew with the company or reduced employee counts of retained employer groups in these markets . the remaining increase of approximately 5,600 members is due to new sales of individual and on exchange dental ppo products in 2017. our self-insured dental membership increased by approximately 1,500 members in 2017. during 2017 , approximately 10,000 members of an employer group converted from our fully-insured dental hmo/ind product to our self-insured dental product effective january 1 , 2017 , which was offset by a decrease of 8,500 members as a result of employer groups that did not renew with the company . some of our self-insured dental hmo/ind membership losses were the result of corporate consolidation and employer groups moving to other carriers . our corporate , all other membership increased slightly as a result of increased membership in our vision plan . story_separator_special_tag revenue ( amounts in thousands ) 2017 2016 total dollar change member volume change rate change total fully-insured dental hmo/ind premium $ 51,419 $ 53,393 $ ( 1,974 ) $ ( 1,432 ) $ ( 542 ) fully-insured dental hmo/ind premium revenue for 2017 decreased by approximately $ 1,974,000 compared to 2016. new fully-insured dental hmo/ind sales volume resulted in an increase in fully-insured dental hmo/ind premium revenue of approximately $ 1,813,000 that was offset by a decrease in fully-insured dental hmo/ind revenue of approximately $ 3,245,000 due to the conversion of an employer group to the self-insured product line in 2017. fully-insured dental hmo/ind premium decreased by $ 542,000 due to lower overall premium rates on a pmpm basis . the conversion of an employer group from fully-insured to the self-insured product line resulted in $ 213,000 of this decrease . t he fully-insured dental hmo/ind segment represented approximately 47.8 % of our total dental business in 2017 . ( amounts in thousands ) 2017 2016 total dollar change member volume change rate change total fully-insured dental ppo premium $ 25,936 $ 22,363 $ 3,573 $ 3,966 $ ( 393 ) fully-insured dental ppo premium revenue for 2017 increased by approximately $ 3,573,000 compared to 2016. fully-insured dental ppo revenue increased by approximately $ 3,966,000 due to an increase in fully-insured ppo group and individual membership in 2017 , offset by a decrease of approximately $ 393,000 due to a decrease in premium rates for the year . the fully-insured dental ppo segment represented approximately 24.1 % of our total dental business in 2017. replace_table_token_9_th 20 self-insured dental revenue increased by approximately $ 360,000 due to new self-insured sales and an increase in membership for existing employer groups . self-insured revenue increased by approximately $ 326,000 due to an increase in the self-insured claims revenue on a per member per month basis , as well as an increase of approximately $ 34,000 in self-insured administrative fee rates on a per member per month basis . the self-insured dental segment represented approximately 27.4 % of our total dental business in 2017. the self-insured segment revenue has two components : self-insured claim revenue - self-insured claim revenue increased approximately $ 326,000 in 2017. the self-insured claim revenue increased by approximately $ 3,433,000 due to the conversion of fully-insured hmo/ind revenue to the self-insured product . this increase was offset by a decrease of approximately $ 3,298,000 , as a result of the loss of employer groups in 2017. in addition , there was an increase in self-insured claim revenue of approximately $ 191,000 as a result of an increase in self-insured claim revenue on a pmpm basis in the 2017. self-insured aso fees - self-insured aso fees increased approximately $ 34,000 in 2017. self-insured aso fees increased by approximately $ 27,000 due to an increase in the average self-insured aso fee rates on a pmpm basis in 2017. in addition , there was an increase of approximately $ 7,000 due to a net membership increase with existing employer groups . corporate , all other premium revenue is primarily derived from the non-dcp dental indemnity product , dental ppo product and vision product underwritten by third party insurance carriers . in the aggregate , corporate , all other premium revenue increased by approximately $ 36,000 , to $ 807,000 in 2017 from $ 771,000 in 2016. investment income investment income decreased approximately $ 9,000 , to $ 265,000 in 2017 from $ 274,000 in 2016. other income and realized ( losses ) gains on investments , net other income and realized ( losses ) gains on investments increased approximately $ 171,000 to $ 249,000 in 2017 from $ 128,000 in 2016. the increase is primarily the result of realized gains due to the sale of investments in 2017 that did not occur in 2016 , offset by a decrease in other income . healthcare services expenses ( amounts in thousands ) 2017 2016 total dollar change member volume change utilization and fee schedule change total fully-insured dental hmo/ind healthcare service expense $ 38,522 $ 39,995 $ ( 1,473 ) $ ( 1,073 ) $ ( 400 ) fully-insured dental hmo/ind healthcare services expense decreased $ 1,473,000 in 2017. fully-insured dental hmo/ind healthcare services expense on a pmpm basis decreased by 1.0 % from , $ 20.13 pmpm in 2016 to $ 19.93 pmpm in 2017. a decrease in fully-insured dental hmo/ind membership due to the conversion of an employer group to our self-insured product resulted in a claim decrease of approximately $ 2,431,000 , which was offset by a claim expense increase of approximately $ 1,358,000 due to new membership in the year . lower healthcare services utilization resulted in a decrease in fully-insured dental hmo/ind healthcare services expense of approximately $ 828,000 in 2017 compared to 2016. this decrease was offset by an increase of approximately $ 428,000 attributable to fee schedule increases effective january 1 , 2017 . ( amounts in thousands ) 2017 2016 total dollar change member volume change utilization and fee schedule change total fully-insured dental ppo healthcare service expense $ 17,721 $ 15,391 $ 2,330 $ 2,730 $ ( 400 ) fully-insured dental ppo healthcare services expense increased by $ 2,330,000 in 2017. fully-insured dental ppo healthcare services expense on a pmpm basis decreased 2.2 % , from $ 16.25 pmpm in 2016 to $ 15.89 pmpm in 2017. an increase in fully-insured dental ppo membership resulted in an increase in fully-insured dental ppo healthcare services expense of $ 2,730,000. in addition , an increase of $ 91,000 is attributable to fee schedule increases effective january 1 , 2017. these increases were offset by lower healthcare services utilization that resulted in a decrease of approximately $ 491,000 in the 2017 period compared to the 2016 period .
| the remaining increase of approximately 7,300 members is due to new sales of individual and on exchange dental ppo products in 2016. our self-insured dental membership decreased by approximately 2,500 members in 2016 as a result of a decrease in membership of existing employer groups in the last twelve months offset by the addition of new self-insured dental hmo and dental ppo employer groups in the southwest ohio and northern kentucky markets . our corporate , all other membership increased by approximately 3,900 members in 2016 as a result of increased membership in our vision plan . revenue ( amounts in thousands ) 2016 2015 total dollar change member volume change rate change total fully-insured dental hmo/ind premium $ 53,393 $ 49,458 $ 3,935 $ 2,548 $ 1,387 fully-insured dental hmo/ind premium rates negotiated with employer groups at their renewals resulted in an increase of approximately $ 1,387,000 in fully-insured dental hmo/ind premium revenue . an increase in fully-insured dental hmo/ind membership in 2016 resulted in an increase in fully-insured dental hmo/ind premiums of approximately $ 2,548,000. the membership increase is the result of new fully-insured employer group business as well as an increase in the fully-insured individual product membership . t he fully-insured dental hmo/ind segment represented approximately 50.6 % of our total dental business in 2016 . ( amounts in thousands ) 2016 2015 total dollar change member volume change rate change total fully-insured dental ppo premium $ 22,363 $ 19,198 $ 3,165 $ 3,596 $ ( 431 ) fully-insured dental ppo premium rates negotiated with employer groups at their renewals resulted in a decrease of approximately $ 431,000 in fully-insured dental ppo premium revenue . an increase in fully-insured ppo group membership in 2016 resulted in an increase in fully-insured dental ppo premiums of approximately $ 3,596,000. the increase in membership is the result of an increase in fully-insured dental ppo group membership as well as an increase in fully-insured on exchange dental ppo membership . the fully-insured dental ppo segment represented approximately 21.2 % of
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we generally seek to charge our customers in the same 21 kadant inc. currency in which our operating costs are incurred . however , our financial performance and competitive position can be affected by currency exchange rate fluctuations affecting the relationship between the u.s. dollar and foreign currencies . we seek to reduce our exposure to currency fluctuations through the use of forward currency exchange contracts . we may enter into forward contracts to hedge certain firm purchase and sale commitments denominated in currencies other than our subsidiaries ' functional currencies . application of critical accounting policies and estimates management 's discussion and analysis of financial condition and results of operations is based upon our consolidated financial statements , which have been prepared in accordance with accounting principles generally accepted in the united states ( gaap ) . the preparation of these consolidated financial statements requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities , disclosure of contingent assets and liabilities at the date of our consolidated financial statements , and the reported amounts of revenues and expenses during the reporting period . our actual results may differ from these estimates under different assumptions or conditions . critical accounting policies are defined as those that entail significant judgments and uncertainties , and could potentially result in materially different results under different assumptions and conditions . we believe that our most critical accounting policies upon which our financial position depends , and which involve the most complex or subjective decisions or assessments , are those described below . for a discussion on the application of these and other accounting policies , see note 1 to the consolidated financial statements . revenue recognition . most of our revenue is recognized under accounting standards codification ( asc ) 605 , `` revenue recognition '' ( asc 605 ) , when the following criteria are met : persuasive evidence of an arrangement exists , delivery has occurred or service has been rendered , the sales price is fixed or determinable , and collectability is reasonably assured . we also enter into arrangements with customers that have multiple deliverables , such as equipment and installation , and we recognize revenues and profits on certain long-term contracts using the percentage-of-completion and completed-contract methods of accounting . under asc 605 , when the terms of sale include customer acceptance provisions , and compliance with those provisions can not be demonstrated until customer acceptance , we recognize revenues upon such acceptance . we include in revenues amounts invoiced for shipping and handling with the corresponding costs reflected in cost of revenues . provisions for discounts , warranties , returns , and other adjustments are provided for in the period in which the related sales are recorded . sales taxes , value-added taxes and certain excise taxes collected from customers and remitted to governmental authorities are accounted for on a net basis and are therefore excluded from revenue . most of our revenue is recognized in accordance with the accounting policies in the preceding paragraph . however , when a sale arrangement involves multiple elements , such as equipment and installation , we consider the guidance in asc 605. such transactions are evaluated to determine whether the deliverables in the arrangement represent separate units of accounting based on the following criteria : the delivered item has value to the customer on a stand-alone basis , and if the contract includes a general right of return relative to the delivered item , delivery or performance of the undelivered item is considered probable and substantially under our control . revenue is allocated to each unit of accounting or element based on relative selling prices and is recognized as each element is delivered or completed . we determine relative selling prices by using either vendor-specific objective evidence ( vsoe ) if that exists , or third-party evidence of selling price . when neither vsoe or third-party evidence of selling price exists for a deliverable , we use our best estimate of the selling price for that deliverable . in cases in which elements can not be treated as separate units of accounting , the elements are combined into a single unit of accounting for revenue recognition purposes . revenues recorded under the percentage-of-completion method of accounting pursuant to asc 605 were $ 27.7 million in 2017 , $ 23.3 million in 2016 , and $ 32.1 million in 2015 . we determine the percentage of completion by comparing the actual costs incurred to date to an estimate of total costs to be incurred on each contract . if a loss is indicated on any contract in process , a provision is made currently for the entire loss . our contracts generally provide for billing of customers upon the attainment of certain milestones specified in the contract . revenues earned on contracts in process in excess of billings are classified as unbilled contract costs and fees , and amounts billed in excess of revenues earned are classified as billings in excess of contract costs and fees . the estimation process under the percentage-of-completion method affects the amounts reported in our consolidated financial statements . a number of internal and external factors affect our percentage-of-completion and cost of sales estimates , including labor rate and efficiency variances , estimates of warranty costs , estimated future material prices from vendors , and customer specification and testing requirements . although we make every effort to ensure the accuracy of our estimates in the application of this accounting policy , if our actual results were to differ from our estimates , or if we were to use different assumptions , it is possible that materially different amounts could be reported as revenues in our consolidated financial statements . for long-term contracts that do not meet the criteria under asc 605-35 to be accounted for under the percentage-of-completion method , we recognize revenue using the completed-contract method . story_separator_special_tag when using the completed-contract method , we recognize revenue when the contract is substantially complete , the product is delivered , and , if applicable , the customer acceptance criteria are met . 22 kadant inc. income taxes . the 2017 tax act was signed into law on december 22 , 2017 and is generally effective for tax years beginning january 1 , 2018. the most significant impacts of the 2017 tax act to us for the year-ended 2017 include a decrease in the federal corporate income tax rate from 35 % to 21 % and a one-time mandatory transition tax on deemed repatriation of previously tax-deferred and unremitted foreign earnings . for 2017 , we recorded a provisional net income tax expense of $ 7.5 million , including the impact of state taxes , which consists of a provisional amount for our one-time mandatory transition tax of $ 10.3 million , partially offset by a provisional net tax benefit of $ 2.8 million for the re-measurement of our deferred income tax assets and liabilities due to the decrease in the federal corporate income tax rate . we anticipate offsetting the one-time mandatory transition tax against existing tax attributes , which will reduce the required federal payment to approximately $ 4.6 million over the elected eight-year payment period . on december 22 , 2017 , the sec staff issued staff accounting bulletin no . 118 ( sab 118 ) related to the income tax accounting implications of the 2017 tax act , which provides guidance on accounting for the 2017 tax act 's impact . sab 118 provides a measurement period , which in no case should extend beyond one year from the 2017 tax act enactment date , during which a company acting in good faith may complete the accounting for the impacts of the 2017 tax act under asc topic 740. in accordance with sab 118 , a company must reflect the income tax effects of the 2017 tax act in the reporting period in which the accounting under asc topic 740 is complete . to the extent that a company 's accounting for certain income tax effects of the 2017 tax act is incomplete , a company can determine a reasonable estimate for those effects and record a provisional estimate in the financial statements in the first reporting period in which a reasonable estimate can be determined . in accordance with sab 118 , we recognized the provisional tax impacts , outlined above , related to the re-measurement of our deferred income tax assets and liabilities and the one-time mandatory transition tax on deemed repatriation of unremitted foreign earnings . the ultimate impact may differ from the provisional amounts , due to , among other things , the significant complexity of the 2017 tax act and anticipated additional regulatory guidance that may be issued by the internal revenue service , changes in analysis , interpretations and assumptions we made and actions we may take as a result of the 2017 tax act . while the 2017 tax act provides for a territorial tax system , beginning in 2018 , it includes two new u.s. tax base erosion provisions , gilti and beat . we have elected to account for any potential gilti tax in the period in which it is incurred , and therefore have not provided any deferred income tax impacts of gilti in our consolidated financial statements for 2017. in addition , we do not expect to be subject to the minimum tax pursuant to the beat provisions . we operate in numerous countries under many legal forms and , as a result , are subject to the jurisdiction of numerous domestic and non-u.s. tax authorities , as well as to tax agreements and treaties among these governments . determination of taxable income in any jurisdiction requires the interpretation of the related tax laws and regulations and the use of estimates and assumptions regarding significant future events , such as the amount , timing and character of deductions , permissible revenue recognition methods under the tax law and the sources and character of income and available tax credits . changes in tax laws , regulations , agreements and treaties , currency-exchange restrictions or our level of operations or profitability in each taxing jurisdiction could have an impact upon the amount of current and deferred tax balances and our results of operations . we estimate the degree to which our deferred tax assets on deductible temporary differences and tax loss or credit carryforwards will result in an income tax benefit based on the expected profitability by tax jurisdiction , and provide a valuation allowance for these deferred tax assets if it is more likely than not that they will not be realized in the future . if it were to become more likely than not that these deferred tax assets would be realized , we would reverse the related valuation allowance . our tax valuation allowance was $ 10.8 million at year-end 2017 . should our actual future taxable income by tax jurisdiction vary from our estimates , additional valuation allowances or reversals thereof may be necessary . when assessing the need for a valuation allowance in a tax jurisdiction , we evaluate the weight of all available evidence to determine whether it is more likely than not that some portion or all of the deferred income tax assets will not be realized . as part of this evaluation , we consider our cumulative three-year history of earnings before income taxes , taxable income in prior carryback years , future reversals of existing taxable temporary differences , prudent and feasible tax planning strategies , and expected future results of operations . at year-end 2017 , we continued to maintain a valuation allowance in the united states against certain of our state operating loss carryforwards due to the uncertainty of future profitability in these state jurisdictions in the united states . at year-end 2017 , we maintained valuation allowances in certain foreign jurisdictions because of the uncertainty of future profitability .
| excluding the incremental paal revenues and the favorable effect of foreign currency translation , revenues increased $ 7.3 million , or 4 % , compared to 2016 , primarily due to increased demand for our products at our chinese operations that was partially offset by decreased demand for our products at our north american operations . revenues from our doctoring , cleaning , & filtration product line in 2017 increased $ 3.7 million , or 3 % , compared to 2016 primarily due to increased demand for our parts and consumables products . revenues from our fluid-handling product line in 2017 increased $ 15.0 million , or 17 % , compared to 2016 , due to the inclusion of $ 7.7 million in revenues from acquisitions , principally unaflex , and a $ 1.0 million increase from the favorable effect of foreign currency translation . excluding acquisitions and the favorable effect of foreign currency translation , revenues increased $ 6.2 million , or 7 % , largely due to increased demand for our parts and consumables products primarily at our north american and european operations , and , to a lesser extent , increased demand for our capital equipment at our european operations . wood processing systems segment revenues from our wood processing systems segment increased $ 58.2 million to $ 95.1 million in 2017 from $ 36.9 million in 2016 , principally due to the inclusion of $ 48.4 million in revenues from our forest products business of nii fpg , which was acquired in july 2017 , and $ 1.0 million from the favorable effect of foreign currency translation . excluding the acquisition and the favorable effect of foreign currency translation , revenues increased $ 8.9 million , or 24 % , primarily related to increased demand for our products due to continued strength in the u.s. housing industry . fiber-based products revenues from our fiber-based products business increased $ 1.6 million , or 14 % , to $ 12.4 million in 2017 from $ 10.8 million in 2016 , primarily due to increased demand for our biodegradable granular products . gross profit margin gross profit margins for 2017 and 2016 were as follows : replace_table_token_7_th 27 kadant inc .
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our failure to raise capital as and when needed would impact our going concern and would have a negative impact on our financial condition and our ability to pursue our business strategy . we will need to generate significant revenues to achieve profitability , and we may never do so . acquisition of aquarius biotechnologies on january 29 , 2015 , we entered into the merger agreement with aquarius , saffron merger sub , inc. , a delaware corporation and a wholly-owned subsidiary of ours ( “ merger sub ” ) and j. carl craft , as the stockholder representative . the merger contemplated by the merger agreement ( the “ aquarius merger ” ) became effective on january 29 , 2015 , following the satisfaction or waiver of the conditions described in the merger agreement , including approval of the transaction by 100 % of aquarius ' stockholders . pursuant to the aquarius merger , the merger sub merged with and into aquarius , with aquarius surviving the merger as a wholly-owned subsidiary of ours . pursuant to the terms of the merger agreement , we were obligated to issue an aggregate of up to 5,000,000 shares of our common stock at closing , subject to adjustment as set forth in the merger agreement . at closing , we issued 4,608,020 shares ( the “ closing shares ” ) of our common stock as closing consideration . the number of closing shares may be adjusted after the closing under the terms of the merger agreement but in no event shall the number of closing shares exceed 5,000,000 shares of our common stock . in addition , subject to our right of setoff for indemnification claims , we may issue up to an additional 3,000,000 shares ( the “ additional shares ” ) of our common stock upon the achievement of certain milestones . the milestone consideration consists of ( i ) 1,500,000 shares issuable upon the dosing of the first patient in a phase iii trial sponsored by us for a product utilizing aquarius ' proprietary cochleate delivery technology and ( ii ) 1,500,000 shares issuable upon fda approval of the first nda submitted by us for a product utilizing aquarius ' proprietary cochleate delivery technology . additional ( one time ) liabilities of approximately $ 400,000 were incurred to complete the transaction and we expect that for the remainder of 2015 that the transaction will have a minimal impact on our liquidity . financial operations overview revenue to date , we have not generated any revenue . our ability to generate product revenue from our legacy products , which we do not expect to occur before 2018 , if ever , will depend significantly on the successful development and eventual commercialization of mat9001 . we will generate contract revenue resulting from the acquisition of aquarius . research and development expenses research and development expenses consist of costs incurred for the development of mat9001 and identification of product candidates under our mat8800 discovery program , which include : - 70 - · the cost of conducting pre-clinical work ; · the cost of acquiring , developing and manufacturing pre-clinical trial materials ; · costs for consultants and contractors associated with chemistry and manufacturing controls ( cmc ) , pre-clinical activities and regulatory operations ; · expenses incurred under agreements with contract research organizations , or cros , that conduct our pre-clinical trials ; and · employee-related expenses , including salaries and stock-based compensation expense for those employees involved in the research and development process . the table below summarizes our direct research and development expenses for mat9001 for the years ended december 31 , 2014 and 2013. our direct research and development expenses consist principally of external costs , such as fees paid to contractors , consultants , analytical laboratories and cros , in connection with our development work . we typically use our employee and infrastructure resources for developing mat9001 . replace_table_token_1_th 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 human trials . we believe we have optimized the manufacturing process for the active pharmaceutical ingredient of mat9001 and have completed various preclinical studies with the mat9001 active ingredient . we completed the first preclinical studies of mat9001 during the fourth quarter of 2013 with others completed during 2014. we commenced manufacturing of gmp batches of mat9001 late in the first quarter of 2014. we filed our ind for mat9001 with the fda on october 20 , 2014 and obtained approval on december 1 , 2014. we started the first human study of mat9001 during the fourth quarter of 2014. as noted above , on january 29 , 2015 we acquired aquarius . with this acquisition , we will be moving forward on developing the product candidates and technology we acquired from aquarius , including mat2203 and mat2501 . general and administrative expenses general and administrative expenses consist principally of salaries and related costs for personnel in executive and finance functions . other general and administrative expenses include facility costs , communication expenses , and professional fees for legal , patent review , consulting and accounting services . we anticipate that our general and administrative expenses will increase in 2015 due to many factors , the most significant of which include : · increased staff personnel as we expand our operations to prepare for and execute upon our research and development programs ; and - 71 - · increased expenses related to becoming a publicly-traded company , including expenses in support of compliance with the requirements of section 404 of the sarbanes-oxley act . sale of net operating losses ( nols ) income obtained from selling unused net operating losses ( nols ) and unused research tax credits under the new jersey technology business tax certificate program . story_separator_special_tag other ( income ) /expense , net other income/expense , net is largely comprised of interest income/ ( expense ) and franchise taxes . application of critical accounting policies our discussion and analysis of our financial condition and results of operations are based on our financial statements , which have been prepared in accordance with u.s. generally accepted accounting principles , or u.s. gaap . the preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of 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 . we base our estimates on historical experience , known trends and events , and various other factors that are believed to be reasonable under the circumstances , the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources . 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 financial statements appearing elsewhere in this quarterly report . we believe the following accounting policies to be most critical to the judgments and estimates used in the preparation of our financial statements . accrued research and development expenses as part of the process of preparing our financial statements , we are required to estimate our accrued expenses , particularly for product development costs . this process involves reviewing open contracts and purchase orders , communicating with our personnel to identify services that have been performed on our behalf and estimating the level of service performed and the associated cost incurred for the service when we have not yet been invoiced or otherwise notified of the actual cost . the majority of our service providers invoice us monthly in arrears for services performed or when contractual milestones are met . 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 as necessary . examples of estimated accrued research and development expenses include : · fees paid to contractors in connection with the development of manufacturing processes for mat9001 ; · fees paid to cros in connection with preclinical and clinical development activities ; · fees paid to contractors in connection with preparation of regulatory submissions ; and · fees paid to vendors related to product manufacturing , development and distribution of clinical study supplies . we base our expenses related to pre-clinical and human studies on our estimates of the services received and efforts expended pursuant to contracts with multiple development contractors that conduct and manage development work and studies 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 clinical expense . payments under some of these contracts may depend on factors such as the successful enrollment of subjects and the completion of specific study milestones . in accruing service fees , we will estimate the time period over which services will be performed , the completion of certain tasks , enrollment of subjects , study center activation 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 will adjust the accrual or prepayment 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 may result in us reporting amounts that are too high or too low in any particular period . based on limited historical experience , actual results have not been materially different from our estimates . - 72 - research and development expenses research and development expenses are charged to operations as they are incurred . stock-based compensation option grants we account for all share-based compensation payments issued to employees , directors , and non-employees using an option pricing model for estimating fair value . accordingly , share-based compensation expense is measured based on the estimated fair value of the awards on the date of grant , net of forfeitures . we recognize compensation expense for the portion of the award that is ultimately expected to vest over the period during which the recipient renders the required services to us using the straight-line single option method . in accordance with authoritative guidance , we re-measure the fair value of non-employee share-based awards as the awards vest , and recognize the resulting value , if any , as expense during the period the related services are rendered . significant factors , assumptions and methodologies used in determining fair value we apply the fair value recognition provisions of asc topic 718 , compensation-stock compensation , which we refer to as asc 718. determining the amount of share-based compensation to be recorded required us to develop estimates of the fair value of stock options as of their grant date before operating as a public company . we recognize share-based compensation expense ratably over the requisite service period , which in most cases is the vesting period of the award . calculating the fair value of share-based awards requires that we make highly subjective assumptions . we use the black-scholes option pricing model to value our stock option awards .
| as of december 31 , 2014 , we had cash totaling $ 2.6 million . 2013 private placement in july and august 2013 , we completed the 2013 private placement , under which we sold an aggregate of 15,000,000 shares of our common stock and warrants to purchase an aggregate of 7,500,000 shares of our common stock with an exercise price of $ 2.00 per share , which warrants are exercisable for a period of five years from the initial closing date . aegis capital corp. acted as the placement agent for the 2013 private placement ( the “ placement agent ” ) . the gross proceeds to us from the 2013 private placement were $ 15.0 million . warrant private placement contemporaneously with the initial closing of the 2013 private placement , we sold 500,000 private placement warrants to herbert conrad , our chairman of the board , for a purchase price of $ 0.04 per warrant . the private placement warrants have an exercise price of $ 2.00 per share . the private placement warrants were offered to all preferred stockholders of matinas biopharma prior to the 2013 merger , and only mr. conrad exercised the offer . - 76 - cash flows the following table sets forth the primary sources and uses of cash for each of the period set forth below : replace_table_token_5_th operating activities we have incurred significant costs in the area of research and development , including manufacturing , analytical , regulatory and other development costs , as the manufacturing process for our product was being developed . net cash used in operating activities was approximately $ 8.0 million for the year ended december 31 , 2014 and $ 3.0 million for the year ended december 31 , 2013. the increase in cash used in operating activities for the year ended december 31 , 2014 compared to the year ended december 31 , 2013 was primarily due to higher development costs in connection with development of the manufacturing process , clinical costs , compensation/infrastructure expenses and the
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31 as of december 31 , 2020 , our lease portfolio had the following characteristics : 799 properties located in 46 states and representing an aggregate leasable area of 5.2 million square feet ; 99.6 % occupancy ( based on leasable square footage ) ; an average remaining lease term of 10.2 years ( weighted by annualized base rent ) ; an average annual rent escalation of 1.44 % through december 31 , 2030 ( weighted by annualized base rent ) covid-19 we are closely monitoring the impact of the covid-19 pandemic on all aspects of our business , including how it will impact our tenants . the outbreak continues to significantly and adversely impact economic activity in many areas of the united states , including where we own properties and where our headquarters are located . our managed restaurants and certain of our tenants have experienced and continue to experience operational challenges as a result of the covid-19 pandemic , which has had , and we anticipate will continue to have , an impact on our and their financial condition , results of operations , liquidity and creditworthiness . the situation surrounding the covid-19 pandemic remains fluid , and we continue to actively manage our response in collaboration with tenants , government officials and business partners and assess potential impacts to our financial position and operating results , as well as potential adverse developments to our business . for further information regarding the impact of covid-19 on the company , see part ii , item 1a titled “ risk factors. ” we have collected over 99 % of our portfolio 's contractual base rent for the year ended december 31 , 2020. rent deferrals agreed to for rent owed for second quarter of 2020 were for approximately $ 1.0 million of contractual base rent as of june 30 , 2020 and were fully repaid prior to december 31 , 2020. in the third quarter of 2020 , the company agreed to rent abatements as part of lease amendments for concessions of the type described above and for lease payments due in the second quarter . these agreements for abatements represent approximately $ 1.6 million of rental revenue recognized in the second quarter of 2020. during the third quarter of 2020 , the receivables for abatements were recorded as lease incentives and will be amortized as a reduction to revenue over the amended lease terms . the company did not agree to any rent deferrals during the fourth quarter of 2020. not all tenant requests have resulted or will ultimately result in modification agreements , nor is the company forgoing its contractual rights under its lease agreements . rent collections , rent relief requests , and rent concessions to date may not be indicative of collections , requests , or concessions in any future period . 32 results of operations the results of operations for the accompanying consolidated financial statements discussed below are derived from our consolidated statements of comprehensive income ( “ comprehensive income statement ” ) found elsewhere in this annual report on form 10-k. the following discussion includes the results of our continuing operations as summarized in the table below . replace_table_token_7_th story_separator_special_tag roman ' , sans-serif ; font-size:10pt ; font-style : italic ; font-weight:400 ; line-height:138 % '' > realized gain on sale , net there was no realized gain on sale , for the years ended december 31 , 2020 or 2019 as the company did not sell any assets . income taxes during the years ended december 31 , 2020 and 2019 , income tax expense on real estate operations was $ 165 thousand and $ 152 thousand , respectively . income tax expense on real estate operations consists of state and local income taxes incurred by fcpt on its lease portfolio . as fcpt acquires additional properties in states subject to state income taxes , income tax expense will continue to increase . 34 restaurant operations restaurant revenues decreased approximately $ 4.3 million in the year ended december 31 , 2020 compared to the year ended december 31 , 2019 , due to decreased seating capacity of the restaurants as a result of the covid-19 pandemic and restrictions intended to prevent its spread . total restaurant expenses decreased approximately $ 3.4 million in the year ended december 31 , 2020 compared to the year ended december 31 , 2019 , primarily due a decrease in the hours of restaurant employees and cost of good sold in conjunction with the decreased seating capacity of the restaurants as a result of the covid-19 pandemic . during the years ended december 31 , 2020 and 2019 , income tax expense at the kerrow restaurant operating business was $ 82 thousand and $ 113 thousand , respectively . critical accounting policies and estimates the preparation of fcpt 's consolidated financial statements in conformance with accounting principles generally accepted in the united states of america requires management to make estimates on assumptions that affect the reported amounts of assets , liabilities , revenues and expenses as well as other disclosures in the financial statements . on an ongoing basis , management evaluates its estimates and assumptions ; however , actual results may differ from these estimates and assumptions , which in turn could have a material impact on our financial statements . estimates and assumptions include , among other things , subjective judgments regarding the fair values and useful lives of our properties for depreciation and lease classification purposes , and asset impairment analysis . a summary of fcpt 's accounting policies and procedures are included in note 2 of our consolidated financial statements , included in part ii , item 8 of this annual report on form 10-k. management believes the following critical accounting policies , among others , affect its more significant estimates and assumptions used in the preparation of our consolidated financial statements . real estate investments , net real estate investments , net are recorded at cost less accumulated depreciation . building components are depreciated over estimated useful lives using the straight-line method . story_separator_special_tag leasehold improvements , which are reflected on our consolidated balance sheets as a component of buildings , within land , buildings and equipment , net , are amortized over the lesser of the non-cancelable lease term or the estimated useful lives of the related assets using the straight-line method . equipment is depreciated over estimated useful lives also using the straight-line method . real estate development and construction costs for newly constructed restaurants are capitalized in the period in which they are incurred . gains and losses on the disposal of land , buildings and equipment are included in our accompanying consolidated statements of income ( “ income statement ” ) . our accounting policies regarding land , buildings and equipment , including leasehold improvements , include our judgments regarding the estimated useful lives of these assets , the residual values to which the assets are depreciated or amortized , the determination of what constitutes a reasonably assured lease term , and the determination as to what constitutes enhancing the value of or increasing the life of existing assets . these judgments and estimates may produce materially different amounts of reported depreciation and amortization expense if different assumptions were used . as discussed further below , these judgments may also impact our need to recognize an impairment charge on the carrying amount of these assets as the cash flows associated with the assets are realized , or as our expectations of estimated future cash flows change . acquisition of real estate the company evaluates acquisitions to determine whether transactions should be accounted for as asset acquisitions or business combinations in accordance with financial accounting standards board ( “ fasb ” ) accounting standards update ( “ asu ” ) 2017-01. the company has determined the land , building , site improvements , and in-places leases ( if any ) of assets acquired were each single assets as the building and property improvements are attached to the land and can not be physically removed and used separately from the land without incurring significant costs or reducing their fair value . additionally , the company has not acquired a substantive process used to generate outputs . as substantially all of the fair value of the gross assets acquired are concentrated in a single identifiable asset and there were no processes acquired , the acquisitions do not 35 qualify as businesses and are accounted for as asset acquisitions . related transaction costs are generally capitalized and amortized over the useful lives of the acquired assets . the company allocates the purchase price ( including acquisition and closing costs ) of real estate acquisitions to land , building , and improvements based on their relative fair values , as-if-vacant , and lease intangibles ( if any ) . in making estimates of fair values for this purpose , the company uses a third-party specialist that obtains various information about each property , as well as the pre-acquisition due diligence of the company and prior leasing activities at the site . lease intangibles lease intangibles , if any , acquired in conjunction with the purchase of real estate represent the value of in-place leases and above- or below-market leases . for real estate acquired subject to existing lease agreements , acquired lease intangibles are valued based on the company 's estimates of costs related to tenant acquisition and the asset carrying costs , including lost revenue , that would be incurred during the time it would take to locate a tenant if the property were vacant , considering current market conditions and costs to execute similar leases at the time of the acquisition . above-market and below-market lease intangibles are recorded based on the present value of the difference between the contractual amounts to be paid pursuant to the leases at the time of acquisition of the real estate and the company 's estimate of current market lease rates for the property , measured over a period equal to the remaining initial term of the lease . in-place lease intangibles are amortized on a straight-line basis over the remaining initial term of the related lease and included in depreciation and amortization expense . above-market lease intangibles are amortized over the remaining initial terms of the respective leases as a decrease in rental revenue . below-market lease intangibles are generally amortized as an increase to rental revenue over the remaining initial term of the respective leases , but may be amortized over the renewal periods if the company believes it is likely the tenant will exercise the renewal option . should a lease terminate early , the unamortized portion of any related lease intangible is immediately recognized as an impairment loss included in depreciation and amortization expense . to date , the company has not had significant early terminations . impairment of long-lived assets land , buildings and equipment and certain other assets , including definite-lived intangible assets , are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable . such events and changes may include macroeconomic conditions , including those caused by global pandemics , like the recent coronavirus disease pandemic ( “ covid-19 ” ) and restrictions intended to prevent its spread , which may result in property operational disruption and indicate that the carrying amount may not be recoverable . recoverability of assets to be held and used is measured by a comparison of the carrying amount of the assets to the future undiscounted net cash flows expected to be generated by the assets . identifiable cash flows are measured at the lowest level for which they are largely independent of the cash flows of other groups of assets and liabilities , generally at the restaurant level . if these assets are determined to be impaired , the amount of impairment recognized is measured by the amount by which the carrying amount of the assets exceeds their fair value . fair value is generally determined by appraisals or sales prices of comparable assets .
| during the year ended december 31 , 2020 , amortization of above and below market rents , and lease incentives decreased rental revenue by $ 1.3 million , as compared to $ 0.2 million for the year ended december 31 , 2019 . 33 general and administrative expense general and administrative expense is comprised of costs associated with personnel , office rent , legal , accounting , information technology and other professional and administrative services in association with our real estate operations , our reit structure and public company reporting requirements . general and administrative expense increased $ 1.1 million in the year ended december 31 , 2020 compared to the year ended december 31 , 2019 , primarily as a result of a $ 1.0 million increase in compensation and employee benefits due to increased headcount , $ 0.4 million increase in accounting , advisory , and recruiting professional fees , offset by a $ 0.2 million decrease in non-cash stock compensation expense . depreciation and amortization expense depreciation and amortization expense represents the depreciation on real estate investments and equipment that have estimated lives ranging from 2 to 55 years . depreciation and amortization expense increased by approximately $ 3.2 million for the year ended december 31 , 2020 compared to the year ended december 31 , 2019 , primarily due to the acquisition of 100 restaurant properties acquired in 2020 , and the depreciation on 97 properties acquired in 2019 that incurred a full year of depreciation . property expense upon adoption of asc 842 , we record all tenant expenses , both reimbursed and non-reimbursed , to property expense . we also record initial direct costs ( lease negotiation and other previously capitalizable transaction expenses ) as property expenses . other property expenses consist of expenses incurred on vacant properties , abandoned deal costs , and franchise taxes . during the year ended december 31 , 2020 , we recorded property expenses of $ 3.5 million , of which $ 2.3 million was reimbursed by tenants . during the year ended december 31 , 2019 , we recorded property expenses of $ 1.6 million , of which $ 0.9 million was reimbursed by tenants . the increase in non-reimbursed
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during fiscal years 2015 and 2014 , fresh lemon sales were $ 67.0 million and $ 69.8 million , respectively , on 2.7 million and 2.9 million cartons of lemons sold at average per carton prices of $ 24.81 and $ 24.07 , respectively . the higher average per carton price in fiscal year 2015 compared to fiscal year 2014 was primarily due to more favorable overall market conditions . additionally , lemon by-products , shipping and handling , commissions and other lemon sales were $ 12.0 million in fiscal year 2015 compared to $ 9.9 million in fiscal year 2014 . · avocados : the decrease in fiscal year 2015 was primarily due to lower prices partially offset by increased production . the california avocado crop typically experiences alternating years of high and low production due to plant physiology . during fiscal years 2015 and 2014 , 7.0 million and 6.7 million pounds of avocados were sold at average per pound prices of $ 1.02 and $ 1.10 , respectively . lower prices in fiscal year 2015 were primarily due to increased supply in the marketplace . additionally , fiscal year 2014 revenue included a $ 0.1 million avocado crop insurance claim settlement . · navel and valencia oranges : the decrease in fiscal year 2015 was primarily due to lower prices and decreased volume of oranges sold . during fiscal years 2015 and 2014 , orange sales were $ 5.6 million and $ 7.6 million , respectively , on 744,000 and 754,000 40-pound carton equivalents of oranges sold at average per carton prices of $ 7.56 and $ 10.08 , respectively . the higher prices in fiscal year 2014 were primarily due to decreased market supply resulting from a period of freezing temperatures in california 's san joaquin valley during december 2013 . 35 · specialty citrus and other crops : the decrease in fiscal year 2015 is primarily due to lower price and volume of pistachios sold . in fiscal years 2015 and 2014 , we sold 70,000 and 111,000 pounds of pistachios at average per pound prices of $ 4.33 and $ 6.15 , respectively . rental operations revenue was $ 5.1 million in fiscal year 2015 compared to $ 4.6 million in fiscal year 2014. the increase in fiscal year 2015 was primarily due to additional rental revenue from 65 newly completed agricultural workforce housing units that we began renting in may 2015 and increased organic recycling and other revenue . real estate development revenue was $ 0.1 million in fiscal year 2015 compared to $ 0.3 million in fiscal year 2014. the decrease in fiscal year 2015 revenue compared to fiscal year 2014 is primarily due to lower alfalfa production at our windfall farms development property . in fiscal years 2015 and 2014 , we removed approximately 200 acres of alfalfa and planted vineyards . costs and expenses total costs and expenses for fiscal year 2015 were $ 95.7 million compared to $ 93.6 million for fiscal year 2014. this 2 % increase of $ 2.1 million was primarily attributable to increases in our agribusiness costs of $ 2.9 million partially offset by decreases in our real estate development costs and selling , general and administrative expenses of , in aggregate , $ 1.1 million . costs associated with our agribusiness division include packing costs , harvest costs , growing costs , costs related to the lemons we procure from third-party growers and depreciation expense . these costs are discussed further below : replace_table_token_9_th · packing costs : packing costs consist of the costs to pack lemons for sale such as labor and benefits , cardboard cartons , fruit treatments , packing and shipping supplies and facility operating costs . the increase in fiscal year 2015 is primarily due to $ 2.5 million of costs at our yuma , arizona packinghouse which was acquired in june 2014 and higher per carton packing costs . in fiscal years 2015 and 2014 , we packed and sold 2.7 million and 2.9 million cartons of lemons at average per carton costs of $ 7.65 and $ 6.18 , respectively . the increase in average per carton costs is primarily the result of decreased volume of fresh lemons packed and sold . · harvest costs : the increase in fiscal year 2015 was primarily attributable to higher lemon harvest costs and higher avocado and olive harvest volumes compared to fiscal year 2014 . · growing costs : growing costs , also referred to as cultural costs , consist of orchard maintenance costs such as cultivation , fertilization and soil amendments , pest control , pruning and irrigation . the increase in fiscal year 2015 is primarily due to increased fertilization and soil amendments and pest control costs of $ 0.7 million and $ 0.3 million , respectively , partially offset by decreased lease expense and pruning costs of $ 0.6 million and $ 0.1 million , respectively , compared to fiscal year 2014 . · third-party grower costs : we sell lemons that we grow and lemons that we procure from other growers . the cost of procuring lemons from other growers is referred to as third-party grower costs . of the 2.7 million and 2.9 million cartons sold during fiscal years 2015 and 2014 , respectively , 0.9 million ( 36 % ) and 1.0 million ( 36 % ) were procured from third-party growers at average per carton prices of $ 22.36 and $ 21.00 , respectively . additionally , we incurred $ 1.2 million of costs for purchased , packed fruit for resale compared to $ 1.6 million in fiscal year 2014 . story_separator_special_tag · depreciation expense in fiscal year 2015 was $ 0.5 million higher than fiscal year 2014 primarily due to a net increase in assets placed into service and the acquisition of our yuma , arizona packinghouse in june 2014. real estate development expenses for fiscal year 2015 were $ 1.3 million compared to $ 1.8 million in fiscal year 2014. in july 2014 , we recognized an impairment charge of $ 0.4 million on our centennial real estate development project . there were no impairment charges recognized in fiscal year 2015 . 36 selling , general and administrative expenses for fiscal year 2015 were $ 13.8 million compared to $ 14.3 million for fiscal year 2014. this 4 % decrease of $ 0.5 million is primarily attributable to the following : · $ 1.3 million net decrease in salaries , benefits and incentive compensation primarily due to incentive compensation decreases as a result of a decrease in operating income in fiscal year 2015 compared to fiscal year 2014 ; and · $ 0.9 million increase in legal and consulting expenses associated with our east area i real estate development project , which resulted in entering into a real estate development joint venture with the lewis group of companies on november 10 , 2015. other income ( expense ) other income for fiscal year 2015 was $ 6.5 million compared to $ 0.7 million for fiscal year 2014. the $ 5.8 million increase in income is primarily the result of : · $ 0.2 million increase in net interest expense ; · $ 5.0 million gain on the sale of stock in calavo growers , inc. ; and · $ 0.9 million gain on the sale of wilson ranch . income taxes we recorded an income tax provision of $ 4.0 million for fiscal year 2015 on pre-tax income of $ 11.1 million compared to an income tax provision of $ 3.6 million for fiscal year 2014 on pre-tax income of $ 10.6 million . our effective tax rate is 35.9 % for fiscal year 2015 compared to an effective rate of 33.8 % for fiscal year 2014. fiscal year 2014 compared to fiscal year 2013 revenues total revenue for fiscal year 2014 was $ 103.5 million compared to $ 84.9 million for fiscal year 2013. the 22 % increase of $ 18.6 million was primarily the result of increased agribusiness revenues , as detailed below : replace_table_token_10_th · lemons : the increase in fiscal year 2014 was primarily the result of higher prices for fresh lemons sold partially offset by decreased volume . during fiscal years 2014 and 2013 , fresh lemon sales were $ 69.8 million and $ 51.5 million , respectively , on 2.9 million and 3.1 million cartons of lemons sold at average per carton prices of $ 24.07 and $ 16.61 , respectively . the higher average per carton price in fiscal year 2014 compared to fiscal year 2013 was primarily due to more favorable overall market conditions . additionally , lemon by-products and other lemon sales were $ 9.9 million in fiscal year 2014 compared to $ 6.6 million in fiscal year 2013 . · avocados : the decrease in fiscal year 2014 was primarily due to decreased production partially offset by higher prices . the california avocado crop typically experiences alternating years of high and low production due to plant physiology . during fiscal years 2014 and 2013 , 6.7 million and 15.0 million pounds of avocados were sold at average per pound prices of $ 1.10 and $ 0.78 , respectively . higher prices in fiscal year 2014 were due to a decreased supply in the marketplace . additionally , fiscal year 2014 revenue included a $ 0.1 million avocado crop insurance claim settlement . 37 · navel and valencia oranges : the increase in fiscal year 2014 was primarily due to higher prices partially offset by decreased volume . during fiscal years 2014 and 2013 , orange sales were $ 7.6 million and $ 5.5 million , respectively , on 754,000 and 799,000 40-pound carton equivalents of oranges sold at average per carton prices of $ 10.08 and $ 6.88 , respectively . the increase in prices in fiscal year 2014 was primarily due to decreased market supply resulting from a period of freezing temperatures in california 's san joaquin valley during december 2013 . · specialty citrus and other crops : the decrease in fiscal year 2014 was primarily due to decreases in peach , plum and olive revenues . in fiscal year 2014 , the peach and plum orchards we leased at the sheldon ranch were sold by the owners , resulting in a $ 0.4 million decrease in revenues . additionally , other crop revenue decreased $ 0.4 million in fiscal year 2014 primarily due to decreased volume as a result of removing 80 acres of olive orchards at the sheldon ranch . rental operations revenue was $ 4.6 million in fiscal year 2014 compared to $ 4.3 million in fiscal year 2013. the increase in fiscal year 2014 was primarily due to rent increases for residential housing and agricultural land leases . real estate development revenue was $ 0.3 million in fiscal year 2014 compared to $ 0.6 million in fiscal year 2013. the decrease in fiscal year 2014 revenue compared to fiscal year 2013 is primarily due to lower alfalfa production at our windfall farms development property . costs and expenses total costs and expenses for fiscal year 2014 were $ 93.6 million compared to $ 79.5 million for fiscal year 2013. this 18 % increase of $ 14.1 million was primarily attributable to increases in our agribusiness costs , real estate development costs and selling , general and administrative expenses of $ 10.7 million , $ 0.4 million and $ 2.4 million , respectively . costs associated with our agribusiness division include packing costs , harvest costs , growing costs , costs related to the lemons we procure from third-party growers and depreciation expense .
| for fiscal year 2015 , our lemon operations costs were $ 61.8 million compared to $ 59.4 million for fiscal year 2014. the 4 % increase of $ 2.4 million primarily consists of the following : · packing costs for fiscal year 2015 were $ 2.7 million higher than fiscal year 2014 . · harvest costs for fiscal year 2015 were $ 0.3 million higher than fiscal year 2014 . · growing costs for fiscal year 2015 were $ 0.7 million higher than fiscal year 2014 . · third-party grower costs for fiscal year 2015 were $ 1.3 million lower than fiscal year 2014. other agribusiness for fiscal year 2015 our other agribusiness segment revenue was $ 16.1 million compared to $ 18.8 million for fiscal year 2014. the 14 % decrease of $ 2.7 million primarily consists of the following : · avocado revenue for fiscal year 2015 was $ 0.3 million lower than fiscal year 2014 . · navel and valencia orange revenue in fiscal year 2015 was $ 2.0 million lower than in fiscal year 2014 . · specialty citrus and other crop revenue for fiscal year 2015 was $ 0.4 million lower than fiscal year 2014. costs and expenses associated with our other agribusiness segment include harvest and growing costs . our other agribusiness costs and expenses for fiscal year 2015 were similar to fiscal year 2014 at $ 12.1 million : · harvest costs for fiscal year 2015 were $ 0.4 million higher than fiscal year 2014 . · growing costs for fiscal year 2015 were $ 0.4 million lower than fiscal year 2014. lemon and other agribusiness depreciation and amortization for fiscal year 2015 were $ 3.3 million compared to $ 2.8 million for fiscal year 2014. the 18 % increase of $ 0.5 million was primarily due to a net increase in assets placed into service and the acquisition of our yuma , arizona packinghouse in june 2014. rental operations our rental operations segment had revenues of approximately $ 5.1 million and $ 4.6 million in fiscal years 2015 and 2014 , respectively . the $ 0.5 million increase in fiscal year 2015 was primarily due to rental
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this section provides an analysis of our results of operations for the year ended june 30 , 2012 ( our first full fiscal year since the year end change , which we also refer to as `` fiscal year 2012 '' or `` current fiscal year '' ) , the six month transition period ended june 30 , 2011 and the years ended december 31 , 2010 and 2009 on both a consolidated and segment basis . the unaudited information for the year ended june 30 , 2011 ( which reflects our combined results for the six months ended december 31 , 2010 and the six month transition period of january 1 , 2011 through june 30 , 2011 ) and the six months ended june 30 , 2010 is presented herein for comparative purposes . our segments are msg media , msg entertainment and msg sports . liquidity and capital resources . this section provides a discussion of our financial condition , as well as an analysis of our cash flows for the years ended june 30 , 2012 and 2011 , six months ended june 30 , 2011 and 2010 and years ended december 31 , 2010 and 2009 . the discussion of our financial condition and liquidity includes summaries of ( i ) our primary sources of liquidity and ( ii ) our contractual obligations and off balance sheet arrangements that existed at june 30 , 2012 . seasonality of our business . this section discusses the seasonal performance of our msg sports and msg entertainment segments . recently issued accounting pronouncements and critical accounting policies . this section includes a discussion of accounting policies considered to be important to our financial condition and results of operations and which require significant judgment and estimates on the part of management in their application . in addition , all of our significant accounting policies , including our critical accounting policies , are discussed in the notes to our consolidated financial statements included in item 8 of this annual report on form 10-k. business overview the company is a fully-integrated sports , entertainment and media business comprised of dynamic and powerful assets and brands . madison square garden 's business grew from the legendary venue widely known as `` the world 's most famous arena . '' the company is comprised of three business segments : msg media , msg entertainment and msg sports , which are strategically aligned to work together to drive our overall business , which is built on a foundation of iconic venues and compelling content , including live sports and entertainment events that we create , produce , present and or distribute through our programming networks and other media assets . a description of our segments follows : msg media msg media , which represented approximately 48 % of our consolidated revenues for the year ended june 30 , 2012 , is a leader in production and content development for multiple distribution platforms , including content originating from our venues . msg media consists of the company 's regional sports networks , msg network and msg+ , collectively the `` msg networks , '' and `` fuse '' , a national television network dedicated to music . msg networks also include high-definition channels , msg hd and msg+ hd , and fuse includes its high-definition channel , fuse hd . msg networks are home to seven professional sports teams : the knicks , rangers , liberty , islanders , devils , sabres and red bulls , as well as to our critically acclaimed original and other programming . fuse focuses on music-related programming , including coverage of premier artists , events and festivals , original content and concerts . msg media is also responsible for managing interactive and digital initiatives across all business segments . our interactive businesses are the network of web sites ( including msg.com , thegarden.com , beacontheatre.com , radiocity.com , chicagotheatre.com and fuse.tv , as well as sites dedicated to our sports teams ( nyknicks.com , newyorkrangers.com , knicksnow.com , blueshirtsunited.com and newyorkliberty.com ) ) and mobile , video on demand and digital platforms for all madison square garden properties . 38 revenue sources our msg media segment earns revenues from two primary sources : affiliation fees and advertising . affiliation fees , which are the fees we earn from distributors that carry our programming , constitute the significant majority of the msg media segment revenues . fees paid by advertisers to show advertising during our programs make up a smaller portion of msg media segment overall revenues . affiliation fees we earn affiliation fees from certain distributors , that carry our programming services . the fees we receive depend largely on the demand from subscribers for our programming . affiliation fees from cablevision accounted for more than 10 % of the company 's consolidated revenues during the years ended june 30 , 2012 and 2011 , the six months ended june 30 , 2011 and 2010 and the years ended december 31 , 2010 and 2009. advertising revenues we earn advertising revenues through the sale of commercial time to advertisers during our programming or through the sale of program sponsorship rights . we typically sell advertising time through our in-house staff and , to a lesser extent , through agencies . expenses the principal expenses of our msg media segment are rights fees , which we pay to sports teams in order to carry their games and others who hold rights to the programming content ( such as movies , concerts and other programming ) we telecast ; other direct programming costs , which include the salaries of on-air personalities , producers and technicians ; and the costs of studio , broadcast and transmission facilities . we also allocate a portion of our corporate expenses to the msg media segment . story_separator_special_tag programming acquisition costs ( rights fees ) msg networks obtains telecast rights for the sports teams whose games we distribute , the cost of which we recognize in proportion to the economic benefits received , which is typically on a straight-line basis over the term of the applicable contract or license period . we negotiate directly with the teams to determine the fee and other provisions of the rights arrangements . rights fees for sports programming are influenced by , among other things , the size and demographics of the geographic area in which the programming is distributed , and the popularity and or the on-court or on-ice competitiveness of a team . for purposes of reporting our segment information the rights fees we pay to the company 's owned teams are recognized as inter-segment charges to our msg media segment . these inter-segment charges are eliminated in the consolidated financial statements . in addition to the rights for our knicks , rangers and liberty franchises , we have long-term rights agreements in place with the islanders , devils and sabres . in addition to rights fees for sports telecasts , we must also pay to acquire the rights to carry or produce other events or programming , such as movies , concerts or specials . other direct programming costs other direct programming costs include , but are not limited to the salaries of our on-air personalities , producers , directors , technicians , writers and other creative and technical staff , as well as expenses associated with location costs and maintaining studios and transmission facilities . certain owned original programming is produced for the company 's networks by independent production companies . owned original programming costs are expensed as incurred and included in the other direct programming costs described above . marketing and advertising costs we incur costs to market our media business and our programs through outdoor and newspaper advertisements , television and radio advertising and online marketing . factors affecting operating results the financial performance of our msg media segment is affected by the affiliation arrangements we are able to negotiate with distributors and also by the advertising rates we can charge advertisers . these factors in turn depend on the popularity and or on-court and on-ice competitiveness of the professional sports teams carried on msg networks as well as the cost and the attractiveness of the programming content generally on msg networks and fuse . 39 due largely to our long-term rights agreements and the generally recurring nature of our affiliation arrangements , the msg networks have consistently produced operating profits over a number of years . see `` item 1a . risk factors — risks relating to our media business — the success of our media business also depends on affiliation fees , and on agreements with a limited number of distributors of our programming , the loss of which or renewal of which on less favorable terms could negatively affect our results of operations `` and `` comparison of the six months ended june 30 , 2011 versus the six months ended june 30 , 2010 — consolidated results of operations — revenues '' for a discussion of risks associated with our affiliation agreements and the expiration of certain affiliation agreements . advertising revenues are less predictable and can vary based upon a number of factors , including general economic conditions . our msg media segment 's future performance is also dependent on the u.s. and global economies , the impact of direct competition , and the relative strength of our current and future advertising customers . continuation of the economic downturn may lead to lower demand for television advertising . we have already experienced some of these effects during this economic downturn and any continuation could adversely affect our future results of operations , cash flows and financial position . msg entertainment our msg entertainment segment , which , net of inter-segment revenues , represented 20 % of our consolidated revenues for the year ended june 30 , 2012 , is one of the country 's leaders in live entertainment . msg entertainment presents or hosts live entertainment events in our diverse collection of venues , including concerts , family shows , performing arts and special events . these venues include the garden , the theater at madison square garden , radio city music hall , the beacon theatre , the chicago theatre and the wang theatre . in june 2012 , we expanded our geographic footprint with the purchase of the forum in inglewood , california and have plans to renovate the historic venue , which serves the greater los angeles area . the scope of our collection of venues enables us to showcase acts that cover a wide spectrum of genres and popular appeal , such as concerts , including shows by artists such as prince , elton john , phish , the allman brothers band , bruce springsteen , lady gaga , taylor swift , justin bieber , swedish house mafia , bon iver and one direction ; family shows , such as yo gabba gabba ! , sesame street live and disney 's phineas and ferb ; special events such as the tony awards and amnesty international 's secret policeman 's ball , and appearances by the dalai lama ; and theatrical productions , such as peter pan and a christmas story . msg entertainment also creates , produces and or presents live productions , including the radio city christmas spectacular , featuring the rockettes , that are performed in the company 's and other venues . the radio city christmas spectacular is the top grossing live holiday family show in north america and was seen by approximately 1.3 million people nationwide during the 2011 holiday season . we have also co-produced or presented events by the world-renowned cirque du soleil .
| the net increase is attributable to the following : increase in msg media segment expenses $ 3,400 increase in msg entertainment segment expenses 1,750 decrease in msg sports segment expenses ( 8,775 ) increase in other expenses 9,176 $ 5,551 increase in other expenses discussed above primarily reflects an increase in certain costs related to being an independent public company , which were not allocated to the company 's business segments . depreciation and amortization depreciation and amortization for the year ended december 31 , 2010 decreased $ 4,429 , or 7 % , to $ 56,907 as compared to the prior year . the decline reflects a decline in depreciation and amortization on property and equipment of $ 2,506 primarily due to a lower depreciable asset base . additionally , amortization of intangible assets declined by $ 1,923 , primarily due to certain intangible assets becoming fully amortized . interest expense , net interest expense , net for the year ended december 31 , 2010 increased $ 2,340 , or 209 % , to $ 3,457 as compared to the prior year primarily driven by higher interest expense related to fees associated with the company 's credit facility . miscellaneous income miscellaneous income for the years ended december 31 , 2010 and 2009 reflects a dividend of $ 2,000 received from an investment accounted for under the cost method during each of the years ended december 31 , 2010 and 2009. for the year ended december 31 , 2010 , miscellaneous income also reflects a gain from insurance proceeds of $ 1,147 , which relates to certain fully amortized theater show assets that were destroyed in a flood at a storage facility . income taxes income tax expense for the year ended december 31 , 2010 of $ 51,611 differs from the income tax expense derived from applying the federal statutory tax rate to pretax income due principally to state income taxes , as well as a tax benefit of $ 1,403 resulting from nontaxable disability insurance recoveries net of nondeductible disability insurance premiums expense , a tax benefit of $ 2,148 from the domestic production activities deduction , and a tax benefit of $ 3,862 resulting from a change in the tax rate used to measure deferred taxes , partially offset by a tax expense of $ 806 relating to nondeductible expenses . the effective
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36 while these budgetary considerations have put downward pressure on growth in the defense industry and will likely continue to do so , we believe that much of our business is well positioned in areas that the dod has indicated are areas of focus for future defense spending to help the dod meet its critical future capability requirements for protecting u.s. security and the security of our allies in the years to come . in transportation , we continue to believe that our products and services are critical to our customers to ensure that they maximize revenue and efficiencies in fare collection in a resource constrained environment . some customers have responded to the current market environment by seeking financing for their projects from the system supplier . an example of this is our contract with the chicago transit authority , awarded in late 2011. we have designed and manufactured a new fare collection system for the chicago transit authority and will receive monthly payments for the system over an approximate ten-year period which began as of january 1 , 2014. while future defense plans , changes in defense spending levels and changes in spending for mass transit projects could have a materially adverse effect on our consolidated financial position , we have and plan to continue to make strategic investments and acquisitions to align our businesses in growth areas of our respective markets that we believe are the most critical priorities and mission areas for our customers . segment overview cubic transportation systems cts is a systems integrator of payment and information technology and services for intelligent travel solutions . we deliver integrated systems for transportation and traffic management , delivering tools for travelers to choose the smartest and easiest way to travel and pay for their journeys , and enabling transportation authorities and agencies to manage demand across the entire transportation network all in real time . we offer fare collection and revenue management devices , software , systems and multiagency , multimodal integration technologies , as well as a full suite of operational services that help agencies and operators efficiently collect fares and revenue , manage operations , reduce revenue leakage and make transportation more convenient . through our nextbus and intelligent transport management solutions ( itms ) businesses , respectively , we also deliver real-time passenger information systems for tracking and predicting vehicle bus arrival times and we are a leading provider of urban and inter-urban intelligent transportation and enforcement solutions and technology and infrastructure maintenance services to uk and other international city , regional and national road and transportation agencies . through our urban insights business we use big data and predictive analytics technology and a consulting model to help the transportation industry improve operations , reduce costs and better serve travelers . the transportation markets we serve are undergoing a substantial change . mounting pressure on transportation authorities to stretch their operating budgets is fueling a trend toward outsourced services and payment systems that lower operating cost . we believe we are positioned at the forefront of this change . we believe that we hold the leading market position in large-scale automated fare payment and revenue management systems and services for major metropolitan areas . cts has delivered over 20 regional back office operations which together serve over 38 million people every day in major markets around the world . we have implemented and , in many cases , operate automated fare payment and revenue management systems for some of the world 's largest transportation systems , examples include london ( oyster/contactless payment® ) , the chicago region ( ventra® ) , the san francisco bay area ( clipper® ) , the los angeles region ( tap® ) , the new york region ( metrocard ) , the sydney region ( opal card ) and the brisbane region ( go card ) . we have also recently been awarded a contract by the new hampshire state department of transportation to deploy our back-office system for the purposes of toll revenue collection . through our nextbus , itms and urban insights businesses we provide advanced transportation operational management and analytics capabilities and related services to over 150 customers including organizations such as transport for london , transport scotland , highways england , transport for greater manchester , transport for new south wales , los angeles metro , san francisco muni , the toronto transit commission and the metropolitan boston transit administration . in addition to helping us secure similar projects in new markets , our comprehensive suite of new technologies and capabilities enables us to benefit from a recurring stream of revenues in established markets resulting from innovative new services , technology obsolescence , equipment refurbishment and the introduction of new or adjacent applications . in 2015 , revenues from services provided by cts were $ 315.4 million , or 56 % of cts sales . 37 we are currently designing and building major new systems in vancouver , ireland and new hampshire . typically , profit margins during the design and build phase of major projects are lower than during the operate-and-maintain phase . this has in the past caused , and may in the future cause , swings in profitability from period to period . in addition , cash flows are often negative during portions of the design-and-build phase , until major milestones are reached and cash payments are received . this was the case in 2014 , for our chicago and vancouver contracts as we experienced negative cash flows from these two major projects , however , in 2015 cash flows from our north american operations were positive . each of these projects includes a ten-year operate and maintain period and we expect cash flows from these projects to be positive in future years . cash payment terms offered by our mass transit customers in a competitive environment are sometimes not favorable to us . story_separator_special_tag the customers ' budget constraints often result in less funding available for the build of a new system , with more funds becoming available when the system becomes operational . this , coupled with the inherent risks in managing large infrastructure projects , can yield negative cash flows and lower and less predictable profit margins on contracts during the design and build phase . conversely , during the operate-and-maintain phase , revenues and costs are typically more predictable and profit margins tend to be higher . gross profit margins from services sales in cts were 32 % and 24 % for fiscal years 2015 and 2014 , respectively , and gross profit margin from product sales was 25 % and 28 % in 2015 and 2014 , respectively . generally , the trend toward more services revenues has helped to generate higher profit margins from the segment in recent years than in the past ; however in 2014 service gross margins were lower than product gross margins mostly due to the increased costs of the first year of providing services on the chicago contract . in 2015 the service gross margin returned to a more typical level as the start-up phase of the chicago contract was completed . the mix of product and services sales can produce fluctuations in margin from period-to-period ; however , we expect the trend of increasing services sales to continue in the next several years . most of our sales in cts for fiscal year 2015 were from fixed-price contracts . however , some of our service contracts provide for variable payments , in addition to the fixed payments , based on meeting certain service level requirements and , in some cases , based on system usage . service level requirements are generally contingent upon factors that are under our control , while system usage payments are contingent upon factors that are generally not under our control , other than basic system availability . development and system integration contracts in cts are usually accounted for on a percentage-of-completion basis using the cost-to-cost method to measure progress toward completion , which requires us to estimate our costs to complete these contracts on a regular basis . our actual results can vary significantly from these estimates and changes in estimates can result in significant swings in revenues and profitability from period to period . generally , we are at risk for increases in our costs , unless an increase results from customer- requested changes . at times , there can be disagreement with a customer over who is responsible for increases in costs . in these situations we must use judgment to determine if it is probable that we will recover our costs and any profit margin . revenue under contracts for services in cts is generally recognized either as services are performed or when a contractually required event has occurred , depending on the contract . revenue under such contracts is generally recognized on a straight-line basis over the period of contract performance , unless evidence suggests that the revenue is earned or the obligations are fulfilled in a different pattern . costs incurred under these services contracts are expensed as incurred , and may vary from period to period . incentive fees included in some of our cts service contracts are recognized when they become fixed and determinable based on the provisions of the contract . as described above , often these fees are based on meeting certain contractually required service levels or based on system usage levels . contractual terms can also result in variation of both revenues and expenses , resulting in fluctuations in earnings from period to period . for the new fare collection system for the chicago transit authority , the contract specifies that we would not begin to be paid until we entered the service period . in accordance with authoritative accounting literature , we did not begin recognizing revenue on this contract until it entered the service period in august 2013. as of september 30 , 2015 , we had capitalized $ 73.0 million , net , in direct costs associated with developing the new fare collection system . selling , general and administrative ( sg & a ) costs associated with this contract are not being capitalized , but are being expensed as incurred . capitalized costs are being recognized as cost of sales based upon the ratio of revenue recorded during a period compared to the revenue expected to be recognized over the term of the contract . cubic global defense services cgd services is a leading provider of highly specialized support services to the u.s. government and allied nations . services provided include live , virtual and constructive training , real-world mission rehearsal exercises , professional military education , intelligence support , information technology , information assurance and related cyber support , development of military doctrine , consequence management , infrastructure protection and force protection , as well as support to field operations , force deployment and redeployment and logistics . cgd services is a highly specialized and customer centric business which we believe knows how to meet the unique requirements of each of its many customers . in the government services marketplace , reputation , quality and relationships are always important . we uphold our credentials for professional excellence by consistently providing high-value and cost-effective support for our customers . 38 cgd services is focused on customers within the u.s. government , extending to the dod , all branches of the u.s. armed services , the department of homeland security , non-military agencies , and allied nations under fms contracts funded by the u.s. government . cgd services is the prime contractor at more than 40 military training and support facilities and supports some of the largest exercises and training events each year including the largest annual constructive simulation training event under our korea battle simulation center ( kbsc ) support contract . cubic won the recomplete of the kbsc contract which has a base and four option periods . the segment supports all four of the u.s.
| cts operating income increased by 15 % predominantly due to improvements in operating results on service contracts in north america . businesses we acquired in all of our segments in 2015 and 2014 generated operating losses of $ 3.9 million in 2015 compared to $ 8.3 million in 2014. unallocated corporate and other costs for fiscal 2015 were $ 25.5 million in 2015 compared to $ 8.0 million in 2014. the increase in 40 unallocated corporate costs is primarily related to strategic and it system resource planning as part of our one cubic initiative totaling $ 13.2 million , $ 3.0 million of consulting and legal fees related to an investigation conducted by the audit committee of the board of directors and a $ 1.4 million increase in stock-based compensation that was not allocated to segment operations . the average exchange rates between the prevailing currencies in our foreign operations and the u.s. dollar resulted in a decrease in operating income of $ 7.8 million in 2015 compared to 2014. in 2015 we exited our global asset tracking business . this business did not generate any significant revenue in 2015 or 2014 , and had $ 2.3 million of operating losses in each of those years . a correction of immaterial errors reduced operating income in the first quarter of fiscal 2015 by $ 2.1 million . see note 1 , summary of significant accounting policies of the notes to condensed consolidated financial statements in item 8 , financial statements and supplementary data of this form 10-k for further detail . operating income was $ 92.5 million in 2014 compared to $ 40.7 million in 2013 , an increase of 127 % . cgd services operating income increased by $ 43.9 million in 2014 , because we recorded a goodwill impairment charge of $ 50.9 million in 2013. excluding the impact of the 2013 goodwill impairment , cgd services operating income decreased primarily due to reduced sales and reduced profit margins on contracts
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our strong financial position allowed us to pay a special cash dividend of $ 16.6 million in december 2013 , an increase of 50 % on a per-share basis over the special cash dividend paid in december 2012. the total value of inventories on hand at the end of fiscal 2014 increased by $ 24.1 million , or 15.2 % , in comparison to the total value of inventories on hand at the end of fiscal 2013. acquisition costs for tree nuts have increased in the 2013 crop year ( which falls into our 2014 fiscal year ) , and acquisition costs remain at levels that are significantly higher than historical averages . while we completed our procurement of the current year crop of inshell walnuts during the second quarter of fiscal 2014 , the total payments to our walnut growers were not determined until the third quarter of fiscal 2014 , which is typical . the final prices paid to the walnut growers were based upon current market prices and other factors , such as crop quality . at june 26 , 2014 there are no amounts due to walnut growers . story_separator_special_tag font-family : times new roman '' > net rental and miscellaneous expense was $ 2.8 million for fiscal 2014 compared to $ 1.6 million for fiscal 2013. this change was primarily due to increased maintenance expense on the exterior of our office building in elgin , illinois . this maintenance project is approximately 40 % complete and we expect the project to conclude in fiscal 2015. income tax expense income tax expense was $ 13.5 million , or 34.0 % of income before income taxes , for fiscal 2014 compared to $ 13.5 million , or 38.3 % of income before income taxes for fiscal 2013. the decrease in the effective tax rate of fiscal 2014 is mainly due to the tax benefit of losses realized through the company 's divestiture of its equity investment in arma energy , inc. ( aei ) , an unconsolidated variable interest entity , and cancellation of a secured promissory note due from aei , in the third quarter of fiscal 2014. net income net income was $ 26.3 million , or $ 2.38 basic and $ 2.36 diluted per common share , for fiscal 2014 , compared to $ 21.8 million , or $ 2.00 basic and $ 1.98 diluted per common share , for fiscal 2013 , due to the factors discussed above . fiscal 2013 compared to fiscal 2012 net sales our net sales increased 4.8 % to $ 734.3 million for fiscal 2013 from $ 700.6 million for fiscal 2012. sales volume ( measured as pounds sold to customers ) increased by 4.3 % for fiscal 2013 in comparison to sales volume for fiscal 2012. the increase in net sales was primarily attributable to the aforementioned sales volume increase , specifically , increased distribution of fisher snack and recipe nuts and private brand snack nuts to both new and existing customers . the increase in sales volume was also attributable to the favorable impact of lower selling prices on consumer demand during the second half of the current fiscal year . 24 the following summarizes sales by product type as a percentage of total gross sales . the information is based upon gross sales , rather than net sales , because certain adjustments from gross sales to net sales , such as promotional discounts , are not allocable to product type . replace_table_token_5_th for both fiscal 2013 and fiscal 2012 , the largest component of the other product type was trail and snack mixes which include nut products . the following table shows a comparison of sales by distribution channel ( dollars in thousands ) : replace_table_token_6_th * sales of branded products , primarily all fisher brand , were approximately 30 % and 29 % of total consumer channel sales during fiscal 2013 and 2012 , respectively . net sales in the consumer distribution channel increased by 4.2 % in dollars and 2.9 % in sales volume in fiscal 2013 compared to fiscal 2012. total fisher brand sales volume increased by 16.5 % in fiscal 2013 compared to fiscal 2012 due primarily to higher sales to existing customers and approximately $ 8.5 million in sales to new recipe nut customers . recent market data indicates that fisher recipe nuts continue to gain significant market share in the overall recipe nut category . private brand consumer sales volume increased by 3.1 % in fiscal 2013 compared to fiscal 2012. additionally , sales volume for both private brand and branded nut products were favorably impacted by an increase in consumer demand for nuts and nut products due to lower selling prices during the second half of fiscal 2013. net sales in the commercial ingredients distribution channel increased by 0.7 % in dollars and 3.7 % in sales volume in fiscal 2013 compared fiscal 2012. the sales volume increase was primarily due to increased sales of peanut and pecan products from lower selling prices and increased almond sales as a result of distribution gains achieved by a major existing customer . net sales in the contract packaging distribution channel increased by 22.1 % in dollars and 14.4 % in sales volume in fiscal 2013 compared to fiscal 2012. the increase in sales dollars and sales volume was primarily due to new snack mix product launches and increased promotional activity implemented by a major existing customer during fiscal 2013. net sales in the export distribution channel decreased 1.4 % in dollars and 3.9 % in sales volume in fiscal 2013 compared to fiscal 2012. the decrease in sales volume was due primarily to the unfavorable impact on customer demand of higher peanut prices that existed in the first two quarters of fiscal 2013 which was not offset by increased demand in the last two quarters of fiscal 2013. gross profit gross profit increased 12.1 % to $ 120.0 million in fiscal 2013 from $ 107.1 million in fiscal 2012. our gross profit margin increased to 16.3 % of net sales story_separator_special_tag for fiscal 2013 from 15.3 % for fiscal 2012. the increases in gross profit and gross profit margin are primarily due to improved alignment of selling prices with commodity acquisition costs that occurred in the first half of fiscal 2013 combined with efficiency improvements within the manufacturing process that were achieved in the second half of fiscal 2013 . 25 operating expenses selling and administrative expenses for fiscal 2013 increased slightly to 10.7 % of net sales from 10.6 % of net sales for fiscal 2012. selling expenses for fiscal 2013 were $ 47.1 million , an increase of $ 2.0 million , or 4.5 % , over the amount recorded for fiscal 2012 due primarily to a $ 2.0 million increase in marketing and advertising expenses to support our branded products and a $ 0.4 million increase in compensation related expense . this increase in selling expenses for fiscal 2013 was partially offset by a $ 0.7 million decrease in broker commissions due primarily to a change in customer mix . administrative expenses for fiscal 2013 were $ 31.2 million , an increase of $ 2.2 million , or 7.7 % , from the amount recorded for fiscal 2012 due primarily to ( i ) a $ 1.5 million increase in consulting and other professional services , ( ii ) a $ 0.6 million increase in compensation related expense , and ( iii ) a $ 0.3 million increase in depreciation and amortization expense . this increase in administrative expenses was partially offset by a $ 0.6 million gain on the sale of land and a building where we operated a retail store . income from operations due to the factors discussed above , our income from our operations was $ 41.6 million , or 5.7 % of net sales , for fiscal 2013 , compared to $ 33.0 million , or 4.7 % of net sales , for fiscal 2012. interest expense interest expense was $ 4.8 million for fiscal 2013 compared to $ 5.4 million for fiscal 2012. the decrease in interest expense was due primarily to lower average short-term borrowings . rental and miscellaneous expense , net net rental and miscellaneous expense was $ 1.6 million for fiscal 2013 compared to $ 1.4 million for fiscal 2012. income tax expense income tax expense was $ 13.5 million , or 38.3 % of income before income taxes , for fiscal 2013 compared to $ 9.1 million , or 34.7 % of income before income taxes for fiscal 2012. the increase in the effective tax rate of fiscal 2013 is mainly due to the impact of a full valuation allowance recorded against deferred tax assets that were created as a result of our equity investment in , and sale of intellectual property rights to an unconsolidated variable interest entity . net income net income was $ 21.8 million , or $ 2.00 basic and $ 1.98 diluted per common share , for fiscal 2013 , compared to $ 17.1 million , or $ 1.60 basic and $ 1.58 diluted per common share , for fiscal 2012 , due to the factors discussed above . liquidity and capital resources general the primary uses of cash are to fund our current operations , fulfill contractual obligations , make capital improvements , pursue our strategic plan and repay indebtedness . also , various uncertainties could result in additional uses of cash . the primary sources of cash are results of operations and availability under our credit agreement , dated february 7 , 2008 that provides a revolving loan commitment and letter of credit subfacility ( as amended , the credit facility ) . we anticipate that expected net cash flow generated from operations and amounts available pursuant to the credit facility will be sufficient to fund our operations for the next twelve months . increases in our available credit under our credit facility due to our improved financial performance in the past have allowed us to consummate business acquisitions , devote more funds to promote our products , ( especially our fisher and orchard valley harvest brands ) , develop new products , pay special cash dividends in december 2012 and december 2013 , and explore other growth strategies outlined in our strategic plan , which includes expansion into existing markets and international markets such as china . cash flows from operating activities have historically been driven by net income but are also significantly influenced by inventory requirements , which can change based upon fluctuations in both quantities and market prices of the various nuts and nut products we buy and sell . current market trends in nut prices and crop estimates also impact nut procurement . 26 the following table sets forth certain cash flow information for the last three fiscal years : replace_table_token_7_th operating activities . cash provided by operating activities was $ 11.9 million in fiscal 2014 , a decrease of $ 23.8 million compared to fiscal 2013. this decline is due primarily to the negative cash flow impact of changes in certain working capital items , primarily accounts receivable and inventory . the accounts receivable decrease was a result of an unfavorable change of $ 6.6 million from fiscal 2013 , due primarily to higher sales in the month of june 2014 compared to june 2013. our nut commodity purchases were $ 56.7 million higher during fiscal 2014 than fiscal 2013 due mainly to higher nut acquisition costs among several nut commodities , primarily walnuts , almonds and pecans . total inventories were $ 182.8 million at june 26 , 2014 , an increase of $ 24.1 million , or 15.2 % , from the inventory balance at june 27 , 2013. this increase is due primarily to a $ 17.8 million increase in raw nut input stocks which was primarily attributable to increased quantities of peanuts , walnuts and almonds coupled with significantly higher acquisition costs for walnuts , almonds and pecans .
| iri market data from june 2014 indicates that fisher recipe nuts are the market share leader in the overall recipe nut category , excluding wholesale club sales . total fisher brand sales volume increased by 6.7 % in fiscal 2014 compared to fiscal 2013 due primarily to higher sales to existing customers and approximately $ 1.4 million in sales to new recipe nut customers . fisher recipe nut sales volume increased 22.5 % from fiscal 2013 , primarily as a result of increased sales to a significant customer . partially offsetting the fisher recipe nut sales volume increase , fisher brand snack nut sales volume declined 15.2 % primarily as a result of reduced distribution of inshell peanuts at a major fisher snack nut customer due to competitive pricing pressure . distribution was regained with this specific customer at the beginning of the fourth quarter of 2014. as a result of our category management and innovation efforts , sales volume of private brand snack nuts and trail mixes increased by 9.1 % in fiscal 2014 compared to fiscal 2013. the above noted increase in sales volume in the consumer distribution channel was offset in part by a volume decline for cashews , primarily due to lost distribution with a major private brand customer in the first half of the current fiscal year that was regained in the latter part of the current fourth quarter . net sales in the commercial ingredients distribution channel increased by 8.7 % in dollars and 5.8 % in sales volume in fiscal 2014 compared fiscal 2013. the sales volume increase was primarily due to increased sales of almonds to a major existing customer . net sales in the contract packaging distribution channel increased by 14.2 % in dollars and 19.2 % in sales volume in fiscal 2014 compared to fiscal 2013. the increase in sales volume was due primarily to increased sales of almonds , trail mixes and chocolate and yogurt coated products due to new product launches executed
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net charge-offs for fiscal 2015 amounted to $ 110.6 million , a 10.1 % decrease from the $ 123.0 million charged off during fiscal 2014. accounts that were 60 days or more past due were 4.3 % and 3.0 % on a recency basis , and were 7.0 % and 5.3 % on a contractual basis at march 31 , 2015 and march 31 , 2014. the increase in accounts contractually delinquent was primarily due to the change in branch level incentives discussed in the second quarter of fiscal 2015. when excluding the impact of payroll deduct loans in mexico , the accounts contractually delinquent 60 days or more past due were 6.1 % at march 31 , 2015. during fiscal 2015 , the company has also had a decrease in year-over-year loan loss ratios . net charge-offs as a percentage of average net loans decreased from 14.7 % during fiscal 2014 to 12.9 % during fiscal 2015. the net charge-off ratio benefited from the change in branch level incentives mentioned above . we estimate the net charge-off ratio would have been approximately 14.1 % for 2015 excluding the impact of the change . fiscal 2014 charge-off ratio of 14.7 % and the estimated fiscal 2015 charge-off ratio of 14.1 % are in line with historical levels . general and administrative expenses during fiscal 2015 increased by $ 10.8 million , or 3.8 % , over fiscal 2014. of the total increase , approximately $ 5.0 million related to personnel expense , the majority of which was attributable to the year-over-year increase in our branch network , normal merit increases to employees , increased health insurance costs , and incentive costs . general and administrative expenses , when divided by average open branches , decreased slightly when comparing the two fiscal years and , overall , general and administrative expenses as a percent of total revenues increased to 47.9 % in fiscal 2015 from 46.9 % in fiscal 2014 , respectively . interest expense increased by $ 2.1 million , or 9.9 % , during fiscal 2015 , as compared to the previous fiscal year as a result of an increase in average debt outstanding of 12.0 % . income tax expense increased $ 1.6 million , or 2.5 % , primarily from an increase in pre-tax income . the effective tax rate decreased to 37.0 % for fiscal 2015 compared to 37.4 % for fiscal 2014. the decrease was primarily due the reduction of state taxes resulting from a change in the corporate structure . 30 regulatory matters cfpb investigation as previously disclosed , on march 12 , 2014 , the company received a civil investigative demand ( “ cid ” ) from the consumer financial protection bureau ( the “ cfpb ” ) . the stated purpose of the cid is to determine whether the company has been or is “ engaging in unlawful acts or practices in connection with the marketing , offering , or extension of credit in violation of sections 1031 and 1036 of the consumer financial protection act , 12 u.s.c . §§ 5531 , 5536 , the truth in lending act , 15 u.s.c . §§ 1601 , et seq. , regulation z , 12 c.f.r . pt . 1026 , or any other federal consumer financial law ” and “ also to determine whether bureau action to obtain legal or equitable relief would be in the public interest. ” the company responded , within the deadlines specified in the cid , to broad requests for production of documents , answers to interrogatories and written reports related to loans made by the company and numerous other aspects of the company 's business . also as previously disclosed , on august 7 , 2015 , the company received a letter from the cfpb 's enforcement office notifying the company that , in accordance with the cfpb 's discretionary notice and opportunity to respond and advise ( “ nora ” ) process , the staff of cfpb 's enforcement office is considering recommending that the cfpb take legal action against the company ( the “ nora letter ” ) . the nora letter states that the staff of the cfpb 's enforcement office expects to allege that the company violated the consumer financial protection act of 2010 , 12 u.s.c . §5536 . the nora letter confirms that the company has the opportunity to make a nora submission , which is a written statement setting forth any reasons of law or policy why the company believes the cfpb should not take legal action against it . the company understands that a nora letter is intended to ensure that potential subjects of enforcement actions have the opportunity to present their positions to the cfpb before an enforcement action is recommended or commenced . the company has made nora submissions to the cfpb 's enforcement office . the company expects that there will continue to be additional requests or demands for information from the cfpb and ongoing interactions between the cfpb , the company and company counsel as part of the investigation . we are currently unable to predict the ultimate timing or outcome of the cfpb investigation . while the company believes its marketing and lending practices are lawful , there can be no assurance that the cfpb 's ongoing investigation or future exercise of its enforcement , regulatory , discretionary or other powers will not result in findings or alleged violations of federal consumer financial protection laws that could lead to enforcement actions , proceedings or litigation and the imposition of damages , fines , penalties , restitution , other monetary liabilities , sanctions , settlements or changes to the company 's business practices or operations that could have a material adverse effect on the company 's business , financial condition or results of operations or eliminate altogether the company 's ability to operate its business profitably or on terms substantially similar to those on which it currently operates . story_separator_special_tag see “ business - government regulation - federal legislation ” for a further discussion of these matters and the federal regulations to which the company 's operations are subject and “ risk factors ” for more information regarding these regulations and related risks . cfpb proposed rulemaking initiative on march 26 , 2015 , the cfpb announced that it was considering proposing rules under its unfair , deceptive and abusive acts and practices rulemaking authority relating to payday , vehicle title , and similar loans . the proposal would cover short-term loans with a contractual term of 45 days or less , as well as “ longer-term loans ” with a term of longer than 45 days with an all-in annualized percentage rate of interest ( “ apr ” ) in excess of 36 % in which the lender has either a non-purchase money security interest in the consumer 's vehicle or the right to collect repayment from the consumer 's bank account or paycheck . we believe the cfpb 's “ longer-term ” credit proposals seek to address a concern that consumers suffer harm if lenders fail to underwrite loans but take a security interest in the consumer 's vehicle or access to repayment from a consumer 's account or wages . although the company does not make loans with terms of 45 days or less or obtain access to a customer 's bank account or paycheck for repayment of any of its loans , it does make some vehicle-secured loans with an apr within the scope of the proposal . the company currently estimates that the amount of such vehicle-secured loans in its loan portfolio as of march 31 , 2016 are approximately 13 % of its total number of loans and approximately 20 % of its portfolio by gross loan balance . the proposals would require a lender , as a condition of making a covered longer-term loan , to first make a good-faith reasonable determination that the consumer has the ability to repay the covered longer-term loan without reborrowing or defaulting . the proposals would require lenders to verify income , “ major financial obligations ” and borrowing history . lenders would also be required determine that a consumer is able to make all projected payments under the covered longer-term loan as those payments are due , while still fulfilling other major financial obligations and meeting living expenses . this ability to repay assessment would apply to both the initial longer-term loan and to any subsequent refinancing . in addition , the proposals would include a rebuttable presumption that customers seeking to refinance a covered longer-term loan lack an “ ability to repay ” if at the time of refinancing the borrower : ( i ) was delinquent or had recently been delinquent on an outstanding loan ; ( ii ) stated or indicated an inability to make a scheduled payment or that the loan was causing financial distress ; ( iii ) is allowed to skip a payment or pays a smaller amount than a payment that would have been due on the loan , unless the refinancing provides a substantial amount of cash to the consumer ; or ( iv ) is in default on the 31 outstanding loan . to overcome this presumption of inability to repay , the lender would have to verify a change in the borrower 's circumstances to indicate an ability to repay the additional extension of credit . these proposals are subject to several procedural requirements and to possible change before any final rules would be issued and implemented and we can not predict what the ultimate rulemaking will provide . the company does not believe that these proposals as currently described by the cfpb would have a material impact on the company 's existing lending procedures , because the company currently underwrites all its loans ( including those secured by a vehicle title that would fall within the scope of these proposals ) by reviewing the customer 's ability to repay based on the company 's standards . however , there can be no assurance that these proposals for longer-term loans , if and when implemented in final rulemaking , would not require changes to the company 's practices and procedures for such loans that could materially and adversely affect the company 's ability to make such loans , the cost of making such loans , the company 's ability to , or frequency with which it could , refinance any such loans , and the profitability of such loans . any final rulemaking also could have effects beyond those contemplated in the initial proposal that could further materially and adversely impact our business and operations . as part of the cfpb 's outline of the proposed rulemaking initiative described above , the cfpb also stated that it expects to conduct separate rulemaking to identify larger participants in the installment lending market for purposes of its supervision program . though the timing of any such rulemaking is uncertain , the company believes that the implementation of such rules would likely bring the company 's business under the cfpb 's supervisory authority which , among other things , would subject the company to reporting obligations to , and on-site compliance examinations by , the cfpb . see part i , item 1 , “ business - government regulation - federal legislation , ” for a further discussion of these matters and the federal regulations to which the company 's operations are subject and part i , item 1a , “ risk factors , ” for more information regarding these regulatory and related risks . military lending act in july 2015 , the department of defense ( the “ dod ” ) amended its existing regulation that implements the military lending act ( the “ mla ” ) . the final rule prohibits creditors from extending consumer credit if the military annual percentage rate or mapr exceeds 36 % . the rule covers both members of the armed forces and their dependents ( “ covered borrowers ” ) .
| the following table sets forth certain information derived from the company 's consolidated statements of operations and balance sheets , as well as operating data and ratios , for the periods indicated : replace_table_token_8_th ( 1 ) average gross loans receivable have been determined by averaging month-end gross loans receivable over the indicated period . ( 2 ) average net loans receivable have been determined by averaging month-end gross loans receivable less unearned interest and deferred fees over the indicated period . ( 3 ) operating margin is computed as total revenues less provision for loan losses and general and administrative expenses as a percentage of total revenues . comparison of fiscal 2016 versus fiscal 2015 net income was $ 87.4 million during fiscal 2016 , a 21.1 % decrease from the $ 110.8 million earned during fiscal 2015 . the decrease in net income was significantly impacted by a $ 10.0 million after-tax gain realized during the prior year from the sale of previously charged-off accounts that was not repeated in the current year . operating income ( revenues less provision for loan losses and general and administrative expenses ) excluding the impact of the charge-off sale decreased $ 18.6 million due to a $ 29.1 million decrease in interest and fee income and a $ 4.8 million increase in provision expense offset by a $ 22.9 million decrease in general and administrative expenses . net income was also impacted by a $ 14.7 million decrease in income tax expense and a $ 3.5 million increase in interest expense . total revenues decreased to $ 557.5 million in fiscal 2016 , a $ 52.7 million , or 8.6 % , decrease from the $ 610.2 million in fiscal 2015 . revenues from the 1,233 branches open throughout both fiscal years decreased by 6.9 % . at march 31 , 2016 , the company had 1,339 branches in operation , an increase of 19 branches from march 31 , 2015 . interest and fee income during fiscal 2016 decreased by $ 29.1 million , or 5.6 % , from fiscal 2015 . we experienced a 3.3 % decrease in our average net
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53 self-pay revenues represented approximately 13.7 % of our net operating revenues , net of contractual allowances and discounts ( but before provision for bad debts ) , in 2013 compared to 13.0 % in 2012. the amount of foregone revenue related to providing charity care services as a percentage of net operating revenues was approximately 5.4 % and 5.3 % in 2013 and 2012 , respectively . direct and indirect costs incurred by us in providing charity care services were approximately 0.9 % and 1.0 % of net operating revenues in 2013 and 2012 , respectively . the patient protection and affordable care act , or ppaca , was signed into law on march 23 , 2010. in addition , the health care and education affordability reconciliation act of 2010 , or reconciliation act , which contains a number of amendments to ppaca , was signed into law on march 30 , 2010. these two healthcare acts , referred to collectively as the reform legislation , include a mandate that requires substantially all u.s. citizens to maintain medical insurance coverage , which will ultimately increase the number of persons with access to health insurance in the united states . the reform legislation , as originally enacted , is expected to expand health insurance coverage through a combination of public program expansion and private sector health insurance reforms . we believe the expansion of private sector and medicaid coverage will , over time , increase our reimbursement related to providing services to individuals who were previously uninsured , which should reduce our expense from uncollectible accounts receivable . the reform legislation also makes a number of other changes to medicare and medicaid , such as reductions to the medicare annual market basket update for federal fiscal years 2010 through 2019 , a productivity offset to the medicare market basket update which began october 1 , 2011 , and a reduction to the medicare and medicaid disproportionate share payments , that could adversely impact the reimbursement received under these programs . the various provisions in the reform legislation that directly or indirectly affect reimbursement are scheduled to take effect over a number of years . over time , we believe the net impact of the overall changes as a result of the reform legislation will have a positive effect on our net operating revenues . other provisions of the reform legislation , such as requirements related to employee health insurance coverage , should increase our operating costs . starting in 2014 , the reform legislation may result in an increase in the number of patients using our facilities who have health insurance coverage . the congressional budget office , or cbo , anticipates that , as a result of the reform legislation , millions of uninsured americans across the nation could gain coverage through health insurance exchanges and medicaid expansion . based on cbo projections as issued on may 14 , 2013 , and july 30 , 2013 , the incremental insurance coverage due to the reform legislation could result in 13 million and 25 million formerly uninsured americans gaining coverage by the end of 2014 and 2016 , respectively . the cbo projects , by the end of 2016 , a 45 % reduction in the number of nonelderly americans who remain uninsured due to the effects on insurance coverage from the reform legislation . the 29 states in which we operate hospitals include nine of the 10 states with the highest percentage of nonelderly uninsured people from among the state 's nonelderly population . more broadly , the 29 states in which we operate hospitals include 26 of the 30 states with the highest percentage of nonelderly uninsured people from among the state 's nonelderly population . we have healthcare reform outreach efforts underway in select markets . such efforts include the expanded use of eligibility screening services , select facility designations as certified application counselor organizations , and approximately 400 volunteers and staff members trained and designated as certified application counselors , or cacs . these cacs will assist people in understanding and , if appropriate , enrolling in new coverage options , including , but not limited to qualified health plans , or qhps , on the health insurance exchange or marketplace , medicaid expansion , the children 's health insurance program , and the medicaid program for those eligible but not yet enrolled . our hospitals are well positioned to participate in the provider networks of various qhps offering plan options on the health insurance exchanges . as of december 31 , 2013 , 134 of 135 of our hospitals participated in a health insurance exchange agreement , 95 % of our hospitals possessed two or more contracts , 90 % of our hospitals had a contract with the first or second lowest cost bronze plans ( qhps with a 60 % actuarial value ) , and 92 % of our hospitals had a contract with the first or second lowest cost silver plans ( qhps with a 70 % actuarial value ) . most of our exchange reimbursement arrangements reflect a slight discount to that of commercial rates . also included in the reform legislation are provisions aimed at reducing fraud , waste and abuse in the healthcare industry . these provisions allocate significant additional resources to federal enforcement agencies and expand the use of private contractors to recover potentially inappropriate medicare and medicaid payments . the reform legislation amends several existing federal laws , including the medicare anti-kickback statute and the false claims act , making it easier for government agencies and private plaintiffs to prevail in lawsuits brought against healthcare providers . these amendments also make it easier for potentially severe fines and penalties to be imposed on healthcare providers accused of violating applicable laws and regulations . story_separator_special_tag 54 on june 28 , 2012 , the supreme court of the united states largely upheld the constitutionality of the reform legislation , though it overturned an aspect of the legislation that would have permitted the federal government to withhold all medicaid funding from a state if that state did not expand medicaid coverage to the extent required by the reform legislation . the supreme court 's ruling instead held that only new incremental funding could be withheld from a state in such a situation . as a result , states will face less severe financial consequences if they refuse to expand medicaid coverage to individuals with incomes below certain thresholds . since the supreme court 's ruling , some states have suggested that , for budgetary and other reasons , they would not expand their medicaid programs . if states refuse to expand their medicaid programs , the number of uninsured patients at our hospitals will decline by a smaller margin as compared to our expectations when the reform legislation was first adopted . in response to the supreme court ruling , the previous estimates of the reduction in uninsured individuals as a result of the reform legislation have been revised , with approximately 25 million additional individuals expected to have health insurance coverage by 2016. of the 29 states in which we operate hospitals , 12 states are expanding their medicaid programs . at this time , the other 17 states are not expanding medicaid coverage . indiana , pennsylvania and texas , where we operated a significant number of hospitals as of december 31 , 2013 , are three of the states that are not expanding medicaid coverage . after giving effect to the hma merger , we will also operate a significant number of hospitals in florida and tennessee , which also have not expanded medicaid coverage . in addition , three of the states that are not expanding medicaid , including pennsylvania , are evaluating options such as waiver plans to operate an alternative medicaid expansion plan . because of the many variables involved , including clarifications and modifications resulting from the rule-making process , the development of agency guidance and future judicial interpretations , whether and how many states decide to expand or not to expand medicaid coverage , the number of uninsured who elect to purchase health insurance coverage , budgetary issues at federal and state levels , and the potential for delays in the implementation of some of the provisions of the reform legislation , we may not be able to realize the positive impact the reform legislation may have on our business , results of operations , cash flow , capital resources and liquidity . furthermore , we can not predict whether we will be able to modify certain aspects of our operations to offset any potential adverse consequences from the reform legislation . in a number of markets , we have partnered with local physicians in the ownership of our facilities . such investments have been permitted under an exception to the physician self-referral law , or stark law , that allows physicians to invest in an entire hospital ( as opposed to individual hospital departments ) . the reform legislation changes the whole hospital exception to the stark law . the reform legislation permits existing physician investments in a whole hospital to continue under a grandfather clause if the arrangement satisfies certain requirements and restrictions , but physicians are now prohibited , from the time the reform legislation became effective , from increasing the aggregate percentage of their ownership in the hospital . the reform legislation also restricts the ability of existing physician-owned hospitals to expand the capacity of their facilities . in addition to the reform legislation , the american recovery and reinvestment act of 2009 included provisions for implementing health information technology under the health information technology for economic and clinical health act , or hitech . these provisions were designed to increase the use of electronic health records , or ehr , technology and establish the requirements for a medicare and medicaid incentive payments program beginning in 2011 for eligible hospitals and providers that adopt and meaningfully use certified ehr technology . these incentive payments are intended to offset a portion of the costs incurred to implement and qualify as a meaningful user of ehr . rules adopted in july 2010 by the department of health and human services established an initial set of standards and certification criteria . our hospital facilities have been implementing ehr technology on a facility-by-facility basis since 2011. we anticipate recognizing incentive reimbursement related to the medicare or medicaid incentives as we are able to implement the certified ehr technology , meet the defined meaningful use criteria , and information from completed cost report periods is available from which to calculate the incentive reimbursement . the timing of recognizing incentive reimbursement will not correlate with the timing of recognizing operating expenses and incurring capital costs in connection with the implementation of ehr technology which may result in material period-to-period changes in our future results of operations . hospitals that do not qualify as a meaningful user of ehr technology by 2015 are subject to a reduced market basket update to the inpatient prospective payment system standardized amount in 2015 and each subsequent fiscal year . although we believe that our hospital facilities will be in compliance with the ehr standards by 2015 , there can be no assurance that all of our facilities will be in compliance and therefore not subject to the penalty provisions of hitech . we recognized approximately $ 165.9 million , $ 126.7 million and $ 63.4 million during the years ended december 31 , 2013 , 2012 and 2011 , respectively , of incentive reimbursement for hitech incentive reimbursements from medicare and medicaid related to certain of our hospitals and for certain of our employed physicians , which are presented as a reduction of operating expenses .
| 58 year ended december 31 , 2013 compared to year ended december 31 , 2012 net operating revenues decreased slightly by 0.2 % to approximately $ 12.998 billion in 2013 , from approximately $ 13.029 billion in 2012. included in 2012 net operating revenues on a non-same store basis is approximately $ 105.3 million of net operating revenues from an industry-wide settlement with the united states department of health and human services and cms , based on a claim that acute-care hospitals in the u.s. were underpaid from the medicare inpatient prospective payment system in federal fiscal years 1999 through 2011. the underpayments resulted from calculations related to the rural floor budget neutrality adjustments implemented in connection with the balanced budget act of 1997. also included in 2012 net operating revenues is an unfavorable adjustment of approximately $ 21.0 million , related to the revised supplemental security income ratios issued for federal fiscal years 2006 through 2009 utilized for calculating medicare disproportionate share hospital reimbursements . excluding the $ 84.3 million net effect of these two items on 2012 , net operating revenues for the year ended december 31 , 2013 increased $ 53.0 million . of this increase in net operating revenues , $ 74.4 million was contributed by hospitals acquired in 2012 , offset by a decrease of $ 21.4 million in net operating revenues from hospitals owned throughout both periods . on a same-store basis , net operating revenues decreased 0.2 % . the decrease in net operating revenues from the hospitals owned throughout both periods is primarily due to physician office system conversions that negatively affected productivity in some physician practices and an unfavorable rate adjustment in indiana 's state supplemental medicaid program . on a consolidated basis , inpatient admissions decreased by 6.7 % and adjusted admissions decreased by 4.0 % during the year ended december 31 , 2013. on a same-store basis , inpatient admissions decreased by 7.2 % and adjusted admissions decreased by 4.6 % during the year ended december 31 , 2013. this decrease in same-store inpatient admissions was significantly impacted by seasonality factors , including the loss of one day in 2013 as compared to 2012 , which was a leap year , as well as additional holidays that fell on weekdays during the first quarter in 2013. the decrease was also reflective of lower admissions from women 's services including obstetrics and gynecology , fewer flu and respiratory-related admissions , lower admissions from primarily low intensity cardiology services , lower admissions due to weather and service closures in a few of our hospitals , lower readmissions and reductions due to the continued impact of involuntary turnover of employed physicians occurring at the
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institutional research services revenues consist of brokerage commissions derived from securities transactions executed on an agency basis on behalf of mutual funds , institutional and private wealth management clients as well as investment banking revenue , which consists of underwriting profits , selling concessions and management fees associated with underwriting activities . commission revenues vary directly with account trading activity and new account generation . investment banking revenues are directly impacted by the overall market conditions , which affect the number of public offerings which may take place . 28 distribution fees and other income primarily include distribution fee revenue earned in accordance with rule 12b-1 of the company act , as amended , along with sales charges and underwriting fees associated with the sale of the mutual funds plus other revenues . distribution fees fluctuate based on the level of aum and the amount and type of mutual funds sold directly by g.distributors or through various distribution channels . 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 . distribution costs include marketing , product distribution and promotion costs . 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 2008 employment agreement so long as he is an executive of gbl and devotes the substantial majority of his working time to the business . other operating expenses include general and administrative operating costs and clearing charges and fees for g.research 's brokerage operation . other income and expenses include net gains and losses from investments ( which includes 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 statements of financial condition we ended the 2013 year with approximately $ 575.5 million in cash and investments , net of securities sold , not yet purchased of $ 6.2 million , which includes $ 5.8 million of cash and investments held by our consolidated investment partnerships . the $ 575.5 million consists of $ 210.5 million cash and cash equivalents , primarily invested in our 100 % u.s. treasury money market fund , $ 118.6 million invested in common stocks , $ 38.0 million invested in u.s. treasury obligations , $ 96.0 million invested in partnerships and $ 23.6 million in other types of investments . this also included approximately $ 88.8 million of our available for sale ( `` afs '' ) securities , consisting of investments in the gabelli dividend & income trust , the gdl fund , westwood holdings group and various other gabelli and gamco open-end funds . our debt consisted of $ 100 million of 5.875 % senior notes due june 1 , 2021 and $ 11.9 million in zero coupon subordinated debentures ( current principal amount of $ 13.8 million ) due december 31 , 2015 , which were originally distributed to shareholders as a dividend on december 31 , 2010. equity , excluding noncontrolling interests , was $ 457.3 million or $ 17.53 per share on december 31 , 2013 compared to $ 367.6 million or $ 14.28 per share on december 31 , 2012. the increase in equity from the end of 2012 was principally related to comprehensive income of $ 120.8 million and $ 2.1 million of stock based compensation partially offset by the declaration of dividends of $ 18.7 million and the purchase of treasury stock of $ 14.8 million during 2013. replace_table_token_7_th our strong and liquid balance sheet provides us access to financial markets and the flexibility to opportunistically add operating resources to our firm and consider strategic initiatives . we filed a shelf registration with the sec in 2012 which , among other things , provides us the flexibility to sell any combination of senior and subordinate debt securities , convertible debt securities , equity securities ( including common and preferred stock ) , and other securities up to a total amount of $ 400 million . the shelf is available through may 30 , 2015 , at which time it may be renewed . our primary goal is to use our liquid resources to opportunistically and strategically grow operating 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 . 29 story_separator_special_tag expenses compensation : total compensation costs , which are largely variable in nature , increased $ 24.6 million , or 17.9 % , to $ 161.8 million in 2013 from $ 137.2 million in 2012. variable compensation costs increased $ 21.5 million to $ 121.9 million in 2013 from $ 100.4 million in 2012 and increased as a percent of revenues to 30.7 % in 2013 from 29.2 % in 2012. variable compensation is driven by revenue levels which increased in 2013 from 2012. fixed compensation costs increased to $ 39.9 million in 2013 from $ 36.9 million in 2012. stock based compensation : stock based compensation was $ 2.1 million in 2013 , a decrease of $ 11.5 million , as compared to $ 13.6 million story_separator_special_tag in 2012. the decrease results from the acceleration of restricted stock awards ( `` rsas '' ) vesting in 2012 , which resulted in $ 10.1 million of expense recognized in 2012 that would have been recognized from 2013 to 2016 . 32 management fee : in 2013 management fee expense increased to $ 18.8 million versus $ 13.0 million in 2012. management fee expense is incentive-based and entirely variable in the amount of 10 % of the aggregate pre-tax profits which is paid to mr. gabelli ( or his designee ) in accordance with his employment agreement . a portion of these management fees , totaling $ 1.4 million , was waived prior to being earned in 2013. distribution costs : distribution costs , which include marketing , promotion and distribution costs increased $ 8.1 million , or 19.9 % , to $ 48.9 million in 2013 from $ 40.8 million in 2012 driven by an increase in average open-end equity mutual funds aum of 16.6 % and a higher percentage of mutual fund aum coming through intermediary channels . other operating expenses : our other operating expenses were $ 23.5 million in 2013 compared to $ 28.5 million in 2012 , a decrease of $ 5.0 million or 17.5 % . the year over year decrease of $ 5.0 million was largely comprised of a $ 2.5 million decrease in legal and regulatory costs , and $ 2.4 million in lower contributions to charitable organizations with the remaining decrease spread among multiple categories of expense . operating income and margin operating income increased $ 31.3 million , or 28.2 % , to $ 142.4 million for 2013 versus $ 111.1 million in the prior year period . included in the 2012 results was a charge of $ 10.1 million related to the acceleration of rsas . excluding this charge , operating income increased $ 21.2 million , or 17.5 % , in 2013 from $ 121.2 million in 2012. this increase was primarily due to the growth in revenues which were largely attributable to the higher levels of average aum in 2013 versus 2012. operating margin was 35.8 % for the year ended december 31 , 2013 , versus 32.3 % in the prior year period . the improvement in operating margin was due to leveraging of fixed costs partially offset by higher management fee expense . operating income before management fee was $ 161.2 million for the year ended of 2013 , versus $ 124.1 million in the prior year . operating margin before management fee was 40.6 % in the 2013 period versus 36.1 % in the 2012 period ( 39.0 % excluding one-time costs ) . the reconciliation of operating income before management fee and operating margin before management fee , both of which are non-gaap measures to their respective gaap measures , is provided at the end of this section . other income and expense total other income ( expense ) ( which primarily represents investment income from our proprietary investments ) , net of interest expense , was $ 41.1 million for the year ended december 31 , 2013 compared to $ 6.2 million in 2012. net gain from investments was $ 56.2 million in 2013 as compared to $ 22.7 million in 2012. loss on extinguishment of debt declined to $ 1.0 million in 2013 from $ 6.3 million in 2012. interest and dividend income was $ 7.1 million in 2013 compared to $ 5.7 million in 2012. the increase of $ 1.4 million was due entirely to dividend income as interest income was flat year over year . interest expense decreased $ 5.4 million to $ 10.5 million in 2013 , from $ 15.9 million in 2012. the decline was due to a lower total average debt outstanding . on may 15 , 2013 , we repaid the $ 99 million of 5.5 % senior notes which matured on that date . additionally , during the third quarter of 2012 , we reduced our outstanding debt through the repurchase of $ 64.1 million ( face value ) five year zero coupon subordinated debentures due 2015. in 2013 , the board of directors of gbl initiated a shareholder designated charitable contribution program on behalf of all registered class a and class b shareholders . under the program the board approved two $ 0.25 per share contributions , resulting in a charge of $ 10.6 million in 2013. income taxes the effective tax rate was 36.1 % for the year ended december 31 , 2013 , versus 35.6 % for the year ended december 31 , 2012. the 2012 rate included a benefit of 1.2 % resulting from the difference between the tax and book basis of the zero coupon subordinated debentures repurchased during the year which was partially offset in 2013 by a 0.6 % tax rate benefit from the increase in donations of appreciated securities . net income attributable to noncontrolling interest net income attributable to noncontrolling interests was $ 0.5 million in 2013 compared to $ 56,000 in 2012 , the result of improved performance in the underlying investment partnerships consolidated for gaap purposes . shareholder compensation and initiatives during 2013 , we returned $ 33.5 million of our earnings to shareholders through dividends and stock repurchases . we returned to shareholders a total of $ 0.22 per share in regular quarterly cash dividends and one special cash dividend of $ 0.50 per share in 2013 totaling $ 18.7 million . during 2012 , we returned $ 131.3 million of our earnings to shareholders through dividends and stock repurchases . we returned to shareholders a total of $ 0.18 per share in regular quarterly cash dividends , two special cash dividends of $ 0.25 per share each and one special cash dividend of $ 2.20 per share totaling $ 76.4 million during 2012 . 33 through our stock buyback program , we repurchased 229,228 and 1,138,313 shares in 2013 and 2012 , respectively , for approximately $ 14.8 million and $ 54.9 million , or $ 64.41 and $ 48.25
| 31 operating results for the year ended december 31 , 2013 as compared to the year ended december 31 , 2012 revenues total revenues were $ 397.6 million in 2013 , $ 53.3 million or 15.5 % higher than the total revenues of $ 344.3 million in 2012. the change in total revenues by revenue component was as follows ( dollars in millions ) : replace_table_token_11_th investment advisory and incentive fees : investment advisory fees , which comprised 78.0 % of total revenues in 2013 , are directly influenced by the level and mix of average aum . average total aum rose 15.8 % to $ 41.7 billion in 2013 as compared to $ 36.0 billion in 2012. average equity aum rose 17.0 % to $ 39.9 billion in 2013 from $ 34.1 billion in 2012. incentive fees , which comprised 6.6 % of total revenues in 2013 , result from our ability to either generate an absolute return in a portfolio or meet or exceed a specific benchmark index or indices and can vary significantly from one period to another . incentive fees were higher in 2013 as portfolios largely benefitted from the stronger prevailing u.s. and global stock market performance . fund revenues increased $ 26.9 million or 14.4 % , to $ 213.9 million , driven by higher average aum . revenue from open-end funds increased $ 19.5 million , or 15.7 % , from the prior year as average aum in 2013 increased $ 1.9 billion , or 13.1 % , to $ 16.4 billion from the $ 14.5 billion in 2012. closed-end fund revenues increased $ 7.4 million , or 11.8 % , to $ 70.1 million from the prior year and was comprised of $ 6.7 million in investment advisory fees attributable to higher average aum and $ 0.7 million in incentive fees on certain closed-end fund aum . revenue from institutional and private wealth management accounts , excluding incentive fees , which are generally billed on beginning quarter aum , increased $ 17.5 million , or 20.4 % , principally due to higher billable aum levels throughout the course of 2013 and an increase of $ 2.4 million in incentive fees earned on certain accounts . in 2013 , average aum in our equity institutional and private wealth management business increased $ 3.1 billion , or 21.2 % , for the year to $ 17.7 billion . total advisory fees from investment partnerships increased $
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these expenses included director fees , custody fee , tax fees , and other expenses related to the operation of the fund . the decrease in 2018 was primarily due to a decrease in expenses related to collection costs on certain non-accrual loans . net investment income for the years ended december 31 , 2018 , 2017 and 2016 , was $ 35.0 million , $ 34.4 million and $ 43.1 million , respectively . net realized loss from loans was $ 8.2 million , $ 9.1 million and $ 19.1 million for the years ended december 31 , 2018 , 2017 and 2016 , respectively . the primary reason for the decrease in 2018 was due to less loans write offs during the year as the loan portfolio continues to decline . net realized gain ( loss ) from derivative instruments was less than ( $ 0.1 ) million , $ 0.7 million and $ 0.1 million for the years ended december 31 , 2018 , 2017 and 2016 , respectively . the primary reason for the loss was the fund had to pay the interest payments on the interest rate swap agreement when the fixed rate interest of the swap was higher than the floating rate in the first and second quarters of 2018. these losses were partially offset by interest payments received when the floating rate rose above the fixed rates in the third and fourth quarters of 2018. net change in unrealized gain ( loss ) from loans was $ 2.0 million , ( $ 10.2 ) million and ( $ 2.4 ) million for the years ended december 31 , 2018 , 2017 and 2016 , respectively . the unrealized gain ( loss ) from loans consisted of fair value adjustments taken against loans as a result of an improvement or deterioration in certain portfolio companies ' performance as well as reversal of prior adjustments on realized loan losses . net change in unrealized gain from derivative instruments was $ 0.4 million , $ 0.2 million and $ 0.3 million for the years ended december 31 , 2018 , 2017 and 2016 , respectively . the unrealized gain consisted of fair market value adjustments to the derivative interest rate cap or swap . the increase in 2018 was primarily due to the change in expectations of libor interest rates during the year . net increase in net assets resulting from operations for the years ended december 31 , 2018 , 2017 and 2016 was $ 29.0 million , $ 16.0 million and $ 21.9 million , respectively . on a per share basis , for the years ended december 31 , 2018 , 2017 and 2016 , there was a net increase in net assets resulting from operations of $ 290.47 , $ 160.00 and $ 219.45 , respectively . liquidity and capital resources -- december 31 , 2018 and 2017 the fund is owned entirely by the company . the company is expected , but not required , to make further contributions to the capital of the fund to the extent of the company 's members ' capital commitment to the company and excess cash balances of the company . as of december 31 , 2018 , the company had received subscriptions for capital in the amount of $ 375.0 million , all of which had been called and received . 20 the change in cash for the years ended december 31 , 2018 , 2017 and 2016 was as follows : replace_table_token_1_th in july 2013 , the fund established a secured syndicated loan facility led by wells fargo bank , n.a . and mufg union bank , n.a . in an initial amount of up to $ 125.0 million . in november 2014 , the borrowing availability thereunder was increased to $ 255.0 million . borrowings by the fund are collateralized by all the assets of the fund . loans under the facility may be , at the option of the fund , either reference rate or libor loans . the fund will pay interest on its borrowings and will also pay a fee on the unused portion of the facility . the loan facility was due to expire on november 7 , 2017. however , the facility was renewed and amended on october 30 , 2017. the amended facility has a term of three years and will expire on october 30 , 2020. the borrowing availability under the renewed and amended loan facility was initially $ 200.0 million . effective january 30 , 2018 , management elected to reduce the borrowing availability to $ 180.0 million . management elected again to reduce the borrowing availability to $ 160.0 million effective april 5 , 2018 , to $ 140.0 million effective may 15 , 2018 , to $ 130.0 million effective september 13 , 2018 , to $ 110.0 million effective october 9 , 2018 , to $ 100.0 million effective november 13 , 2018 , to $ 90.0 million effective december 31 , 2018 , to $ 80.0 million effective february 5 , 2019 and to $ 65.0 million effective march 5 , 2019. beginning march 29 , 2019 , the lenders ' commitments will automatically and permanently reduce each fiscal quarter by an amount equal to 12.5 % of the aggregate amount of such commitments as of december 31 , 2018. borrowings by the fund are collateralized by all the assets of the fund . loans under the facility may be , at the option of the fund , either reference rate , libor or libor market index rate loans . the fund will pay interest on its borrowings , and will also pay a fee on the unused portion of the facility . as of december 31 , 2018 , $ 87.5 million was outstanding under the facility . as of december 31 , 2018 and 2017 , 1.3 % and 1.5 % , respectively , of the fund 's story_separator_special_tag these expenses included director fees , custody fee , tax fees , and other expenses related to the operation of the fund . the decrease in 2018 was primarily due to a decrease in expenses related to collection costs on certain non-accrual loans . net investment income for the years ended december 31 , 2018 , 2017 and 2016 , was $ 35.0 million , $ 34.4 million and $ 43.1 million , respectively . net realized loss from loans was $ 8.2 million , $ 9.1 million and $ 19.1 million for the years ended december 31 , 2018 , 2017 and 2016 , respectively . the primary reason for the decrease in 2018 was due to less loans write offs during the year as the loan portfolio continues to decline . net realized gain ( loss ) from derivative instruments was less than ( $ 0.1 ) million , $ 0.7 million and $ 0.1 million for the years ended december 31 , 2018 , 2017 and 2016 , respectively . the primary reason for the loss was the fund had to pay the interest payments on the interest rate swap agreement when the fixed rate interest of the swap was higher than the floating rate in the first and second quarters of 2018. these losses were partially offset by interest payments received when the floating rate rose above the fixed rates in the third and fourth quarters of 2018. net change in unrealized gain ( loss ) from loans was $ 2.0 million , ( $ 10.2 ) million and ( $ 2.4 ) million for the years ended december 31 , 2018 , 2017 and 2016 , respectively . the unrealized gain ( loss ) from loans consisted of fair value adjustments taken against loans as a result of an improvement or deterioration in certain portfolio companies ' performance as well as reversal of prior adjustments on realized loan losses . net change in unrealized gain from derivative instruments was $ 0.4 million , $ 0.2 million and $ 0.3 million for the years ended december 31 , 2018 , 2017 and 2016 , respectively . the unrealized gain consisted of fair market value adjustments to the derivative interest rate cap or swap . the increase in 2018 was primarily due to the change in expectations of libor interest rates during the year . net increase in net assets resulting from operations for the years ended december 31 , 2018 , 2017 and 2016 was $ 29.0 million , $ 16.0 million and $ 21.9 million , respectively . on a per share basis , for the years ended december 31 , 2018 , 2017 and 2016 , there was a net increase in net assets resulting from operations of $ 290.47 , $ 160.00 and $ 219.45 , respectively . liquidity and capital resources -- december 31 , 2018 and 2017 the fund is owned entirely by the company . the company is expected , but not required , to make further contributions to the capital of the fund to the extent of the company 's members ' capital commitment to the company and excess cash balances of the company . as of december 31 , 2018 , the company had received subscriptions for capital in the amount of $ 375.0 million , all of which had been called and received . 20 the change in cash for the years ended december 31 , 2018 , 2017 and 2016 was as follows : replace_table_token_1_th in july 2013 , the fund established a secured syndicated loan facility led by wells fargo bank , n.a . and mufg union bank , n.a . in an initial amount of up to $ 125.0 million . in november 2014 , the borrowing availability thereunder was increased to $ 255.0 million . borrowings by the fund are collateralized by all the assets of the fund . loans under the facility may be , at the option of the fund , either reference rate or libor loans . the fund will pay interest on its borrowings and will also pay a fee on the unused portion of the facility . the loan facility was due to expire on november 7 , 2017. however , the facility was renewed and amended on october 30 , 2017. the amended facility has a term of three years and will expire on october 30 , 2020. the borrowing availability under the renewed and amended loan facility was initially $ 200.0 million . effective january 30 , 2018 , management elected to reduce the borrowing availability to $ 180.0 million . management elected again to reduce the borrowing availability to $ 160.0 million effective april 5 , 2018 , to $ 140.0 million effective may 15 , 2018 , to $ 130.0 million effective september 13 , 2018 , to $ 110.0 million effective october 9 , 2018 , to $ 100.0 million effective november 13 , 2018 , to $ 90.0 million effective december 31 , 2018 , to $ 80.0 million effective february 5 , 2019 and to $ 65.0 million effective march 5 , 2019. beginning march 29 , 2019 , the lenders ' commitments will automatically and permanently reduce each fiscal quarter by an amount equal to 12.5 % of the aggregate amount of such commitments as of december 31 , 2018. borrowings by the fund are collateralized by all the assets of the fund . loans under the facility may be , at the option of the fund , either reference rate , libor or libor market index rate loans . the fund will pay interest on its borrowings , and will also pay a fee on the unused portion of the facility . as of december 31 , 2018 , $ 87.5 million was outstanding under the facility . as of december 31 , 2018 and 2017 , 1.3 % and 1.5 % , respectively , of the fund 's
| if the fund fails to meet these requirements , it will be taxed as an ordinary corporation on its taxable income for that year ( even if that income is distributed to the company ) and all distributions out of its earnings and profits will be taxable to the members of the company as ordinary income ; thus , such income will be subject to a double layer of tax . there is no assurance that the fund will meet the ongoing requirements to qualify as a ric for tax purposes . the fund 's investment objective is to achieve a superior risk adjusted investment returns . the fund seeks to achieve its investment objective by providing debt financing to portfolio companies . since inception , the fund 's investing activities have focused primarily on private debt securities . the fund generally receives warrants to acquire equity securities in connection with its portfolio investments . the fund generally distributes these warrants to its shareholder upon receipt , or soon thereafter . the fund also has guidelines for the percentages of total assets which will be invested in different types of assets . the portfolio investments of the fund will primarily consist of debt financing to venture capital backed technology companies . the borrower 's ability to repay its loans may be adversely impacted by several factors , and as a result , the loan may not fully be repaid . furthermore , the fund 's security interest in any collateral over the borrower 's assets may be insufficient to make up any shortfall in payments . critical accounting policies , practices and estimates critical accounting policies and practices are those accounting policies and practices that are both the most important to the portrayal of the fund 's net assets and results of operations and require the most difficult , subjective or complex judgments , often as a result of the need to make estimates about the effect of matters that are inherently uncertain . critical accounting estimates are accounting estimates where the nature of the estimates is material due to the levels of subjectivity and judgment necessary to account for highly uncertain matters or the susceptibility of such matters to change and the impact of the estimates of the on net assets or operating performance is material . in evaluating the most critical
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accordingly , all common shares , stock options , warrants , and per share amounts contained in this annual report have been retroactively adjusted to reflect the reverse split for all periods presented . critical accounting policies the preparation of financial statements in conformity with accounting principles generally accepted in the united states requires management to make estimates and assumptions that affect the reported assets , liabilities , sales and expenses in the accompanying financial statements . critical accounting policies are those that require the most subjective and complex judgments , often employing the use of estimates about the effect of matters that are inherently uncertain . such critical accounting policies , including the assumptions and judgments underlying them , are disclosed in note 1 to the financial statements included in this annual report . however , we do not believe that there are any alternative methods of accounting for our operations that would have a material effect on our financial statements . story_separator_special_tag text-align : justify ; text-indent : 0.5in '' > depreciation and amortization expense in 2020 was $ 105,175 , as compared to $ 192,569 in 2019. the decrease of $ 87,394 is primarily the result of our fully depreciated 3d printer in 2020 , partially offset by an increase in patent amortization expense during the year . other operating expenses for fiscal 2020 totaled $ 285,295 , compared to $ 158,706 for fiscal 2019. the increase of $ 126,589 is primarily due to an increase in insurance premiums , in particular our director 's & officer 's policy premium which increased by $ 115,396. in fiscal 2020 , our net other income & expense was net income of $ 498,629 compared to net income of $ 62,836 in 2019. the increase of $ 435,793 is primarily due to increased incentives from the state of new mexico of $ 99,780 and income from the company 's payroll protection plan loan of $ 361,700 , partially offset by a decrease in interest income of $ 17,702 and an increase in interest expense of $ 5,223. sigma 's net loss before preferred dividends for fiscal 2020 decreased $ 1,120,710 overall and totaled $ 5,200,139 , as compared to a net loss before preferred dividends of $ 6,320,849 for fiscal 2019. net loss applicable to common stockholders for fiscal 2020 was $ 7,009,414 , as compared to $ 6,320,849 for fiscal 2019. the 2020 net operating loss component of the overall loss being $ 684,917 lower than in 2019 and the other income component being a $ 435,793 higher . preferred stock dividends were $ 1,809,275 in 2020 and $ 0 in 2019. liquidity and capital resources as of december 31 , 2020 , we had $ 3,700,814 in cash and working capital of $ 4,332,053 , as compared to $ 86,919 in cash and a working capital deficit of $ 98,315 as of december 31 , 2019. on january 12 , 2021 , the company closed a public offering of common stock resulting in net proceeds of approximately $ 4,532,444 after deducting commissions and other offering expenses payable by the company . in february and march of 2021 , the company received net cash proceeds of $ 1,136,010 from the exercise of outstanding warrants . we believe that our existing cash on hand will be sufficient to fund our anticipated operating costs and capital expenditure requirements through 2021. we have based this estimate on assumptions that may prove to be wrong , and we could exhaust our capital resources sooner than we expect . because of the numerous risks and uncertainties associated with the research , development , and commercialization of our products , we are unable to estimate the exact amount of our working capital requirements . our future capital requirements will depend on many factors , including : ● the cost of expending , maintaining , and enforcing our intellectual property portfolio , including filing , prosecuting , defending and enforcing our patent claims and other intellectual property rights ; ● the effect of competing technological and market developments ; ● the revenue from the sales of our existing and future products ; ● the cost of operating as a public company ; and ● the other factors listed under item 1a “ risk factors. ” our major sources of funding have been proceeds from public and private offerings of our equity securities ( both common stock and preferred stock ) , and from warrant exercises . on march 15 , 2019 , the company closed a public offering of equity securities resulting in net proceeds of approximately $ 1,679,230 after deducting commissions and other offering expenses payable by the company . in may 2019 , the company closed a private placement of equity securities resulting in net proceeds of approximately $ 515,000 , after deducting placement agent commissions and other offering expenses payable by the company . in august 2019 , the company closed a public offering of equity securities resulting in net proceeds of approximately $ 1,971,000 , after deducting placement agent commissions and other offering expenses payable by the company . in september 2019 , aegis capital corp. partially exercised its over-allotment option granted by the company in the foregoing august 2019 public offering , resulting in net proceeds of $ 148,800 after deducting placement agent commissions . in january 2020 , we completed two private placements consisting of shares of our newly created series d and series e preferred stock , warrants to purchase additional shares of series d preferred stock and warrants to purchase shares of our common stock resulting in net cash proceeds to us of approximately $ 1,711,124. during 2020 , institutional holders of the series d preferred warrants exercised 6,146 of 6,156 such warrants resulting in net story_separator_special_tag proceeds to the company of $ 5,820,998. as of march 23 , 2021 , if all of the remaining common warrants to purchase our common stock are exercised by the holders thereof , the potential net proceeds to us will be $ 1,291,000. on april 6 , 2020 , we closed an offering of equity securities in which the company sold and issued to certain institutional investors ( a ) shares of the company 's common stock and pre-funded warrants , and ( b ) series a warrants ( the “ private warrants ” ) to purchase shares of the company 's common stock pursuant to a private placement resulting in net proceeds of approximately $ 1,230,000. as of march 23 , 2021 , if all of the series a warrants are exercised by the holders thereof for cash , the potential gross cash proceeds to us will be $ 956,015. on january 12 , 2021 , the company closed a public offering of equity securities resulting in net proceeds of approximately $ 4,532,444 after deducting commissions and other offering expenses payable by the company . we will need to raise additional amounts to fund our operations , maintain compliance with the nasdaq listing requirements and implement our business plan . there is no assurance as to the amount and availability of any required future financing or the terms thereof . such financing , if in the form of equity , may be highly dilutive to our existing stockholders and may otherwise include onerous terms . if in the form of debt , such financing may include covenants and repayment obligations which may be difficult to meet and that could adversely affect our business operations . there is also significant uncertainty from the affect that the novel coronavirus may have on the availability and type of financing . to the extent that funds are not available to us , we may be required to delay , limit , or terminate our business operations and lose our nasdaq listing . 20 during 2021 , we expect to sustain our operations and our commercialization and marketing efforts with our cash reserves and revenues generated from sales of our printrite 3d® technology . we expect that continued enhancements of our ipqa®-enabled printrite3d® technology will enable us to further commercialize this technology into the am metal market in 2021. to support the commercialization of our printrite3d® technology , we plan to continue funding our development activities and operating expenses by licensing our printrite3d® systems and supporting field services , as applicable , and providing printrite3d®-enabled engineering consulting services concerning our areas of expertise ( materials and manufacturing quality assurance and process control technologies ) and through the use of proceeds from sales of our securities . net cash used in operating activities net cash used in operating activities in 2020 decreased to $ 4,809,868 from $ 5,514,805 in 2019 , which is a decrease in cash used of $ 704,937. this decrease is primarily attributable to : ( 1 ) a decrease in our net loss before preferred dividends of $ 1,120,710 ; ( 2 ) higher equity-based compensation expenses of $ 150,644 due to : ( a ) increased options and common share grants awarded to employees of $ 99,602 ; ( b ) increased stock options granted to consultants in lieu of cash of $ 70,096 , partially offset by ( c ) lower equity based compensation for directors of $ 60,117 ; ( 3 ) an increase in accounts receivable of $ 259,282 due to increased sales ; ( 4 ) a decrease in inventory growth in 2020 from 2019 of $ 297,700 ; ( 5 ) a decrease in current and long-term prepaid expenses of $ 319,463 primarily due to the release of collateral for a letter of credit and amortization of our three-year membership in the uk 's national centre for additive manufacturing ( “ ncam ” ) ; ( 6 ) a decrease in accounts payable and accrued expenses of $ 732,471 due to payments in 2020 related to 2019 payables as well as lower accounts payable in 2020 resulting from our improved cash position ; ( 7 ) a decrease in deferred revenue of $ 149,439 ; ( 8 ) long-term stock appreciation rights granted to employees and consultants of $ 48,341 ; ( 9 ) long-term deferral of payroll taxes under the cares act of $ 37,728 ; and ( 10 ) a decrease in depreciation expense of $ 87,394. net cash used by investing activities net cash used by investing activities during fiscal 2020 was $ 298,359 , which compares to cash used by investing activities during the same period of 2019 totaling $ 85,798. the increase is primarily due to increased purchases of fixed assets of $ 54,587 , additional costs incurred for patents of $ 36,561 and the receipt of cash from loan repayments of $ 121,913 in 2019. net cash provided by financing activities cash provided by financing activities during fiscal 2020 increased to $ 8,722,122 from $ 4,407,740 during the same period in 2019 , an increase of $ 4,314,382 primarily as a result of the exercise of series d preferred warrants from our january 2020 private offering , which resulted in net proceeds to the company of $ 5,820,998 , partially offset by lower net proceeds from our 2020 private and public offerings over 2019. we have no credit lines as of march 24 , 2021 , nor have we ever had a credit line since our inception . our ability to continue to fund our liquidity and working capital needs will be dependent upon the success of our efforts to generate revenues from existing and future printrite3d®-proof-of-concept contracts , follow-on contracts resulting from successful proof-of-concept engagements , possible strategic partnerships , and by obtaining additional capital from the sale of securities or by borrowing funds from lenders to fulfill our business plans . if we issue additional equity or
| in fiscal 2020 , salaries and benefits costs were $ 2,622,162 as compared to $ 2,354,329 for the same period in 2019. the $ 267,833 increase resulted primarily from salary increases and related employer payroll taxes of $ 148,270 , employee bonuses of $ 127,250 , and increased sales commissions of $ 8,800 , partially offset by lower benefits costs of $ 23,578. stock-based compensation for fiscal 2020 was $ 596,842 compared to $ 497,240 for the same period in 2019. this $ 99,602 increase resulted primarily from stock grants made to employees of $ 23,610 and additional stock options granted to employees of $ 75,992. during fiscal 2020 , sigma incurred research and development expenditures of $ 351,404 compared to $ 647,994 in the same period of 2019. the $ 296,590 decrease is primarily the result of completed product development , as well as the reduced use of consultants during the year . sigma 's investor and public relation fees incurred in fiscal 2020 were $ 434,852 , compared to $ 417,750 in fiscal 2019. the increase in the comparative expenditures results primarily from an additional investor relations consultant of $ 90,369 , increased investor conferences and virtual shareholder meetings of approximately $ 20,000 , partially offset by decreased advertising and trade show expenses of $ 100,000. organization costs for fiscal 2020 were 425,847 , compared to $ 530,958 for the same period in 2020. the decrease of $ 105,111 is primarily attributable to lower directors ' compensation in 2020 of $ 135,944 and investment bank consulting fees of $ 31,500 , partially offset by increased shareholder services costs of $ 49,149 as a result of a special shareholders meeting held in march 2020 and costs incurred for the conversion of series d preferred stock throughout 2020. legal and professional service fees in fiscal 2020 were $ 676,142 compared to $ 664,403 paid in fiscal 2019. the increase of $ 11,739 is primarily attributable to an increase in legal fees of $ 128,010 related to a special shareholders meeting , nasdaq
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5 ) recurring revenue from all sources represents approximately 40.5 % of total revenue . revenues revenues for the year ended december 31 , 2016 increased $ 6,479,988 ( 23.4 % ) to $ 34,121,970 as compared to $ 27,641,982 for the year ended december 31 , 2015. software sales increased by $ 472,578 to $ 4,707,546 in 2016 from $ 4,234,968 in 2015 for an overall increase of 11.2 % . this increase was primarily due to an increase in sales of our accounting software products , such as sage erp x3 , cloud solutions netsuite and acumatica , and accellos warehouse management . service revenue increased by $ 6,007,410 to $ 29,414,424 in 2016 from $ 23,407,014 in 2015 for an overall increase of 25.7 % . the overall increases are primarily due to the continued marketing efforts and very competitive pricing , and the company 's strategy to increase its business by seeking additional opportunities through potential acquisitions , partnerships or investments . the four acquisitions completed in 2015 contributed $ 7,110,095 in revenue to the year ended december 31 , 2016. gross profit gross profit for the year ended december 31 , 2016 increased $ 1,883,708 ( 17.4 % ) to $ 12,727,242 as compared to $ 10,843,534 for the year ended december 31 , 2015. the increase in overall gross profit for this period is attributed to the increase in revenues from existing business and the four acquisitions . for the year ended december 31 , 2016 , the overall gross profit percentage was 37.3 % as compared to 39.2 % for the year ended december 31 , 2015. the gross profit attributed to software sales increased $ 71,683 to $ 2,222,405 for 2016 from $ 2,150,722 in 2015 which resulted in a decrease in the gross profit percentage from 50.8 % in 2015 to 47.2 % for 2016. the mix of products being sold by the company changes from time to time and sometimes causes the overall gross margin percentage to vary . the gross profit attributed to services increased $ 1,812,025 from 2015 to 2016 primarily due to the implementations of larger scale accounting systems . the gross profit percentage attributed to services decreased to 35.7 % in 2016 from 37.1 % in 2015. operating expenses selling and marketing expenses increased $ 54,010 ( 1.3 % ) to $ 4,358,234 for the year ended december 31 , 2016 compared to $ 4,304,224 for the year ended december 31 , 2015 due to a full year of expenses attributed to the prior year acquisitions offset mostly by corporate cost saving measures . general and administrative expenses increased $ 738,639 ( 13.1 % ) to $ 6,374,210 for the year ended december 31 , 2016 as compared to $ 5,635,571 for the year ended december 31 , 2015 primarily as a result of increases in payroll and related expenses associated with the addition of management personnel and the incremental costs associated with the acquisitions and integrations . depreciation and amortization expense for the year ended december 31 , 2016 was $ 684,660 as compared to $ 485,091 for the year ended december 31 , 2015. this increase is primarily attributed to the increase in amortization associated with the intangible assets acquired through acquisition in 2015. income taxes for the year ended december 31 , 2016 , the company 's federal and state provision requirements were calculated based on the estimated tax rate . the federal effective rate is higher than the statutory rate primarily due to the reversal of a significant portion of the previously reserved deferred tax assets for the net operating losses in addition to incentive stock options ( iso ) and 50 % of general meal and entertainment expense which are not tax deductible for the company . 22 for the year ended december 31 , 2016 , the company 's federal and state provision requirements were offset by the reversal of a portion of the valuation allowance no longer deemed necessary . the company recorded a net tax benefit of $ 2,223,734 which represents a reduction in our valuation allowance on tax attributes that are expected to be utilized based on management 's assessment and evaluation of historical and projected income . liquidity and capital resources we are currently seeking additional operating income opportunities through potential acquisitions or investments . such acquisitions or investments may consume cash reserves or require additional cash or equity . our working capital and additional funding requirements will depend upon numerous factors , including : ( i ) strategic acquisitions or investments ; ( ii ) an increase to current company personnel ; ( iii ) the level of resources that we devote to sales and marketing capabilities ; ( iv ) technological advances ; and ( v ) the activities of competitors . in addition to developing new products , obtaining new customers and increasing sales to existing customers , management plans to increase its business and profitability by entering into collaboration agreements , buying assets , and acquiring companies in the business software and information technology consulting market with solid revenue streams and established customer bases that generate positive cash flow . on may 6 , 2014 , swk acquired certain assets of esc , inc. pursuant to an asset purchase agreement for a promissory note in the aggregate principal amount of $ 350,000 ( the “ esc note ” ) . the esc note matures on april 1 , 2019. monthly payments are $ 6,135 including interest at 2 % per year . at december 31 , 2016 and december 31 , 2015 the outstanding balance was $ 173,535 and $ 242,926 respectively . on march 11 , 2015 swk entered into an asset purchase agreement with 2000 soft , inc. d/b/a atr , a california corporation , and karen espinoza mcgarrigle in her individual capacity as shareholder . swk acquired certain assets of atr ( as defined in the purchase agreement ) . story_separator_special_tag in consideration for the acquired assets , the company issued a promissory note in the aggregate principal amount of $ 175,000 and paid cash of $ 80,000. at december 31 , 2016 and december 31 , 2015 the outstanding balance was $ 74,194 and $ 132,229 respectively . as additional consideration , the company will pay 10 % of the net margin on maintenance renewals for former atr customers for the first twelve months and 5 % of the net margin on maintenance renewals for the following twelve months . amounts due under this arrangement are minimal . in march 2015 , 363,490 shares of common stock were sold at a price of $ 4.24 per share and 181,745 warrants were sold at a price of $ .01. the gross proceeds raised was $ 1,543,015 and the underwriting and expenses relating to the offering of $ 730,992 , resulting in net proceeds to the company of $ 812,023. on july 6 , 2015 , swk acquired certain assets of productivetech inc. ( pti ) pursuant to an asset purchase agreement cash of $ 500,000 and a promissory note for $ 600,000 ( the “ pti note ” ) . the note is due in 60 months from the closing date and bears interest at a rate of two and one half ( 2.5 % ) percent . the monthly payments including interest are $ 10,645. at december 31 , 2016 and december 31 , 2015 the outstanding balance was $ 437,403 and $ 552,645 respectively . on october 1 , 2015 swk entered into an asset purchase agreement with the macabe associates , inc. , ( “ macabe ” ) , a washington corporation and mary abdian and john nicholson in their individual capacity as shareholders . swk acquired certain assets and liabilities of macabe ( as defined in the purchase agreement ) . in consideration for the acquired assets , the company paid $ 21,423 in cash . as additional consideration , the company paid $ 5,500 cash after twelve months from closing and will pay $ 5,500 cash twenty-four months from closing on the net-to-swk revenues for software and maintenance sales if certain estimates are met for a total of $ 11,000 and was recorded as part of the contingent consideration included in the purchase price . additionally , the company will pay 35 % of the net margin on software maintenance renewals for former macabe customers for the first twelve months , and then 30 % , 25 % and 20 % of the net margin on software maintenance renewals for the following three years . the company will also pay 50 % the first year , and 40 % , 30 % and 20 % the three years after on the net margin on easy solution maintenance , new software & license to existing macabe customers and easy solutions software and maintenance sales to new customers . on any former macabe customers migrating to netsuite , x3 or acumatica , the company will pay 50 % of the net margin of the sale after applicable costs and commissions for the three years period after the acquisition . the company estimated this contingent consideration to be approximately $ 417,971 at acquisition and which is included in the purchase price . certain payments were made in each of these contingent consideration components , resulting in a remaining balance of $ 211,685 as of december 31 , 2016 . 23 on october 19 , 2015 , swk acquired certain assets of oates & company , llc ( oates ) pursuant to an asset purchase agreement cash of $ 125,000 and a promissory note for $ 175,000 ( the “ oates note ” ) . the note is due in three years from the closing date and bears interest at a rate of two ( 2 % ) percent . the monthly payments including interest are $ 5,012. at december 31 , 2016 and december 31 , 2015 the outstanding balance was $ 108,018 and $ 165,383 respectively . additionally in connection with the purchase agreement , the company issued a convertible note for $ 200,000. the convertible note was due january 1 , 2017 and bore interest at a rate of one ( 1 % ) percent . the quarterly interest payments were computed on the basis of 365-day year from the date of this note until paid . on december 9 , 2016 the convertible note was converted into 66,667 shares of common stock . on july 21 , 2016 , swk entered into a revolving demand note ( the “ revolving demand note ” ) by and between swk ( the “ borrower ” ) and m & t bank ( “ lender ” ) , a commercial lender . the lender has agreed to loan swk up to a principal amount of one million dollars . the interest rate on the revolving demand note shall be a variable rate , equal to the “ prime rate ” , plus ninety-five one-hundredths percent ( 0.95 % ) per annum . there is a minimum interest rate floor of four percent ( 4 % ) . the revolving demand note is secured by all of the borrower 's assets pursuant to a security agreement . furthermore , on july 21 , 2016 , the company and mr. mark meller , individually , entered into unlimited guaranty agreements ( the “ guaranty agreements ” ) with the lender . under the guaranty agreements , the company and mr. meller personally , jointly and severally guaranteed the liabilities of the borrower due and owing under the terms of the revolving demand note .
| providing seamless integration and dramatically decreasing data-entry time and associated costs , it is marketed and distributed worldwide by the company 's direct sales force , as well as through its platform partner , sps commerce , inc. and a growing national network of independent software partners and resellers , to customers largely supplying big-box retailers , including walmart , sears , target and costco . 20 we also provide managed it services to our customers . as microsoft certified systems engineers and microsoft certified professionals , our staff offers a host of mission critical services , including remote network monitoring , server implementation , support and assistance , operation and maintenance of large central systems , technical design of network infrastructure , technical troubleshooting for large scale problems , network and server security , and back-up , archiving and storage of data from servers . we compete with numerous large and small companies in this market sector , both nationally and locally . distinguished as one of the largest sage erp x3 practices in north america , we resell enterprise resource planning software published by sage , which addresses the financial accounting requirements of small- and medium-size businesses focused on manufacturing and distribution . we also offer services related to these sales , including installation , support and training . these product sales are primarily packaged software programs installed on a user workstation , on a local area network server , or in a hosted environment . the programs perform and support a wide variety of functions related to accounting , including financial reporting , accounts payable , accounts receivable and inventory management . we employ class instructors and host formal , topic-specific , training classes , both on-site at our clients ' facilities and at our corporate offices . our instructors must pass annual subject matter examinations required by sage to retain their product-based teaching certifications . we also provide end-user technical support services through our support/help desk , which is available during normal business hours , monday through friday . our
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other revenue increased 4 % compared with the prior year , primarily due to the formation and consolidation of the vten joint venture during the third quarter of the current year . ( see note 3 to the accompanying consolidated financial statements . ) costs of revenues costs of revenues increased 9 % . excluding the impact of foreign currency fluctuations , own and ten acquisitions and the group nine transaction , costs of revenues increased 7 % for the year ended december 31 , 2017 . the increase was primarily attributable to increased spending on content at our international networks segment , particularly sports rights and associated production costs . content amortization was $ 1.9 billion and $ 1.7 billion for the years ended december 31 , 2017 and december 31 , 2016 , respectively . selling , general and administrative selling , general and administrative expenses consist principally of employee costs , marketing costs , research costs , occupancy and back office support fees . selling , general and administrative expenses increased 5 % . excluding the impact of foreign currency fluctuations , own and ten acquisitions , selling , general and administrative expenses increased 3 % for the year ended december 31 , 2017 . the increase was primarily due to transaction costs for the scripps networks acquisition and integration costs of $ 79 million , including the $ 35 million charge associated with the modification of advance/newhouse 's preferred stock . ( see note 12 to the accompanying consolidated financial statements . ) impairment of goodwill goodwill impairment expense of $ 1.3 billion was recognized during the year ended december 31 , 2017 . ( see note 8 to the accompanying consolidated financial statements . ) depreciation and amortization depreciation and amortization expense includes depreciation of fixed assets and amortization of finite-lived intangible assets . depreciation and amortization was consistent for the year ended december 31 , 2017 , compared with the prior period as capital spending has remained consistent over the periods . restructuring and other charge s restructuring and other charges increased $ 17 million . the increase was primarily due to higher personnel-related termination costs for voluntary and involuntary severance actions . ( see note 15 to the accompanying consolidated financial statements . ) loss ( gain ) on disposition the change in loss ( gain ) on disposition was $ 67 million . we recorded a $ 4 million loss for the year ended december 31 , 2017 due to the sale of the raw and betty production studios on april 28 , 2017 , compared with a gain of $ 63 million for the year ended december 31 , 2016 . the gain on disposition recorded for the year ended december 31 , 2016 is comprised of the $ 50 million gain for the deconsolidation of our digital networks business seeker and sourcefed studios in connection with the group nine transaction and the $ 13 million gain due to the disposition of our radio businesses in the nordics . ( see note 3 to the accompanying consolidated financial statements . ) interest expense interest expense increased $ 122 million for the year ended december 31 , 2017 primarily due to costs incurred for the unsecured bridge loan commitment as well as interest accrued on the senior notes issued on september 21 , 2017 for the financing of the anticipated scripps networks acquisition . ( see note 9 to the accompanying consolidated financial statements . ) 40 loss on extinguishment of debt on march 13 , 2017 , we issued new senior notes in an aggregate principal amount of $ 650 million and used the proceeds to fund the repurchase of $ 600 million of combined aggregate principal amount of our then-outstanding senior notes through a cash tender offer that closed on march 13 , 2017 . as a result , we recognized a $ 54 million loss on extinguishment of debt , which included $ 50 million for premiums to par value , $ 2 million of non-cash write-offs of unamortized deferred financing costs , $ 1 million for the write-off of the original issue discount of the existing senior notes and $ 1 million accrued for other third-party fees . ( see note 9 to the accompanying consolidated financial statements . ) loss from equity investees , net losses from our equity method investees increased $ 173 million primarily due to losses from investments in limited liability companies that sponsor renewable energy projects related to solar energy , partially offset by increases in earnings at own and decreases in losses at all3media . ( see note 4 to the accompanying consolidated financial statements . ) other ( expense ) income , net the table below presents the details of other expense , net ( in millions ) . replace_table_token_5_th other expense increased $ 114 million in 2017 . we recorded foreign currency losses during 2017 compared to foreign currency gains during 2016 , mostly due to exchange rate changes on the u.s. dollar compared with the british pound that impacted foreign currency monetary assets . increases in losses from derivative instruments primarily resulted from losses of $ 98 million on interest rate contracts used to economically hedge the pricing for the issuance of a portion of the dollar-denominated senior notes , which were settled on september 21 , 2017 . the interest rate contracts did not receive hedging designation . the losses were partially offset by various other items , including a gain of $ 17 million on previously settled interest rate contracts for which the hedged issuance of debt is considered remote following the issuance of the senior notes on september 21 , 2017 . ( see note 9 and note 10 to the accompanying consolidated financial statements . ) on november 30 , 2017 , the company acquired from harpo a controlling interest in own . we recognized a remeasurement gain to account for the difference between the carrying value and the fair value of previously held 49.50 % equity interest . ( see note 3 to the accompanying consolidated financial statements . story_separator_special_tag ) 41 income taxes the following table reconciles the company 's effective income tax rate to the u.s. federal statutory income tax rate . replace_table_token_6_th income tax expense was $ 176 million and $ 453 million and our effective tax rate was ( 128 ) % and 27 % for 2017 and 2016 , respectively . during 2017 , the decrease in the effective tax rate was primarily attributable to the impact of non-cash goodwill impairment charges that are non-deductible for tax purposes . thereafter , the decrease in the effective tax rate was primarily due to investment tax credits that we receive related to our renewable energy investments , and to a lesser extent , the domestic production activity deduction benefit , the allocation and taxation of income among multiple foreign and domestic jurisdictions , and the impact of the 2017 tax act ( see note 16 to the accompanying consolidating financial statements ) . the benefits were partially offset by an increase in reserves for uncertain tax positions in 2017. in 2016 , we favorably resolved multi-year state tax positions that resulted in a reduction of reserves related to uncertain tax positions that did not recur in 2017 . 42 segment results of operations – 2017 vs. 2016 we evaluate the operating performance of our operating segments based on financial measures such as revenues and adjusted oibda . adjusted oibda is defined as operating income excluding : ( i ) mark-to-market share-based compensation , ( ii ) depreciation and amortization , ( iii ) restructuring and other charges , ( iv ) certain impairment charges , ( v ) gains and losses on business and asset dispositions , and ( vi ) certain inter-segment eliminations related to production studios . additionally , beginning with the quarter ended september 30 , 2017 , adjusted oibda also excludes material incremental third-party transaction costs directly related to the scripps networks acquisition and planned integration . we use this measure to assess the operating results and performance of our segments , perform analytical comparisons , identify strategies to improve performance , and allocate resources to each segment . we believe adjusted oibda is relevant to investors because it allows them to analyze the operating performance of each segment using the same metric management uses . we exclude mark-to-market share-based compensation , restructuring and other charges , certain impairment charges , gains and losses on business and asset dispositions and scripps networks acquisition and integration costs from the calculation of adjusted oibda due to their impact on comparability between periods . we also exclude the depreciation of fixed assets and amortization of intangible assets and deferred launch incentives as these amounts do not represent cash payments in the current reporting period . certain corporate expenses and inter-segment eliminations related to production studios are excluded from segment results to enable executive management to evaluate segment performance based upon the decisions of segment executives . as of january 1 , 2017 , the company no longer excludes amortization of deferred launch incentives in calculating total adjusted oibda as this expense is not material . for the year ended december 31 , 2016 , deferred launch incentives of $ 13 million were not reflected as an adjustment to the calculation of total adjusted oibda in order to conform to the current presentation . adjusted oibda should be considered in addition to , but not a substitute for , operating income , net ( loss ) income and other measures of financial performance reported in accordance with u.s. generally accepted accounting principles ( “ gaap ” ) . additional financial information for our segments and geographical areas in which we do business is discussed in note 21 to the accompanying consolidated financial statements included in item 8 , “ financial statements and supplementary data ” in this annual report on form 10-k. the table below presents the calculation of total adjusted oibda ( in millions ) . replace_table_token_7_th ( a ) selling , general and administrative expenses exclude mark-to-market share-based compensation , restructuring and other charges , gains ( losses ) on dispositions and third-party transaction costs directly related to the scripps networks acquisition and planned integration . 43 the table below presents a reconciliation of consolidated net income available to discovery communications , inc. to total adjusted oibda ( in millions ) . replace_table_token_8_th u.s. networks the table below presents , for our u.s. networks segment , revenues by type , certain operating expenses , adjusted oibda and a reconciliation of adjusted oibda to operating income ( in millions ) . replace_table_token_9_th revenues distribution revenue consists principally of fees from affiliates for distributing our linear networks , supplemented by revenue earned from svod content licensing and other emerging forms of digital distribution . distribution revenues increased 5 % . excluding the impact of the own acquisition , distribution revenues increased 4 % , primarily driven by increases in affiliate fee rates and increases in svod revenue due to the timing of content deliveries . these increases were partially offset by a decline in affiliate subscribers . total portfolio subscribers declined 5 % for the year ended december 31 , 2017 , while subscribers to our fully distributed networks declined 3 % for the same period . advertising revenue increased 3 % . excluding the impact of the own and ten acquisitions and the group nine transaction , advertising revenue increased 2 % for the year ended december 31 , 2017 . the increase was primarily due to pricing 44 increases and continued monetization of our go platform , partially offset by lower audience delivery due to continued linear distribution audience universe declines . other revenue increased 30 % primarily due to the formation and consolidation of the vten joint venture during the third quarter of the current year . ( see note 3 to the accompanying consolidated financial statements . ) costs of revenues costs of revenues increased 3 % for the year ended december 31 , 2017 . excluding the impact of own and ten acquisitions and the group nine transaction , costs of revenue increased 1 % .
| our content can be re-edited and updated in a cost-effective manner to provide topical versions of subject matter that can be utilized around the world on a variety of platforms . although the company utilizes certain brands and content globally , we classify our operations in two reportable segments : u.s. networks , consisting principally of domestic television network brands , and international networks , consisting primarily of international television network brands . for further discussion of our company , segments in which we do business , and our content development activities and revenues , see our business overview set forth in item 1 , `` business '' in this annual report on form 10-k. 38 results of operations – 2017 vs. 2016 consolidated results of operations – 2017 vs. 2016 our consolidated results of operations for 2017 and 2016 were as follows ( in millions ) . replace_table_token_4_th nm - not meaningful revenues distribution revenue consists principally of fees from affiliates for distributing our linear networks , supplemented by revenue earned from svod content licensing and other emerging forms of digital distribution . distribution revenue increased 8 % . excluding the impact of foreign currency fluctuations , distribution revenue increased 7 % . u.s. networks distribution revenue increases were driven by increases in affiliate fee rates and increases in svod revenue partially offset by a decline in affiliate subscribers . total u.s. networks portfolio subscribers declined 5 % for the year ended december 31 , 2017 , while subscribers to our fully distributed networks declined 3 % for the same period . international networks ' distribution revenue increase was mostly due to increases in contractual rates in europe following further investment in sports content , and to a lesser extent increases in latin america due to increases in rates offset by decreases in subscribers . contributions from other distribution revenues also contributed slightly to growth . other distribution revenues were comprised of content deliveries under licensing agreements . these increases were partially offset by decreases in contractual rates in asia . 39 advertising revenue is dependent
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in june 2017 , the fda approved our 510 ( k ) applications for marketing clearance in the united states of our compuflo epidural computer controlled anesthesia system . we are in the process of introductory meetings with medical device distributors within the united states and europe . there have been five medical instruments sold in the united states in 2018 and limited amounts sold internationally as of the reporting date . certain of our medical instruments have obtained european ce mark approval and can be marketed and sold in most european countries . in november 20 , 2018 , milestone scientific inc. received a letter from nyse american llc ( the “ exchange ” ) stating that the company was not in compliance with the continued listing standards as set forth in section ( s ) 1003 ( a ) ( i ) , ( ii ) , and ( iii ) of the nyse american company guide ( the “ company guide ” ) .on december 20 , 2018 , the company submitted a plan of compliance ( the “ plan ” ) to the exchange addressing how it intends to regain compliance with section ( s ) 1003 ( a ) ( i ) , ( ii ) and ( iii ) of the company guide by may 20 , 2020. on january 24 , 2019 , the company received a letter from the exchange stating that the company 's plan has been accepted by the exchange . the company is still not in compliance with section ( s ) 1003 ( a ) ( i ) , ( ii ) and ( iii ) of the company guide and its listing on the exchange is being continued pursuant to an extension granted by the exchange . if the company is not in compliance with the continued listing standards by may 20 , 2020 , or if the company does not make progress consistent with the plan , the exchange will initiate delisting procedures as appropriate . the company may appeal a staff delisting determination in accordance with section 10 and part 12 of the company guide . in 2018 , we remained focused on advancing efforts to achieve our three primary objectives ; in our medical sector ; those being : ● identify distributors in the united states for the epidural instruments , now that fda clearance has been received ; ● worldwide distribution of the compuflo epidural computer controlled anesthesia system ; and ● complete the cosmetic device and obtain european regulatory approve ( ce market clearance ) . wand sta dental instrument growth since its market introduction in early 2007 , the wand/sta instrument and prior c-clad products have been used to deliver over 66 million safe , effective and comfortable injections . the instrument has also been favorably evaluated in numerous peer-reviewed , published clinical studies and associated articles . moreover , there appears to be a growing consensus among users that the sta instrument is proving to be a valuable and beneficial instrument that is positively impacting the practice of dentistry worldwide . global distribution network beginning january 1 , 2016 , milestone scientific entered into a non-exclusive distribution agreement with henry schein , inc. ( “ henry schein ” ) . in june 2016 , that agreement was replaced with an exclusive distribution arrangement for our dental products for the united states and canada with henry schein . under this arrangement we have a semi-dedicated independent sales force visiting dentists . 25 to date , henry schein has endeavored to accomplish the goals set forth in the exclusive distribution agreement for the wand sta instrument and handpieces , including training of its exclusive products sale 's specialists . specifically , up to 25 exclusive product sales specialists have now been fully trained as experts in the features , advantages and benefits of the wand/ sta instrument and handpieces and all are currently in the field selling the instrument . henry schein also plans to increase the number of exclusive product specialist in 2019 and to train an additional customer service representative to support dentists across north america through its exclusive product sales customer call center , as business volume increases . on the global front , we have granted exclusive marketing and distribution rights for the wand/sta instrument to select dental suppliers in various international regions in asia , africa , south america and europe . they include fm produkty dla stomatologii in poland and unident ab in the scandinavian countries of denmark , sweden , norway and iceland . in october 2012 , the state food and drug administration ( cfda ) of the people 's republic of china approved our wand/sta single tooth anesthesia system ( sta system ) . in may 2014 , the cfda also approved the wand sta handpieces for sale in china . in june 2014 , milestone scientific invested $ 1 million in milestone china ltd. ( “ milestone china ” ) by contributing 772 sta instruments to milestone china for a 40 % ownership interest . milestone scientific recorded this investment under the equity method of accounting . milestone china became the company exclusive distributor of dental products in china . as of december 31 , 2018 and 2017 , milestone scientific 's investment in milestone china was $ 0. as of december 31 , 2018 and 2017 , milestone scientific 's share of cumulative suspended losses of milestone china were $ 3,380,388 and $ 3,147,470 , respectively . in september 2014 , milestone medical received ce clearance to distribute their epidural and intra-articular instruments in the european community ( eu ) . milestone medical signed a distribution agreement in march 2015 with a medical distributor in poland for the distribution of the epidural instrument . story_separator_special_tag this distribution agreement was terminated in late 2016 due to the distributor 's inadequate performance under the distribution agreement . milestone medical is continuing to pursue distributors for the instrument in the eu community . the following table shows a breakdown of milestone scientific 's product sales ( net ) , domestically and internationally , by business segment product category : replace_table_token_1_th 26 replace_table_token_2_th milestone scientific 's discussion and analysis of the financial condition and results of operations is based upon its consolidated financial statements that have been prepared in accordance with accounting principles generally accepted in the united states ( `` gaap '' ) and include the accounts of its wholly-owned and majority-owned subsidiaries including , wand dental , milestone advanced cosmetic and milestone medical . milestone education was a variable interest entity of which milestone scientific was the primary beneficiary and is consolidated into milestone scientific 's financial statements . milestone scientific purchased the remaining 50 % of milestone education in september 2018 for $ 1.00 increasing its ownership of milestone education to 100 % . all significant , intra-entity transactions and balances are eliminated in the consolidation . current product platform see item 1. description of business . summary of critical accounting policies and significant judgments and estimates principles of consolidation milestone scientific 's discussion and analysis of the financial condition and results of operations is based upon its consolidated financial statements that have been prepared in accordance with accounting principles generally accepted in the united states ( `` gaap '' ) and include the accounts of its wholly-owned and majority-owned subsidiaries including , wand dental , milestone advanced cosmetic and milestone medical . milestone education was a variable interest entity of which milestone scientific was the primary beneficiary and is consolidated into milestone scientific 's financial statements . milestone scientific purchased the remaining 50 % of milestone education in september 2018 for $ 1.00 increasing its ownership of milestone education to 100 % . all significant , intra-entity transactions and balances are eliminated in the consolidation . milestone scientific invested $ 1 million in milestone china ltd. ( “ milestone china ” ) by contributing 772 sta instruments to milestone china for a 40 % ownership interest . milestone scientific recorded this investment under the equity method of accounting . milestone scientific has a variable interest in milestone china , it considered the guidance in asc 810 , “ consolidation ” as it relates to determining whether milestone china is a vie and , if so , identifying the primary beneficiary . milestone scientific would be considered the primary beneficiary of the vie if it has both of the following characteristics : ● power criterion : the power to direct the activities that most significantly impact the entity 's economic performance ; and ● losses/benefits criterion : the obligation to absorb losses that could potentially be significant or the right to receive benefits that could potentially be significant to the vie 27 milestone scientific does not have the ability to control the activities that most significantly impact milestone china 's economics and , therefore , the power criterion has not been met . management placed the most weight on the relationship and significance of activities of milestone china to the ceo and a group of significant shareholders , including the milestone china ceo , of milestone china which have the power to direct the activities that most significantly impact the economic performance of milestone china . management has concluded that milestone scientific is not the primary beneficiary under asc 810. accordingly , milestone china has not been consolidated into the financial statements of milestone scientific and continues to be accounted for under the equity method . see note h. the preparation of these consolidated financial statements requires us to make estimates and judgments that affect the reported amounts of assets , liabilities , revenues and expenses , and related disclosure of contingent assets and liabilities . on an on-going basis , milestone scientific evaluates its estimates , including those related to accounts receivable , inventories , stock-based compensation and contingencies . milestone scientific bases its estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances , the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not clear from other sources . actual results may differ from those estimates under different assumptions or conditions . while significant accounting policies are more fully described in note c to the consolidated financial statements included elsewhere in this report , milestone scientific believes that the following accounting policies and significant judgment and estimates are most critical in understanding and evaluating the reported financial results . assessment of our ability to continue as a going concern in accordance with accounting standard codification ( “ asc ” ) 205-40 , “ presentation of financial statements – going concern ” , the company has evaluated whether there are conditions or events , considered in the aggregate , that raise substantial doubt about the company 's ability to continue as a going concern within one year after the date that the consolidated financial statements are issued . milestone scientific has incurred operating losses and negative cash flows from operating activities in virtually each year since its inception . these factors raise substantial doubt regarding the company 's ability to continue as a going concern . milestone scientific is actively pursuing the generation of positive cash flows from operating activities through an increase in revenue from its dental business worldwide , the generation of revenue from its medical devices and disposables business in the united states and worldwide , and a reduction in operating expenses .
| milestone is in the process of attending medical device trade shows and attending introductory meetings with medical device distributors within the united states and european markets . the company 's focus is on marketing its epidural devices throughout europe and the united states . gross profit for 2018 and 2017 were as follows : replace_table_token_6_th consolidated gross profit for the twelve months ended december 31 , 2018 and 2017 , were approximately 46 % and 62 % , respectively . dental gross profit for the twelve months ended december 31 , 2018 and 2017 , were approximately $ 4.6 million ( 48 % ) and $ 7.2 million ( 64 % ) , respectively . dental gross margin for the twelve months ended december 31 , 2018 decreased due to a reserve of approximately $ 309,000 for slow moving and damaged hand pieces , a reserve of approximately $ 1.2 million for the underlying inventory associated with deferred cost due to milestone china 's market under performance and liquidity constraints . milestone scientific also incurred approximately $ 165,000 of costs to correct discoloration issues with instruments and damaged handpieces . the medical gross profit was impacted by a reserve of $ 234,350 for slow moving intra-articular medical instruments due to the continued delay of the intra- articular regulatory approval . . selling , general and administrative expenses for 2018 and 2017 were as follows : replace_table_token_7_th 30 consolidated selling , general and administrative expenses for the twelve months ended december 31 , 2018 and 2017 , were approximately $ 10.6 million and $ 11.9 million , respectively . the decrease of approximately $ 1.3 million is predominantly due to the decrease in corporate expenses relating to consulting fees . milestone scientific continues the process of managing expenses while building on the business platform in the medical segment . research and development for 2018 and 2017 were as follows : replace_table_token_8_th consolidated research and development expenses for the twelve months ended december 31 , 2018 and 2017 , were approximately $ 246,000 and $ 273,000 , respectively . the decrease is due to a reduction in development costs associated with the epidural
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we commercially launched our breast health supplement at the end of 2014 , although to-date we have not generated any revenue from product sales and we are not dependent on sales to any one customer . we have financed our operations primarily through the sale of equity securities and convertible debt securities from which we raised $ 9.6 million of net cash from our inception through december 31 , 2014. share exchange on january 23 , 2014 , we ( then operating as thompson designs , inc. ) , biopharmx , inc. and stockholders of biopharmx , inc. , who collectively owned 100 % of biopharmx , inc. , entered into and consummated transactions pursuant to a share exchange agreement , such transaction referred to as the share exchange , whereby we issued to the stockholders of biopharmx , inc. an aggregate of 7,025,000 shares of our common stock , in exchange for 100 % of the shares of biopharmx , inc. held by stockholders . the shares of our common stock received by the stockholders of biopharmx , inc. in the share exchange constituted approximately 77.8 % of our then issued and outstanding common stock , after giving effect to the issuance of shares pursuant to the share exchange agreement . as a result of the share exchange , biopharmx , inc. became our wholly-owned subsdidiary . for accounting purposes , the share exchange was treated as a reverse acquisition with biopharmx , inc. as the acquirer and us as the acquired party , and as a result the historical financial statements prior to the share exchange included in this annual report on form 10-k are the historical financial statements of biopharmx , inc. on march 3 , 2014 , we changed our name to biopharmx corporation . on april 25 , 2014 , we reincorporated from nevada to delaware . 31 story_separator_special_tag size= '' 2 '' > between september 2012 and march 2014 , we issued 6 % unsecured convertible notes to investors in the aggregate principal amount of $ 2.25 million . these notes had maturity dates from one to three years from the date of issuance , with principal and interest payable at maturity . the notes automatically converted in 2014 into shares of our common stock on the completion of our reverse acquisition by biopharmx , inc. in january 2014 and closing of a financing in the amount of at least $ 2 million at a conversion price per share equal to 80 % of the per share offering price of such financing . during the year ended december 31 , 2014 , we completed the private placement of shares of series a preferred stock and warrants to purchase common stock . the private placement was consummated in a series of closings that occurred between april 2014 and november 2014. we sold to accredited investors and non-u.s. persons 4.2 million shares of series a preferred stock at a per share price of $ 1.85 for net proceeds of approximately $ 7.3 million and issued to the investors , for no additional consideration , warrants to purchase in the aggregate 2.0 million shares of our common stock , at an exercise price of $ 3.70 per share pursuant to a series of subscription agreements . additionally , under the subscription agreement with one of the investors , that investor is committed to purchase an additional 1,081,081 shares of series a preferred stock at a per share price of $ 1.85 upon the achievement of certain milestones which would raise another $ 2.0 million in gross proceeds . the milestones include our receiving revenues of $ 2.0 million for our vi 2 olet product or uplisting our stock to nyse or nasdaq . two of our majority common stockholders and this investor also entered into a voting agreement whereby these stockholders agreed to ( i ) vote in favor of any merger or sale of us which has been approved by the board of directors and holders of at least 50 % of the then outstanding shares of series a preferred stock , and ( ii ) irrevocably grant to such investor a proxy to vote in favor of such business combination transaction . these stockholders also agreed to sell their shares to a purchaser in a transaction approved by holders of at least 67 % of shares of series a preferred stock or 67 % of shares of common stock and series a preferred stock in the aggregate . the following table summarizes total current assets , liabilities and working capital ( in thousands ) . december 31 , 2014 current assets $ 2,520 current liabilities 1,367 working capital $ 1,153 net cash used for operating activities for the year ended december 31 , 2014 was $ 6.0 million . cash used in operating activities was primarily due to a net loss for the year ended december 31 , 2013 of $ 7.8 million which was partially offset by changes in operating assets and liabilities of $ 413,000 , non-cash interest expense of $ 76,000 , warrants issued for $ 99,000 and stock-based compensation of $ 1.2 million . cash used in investing activities was primarily for acquisition of intellectual property and acquisition of fixed assets . 34 net cash used for operating activities for the year ended december 31 , 2013 was $ 1.1 million . story_separator_special_tag cash used in operating activities was primarily due to a net loss for the year ended december 31 , 2013 of $ 1.6 million which was partially offset by changes in operating assets and liabilities of $ 371,000 , non-cash interest expense of $ 74,000 and stock-based compensation of $ 58,000. cash used in investing activities was primarily for the acquisition of intellectual property and the acquisition of fixed assets . net cash provided by financing activities for the years ended december 31 , 2014 and 2013 was $ 8.4 million and $ 1.0 million , respectively . this consisted of $ 7.3 million from issuing series a preferred stock in the year ended december 31 , 2014 and $ 1.0 million in proceeds from issuing convertible notes for each of the years ended december 31 , 2014 and 2013. subsequent events in march 2015 , we amended certain warrants to reduce the exercise price of such warrants from $ 3.70 to $ 2.50 per share with a corresponding increase in the number of shares of common stock exercisable under the warrants so that the aggregate exercise value of such warrants remained the same . as of march 27 , 2015 , the holders had exercised such warrants for an aggregate of 397,996 shares of common stock for an aggregate cash exercise price of $ 994,990. going concern as reflected in the accompanying financial statements , those financial statements have been prepared assuming we will continue as a going concern . we have incurred recurring losses and negative cash flows from operations since inception . we have not generated revenues and have funded our operating losses through the issuance of convertible notes payable and series a preferred stock . we have a limited operating history and our prospects are subject to risks , expenses and uncertainties frequently encountered by companies in the industry . the significant risks described herein could have a significant negative impact on our financial viability and raise substantial doubt about our ability to continue as a going concern . we are working on our business model to increase working capital by managing our cash flow , securing financing and introducing our first product to market . risks include , but are not limited to , the uncertainty of availability of additional financing and the uncertainty of achieving future profitability . we intend to raise additional funds through the issuance of equity securities . there can be no assurance that such financing will be available or on terms which are favorable to us . failure to generate sufficient cash flows from operations , raise additional capital or reduce certain discretionary spending could have a material adverse effect on our ability to achieve our intended business objectives . these factors raise substantial doubt about our ability to continue as a going concern . the financial statements do not contain any adjustments that might result from the outcome of this uncertainty . as shown in the accompanying financial statements , we incurred a net loss of $ 7.8 million and $ 1.6 million during the years ended december 31 , 2014 and 2013 , respectively , and have an accumulated deficit of $ 9.5 million as of december 31 , 2014. as of december 31 , 2014 , we had working capital of $ 1.2 million . while we believe that we have a plan to fund on-going operations , there is no assurance that our plan will be successfully implemented . we are experiencing the following risks and uncertainties in the business : the discovery of key raw materials to formulate novel products depends on our ability to identify , negotiate and secure procurement of such materials . this also depends on our ability to establish comprehensive and long term vendor contracts and relationships . our ability to compete and to achieve our product platform strategy depends on our ability to protect our proprietary discoveries and technologies . we currently rely on a combination of 35 copyrights , trademarks , trade secret laws and confidentiality agreements to protect our intellectual property rights . we also rely upon unpatented know-how and continuing technological innovation . our continued operations are dependent upon our ability to identify , recruit and retain adequate management personnel and contractors to perform certain jobs such as research and development , patent generation , regulatory affairs and general administrative functions . we require highly trained professionals of varying levels and experience along with a flexible work force . our ability to generate income in the short-run will depend greatly on the rate of adoption and ability to establish a market for our vi 2 olet breast health tablet . research and development for novel prescription or otc based products can be very extensive and lengthy in nature ; and the clinical trial process with the food and drug administration can require significant funding and time consuming patient studies . the competitive landscape could change significantly over the time period to complete targeted product development milestones . the current competition for our products could also turn into strategic partners or potential acquirers in the future . recent accounting pronouncements in may 2014 , the financial accounting standards board ( fasb ) issued accounting standards update ( asu ) 2014-09 , revenue from contracts with customers , ( asu 2014-09 ) , which converges the fasb and the international accounting standards board standards on revenue recognition . areas of revenue recognition that will be affected include , but are not limited to , transfer of control , variable consideration , allocation of transfer pricing , licenses , time value of money , contract costs and disclosures .
| replace_table_token_4_th sales and marketing expenses for the years ended december 31 , 2014 and 2013 were $ 2.3 million and $ 132,000 , respectively . the increase from year-to-year of $ 2.2 million is primarily due to the ramp up in marketing and sales to launch our vi 2 olet breast health tablet product . sales and marketing compensation increased $ 392,000 and stock compensation increased $ 140,000 as a result of hiring people who had previously been consultants as employees in 2014. outside agencies accounted for $ 769,000 of the increase from year-to-year to accomplish the marketing goals for our new product . marketing costs to launch our new product increased by $ 496,000 and travel increased by $ 54,000 from 2014 to 2013. allocated overhead , consisting of facilities , insurance and maintenance expenses , increased by $ 110,000 . 32 sales and marketing expenses for the year ended december 31 , 2013 consisted primarily of consultant compensation and non-employee stock compensation expense in the amount of $ 93,000 and the cost of developing marketing strategy and material in the amount of $ 30,000. as of december 31 , 2014 , we had 3 employees in sales and marketing . general and administrative expenses our general and administrative expenses consist of the cost of our executive , finance , corporate development and other administrative functions . replace_table_token_5_th general and administrative expenses for the years ended december 31 , 2014 and 2013 were $ 3.0 million and $ 711,000 , respectively . the increase from year-to-year of $ 2.2 million is primarily due to beginning in the year ended december 31 , 2014 to pay our officers ' salaries of $ 500,000 , adding support staff , which resulted in $ 1.0 million in cash compensation , $ 160,000 in stock compensation to an investor for service as a director and other consulting services and $ 658,000 in stock compensation for employees and consultants . the cost of the reverse merger and overhead related to being a publicly-traded company increased costs by $
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see “ liquidity and capital resources ” and “ results of operation - fiscal year 2014 compared to fiscal year 2013 – interest expense ” elsewhere in this item 7 and note 11 of the notes to consolidated financial statements included elsewhere in this report for additional information . interest and other i ncome interest and other income was $ 0.8 million and $ 0.5 million for 2015 and 2014 , respectively . interest income increased 80 % in 2015 as a result of higher weighted average interest rates based on a larger average balances of marketable securities held by the company in 2015 compared to last year 's comparable period . during 2015 and 2014 , the company earned interest income principally from its investments , which were primarily in short-term instruments and money market funds . income tax provision the company 's effective income tax rate of 12.1 % for 2015 was lower than the statutory u.s. federal income tax rate because portions of the company 's taxable income in 2015 were derived in foreign jurisdictions with lower effective income tax rates . the company 's effective income tax rate was 291.7 % for 2014 , which was adversely affected by a non-cash charge of $ 64.0 million for the accrual of u.s. deferred income taxes on the undistributed earnings of the company 's subsidiary in singapore . the aforementioned charge was partially offset by a tax benefit of $ 2.2 million recorded by the company in the 2014 second quarter in connection with a tax refund related to amended federal income tax returns . the effect of the aforementioned items was to increase the company 's income tax provision from $ 2.6 million to $ 64.4 million for 2014. see “ results of operations – fiscal year 2014 compared to fiscal year 2013 – income tax provision ” elsewhere in this item 7 . 28 net earnings the company 's net earnings for 2015 were $ 20.0 million , including the pre-tax charges of $ 1.6 million related to a modification of previously issued employee stock options , cost reduction initiatives in the united states and the facility closures and additional 2014 fiscal year-end audit fees mentioned above , compared to a net loss of $ 42.3 million for 2014 , including $ 64.0 million related to the u.s. income tax on the undistributed earnings of the company 's subsidiary in singapore , a tax benefit of $ 2.2 million in connection with a tax refund related to amended federal income tax returns and pre-tax charges of $ 1.5 million related to the modification of previously issued employee stock options , the closure of the company 's facility in zhuhai , china and the financial advisory services fee mentioned above . the net impact of the items described above was to reduce net earnings by $ 1.0 million in 2015 and to reduce net earnings by $ 62.5 million in 2014. basic and diluted earnings per share basic and diluted earnings per share for 2015 were $ 0.96 , including the additional non-cash charges related to the modification of previously issued employee stock options , cost reduction initiatives in the united states and the facility closures and the additional 2014 fiscal year-end audit fees mentioned above , compared to a basic and diluted loss per share of $ 2.03 , including the non-cash charge for the accrual of u.s. income tax on undistributed earnings , the tax benefit in connection with the tax refund related to amended federal income tax returns , the additional non-cash charges resulting from the modification of previously issued employee stock options , the pre-tax charges in connection with the closure of the zhuhai facility and the financial advisory services retention fee mentioned above . the net impact of the items described above was to reduce basic and diluted earnings per share by $ 0.04 and $ 3.00 in 2015 and 2014 , respectively . fiscal year 2014 compared to fiscal year 2013 the comparison of the company 's results of operations for 2014 to the company 's results of operations for 2013 are impacted by the fact that the 2013 fiscal year consisted of 53 weeks and the 2014 fiscal year consisted of 52 weeks . replace_table_token_4_th 29 net sales the company 's total net sales worldwide in 2014 decreased 6 % from 2013 as a result of lower unit volumes of printed circuit materials products shipped to the company 's customers in north america , asia and europe . the lower sales of printed circuit materials products sold by the company in 2014 was partially offset by higher sales of aerospace composite materials , parts and assemblies products by the company 's operations in north america , asia and europe . the company 's total net sales of its printed circuit materials products were $ 135.4 million in 2014 and $ 150.6 million in 2013 and comprised 82 % and 85 % of the company 's total net sales worldwide in 2014 and 2013 , respectively . the company 's total net sales of its aerospace composite materials , parts and assemblies products were $ 30.4 million in 2014 and $ 25.9 million in 2013 and comprised 18 % and 15 % of the company 's total net sales worldwide in 2014 and 2013 , respectively . the company 's foreign sales were $ 83.6 million , or 50 % of the company 's total net sales worldwide , during 2014 compared to $ 95.4 million of sales , or 54 % of total net sales worldwide during 2013. the company 's foreign sales during 2014 declined 12 % from 2013 as a result of lower sales in asia and europe . story_separator_special_tag the company 's sales in north america , asia and europe were 50 % , 43 % and 7 % , respectively , of the company 's total net sales worldwide in 2014 compared to 46 % , 45 % and 9 % , respectively , in 2013. the company 's sales in north america increased 2 % , its sales in asia decreased 9 % and its sales in europe decreased 31 % in 2014 compared to 2013. during 2014 , 88 % of the company 's total net sales worldwide of printed circuit materials consisted of high performance printed circuit materials , compared to 82 % for 2013. cost of sales the company 's cost of sales decreased by 7 % in 2014 from 2013 primarily as a result of lower sales and lower production volumes in 2014 than in 2013 , and cost of sales as a percentage of sales decreased to 71.0 % in 2014 from 71.3 % in 2013. the decrease in costs of sales as a percentage of sales was due primarily to the improved operating performance of the company 's patc business unit , the elimination of the additional , and in some instances duplicative , costs associated with transferring aerospace composite materials manufacturing from the company 's park advanced composite materials , inc. ( “ pacm ” ) facility to the company 's patc facility in 2013 , the cost reductions resulting from the closures of the company 's pacm facility and nelco zhuhai facility in 2013 and lower depreciation expense in 2014 than in 2013. gross profit the company 's gross profit in 2014 was lower than its gross profit in the prior fiscal year , but the overall gross profit as a percentage of net sales for the company 's worldwide operations increased to 29.0 % in 2014 compared to 28.7 % in 2013 despite significantly lower sales and the partially fixed nature of overhead costs . the gross profit margin in 2014 benefitted from the higher percentage of sales of higher margin , high performance printed circuit materials products in 2014 than in 2013 , cost reductions as a result of the aforementioned facility closures , the improved operating performance of the company 's patc business unit and the lower depreciation expense in 2014 than in 2013 . 30 selling , general and administrative expenses selling , general and administrative expenses decreased by $ 1.4 million , or 5 % , during 2014 compared to 2013. such expenses measured as percentages of sales were 15.2 % during 2014 compared to 15.1 % during 2013. the increase as a percentage of sales was the result of lower revenues combined with the partially fixed nature of such expenses . such expenses in 2013 were impacted by additional , and in some instances duplicative , expenses associated with the consolidation of all of the company 's north american aerospace composite materials , parts and assemblies manufacturing , development and design activities at its patc business unit . the decrease in such expenses in 2014 was primarily the result of lower legal fees and expenses , lower selling and freight expenses commensurate with lower sales in 2014 than in 2013 and the elimination of the additional , and in some instances duplicative , expenses associated with operating two facilities during the consolidation of the company 's aerospace activities at its patc business unit in the 2013 fiscal year . although such expenses declined in 2014 , they were partially offset by increases in stock option expenses in 2014 compared to 2013 due to additional non-cash charges resulting from the modification of previously issued employee stock options resulting from the special cash dividend paid by the company in february 2014 and a financial advisory services retention fee . selling , general and administrative expenses in 2014 included $ 1.7 million of stock option expenses compared to $ 0.9 million in 2013. restructuring charges the company recorded pre-tax restructuring charges of $ 0.5 million during 2014 in connection with the closure of its nelco zhuhai facility located in the free trade zone in zhuhai , china in the 2013 fiscal year second quarter , and the company recorded pre-tax restructuring charges of $ 3.7 million in 2013 in connection with the closure of the nelco zhuhai facility and the closure of the pacm facility in waterbury , connecticut in the 2013 fiscal year third quarter . earnings from operations for the reasons set forth above , the company 's earnings from operations were $ 22.4 million for 2014 , including the non-cash pre-tax charges of $ 0.7 million associated with the modification of previously issued employee stock options , $ 0.3 million for the financial advisory services retention fee and $ 0.5 million related to the closure of the nelco zhuhai facility described above , compared to $ 20.3 million for 2013 , including the pre-tax restructuring charges of $ 3.7 million related to the closures of the nelco zhuhai facility and the pacm facility described above . interest expense the interest expense in 2014 related to the company 's borrowings under the four-year amended and restated revolving credit facility agreement that the company entered into with pnc bank , national association in the fourth quarter of 2014. the amended and restated agreement provides for loans up to $ 104 million to the company and letters of credit up to $ 2 million for the account of the company and , subject to the terms and conditions of the agreement , an interest rate on the outstanding loan balance of libor plus 1.10 % . other interest rate options are available to the company under the agreement .
| 26 the company 's foreign sales were $ 86.7 million , or 53 % of the company 's total net sales worldwide , during 2015 compared to $ 83.6 million of sales , or 50 % of total net sales worldwide during 2014. the company 's foreign sales during 2015 increased 4 % from 2014 as a result of higher sales in asia . the company 's sales in north america , asia and europe were 46 % , 47 % and 7 % , respectively , of the company 's total net sales worldwide in 2015 compared to 50 % , 43 % and 7 % , respectively , in 2014. the company 's sales in north america decreased 8 % , its sales in asia increased 6 % and its sales in europe decreased 9 % in 2015 compared to 2014. during 2015 , 92 % of the company 's total net sales worldwide of printed circuit materials consisted of high performance printed circuit materials , compared to 88 % during 2014. the company 's high performance printed circuit materials ( non-fr4 printed circuit materials ) include high-speed , low-loss materials for digital and radio frequency ( “ rf ” ) /microwave applications requiring lead-free compatibility and high bandwidth signal integrity , bismalimide triazine ( “ bt ” ) materials , polyimides for applications that demand extremely high thermal performance and reliability , cyanate esters , quartz reinforced materials , and polytetrafluoroethylene ( “ ptfe ” ) and modified epoxy materials for rf/microwave systems that operate at frequencies up to at least 79ghz . gross profit despite the reduction in the company 's total net sales and the fixed nature of certain overhead costs , the company 's gross profit in 2015 was 2 % higher than its gross profit in the prior fiscal year and the overall gross profit as a percentage of net sales increased to 30.2 % in 2015 compared to 29.0 % in 2014. the increase in the gross profit margin was primarily due to reductions in utility rates , cost reduction initiatives in the united states , a decrease in repairs and maintenance expenses and the improved operating performance of the company 's patc business unit as a result of the increase in sales and efficiencies from larger production volumes . the gross profit in 2015 also benefited from the higher percentage of sales of higher margin , high performance printed
| 15,939 |
for a complete description of the terms for the senior credit facility and our cash flow hedges , see note 8 and note 9 , respectively , to our consolidated financial statements set forth in item 8 of this form 10-k. secondary offering as of december 31 , 2013 , greenlight beneficially owned approximately 38 % of our common stock . this represents a decrease from greenlight 's beneficial ownership of approximately 63 % as of january 1 , 2013. in august 2013 , greenlight sold 1.5 million shares of our stock in a secondary offering . in november 2013 , greenlight sold an additional 2.5 million shares of our stock in another secondary offering . as a result of these transactions , we are no longer a controlled company . we did not receive any proceeds from these sales of shares and all costs associated with this transaction were charged to greenlight . 2014 outlook our execution plan to grow comparable store sales includes : building traffic by : promoting innovative and effective value enhance our healthy options focusing on fresh baked bagels and beverage innovation delivering relevant , reliable and valuable guest experiences 27 building average check through bulk bagels , and accelerating catering growth increasing media and brand awareness with a balanced approach of local ( grass roots ) and mass marketing : local brand activation directional outdoor and radio support digital marketing/social media we expect that our catering channel will benefit from new initiatives in fiscal 2014 that include an enhanced call center , expanded search engine marketing , utilization of sales coordinators in smaller markets and database activation . our plan is to improve corporate margins by focusing on strategic contract renegotiations , distribution optimization , improving packaging quality and costs , and improving marketing and construction materials purchases . our emphasis on acceleration of unit growth includes the opening of 75 to 85 units in 2014. we will seek to accomplish this objective by continuing to focus on a franchise first growth model , asset light unit economics , penetration into new key channels and opportunistic refranchising and acquisition efforts . we see refranchising our units as an opportunity to attract high quality franchisees that will support our accelerated growth initiatives . the airport channel currently consists of sixteen licensed locations with an average unit volume of $ 1.9 million and a total of $ 24.3 million in sales for 2013 , on which we receive a royalty . we opened units in dallas/fort worth , denver , san diego and atlanta in fiscal 2013 and were recently awarded additional locations in the san diego , atlanta , la guardia ( new york ) , miami and san jose ( california ) airports . we currently have a robust pipeline of existing franchise development agreements and new license locations . as of february 21 , 2014 , we have 27 development agreements in place for 186 total restaurants , 47 of which have already opened . based upon the development agreements , we expect the remaining 139 new restaurants will open on various dates through 2021. we expect to spend between $ 24 million and $ 26 million in capital expenditures in 2014 which includes the opening of company-owned restaurants and the relocation of additional company-owned restaurants . we also intend to deploy our capital into areas such as the remodeling or refreshing of existing stores , installing drive-thru lanes and adding new exterior signage at certain locations . our free cash flow is expected to continue to provide us with the financial resources to execute on our fiscal 2014 plan , including the continued servicing of our elevated level of debt . use of non-gaap financial information in addition to the results reported in accordance with accounting principles generally accepted in the united states of america ( gaap ) included in this filing , we have provided certain non-gaap financial information , including non-gaap total revenues excluding the extra week in fiscal 2011 ; adjusted earnings before interest , taxes , depreciation and amortization , restructuring expenses , strategic alternative expenses , and other operating expenses/income ( adjusted ebitda ) ; net income adjusted for the extra 53 rd week in fiscal 2011 , restructuring expenses , strategic alternatives expense , incremental interest expense on additional credit facility borrowings and other operating expenses/income ( adjusted net income ) ; earnings per share adjusted for the extra 53 rd week in fiscal 2011 , restructuring expenses , strategic alternatives expense , incremental interest expense on additional credit facility borrowings and other operating expenses/income ( adjusted net income per share ) ; and free cash flow , which we define as net cash provided by operating activities less net cash used in investing 28 activities . management believes that the presentation of this non-gaap financial information provides useful information to investors because this information may allow investors to better evaluate our ongoing business performance and certain components of our results . in addition , the board uses this non-gaap financial information to evaluate the performance of the company and its management team . this information should be considered in addition to the results presented in accordance with gaap , and should not be considered a substitute for the gaap results . not all of the aforementioned items defining adjusted ebitda occur in each reporting period , but have been included in our definitions of these terms based on historical activity . we have reconciled the non-gaap financial information to the nearest gaap measure on pages 31 , 37 , 42 and 46. we include in this report information on system-wide comparable store sales percentages . restaurants included in our comparable store sales percentages include those restaurants in operation for a full six fiscal quarters . system-wide comparable store sales percentages refer to changes in sales of our restaurants , whether operated by the company or by franchisees and licensees , in operation for six fiscal quarters including those restaurants temporarily closed for an immaterial amount of time . story_separator_special_tag some of the reasons restaurants may be temporarily closed include remodeling , relocations , road construction , rebuilding related to site-specific catastrophes and natural disasters . franchise and license comparable store sales percentages are based on sales of franchised and licensed restaurants , as reported by franchisees and licensees . management reviews the increase or decrease in comparable store sales to assess business trends . comparable store sales exclude permanently closed locations . when we intend to relocate a restaurant , we consider that restaurant to be temporarily closed for up to twelve months after it ceases operations . if a suitable relocation site has not been identified by the end of twelve months , we consider the restaurant to be permanently closed . until that time , we include the restaurant in our open store count , but exclude its sales from our comparable store sales . as of december 31 , 2013 , there are four stores that are currently closed but that we intend to relocate , and are thus considered to be temporarily closed . we use company-owned store sales , franchise and license sales and the resulting system-wide sales information internally in connection with restaurant development decisions , planning , and budgeting analyses . we believe system-wide comparable store sales information is useful in assessing consumer acceptance of our brands ; facilitates an understanding of our financial performance and the overall direction and trends of sales and operating income ; helps us appreciate the effectiveness of our advertising and marketing initiatives ; and provides information that is relevant for comparison within the industry . comparable store sales percentages are non-gaap financial measures , which should not be considered in isolation or as a substitute for other measures of performance prepared in accordance with gaap , and may not be equivalent to comparable store sales as defined or used by other companies . we do not record franchise or license restaurant sales as revenues . however , royalty revenues are calculated based on a percentage of franchise and license restaurant sales , as reported by the franchisees or licensees . 29 results of operations for fiscal 2013 as compared to fiscal 2012 financial highlights total revenues increased $ 7.5 million , or 1.8 % , which was driven by an increase in company-owned restaurant revenue of $ 3.6 million , an increase of $ 3.0 million from our manufacturing operations and an increase in franchise and license related revenue of $ 1.3 million , partially offset by a decline in revenue of $ 0.5 million from commissaries that were closed by the end of the first quarter of fiscal 2012. replace_table_token_8_th system-wide comparable store sales decreased -0.3 % , primarily due to a company-owned comparable store sales decrease of -0.6 % . during fiscal 2013 , we focused on stimulating comparable transactions by improving our value layer deals coupled with innovative features on our premium sandwiches . while we faced challenging economic headwinds in fiscal 2013 , we believe that the investment in value and additional discounting had a positive impact on transactions for the year and that we are well positioned for fiscal 2014. our overall gross margin ( excluding depreciation and amortization ) for fiscal 2012 was $ 88.6 million for fiscal 2013 , a decrease of 1.9 % . we attribute this decrease to the deleveraging of company-owned restaurant costs resulting from our investment in discounting . replace_table_token_9_th interest expense increased $ 2.6 million due to an increase of $ 50.6 million in our average debt balance and a 0.4 % increase in our weighted average interest rate . in fiscal 2012 , we funded a special dividend through an amendment of our senior credit facility . net income was $ 14.6 million for fiscal 2013 , an increase of 14.3 % from net income of $ 12.7 million for fiscal 2012. diluted earnings per share ( eps ) were $ 0.82 for fiscal 2013 compared to $ 0.74 in fiscal 2012. the increase in diluted eps is primarily due to an increase in earnings from operations and the elimination of one-time expenses incurred in fiscal 2012 towards a strategic alternatives review process and restructuring , partially offset by an increase in interest expense in fiscal 2013 resulting from a higher amount of third party debt incurred for the funding of a special dividend in fiscal 2012. diluted eps for fiscal 2012 was impacted by approximately $ 0.15 per share for strategic alternative transaction expenses and restructuring charges . for fiscal 2013 , increased interest expense impacted diluted eps by approximately $ 0.10 per share . 30 adjusted ebitda was $ 47.2 million for fiscal 2013 , a decrease of 5.0 % from adjusted ebitda of $ 49.7 million for fiscal 2012. in fiscal 2012 , we expensed $ 3.7 million towards the strategic alternatives review process . we did not incur similar costs in fiscal 2013. consolidated results fiscal 2013 vs fiscal 2012 replace_table_token_10_th * * not meaningful to stimulate transaction growth in fiscal 2013 , we concentrated on value bundling to our customers . our discounting , which is recorded against revenue , increased $ 7.7 million from fiscal 2012. while fiscal 2013 proved to be challenging , we believe that this investment in discounting has had a positive impact on transaction growth for the year and that we are well positioned for fiscal 2014. strong third-party sales from our manufacturing operation and an increase in comparable store sales from our franchise and license operations of +0.4 % helped mitigate the impact of this discounting at our company-owned restaurants . our income from operations increased by $ 3.6 million in fiscal 2013 to $ 27.9 million primarily as a result of the reversing effect of expenses incurred with the strategic alternatives review process we undertook in 2012 , improved manufacturing results and increased franchise and license revenue , partially offset by a decline in operations at our company-owned restaurants resulting from the deleveraging of costs associated with our investment in discounting .
| adjusted net income increased $ 3.1 million , or 23.9 % to $ 16.3 million , or $ 0.94 adjusted earnings per diluted share , compared to adjusted net income of $ 13.1 million , or $ 0.78 adjusted earnings per diluted share , on a comparable 52-week basis . adjusted ebitda increased 11.7 % primarily due to improved revenue and cost saving initiatives . our board authorized a review of strategic alternatives to maximize value for all stockholders . this review was initiated in may and culminated in december with a recapitalization of the company , including the payment of a one-time special cash dividend of $ 4.00 per share of common stock totaling $ 68.1 million on december 27 , 2012 . 36 consolidated results fiscal 2012 vs fiscal 2011 replace_table_token_18_th * * not meaningful our income from operations decreased by $ 0.3 million in 2012 to $ 24.2 million primarily as a result of the non-recurring strategic alternatives review process we undertook in 2012 and an additional $ 0.8 million in income from operations resulting from the 53 rd week in fiscal 2011 , primarily offset by improved margins in fiscal 2012. total revenues increased by $ 3.4 million to $ 427.0 million , primarily the result of increased revenue from our company-owned stores . the extra 53 rd week in 2011 contributed an additional $ 7.3 million in revenue . system-wide comparable stores were +1.0 % for fiscal 2012 which we attribute to strong check growth of +4.2 % , reflecting price and product mix favorability . our catering business continues to be a strong revenue generator , as evidenced by an increase in catering sales of 18.1 % over fiscal 2011. to build same store sales , we focus on building traffic by leveraging our strengths , growing average check and building brand awareness through various marketing initiatives . net income decreased for fiscal 2012 primarily due to the extra 53 rd week in 2011 , which contributed net income of $ 0.5 million , and $ 3.7 million ( $ 2.2 million , net of tax ) in non-recurring strategic alternatives expenses , partially offset by improved margins . 37 company-owned restaurant operations replace_table_token_19_th
| 15,940 |
for example , a gain ( loss ) in the non-qualifying hedge category for certain energy derivatives is offset by decreases ( increases ) in the fair value of related physical asset positions in the portfolio or contracts , which are not marked to market under gaap . for this reason , nee 's management views results expressed excluding the impact of the non-qualifying hedges as a meaningful measure of current period performance . the second category , referred to as trading activities , which is included in adjusted earnings , represents the net unrealized effect of actively traded positions entered into to take advantage of expected market price movements and all other commodity hedging activities . at fpl , substantially all changes in the fair value of energy derivative transactions are deferred as a regulatory asset or liability until the contracts are settled , and , upon settlement , any gains or losses are passed through the fuel clause . see note 4 . 2018 summary net income attributable to nee for 2018 was higher than 2017 by $ 1,258 million , or $ 2.49 per share , assuming dilution , due to higher results at fpl and neer , partly offset by lower results at corporate and other . fpl 's increase in net income in 2018 was primarily driven by continued investments in plant in service and other property , increased retail rate base under the 2016 rate agreement and the absence of the 2017 net impact of storm restoration costs due to hurricane irma discussed below . neer 's results increased in 2018 primarily reflecting nep investment gains upon deconsolidation and the absence of the 2017 duane arnold impairment charge , and lower income tax expense related to the reduction in the federal corporate income tax rate partly offset by the income tax benefits recognized on revaluing the deferred taxes upon enactment of tax reform in 2017 . in 2018 , neer added approximately 1,406 mw of new wind generating capacity , 899 mw of wind repowering generating capacity and 326 mw of solar generating capacity in the u.s. and increased its backlog of contracted renewable development projects . see note 1 - nextera energy partners , lp for a discussion of the deconsolidation of nep in january 2018 . 38 corporate and other 's results in 2018 decreased primarily reflecting the absence of the 2017 gain on sale of the fiber-optic telecommunications business and unfavorable non-qualifying hedge activity . nee and its subsidiaries require funds to support and grow their businesses . these funds are primarily provided by cash flows from operations , borrowings or issuances of short- and long-term debt , proceeds from differential membership investors , sales of assets to nep or third parties and , from time to time , issuances of equity securities . see liquidity and capital resources - liquidity . story_separator_special_tag electric rate regulation - cost recovery clauses . underrecovery or overrecovery of cost recovery clause and other pass-through costs ( deferred clause and franchise expenses and revenues ) can significantly affect nee 's and fpl 's operating cash flows . the 2018 net underrecovery impacting nee and fpl 's operating cash flows was approximately $ 209 million and the impact of the 2017 net overrecovery was approximately $ 82 million . the 2018 decrease in fuel cost recovery revenues primarily reflects a lower average fuel factor resulting in lower revenues of approximately $ 218 million . the 2017 increase in fuel cost recovery revenues primarily reflects a higher average fuel factor resulting in higher revenues of approximately $ 258 million . storm-related revenues decreased in 2018 primarily as a result of the conclusion in february 2018 of a surcharge related to hurricanes impacting fpl 's service territory in 2016. the 2017 increase in storm-related revenues relates to fpl 's recovery of eligible storm restoration costs following hurricanes impacting fpl 's service territory in 2016 and replenishment of the storm reserve for a 12-month period beginning on march 1 , 2017. in 2018 , 2017 and 2016 , cost recovery clauses contributed approximately $ 113 million , $ 120 million and $ 112 million , respectively , to fpl 's net income . other items impacting fpl 's consolidated statements of income fuel , purchased power and interchange expense fuel , purchased power and interchange expense decreased $ 291 million and increased $ 294 million during 2018 and 2017 , respectively . the decrease for 2018 primarily relates to a higher deferral of fuel expense and approximately $ 129 million in lower capacity fees . fpl deferred approximately $ 176 million and $ 11 million of retail fuel costs in 2018 and 2016 , respectively , compared with the recognition of approximately $ 49 million of deferred retail fuel costs in 2017. the increase for 2017 primarily relates to approximately $ 314 million of higher fuel and energy prices . storm restoration costs in december 2017 , following the enactment of tax reform , fpl determined that it would not seek recovery of hurricane irma storm restoration costs through a surcharge from customers and , as a result , the regulatory asset associated with hurricane irma was written off . as allowed under the 2016 rate agreement , fpl used available reserve amortization to offset nearly all of the expense , and plans to partially restore the reserve amortization through tax savings generated during the term of the 2016 rate agreement . see note 1 - rate regulation . depreciation and amortization expense the major components of fpl 's depreciation and amortization expense are as follows : replace_table_token_9_th depreciation expense increased $ 1,693 million and decreased $ 760 million during 2018 and 2017 , respectively . story_separator_special_tag the increase in 2018 primarily reflects the reversal of reserve amortization in 2018 compared to recording reserve amortization in 2017 , partly offset 40 by lower storm-recovery cost amortization as a result of the conclusion , in february 2018 , of the recovery of restoration costs from hurricanes that impacted fpl 's service territory in 2016. the decrease in 2017 primarily reflects approximately $ 1,237 million of higher reserve amortization , partly offset by higher depreciation recovered under base rates due to higher rates as a result of the 2016 rate agreement , higher storm-recovery cost amortization related to the recovery of restoration costs from hurricanes that impacted fpl 's service territory in 2016 and higher plant in service balances . the reserve amortization , or reversal of such amortization , reflects adjustments to accrued asset removal costs provided under the 2016 and 2012 rate agreements in order to achieve the targeted regulatory roe . reserve amortization is recorded as a reduction to ( or when reversed as an increase to ) accrued asset removal costs which is reflected in noncurrent regulatory liabilities on the consolidated balance sheets . at december 31 , 2018 , approximately $ 541 million remains in accrued asset removal costs related to reserve amortization . taxes other than income taxes and other taxe s other than income taxes and other increased $ 103 million in 2017 primarily due to higher franchise and revenue taxes , neither of which impacts net income , as well as higher property taxes reflecting growth in plant in service balances . income taxes fpl 's income taxes for 2018 decreased $ 567 million primarily related to the decrease in the federal corporate income tax rate . neer : results of operations neer owns , develops , constructs , manages and operates electric generation facilities in wholesale energy markets primarily in the u.s. , as well as in canada and spain . neer also provides full energy and capacity requirements services , engages in power and gas marketing and trading activities and invests in natural gas , natural gas liquids and oil production and pipeline infrastructure assets . neer 's net income less net income attributable to noncontrolling interests for 2018 , 2017 and 2016 was $ 4,664 million , $ 2,964 million and $ 1,118 million , respectively , resulting in an increase in 2018 of $ 1,700 million and an increase in 2017 of $ 1,846 million . the primary drivers , on an after-tax basis , of these changes are in the following table . replace_table_token_10_th ( a ) reflects after-tax project contributions , including ptcs , itcs and deferred income taxes and other benefits associated with convertible itcs for wind and solar projects , as applicable ( see note 1 - electric plant , depreciation and amortization , - income taxes and - sales of differential membership interests and note 6 ) , as well as income tax benefits related to the canadian tax restructuring , but excludes allocation of interest expense or corporate general and administrative expenses . results from projects and pipelines are included in new investments during the first twelve months of operation or ownership . project results are included in existing assets and pipeline results are included in gas infrastructure beginning with the thirteenth month of operation or ownership . ( b ) excludes allocation of interest expense and corporate general and administrative expenses . ( c ) includes differential membership interest costs . excludes unrealized mark-to-market gains and losses related to interest rate derivative contracts , which are included in change in non-qualifying hedge activity . ( d ) see overview - adjusted earnings for additional information . 41 new investments in 2018 , results from new investments decreased slightly primarily due to the expected smaller than usual renewable mw additions during 2017 ( 1,659 mw of wind generating capacity and 326 mw of solar wind generating capacity during or after 2017 ) . in 2017 , results from new investments increased primarily due to higher earnings of approximately $ 316 million , including the net effect of deferred income taxes and other benefits associated with itcs and convertible itcs , related to the addition of approximately 1,818 mw of wind generating capacity and 1,378 mw of solar generating capacity during or after 2016 , and higher earnings of approximately $ 44 million related to additional investments in natural gas pipeline projects . interest and general and administrative expenses interest and general and administrative expenses includes interest expense , differential membership interest costs and other corporate general and administrative expenses . in 2018 and 2017 , interest and general and administrative expenses reflect higher borrowing costs and other costs to support the growth of the business . other factors supplemental to the primary drivers of the changes in neer 's net income less net income attributable to noncontrolling interests discussed above , the discussion below describes changes in certain line items set forth in nee 's consolidated statements of income as they relate to neer . operating revenues operating revenues for 2018 decreased $ 286 million primarily due to : lower revenues of approximately $ 718 million related to the deconsolidation of nep , partly offset by , higher revenues of $ 193 million from the customer supply and proprietary power and gas trading business , favorable unrealized mark-to-market activity of $ 115 million from non-qualifying hedges , and higher revenues from new investments of $ 105 million . operating revenues for 2017 increased $ 288 million primarily due to : higher revenues from new investments of approximately $ 318 million , lower unrealized mark-to-market losses from non-qualifying hedges ( $ 71 million for 2017 compared to $ 273 million in 2016 ) , and higher revenues of $ 125 million from the customer supply and proprietary power and gas trading business , partly offset by , lower revenues from existing assets of $ 291 million primarily reflecting the sale of certain natural gas generation facilities in 2016 , and lower revenues from the gas infrastructure business of $ 89 million .
| in september 2017 , hurricane irma passed through florida causing damage throughout much of fpl 's service territory . in december 2017 , following the enactment of tax reform , fpl used available reserve amortization to offset nearly all of the write-off of hurricane irma storm restoration costs , and fpl plans to partially restore the reserve amortization through tax savings generated during the term of the 2016 rate agreement . see note 1 - rate regulation . the use of reserve amortization was permitted under the 2012 rate agreement and continues during the term of the 2016 rate agreement . see item 1. business - fpl - fpl regulation - fpl electric rate regulation - base rates for additional information on the 2016 and 2012 rate agreements . in order to earn a targeted regulatory roe , subject to limitations associated with the 2016 and 2012 rate agreements , reserve amortization is calculated using a trailing thirteen-month average of retail rate base and capital structure in conjunction with the trailing twelve months regulatory retail base net operating income , which primarily includes the retail base portion of base and other revenues , net of o & m , depreciation and amortization , interest and tax expenses . in general , the net impact of these income statement line items must be adjusted , in part , by reserve amortization to earn the targeted regulatory roe . in certain periods , reserve amortization is reversed so as not to exceed the targeted regulatory roe . the drivers of fpl 's net income not reflected in the reserve amortization calculation typically include wholesale and transmission service revenues and expenses , cost recovery clause revenues and expenses , afudc - equity and revenue and costs not recoverable from retail customers by the fpsc . in 2018 , fpl recorded the reversal of reserve amortization of approximately $ 541 million and in 2017 and 2016 , fpl recorded reserve amortization of $ 1,250 million and $ 13 million , respectively . fpl 's regulatory roe for 2018 , 2017
| 15,941 |
18 recent developments restatement of previously-issued financial statements in connection with the preparation , review and audit of the company 's consolidated financial statements required to be included in its annual report on form 10-k for the fiscal year ended october 31 , 2014 , the company identified a non-cash misstatement in its historical consolidated financial statements related to its treatment of contingent consideration in the acquisition of rfg in june 2011. in accordance with the earn-out provisions in the rfg acquisition agreement , if rfg 's operating results exceeded defined thresholds , additional purchase price was required to be paid by the company , subject to a ceiling . rfg 's results substantially exceeded defined thresholds and expectations and , accordingly , rfg 's former owners received the maximum earn-out payment permitted pursuant to the acquisition agreement . the total cumulative amount of non-cash operating expense , primarily related to the revaluation of rfg earn-out liability , that needed to be recorded is approximately $ 88.1 million , accounted for over the period from the date of acquisition of rfg ( i.e . june 1 , 2011 ) through the period ended october 31 , 2014. initially , we recorded the contingent consideration , which was settleable in common stock , as an equity instrument and therefore did not record expense based on the changes in fair value of the contingent consideration . however , the contingent consideration should have been accounted for as a liability requiring re-measurement to fair value . additionally , certain amounts of the consideration have been recorded as compensation expense . see following table for the total adjustments relating to contingent consideration and non-cash compensation for the acquisition of rfg for fiscal years 2014 , 2013 , and 2012 : replace_table_token_4_th the company has also identified certain immaterial adjustments primarily relating to non-controlling interest , diluted number of shares outstanding , and income tax expense related to fiscal years ended october 31 , 2014 , october 31 , 2013 , and october 31 , 2012 , which are reflected in the restated consolidated financial statements for the relevant periods . see note 3 , restatement of previously-issued financial statements to the consolidated financial statements for more information . we have not amended our previously-filed annual reports on form 10-k or quarterly reports on form 10-q for the periods affected by the restatement . the financial information that has been previously filed or otherwise reported for these periods is superseded by the information in this form 10-k , and the financial statements and related financial information contained in such previously-filed reports should no longer be relied upon . dividend payment on december 8 , 2014 , we paid a $ 0.75 per share dividend in the aggregate amount of $ 13.0 million to shareholders of record on november 17 , 2014. contingencies from time to time , we are also involved in litigation arising in the ordinary course of our business that we do not believe will have a material adverse impact on our financial statements . in january 2015 , various class action lawsuits have been initiated against the company related to the restatement of previously-issued financial statements , we believe these are without merit and will defend ourselves vigorously . see item 3 of this annual report on form 10-k which is incorporated by reference herein . deconsolidation of freshrealm , llc on may 2 , 2014 , we closed our second amended and restated limited liability company agreement ( agreement ) by and among freshrealm and the ownership members of freshrealm . the effective date of this agreement was april 30 , 2014. pursuant to this agreement , impermanence , llc ( impermanence ) was admitted as an ownership member of freshrealm . impermanence contributed $ 10.0 million to freshrealm for 28.6 % ownership . we agreed to dilute our ownership percentage in freshrealm , as an injection of significant working capital would reduce the immediate need of calavo to provide operating funds to freshrealm and would also serve to preserve the value of our investment . 19 as a result of the admission of impermanence , calavo 's ownership was reduced from 71.1 % to 50.8 % and $ 4.6 million was attributed to noncontrolling interest . additionally , effective april 1 , 2014 , the first $ 10.0 million of losses will be allocated primarily to impermanence . even though calavo controlled greater than 50 % of the outstanding units of freshrealm as of may 2 , 2014 , the minority/non-calavo unit-holders held substantive participating rights . these rights existed primarily in two forms : ( 1 ) two out of a total of four board of director seats and ( 2 ) a provision in the agreement that states that for situations for which the approval of the members , as defined , ( rather than the approval of the board of directors on behalf of the members ) is required by the agreement , the members shall act by super-majority vote . super-majority vote is defined in the agreement as the affirmative vote of the holders of at least seventy percent of the outstanding units that are held by the members . as such , calavo can not control freshrealm through its two board of director seats , nor its 50.8 % ownership . based on the foregoing , we deconsolidated freshrealm as of may 2 , 2014. as a result of the deconsolidation , we were required to record a gain related to this transaction . pursuant to asc 810-10-40-5 , we calculated our gain on deconsolidation by considering : a ) the aggregate of ( 1 ) the fair value of any retained noncontrolling investment in the former subsidiary at the date the subsidiary is deconsolidated and ( 2 ) the carrying amount of any noncontrolling interest in the former subsidiary ; less b ) the carrying amount of the former subsidiary 's assets and liabilities . story_separator_special_tag see following table : ( as of may 2 , 2014 , in thousands ) fair value of retained noncontrolling investment $ 16,962 carrying amount of noncontrolling interest $ 4,031 carrying amount of freshrealm 's assets and liabilities ( $ 8,371 ) gain on deconsolidation of freshrealm $ 12,622 we estimated the fair value of our noncontrolling interest in freshrealm by performing a forecast projection analysis . this analysis was conducted with the consultation from a third party consulting firm . see note 16 to the financial statements for additional information regarding the fair value calculation and assumptions used . based on the above , we recorded a gain on the deconsolidation of freshrealm of $ 12.6 million , which has been recorded on the face of the income statement . our investment in freshrealm has been recorded as investment in unconsolidated subsidiaries on our balance sheet . as of july 31 , 2014 , freshrealm issued additional units to various 3 rd parties , which reduced our ownership percentage to exactly 50 % . critical accounting estimates our discussion and analysis of our financial condition and results of operations are based upon our consolidated financial statements , which have been prepared in accordance with accounting principles generally accepted in the united states of america . the preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets , liabilities , revenues and expenses . on an ongoing basis , we re-evaluate all of our estimates , including those related to the areas of customer and grower receivables , inventories , useful lives of property , plant and equipment , promotional allowances , income taxes , retirement benefits , and commitments and contingencies . we base our estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances , the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources . additionally , we frequently engage 3 rd party valuation experts to assist us with estimates described below . actual results may materially differ from these estimates under different assumptions or conditions as additional information becomes available in future periods . management has discussed the development and selection of critical accounting estimates with the audit committee of the board of directors and the audit committee has reviewed our disclosure relating to critical accounting estimates in this annual report . we believe the following are the more significant judgments and estimates used in the preparation of our consolidated financial statements . promotional allowances . we provide for promotional allowances at the time of sale , based on our historical experience . our estimates are generally based on evaluating the relationship between promotional allowances and gross sales . the derived percentage is then applied to the current period 's sales revenues in order to arrive at the appropriate debit to sales allowances for the period . the offsetting credit is made to accrued liabilities . when certain amounts of specific customer accounts are subsequently identified as 20 promotional , they are written off against this allowance . actual amounts may differ from these estimates and such differences are recognized as an adjustment to net sales in the period they are identified . a 1 % change in the derived percentage for the entire year would impact results of operations by approximately $ 0.7 million . income taxes . we account for deferred tax liabilities and assets for the future consequences of events that have been recognized in our consolidated financial statements or tax returns . measurement of the deferred items is based on enacted tax laws . in the event the future consequences of differences between financial reporting bases and tax bases of our assets and liabilities result in a deferred tax asset , we perform an evaluation of the probability of being able to realize the future benefits indicated by such asset . a valuation allowance related to a deferred tax asset is recorded when it is more likely than not that some portion or all of the deferred tax asset will not be realized . as a multinational corporation , we are subject to taxation in many jurisdictions , and the calculation of our tax liabilities involves dealing with uncertainties in the application of complex tax laws and regulations in various taxing jurisdictions . if we ultimately determine that the payment of these liabilities will be unnecessary , the liability will be reversed and we will recognize a tax benefit during the period in which it is determined the liability no longer applies . conversely , we record additional tax charges in a period in which it is determined that a recorded tax liability is less than the ultimate assessment is expected to be . the application of tax laws and regulations is subject to legal and factual interpretation , judgment and uncertainty . tax laws and regulations themselves are subject to change as a result of changes in fiscal policy , changes in legislation , the evolution of regulations and court rulings . therefore , the actual liability for u.s. or foreign taxes may be materially different from management 's estimates , which could result in the need to record additional tax liabilities or potentially reverse previously recorded tax liabilities . goodwill and acquired intangible assets . goodwill , defined as unidentified asset ( s ) acquired in conjunction with a business acquisition , is tested for impairment on an annual basis and between annual tests whenever events or changes in circumstances indicate that the carrying amount may not be recoverable . goodwill is tested at the reporting unit level , which is defined as an operating segment or one level below the operating segment . goodwill impairment testing is a two-step process . the first step of the goodwill impairment test , used to identify potential impairment , compares the fair value of a reporting unit with its carrying amount , including goodwill .
| fiscal year 2014 decreases in operating cash flows , caused by working capital changes , includes an increase in prepaid expenses and other current assets of $ 8.8 million , a decrease in payable to growers of $ 7.0 million , an increase in accounts receivable of $ 1.7 million , an increase in inventory of $ 2.3 million and an increase in income tax receivable of $ 0.6 million , partially offset by an increase in trade accounts payable and accrued expenses of $ 8.6 million . the decrease in payable to our growers primarily reflects a decrease in california fruit delivered in the month of october 2014 , as compared to the month of october 2013. the increase in prepaid expenses and other current assets is primarily due to an increase in the receivable of mexican iva taxes related to the increase of purchases of mexican avocados as compared to prior year . the increase in our accounts receivable balance as of october 31 , 2014 , when compared to october 31 , 2013 , primarily reflects an increase in sales in our foods and rfg segments in the month of october 2014 , as compared to october 2013. the increase in our inventory balance is primarily related to an increase in mexico avocado inventory on hand at october 31 , 2014 , as compared to the same prior year period . the increase in our trade accounts payable and accrued expenses is mainly due to an increase in purchases of mexican 32 avocados from co-packers in the month of october 2014 , as compared to october 2013. in addition , this increase is also attributed to an increase in freight accruals due to an overall increase in the volume of mexican avocados in the month of october 2014 , as compared to october 2013. cash used in investing activities was $ 18.6 million , $ 7.7 million , and $ 7.4 million for fiscal years 2014 , 2013 , and 2012. fiscal year 2014 cash flows used in investing activities include capital expenditures of $ 11.6 million , the deconsolidation of freshrealm , net of cash $ 6.8 million , and investments in unconsolidated entities of $ 0.2 million . cash used in financing activities was $ 4.1 million , $ 5.1 million
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we also are evaluating compounds in our receptor tyrosine kinase inhibitor program , or rtki program , that inhibit the vascular endothelial growth factor , or vegf , pathway , for the potential treatment of a number of retinal diseases and novel next-generation anti-inflammatories designed to exhibit steroid-like anti-inflammatory action with the goal of eliminating the risk of iop increase and cataract formation . inveltys received fda approval under section 505 ( b ) ( 2 ) of the fdca , which is the pathway we plan to rely on for the approval of eysuvis as well . we have retained worldwide commercial rights for inveltys and our current product candidates , including eysuvis . since the fda approval of inveltys , we have built a commercial infrastructure with our own focused , specialty sales force which includes 57 territory sales managers , or tsms , 7 regional sales leaders , or rsls , and 3 directors of national accounts , or dnas . if eysuvis is approved by the fda , we plan to increase our sales force from 57 sales representatives to a total of approximately 75 to 100 sales representatives , who will promote both eysuvis and inveltys . we expect to commercialize in the united states any of our other product candidates that receive marketing approval as well . we also expect to explore commercialization of eysuvis for the treatment of dry eye disease in certain markets outside the united states , including the european union , or eu , utilizing a variety of collaboration , distribution and other marketing arrangements with one or more third parties . since inception , we have incurred significant losses from operations and negative cash flows from operations . our net losses were $ 94.3 million for the year ended december 31 , 2019 and $ 66.7 million for the year ended december 31 , 2018. as of december 31 , 2019 , we had an accumulated deficit of $ 295.5 million . as we commercially launched our first product , inveltys , in january 2019 , we have had only limited revenues to date from product sales and have financed our operations primarily through public offerings of common stock , private placements of preferred stock , convertible debt financings , borrowings under credit facilities , warrants , and sales of our common stock under our at-the-market offering facility , or the atm offering . we have devoted substantially all of our financial resources and efforts to research and development , including preclinical studies and clinical trials and engaging in activities to commercialize inveltys . although we expect to continue to generate revenue from sales of inveltys , there can be no assurance that we will generate any such revenue or as to the timing of any such revenue , and we expect to continue to incur significant expenses and operating losses over the next several years . our net losses may fluctuate significantly from quarter‑to‑quarter and year‑to‑year . financial operations overview product revenues , net as a result of the commercial launch of inveltys in the united states in early january 2019 , we commenced generating product revenues from sales of inveltys . our product revenues are recorded net of provisions relating to estimates for ( i ) trade discounts and allowances , such as discounts for prompt payment and distributor fees , ( ii ) estimated rebates , chargebacks and co-pay assistance program , and ( iii ) reserves for expected product returns . these estimates reflect current contractual and statutory requirements , known market events and trends , industry data and forecasted customer buying and payment patterns . actual amounts may ultimately differ from these estimates . if actual results vary , estimates may be adjusted in the period such change in estimate becomes known , which could have an impact on earnings in the period of adjustment . cost of product revenues cost of product revenues consists primarily of materials , third-party manufacturing costs , freight and distribution costs , royalty expense , allocation of labor , quality control and assurance , reserves for defective inventory , and other manufacturing overhead costs . we expense cost of product revenues related to product candidates as research 107 and development expenses prior to regulatory approval in the respective territory . we received u.s. regulatory approval for inveltys on august 22 , 2018. selling , general and administrative expenses selling , general and administrative expenses consist primarily of salaries , benefits , commissions , stock‑based compensation and travel expenses related to our commercial infrastructure and our executive , finance , human resources , legal , information technology and business development functions . selling , general and administrative expenses also includes external costs related to marketing , samples and professional fees for auditing , tax , information technology , consultants , legal services and allocated facility‑related costs not otherwise included in research and development expenses . we anticipate that our selling , general and administrative expenses will increase in the future if and as we increase our headcount to support our continued research activities and development of our product candidates or additional product candidates and continue to build our commercial infrastructure to support the commercialization of inveltys or of any product candidates for which we obtain marketing approval , including eysuvis . in addition , we anticipate increased expenses related to supporting a larger organization and increase in selling expense related to eysuvis , if approved . research and development expenses research and development expenses consist of costs associated with our research activities , including compensation and benefits for full‑time research and development employees , an allocation of facilities expenses , overhead expenses , payments to universities under our license agreements and other outside expenses . story_separator_special_tag our research and development expenses include : · employee‑related expenses , including salaries , related benefits , travel and stock‑based compensation ; · expenses incurred for the preclinical and clinical development of our product candidates and under agreements with contract research organizations , or cros , including costs of manufacturing product candidates prior to receipt of regulatory approval ; · facilities , depreciation and other expenses , which include direct and allocated expenses for rent and maintenance of facilities and supplies ; and · payments made under our third‑party licensing agreements , including development royalty and reimbursable expenses for defense of agreed upon patents under a license agreement with jhu . we expense research and development costs as they are incurred . research and development costs that are paid in advance of performance are capitalized as a prepaid expense until incurred . we track outsourced development costs by development program but do not allocate personnel costs , payments made under our license agreements or other costs to specific product candidates or development programs . these costs are included in employee ‑ related costs and other research and development costs in the line items in the tables under “ results of operations ” . we expect that our research and development costs will decrease in 2020 as compared to the year ended december 31 , 2019 as a result of the completion of stride 3. however , we expect that such costs will increase if and as we continue to advance our product candidates , including eysuvis , and conduct additional late-stage clinical trials . the process of conducting preclinical studies and clinical trials necessary to obtain regulatory approval is costly and time‑consuming . we may never succeed in obtaining marketing approval for any of our product candidates , including eysuvis . the probability of success for each product candidate may be affected by numerous factors , including preclinical data , clinical data , competition , manufacturing capability and commercial viability . 108 interest income interest income consists of interest earned on our cash balance held in a deposit account . interest expense interest expense primarily consists of contractual coupon interest , amortization of debt discounts and debt issuance costs recognized on our debt facility . loss on extinguishment of debt loss on extinguishment of debt in 2018 primarily consisted of unamortized debt issuance cost and a prepayment penalty on our venture debt facility entered into in 2014 which was repaid in full with proceeds from the athyrium credit facility on october 1 , 2018. 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 financial statements , which we have prepared in accordance with u.s. generally accepted accounting principles . we believe that several accounting policies are important to understanding our historical and future performance . we refer to these policies as critical because these specific areas generally require us to make judgments and estimates about matters that are uncertain at the time we make the estimate , and different estimates—which also would have been reasonable—could have been used . on an ongoing basis , we evaluate our estimates and judgments , including those described in greater detail below . we base our estimates on historical experience and other market‑specific or other relevant assumptions that we believe to be reasonable under the circumstances , the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources . actual results may differ from these estimates under different assumptions or conditions . while our significant accounting policies are described in more detail in the notes to our financial statements appearing at the end of this annual report on form 10-k , we believe that the following accounting policies are those most critical to the judgments and estimates used in the preparation of our financial statements . revenue we account for revenue in accordance with accounting standards codification ( “ asc ” ) topic 606 , revenue from contracts with customers . under asc topic 606 , an entity recognizes revenue when its customer obtains control of promised goods or services , in an amount that reflects the consideration that the entity expects to be entitled in exchange for those goods or services . we perform the following five steps to recognize revenue under asc topic 606 : ( i ) identify the contract ( s ) with a customer ; ( ii ) identify the performance obligations in the contract ; ( iii ) determine the transaction price ; ( iv ) allocate the transaction price to the performance obligations in the contract ; and ( v ) recognize revenue when ( or as ) the entity satisfies a performance obligation . we only recognize revenue when it is probable that we will collect the consideration to which we are entitled in exchange for the goods or services that will be transferred to the customer . product revenues , net we sell inveltys to wholesalers and or specialty distributors in the united states , or customers . these customers subsequently resell our products to specialty and other retail pharmacies . in addition to agreements with customers , we enter into arrangements with payors that provide for government-mandated and or privately-negotiated rebates , chargebacks and discounts for the purchase of our products . the goods promised in our product sales contracts represent a single performance obligation . we recognize revenue from product sales at the point the customer obtains control of the product , which occurs upon delivery . the transaction price ( “ net sales price ” ) that is recognized as revenue for product sales includes the selling price to the 109 customer and an estimate of variable consideration .
| in addition , we incurred a $ 5.1 million increase in costs for sales and marketing and other activities primarily related to our executive , finance , human resource , legal , information technology , business development and support functions for the commercial launch of inveltys , a $ 2.6 million increase in sample costs , a $ 0.1 million increase in costs associated with legal , accounting and finance , a $ 2.6 million increase in facilities costs related to our watertown lease , which commenced in november 2018 , along with a larger allocation of our overall facility costs related to this lease , $ 0.3 million of expense related to the milestone that was payable to jhu upon first commercial sale of inveltys and $ 0.4 million for the annual product fee for inveltys under the pdufa program . 114 we anticipate that our selling , general and administrative expenses will increase in the future if and as we increase our administrative headcount to support our continued research activities and seek marketing approval for our lead product candidate , eysuvis and expand our salesforce if eysuvis receives regulatory approval . research and development expenses the followi ng table summarizes the research and development expenses incurred during the years ended december 31 , 2019 and 2018 : replace_table_token_4_th research and development expenses were $ 27.3 million for the year ended december 31 , 2019 compared to $ 29.3 million for the year ended december 31 , 2018 , a decrease of $ 2.0 million . this decrease in research and development expenses was primarily due to a $ 2.4 million decrease in kpi-121 development costs driven by a decrease in the manufacturing cost of inveltys , which was recognized as research and development cost prior to fda approval , and subsequently recognized as cost of product revenues , and a decrease related to our external cost for our phase 3 clinical trial of inveltys for the treatment
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when the commercial transport industry recovers from the disruption caused by the covid-19 pandemic , we would expect commercial transport market sales to account for a percentage of net sales that is relatively in line with our historical results prior to the covid-19 pandemic . maintaining and growing sales to the commercial transport market will depend not only on market recovery from the impacts of the covid-19 pandemic , but also on airlines ' capital spending budgets for cabin upgrades as well as the purchase of new aircraft by global airlines . this spending by the airlines is impacted by their profits , cash flow and available financing as well as competitive pressures between the airlines to improve the travel experience for their passengers . we expect that new aircraft will be equipped with more passenger and aircraft connectivity and in-seat power than previous generation aircraft which drives demand for our avionics and power products . this market has historically experienced strong growth from airlines installing in-seat passenger power systems on their existing and newly delivered aircraft . although the 737 max was re-certified in the united states in november 2020 and in europe in january 2021 , and that the demand for the aircraft in the long-term has not changed , further delays in regulatory approval of the boeing 737 max in one or more jurisdictions could substantially decrease sales to this market in the near or long term which could have a material adverse effect on our business , financial condition , results of operations and cash flows . the 737 max situation affected us not only because it has been our largest production program , but also because the grounding reduced capacity in the world 's airline fleets , challenging our aftermarket business . our ability to maintain and grow sales to this market depends on our ability to maintain our technological advantages over our competitors and maintain our relationships with major in-flight entertainment suppliers and global airlines . military aerospace market sales to the military aerospace market include sales of lighting & safety products , avionics products , electrical power & motion products and structures products . sales to this market totaled approximately 13.5 % of our consolidated sales and amounted to $ 67.9 million in 2020. the military market is dependent on governmental funding which can change from year to year . risks are that overall spending may be reduced in the future , specific programs may be eliminated or that we fail to win new business through the competitive bid process . astronics does not have significant reliance on any one program such that cancellation of a particular program will cause material financial loss . we believe that we will continue to have opportunities similar to past years regarding this market . business jet market the business jet market has also been impacted by the pandemic with new aircraft build rates significantly lower than the previous year . most of our sales in this market are line-fit products driven by aircraft build rates although there are some aftermarket sales as well . we expect some improvement in the second half of 2021 moving into 2022 as build rates are expected to improve . sales to the business jet market include sales of lighting & safety products , avionics products , and electrical power & motion products . sales to this market totaled approximately 12.0 % of our consolidated sales in 2020 and amounted to $ 60.4 million . sales to the business jet market are driven by our ship set content on new aircraft and build rates of new aircraft . business jet oem build rates are impacted by global wealth creation and corporate profitability . we continue to see opportunities on new 21 aircraft currently in the design phase to employ our lighting & safety , electrical power and avionics technologies in this market . there is risk involved in the development of any new aircraft including the risk that the aircraft will not ultimately be produced or that it will be produced in lower quantities than originally expected and thus impacting our return on our engineering and development efforts . tests systems products our test systems segment accounted for approximately 16.8 % of our consolidated sales in 2020 and amounted to $ 84.6 million . sales to the aerospace & defense market were approximately $ 81.1 million in 2020. sales to the semiconductor market were approximately $ 3.5 million from residual warranty revenue following the company 's divestiture of its semiconductor test business on february 13 , 2019. no further semiconductor revenues are expected beyond 2020. critical accounting policies our financial statements and accompanying notes are prepared in accordance with u.s. generally accepted accounting principles . the preparation of the company 's financial statements requires management to make estimates , assumptions and judgments that affect the amounts reported . these estimates , assumptions and judgments are affected by management 's application of accounting policies , which are discussed in the notes to consolidated financial statements , note 1 of item 8 , financial statements and supplementary data of this report . the critical accounting policies have been reviewed with the audit committee of our board of directors . revenue recognition revenue is recognized when , or as , the company transfers control of promised products or services to a customer in an amount that reflects the consideration the company expects to be entitled in exchange for transferring those products or services . sales shown on the company 's consolidated statements of operations are from contracts with customers . payment terms and conditions vary by contract , although terms generally include a requirement of payment within a range from 30 to 90 days after the performance obligation has been satisfied ; or in certain cases , up-front deposits . in circumstances where the timing of revenue recognition differs from the timing of invoicing , the company has determined that the company 's contracts generally do not include a significant financing component . story_separator_special_tag taxes collected from customers , which are subsequently remitted to governmental authorities , are excluded from sales . the company recognizes an asset for the incremental , material costs of obtaining a contract with a customer if the company expects the benefit of those costs to be longer than one year and the costs are expected to be recovered . these incremental costs include , but are not limited to , sales commissions incurred to obtain a contract with a customer . as of december 31 , 2020 , the company does not have material incremental costs on any open contracts with an original expected duration of greater than one year . the company recognizes an asset for certain , material costs to fulfill a contract if it is determined that the costs relate directly to a contract or an anticipated contract that can be specifically identified , generate or enhance resources that will be used in satisfying performance obligations in the future , and are expected to be recovered . such costs are amortized on a systematic basis that is consistent with the transfer to the customer of the goods to which the asset relates . start-up costs are expensed as incurred . capitalized fulfillment costs are included in inventories in the accompanying consolidated balance sheets . should future orders not materialize or it is determined the costs are no longer probable of recovery , the capitalized costs are written off . as of december 31 , 2020 and 2019 , the company did not have material capitalized fulfillment costs . a performance obligation is a promise in a contract to transfer a distinct good or service to the customer , and is the unit of account . the majority of our contracts have a single performance obligation as the promise to transfer the individual goods or services is not separately identifiable from other promises in the contracts which are , therefore , not distinct . thus , the contract 's transaction price is the revenue recognized when or as that performance obligation is satisfied . promised goods or services that are immaterial in the context of the contract are not separately assessed as performance obligations . some of our contracts have multiple performance obligations , most commonly due to the contract covering multiple phases of the product lifecycle ( development , production , maintenance and support ) . for contracts with multiple performance obligations , the contract 's transaction price is allocated to each performance obligation using our best estimate of the standalone selling price of each distinct good or service in the contract . the primary method used to estimate standalone selling price is the expected cost plus margin approach , under which expected costs are forecast to satisfy a performance obligation and then an appropriate margin is added for that distinct good or service . shipping and handling activities that occur after the customer has obtained control of the good are considered fulfillment activities , not performance obligations . 22 some of our contracts offer price discounts or free units after a specified volume has been purchased . the company evaluates these options to determine whether they provide a material right to the customer , representing a separate performance obligation . if the option provides a material right to the customer , revenue is allocated to these rights and recognized when those future goods or services are transferred , or when the option expires . contract modifications are routine in the performance of our contracts . contracts are often modified to account for changes in contract specifications or requirements . in most instances , contract modifications are for goods or services that are distinct , and , therefore , are accounted for as new contracts . the effect of modifications has been reflected when identifying the satisfied and unsatisfied performance obligations , determining the transaction price and allocating the transaction price . the majority of the company 's revenue from contracts with customers is recognized at a point in time , when the customer obtains control of the promised product , which is generally upon delivery and acceptance by the customer . these contracts may provide credits or incentives , which may be accounted for as variable consideration . variable consideration is estimated at the most likely amount to predict the consideration to which the company will be entitled , and only to the extent it is probable that a subsequent change in estimate will not result in a significant revenue reversal when estimating the amount of revenue to recognize . variable consideration is treated as a change to the sales transaction price and based on an assessment of all information ( i.e. , historical , current and forecasted ) that is reasonably available to the company , and estimated at contract inception and updated at the end of each reporting period as additional information becomes available . most of our contracts do not contain rights to return product ; where this right does exist , it is evaluated as possible variable consideration . for contracts that are subject to the requirement to accrue anticipated losses , the company recognizes the entire anticipated loss in the period that the loss becomes probable . for contracts with customers in which the company promises to provide a product to the customer that has no alternative use to the company and the company has enforceable rights to payment for progress completed to date inclusive of profit , the company satisfies the performance obligation and recognizes revenue over time , using costs incurred to date relative to total estimated costs at completion to measure progress toward satisfying our performance obligations . incurred cost represents work performed , which corresponds with , and thereby best depicts , the transfer of control to the customer . contract costs include labor , material and overhead . the company also recognizes revenue from service contracts ( including service-type warranties ) over time .
| important factors affecting our growth and profitability are the ongoing impacts of the covid-19 pandemic and the timing and extent of recovery ( as discussed more fully below ) , the rate at which new aircraft are produced , government funding of military programs , our ability to have our products designed into new aircraft and the rates at which aircraft owners , including commercial airlines , refurbish or install upgrades to their aircraft . new aircraft build rates and aircraft owners spending on upgrades and refurbishments is cyclical and dependent on the strength of the global economy . once designed into a new aircraft , the spare parts business is frequently retained by the company . future growth and profitability of the test business is dependent on developing and procuring new and follow-on business . the nature of our test systems business is such that it pursues large , often multi-year , projects . there can be significant periods of time between orders in this business which may result in large fluctuations of sales and profit levels and backlog from period to period . test systems segment customers include the department of defense , prime contractors to the department of defense , mass transit operators and prime contractors to mass transit operators . each of the markets that we serve presents opportunities that we expect will provide growth for the company over the long-term . we continue to look for opportunities in all of our markets to capitalize on our core competencies to expand our existing business and to grow through strategic acquisitions . challenges which continue to face us include the ongoing covid-19 pandemic and its continued impact on the aerospace industry and improving shareholder value through increasing profitability . increasing profitability is dependent on many things , primarily sales growth , both acquired and organic , and the company 's ability to control operating expenses and to identify means of creating improved productivity . sales are driven by increased build rates for existing aircraft , market acceptance and economic success of new aircraft and our products , continued government funding of defense programs , the company 's ability to obtain production contracts for parts we currently supply or have been selected to design and develop for new aircraft platforms and
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the net impact of the audit resolution resulted in a tax benefit of $ 207 million for 2014 , which impacted the effective tax rate . this benefit consisted primarily of the recognition of previously unrecognized tax benefits of $ 200 million and additional u.s. manufacturing deductions of $ 7 million . the effective tax rate was also positively impacted by the recognition of $ 18 million of aftc with no related tax expense . also during 2014 , we recorded $ 18 million of tax credits , mainly research and experimentation credits pertaining to current and prior years . the effective tax rate for 2014 was also impacted by an enacted tax rate decrease in spain , tax losses related to functional currency differences and the impact of our foreign operations being taxed at lower statutory tax rates . valuation allowances in 2015 , we recorded a net valuation allowance reversal of $ 1 million related to certain foreign loss carryforwards , which impacted the effective tax rate for the year . in 2014 , we recorded a net valuation allowance of $ 7 million , mainly related to foreign loss carryforwards , which impacted the effective tax rate for the year . segment review pulp and paper sales in our pulp and paper segment decreased by $ 219 million , or 5 % when compared to sales in 2015. this decrease in sales is mostly due to a 3 % decrease in net average selling prices for pulp and paper as well as a decrease in our paper sales volumes , partially offset by an increase in our pulp sales volumes of approximately 2 % . operating income in our pulp and paper segment amounted to $ 217 million in 2016 , a decrease of $ 53 million , when compared to operating income of $ 270 million in 2015. our results were negatively impacted by : 33 lower average selling prices for paper and pulp ( $ 135 million ) lower volume and mix ( $ 30 million ) mostly related to lower volume of paper partially offset by higher volume of pulp higher restructuring costs mostly related to the conversion at ashdown described above and the closure of a pulp dryer and idling of related assets at our plymouth mill , related to our plan to optimize fluff pulp manufacturing ( $ 28 million ) higher other income/expense ( $ 13 million ) mostly due to net gain on sale of property , plant and equipment in 2015 these decreases were partially offset by : lower depreciation charges ( $ 59 million ) due to lower accelerated depreciation related to our 2014 decision to convert a paper machine at our ashdown facility to a high quality fluff pulp line and lower depreciation expenses due to certain assets reaching the end of their useful lives positive impact of a weaker canadian dollar on our canadian denominated expenses , net of our hedging program ( $ 44 million ) lower input costs ( $ 44 million ) mostly related to lower fiber and energy costs due to improved market and weather conditions lower operating expenses ( $ 6 million ) mostly related to lower freight costs due to favorable global economic factors including excess vessel capacity , carrier consolidation and lower oil prices as well as lower maintenance costs due to timing of major maintenance when compared to 2015 and reduced scope of outages and cost control measures , partially offset by lower productivity sales in 2015 in our pulp and paper segment decreased by $ 216 million , or 5 % when compared to sales in 2014. this decrease in sales is mostly due to a 5 % decrease in net average selling prices for pulp and paper . total sales volume and foreign exchange were flat when compared to 2014. operating income in 2015 in our pulp and paper segment amounted to $ 270 million , a decrease of $ 82 million , when compared to operating income of $ 352 million in 2014. our results were negatively impacted by : lower average selling prices for paper and pulp ( $ 211 million ) higher depreciation charges ( $ 61 million ) due to higher accelerated depreciation related to our 2014 decision to convert a paper machine at our ashdown facility to a high quality fluff pulp line , partially offset by lower depreciation expenses due to certain assets reaching the end of their useful lives lower other income/expense ( $ 6 million ) due to proceeds from insurance claims on machinery and equipment in 2014 , increase in bad debt expense as well as other expenses , partially offset by net gain on property , plant and equipment in 2015 these decreases were partially offset by : positive impact of a weaker canadian dollar on our canadian denominated expenses , net of our hedging program ( $ 100 million ) lower input costs ( $ 44 million ) mostly related to lower energy costs due to extreme cold weather in 2014 and chemical costs in part due to favorable prices , partially offset by higher fiber costs due to wet weather in the southern u.s. region in the first half of 2015 lower restructuring costs mostly due to the ottawa pension settlement in 2014 lower operating expenses ( $ 23 million ) mostly related to lower freight costs due to the 2014 strike at the port of vancouver and disruption in the canadian rail service also in 2014 and lower maintenance costs due to timing of major maintenance as well as additional repairs and extended scope of outages in 2014 lower volume and mix ( $ 5 million ) mostly related to higher volume of pulp partially offset by lower volume of paper personal care sales in 2016 in our personal care segment increased by $ 48 million , or 6 % when compared to sales in 2015. this increase in sales is driven by higher sales volume and mix of approximately 9 % including sales of hdis since october 1 , 2016. this increase was partially offset by lower selling prices story_separator_special_tag of approximately 3 % while foreign exchange was flat when compared to 2015. operating income decreased by $ 4 million or 7 % in 2016 compared to 2015. our results were negatively impacted by : unfavorable average net selling prices ( $ 25 million ) 34 higher operating expenses ( $ 10 million ) mostly related to higher selling , general and administrative expenses as well as higher salaries and wages due to additional labor , salary increases and an increase in advertising expense unfavorable foreign exchange impact , net of our hedging program ( $ 5 million ) increased depreciation charges ( $ 2 million ) these decreases were partially offset by the following : lower input costs ( $ 30 million ) mostly due to a decrease in price of super absorbent polymers , fluff pulp and non-woven as well as insourcing initiatives higher sales volume and mix ( $ 5 million ) favorable other income/expense ( $ 3 million ) mostly due to foreign exchange gain on working capital sales in 2015 in our personal care segment decreased by $ 59 million , or 6 % when compared to sales in 2014. this decrease in sales is driven by unfavorable foreign currency rates of approximately 9 % , due to the fluctuation between the u.s. dollar and the euro and lower selling prices , partially offset by higher sales volume and mix of approximately 4 % . operating income increased by $ 12 million or 24 % in 2015 compared to 2014. our results were positively impacted by : lower input costs ( $ 36 million ) mostly due to a decrease in price of super absorbent polymers , non-woven and fluff pulp as well as insourcing initiatives higher sales volume and mix ( $ 12 million ) these increases were partially offset by the following : unfavorable foreign exchange mostly between the u.s. dollar and the euro , net of our hedging program ( $ 12 million ) unfavorable average net selling prices ( $ 11 million ) higher operating expenses ( $ 10 million ) mostly due higher selling , general and administrative expenses as well as higher salaries and wages due to additional labor for newly installed capacity higher depreciation charges ( $ 3 million ) stock-based compensation expense under the omnibus incentive plan , we may award to key employees and non-employee directors at the discretion of the human resources committee of the board of directors , non-qualified stock options , incentive stock options , stock appreciation rights , restricted stock units , performance-conditioned restricted stock units , performance share units , deferred share units ( “ dsus ” ) and other stock-based awards . the non-employee directors only receive dsus . we generally grant awards annually and use , when available , treasury stock to fulfill awards settled in common stock and options exercises . for the year ended december 31 , 2016 , stock-based compensation expense recognized in our results of operations was $ 16 million ( 2015– $ 10 million ; 2014 – $ 9 million ) for all outstanding awards . stock-based compensation expense not yet recognized amounted to $ 17 million ( 2015 – $ 16 million ; 2014 – $ 14 million ) and will be recognized over the remaining service period of approximately 26 months . the aggregate value of liability awards settled in 2016 was $ 4 million ( 2015 – $ 4 million ; 2014 – $ 12 million ) . the total fair value of equity awards settled in 2016 was $ 2 million , representing the fair value at the time of settlement . the fair value at the grant date for these settled equity awards was $ 3 million . compensation costs for performance awards are based on management 's best estimate of the final performance measurement . liquidity and capital resources our principal cash requirements are for ongoing operating costs , pension contributions , working capital and capital expenditures , as well as principal and interest payments on our debt and income tax payments . we expect to fund our liquidity needs primarily with internally generated funds from our operations and , to the extent necessary , through borrowings under our contractually committed $ 700 million credit facility , of which $ 650 million is currently undrawn and available , or through our $ 150 million receivables securitization facility , of which $ 32 million is currently undrawn and available . under adverse market conditions , there can be no assurance that these agreements would be available or sufficient . see “ capital resources ” below . our ability to make payments on the requirements mentioned above will depend on our ability to generate cash in the future , which is subject to general economic , financial , competitive , legislative , regulatory and other factors that are beyond our control . our credit and 35 receivable securitization facilities and debt indentures impose various restrictions and covenants on us that could limit our ability to respond to market conditions , to provide for unanticipated capital investments or to take advantage of business opportunities . a portion of our cash is held outside the u.s. by foreign subsidiaries . the earnings of the foreign subsidiaries , which reflect full provision for local income taxes , are indefinitely reinvested in foreign operations . we do not intend on repatriating these funds and no provision is made for income taxes that would be payable upon the distribution of earnings from foreign subsidiaries as computation of these amounts is not practical . operating activities our operating cash flow requirements are primarily for salaries and benefits , the purchase of fiber , energy and raw materials and other expenses such as income tax and property taxes .
| replace_table_token_10_th replace_table_token_11_th commentary : ( a ) include results of hdis since october 1 , 2016 . ( b ) includes raw materials ( such as fiber , chemicals , nonwovens and super absorbent polymers ) and energy expenses . ( c ) includes maintenance , freight costs , sg & a expenses and other costs . ( d ) in 2016 , we recorded $ 29 million of accelerated depreciation related to the conversion of a paper machine to a high quality fluff pulp line at our ashdown mill , compared to $ 77 million recorded in 2015. depreciation charges were lower by $ 9 million in 2016 , excluding foreign currency impact . ( e ) 2016 restructuring charges relate mostly to : 2015 restructuring charges relate mostly to : -fluff conversion related charges at ashdown ( $ 26 million ) -plymouth optimization charges ( $ 5 million ) -severance and termination costs ( $ 4 million ) -credit related to pension settlement and withdrawal liabilities ( $ 3 million ) - fluff conversion related charges at ashdown ( $ 3 million ) -termination costs at attends healthcare limited ( “ attends europe ” ) ( $ 1 million ) 31 ( f ) 2016 operating expenses/income includes : 2015 operating expenses/income includes : - foreign exchange loss ( $ 6 million ) - environmental provision ( $ 2 million ) - other income ( $ 4 million ) - net gain on sale of property , plant & equipment ( $ 15 million ) - environmental provision ( $ 4 million ) - foreign exchange gain ( $ 3 million ) - bad debt expense ( $ 5 million ) - other expense ( $ 4 million ) interest expense , net we incurred $ 66 million of net interest expense in 2016 , a decrease of $ 66 million compared to net interest expense of $ 132 million in 2015. this decrease was mostly due to a premium of $ 42 million paid in august 2015 on the partial repayment of the 9.5 % notes due 2016
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for further information on the series b preferred stock financing , see note 15 : subsequent events , to the consolidated financial information in part ii , item 8 of this annual report on form 10-k. with respect to our current operations , the company currently operates a single business , wmmrc , whose sole activity is the reinsurance of mortgage insurance policies that has been operated in runoff mode since september 26 , 2008. since that date , wmmrc has not underwritten any new policies ( and by extension any new risk ) . wmmrc , through predecessor companies , began reinsuring risks in 1997 and continued through september 25 , 2008 . 19 all agreements are on an excess of loss basis , except for certain reinsurance treaties with gmic and radian during 2007 and 2008 , which are reinsured on a 50 percent quota share basis . pursuant to the excess of loss reinsurance treaties , wmmrc reinsures a second loss layer which ranges from 5 percent to 10 percent of the risk in force in excess of the primary mortgage insurer 's first loss percentages which range from 4 percent to 5 percent . each calendar year , or book year , is treated separately from other years when calculating losses . in return for accepting a portion of the risk , wmmrc receives , net of ceding commission , a percentage of the premium that ranges from 25 to 40 percent . beginning in 2006 , the u.s. housing market and related credit markets experienced a multi-year downturn . during that period , housing prices declined materially , credit guidelines tightened , delays in mortgage servicing and foreclosure activities occurred , and deterioration in the credit performance of mortgage loans occurred . in addition , the macro-economic environment during that period demonstrated limited economic growth , stubbornly high unemployment , and limited median wage gains . beginning in 2012 , home prices began to rise again although they remain below their 2006 peak . the outlook for the housing market is cautiously optimistic with relatively low interest rates and an improving jobs market . nevertheless , wmmrc 's operating environment remains challenged as much of its results over the next several years will be directly affected by the inventory of pending defaulted mortgages at its ceding companies arising primarily from mortgages originated in calendar years 2005 through 2008. our financial information the financial information in this annual report on form 10-k has been derived from our consolidated financial statements . critical accounting policies our consolidated financial statements are prepared in accordance with generally accepted accounting principles in the united states ( “ gaap ” ) , which requires management to make estimates and assumptions that affect reported and disclosed amounts of assets and liabilities and the reported amounts of revenues and expenses during the reporting period . we believe that the critical accounting policies set forth in the accompanying consolidated financial statements describe the more significant judgments and estimates used in the preparation of our consolidated financial statements . these accounting policies pertain to premium revenues and risk transfer , valuation of investments , loss and loss adjustment expense reserves , our values under fresh start accounting and the resulting loss contract fair market value reserve . if actual events differ significantly from the underlying judgments or estimates used by management in the application of these accounting policies , there could be a material effect on our results of operations and financial condition . the company adopted fresh start accounting in accordance with asc 852 ( as in effect on the effective date ) . ( see note 3 to our consolidated financial statements ( “ fresh start accounting ” ) in item 8 of this annual report on form 10-k ) . recently issued accounting standards and their impact on the company have been presented under “ new accounting pronouncements ” in note 2 to the consolidated financial statements ( “ significant accounting policies ” ) in item 8 of this annual report on form 10-k. fresh start accounting under asc 852 , the application of fresh start accounting results in the allocation of reorganization value to the fair value of assets , and is required when ( a ) the reorganization value of assets immediately prior to confirmation of a plan of reorganization is less than the total of all post-petition liabilities and allowed claims and ( b ) the holders of voting shares immediately prior to the confirmation of the plan of reorganization receive less than 50 percent of the voting shares of the emerging entity . the company adopted fresh start accounting as of the effective date , which represents the date on which all material conditions precedent to the effectiveness of the plan were satisfied or waived . material differences , including with respect to its business operations , financial performance , asset size and other factors , exist with respect to the pre-petition operations and financial position of wmi and its subsidiaries as compared with the post-emergence operations and financial position of the company . in order to address such differences , in preparing these and future financial statements , management has concluded that it is appropriate to use the financial information of wmihc 's wholly-owned subsidiary , wmmrc as the basis for its past and ongoing financial reporting . information in the accompanying consolidated financial statements labeled as “ predecessor ” refers to periods prior to the adoption of fresh start reporting , while those labeled as “ successor ” refer to periods following the company 's reorganization and emergence from bankruptcy . 20 segments the company manages its business on the basis of one operating segment , mortgage reinsurance , in accordance with gaap . within the mortgage reinsurance segment , our current risks arise solely from the reinsurance of mortgage insurance policies that were placed on certain residential mortgage loans prior to the petition date . the majority of these policies were required by mortgage lenders as a stipulation to approve the mortgage loans . story_separator_special_tag the mortgage insurance policies protect the beneficiaries of the policy from all or a portion of default-related losses . overview of revenues and expenses because wmihc has no current significant operations of its own , its revenue is derived almost entirely from earnings on its investment portfolio , as well as payments it receives from wmmrc . at this time , dividends received by wmihc from wmmrc must be distributed to holders of wmihc 's runoff notes in accordance with the terms of the runoff notes indentures . wmmrc 's revenues consist primarily of the following : ● net premiums earned on reinsurance contracts ; ● positive changes to ( and corresponding releases from ) loss contract reserves ; and ● net investment income and net gains ( losses ) on wmmrc 's investment portfolio . wmmrc 's expenses consist primarily of the following : ● underwriting expenses ; and ● story_separator_special_tag for the year ended december 31 , 2014 , we incurred $ 22.2 million of total interest expense , $ 9.0 million of which was payable on the runoff notes and $ 13.2 million of which was the result of reserving the deferred offering costs relating to the contemplated note purchase agreement termination ( the “ note purchase agreement termination ” ) as more fully described in note 15 to our consolidated financial statements ( “ subsequent events ” ) in item 8 of this annual report on form 10-k. for the periods ended december 31 , 2013 and 2012 , we incurred $ 14.9 million and $ 13.5 million , respectively , of interest expense which is payable on the runoff notes . the amount of runoff interest expense for the year ended december 31 , 2012 was less than the interest expense for the year ended december 31 , 2013 primarily due to the fact that the runoff notes were not issued until march 19 , 2012. the amount of runoff interest expense for the year ended december 31 , 2014 was less than the interest expense for the years ended december 31 , 2013 and december 31 , 2012 , primarily due to the fact that the runoff notes have been significantly reduced . because sufficient “ runoff proceeds ” ( as such term is defined in the indentures ) have not always been available to pay accrued interest on the runoff notes , a portion of our obligation to pay interest on the runoff notes has been satisfied using the “ pay-in-kind ” or “ pik ” feature available under the indentures . for the year ended december 31 , 2014 as a result , $ 4.6 million of “ pik notes ” were issued in satisfaction of our obligation to pay interest on the runoff notes and $ 5.2 million of interest was paid in cash . additionally an expense of $ 13.2 million , which was the result of reserving the deferred offering costs relating to the contemplated note purchase agreement termination , was recorded and accrued interest expense decreased by $ ( 0.8 ) million yielding net interest expense of $ 22.2 million for the year ended december 31 , 2014. for the year ended december 31 , 2013 , $ 5.5 million of “ pik notes ” were issued in satisfaction of our obligation to pay interest on the runoff notes and $ 9.7 million of interest was paid in cash . accrued interest expense decreased by $ 0.3 million yielding net interest expense of $ 14.9 million for the year ended december 31 , 2013. for the year ended december 31 , 2012 , $ 8.3 million of “ pik notes ” were issued in satisfaction of our obligation to pay interest on the runoff notes and $ 3.7 million of interest was paid in cash . the total interest expense of $ 13.5 million includes $ 1.5 million of interest accrued since the last interest payment period . the accrued interest is converted to pik notes at the next payment date if there is not sufficient cash available to satisfy the required interest payment . net income ( loss ) net income for the year ended december 31 , 2014 totaled $ 3.1 million compared to net income of $ 0.3 million and a net loss of $ 15.8 million for the years ended december 31 , 2013 and 2012 , respectively . the primary factors impacting the change in net loss for the earlier periods compared to 2014 and 2013 are summarized in the tables below . year ended december 31 , 2014 versus year ended december 31 , 2013 summary of change in net income ( loss ) ( in thousands ) : replace_table_token_4_th year ended december 31 , 2014 versus year ended december 31 , 2012 summary of change in net income ( loss ) ( in thousands ) : replace_table_token_5_th 23 year ended december 31 , 2013 versus year ended december 31 , 2012 summary of change in net income ( loss ) ( in thousands ) : replace_table_token_6_th comprehensive income ( loss ) the company has no comprehensive income ( loss ) other than the net income ( loss ) disclosed in the consolidated statements of operations . net premiums earned the majority of wmmrc 's reinsurance contracts require premiums to be written and earned monthly . in a few cases , the premiums earned reflect the pro rata inclusion into income of premiums written over the life of the reinsurance contracts . details of premiums earned are provided in the following table : replace_table_token_7_th for the year ended december 31 , 2014 , premiums earned totaled $ 7.2 million , a decrease of $ 3.7 million and $ 13.4 million when compared to premiums earned of $ 10.9 million and $ 20.6 million during the 12 months ended on december 31 , 2013 and december 31 , 2012 , respectively . the company 's revenues attributable to wmmrc will continue to decrease due to wmmrc operating in runoff mode .
| the impact of the release of the premium deficiency reserves is significant in that it results in reduced underwriting expenses . such reduction in underwriting expenses is primarily a result of improvements in general economic conditions and , specifically , improvements in the overall real estate market . these improvements resulted in lower than expected incurred losses . the components that gave rise to net income in the years ended december 31 , 2014 and december 31 , 2013 compared to a net loss in the complete year ended december 31 , 2012 , are described in the tables below under the net income ( loss ) section . the total revenue for the year ended december 31 , 2014 was $ 8.5 million , compared to total revenue of $ 10.2 million and $ 30.6 million for the same periods in 2013 and 2012 , respectively . wmmrc 's declining revenues , including the $ 1.7 million revenue decrease between 2013 and 2014 and the $ 22.1 million revenue decrease comparing 2012 and 2014 , are largely attributable to the operations of wmmrc in runoff mode and the change in the interest rate environment ( primarily as it relates to the year ended december 31 , 2013 ) which caused an increase in unrealized losses due to changes in fair market value which were recognized in earlier periods as investment income . no new business is being undertaken and the revenues are expected to continue to decrease . 21 underwriting expenses or recoveries ( defined as losses , loss adjustment expenses and ceding commission expenses ) totaled $ 3.9 million for the year ending december 31 , 2014 , resulting in an increase in expense of $ 8.7 million and a decrease of $ 28.5 million , for the years ending december 31 , 2013 and 2012 , respectively , compared to underwriting recoveries of $ 4.8 million and underwriting expenses of $ 32.4 million , respectively , for the years ending december 31 ,
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in order to focus our efforts , we performed a review of our portfolio of assets within these core businesses to identify those products where we believe we have , and can maintain , a competitive advantage and we continue to define and shape our operations and business strategies around these assets . once we committed to our core businesses , we began analyzing the strategic alternatives for business units and assets that fall outside our definition of “ core ” . in order to focus on our objectives , we began divesting businesses and assets , which , in each case , were not aligned with our core business objectives . this not only allowed us to better focus our internal resources on our eye-health , gi and dermatology businesses , but also provided us with significant sources of capital , which we used to reduce our debt and improve our capital structure as a result of the focus on our core businesses and the divestitures of businesses not aligned with our core business objectives , and reduced sales of products in our diversified products segment due to the loss of exclusivity , a greater portion of our revenues are now driven by our core businesses . in 2018 , 2017 and 2016 , our bausch + lomb ( eye-health ) , salix ( gi ) and ortho dermatologics ( dermatology ) revenues collectively represented approximately 71 % , 67 % and 63 % of our total revenues , respectively . the increase in this percentage over this period demonstrates our convictions in these businesses . begin redirecting the allocation of capital to drive growth the ranking of our business units during 2016 changed our view as to how to allocate capital across our activities . in support of our core activities , our leadership team aggressively reallocated resources to : ( i ) promote our core businesses , ( ii ) make strategic investments in our infrastructure and ( iii ) direct r & d to our eye-health , gi and dermatology businesses to drive growth organically . the outcome of this process allows us to better drive value in our product portfolio and generate operational efficiencies . promotion of our core businesses - to position the company to drive the value of our core assets , we made a number of leadership changes and took steps to increase our promotional and sales force efforts , particularly in our gi business . in support of our gi business , we initiated a significant sales force expansion program in december 2016 to reach potential primary care physician ( “ pcp ” ) prescribers of xifaxan ® for irritable bowel syndrome with diarrhea ( “ ibs-d ” ) and relistor ® tablets for opioid induced constipation ( “ oic ” ) . in the first quarter of 2017 , we hired approximately 250 trained and experienced sales force representatives and managers to create , bolster and sustain deep relationships with pcps . with approximately 70 % of ibs-d patients initially presenting symptoms to a pcp , we believe that the dedicated pcp sales force is better positioned to reach more patients in need of ibs-d treatment . in addition , we have expanded our dedicated pain sales representatives to strengthen our position in the oic market . the investment in these additional sales resources , including an increase in associated promotional costs , was in excess of $ 50 million during 2017 ; these investments were essential and strategic as they have allowed us to capitalize 42 on the potential of our xifaxan ® and relistor ® franchises . revenues from our xifaxan ® and relistor ® franchises increased approximately 22 % and 37 % , respectively , in 2018 when compared to 2017. continued investment in emerging markets - in october 2018 , we acquired the 40 % minority interests of medpharma pharmaceutical and chemical industries llc ( `` medpharma '' ) for $ 18 million , thereby completing the planned acquisition of this joint venture . medpharma formulates , manufactures and distributes certain branded generic pharmaceuticals and non-patented generic pharmaceuticals for the company and third parties . in 2014 , we entered into the medpharma joint venture to provide the company with a presence in the united arab emirates ( `` uae '' ) . the completion of this acquisition provides us with full control over the business activities of medpharma and allows us to wholly benefit from the allocation of additional company resources and the growth , if any , in the uae and the surrounding region . strategic investments in our infrastructure - in support of our core businesses , we have and continue to make strategic investments in our infrastructure , the most significant of which are at our waterford facility in ireland , our rochester facility in new york , and our greenville facility in south carolina . to meet the forecasted demand for our biotrue ® oneday lenses , in july 2017 , we placed into service a $ 175 million multi-year strategic expansion project of the waterford facility . the emphasis of the expansion project was to : ( i ) develop new technology to manufacture , automatically inspect and package contact lenses , ( ii ) bring that technology to full validation and ( iii ) increase the size of the waterford facility . as a result of the increased production capacity and in support of our core eye-health business , we added approximately 300 production employees since the project 's inception , bringing total headcount to approximately 1,350 employees , and succeeded in increasing production , which in 2017 was over 30 % higher than it was in 2015 at the facility . we continue to invest in this facility , spending approximately $ 5 million during 2018 and budgeting an additional $ 16 million through june 2020. in order to address the expected global demand for our bausch + lomb ultra ® contact lens , in december 2017 , we completed a multi-year , $ 200 million strategic upgrade to our rochester facility . story_separator_special_tag the upgrade increased production capacity in support of our bausch + lomb ultra ® and sihy daily aqualox tm product lines and better supports the production of other well established contact lenses such as our purevision ® , purevision ® 2 ( svs , toric , and multifocal ) , soflens ® 38 and silsoft ® . in connection with the increased production capacity , we added approximately 120 production employees since the project 's inception , bringing total headcount to approximately 1,000 employees , and continue to make investments to enhance our production technologies and capacity at the facility . these enhancements to our production technologies and capacity led , in part , to the validation of sihy daily production at the rochester facility and the successful launch of sihy daily aqualox tm lenses in japan in september 2018. additionally , in november 2018 , we announced strategic expansion projects that will add multiple production lines to our waterford and rochester facilities in order to support our strategic investments in eye-health and meet the anticipated global demand for our sihy daily contact lenses , one of our significant seven products . these expansion projects are expected to be completed in 2022 and increase our combined headcount at these sites by more than 200 employees . to support the growth of our biotrue ® lens care product lines , in may 2018 , we placed into service a new production line in our bausch + lomb greenville , south carolina manufacturing facility , where we produce a substantial portion of our lens care product lines . the new production line has been validated to produce contact lens solutions for our biotrue ® , renu ® and sensitive eyes ® brands and replaces one of the facility 's original 1983 production lines that had limitations in product configurations . planned and in development for more than two years , the new production line cost $ 25 million , has a capacity ranging between 40 million and 50 million bottles annually and is expected to generate additional sustainable operational efficiencies through 2019. we believe the investments in our waterford , rochester and greenville facilities and related expansion of labor forces further demonstrates the growth potential we see in our bausch + lomb products and our eye-health business . direct r & d investment to our bausch + lomb , gi and dermatology businesses to drive growth - our r & d organization focuses on the development of products through clinical trials . as of december 31 , 2018 , approximately 1,200 dedicated r & d and quality assurance employees in 23 r & d facilities were involved in our r & d efforts . our r & d expenses for 2018 , 2017 and 2016 , were $ 413 million , $ 361 million and $ 421 million , respectively , and was approximately 5 % as a percentage of revenue for 2018 as opposed to approximately 4 % for 2017 and 4 % for 2016. as part of our turnaround , we removed projects related to divested businesses and rebalanced our portfolio to better align with our long-term plans and focus on core businesses . our investment in r & d reflects our commitment to drive organic growth through internal development of new products , a pillar of our new strategy . we have over 250 projects in our global pipeline and anticipate submitting approximately 120 of those projects for regulatory approval in 2019 and 2020 . 43 core assets that have received a significant portion of our r & d investment in current and prior periods are listed below . dermatology - duobrii ( provisional name ) , under development as internal development project ( `` idp '' ) 118 , is the first and only topical lotion that contains a unique combination of halobetasol propionate and tazarotene for the treatment of moderate-to-severe plaque psoriasis in adults . halobetasol propionate and tazarotene are each approved to treat plaque psoriasis when used separately , but are limited in duration of use . halobetasol propionate may be used for up to two weeks and tazarotene may be limited due to irritation . based on existing data from clinical studies , the combination of these ingredients in duobrii ( provisional name ) with a dual mechanism of action , potentially allows for expanded duration of use , with reduced adverse events . on june 18 , 2018 , we announced that we received a complete response letter ( “ crl ” ) from the fda to our new drug application ( “ nda ” ) for duobrii ( provisional name ) . the crl did not specify any deficiencies related to the clinical efficacy or safety of duobrii ( provisional name ) and did not identify issues with our chemistry , manufacturing and controls processes . the crl only noted questions regarding pharmacokinetic data . working to resolve this matter expeditiously , we met with the fda to understand the additional data requirements . we resubmitted our nda , and on august 29 , 2018 , we announced that the fda accepted the application as a class 2 resubmission , with a prescription drug user fee act ( “ pdufa ” ) action date of february 15 , 2019. on february 15 , 2019 we announced that the fda is still finalizing its review and would be unable to meet the pdufa action date . we expect a decision from the fda in the near future . dermatology - bryhali is a novel product that contains a unique , lower concentration of halobetasol propionate for the treatment of moderate-to-severe psoriasis which is fda approved for 8 weeks of use . the fda has previously approved halobetasol propionate to treat plaque psoriasis , but limited in duration of use . we launched bryhali in november 2018. dermatology - we are planning to expand the indication for bryhali ( halobetasol propionate lotion 0.01 % ) from plaque psoriasis to corticosteroid responsive dermatoses ( idp-133 ) .
| our segment revenues and segment profits are discussed in detail in the subsequent section titled `` reportable segment revenues and profits '' . cash discounts and allowances , chargebacks and distribution fees as is customary in the pharmaceutical industry , gross product sales are subject to a variety of deductions in arriving at net product sales . provisions for these deductions are recognized concurrently with the recognition of gross product sales . these provisions include cash discounts and allowances , chargebacks , and distribution fees , which are paid or credited to direct customers , as well as rebates and returns , which can be paid or credited to direct and indirect customers . price appreciation credits are generated when we increase a product 's wholesaler acquisition cost ( `` wac '' ) under our contracts with certain wholesalers . under such contracts , we are entitled to credits from such wholesalers for the impact of that wac increase on inventory on hand at the wholesalers . in wholesaler contracts , such credits are offset against the total distribution service fees we pay on all of our products to each such wholesaler . in addition , some payor contracts require discounting if a price increase or series of price increases in a contract period exceeds a negotiated threshold . provision balances relating to amounts payable to direct customers are netted against trade receivables and balances relating to indirect customers are included in accrued liabilities . we actively manage these offerings , focusing on the incremental costs of our patient assistance programs , the level of discounting to non-retail accounts and identifying opportunities to minimize product returns . we also concentrate on managing our relationships with our payors and wholesalers , reviewing the ranges of our offerings and being disciplined as to the amount and type of incentives we negotiate . provisions recorded to reduce gross product sales to net product sales and revenues for the years ended december 31 , 2018 and 2017 were as follows : replace_table_token_10_th cash discounts and allowances , returns ,
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% , from approximately $ 495,000 reported for the twelve months ended january 31 , 2019 compared to approximately $ 403,000 for the twelve months ended january 31 , 2020. having completed property improvements at our tucson , arizona property during the fiscal year ended january 31 , 2019 , our repair and maintenance expense in the current year was significantly lower . management believes the improvements , which complies with the increasing best western standards , has led to improved guest satisfaction and driven revenue growth hospitality expense increased by approximately $ 27,000 , or 5.6 % , from $ 483,000 for the twelve months ended january 31 , 2019 to approximately $ 510,000 for the twelve months ended january 31 , 2020. the increase was primarily due to the additional product mix provided during the hotels ' complimentary breakfast and happy hour required by best western . utility expenses increased by $ 21,000 , or 5.8 % to approximately $ 383,000 000 for the twelve months ended january 31 , 2020 from approximately $ 362,000 for the twelve months ended january 31 , 2019. utility increases were consistent with , and in support of , our higher revenues . hotel property depreciation expenses increased by approximately $ 57,000 , or 6.7 % , from approximately $ 845,000 reported for the twelve months ended january 31 , 2019 compared to approximately $ 902,000 for the twelve months ended january 31 , 2020. increased depreciation resulted from the additional capital expenditures associated with the tucson hotel improvements and , to a lesser extent , improvements at the albuquerque hotel , made during the fiscal year ended january 31 , 2019 . 11 revenue – discontinuing operations hotel operations & corporate overhead segment on october 24 , 2018 , the trust sold its yuma , arizona hotel to an unrelated third party for approximately $ 16.05 million , which the trust received in cash . total gain on sale was approximately $ 9.6 million . for the fiscal year ended january 31 , 2019 , the yuma , arizona hotel had approximately $ 3,294,000 of revenue consisting of approximately $ 3.2 million of room and other revenues and approximately $ 28,000 of food and beverage revenues . for the fiscal year ended january 31 , 2018 , the yuma , arizona hotel had approximately $ 4,125,000 of revenue , consisting of approximately $ 4.1 million in room and other revenues and approximately $ 42,000 of food and beverage revenues since the yuma hotel was sold in the fiscal year ended january 31 , 2019 , no revenue exists for the current fiscal year . ibc technology segment our ibc technologies division was sold effective july 31 , 2018 , to an unrelated party for approximately $ 3.0 million , for which the trust received $ 250,000 in cash , carried the balance of $ 2,750,000 in the form of a secured note . for the fiscal year ended january 31 , 2019 we had total ibc revenue of approximately $ 223,000. there is no revenue for the current fiscal year . hotel operations & corporate overhead segment for the twelve months ended january 31 , 2019 , ibc had approximately $ 2,808,000 of total expenses . there are no expenses for ibc in the current fiscal year ended january 31 , 2020 for the fiscal year ended january 31 , 2019 , our yuma , arizona hotel was owned and operated by the trust for approximately 9 months and incurred normal routine operating expenses including approximately $ 1,262,000 of room expenses , approximately $ 36,000 food and beverage expenses , approximately $ 365,000 general and administrative expenses , approximately $ 177,000 of sales and marketing expenses , approximately $ 185,000 of repairs and maintenance expenses , approximately $ 168,000 of hospitality expenses , approximately $ 161,000 utilities , approximately $ 344,000 of depreciation , approximately $ 88,000 of property insurance and tax expenses . there are no expenses for the yuma , arizona hotel for the fiscal year ended january 31 , 2020 . 12 ibc technology segment total expenses of approximately $ 892,000 for the twelve months ended january 31 , 2019 were approximately for the twelve months ended january 31 , 2018. our ibc technologies division was sold in august 2018. for the fiscal year ended january 31 , 2019 , our ibc development segment was owned and operated by the trust for approximately 7 months and incurred normal routine operating expenses including approximately $ 402,000 of general and administrative expenses , of approximately $ 292,000 of sales and marketing expenses , approximately $ 143,000 of reservation acquisition costs , and approximately $ 50,000 of depreciation expense liquidity and capital resources overview – hotel operations & corporate overhead our principal source of cash to meet our cash requirements , including distributions to our shareholders , is our share of the partnership 's cash flow , quarterly distributions from the albuquerque , new mexico property and sales of our hotel properties . the partnership 's principal source of revenue is hotel operations and distributions for the one hotel property it owns in tucson , arizona . our liquidity , including our ability to make distributions to our shareholders , will depend upon our ability , and the partnership 's ability , to generate sufficient cash flow from hotel operations and to service our debt . hotel operations are significantly affected by occupancy and room rates at the hotels . story_separator_special_tag due to the impact of the covid-19 virus on the travel and hospitality industries , and the economy in general , we are anticipating significantly lower occupancy and adr during this coming year and capital improvements are expected to decrease from the prior year , especially in our first fiscal quarter february 1 , 2020 through april 30 , 2020. we expect only modest recovery in our second fiscal quarter ( may-july , 2020 ) with continuing improvement during the remainder of the fiscal year ending january 31 , 2021 , as the travel and hospitality industries , and overall economy , rebound . with approximately $ 1,200,000 of cash and short term investments as of january 31 , 2020 and the availability of a $ 1,000,000 related party demand/revolving line of credit/promissory note and the availability of our two available advances to affiliate credit facilities for a total of $ 1,000,000 maximum borrowing capacity , we believe that we will have enough cash on hand to meet all of our financial obligations as they become due for at least the next twelve months from the issuance date of the these consolidated financial statements . in addition , our management is analyzing other strategic options available to us , including raising additional funds , increasing borrowings at either , or both , the albuquerque and tucson hotels and using the funds generated to pay intercompany loans due from the tucson hotel to the partnership of approximately $ 3.7 million ; however , such transactions may not be available on terms that are favorable to us , or at all . there can be no assurance that we will be successful in refinancing debt or raising additional or replacement funds , or that these funds may be available on terms that are favorable to us . if we are unable to raise additional or replacement funds , we may be required to sell certain of our assets to meet our liquidity needs , which may not be on terms that are favorable . 13 net cash used in operating activities totaled approximately $ 953,000 during fiscal year 2020 as compared to approximately $ 1,799,000 used in the prior fiscal year . consolidated net income was approximately $ ( 1,978,000 ) for the fiscal year ended january 31 , 2020 as compared to consolidated net income for the fiscal year ended january 31 , 2019 of approximately $ 11,106,000. explanation of the differences between these fiscal years are explained above in the results of operations of the trust . changes in the adjustments to reconcile net loss and net income for the years ended january 31 , 2020 and 2019 , respectively , consist primarily of gain on disposal of assets , hotel property depreciation , and changes in assets and liabilities . hotel property depreciation was approximately $ 902,000 during fiscal year 2020 compared to approximately $ 1,245,000 during fiscal year 2019 , a decrease of $ 343,000 as the trust recognized less depreciation as one of the hotel properties was sold during the fiscal year 2019. there was no amortization of intangibles during fiscal years 2020 or 2019. changes in assets and liabilities for accounts receivable , prepaid expenses and other assets and accounts payable and accrued expenses totaled approximately $ 91,000 and approximately $ ( 296,000 ) for the fiscal years ended january 31 , 2020 and 2019 , respectively . this increase in changes in assets and liabilities for the fiscal year ended january 31 , 2020 compared to the fiscal year ended january 31 , 2019 was due to decreases in accounts payables and accrued liabilities . net cash provided by investing activities totaled approximately $ 1,305,000 for the year ended january 31 , 2020 compared to net cash provided by investing activities of approximately $ 8,372,000 for the year ended january 31 , 2019. the decrease in net cash provided by investing activities during fiscal year 2020 was due to ( 1 ) the yuma hotel sale in the prior year ; and there were no hotels sold in the current year , ( 2 ) the $ 1.0 million investments in unigen power inc. [ upi ] , ( 3 ) offset by the lending on advances to affiliates – related party of approximately $ 75,000 during the fiscal year 2020 as compared to approximately $ 776,000 for the fiscal year 2019. net cash provided by financing activities totaled approximately $ 99,000 compared to net cash used of $ 10,399,000 for the years ended january 31 , 2020 and 2019 , respectively . the significant decrease of approximately $ 10,498,000 was primarily due to decreases in distributions to non-controlling interest holders , decreases in repurchase of treasury stock ; and increases in collection online of credit – related party , principal payments on mortgage notes payables for continuing operations was approximately $ 120,000 and $ 102,000 during the fiscal years ended january 31 , 2020 and 2019 , respectively . payments on notes payable to banks was approximately $ 170,000 and approximately $ -0- during the fiscal years ended january 31 , 2020 and 2019 , respectively as we paid off our mortgages on our yuma , arizona property in the fiscal year ended january 31 , 2019 , as that asset was sold . borrowings on mortgage notes payable was $ 1,400,000 and $ -0- during the fiscal years ended january 31 , 2020 and 2019 , respectively due to refinancing our albuquerque , new mexico property in the fiscal year ended january 31 , 2020. for the fiscal year ended january 31 , 2020 , payments on line of credit – related party netted against borrowings on line of credit – related party was approximately $ -0- of net
| for comparability purposes , the current fiscal year revenues do not include our yuma , arizona properties which was sold on october 24 , 2018 , and our ibc technology division which was sold in august of 2018. we realized a 7.1 % increase in room revenues during fiscal year 2020 as room revenues were approximately $ 6,278,000 for the fiscal year ending january 31 , 2020 as compared to approximately $ 5,862,000 for the fiscal year ending january 31 , 2019. with changes in our food and beverage offerings , our food and beverage revenue increased by 36.0 % to approximately $ 68,000 for fiscal year 2020 as compared to approximately $ 50,000 during fiscal year 2019 , an increase of approximately $ 18,000 . - we also realized an approximate 1.2 % decrease in management and trademark fee revenues during fiscal year 2020 to approximately $ 170,000 as compared to approximately $ 172,000 during fiscal year 2019. management and trademark fee revenues decreased during fiscal year 2020 as a result of the loss of management fees due to the sale of the yuma hotel , offset by higher fees from the remaining hotels . management fees remained unchanged year on year at 5 % . during fiscal year 2021 , we expect management and trademark fee revenues to be lower when compared to fiscal year 2020 management and trademark fee revenues , on reduced revenues . we realized an approximate 40 % decrease in other revenues from the hotel properties during fiscal year 2020 to approximately $ 51,000 as compared to approximately $ 85,000 during fiscal year 2019 . 10 expenses – continuing operations : total expenses before interest expense and income tax provision was approximately $ 8,421,000 for the twelve months ended january 31 , 2020 reflecting an increase of approximately $ 947,000 compared to total expenses before interest expense and income tax provision of approximately $ 7,474,000 for the twelve months ended january 31 , 2019. the increase was primarily due to an increase in operating expenses for the $ 825,000 impairment of the ibc/obasa note receivable and the effects
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competitive and regulatory environment another major external market factor affecting our business and results of operations is competition , which may take the form of competitive pressure on the commissions we charge for our brokerage services or competition for brokerage and technology development personnel with extensive experience in the specialized markets we serve . competition for the services of productive brokers remained intense in 2010. the consolidation and personnel layoffs by dealers , hedge funds and other market participants over the last few years has also led to increased competition to provide brokerage services to a smaller number of market participants in the near term . in 2010 , we reduced our corporate cash fixed income business in the u.s. as many of the large dealer firms began to rehire salespersons and recommit capital in these markets . during 2010 , the financial markets experienced the beginning of a major global regulatory overhaul , as regulators and legislators in the u.s. and abroad have proposed and , in some instances , already adopted , a slate of regulatory changes that call for , among other things , central clearing of certain derivatives , transparency and reporting of derivatives transactions , mandatory trading of certain derivatives transactions on regulated exchanges or swap execution facilities and the required or increased use of electronic trading system technologies . we believe that the new regulation has not eliminated the uncertainty that has persisted in many otc derivatives markets since the financial crisis and has led to lower trading volumes and fewer participants in many of the markets in which we provide our services . we are optimistic that the regulatory solutions , including centralized clearing , increased transparency and centralized trade reporting , will be generally beneficial to the long-term health of the broader financial markets , although we believe that it will continue to depress near-term volumes in certain derivative markets until the final regulations are adopted and implemented . we believe that our product expertise , proven technology , depth of liquidity and long-standing relationships position us well to capture any newly created opportunities that result from the new regulations . financial overview our results for the last three years reflect the challenging economic conditions following the financial crisis in 2008 during which many market participants , including many of our key customers , experienced reduced liquidity , credit contraction , financial institution consolidation and market 62 participant bankruptcies . our geographic and product diversity enabled us to take advantage of areas of market strength over this period , even as several otc derivative markets in which we provide our services were impacted by economic and regulatory uncertainty . as more fully discussed below , our results of operations are significantly impacted by the amount of our revenues and the amount of compensation and benefits we provide to our employees . the following factors had a significant impact on our revenues and employee costs during the three year period ended december 31 , 2010 : our total revenues of $ 862.1 million for the year ended december 31 , 2010 increased from $ 818.7 million for the year ended december 31 , 2009. the main factors contributing to our increase in total revenues in 2010 as compared to 2009 were : $ 52.3 million in revenues contributed from kyte , which was acquired on july 1 , 2010 ; improved economic and market conditions in certain emerging markets and asia ; increased trading activity in certain financial and commodity product markets in which we have a leading market share ; higher share and commodity values , on average , as they relate directly to the commissions revenue we receive in certain equity and commodity products ; increased electronic trading activity on our hybrid brokerage platforms in europe and the u.s. ; contributions from other acquisitions , new brokerage desks and new brokers hired across all product categories ; and the strong performance of our trayport subsidiary . partially offsetting these factors were several negative factors that affected our brokerage and other revenues , including : increased competition in certain cash fixed income markets globally , which led us to reduce our corporate fixed income presence in the u.s ; lower cash equity and equity derivative trading volumes in the u.s. and europe ; regulatory and governmental uncertainty as it relates to market structure and operations in otc derivative markets ; and narrower credit spreads , on average , as they relate directly to certain cash fixed income desk revenues . the main factors contributing to our decrease in revenues for the year ended december 31 , 2009 from the year ended december 31 , 2008 are set forth below under `` year ended december 31 , 2009 compared to the year ended december 31 , 2008 . '' the most significant component of our cost structure is employee compensation and employee benefits , which includes salaries , sign-on bonuses , incentive compensation and related employee benefits and taxes . our employee compensation and employee benefits have decreased from $ 666.0 million for the year ended december 31 , 2008 to $ 558.2 million for the year ended december 31 , 2010. the main factors contributing to the decrease were lower brokerage revenues , which resulted in lower broker performance bonuses , and charges taken in the fourth quarter of 2009 related to the renegotiation of certain employment agreements . our compensation and employee benefits for all employees have both a fixed and variable component . base salaries and benefit costs are primarily fixed for all employees while bonuses constitute the variable portion of our compensation and employee benefits . within overall compensation and employee benefits , the employment cost of our brokerage personnel is the key 63 component . bonuses for brokerage personnel are primarily based on individual performance and or the operating results of their related brokerage desk . additionally , a portion of our bonus expense is subject to contractual guarantees that may require us to make bonus payments to brokers regardless of their performance in any particular period . story_separator_special_tag for many of our brokerage employees , their bonus constitutes a significant component of their overall compensation . broker performance bonuses decreased from $ 331.0 million for the year ended december 31 , 2008 to $ 229.1 million for the year ended december 31 , 2010. further , we pay sign-on bonuses to certain newly-hired brokers and retention bonuses to certain of our existing brokers who agree to long-term employment agreements . these bonuses may be paid in the form of cash or restricted stock units ( `` rsus '' ) and are typically expensed over the term of the related employment agreement for cash bonuses and the related vesting period for rsus , which is generally two to four years . these employment agreements typically contain repayment of all or a portion of the cash payment and forfeiture provisions for unvested rsus should the employee voluntarily terminate his or her employment or if the employee 's employment is terminated for cause during the initial term of the agreement . expense related to these bonuses paid to brokerage personnel decreased to $ 32.0 million for the year ended december 31 , 2010 from $ 67.3 million for the year ended december 31 , 2009 and $ 40.8 million for the year ended december 31 , 2008. the expense was significantly higher in 2009 compared to 2008 and 2010 due to charges taken in the fourth quarter of 2009 related to the renegotiation of certain employment agreements . 64 results of consolidated operations the following table sets forth our consolidated results of operations for the periods indicated . beginning in the fourth quarter ended december 31 , 2010 , we included the subtotal `` revenues , net of interest and transaction-based expenses '' , or net revenues , which is defined as total revenues less certain direct incremental costs associated with those revenues . we believe that net revenues provide a useful insight into our business . this revised format has been applied to all periods presented : replace_table_token_5_th 65 the following table sets forth our consolidated results of operations as a percentage of our revenues , net of interest and transaction-based expenses for the periods indicated : replace_table_token_6_th year ended december 31 , 2010 compared to the year ended december 31 , 2009 net income gfi 's net income for the year ended december 31 , 2010 was $ 25.6 million as compared to $ 16.3 million for the year ended december 31 , 2009 , an increase of $ 9.3 million or 57.1 % . total revenues increased by $ 43.4 million , or 5.3 % , to $ 862.1 million for the year ended december 31 , 2010 from $ 818.7 million for 2009. our increased revenues were primarily due to our kyte acquisition , investments in technology and brokerage staff , and growth in our commodity , financial and fixed income derivative product businesses and the reasons set forth above under `` financial overview '' . however , we were adversely affected by foreign exchange rates in 2010 to the extent we earned 66 revenues denominated in euros and the british pound as these currencies were weaker , on average , relative to the u.s. dollar than in 2009. we employed a total of 1,161 brokerage personnel at december 31 , 2010 compared to 1,082 at december 31 , 2009. total interest and transaction-based expenses increased by $ 37.2 million , or 122.4 % to $ 67.6 million for 2010 from $ 30.4 million for 2009. the increase is primarily related to our clearing services business obtained in the acquisition of kyte . kyte incurs exchange , clearing and execution costs in order to provide clearing services to its customers . total expenses other than interest and transaction-based expenses decreased by $ 2.3 million , or 0.3 % , to $ 762.8 million for 2010 from $ 765.1 million in 2009. the decrease in expenses is primarily attributable to decreased compensation expense , which resulted from lower broker performance bonuses and the charge of $ 34.4 million taken in 2009 related to the renegotiation of certain employment agreements and severance . the decrease in these compensation expenses were partially offset by an increase in expenses related to communications and market data , travel and promotion , rent and occupancy , depreciation and amortization , professional fees related to acquisitions , investments in technology and brokerage staff , and investing resources in preparation for the new regulatory framework being developed in the u.s. and europe . revenues the following table sets forth the changes in revenues for the year ended december 31 , 2010 , as compared to the same period in 2009 ( dollars in thousands , except percentage data ) : replace_table_token_7_th * denotes % of revenues , net of interest and transaction-based expenses * * denotes % change in 2010 as compared to 2009 brokerage revenues we offer our brokerage services in four broad product categories : fixed income , equity , financial , and commodity . during the second quarter of 2010 we changed the name of our `` credit products '' category to `` fixed income products '' in order to better describe the full range of products it represents . below is a discussion of our brokerage revenues by product category for the year ended december 31 , 2010. broker productivity ( defined as total brokerage revenues during the period divided by average monthly brokerage personnel headcount for the period ) across all product categories decreased by approximately 5.1 % for 2010 , as compared to 2009 . 67 the decrease in fixed income product brokerage revenues of $ 38.7 million , or 14.0 % , in 2010 as compared with 2009 was primarily attributable to a decrease in revenues from our cash fixed income business of 32.7 % . this decrease was due to increased competition that led us to reduce our corporate cash fixed income presence in the u.s. and narrower credit spreads , on average , as they relate directly to the commissions we receive on certain desks .
| the following tables summarize our total revenues , revenues , net of interest and transaction-based expenses , other expenses and income ( loss ) before income taxes by segment : replace_table_token_13_th replace_table_token_14_th replace_table_token_15_th 76 segment results for the year ended december 31 , 2010 compared to the year ended december 31 , 2009 total revenues total revenues for americas brokerage decreased $ 32.2 million , or 9.8 % , to $ 294.9 million for the year ended december 31 , 2010 from $ 327.1 million for the year ended december 31 , 2009. total revenues for emea brokerage increased $ 14.2 million , or 3.9 % , to $ 379.0 million for the year ended december 31 , 2010 from $ 364.8 million for the year ended december 31 , 2009. total revenues for asia brokerage increased $ 13.4 million , or 21.8 % , to $ 75.0 million for the year ended december 31 , 2010 from $ 61.6 million for the year ended december 31 , 2009. total revenues for our three brokerage segments decreased by $ 4.6 million , or 0.6 % , to $ 748.9 million for the year ended december 31 , 2010 from $ 753.5 million for the year ended december 31 , 2009. the decline in total revenues for our brokerage operations was primarily due to decreases in brokerage revenues in fixed income and equity products , offset by increases in financial and commodity products resulting from the factors described above under `` year ended december 31 , 2010 compared to the year ended december 31 , 2009 '' . total revenues for clearing and backed trading increased $ 52.3 million primarily due to clearing services revenues of $ 41.9 million . the remaining $ 10.4 million in revenues for this segment include equity in earnings of unconsolidated brokerage businesses , interest income and trading profits . all of these revenues were generated by kyte following the acquisition on july 1 , 2010. total revenues for our all other segment primarily consisted of revenues generated from sales of software , analytics and market data . total revenues from all other decreased by $ 4.3 million , or 6.6 % , to $ 60.9 million for the year ended december 31 , 2010 from $ 65.2 million for the year ended december 31 , 2009. the decrease was primarily related to a net decrease of $ 10.5 million
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in october 2020 , we announced the withdrawal of the maa based on feedback from the ema 's committee for medicinal products for human use ( chmp ) that the available clinical data from our 73 table of contents single arm , uncontrolled phase 1 trial did not sufficiently support a positive benefit-risk balance for the proposed indication . in addition , we are currently evaluating ivosidenib in the clinical trials described below . our other marketed product is idhifa® ( enasidenib ) , an oral targeted inhibitor of the mutated isocitrate dehydrogenase 2 , or idh2 enzyme and the first and only fda-approved therapy for patients with r/r aml and an idh2 mutation . in august 2017 , the fda granted our collaboration partner celgene approval of idhifa® for the treatment of adult patients with r/r aml and an idh2 , mutation as detected by an fda-approved test . we were eligible to receive royalties at tiered low-double digit to mid-teen percentage rates on any net sales of idhifa® and have exercised our rights to provide up to one-third of the field-based commercialization efforts in the united states . in june 2018 , celgene submitted an maa to the ema for idhifa® for idh2 mutant-positive aml which it subsequently withdrew in december 2019. on june 11 , 2020 we sold our tiered , sales-based royalty rights on worldwide net sales of idhifa® , as well as our rights to receive up to $ 55.0 million in outstanding regulatory milestone payments from bristol myers squibb , or bms , to royalty pharma , or rpi , for $ 255.0 million . in addition , we and celgene are currently evaluating enasidenib in the clinical trials described below . our pre-commercial clinical cancer product candidates are vorasidenib and ag-270 . we are developing vorasidenib for the treatment of idh mutant-positive low grade glioma . vorasidenib is an orally available , selective brain-penetrant pan-idh mutant inhibitor . we are currently evaluating vorasidenib in the clinical trials described below . we are developing ag-270 for the treatment of cancers carrying a methylthioadenosine phosphorylase , or mtap , deletion , which is present in approximately 15 percent of all cancers . ag-270 is an orally available selective potent inhibitor of methionine adenosyltransferase 2a , or mat2a . on march 25 , 2020 , celgene declined to exercise its right to opt into co-development and co-commercialization for ag-270 , our mat2a inhibitor development program , under our 2016 global research and collaboration agreement with celgene , or the 2016 agreement . we are currently evaluating ag-270 in a phase 1 dose-escalation and expansion trial in multiple tumor types carrying a mtap , deletion , described below . in the first quarter of 2020 , we made the decision to cease the internal development of ag-636 for the treatment of hematologic malignancies , including lymphoma due to limited enrollment in our phase 1 trial in lymphoma . ag-636 is an inhibitor of the metabolic enzyme dihydroorotate dehydrogenase , or dhodh , licensed by us from aurigene discovery technologies limited , or aurigene . the lead product candidate in our genetically defined disease , or gdd , portfolio , mitapivat , is an activator of both wild-type and mutant pyruvate kinase-r , or pkr , for the potential treatment of hemolytic anemias . we are currently evaluating mitapivat for the treatment of pyruvate kinase , or pk , deficiency , thalassemia and sickle cell disease , or scd , in the clinical trials described below . we are also developing ag-946 , a next-generation pkr activator , for the potential treatment of hemolytic anemias and other indications . in addition to the aforementioned development programs , we are seeking to advance a number of early-stage discovery programs in our focus areas of gdds , malignant hematology and solid tumors based on our scientific leadership in the field of cellular metabolism and adjacent areas of biology . collaboration and license agreements in november 2019 , the acquisition of celgene was completed by bms , and celgene became a wholly-owned subsidiary . we will continue to refer to our collaboration agreements with celgene throughout this form 10-k as being with celgene corporation . celgene corporation celgene is a related party through ownership of our common stock . in april 2010 , we entered into a discovery and development collaboration and license agreement focused on cancer metabolism , or the 2010 agreement . the 2010 agreement was amended in october 2011 and july 2014. on june 11 , 2020 , we sold our tiered , sales-based royalty rights on worldwide net sales of idhifa® , as well as our rights to receive up to $ 55.0 million in outstanding regulatory milestone payments from bms , to rpi for $ 255.0 million . under the 2010 agreement , we remain eligible to receive a $ 25.0 million potential milestone payment for the enasidenib program upon achievement of a specified ex-u.s. commercial milestone event , as well as reimbursement for costs incurred for our co-commercialization efforts and development activities . in april 2015 , we entered into a joint worldwide development and profit share collaboration and license agreement with celgene , and our wholly owned subsidiary , agios international sarl , entered into a collaboration and license agreement with celgene international ii sarl , or collectively , the ag-881 agreements , to establish a worldwide collaboration focused on the 74 table of contents development and commercialization of vorasidenib products . the ag-881 agreements were terminated effective september 4 , 2018. in may 2016 , we entered into a master research and collaboration agreement with celgene , or the 2016 agreement . the initial four-year research term for the 2016 agreement expired on may 17 , 2020. on march 25 , 2020 celgene declined the option to extend the research agreement . further , on april 10 , 2020 celgene notified us that they will be declining to elect any program as a continuation program under the 2016 agreement . story_separator_special_tag celgene had designated ag-270 , our inhibitor mat2a , as a development candidate under the 2016 agreement . on march 25 , 2020 , celgene notified us of their decision to decline their option to enter into a development & commercialization agreement with respect to the mat2a program under the 2016 agreement . refer to note 13. collaboration and license agreements , to the consolidated financial statements in this annual report on form 10-k for additional discussion of the collaboration agreements . cstone agreement in june 2018 , we entered into an exclusive license agreement with cstone pharmaceuticals , or the cstone agreement , for the development and commercialization of certain products containing ivosidenib in mainland china , hong kong , macau , and taiwan for therapeutic uses in humans , excluding brain cancer , unless added by us in our sole discretion . on march 2 , 2020 , we amended the cstone agreement to include singapore as part of the cstone territory . we retain development and commercialization rights for the rest of the world . refer to note 13. collaboration and license agreements , to the consolidated financial statements in this annual report on form 10-k for additional discussion of the cstone agreement . financial operations overview impact of covid-19 on our business the spread of sars-cov-2 and the resulting disease covid-19 has caused an economic downturn on a global scale , as well as significant volatility in the financial markets . in march 2020 , the world health organization declared covid-19 a pandemic . as of december 31 , 2020 , we have not experienced a significant financial or supply chain impact directly related to the pandemic but have experienced some disruptions to clinical operations , including timelines to complete patient enrollment in some of our clinical trials and delays in submission of regulatory filings , as further described below . in this time of uncertainty as a result of the covid-19 pandemic , we are continuing to serve our customers while taking precautions to provide a safe work environment for our employees and customers . in march 2020 , we established and implemented a work from home policy for our employees . in april 2020 , we made internal resource allocation decisions in order to deliver on key business objectives and to increase our financial flexibility , including , pausing the development of certain preclinical research programs , delaying the start of certain longer-term clinical studies , limiting staff hiring , reducing the number of contract workers , and delaying or limiting information technology and facilities infrastructure projects . in june 2020 , we implemented phase 1 of our return to work program , which enabled all of our lab-based employees and related support personnel to return to our cambridge office , and in september 2020 we began implementing phase 2 of our return to work program by opening our cambridge office to an additional , limited number of employees who prefer to work onsite . our field-based employees engage with healthcare providers and other third parties remotely and , where local regulations allow , on a limited in-person basis . we are conducting our return to work program under strict guidelines as required by federal , state , and local authorities . we have been monitoring our supply chain network for disruptions due to the covid-19 pandemic , and our third-party manufacturers remain largely unaffected , with any campaign delays experienced to date being limited to a few days in duration . although global shipping continues to be disrupted due to the pandemic , we have not experienced a supply impact and have accrued additional safety stock of tibsovo® in order to further mitigate risk . as the pandemic continues to unfold , the extent of the pandemic 's effect on our operational and financial performance will depend in large part on future developments , which can not be predicted with confidence at this time . future developments include changes in the duration , scope and severity of the pandemic , the actions taken to contain or mitigate its impact , the impact on governmental programs and budgets , the development of treatments or vaccines , and the resumption of widespread economic activity . any prolonged material disruption of our employees , suppliers , manufacturing , or customers could negatively impact our consolidated financial position , consolidated results of operations and consolidated cash flows . as a result , we may have to take further actions that we determine are in the best interests of our employees or as required by federal , state , or local authorities . general since inception , our operations have primarily focused on organizing and staffing our company , business planning , raising capital , assembling our core capabilities in cellular metabolism , identifying potential product candidates , undertaking preclinical studies , conducting clinical trials , establishing a commercial infrastructure and marketing our approved products . to date , we have financed our operations primarily through commercial sales of tibsovo® , funding received from our various 75 table of contents collaboration agreements discussed above , private placements of our preferred stock , our initial public offering of our common stock and concurrent private placement of common stock to an affiliate of celgene , and our follow-on public offerings . additionally , since inception , we have incurred significant operating losses . our net losses were $ 327.4 million , $ 411.5 million and $ 346.0 million for the years ended december 31 , 2020 , 2019 and 2018 , respectively . as of december 31 , 2020 , we had an accumulated deficit of $ 1,843.5 million . we expect to continue to incur significant expenses and net losses until such time we are able to report profitable results . our net losses may fluctuate significantly from year to year .
| we expect research and development costs to increase significantly for the foreseeable future as our product candidate development programs progress . however , the successful development of our product candidates is highly uncertain . as such , at this time , we can not reasonably estimate or know the nature , timing and estimated costs of the efforts that will be necessary to complete the remainder of the development and to commercialize these product candidates . we are also unable to positively predict when future net cash inflows will commence from tibsovo® , vorasidenib , mitapivat , ag-270 , ag-946 or any of our other product candidates . this is due to the numerous risks and uncertainties associated with developing medicines , including the uncertainty of : establishing an appropriate safety profile with an investigational new drug application , or ind , and or nda enabling toxicology and clinical trials ; the successful enrollment in , and completion of , clinical trials ; the receipt of marketing approvals from applicable regulatory authorities ; establishing compliant commercial manufacturing capabilities or making arrangements with third-party manufacturers ; obtaining and maintaining patent and trade secret protection and regulatory exclusivity for our product candidates ; launching commercial sales of the products , if and when approved , whether alone or in collaboration with others ; and 76 table of contents maintaining an acceptable safety profile of the 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 and timing associated with the development of that product candidate . research and development expenses consist primarily of costs incurred for our research activities , including our drug discovery efforts , and the development of our product candidates , which include : employee-related expenses , including salaries , benefits and stock-based compensation expense ; expenses incurred under agreements with third parties , including contract research organizations , or cros , that conduct research and development and both preclinical and
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executive summary net income for the 52 weeks ended january 31 , 2015 increased 2 % to $ 344.2 million , or $ 2.84 per diluted share , as compared to net income of $ 337.6 million , or $ 2.69 per diluted share , during the 52 weeks ended february 1 , 2014 . fiscal 2014 net income includes $ 8.7 million , net of tax , or $ 0.07 per diluted share , related to a gain on the sale of a gulfstream g650 corporate aircraft and charges totaling $ 12.2 million , net of tax , or $ 0.10 per diluted share , related to the company 's golf restructuring . fiscal 2013 net income included $ 4.3 million , net of tax , or $ 0.03 per diluted share , related to the partial recovery from the company 's previously impaired investment in jjb sports and $ 4.7 million , net of tax , or $ 0.04 per diluted share , related to a non-cash impairment charge to reduce the carrying value of a gulfstream g450 corporate aircraft held for sale to fair market value . net sales increased 10 % to $ 6,814.5 million in fiscal 2014 from $ 6,213.2 million in fiscal 2013 due primarily to a 2.4 % increase in consolidated same store sales and the growth of our store network . ecommerce sales penetration in fiscal 2014 increased to 9.2 % of total sales compared to 7.9 % in fiscal 2013 . gross profit decreased to 30.62 % in fiscal 2014 as a percentage of net sales from 31.29 % in fiscal 2013 due primarily to lower merchandise margins and higher shipping expenses , partially offset by occupancy leverage . in fiscal 2014 , the company : opened 46 new dick 's sporting goods stores , one new golf galaxy store and eight new field & stream stores . the company also relocated five dick 's sporting goods stores and two golf galaxy stores , remodeled five dick 's sporting goods stores and closed one dick 's sporting goods store and two golf galaxy stores . declared and paid aggregate cash dividends of $ 0.50 per share of common stock and class b common stock . repurchased approximately 4.3 million shares of common stock for $ 200.0 million . purchased the intellectual property rights to the field & stream mark in product categories that were not otherwise owned by the company , including men 's , women 's and children 's casual apparel , for $ 26.3 million . ended the period with no outstanding borrowings under our revolving senior secured credit facility ( the `` credit agreement '' ) . 25 story_separator_special_tag n increase in transactions of approximately 1.2 % . based upon our fiscal 2014 sales mix , every 1 % change in consolidated same store sales , which consists of both brick and mortar and ecommerce sales , would impact earnings before income taxes for fiscal 2014 by approximately $ 20.6 million . store count during fiscal 2014 , the company opened 46 new dick 's sporting goods stores , one new golf galaxy store and eight new field & stream stores . additionally , the company relocated five dick 's sporting goods stores and two golf galaxy stores , remodeled five dick 's sporting goods stores , and closed one dick 's sporting goods store and two golf galaxy stores . as of january 31 , 2015 , the company operated 603 dick 's sporting goods stores in 46 states , 78 golf galaxy stores in 29 states , 10 field & stream stores in five states and three true runner stores in three states , totaling approximately 34.2 million square feet on a consolidated basis . 27 income from operations income from operations increased $ 17.3 million to $ 554.1 million in fiscal 2014 from $ 536.8 million in fiscal 2013 . gross profit increased 7 % to $ 2,086.7 million in fiscal 2014 from $ 1,944.0 million in fiscal 2013 , but decreased as a percentage of net sales by 67 basis points compared to fiscal 2013 . the decline in the gross profit rate was driven by a decrease in merchandise margin of 58 basis points and an increase in shipping expenses of 17 basis points in fiscal 2014 compared to fiscal 2013. during fiscal 2014 , the decrease in merchandise margin was primarily driven by higher promotional activity , partially offset by changes in sales mix to higher margin categories , as discussed above . the increase in shipping expenses during fiscal 2014 was the result of the growth and increased penetration of ecommerce sales as compared to the company 's total net sales . the decline in the gross profit rate was partially offset by leverage in occupancy costs , which decreased 10 basis points as a percentage of net sales . though overall occupancy costs increased $ 62.3 million from fiscal 2013 , these costs decreased as a percentage of net sales as occupancy costs increased at a lower rate than the 10 % increase in net sales during fiscal 2014. every 10 basis point change in merchandise margin would impact earnings before income taxes for fiscal 2014 by approximately $ 6.8 million . selling , general and administrative expenses increased approximately 8 % to $ 1,502.1 million in fiscal 2014 from $ 1,386.3 million in fiscal 2013 , but decreased as a percentage of net sales by 27 basis points . fiscal 2014 includes ( i ) a pre-tax gain on the sale of a gulfstream g650 corporate aircraft of $ 14.4 million , ( ii ) severance charges totaling $ 3.7 million and ( iii ) non-cash impairment charges totaling $ 14.3 million related to the company 's golf restructuring . fiscal 2013 included a $ 7.9 million non-cash impairment charge to reduce the carrying value of a gulfstream g450 corporate aircraft held for sale to fair market value . story_separator_special_tag apart from the enumerated items , the year over year change in selling , general and administrative expenses as a percentage of net sales is due primarily to lower administrative payroll and related benefit costs , which increased in fiscal 2014 by $ 6.1 million from fiscal 2013 but decreased as a percentage of net sales by 20 basis points . pre-opening expenses increased to $ 30.5 million in fiscal 2014 from $ 20.8 million in fiscal 2013 . pre-opening expenses in any period fluctuate depending on the timing and number of store openings and relocations . during fiscal 2014 , the company opened 46 new dick 's sporting goods stores , one new golf galaxy store and eight new field & stream stores . additionally , the company relocated five dick 's sporting goods stores and two golf galaxy stores in the current year . during fiscal 2013 , the company opened 40 new dick 's sporting goods stores , one new golf galaxy store , two new field & stream stores and one new true runner store and relocated one dick 's sporting goods store and repositioned one golf galaxy store . income taxes the company 's effective tax rate was 38.1 % for fiscal 2014 as compared to 38.2 % for fiscal 2013 . fiscal 2013 ( 52 weeks ) compared to fiscal 2012 ( 53 weeks ) net income the company reported net income for the year ended february 1 , 2014 of $ 337.6 million , or $ 2.69 per diluted share , as compared to net income of $ 290.7 million , or $ 2.31 per diluted share , in fiscal 2012 . fiscal 2013 net income included $ 4.3 million , net of tax , or $ 0.03 per diluted share , related to the partial recovery from the company 's previously impaired investment in jjb sports and $ 4.7 million , net of tax , or $ 0.04 per diluted share , related to a non-cash impairment charge to reduce the carrying value of a gulfstream g450 corporate aircraft held for sale to fair market value . fiscal 2012 net income included a charge of $ 27.6 million , net of tax , or $ 0.22 per diluted share , related to the company 's impairment of its investment in jjb sports . additionally , fiscal 2012 included approximately $ 0.03 per diluted share for the 53 rd week . 28 net sales net sales increased 6 % to $ 6,213.2 million in fiscal 2013 from $ 5,836.1 million in fiscal 2012 due primarily to a 1.9 % increase in consolidated same store sales and the growth of our store network . the 1.9 % increase in consolidated same store sales on a 52-week to 52-week basis contributed $ 104.9 million of the increase in revenue for fiscal 2013 . the remaining $ 272.2 million increase in the company 's noncomparable sales was primarily attributable to new stores , partially offset by the inclusion of the 53 rd week of sales in fiscal 2012. sales during the 53 rd week of fiscal 2012 totaled approximately $ 74 million . the 1.9 % consolidated same store sales increase consisted of a 2.4 % increase at dick 's sporting goods and a 7.1 % decrease at golf galaxy . ecommerce sales penetration was 7.9 % of total sales during fiscal 2013 compared to 5.3 % of total sales during the 53 weeks ended february 2 , 2013 , representing an approximate increase of 59 % in ecommerce sales across both dick 's sporting goods and golf galaxy . the increase in consolidated same store sales was broad based , with larger increases in athletic apparel , athletic footwear and outdoor apparel and cold weather accessories , partially offset by declines in the golf , fitness and outdoor equipment categories . the same store sales increase at dick 's sporting goods was driven by an increase in sales per transaction of approximately 1.8 % and an increase in transactions of approximately 0.6 % . based upon our fiscal 2013 sales mix , every 1 % change in consolidated same store sales , which consists of both brick and mortar and ecommerce sales , would have impacted earnings before income taxes for fiscal 2013 by approximately $ 18.9 million . store count during fiscal 2013 , the company opened 40 new dick 's sporting goods stores , one new golf galaxy store , two new field & stream stores and one new true runner store . additionally , the company relocated one dick 's sporting goods store , repositioned one golf galaxy store and closed three underperforming golf galaxy stores . as of february 1 , 2014 , the company operated 558 dick 's sporting goods stores in 46 states , 79 golf galaxy stores in 29 states , two field & stream stores in two states and three true runner stores in three states , totaling approximately 31.6 million square feet on a consolidated basis . income from operations income from operations increased $ 13.1 million to $ 536.8 million in fiscal 2013 from $ 523.7 million in fiscal 2012 . gross profit increased 6 % to $ 1,944.0 million in fiscal 2013 from $ 1,837.2 million in fiscal 2012 , but decreased as a percentage of net sales by 19 basis points compared to fiscal 2012 . occupancy costs increased $ 62.8 million from fiscal 2012 , and increased as a percentage of net sales by 34 basis points . our occupancy costs are generally fixed in nature and are largely influenced by new store openings . as a percentage of net sales , occupancy costs increased at a higher rate than the 6 % increase in net sales during the fiscal year and were unfavorably affected by 13 basis points due to the inclusion of sales from the 53 rd week in fiscal 2012 .
| the cost of merchandise for the 52 weeks ended january 31 , 2015 includes a $ 2.4 million write-down of golf-related inventory relating to the company 's golf restructuring . 26 ( 3 ) selling , general and administrative expenses include store and field support payroll and fringe benefits , advertising , bank card charges , information systems , marketing , legal , accounting , other store expenses and all expenses associated with operating the company 's corporate headquarters . selling , general and administrative expenses for the 52 weeks ended january 31 , 2015 includes a $ 14.4 million gain on sale of a gulfstream g650 corporate aircraft in addition to asset impairment and severance charges relating to the company 's golf restructuring of $ 14.3 million and $ 3.7 million , respectively . selling , general and administrative expenses for the 52 weeks ended february 1 , 2014 included $ 7.9 million relating to a non-cash impairment charge to reduce the carrying value of a gulfstream g450 corporate aircraft held for sale to fair market value . ( 4 ) pre-opening expenses consist primarily of rent , marketing , payroll and recruiting costs incurred prior to a new or relocated store opening which are expensed as incurred . ( 5 ) impairment of available-for-sale investments reflects the company 's impairment of its investment in jjb sports . ( 6 ) interest expense for the 53 weeks ended february 2 , 2013 included rent payments under the company 's financing lease obligation for its corporate headquarters building , which the company purchased on may 7 , 2012 . ( 7 ) includes investment income recognized to reflect changes in deferred compensation plan investment values with a corresponding charge to selling , general and administrative costs for the same amount . during the 52 weeks ended february 1 , 2014 , other income included $ 4.3 million related to the partial recovery of its previously impaired investment in jjb sports . fiscal 2014 ( 52 weeks ) compared to fiscal 2013 ( 52 weeks ) net income the company reported net income for the year ended january 31 , 2015
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our research and development expenses include : 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 , or cros , contract manufacturing organizations , or cmos , other clinical trial related vendors , consultants and our scientific advisors ; 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 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 . certain of the raw materials used in the process of manufacturing drug product are capitalized upon their acquisition and expensed upon usage , as we have determined these materials have alternative future use . to date , we have conducted research on many different micro rnas with the goal of understanding how they function and identifying those that might be targets for therapeutic modulation . at any given time we are working on multiple targets , primarily within our therapeutic areas of focus . our organization is structured to allow the rapid deployment and shifting of resources to focus on the best known targets based on our ongoing research . as a result , in the early phase of our development programs , our research and development costs are not tied to any specific target . however , we are currently spending the vast majority of our research and development resources on our lead development programs . since our conversion to a corporation in january 2009 , we have grown from 15 research and development personnel to 77 and have spent a total of approximately $ 258.9 million in research and development expenses through december 31 , 2016 . the process of conducting clinical trials and preclinical studies necessary to obtain regulatory approval is costly and time consuming . we , or our strategic alliance partners , may never succeed in achieving marketing approval for any of our product candidates . the probability of success for each product candidate may be affected by numerous factors , including preclinical data , clinical data , competition , manufacturing capability and commercial viability . under our strategic alliance with sanofi , we are responsible for the development of product candidates through proof-of-concept , after which time sanofi would be responsible for the costs of clinical development and commercialization and all related costs , in the event it exercises its option to such program . we also have several independent programs for which we are responsible for all of the research and development costs , unless and until we partner any of these programs in the future . successful development of future product candidates is highly uncertain and may not result in approved products . completion dates and completion costs can vary significantly for each future product candidate and are difficult to predict . we anticipate we will make determinations as to which programs to pursue and how much funding to direct to each program on an ongoing basis in response to our ability to maintain or enter into new strategic alliances with respect to each program or potential product candidate , the scientific and clinical success of each future product candidate , as well as ongoing assessments as to each future product candidate 's commercial potential . we will need to raise additional capital and may seek additional strategic alliances in the future in order to advance our various programs . general and administrative expenses general and administrative expenses consist primarily of salaries and related benefits , including stock-based compensation , related to our executive , finance , legal , business development and support functions . other general and administrative expenses include allocated facility-related costs not otherwise included in research and development expenses and professional fees for auditing , tax and legal services . we expect that general and administrative expenses will increase in the future as we expand our operating activities and incur additional costs associated with being a publicly-traded company . these costs will likely include legal fees , sarbanes-oxley compliance and other accounting fees and directors ' and officers ' liability insurance premiums . 51 other income ( expense ) , net other income ( expense ) consists primarily of interest income and expense , and various income or expense items of a non-recurring nature . we earn interest income from interest-bearing accounts and money market funds for cash and cash equivalents and marketable securities , such as interest-bearing bonds , for our short-term investments . commencing in june 2016 , interest expense is primarily attributable to interest charges associated with borrowings under our secured term loan from oxford . we recorded periodic gains and losses from changes in value of a convertible note payable until its conversion into common stock in january 2015. critical accounting policies and estimates the preparation of our financial statements requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities , disclosure of contingent assets and liabilities , and the revenues and expenses incurred during the reported periods . we base our estimates on historical experience and on various other factors that we believe are reasonable under the circumstances , the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not apparent from other sources . actual results may differ from these estimates under different assumptions or conditions . while our significant accounting policies are described in the notes to our financial statements appearing elsewhere in this annual report , we believe that the following critical accounting policies are most important to understanding and evaluating our reported financial results . story_separator_special_tag revenue recognition our revenues generally consist of upfront payments for licenses or options to obtain licenses in the future , milestone payments and payments for other research services under strategic alliance and collaboration agreements . we recognize revenues when all four of the following criteria are met : ( 1 ) persuasive evidence of an arrangement exists ; ( 2 ) delivery of the products and or services has occurred ; ( 3 ) the selling price is fixed or determinable ; and ( 4 ) collectability is reasonably assured . multiple element arrangements , such as our strategic alliance agreements with sanofi and astrazeneca are analyzed to determine whether the deliverables within the agreement can be separated or whether they must be accounted for as a single unit of accounting . deliverables under the agreement will be accounted for as separate units of accounting provided that ( i ) a delivered item has value to the customer on a stand-alone basis ; and ( ii ) if the agreement includes a general right of return relative to the delivered item , delivery or performance of the undelivered item is considered probable and substantially in the control of the vendor . the allocation of consideration amongst the deliverables under the agreement is derived using a “ best estimate of selling price ” if vendor specific objective evidence and third-party evidence of fair value is not available . if the delivered element does not have stand-alone value , the arrangement is then accounted for as a single unit of accounting , and we recognize the consideration received under the arrangement as revenue on a straight-line basis , which approximates effort over our estimated period of performance , which for us is typically the expected term of the research and development plan . milestones we apply the milestone method of accounting to recognize revenue from milestone payments when earned , as evidenced by written acknowledgement from the collaborator or other persuasive evidence that the milestone has been achieved and the payment is non-refundable , provided that the milestone event is substantive . a milestone event is defined as an event ( i ) that can only be achieved based in whole or in part on either our performance or on the occurrence of a specific outcome resulting from our performance ; ( ii ) for which there is substantive uncertainty at the inception of the arrangement that the event will be achieved ; and ( iii ) that would result in additional payments being due to us . events for which the occurrence is either contingent solely upon the passage of time or the result of a counterparty 's performance are not considered to be milestone events . a milestone event is substantive if all of the following conditions are met : ( i ) the consideration is commensurate with either our performance to achieve the milestone , or the enhancement of the value to the delivered item ( s ) as a result of a specific outcome resulting from our performance to achieve the milestone ; ( ii ) the consideration relates solely to past performance ; and ( iii ) the consideration is reasonable relative to all the deliverables and payment terms ( including other potential milestone consideration ) within the arrangement . we assess whether a milestone is substantive at the inception of each arrangement . if a milestone is deemed non-substantive , we will account for that milestone payment using a method consistent with the related units of accounting for the arrangement over the estimated performance period . deferred revenue 52 amounts received prior to satisfying the above revenue recognition criteria are recorded as deferred revenue in the accompanying balance sheets . amounts not expected to be recognized within the next 12 months are classified as non-current deferred revenue . clinical trial and preclinical study accruals we make estimates of our accrued expenses for clinical trial and preclinical study activities as of each balance sheet date in our financial statements based on the facts and circumstances known to us at that time . these accruals are based upon estimates of costs incurred and fees that may be associated with services provided by clinical trial investigational sites , clinical research organizations ( “ cros ” ) and for other clinical trial-related activities . payments under certain contracts with such parties depend on factors such as successful enrollment of patients , site initiation and the completion of clinical trial milestones . in accruing for these services , we estimate the time period over which services will be performed and the level of effort to be expended in each period . if possible , we obtain information regarding unbilled services directly from these service providers . however , we may be required to estimate these services based on other information available to us . if we underestimate or overestimate the activities or fees associated with a study or service at a given point in time , adjustments to research and development expenses may be necessary in future periods . historically , our estimated accrued liabilities have approximated actual expense incurred . subsequent changes in estimates may result in a material change in our accruals . fair value option accounting standards for fair value measurements establishes a three-level hierarchy for disclosure of financial instruments measured at fair value . the classification of assets and liabilities within the hierarchy is based on whether the inputs to the measurement valuation methodology are observable or unobservable . observable inputs reflect market-derived or market-based information obtained from independent sources , while unobservable inputs reflect our estimates about market data . the following three-level fair value hierarchy is based on the transparency of the inputs used to measure the fair value of the financial instruments : level 1 includes financial instruments for which quoted market prices for identical instruments are available in active markets . level 2 includes financial instruments for which there are inputs other than quoted prices included in level 1 that are observable for the asset or liability , either directly or indirectly .
| this decrease was primarily a result of amortization of the $ 2.0 million upfront payment received in august 2014 , which was recognized over the estimated period of performance , ending in september 2015. in january 2015 , may 2015 and september 2015 , we earned research milestone payments under the august 2014 collaboration and license agreement of $ 0.1 million , $ 0.3 million , and $ 0.3 million , respectively . as of december 31 , 2016 , we had $ 2.1 million of deferred revenue , which consisted of payments received through our strategic alliances that have not yet been recognized in accordance with our revenue recognition policies . research and development expenses the following table summarizes the components of our research and development expenses for the periods indicated , together with year-over-year changes ( dollars in thousands ) : 54 replace_table_token_5_th research and development expenses increased by $ 7.9 million for the year ended december 31 , 2016 compared to the year ended december 31 , 2015. the increase was principally driven by a $ 6.2 million increase in external development expenses , primarily attributable to incremental costs incurred associated with rg-101 phase ii studies , increased costs associated with our global athena natural history of disease study and start-up costs for our rg-012 phase ii study . general and administrative expenses general and administrative expenses were $ 18.4 million for the year ended december 31 , 2016 compared to $ 19.1 million for the year ended december 31 , 2015 . this change was primarily driven by a decrease in personnel costs , including non-cash stock based compensation , of $ 0.5 million for the year ended december 31 , 2016 compared to the year ended december 31 , 2015 . interest and other expenses interest and other expenses were $ 1.2 million for the year ended december 31 , 2016 compared to $ 0.1 million for the year ended december 31 , 2015 . this increase was
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we offer a wide range of services at various price points , from basic burglar alarm monitoring to our full suite of adt pulse interactive services . our ability to increase the average revenue per customer per month depends on a number of factors , including our ability to effectively introduce and market additional features and services that increase the value of our offerings to customers , which we believe drives customers to purchase higher levels of service and supports our ability to make periodic adjustments to pricing . we focus on keeping customer service and monitoring costs as low as possible without detracting from the high-quality service levels for which we are known and that our customers have come to expect . we believe that our ability to retain customers for longer periods of time is driven in part by our disciplined customer selection practices and our delivery of a superior customer experience . key performance measures we operate our business with the goal of retaining customers for long periods of time in order to recoup our initial investment in new customers , achieving cash flow break-even in slightly less than three years . we generate substantial recurring net operating cash flow from our customer base . in evaluating our results , we review the following key performance indicators : customer growth . growth of our customer base is crucial to drive our recurring customer revenue as well as to leverage costs of operations . to grow our customer base , we market our electronic security and home/business automation systems and services through national television advertisements , internet advertising and also through a direct sales force and an authorized dealer network . the key customer metrics that we use to track customer growth are gross customer additions and ending customers . gross customer additions are new monitored customers installed or acquired during the period . customer attrition rate . our economic model is highly dependent on customer retention . success in retaining customers is driven in part by our discipline in accepting new customers with favorable characteristics and by providing high quality equipment , installation , monitoring and customer service . we evaluate our customer retention based upon the recurring revenue lost resulting from customer attrition , net of dealer charge-backs and re-sales . dealer charge-backs represent customer cancellations charged back to the dealers because the customer cancelled service during the initial period of the contract , generally 12 to 15 months . re-sales are inactive customer sites that are returned to active service during the period . the attrition rate is a 52 week trailing ratio , the numerator of which is the annualized recurring revenue lost during the period due to attrition and the denominator of which is total annualized recurring revenue based on an average of recurring revenue under contract at the beginning of each month during the period . recurring customer revenue . recurring customer revenue is generated by contractual monthly recurring fees for monitoring and other recurring services provided to our customers . for fiscal year 2012 , recurring customer revenue represented approximately 90 % of total revenue . our other revenue , which represented the remaining 10 % of total revenue in fiscal year 2012 , consists of revenue associated with sale of equipment , deferred revenue related to upfront installations fees , non-routine repair and maintenance services and customer termination charges . 33 average revenue per customer . average revenue per customer measures the average amount of recurring revenue per customer per month , and is calculated based on the recurring revenue under contract at the end of the period , divided by the total number of customers under contract at the end of the period . earnings before interest , taxes , depreciation and amortization ( ebitda ) . ebitda is a non-gaap measure reflecting net income adjusted for interest , taxes and certain non-cash items which include depreciation of subscriber system assets and other fixed assets , amortization of deferred costs and deferred revenue associated with customer acquisitions , and amortization of dealer and other intangible assets . we believe ebitda is useful to provide investors with information about operating profits , adjusted for significant non-cash items , generated from the existing customer base . a reconciliation of ebitda to net income ( the most comparable gaap measure ) is provided under results of operationsnon-gaap measures. free cash flow ( fcf ) . fcf is a non-gaap measure that our management employs to measure cash that is free from any significant existing obligation and is available to service debt and make investments . the difference between net cash provided by operating activities ( the most comparable gaap measure ) and fcf is cash outlays for capital expenditures , subscriber system assets , dealer generated customer accounts and bulk account purchases . a reconciliation of fcf to net cash provided by operating activities is provided under results of operationsnon-gaap measures. story_separator_special_tag acquisition of broadview security in may 2010. in addition , an estimated $ 4 million of revenue is attributable to the additional week in fiscal year 2011. the remaining increase was primarily due to higher average revenue per customer as well as growth in customer accounts , net of attrition . average revenue per customer increased by $ 1.14 , or 3.2 % , as of september 30 , 2011 compared with september 24 , 2010 primarily due to planned price escalations to certain existing customers . the increase in average revenue per customer was also driven by the addition of new customers at higher monthly rates as well as increased take rates on new service offerings . such offerings included the launch of adt pulse , which generates average revenue per customer that , on average , is approximately $ 10 higher than we generate on our standard services . gross customer additions were approximately 1.1 million during the year ended september 30 , 2011 , reflecting customer account growth from all channels . story_separator_special_tag net of attrition , our ending number of customers grew by 66,000 , or 1.1 % , during 2011. our annualized customer attrition as of september 30 , 2011 was 13.0 % compared with 13.3 % as of september 24 , 2010. we attribute the reduction in customer attrition to our disciplined customer selection process and our continued focus on high quality service . operating income operating income of $ 693 million increased by $ 189 million , or 37.5 % , for the year ended september 30 , 2011 as compared with the year ended september 24 , 2010. operating margin was 22.3 % for the year ended september 30 , 2011 compared with 19.5 % for the year ended september 24 , 2010. operating income and operating margin for the year ended september 30 , 2011 were favorably impacted by the increase in recurring customer revenue at a higher average revenue per customer and synergies achieved from the integration of broadview security . during fiscal year 2011 , we continued to integrate broadview security , which resulted in synergies related to the elimination of redundant facilities , headcount and marketing costs . we estimate these synergies contributed approximately $ 102 million of operating income benefit for the year ended september 30 , 2011 , compared with $ 30 million for the prior year . to achieve these synergies , we incurred $ 28 million of integration costs for the year ended september 30 , 2011 , compared with $ 18 million of integration costs and $ 17 million of acquisition costs for the prior year . in addition , for the year ended september 24 , 2010 , we recorded restructuring expenses of $ 18 million , of which we incurred $ 14 million in conjunction with the broadview security acquisition , as compared with nil in the year ended september 30 , 2011. lastly , operating income was unfavorably impacted by approximately $ 5 million due to the 53rd week in fiscal year 2011. interest expense , net net interest expense was $ 89 million for the year ended september 30 , 2011 as compared with $ 106 million for the year ended september 24 , 2010. included in the year ended september 30 , 2011 was $ 87 million of allocated interest expense related to tyco 's external debt compared with $ 102 million for the year ended september 24 , 2010. income tax expense income tax expense of $ 228 million increased $ 69 million for the year ended september 30 , 2011 as compared with the year ended september 24 , 2010 , while the effective tax rate decreased to 37.7 % from 39.9 % . the increase in the tax expense is primarily related to an increase in pre-tax income of $ 206 million , while the decrease in the effective tax rate for the year ended september 30 , 2011 was primarily the result of a decrease in the overall effective state income tax rate . the effective tax rate can vary from year to year due to permanent tax adjustments , discrete items such as the settlement of income tax audits and changes in tax laws , as well as recurring factors such as changes in the overall effective state tax rate . 36 non-gaap measures in an effort to provide investors with additional information regarding our results as determined by gaap , we also disclose non-gaap measures which management believes provide useful information to investors . these measures consist of ebitda and fcf . these measures are not financial measures under gaap and should not be considered as substitutes for net income , operating profit , cash from operating activities or any other operating performance measure calculated in accordance with gaap , and they may not be comparable to similarly titled measures reported by other companies . we use ebitda to measure the operational strength and performance of our business . we use fcf as an additional performance measure of our ability to service debt and make investments . these measures , or measures that are based on them , may be used as components in our incentive compensation plans . we believe ebitda is useful because it measures our success in acquiring , retaining and servicing our customer base and our ability to generate and grow our recurring revenue while providing a high level of customer service in a cost-effective manner . ebitda excludes interest expense and the provision for income taxes . excluding these items eliminates the expenses associated with our capitalization and tax structure . because ebitda excludes interest expense , it does not give effect to cash used for debt service requirements and thus does not reflect available funds for distributions , reinvestment or other discretionary uses . ebitda also excludes depreciation and amortization , which eliminates the impact of non-cash charges related to capital investments . depreciation and amortization includes depreciation of subscriber system assets and other fixed assets , amortization of deferred costs and deferred revenue associated with subscriber acquisitions and amortization of dealer and other intangible assets . there are material limitations to using ebitda . ebitda may not be comparable to similarly titled measures reported by other companies . furthermore , ebitda does not take into account certain significant items , including depreciation and amortization , interest expense and tax expense , which directly affect our net income . these limitations are best addressed by considering the economic effects of the excluded items independently , and by considering ebitda in conjunction with net income as calculated in accordance with gaap . fcf is defined as cash from operations less cash outlays related to capital expenditures , subscriber system assets , dealer generated customer accounts and bulk account purchases . dealer generated accounts are accounts that are generated through our network of authorized dealers . bulk account purchases represent accounts that we acquire from third parties outside of our authorized dealer network , such as other security service providers , on a selective basis .
| net of attrition , our ending number of customers grew by 71,000 , or 1.1 % , during 2012. our annualized customer attrition as of september 28 , 2012 was 13.8 % compared with 13.0 % as of september 30 , 2011 and 13.5 % as of june 28 , 2012. the majority of the increase in customer attrition from june 28 , 2012 was due to voluntary disconnects , which includes customers cancelling service as a result of price escalations implemented in the second and third quarters of fiscal year 2012. we continue to focus on high quality service and our disciplined customer selection process in order to limit customer attrition . operating income operating income of $ 722 million increased by $ 29 million , or 4.2 % , for the year ended september 28 , 2012 as compared with the year ended september 30 , 2011. operating margin was 22.4 % for the year ended september 28 , 2012 compared with 22.3 % for the year ended september 30 , 2011. the increase in operating income was due primarily to an $ 80 million increase resulting from growth in recurring customer revenue at a higher average revenue per customer . during the second half of fiscal year 2012 , we implemented a change in our direct channel to increase the mix of our gross additions toward more adt-owned systems , which results in the deferral of a higher proportion of upfront installation revenue and related costs . this shift in mix increased operating income for fiscal year 2012 by approximately $ 6 million and is expected to increase operating income for fiscal year 2013 by approximately $ 15 million . the increase in operating income for fiscal year 2012 was partially offset by higher selling related expenses of approximately $ 36 million , which resulted from investments to grow our business , including expansion of our internal sales force and other lead generating activities . we also incurred charges related to legal matters of $ 15 million during the fourth quarter of fiscal year 2012 , which unfavorably impacted operating income for the year . we do not expect to incur similar legal related costs in fiscal year 2013. as a result of the separation of our business from the commercial security business of tyco , we recognized dis-synergies which resulted in incremental operating expenses of approximately $ 5 million during the second half of the year ended september 28 , 2012. we expect annual dis-synergy expenses to total
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thus , movements in the value of local currency relative to the u.s. dollar in countries where we source our products affect our cost of goods sold . further , our international operations sell in their local currencies and are exposed to their domestic currency movements against the u.s. dollar . see “ part i , item1a . risk factors - risks associated with currency volatility could harm our sales , profitability , cash flows and results of operations `` and `` note 13. derivative financial instruments '' to the consolidated financial statements contained in item 8 of this report . mead consumer and office products business merger on may 1 , 2012 , we completed the merger of mead c & op with a wholly-owned subsidiary of the company . mead c & op is a leading manufacturer and marketer of school supplies , office products , and planning and organizing tools - including the mead ® , five star ® , trapper keeper ® , at-a-glance ® , cambridge ® , day runner ® , hilroy , tilibra and grafons brands in the u.s. , canada and brazil . the results of mead c & op are included in the company 's consolidated financial statements from the date of the merger . debt refinancing effective may 13 , 2013 ( the “ effective date ” ) , the company entered into an amended and restated credit agreement ( the “ restated credit agreement ” ) among the company , certain subsidiaries of the company , bank of america , n.a. , as administrative agent , and the other agents and lenders party thereto . the restated credit agreement amended and restated the company 's prior credit agreement , dated as of march 26 , 2012 , as amended ( the “ 2012 credit agreement ” ) , that had been entered into in connection with the merger . the restated credit agreement provides for a $ 780 million , five-year senior secured credit facility , which consists of a $ 250.0 million multi-currency revolving credit facility , due may 2018 ( the “ revolving facility ” ) , and a $ 530.0 million u.s. dollar denominated senior secured term loan a , due may 2018 ( the “ restated term loan a '' ) . specifically , in connection with the restated credit agreement , the company : replaced its then-existing u.s.-dollar denominated senior secured term loan a , due may 2017 , under the 2012 credit agreement , which had an aggregate principal amount of $ 220.8 million outstanding immediately prior to the effective date , with the restated term loan a , due may 2018 , in an aggregate original principal amount of $ 530.0 million ; prepaid in full its then-existing u.s.-dollar denominated senior secured term loan b , due may 2019 , under the 2012 credit agreement , which had an aggregate principal amount of $ 310.2 million outstanding immediately prior to the effective date , using a portion of the proceeds from the restated term a loan ; and replaced the $ 250.0 million revolving credit facility under the 2012 credit agreement with the revolving facility , under which $ 47.3 million was outstanding immediately following the effective date . prior to the effective date , the company 's repaid in full the $ 21.4 million canadian-dollar denominated senior secured term loan a , due may 2017 that had been drawn under the 2012 credit agreement . restructuring during the fourth quarter of 2013 , in light of current economic and industry conditions and in anticipation of an uncertain demand environment as well as the impact of industry consolidation in 2014 , we committed to restructuring actions that were primarily focused on streamlining our north american school , office and computer products operations . these actions will reduce 20 approximately 12 % of our north american salaried workforce , impacting all operational , supply chain and administrative functions , with efforts beginning in early 2014. such efforts are expected to be complete by the end of 2014. we expect to realize approximately $ 24 million in annual savings from these restructuring actions . also during the year 2013 , we committed to incremental cost savings plans intended to improve the efficiency and effectiveness of our businesses . these plans relate to cost-reduction initiatives within our north american and international segments , and are primarily associated with post-merger integration activities of the north american operations following the merger and changes in the european business model and manufacturing footprint . the most significant of these plans was finalized during the second quarter of 2013 , and relates to the closure of our brampton , canada distribution and manufacturing facility and relocation of its activities to other facilities within the company . during the year 2012 , we initiated cost savings plans related to the consolidation and integration of our then recently acquired mead c & op business . the most significant of these plans related to our dated goods business and included closure of a manufacturing and distribution facility in east texas , pennsylvania and relocation of its activities to other facilities within the company , which was completed during the second quarter of 2013. we also committed to certain cost savings plans that are expected to improve the efficiency and effectiveness of our u.s. and european businesses , which were independent of any plans related to our acquisition of mead c & op . income taxes in 2012 , due to the merger , we analyzed our need for maintaining a valuation allowance against the expected u.s. future tax benefits . based on our analysis we determined that there existed sufficient evidence in the form of future taxable income from the combined operations to release $ 126.1 million of the valuation allowance that had been previously recorded against the u.s. deferred income tax assets . the resulting deferred tax assets are comprised principally of net operating loss carryforwards that are expected to be fully realized within the expiration period and other temporary differences . story_separator_special_tag also in 2012 , valuation allowances in the amount of $ 19.0 million were released in certain foreign jurisdictions . in 2013 , the company had a net tax benefit from the release of certain foreign jurisdictions in the amount of $ 11.6 million . discontinued operations as of may 31 , 2011 , we disposed of the gbc fordigraph pty ltd ( “ gbc fordigraph ” ) business . the australia-based business was formerly part of the acco brands international segment and the results of operations are included in the financial statements as a discontinued operation for all periods presented . in 2011 , we received net proceeds of $ 52.9 million and recorded a gain on the sale of $ 41.9 million ( $ 36.8 million after-tax ) . for further information on discontinued operations see `` note 19. discontinued operations '' to the consolidated financial statements contained in item 8 of this report . story_separator_special_tag style= '' font-family : inherit ; font-size:10pt ; '' > in the prior-year period . during 2012 we took an impairment charge of $ 1.9 million related our neschen gbc graphics films , llc joint venture . other expense , net was $ 7.6 million compared to $ 61.3 million in the prior-year period . the improvement was due to the absence of one-time merger-related refinancing costs of $ 61.4 million for the repurchase or discharge of all of the company 's outstanding senior secured notes in the prior year . the current year includes $ 9.4 million for the write-off of debt origination costs related to the may 2013 refinancing and $ 2.0 million for a gain related to a bargain purchase on an acquisition completed in the fourth quarter of 2013. for a further discussion of the company 's refinancing completed in the second quarter of 2013 see `` note 4. long-term debt and short-term borrowings '' to our consolidated financial statements contained in item 8 of this report . income taxes income tax expense from continuing operations was $ 14.4 million on income from continuing operations before taxes of $ 91.7 million . the low tax rate of 15.7 % is primarily due to the reversal of valuation allowances for certain foreign jurisdictions 23 in the amount of $ 11.6 million . for the prior-year period , the company reported an income tax benefit from continuing operations of $ 121.4 million on a loss from continuing operations before taxes of $ 4.4 million , primarily due to the release of certain valuation allowances for the u.s. and certain foreign jurisdictions in the amount of $ 126.1 million and $ 19.0 million , respectively . segment discussion replace_table_token_5_th ( a ) segment operating income excludes corporate costs ; interest expense , net ; equity in earnings of joint ventures and other expense , net . see note 16. information on business segments to the consolidated financial statements contained in item 8 of this report for a reconciliation of total segment operating income to income from continuing operations before income taxes . acco brands north america acco brands north america net sales increased $ 13.2 million , or 1 % , to $ 1,041.4 million , compared to $ 1,028.2 million in the prior-year period . the merger contributed incremental sales of approximately $ 88 million , with twelve months of results included in the current year and only eight months of results in the prior year . the underlying decline of approximately $ 75 million includes unfavorable currency translation of $ 4.2 million . the decline was driven by soft consumer demand , consumers purchasing more lower-priced products , and lost placements with some customers . these factors impacted both the acquired mead and legacy acco brands businesses . the planned exit from unprofitable business accounted for $ 26.0 million of the decline . acco brands north americas operating income increased $ 12.0 million , or 14 % , to $ 98.2 million compared to $ 86.2 million in the prior-year period , and operating income margin increased to 9.4 % from 8.4 % in the prior-year period . the improvement was due to synergies and productivity savings and the absence of $ 11.5 million of amortization of step-up in inventory value due to the merger . partially offsetting the improvement were lower sales volume , unfavorable customer/product mix , higher amortization of intangibles of $ 5.1 million and $ 1.8 million of costs related to the relocation of our corporate and u.s. headquarters . acco brands international acco brands international net sales increased $ 15.4 million , or 3 % , to $ 566.6 million compared to $ 551.2 million in the prior-year period . the merger contributed incremental sales of $ 37.3 million , with twelve months of results included in the current year and only eight months of results in the prior year . the underlying decline of $ 21.9 million includes unfavorable currency translation of $ 23.5 million , or 4 % . excluding the effect of the merger and currency translation , sales increased $ 1.7 million with growth in brazil due to higher pricing and volume . partially offsetting the increase were lower sales in other regions , primarily in europe during the first quarter , which included $ 3.6 million of unprofitable business that was exited . acco brands international operating income increased $ 4.5 million , or 7 % , to $ 66.5 million , compared to $ 62.0 million in the prior-year period , and operating income margin increased to 11.7 % from 11.2 % in the prior-year period . foreign currency translation negatively impacted results by $ 3.7 million , or 6 % . the underlying improvement ( exclusive of currency translation ) 24 reflects productivity savings , lower pension expenses , a $ 2.5 million gain on the sale of a facility and the absence of $ 1.8 million of amortization of step-up in inventory value due to the merger . this was partially offset by higher restructuring charges of $ 3.1 million .
| additionally , the computer products group segment declined primarily due to increased competition in the tablet and smartphone categories . cost of products sold cost of products sold includes all manufacturing , product sourcing and distribution costs , including depreciation related to assets used in the manufacturing , procurement and distribution process , inbound and outbound freight , shipping and handling costs , purchasing costs associated with materials and packaging used in the production processes , including an allocation of information technology costs . cost of products sold decreased $ 4.8 million , or 0.4 % to $ 1.220 billion compared to $ 1.225 billion in the prior-year period and includes $ 18.7 million of favorable currency translation . the underlying decrease was due to lower sales demand , together with synergies and productivity savings and the absence of $ 13.3 million of amortization of step-up in inventory value due to the merger , which was partially offset by the full year impact from the acquisition of mead c & op . gross profit management believes that gross profit and gross profit margin provide enhanced shareholder appreciation of underlying profit drivers . gross profit increased $ 11.4 million , or 2 % , to $ 544.8 million , compared to $ 533.4 million in the prior-year period , and includes $ 8.8 million of unfavorable currency translation . the underlying increase was due to the full year results from the acquisition of mead c & op , together with synergies and productivity savings , which partly offset by the absence of $ 13.3 million of amortization of step-up in inventory value due to the merger and by lower sales volume . 22 gross profit margin increased to 30.9 % from 30.3 % . the increase was driven by synergies and productivity savings , as well as the full year impact of mead c & op , which has historically higher relative margins , but was partially offset by adverse sales mix , particularly in the
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in 2012 , we launched innovative new products in both existing and new categories , including arm & hammer ultra last , a longer lasting clumping cat litter , oxiclean dishwashing booster , which removes cloudy film and food particles on glasses and dishes , a line of toothpaste for sensitive teeth under the arm & hammer brand and arm & hammer tooth tunes battery operated toothbrushes with proprietary technology that delivers music while brushing . in 2013 , we also plan to increase marketing spending focused behind the launch of innovative new premium products in our power brands ( including arm & hammer ultra power 4x , a concentrated form of liquid laundry detergent , and a line of lubrication products under our trojan brand ) , which we expect will continue to drive market share gains . we also continued to experience high raw material and energy costs throughout 2012. historically , we have been able to mitigate the effects of cost increases primarily by implementing cost reduction programs and , to a lesser extent , by passing along some of these cost increases to our customers . we have also entered into pre-buying arrangements with certain suppliers and hedge agreements for diesel fuel costs . however , the increased price competition that we have experienced in recent periods has diminished the impact of some of these measures and affected our gross margins . maintaining tight controls on our overhead costs has been a hallmark of our company and has enabled us to effectively navigate recent challenging economic conditions . the identification and integration of strategic acquisitions are an important component of our overall strategy . our failure to effectively implement this initiative , including a failure to integrate any acquisition or achieve expected synergies , may cause us to incur material asset write-downs . we actively seek acquisitions that fit our guidelines and our strong financial position provides us with flexibility to take advantage of acquisition opportunities . in addition , our ability to quickly integrate acquisitions and leverage our existing infrastructure have enabled us to establish a strong track record in making accretive acquisitions . since 2001 , we have acquired seven of our eight current power brands . in 2012 , we completed the acquisition of our l'il critters and vitafusion dietary supplements . for information regarding risks and uncertainties that could materially adversely affect our business , results of operations and financial condition , see risk factors in item 1a of this annual report . 35 recent developments avid acquisition on october 1 , 2012 , the company acquired all of the issued and outstanding capital stock of avid health , inc. ( avid health ) . avid health is a leader in the dietary supplement category that includes vitamins and minerals . its products , among others , include l'il critters children 's gummy form dietary supplements and vitafusion adult gummy form dietary supplements . the total purchase price was approximately $ 650 million , which is subject to adjustment based on the closing working capital of avid health and its subsidiaries . the company financed the acquisition with a combination of proceeds from an underwritten public offering of $ 400 million aggregate principal amount of 2.875 % senior notes due 2022 , the issuance of commercial paper and cash . avid health 's annual sales for the twelve months ended june 2012 were approximately $ 230 million . these dietary supplement brands will be managed principally within the consumer domestic segment . new corporate office building on july 20 , 2011 , the company entered into a 20 year lease for a new corporate headquarters building constructed in ewing , new jersey ( approximately 10 miles from the company 's former corporate headquarters in princeton , new jersey ) to meet office space needs for the foreseeable future . the company began occupancy in late 2012 and as a result , the lease will expire in 2032. the company 's lease commitment is approximately $ 116 million over the lease term . based on certain clauses in the lease , the company is considered the owner for financial statement reporting purposes , and recorded approximately $ 50 million as of december 31 , 2012 in building assets and a corresponding amount in other long-term liabilities . 2.875 % senior notes on september 26 , 2012 , the company closed an underwritten public offering of $ 400 million aggregate principal amount of 2.875 % senior notes ( the notes ) . the notes were issued under the second supplemental indenture ( the second supplemental indenture ) , dated september 26 , 2012 , to the indenture dated december 15 , 2010 , between the company and the bank of new york mellon trust company , n.a. , as trustee . interest on the 2.875 % notes is payable semi-annually , beginning april 1 , 2013. the notes will mature on october 1 , 2022 , unless earlier retired or redeemed pursuant to the terms of the second supplemental indenture . share repurchase authorization on october 31 , 2012 , the company 's board of directors authorized a new share repurchase program , under which the company may purchase up to an additional $ 300 million of the company 's common stock . under the new program , shares may be repurchased from time to time in the open market , in privately negotiated transactions or otherwise , subject to market conditions , and corporate and legal requirements . there is no expiration date on the stock repurchase authorization and the company is not obligated to acquire any specific number of shares . the previous share repurchase program announced in august 2011 had an authorization of $ 300 million , $ 20 million of which remained available on october 31 , 2012. in 2012 , the company purchased approximately 5 million shares at an aggregate cost of approximately $ 250 million under both programs . story_separator_special_tag as of december 31 , 2012 , the company had used the full $ 300 million authorized under the august 2011 program , and had $ 270 million remaining available for use under the october 2012 program . in january 2013 , the company purchased an additional 0.9 million shares at an aggregate cost of approximately $ 50 million . as of the filing date of this annual report , the company has made no additional purchases in 2013 and has approximately $ 220 million remaining for use in the repurchase of the company 's shares . critical accounting policies and estimates the company 's consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the u.s. of america ( gaap ) . the preparation of these financial statements 36 requires management to make estimates and assumptions that affect the reported amounts of assets , liabilities , revenue and expenses , and related disclosure of contingent assets and liabilities . by their nature , these judgments are subject to uncertainty . they are based on the company 's historical experience , its observation of trends in industry , information provided by its customers and information available from other outside sources , as appropriate . the company 's significant accounting policies and estimates are described below . revenue recognition and promotional and sales return reserves virtually all of the company 's revenue represents sales of finished goods inventory and is recognized when delivered or picked up by our customers . the reserves for consumer and trade promotion liabilities and sales returns are established based on our best estimate of the amounts necessary to settle future and existing claims on products sold as of the balance sheet date . promotional reserves are provided for sales incentives , such as coupons to consumers , and sales incentives provided to customers ( such as slotting , cooperative advertising , incentive discounts based on volume of sales and other arrangements made directly with customers ) . all such costs are netted against sales . slotting costs are recorded when the product is delivered to the customer . cooperative advertising costs are recorded when the customer places the advertisement for the company 's products . discounts relating to price reduction arrangements are recorded when the related sale takes place . costs associated with end-aisle or other in-store displays are recorded when product that is subject to the promotion is sold . the company relies on historical experience and forecasted data to determine the required reserves . for example , the company uses historical experience to project coupon redemption rates to determine reserve requirements . based on the total face value of consumer domestic coupons redeemed over the past several years , if the actual rate of redemptions were to deviate by 0.1 % from the rate for which reserves are accrued in the financial statements , an approximately $ 2.1 million difference in the reserve required for coupons would result . with regard to other promotional reserves and sales returns , the company uses experience-based estimates , customer and sales organization inputs and historical trend analysis in arriving at the reserves required . if the company 's estimates for promotional activities and sales returns were to change by 10 % the impact to promotional spending and sales return accruals would be approximately $ 6.7 million . while management believes that its promotional and sales returns reserves are reasonable and that appropriate judgments have been made , estimated amounts could differ materially from actual future obligations . during the twelve months ended december 31 , 2012 , 2011 and 2010 , the company reduced promotion liabilities by approximately $ 4.0 million , $ 8.2 million and $ 6.8 million , respectively , based on a change in estimate as a result of actual experience and updated information . these adjustments are immaterial relative to the amount of trade promotion expense incurred annually by the company . impairment of goodwill , trademarks and other intangible assets and property , plant and equipment carrying values of goodwill , trademarks and other indefinite lived intangible assets are reviewed periodically for possible impairment . for finite intangible assets , the company assesses business triggering events . the company 's impairment analysis is based on a discounted cash flow approach that requires significant judgment with respect to unit volume , revenue and expense growth rates , and the selection of an appropriate discount rate . management uses estimates based on expected trends in making these assumptions . with respect to goodwill , impairment occurs when the carrying value of the reporting unit exceeds the discounted present value of cash flows for that reporting unit . for trademarks and other intangible assets , an impairment charge is recorded for the difference between the carrying value and the net present value of estimated future cash flows , which represents the estimated fair value of the asset . judgment is required in assessing whether assets may have become impaired between annual valuations . indicators such as unexpected adverse economic factors , unanticipated technological change , distribution losses , or competitive activities and acts by governments and courts may indicate that an asset has become impaired . the result of the company 's annual goodwill impairment test determined that the estimated fair value substantially exceeded the carrying values of all reporting units .
| marketing expenses for 2012 were $ 357.3 million , an increase of $ 3.2 million as compared to 2011 due primarily to the effect of the acquired businesses , partially offset by the impact of foreign exchange rates . marketing expenses as a percentage of net sales were 12.2 % in 2012 as compared to 12.9 % in 2011. this reduction is due to a shift toward higher trade promotion spending , which is included in net sales , and partly due to the lower spending rate of the acquired avid health dietary supplements business . 41 selling , general and administrative expenses ( sg & a ) expenses for 2012 were $ 389.0 million , an increase of $ 21.2 million as compared to 2011 due to costs associated with the avid health acquisition , higher costs for salaries and fringe benefits , costs associated with the company 's new headquarter facility and unfavorable foreign exchange rates partially offset by lower legal expenses . other income and expenses equity in earnings of affiliates was $ 8.9 million as compared to $ 10.0 million in 2011. the decrease is primarily due to costs related to the start-up of the natronx technologies llc ( natronx ) joint venture . interest expense in 2012 increased $ 5.3 million compared to 2011 primarily due to the debt incurred to purchase avid health . the company issued $ 400 million of 2.875 % senior notes and $ 250 million of commercial paper at the end of the third quarter of 2012 . ( see the liquidity and capital resources below in this management 's discussion and analysis for further information . ) taxation the 2012 tax rate was 35.5 % as compared to 37.4 % in 2011. the tax rate in 2012 was favorably affected by the settlement of a u.s internal revenue service audit for the years 2008 and 2009 in the first quarter . the effective tax rate for 2011 included a charge for the establishment of a valuation allowance of approximately $
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revenues from fuel and other cost recovery clauses and pass-through costs , such as franchise fees , revenue taxes and storm cost recoveries , do not significantly affect net income ; however , underrecovery or overrecovery of such costs can significantly affect fpl group 's and fpl 's operating cash flows . fluctuations in fuel cost recovery revenues are primarily driven by changes in fuel and energy charges which are included in fuel , purchased power and interchange expense , as well as by changes in energy sales . fluctuations in other cost recovery clauses and pass-through costs revenues are primarily driven by changes in capacity charges , franchise fee costs and storm reserve deficiency amortization , and the impact of changes in o & m and depreciation expense on the underlying cost recovery clause , as well as changes in energy sales . capacity charges and franchise fee costs are included in fuel , purchased power and interchange and taxes other than income taxes , respectively , in the consolidated statements of income . ordinarily , the fuel charge is set annually based on estimated fuel costs and estimated customer usage , plus or minus a true-up for prior period estimates . fpl utilizes an fpsc approved risk management fuel procurement program , which is intended to reduce the risk of unexpected fuel price volatility by locking in fuel prices for a portion of fpl 's fuel requirements . the results of the program are reviewed by the fpsc as part of the annual review of fuel costs . in response to higher fuel prices , in january 2006 and january 2005 the retail fuel clause recovery factor was increased approximately 46 % and 7 % , respectively . this was the primary contributor to the increase in fuel cost recovery revenues in 2006 and 2005. the retail fuel clause recovery factor for 2007 was reduced approximately 7.2 % in january 2007 primarily in response to expected fuel price changes . this factor will decline again by another 2.3 % during the second quarter of 2007 when turkey point unit no . 5 is placed in service , although a typical 1,000 kwh residential bill will remain the same because the previously discussed base rate increase for this unit will offset the fuel clause recovery factor decline . in february 2005 , fpl began recovering the 2004 storm restoration cost deficiency from retail customers . these revenues are included in other cost recovery clauses and pass-through costs . for the years ended december 31 , 2006 and 2005 , the amount billed to customers related to these storm restoration cost recoveries amounted to approximately $ 151 million and $ 155 million , respectively , and the corresponding expense for the amortization of the storm reserve deficiency is shown as a separate line on the consolidated statements of income . for further discussion , see note 1 - storm reserve deficiency . the decrease in other revenues in 2006 is primarily due to the transfer , effective january 1 , 2006 , of fpl 's retail gas contracts to a subsidiary of fpl group capital , which also reduced fpl 's fuel expense by approximately $ 64 million for the year ended december 31 , 2006. the increase in other revenues in 2005 was primarily due to higher retail gas revenues . replace_table_token_8_th effective january 2006 , fpl 's fuel clause recovery factor was increased in response to higher expected fuel prices in 2006 , as well as the recovery of a portion of underrecovered fuel costs from 2005. the increase in the fuel factor was the primary contributor to the $ 935 million decrease in deferred clause and franchise expenses ( current and noncurrent , collectively ) on fpl group 's and fpl 's consolidated balance sheets at december 31 , 2006 , and positively affected fpl group 's and fpl 's cash flows from operations for the year ended december 31 , 2006. the increase in fuel and energy charges in 2006 reflects higher fuel and energy prices of approximately $ 415 million and approximately $ 98 million attributable to higher energy sales partly offset by approximately $ 64 million related to the transfer of fpl 's retail gas business . the increase in fuel and energy charges in 2005 reflects higher fuel energy prices of approximately $ 1,352 million , approximately $ 98 million attributable to higher energy sales and $ 21 million related to higher retail gas costs . the recovery of costs incurred in a prior period represents the collection of underrecovered fuel costs the fpsc permitted fpl to start collecting at the beginning of the year . the net overrecovery ( underrecovery ) of costs during the period represents fuel clause collections from customers which were higher ( lower ) than fuel and energy costs incurred . fpl 's o & m expenses increased approximately $ 67 million in 2006 primarily due to higher transmission and distribution costs and costs associated with fpl 's storm secure plan totaling approximately $ 39 million , higher nuclear costs of approximately $ 38 million , excluding the sleeving and reactor vessel head amortization cost reductions discussed below , and higher employee benefit costs , primarily medical , of approximately $ 10 million . in addition , customer service costs increased approximately $ 19 million reflecting additional staffing needs and higher uncollectible accounts as a result of higher customer bills . these factors were partially offset by the suspension in 2006 of approximately $ 20 million of contributions to the storm and property insurance reserve in accordance with the 2005 rate agreement . the increase in nuclear costs were substantially offset by a partial reversal in 2006 of sleeving costs recorded in 2005 that fpl expected to spend , but did not , during the spring 2006 outage of the st. lucie unit no . 2 nuclear plant in order to comply with the nrc regulations concerning tube plugging in the unit 's two steam generators and by lower reactor vessel head amortization costs . story_separator_special_tag the reactor vessel head inspection costs reflect the amortization over a five-year period that began in 2002 , as authorized by the fpsc , of the estimated cost of performing inspections for cracks and corrosion and making any necessary repair to the reactor vessel heads at all four of fpl 's nuclear facilities until replacement . no cracking was detected and no repairs were needed to the reactor vessel head during the spring 2006 outage at st. lucie unit no . 2. the reactor vessel heads at fpl 's three other nuclear units were replaced in 2004 and 2005. fpl intends to replace the reactor vessel head and the steam generators at st. lucie unit no . 2 during its fall 2007 scheduled refueling outage . other changes in o & m expenses were primarily driven by pass-through costs which did not significantly affect net income . management expects o & m in 2007 to continue trending upward reflecting as much as a $ 30 million increase in storm secure plan costs , higher fossil generation costs reflecting the placement of turkey point unit no . 5 into service , and higher employee benefit , customer service and insurance costs . fpl 's o & m expenses increased approximately $ 79 million in 2005 primarily due to higher employee benefit expenses of approximately $ 28 million , higher nuclear maintenance costs of approximately $ 19 million and higher fossil generation costs of approximately $ 18 million , as well as the absence of a $ 21 million settlement related to shareholder litigation which reduced o & m expenses in 2004. in addition , part of the o & m expense increase relates to approximately $ 17 million of expenses associated with increased nuclear security costs which are recovered through the capacity clause . the overall increase in o & m expenses was partially offset by a reversal of a prior year reserve of approximately $ 15 million related to 2004 storm costs that were subsequently determined to be recoverable pursuant to a 2005 fpsc order . increased employee benefits expenses are primarily associated with the absence of a pension transition credit that was fully amortized by the end of 2004 and higher employee costs . the increase in fossil generation expense relates primarily to the introduction of the martin and manatee expansion as well as the timing of overhaul maintenance at some of the older generating units . depreciation and amortization expense for the year ended december 31 , 2006 decreased $ 164 million primarily benefiting from lower depreciation rates and the elimination of the decommissioning accrual approved as part of the 2005 rate agreement ( a collective benefit of approximately $ 242 million ) . this reduction in depreciation rates applied to substantially all power plant assets including turkey point units nos . 3 and 4 and st. lucie units nos . 1 and 2 , which have received 20-year license extensions . this was partially offset by fpl 's continued investment in transmission and distribution facilities to support customer growth and demand ( approximately $ 31 million ) , depreciation from the addition of two new generating units at fpl 's existing martin and manatee power plant sites which became operational on june 30 , 2005 ( approximately $ 23 million ) and increased nuclear depreciation related to plant additions ( approximately $ 24 million ) . fpl expects to place turkey point unit no . 5 , a 1,144 mw natural gas-fired generating unit , into service during the second quarter of 2007. for the year ended december 31 , 2005 , depreciation and amortization expense increased by $ 36 million , of which approximately $ 23 million related to the addition of the two new generating units at the martin and manatee power plant sites . the remainder of the increase was primarily due to fpl 's continued investment in transmission and distribution expansion to support customer growth and demand . the increase in depreciation and amortization expense was partially offset by the suspension , in september 2005 , of fpl 's nuclear decommissioning accrual which totaled approximately $ 79 million annually . taxes other than income taxes increased $ 187 million and $ 49 million for 2006 and 2005 , respectively , primarily due to higher franchise fees and revenue taxes , which are pass-through costs , as a result of increases in fuel and other cost recovery clause revenues . in both 2006 and 2005 , taxes other than income taxes also included higher property taxes reflecting growth in property balances . interest charges for 2006 and 2005 increased primarily due to higher average debt balances used to fund increased investment in generation , transmission and distribution expansion , and to pay for unrecovered fuel and storm restoration costs . in addition , average interest rates in 2006 and 2005 increased approximately 20 basis points and 30 basis points , respectively . the decline in afudc in both 2006 and 2005 is primarily attributable to the placement of the additional martin and manatee units in service on june 30 , 2005 , partially offset by increased afudc on turkey point unit no . 5. interest income , included in other - net in fpl 's consolidated statements of income , increased in 2006 and 2005 by approximately $ 16 million and $ 14 million , reflecting higher interest accrued on the unrecovered balance of the storm reserve deficiency . in 2005 , interest income included interest on deferred costs associated with nuclear security , as approved by the fpsc . fpl currently faces competition from other suppliers of electrical energy to wholesale customers and from alternative energy sources and self-generation for other customer groups , primarily industrial customers . the ferc has jurisdiction over potential changes that could affect competition in wholesale transactions . in 2006 , operating revenues from wholesale and industrial customers combined represented approximately 4 % of fpl 's total operating revenues .
| fpl is in the process of evaluating the economics , risks and advisability , among other things , of potentially building a new nuclear power plant in its service area . fpl 's business strategy is to continue meeting the increased demands of customers in a safe , reliable , cost-effective manner while focusing on operating performance . fpl 's o & m expenses again increased in 2006 reflecting higher transmission and distribution costs and the cost of fpl 's storm secure plan , as well as higher nuclear , customer service and employee medical costs . in addition , in 2006 the fpsc applied a different standard for recovery of 2005 storm costs than was used for the 2004 storm costs and , accordingly , fpl expensed approximately $ 27 million , after-tax and net of interest , of disallowed 2005 storm costs . management expects o & m expenses in 2007 to continue trending upward reflecting as much as a $ 30 million increase in storm secure plan costs , higher fossil generation costs reflecting the placement of turkey point unit no . 5 into service , and higher employee benefit , customer service and insurance costs . fpl energy is in the competitive energy business with the majority of its operating revenues derived from wholesale electricity sales . its business strategy is to maximize the value of its current portfolio , expand its u.s. market-leading wind position and build its portfolio through asset acquisitions . fpl energy 's market is diversified by region as well as by fuel source . fpl energy sells a large percentage of its expected capacity to hedge against price volatility . if fpl energy 's plants do not perform as expected , this high degree of hedging could result in fpl energy being required to purchase power at potentially higher market prices to meet its contractual obligations . fpl energy 's energy marketing and trading business is focused on reducing commodity price risk and extracting maximum value from its assets . fpl energy , through its subsidiaries , is one of the largest producers of wind energy in the world , and with the extension of
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probable credit losses are evaluated using the present value of expected future cash flows ; the severity and duration of the impairment ; the issuer 's financial condition and near-term prospects to service the debt ; the cause of the decline , such as adverse conditions related to the issuer , the industry , or economic environment ; the payment structure of the debt ; the issuer 's failure to make scheduled interest or principal payments ; and any change in the issuer 's credit rating by rating agencies . if the present value of expected future cash flows discounted at the security 's effective yield is less than the net book value , the difference is recognized as a credit-related otti in noninterest income . if we do not intend to sell and if we are not likely to be required to sell the security , the otti is separated into an amount representing the credit loss , which is recognized as a charge to noninterest income , and the amount representing all other factors , which is recognized in other comprehensive income ( “ oci ” ) . for equity securities , we consider our intent and ability to hold the security to recovery ; the severity and duration of the impairment ; the issuer 's financial condition , capital strength , and near-term prospects ; and any change in the issuer 's credit rating by rating agencies . if the fair value of the security is less than the net book value , the otti is recognized as a charge to noninterest income . for additional information , see note 3 , “ investment securities , ” to the consolidated financial statements in item 8 of this report . allowance for loan losses we review o ur allowance for loan losses quarterly to determine if it is sufficient to absorb probable loan losses in the portfolio . this determination requires management to make significant estimates and assumptions . while management uses its best judgment and available information , the ultimate adequacy of the allowance is dependent upon a variety of factors beyond our control , including the performance of our loan portfolio , the economy , changes in interest rates , and the view of regulatory authorities towards loan classifications . these uncertainties may result in material changes to the allowance for loan losses in the near term ; however , the amount of the change can not reasonably be estimated . our allowance for loan losses consists of reserves assigned to specific loans and credit relationships and general reserves assigned to loans not separately identified that have been segmented into groups with similar risk 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 , 2017. 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 . story_separator_special_tag 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 . 23 goodwill and other intangible assets we test goodwill annually , or more frequently if necessary , using a qualitative assessment to determine if it is more likely than not that the fair value of a reporting unit is less than its carrying amount . we have one reporting unit for goodwill impairment testing purposes -- community banking . prior to october 2016 , we maintained two reporting units -- community banking and insurance services . the insurance services reporting unit consisted of the company 's wholly owned subsidiary greenpoint , which was sold in october 2016. we performed our annual assessment of goodwill as of october 31 , 2017 , and concluded that our carrying value of goodwill was not impaired . qualitative factors considered in the analysis included macroeconomic conditions , industry and market considerations , overall financial performance , changes in stock price , and our progress towards stated objectives as compared to prior years . an impairment charge to goodwill and other intangible assets may be required in the future if the company 's future earnings and cash flows decline or discount rates used in determining fair value increase . for additional information , see note 9 , “ goodwill and other intangible assets , ” to the consolidated financial statements in item 8 of this report . income taxes the establishment of provisions for federal and state income taxes is a complex area of accounting that involves judgments and estimates in applying relevant tax statutes . we operate in many state tax jurisdictions , which requires the appropriate allocation of income and expense to each state based on a variety of apportionment or allocation bases . audits by federal and state tax authorities may reveal liabilities that differ from our estimates and provisions . we continually evaluate our exposure to possible tax assessments arising from audits and record an estimate of possible exposure based on current facts and circumstances . we measure d eferred 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 establishes a new , flat corporate federal statutory income tax rate of 21 % ; eliminates 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 . the tax reform act also significantly changes u.s. tax law related to foreign operations , however , such changes do not currently impact us . as a result of the tax reform act , we recognized income tax expense totaling $ 6.55 million related to the revaluation of our deferred tax balances , which includes provisional estimates primarily related to certain purchase accounting , indemnification asset , intangible , and depreciation items . we are still analyzing certain aspects of the tax reform act and refining calculations , which could potentially affect the measurement of these balances . based on current projections , we expect that our effective tax rate for 2018 will be approximately 22 % to 23 % under the new tax law ; however , there can be no assurance to the actual amount as it is dependent upon the nature and amount of future income and expenses and transactions with discrete tax effects . for additional information , see note 15 , “ income taxes , ” to the consolidated financial statements in item 8 of this report . performance overview highlights of our results of operations in 201 7 , and financial condition as of december 31 , 2017 , include the following : ● pre-tax income increased $ 4.17 million , or 10.98 % , to $ 42.11 million compared to the prior year . 24 ● net income decreased $ 3.64 million , or 14.49 % , and diluted earnings per share decreased $ 0.19 to $ 1.26 compared to the prior year . excluding the impact of the $ 6.55 million tax expense related to the tax reform act , net income increased $ 2.91 million , or 11.59 % to $ 28.04 million compared to the prior year . ● the gaap efficiency ratio improved to 60.44 % , from 64.98 % , and the non-gaap efficiency ratio improved to 58.07 % , from 61.75
| 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_6_th ( 1 ) fte basis based on the federal statutory rate of 35 % ( 2 ) nonaccrual loans are included in average balances ; however , no related interest income is recognized during the period of nonaccrual . the following table presents the net interest analysis on a fte basis excluding the impact of non-cash purchase accounting accretion from acquired loan portfolios for the periods indicated : replace_table_token_7_th ( 1 ) fte basis based on the federal statutory rate of 35 % ( 2 ) nonaccrual loans are included in average balances ; however , no related interest income is recorded during the period of nonaccrual . ( 3 ) normalized totals are non-gaap financial measures that exclude non-cash loan interest accretion related to pci loans . 27 201 7 compared to 201 6 . net interest income comprised 76.87 % of total net interest and noninterest income in 2017 compared to 75.82 % in 2016. net interest income on a gaap basis increased $ 2.34 million , or 2.75 % , and net interest income on a fte basis increased $ 2.17 million , or 2.50 % . normalized net interest income on a fte basis is a non-gaap measure that excludes non-cash loan accretion income related to pci loans . for additional information , see “ non-gaap financial measures ” below . normalized net interest margin increased 18 basis points compared to an increase of 22 basis points on a fte basis . normalized net interest spread increased 20 basis points compared to an increase of 23 basis points on a fte basis . average earning assets decreased $ 62.94 million , or 2.90 % , primarily due to decreases in investment securities offset by an increase in interest-bearing deposits and loan growth . the normalized yield on earning assets increased 12 basis points compared to an increase of 15 basis points on a gaap basis . average loans increased $ 43.47 million , or 2.42 % , and the average loan to deposit ratio increased to 98.22 % from 96.70 % . the normalized yield on loans decreased 2 basis points while remaining constant on a gaap basis . non-cash accretion income increased $ 651 thousand , or 13.66 % . average interest-bearing liabilities , which consist of interest-bearing
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our proprietary celx diagnostic platform is the only commercially ready technology we are aware of that uses a patient 's living tumor cells to identify the specific abnormal cellular process driving a patient 's cancer and the targeted therapy that best treats it . we believe our celx platform provides two important improvements over traditional molecular diagnostics . first , molecular diagnostics can only provide a snapshot of the genetic mutations present in a patient 's tumor because they analyze dead cells . using dead cells prevents molecular diagnostics from analyzing in real-time the dynamic cellular activities , known as cell signaling , that regulate cell proliferation or survival . cancer can develop when certain cell signaling activity becomes abnormal . since genetic mutations are often only weakly correlated to the cell signaling activity driving a patient 's cancer , a molecular diagnostic is prone to providing an incomplete diagnosis . celx tests overcome this limitation by measuring real-time cell signaling activity in a patient 's living tumor cells . when a celx test detects abnormal signaling activity , a more accurate diagnosis of the patient 's cancer driver is obtained . second , molecular diagnostics can only estimate the probability of a patient 's potential drug response based on a statistical analysis of the drug 's clinical trial results . instead of this indirect estimate of drug response , celx tests directly measure the effectiveness of a targeted therapy in a patient 's living tumor cells . this enables physicians to confirm that the therapeutic matching the patient 's cancer driver is functional in the patient 's tumor cells before prescribing it , which significantly increases the likelihood of a positive clinical outcome . our first analytically validated and commercially ready test using our celx platform , the celx hsf test , diagnoses two new sub-types of her2-negative breast cancer that traditional molecular diagnostics can not detect . our internal studies show that approximately 15-20 % of her2-negative breast cancer patients have abnormal her2 signaling activity similar to levels found in her2+ breast cancer cells . as a result , these her2-negative patients have undiagnosed her2-driven breast cancer and would be likely to respond to the same anti-her2 targeted therapies only her2+ patients receive today . we have two interventional clinical trials underway to evaluate the efficacy of her2 targeted therapies in breast cancer patients selected with our celx hsf test . we completed development of our second celx test for breast cancer during the first quarter of 2018. this new test evaluates independent c-met signaling activity and its involvement with her family signaling in her2-negative breast cancer tumor cells . our internal studies show that approximately 20 % -25 % of her2-negative breast cancer patients have abnormal c-met signaling activity that is co-activated with abnormal her family signaling . these studies suggest that this sub-group of her2-negative breast cancer patients may best respond to treatment with a combination of her family and c-met inhibitors . we intend to combine this c-met signaling function test with our current her2 signaling function test to create the celx multi-pathway ( mp ) test . with this next generation celx test , we plan to provide an analysis of her1 , her2 , her3 , and c-met signaling activity with a single patient tumor specimen . in addition to our celx tests for her2-negative breast cancer , we are developing celx tests to diagnose 12 new potential cancer sub-types we have discovered in breast , lung , colon , ovarian , kidney , and bladder cancers . approved or investigational drugs are currently available to treat these new potential cancer sub-types . we expect to launch these additional tests on a staggered basis over the next few years while continuing our research to identify additional new cancer sub-types . 38 our overall commercialization strategy is to develop diagnostics that identify new cancer sub-types and to seek collaborations with pharmaceutical companies , which can vary in scope . we have two collaborations underway that rely on the celx hsf test to select breast cancer patients for treatment with her2 targeted therapies . for the first one of these collaborations , we are fielding a prospective clinical trial with genentech and the nsabp to evaluate the efficacy of genentech 's her2 targeted therapies in patients with abnormal her2 signaling . we expect interim results from this trial in late 2019 and final results approximately nine months later . for the second of these collaborations , we are fielding a prospective clinical trial with puma biotechnology , inc. and west cancer center to evaluate the efficacy and safety of puma 's drug , nerlynx , and chemotherapy , in breast cancer patients selected with celcuity 's celx hsf test . we expect the trial to be activated in early 2019 and to obtain interim results in late 2019 or early 2020 and final results approximately 12 months later . for a third collaboration , celcuity was selected by nsabp and puma biotechnology , inc. to evaluate tissue samples from a phase ii study evaluating puma biotechnology 's pan-her inhibitor , nerlynx , genentech 's her2 antibody , herceptin , and bristol-myers squibb 's egfr inhibitor , erbitux , in metastatic colorectal cancer patients . this 35-patient study is expected to be completed in late 2020. unlike the trial with nsabp and genentech , celcuity 's test will be used solely to evaluate tissue samples after they have been enrolled in this trial . celcuity will not receive payment for the testing it performs . we expect our celx test will provide critical insight after the trial is completed about the patient characteristics most correlative to drug response . story_separator_special_tag in conjunction with the development of the celx mp test , celcuity will seek collaborations with pharmaceutical companies to field clinical trials that evaluate the efficacy of combining her family inhibitors and c-met inhibitors in breast cancer patients who have abnormal c-met and abnormal her1 pathway activity . the fda has approved two c-met inhibitors and six her-family inhibitors for cancer treatment . additional c-met and her-family inhibitors are being evaluated in on-going clinical trials . several pharmaceutical companies possess both a c-met and a her family inhibitor . we have not generated any revenue from sales to date , and we continue to incur significant research and development and other expenses related to our ongoing operations . as a result , we are not and have never been profitable and have incurred losses in each period since we began operations in 2012. for the year ended december 31 , 2018 and 2017 , we reported a net loss of approximately $ 7.5 million and $ 6.3 million , respectively . as of december 31 , 2018 , we had a combined accumulated deficit of approximately $ 12.6 million under celcuity llc and $ 9.5 million under celcuity inc. as of december 31 , 2018 , we had cash , cash equivalents , and investments of approximately $ 24.9 million . results of operations story_separator_special_tag consisted of depreciation of approximately $ 0.2 million , stock-based compensation expense of approximately $ 1.2 million and interest income of approximately $ 0.1 million . net cash used in operating activities was approximately $ 4.9 million for the year ended december 31 , 2017 and consisted primarily of a net loss of approximately $ 6.3 million and approximately $ 0.1 million in working capital changes , adjusted for non-cash items of approximately $ 1.5 million . the approximately $ 0.1 million of working capital change was primarily due to approximately $ 0.2 million increase in prepaid insurance and deposits , offset by approximately $ 0.1 million increase in accounts payable and accrued expenses . non-cash expense items of approximately $ 1.5 million consisted of depreciation of approximately $ 0.1 million , stock-based compensation expense of approximately $ 0.9 million and interest expense of approximately $ 0.5 million primarily related to amortization of debt discount and debt financing costs . investing activities net cash provided in investing activities for the year ended december 31 , 2018 was approximately $ 19.1 million and consisted of approximately $ 19.7 million of net proceeds from investments in certificates of deposit , government securities ( u.s. treasury notes and u.s. government agency securities ) , adjusted by approximately $ 0.6 million in purchases of property and equipment . net cash used in investing activities for the year ended december 31 , 2017 was approximately $ 29.0 million and consisted of approximately $ 28.7 million of investments in certificates of deposit , government securities ( u.s. treasury notes and u.s. government agency securities ) and approximately $ 0.3 million in purchases of property and equipment . financing activities net cash provided by financing activities for the year ended december 31 , 2018 was approximately $ 0.2 million and consisted of approximately $ 0.3 million of proceeds from the exercise of common stock warrants and employee stock purchases , adjusted by approximately $ 0.1 million for payment of taxes for net share settlement of stock options exercised . 42 net cash provided by financing activities for the year ended december 31 , 2017 was approximately $ 30.7 million and reflects the net proceeds of approximately $ 7.5 million from the sale of unsecured convertible promissory notes and warrants to certain investors through a private placement , as well as the net proceeds of approximately $ 23.3 million from the sale of common stock in our initial public offering . off-balance sheet arrangements we do not currently have any off-balance sheet arrangements as defined in item 303 ( a ) ( 4 ) of regulation s-k. recent accounting pronouncements from time to time new accounting pronouncements are issued by the financial accounting standards board , or fasb , or other standard setting bodies and adopted by us as of the specified effective date . unless otherwise discussed in note 2 to our financial statements included elsewhere in this report , we believe that the impact of recently issued standards that are not yet effective will not have a material impact on our financial position or results of operations upon adoption . critical accounting policies and use of estimates our management 's discussion and analysis of financial condition and results of operations is based on our financial statements , which have been prepared in accordance with accounting principles generally accepted in the united states , or generally accepted accounted principles ( “ u.s . gaap ” ) . the preparation of these financial statements requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements , as well as the reported expenses during the reporting periods . these items are monitored and analyzed by us for changes in facts and circumstances , and material changes in these estimates could occur in the future . we base our estimates on historical experience and on various other factors that we believe are reasonable under the circumstances ; the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources . changes in estimates are reflected in reported results for the period in which they become known . actual results may differ materially from these estimates . our significant accounting policies are more fully described in note 2 to our financial statements included in this report . of our significant accounting policies , we believe that the following is the most critical : stock-based compensation the company 's stock-based compensation consists of
| other general and administrative expenses include professional fees for auditing , tax , and legal services , insurance and travel expenses . we may incur additional fees for legal , accounting , insurance and other professional service fees associated with being a public company , which may increase further when we are no longer able to rely on the “ emerging growth company ” exemption we were afforded under the jobs act . sales and marketing selling and marketing expenses consist primarily of professional and consulting fees related to these functions . to date , we have incurred immaterial sales and marketing expenses as we continue to focus primarily on the development of our celx platform and corresponding celx tests . we expect to begin to incur increased selling and marketing expenses in anticipation of the commercialization of our first celx tests . these increased expenses are expected to include payroll-related costs as we add employees in the commercial departments , costs related to the initiation and operation of our sales and distribution network and marketing related costs . interest expense interest expense primarily consists of the amortization of debt discount and debt financing costs related to the issuance of our unsecured convertible promissory notes that were converted to common stock upon our ipo . interest income interest income consists of interest income earned on our cash , cash equivalents , and investment balances . results of operations comparison of the years ended december 31 , 2018 and 2017 replace_table_token_3_th 40 research and development for the year ended december 31 , 2018 , our total research and development expenses increased approximately $ 1.3 million , or 27 % , to approximately $ 6.3 million from $ 5.0 million for the prior year . the increase primarily resulted from a $ 0.6 million increase in compensation related expenses , including approximately $ 0.1 million of non-cash stock-based compensation , to support development of our celx platform and validation studies of our celx mp test . in addition , other research and development expenses increased approximately $ 0.7 million due to clinical validation and laboratory
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we generally pass on to our customers increases in our freight costs but we may be unsuccessful in doing so . sales net sales include the amounts we earn on sales of soda ash . we recognize revenue from our sales when there is persuasive evidence of an arrangement between us and the customer , products have been delivered to the customer , selling price is fixed , determinable or reasonably estimated and collection is reasonably assured . substantially all of our sales are derived from sales of soda ash , which we sell through our exclusive sales agent , oci chemical . a small amount of our sales is derived from sales of production purge , which is a by-product liquor solution containing soda ash that is produced during the processing of trona ore. for the purposes of our discussion below , we include these transactions in domestic sales of soda ash and in the volume of domestic soda ash sold . sales prices for sales through ansac include the cost of freight to the ports of embarkation for overseas export or to laredo , texas for sales to mexico . sales prices for other international sales may include the cost of rail freight to the port of embarkation , the cost of ocean freight to the port of disembarkation for import by the customer and the cost of inland freight required for delivery to the customer . cost of products sold expenses relating to employee compensation , energy , including natural gas and electricity , royalties and maintenance materials constitute the greatest components of cost of products sold . these costs generally increase in line with increases in sales volume . energy . a major item in our cost of products sold is energy , comprised primarily of natural gas and electricity . we primarily use natural gas to fuel our above-ground processing operations , including the heating of calciners , and we use electricity to power our underground mining operations , including our continuous mining machines , or continuous miners , and shuttle cars . natural gas prices , over the past five years , have ranged between $ 1.95 and $ 6.00 per mmbtu per henry hub natural gas spot price . as of december 31 , 2014 and 2013 , the henry hub natural gas spot price was $ 3.48 and $ 4.23 per mmbtu , respectively . employee compensation . our employee compensation expenses are affected by headcount and salary levels , as well as incentive compensation paid . retirement benefits for certain individuals that provide services to us are provided by oci enterprises under the oci pension plan for salaried employees and oci pension plan for hourly employees . oci enterprises has the right to modify or terminate the benefits at will . we also reimburse oci enterprises for contributions it makes on our behalf to the oci 401 ( k ) retirement plan based upon specified percentages of employee contributions . see item 8 , `` financial statements and supplementary data—note 10 , `` employee compensation , '' for more information on the various plans . royalties . we pay royalties to the state of wyoming , the u.s. bureau of land management and anadarko petroleum or its affiliates , which are calculated based upon a percentage of the value of soda ash sold , or a certain sum per each ton of such products . we also pay a production tax to sweetwater county , and trona severance tax to the state of wyoming that is calculated based on a formula that utilizes the volume of trona ore mined and the value of the soda ash produced . selling , general and administrative expenses selling , general and administrative expenses incurred by oci enterprises and its affiliates on our behalf are generally allocated to us based on the time the employees of those companies spend on our business and the actual direct costs they incur on our behalf . 51 selling , general and administrative expenses incurred by ansac on our behalf are allocated to us based on the proportion of ansac 's total volumes sold for a given period attributable to the soda ash sold by us to ansac . results of operations a discussion and analysis of the factors contributing to our results of operations is presented below for the periods and as of the dates indicated . the accompanying consolidated financial statements for the year ended december 31 , 2012 , represent the predecessor 's results of operations , reflecting the ownership in oci wyoming previously held by the predecessor and wyoming co. on a combined basis , adjusted for the effects of the restructuring and certain push-down accounting effects . the consolidated financial statements for the year ended december 31 , 2013 , presents the results of operations for the partnership , reflecting the combined ownership interests previously held by predecessor and wyoming co. on a combined basis , adjusted for certain push-down accounting effects . see the `` explanatory note , '' disclosed in our annual report on form 10-k filed with the sec on march 14 , 2014 , for more information on the restructuring transactions . the financial statements , together with the following information , are intended to provide investors with a reasonable basis for assessing our historical operations , but should not serve as the only criteria for predicting our future performance . 52 the following tables set forth our results of operations for the years ended december 31 , 2014 , 2013 and 2012 . replace_table_token_7_th * * information is not applicable for the pre-ipo periods . story_separator_special_tag ( 1 ) ore to ash ratio expresses the number of short tons of trona ore needed to produce one short ton of soda ash and liquor and includes our deca rehydration recovery process . ( 2 ) for a discussion of the non-gaap financial measure adjusted ebitda , please read `` non-gaap financial measures '' of this management 's discussion and analysis . ( 3 ) reflects adjusted ebitda divided by sales volumes . 53 story_separator_special_tag traded company , in 2014 compared to 2013 . loss on disposal of assets , net . our loss on disposal of assets of $ 1.0 million for the year ended december 31 , 2014 , relates to the disposal of one asset which was replaced , and the write-off of canceled or abandoned capital projects . operating income . as a result of the foregoing , operating income increased by 20.0 % to $ 96.0 million for the year ended december 31 , 2014 compared to $ 79.9 million for the year ended december 31 , 2013 . other income/ ( expense ) , net . our total other non-operating expense increased to $ 4.1 million for the year ended december 31 , 2014 , compared to $ 2.2 million for the year ended december 31 , 2013 , primarily due to the interest expense recorded in the current year related to our july 2013 debt restructuring and the resulting higher average principal balance of our long-term debt during 2014 verses 2013 . provision for income taxes . the predecessor was subject to income tax and was included in the consolidated income tax returns of oci enterprises . income taxes were allocated to the predecessor based on separate-company computations of income or loss . the income tax expense for the years ended december 31 , 2013 and 2012 are those of the predecessor . due to our status as a master limited partnership as of the ipo , we have not been subject to u.s. federal income tax and certain state income taxes subsequent to september 18 , 2013. net income . as a result of the foregoing , net income increased by 30.2 % to $ 91.9 million for the year ended december 31 , 2014 , compared to $ 70.6 million for the year ended december 31 , 2013 . 2013 compared to 2012 our cost of products sold increased by 5.3 % to $ 349.0 million for the year ended december 31 , 2013 from $ 331.5 million for the year ended december 31 , 2012 , primarily as a result of the following : an increase of 13.0 % in natural gas costs to $ 33.0 million for the year ended december 31 , 2013 , compared to $ 29.2 million for the year ended december 31 , 2012 , due to higher prices ; an increase of 8.5 % in the cost of electricity from $ 24.6 million to $ 26.7 million for the year ended december 31 , 2013 compared to the year ended december 31 , 2012 due to higher rates . the energy consumed on a per ton of soda ash produced basis did not materially change for the year ended december 31 , 2013 , compared to the year ended december 31 , 2012 ; and an increase of 11.4 % in freight costs to $ 122.7 million for the year ended december 31 , 2013 from $ 110.1 million for the year ended december 31 , 2012 , primarily due to an increase in freight costs related to increased international sales volumes to international customers ; partly offset by 55 a decrease of 3.9 % in royalties paid to $ 19.6 million for the year ended december 31 , 2013 , as compared to $ 20.4 million for the year ended december 31 , 2012 , due to a 5.8 % decrease in average sales price , and a decrease in the royalty rate for federal land from 6 % to 4 % on october 2 , 2013. gross profit . gross profit decreased by 29.0 % to $ 93.1 million for the year ended december 31 , 2013 , compared to $ 131.1 million for the year ended december 31 , 2012 , primarily due to the 5.8 % decrease in average sales price over the period , and increases in cost of products sold , excluding freight costs of 2.2 % and freight costs of 11.4 % as discussed above . selling , general and administrative expenses . our selling , general and administrative expenses increased 11.9 % to $ 13.2 million for the year ended december 31 , 2013 from $ 11.8 million for the year ended december 31 , 2012 , primarily due to an increase in allocated charges from ansac caused by higher participation percentage of total ansac volume . there was also an increase in charges allocated from oci enterprises . operating income . as a result of the foregoing , operating income decreased by 33.0 % to $ 79.9 million for the year ended december 31 , 2013 compared to $ 119.3 million for the year ended december 31 , 2012 . other income/ ( expense ) , net . our other non-operating expense increased to $ 2.2 million for the year ended december 31 , 2013 , compared to $ 1.9 million for the year ended december 31 , 2012 . provision for income taxes . the predecessor was subject to income tax and was included in the consolidated income tax returns of oci enterprises . income taxes were allocated to the predecessor based on separate-company computations of income or loss .
| cost of products sold and operating expenses a summary of cost of products sold and operating expenses , and the percentage change between the periods , is as follows : replace_table_token_9_th 2014 compared to 2013 our total cost of products sold decreased by 0.4 % to $ 347.7 million for the year ended december 31 , 2014 from $ 349.0 million for the year ended december 31 , 2013 , primarily as a result of the following : a decrease in operating and maintenance supply costs of 7.1 % to $ 18.4 million for year ended december 31 , 2014 , compared to $ 19.8 million for the year ended december 31 , 2013 , partly due to decreased equipment maintenance costs in the mine ; 54 a decrease of 7.0 % in salaries and benefits to $ 54.7 million for year ended december 31 , 2014 , compared to $ 58.8 million for the year ended december 31 , 2013 , partly due to a $ 5.3 million reduction in pension benefit expense driven by favorable effects of higher actuarial discount rates and market returns . based on actuarial estimates , as of december 31 , 2014 , we expect these pension expenses to revert back to 2013 levels during 2015 ; a decrease of 6.3 % in depreciation , depletion and amortization expense to $ 22.4 million for year ended december 31 , 2014 , compared to $ 23.9 million for the year ended december 31 , 2013 , due primarily to certain in service equipment reaching their maximum depreciable lives , moderately offset by , fixed asset additions during the year ; and a decrease of 3.1 % in royalties paid to $ 19.0 million for the year ended december 31 , 2014 , as compared to $ 19.6 million for the year ended december 31 , 2013 , driven by a reduction in the federal royalty rate from 6 % to 4 % ( `` helium stewardship act of 2013 '' ) , which is due to expire in september 2015 , partially offset by an increase in royalty accruals due to increased production volumes during the year ; partly offset by an increase of 16.7 % in natural gas costs to $ 38.5 million for the year ended december 31 , 2014 , compared to $ 33.0 million for the year ended december 31 , 2013 , due to higher prices and production volume growth ; and an increase of 0.8 % in freight costs to $ 123.7 million for the year ended december 31 , 2014 , as compared to $ 122.7 million for the year ended december 31 , 2013 , due to higher sales volume . gross profit . gross profit increased by 25.9 % to
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27 for the years ended december 31 , 2019 and 2018 net sales net sales by product line were as follows for the years ended december 31 , 2019 and 2018 ( dollars in thousands ) : replace_table_token_6_th 28 net unit sales were as follows : replace_table_token_7_th net sales for the taser segment increased $ 28.5 million , or 11.3 % , primarily as a result of a $ 17.7 million increase in cartridge revenue and a net increase of $ 7.2 million in taser device sales . cartridge revenues increased due to both increased unit sales and an increase in average selling price . the decreased unit sales of x2 and x26p were partially offset by higher average selling prices . as expected , we continue to see a shift to purchases of our latest generation device , taser 7 , from legacy x2 and x26p devices . we expect recurring payment plan subscriptions to increase as we drive sales of taser 7 , which includes a software subscription with axon evidence . net sales for the software and sensors segment increased $ 82.2 million , or 49.3 % . revenue from axon evidence and cloud services increased $ 40.0 million as we continued to add users and associated devices to our network during the year ended december 31 , 2019. the increase in the aggregate number of users and devices also resulted in increased extended warranty revenues of $ 7.3 million . revenue from axon body cameras increased $ 22.2 million and included $ 19.3 million in sales of axon body 3 , which was introduced during the third quarter of 2019. axon dock revenue also increased $ 9.7 million with increased units largely driven by the introduction of axon body 3 , as well as an increase in the average selling price . for the past few years , we have considered bookings for our software and sensors segment as an early indicator of activity for axon camera products and axon evidence services . we have shifted our focus to total company future contracted revenue , which we believe is a more relevant and comprehensive forward-looking performance indicator , as it encompasses all company contracts , including taser . as of december 31 , 2019 , we had approximately $ 1.23 billion of total company future contracted revenue , which included both recognized contract liabilities as well as amounts that will be invoiced and recognized in future periods . we expect to recognize between 20 % - 25 % of this balance over the next twelve months , and expect the remainder to be recognized over the following five to seven years , subject to risks related to delayed deployments , budget appropriation or other contract cancellation clauses . backlog - as of december 31 , 2019 compared to december 31 , 2018 our backlog for products and services includes all orders that have been received and are believed to be firm . in the taser segment , we define backlog as equal to deferred revenue . deferred revenue represents amounts invoiced to customers for goods and services to be delivered in subsequent periods . we process orders within the taser segment quickly , and our best estimate of firm orders outstanding as of period end represents those that have been paid for but remain undelivered . the taser segment backlog balance was $ 55.2 million as of december 31 , 2019 . we expect to realize $ 22.6 million of this deferred revenue balance as revenue during the next 12 months . this represents cash received and accounts receivable from customers on or prior to december 31 , 2019 for products and services expected to be delivered in the next 12 months . 29 in the software and sensors segment , we define backlog as cumulative bookings , net of cancellations , less product and service revenue recognized to date . bookings are generally realized as revenue over multiple years . the software and sensors backlog balance was $ 1.0 billion as of december 31 , 2019 . this backlog balance includes $ 150.6 million of deferred revenue , and $ 875.6 million that has been recorded as bookings but not yet invoiced , all as of december 31 , 2019 . we expect to realize approximately $ 270.0 million of the december 31 , 2019 backlog balance as revenue during the next 12 months . replace_table_token_8_th our backlog of $ 1.1 billion as of december 31 , 2019 has increased significantly from $ 812.7 million as of december 31 , 2018 . the increase in taser segment backlog is not expected to have a material impact on revenue or operating margins . our significant increase in backlog , primarily in the software and sensors segment is indicative of expected revenue growth in this segment . revenue growth in the software and sensors segment is expected to result in improved operating margins over time as additional revenue will cover a larger portion of our selling , general and administrative expenses and research and development costs . we also anticipate gross margins to improve gradually in future years . cost of product and service sales cost of product and service sales ( dollars in thousands ) : replace_table_token_9_th within the taser segment , cost of product sales increased $ 26.8 million , or 33.4 % , to $ 107.2 million in 2019 , compared to $ 80.4 million in 2018 . cost as a percentage of sales increased to 38.1 % from 31.7 % . the increase in cost of product sales was primarily attributable to the mix of products , with higher cost per unit for taser 7 handles and cartridges as well as higher depreciation on new production equipment for the taser 7. additionally , cost of product sales included approximately $ 3.0 million in expense for taser 7 ramp-up and optimization costs related to scrap , obsolete inventory , and higher labor costs . within the software and sensors segment , cost of product and service sales was $ 116.4 million , an increase of $ 35.3 story_separator_special_tag million , or 43.5 % , from 2018 . as a percentage of net sales , cost of product and service sales decreased to 46.7 % in 2019 from 48.6 % in 2018 . cost of product sales increased $ 24.5 million primarily driven by the impact of increased units as well as increased freight and customs expenses , but decreased as a percentage of total segment net sales , reflecting non-recurrence of customer fulfillment costs associated with our acquisition of vievu in may 2018 and higher pricing on axon body 2 cameras and docks . cost of service sales increased $ 10.7 million driven primarily by 30 a $ 5.0 million increase in third party cloud data storage and compute costs , and by a $ 3.9 million increase in professional services expense due to both significant fleet installations during 2019 and an overall increase following the acquisition of vievu in may 2018. in june 2019 , we entered into a purchase agreement for cloud data storage with a three year term beginning july 1 , 2019. we expect that this agreement , in combination with moving certain data into archive storage , will slow the growth of our future storage and compute costs , despite anticipated increases in the amount of data stored . gross margin gross margin ( dollars in thousands ) : replace_table_token_10_th gross margin increased $ 48.7 million to $ 307.3 million for the year ended december 31 , 2019 compared to $ 258.6 million for 2018 . as a percentage of net sales , gross margin decreased to 57.9 % for 2019 from 61.5 % for 2018 . as a percentage of net sales , gross margin for the taser segment decreased to 61.9 % for the year ended december 31 , 2019 from 68.3 % for the year ended december 31 , 2018 . taser 7 devices have a lower average selling price per unit than legacy products due to the bundle of products and services included , and a higher cost per unit than legacy products . additionally , gross margin was impacted by trade in credits provided to certain customers purchasing taser 7 devices . within the software and sensors segment , gross margin as a percentage of total segment net sales was 53.3 % and 51.4 % for the years ended 2019 and 2018 , respectively . within the software and sensors segment , product gross margin was 29.8 % for the year ended december 31 , 2019 and 20.8 % for the same period in 2018 , while the service margins were 74.8 % and 76.0 % during those same periods , respectively . sales , general and administrative expenses sales , general and administrative ( `` sg & a '' ) expenses ( dollars in thousands ) : replace_table_token_11_th 31 sg & a increased $ 56.1 million , or 35.7 % . stock-based compensation expense increased $ 46.6 million in comparison to the prior year comparable period , which was primarily attributable to an increase of $ 30.8 million in expense related to the ceo performance award and expense of $ 11.5 million related to our xspp . during the year ended december 31 , 2019 , attainment of the third through ninth tranches of the ceo performance award and xspp became probable . accordingly , we recorded expense of $ 26.5 million for the ceo performance award and $ 7.3 million for the xspp reflecting the cumulative expense for the third through ninth tranches from the grant dates through december 31 , 2019. refer to note 12 of the notes to our consolidated financial statements within this annual report on form 10-k for additional discussion of the ceo performance award and xspp . stock-based compensation expense also increased over the prior year comparable period due to an increase in headcount . salaries , benefits and bonus expense increased $ 4.4 million , primarily due to an increase in headcount . the increase was partially offset by a decline in expense for contract labor . salaries , benefits and bonus expense decreased as a percentage of sales from 15.0 % for 2018 to 12.7 % for 2019. sales and marketing expenses increased $ 9.5 million , driven by a $ 8.7 million increase in commissions tied to higher revenues . the increase in commissions was also driven by higher commission rates for higher value bundled deals , which have continued to increase . the increases were partially offset by a decrease of $ 2.9 million in professional , consulting and lobbying expenses . legal expenses increased by approximately $ 1.0 million , offset by a $ 3.8 million decrease in professional fees , which were higher during 2018 related to our acquisition of vievu , the adoption of topic 606 , and the implementation of the ceo performance award and xspp . during 2019 , we abandoned certain capitalized software related to implementation work on an enterprise resource planning system conversion , resulting in an impairment charge of $ 1.3 million , and certain planning and site development activities related to our planned new headquarters , resulting in an impairment charge of $ 0.7 million . during 2018 , we recorded an impairment charge of $ 2.0 million related to the abandonment of certain developed technology acquired in a business combination . as discussed in note 9 of the notes to our consolidated financial statements within this annual report on form 10-k , on january 3 , 2020 , we sued the ftc in the district of arizona , and the ftc filed an enforcement action regarding our may 2018 acquisition of vievu llc .
| the increase in accounts and notes receivable and contract assets was attributable to increased sales in 2019 , primarily sales made under subscription plans . the increase in prepaid expenses and other assets of $ 9.8 million during 2019 was primarily attributable to a $ 15.0 million prepayment related to a purchase agreement for cloud data storage that commenced in july 2019 , net of usage of $ 7.0 million , and a smaller increase in deferred commissions . investing activities we used $ 240.7 million for investing activities in 2019 . purchases of investments , net of calls and maturities , were $ 224.4 million . we also invested $ 16.3 million in the purchase of property and equipment and intangibles . financing activities net cash used in financing activities was $ 3.9 million for the year ended december 31 , 2019 . during 2019 , we paid income and payroll taxes of approximately $ 4.1 million on behalf of employees who net-settled stock awards during the period . these cash outflows were partially offset by $ 0.1 million of proceeds from the exercise of stock options . liquidity and capital resources our most significant source of liquidity continues to be funds generated by operating activities and available cash and cash equivalents . in addition , our $ 50.0 million revolving credit facility is available for additional working capital needs or investment opportunities . under the terms of the line of credit , available borrowings are reduced by outstanding letters of credit . advances under the line of credit bear interest at libor plus 1.0 to 1.5 % per year determined in accordance with a pricing grid based on our funded debt to earnings before interest , taxes , depreciation and amortization ( `` ebitda '' ) ratio . as of december 31 , 2019 , we had letters of credit outstanding of $ 2.7 million , leaving the net amount available for borrowing of $ 47.3 million . the facility matures on december 31 , 2021
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depreciation is computed on the straight-line basis over the estimated useful lives of the assets . expenditures for maintenance and repairs are expensed as incurred while renewals and betterments are capitalized . gains or losses on the sale of property and equipment are reflected in net income ( loss ) . 19 index impairment of long-lived assets - we review our long-lived assets , such as property and equipment , operating lease assets , and right-of-use assets , for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable . an impairment loss is recognized when the undiscounted future cash flows estimated to be generated by the asset to be held and used are not sufficient to recover the unamortized balance of the asset . an impairment loss is recognized based on the difference between the carrying values and estimated fair value . the estimated fair value is determined based on either the discounted future cash flows or other appropriate fair value methods with the amount of any such deficiency charged to operations in the current year . estimates of future cash flows are based on many factors , including current operating results , expected market trends and competitive influences . assets to be disposed of by sale are reported at the lower of the carrying amount or fair value , less estimated costs to sell . goodwill – goodwill is recorded when the purchase price paid for an acquisition exceeds the estimated fair value of net identified tangible and intangible assets acquired . goodwill is tested for impairment at the reporting unit level on an annual basis in the fourth quarter and between annual tests if an event occurs or circumstances change that would more likely than not reduce the fair value of the reporting unit below its carrying value . we may first perform a qualitative assessment to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying value . if we conclude that is the case , or chose to not perform the qualitative assessment , we quantify the reporting unit 's fair value . if the carrying amount of the reporting unit exceeds its fair value , we will record an impairment loss based on the difference . the impairment loss will be limited to the amount of goodwill allocated to that reporting unit . multiple valuation techniques may be used to assess the fair value of the reporting unit . all of these techniques include the use of estimates and assumptions that are inherently uncertain . changes in these estimates and assumptions could materially affect the determination of fair value or goodwill impairment , or both . intangible assets , exclusive of goodwill – recognized intangible assets , exclusive of goodwill , are amortized over the useful lives of the assets unless that life is determined to be indefinite . all of our intangible assets , exclusive of goodwill , are finite lived . we evaluate the remaining useful life of an intangible asset each reporting period to determine whether events or circumstances may indicate that a revision to the useful life is warranted to reflect the remaining expected use of the asset . if an intangible asset 's useful life is determined to be finite , but the precise length of that life is not known , the intangible asset is amortized over our best estimate of the asset 's useful life in a manner that reflects the pattern in which the asset 's economic benefits are consumed or expected to be realized . we review our long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable . an impairment loss is recognized when the undiscounted future cash flows estimated to be generated by the asset to be held and used are not sufficient to recover the unamortized balance of the asset . our primary intangible asset , exclusive of goodwill , is a customer relationship intangible which was recognized in the acquisition of mgi and derives its value from future cash flows expected from the customers acquired from mgi . changes in the actual or estimated cash flows of these customers could result in a material adjustment to amortization expense , an impairment loss , or both . estimates of future cash flows are based on many factors , including current cash flows , expected market trends and competitive influences . revenue recognition – we account for a contract with a customer when the written contract is committed , the rights of the parties , including payment terms , are identified , the contract has commercial substance and consideration is probable of collection . substantially all of our revenue is derived by fulfilling customer orders for the purchase of our products under contracts which contain a single performance obligation , to supply continually defined quantities of product at fixed prices . we account for shipping and handling activities that occur after the customer has obtained control of a good as a fulfillment cost rather than as an additional promised service . we recognize revenue at the point in time that control of the ordered product ( s ) is transferred to the customer , which is upon delivery to the customer , or its designee at our location , a customer location or other customer-designated delivery point . for substantially all of our contracts , control of the ordered product ( s ) transfers at our location . amounts invoiced to customers for shipping and handling are reported as revenues and the related costs incurred to deliver product to the customer are reported as cost of goods sold . revenue is measured as the amount of consideration we expect to receive in exchange for fulfilling product orders . incidental items that are immaterial in the context of the contract are recognized story_separator_special_tag depreciation is computed on the straight-line basis over the estimated useful lives of the assets . expenditures for maintenance and repairs are expensed as incurred while renewals and betterments are capitalized . gains or losses on the sale of property and equipment are reflected in net income ( loss ) . 19 index impairment of long-lived assets - we review our long-lived assets , such as property and equipment , operating lease assets , and right-of-use assets , for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable . an impairment loss is recognized when the undiscounted future cash flows estimated to be generated by the asset to be held and used are not sufficient to recover the unamortized balance of the asset . an impairment loss is recognized based on the difference between the carrying values and estimated fair value . the estimated fair value is determined based on either the discounted future cash flows or other appropriate fair value methods with the amount of any such deficiency charged to operations in the current year . estimates of future cash flows are based on many factors , including current operating results , expected market trends and competitive influences . assets to be disposed of by sale are reported at the lower of the carrying amount or fair value , less estimated costs to sell . goodwill – goodwill is recorded when the purchase price paid for an acquisition exceeds the estimated fair value of net identified tangible and intangible assets acquired . goodwill is tested for impairment at the reporting unit level on an annual basis in the fourth quarter and between annual tests if an event occurs or circumstances change that would more likely than not reduce the fair value of the reporting unit below its carrying value . we may first perform a qualitative assessment to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying value . if we conclude that is the case , or chose to not perform the qualitative assessment , we quantify the reporting unit 's fair value . if the carrying amount of the reporting unit exceeds its fair value , we will record an impairment loss based on the difference . the impairment loss will be limited to the amount of goodwill allocated to that reporting unit . multiple valuation techniques may be used to assess the fair value of the reporting unit . all of these techniques include the use of estimates and assumptions that are inherently uncertain . changes in these estimates and assumptions could materially affect the determination of fair value or goodwill impairment , or both . intangible assets , exclusive of goodwill – recognized intangible assets , exclusive of goodwill , are amortized over the useful lives of the assets unless that life is determined to be indefinite . all of our intangible assets , exclusive of goodwill , are finite lived . we evaluate the remaining useful life of an intangible asset each reporting period to determine whether events or circumstances may indicate that a revision to the useful life is warranted to reflect the remaining expected use of the asset . if an intangible asset 's useful life is determined to be finite , but the precise length of that life is not known , the intangible asset is amortized over our best estimate of the asset 's useful life in a manner that reflects the pattern in which the asset 's economic benefits are consumed or expected to be realized . we review our long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable . an impairment loss is recognized when the undiscounted future cash flows estimated to be generated by the asset to be held and used are not sufficient to recover the unamortized balance of the asset . our primary intangible asset , exclusive of goodwill , is a customer relationship intangible which was recognized in the acquisition of mgi and derives its value from future cash flows expected from the customers acquired from mgi . changes in the actual or estimated cash flows of these customers could result in a material adjustment to amortization expense , an impairment loss , or both . estimates of future cash flows are based on many factors , including current cash flows , expected market trends and competitive influences . revenue recognition – we account for a contract with a customer when the written contract is committed , the rights of the parties , including payment terms , are identified , the contract has commercial substance and consideration is probable of collection . substantially all of our revenue is derived by fulfilling customer orders for the purchase of our products under contracts which contain a single performance obligation , to supply continually defined quantities of product at fixed prices . we account for shipping and handling activities that occur after the customer has obtained control of a good as a fulfillment cost rather than as an additional promised service . we recognize revenue at the point in time that control of the ordered product ( s ) is transferred to the customer , which is upon delivery to the customer , or its designee at our location , a customer location or other customer-designated delivery point . for substantially all of our contracts , control of the ordered product ( s ) transfers at our location . amounts invoiced to customers for shipping and handling are reported as revenues and the related costs incurred to deliver product to the customer are reported as cost of goods sold . revenue is measured as the amount of consideration we expect to receive in exchange for fulfilling product orders . incidental items that are immaterial in the context of the contract are recognized
| other , net was $ 0.9 million for 2019 compared to $ 0.2 million in 2018. this increase was primarily related to the settlement of a net working capital dispute and other issues with the seller of golden ridge . covid-19 assessment subsequent to ricebran technologies ' fiscal year ending december 31 , 2019 , the united states experienced an outbreak of a novel coronavirus ( covid-19 ) , which has been declared a “ pandemic ” by the world health organization . this pandemic poses the risk that we or our customers , suppliers and other business partners may be disrupted or prevented from conducting business activities for certain periods of time , the durations of which are uncertain . ricebran technologies has informed its customers that at this time we anticipate operating throughout the covid-19 outbreak . our locations have fewer than 15 people on site at once , and all employees have been trained on covid-19 by our occupational health & safety manager , as well as being cross-trained to backfill in one another 's absence in accordance with gfsi requirements . we are also limiting visitors to all facilities , have cancelled all non-essential travel , and shifted many employees to working remotely . our employees have been reporting to work , either remotely or in-person , without any material changes in attendance or resulting changes in our productivity due to the covid-19 outbreak . we currently do not expect any of our facilities to be subject to government-mandated closures . the covid-19 outbreak has not yet caused any material disruption in the supply of raw materials used in our products or in the distribution of our products . the covid-19 pandemic has become a worldwide health crisis that is adversely affecting the economies and financial markets of many countries , which we expect will adversely affect the demand for our products . however , we are not able to estimate the exact magnitude of the impact of such developments on on our business . the extent
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further , with recent acquisitions , we expanded into liquid handling components and systems used in biotechnology applications including clinical analysis instrumentation . we also have a broad range of end use deep vacuum products for laboratory science applications . in 2018 , the medical segment generated segment revenue of $ 265.4 million and segment adjusted ebitda of $ 75.0 million , reflecting a segment adjusted ebitda margin of 28.3 % . components of our revenue and expenses revenues we generate revenue from sales of our highly engineered , application-critical products and by providing associated aftermarket parts , consumables and services . we sell our products and deliver aftermarket services both directly to end-users and through independent distribution channels , depending on the product line and geography . below is a description of our revenues by segment and factors impacting total revenues . industrials revenue our industrials segment revenues are generated primarily through sales of air compression , vacuum and blower products to customers in multiple industries and geographies . a significant portion of our sales in the industrials segment are made to independent distributors . the majority of industrials segment revenues are derived from short duration contracts and revenue is recognized at a single point in time when control is transferred to the customer , generally at shipment or when delivery has occurred or services have been rendered . certain contracts may involve significant design engineering to customer specifications , and depending on the contractual terms , revenue is recognized either over the duration of the contract or at contract completion when equipment is delivered to the customer . our large installed base of products in our industrials segment drives demand for recurring aftermarket support services primarily composed of replacement part sales to our distribution partners and , to a lesser extent , by directly providing replacement parts and repair and maintenance services to end customers . revenue for services is recognized when services are performed . energy revenue our energy segment revenues are generated primarily through sales of positive displacement pumps , liquid ring vacuum pumps , compressors and integrated systems and engineered fluid loading and transfer equipment and associated aftermarket parts , consumables and services for use primarily in upstream , midstream , downstream and petrochemical end-markets across multiple geographies . the majority of energy segment revenues are derived from short duration contracts and revenue is recognized at a single point in time when control is transferred to the customer , generally at shipment or when delivery has occurred or services have been rendered . certain contracts with 29 customers in the mid- and downstream and petrochemical markets are higher sales value and often have longer lead times and involve more application specific engineering . depending on the contractual terms , revenue is recognized either over the duration of the contract or at contract completion when equipment is delivered to the customer . provisions for estimated losses on uncompleted contracts are recognized in the period in which such losses are determined to be probable . as a result , the timing of these contracts can result in significant variation in reported revenue from quarter to quarter . our large installed base of products in our energy segment drives demand for recurring aftermarket support services to customers , including replacement parts , consumables and repair and maintenance services . the mix of aftermarket to original equipment revenue within the energy segment is impacted by trends in upstream energy activity in north america . revenue for services is recognized when services are performed . in response to customer demand for faster access to aftermarket parts and repair services , we expanded our direct aftermarket service locations in our energy segment , particularly in north american markets driven by upstream energy activity . energy segment products and aftermarket parts , consumables and services are sold both directly to end customers and through independent distributors , depending on the product category and geography . medical revenue our medical segment revenues are generated primarily through sales of highly specialized gas , liquid and precision syringe pumps that are specified by medical and laboratory equipment suppliers for use in medical and laboratory applications . our products are often subject to extensive collaborative design and specification requirements , as they are generally components specifically designed for , and integrated into , our customers ' products . revenue is recognized when control is transferred to the customer , generally at shipment or when delivery has occurred . our medical segment also has limited aftermarket revenues related to certain products . expenses cost of sales cost of sales includes the costs we incur , including purchased materials , labor and overhead related to manufactured products and aftermarket parts sold during a period . depreciation related to manufacturing equipment and facilities is included in cost of sales . purchased materials represent the majority of costs of sales , with steel , aluminum , copper and partially finished castings representing our most significant materials inputs . we have instituted a global sourcing strategy to take advantage of coordinated purchasing opportunities of key materials across our manufacturing plant locations . cost of sales for services includes the direct costs we incur , including direct labor , parts and other overhead costs including depreciation of equipment and facilities , to deliver repair , maintenance and other field services to our customers . story_separator_special_tag selling and administrative expenses selling and administrative expenses consist of ( i ) salaries and other employee-related expenses for our selling and administrative functions and other activities not associated with the manufacture of products or delivery of services to customers ; ( ii ) facility operating expenses for selling and administrative activities , including office rent , maintenance , depreciation and insurance ; ( iii ) marketing and direct costs of selling products and services to customers including internal and external sales commissions ; ( iv ) research and development expenditures ; ( v ) professional and consultant fees ; ( vi ) kkr fees and expenses ; ( vii ) expenses related to our public stock offerings and to establish public company reporting compliance ; and ( viii ) other miscellaneous expenses . certain corporate expenses , including those related to our shared service centers in the united states and europe , that directly benefit our businesses are allocated to our business segments . certain corporate administrative expenses , including corporate executive compensation , treasury , certain information technology , internal audit and tax compliance , are not allocated to the business segments . amortization of intangible assets amortization of intangible assets includes the periodic amortization of intangible assets recognized when an affiliate of kkr acquired us on july 30 , 2013 and intangible assets recognized in connection with businesses we acquired since july 30 , 2013 , including customer relationships and trademarks . impairment of other intangible assets impairment of other intangible assets includes non-cash charges we recognized for the impairment of other intangible assets . 30 other operating expense , net other operating expense , net includes foreign currency gains and losses , restructuring charges , certain litigation and contract settlement losses , environmental remediation , stock-based compensation expense and other miscellaneous operating expenses . provision ( benefit ) for income taxes the provision or benefit for income taxes includes u.s. federal , state and local income taxes and all non-u.s. income taxes . we are subject to income tax in approximately 35 jurisdictions outside of the united states . because we conduct operations on a global basis , our effective tax rate depends , and will continue to depend , on the geographic distribution of our pre-tax earnings among several different taxing jurisdictions . our effective tax rate can also vary based on changes in the tax rates of the different jurisdictions , the availability of tax credits and non-deductible items . on december 22 , 2017 , the u.s. government enacted comprehensive tax legislation commonly referred to as the tax cuts and jobs act ( the tax act ) . the tax act makes broad and complex changes to the u.s. tax code that affected 2017 and 2018 , including , but not limited to , ( 1 ) requiring a one-time transition tax on certain unrepatriated earnings of foreign subsidiaries that is payable over eight years , ( 2 ) bonus depreciation that will allow for full expensing of qualified property , and ( 3 ) a change in us deferred tax assets and liabilities relating to the us tax rate reduction from 35 % to 21 % . see note 15 income taxes to our audited consolidated financial statements included elsewhere in this form 10-k. items affecting our reported results general economic conditions and capital spending in the industries we serve our financial results closely follow changes in the industries and end-markets we serve . demand for most of our products depends on the level of new capital investment and planned and unplanned maintenance expenditures by our customers . the level of capital expenditures depends , in turn , on the general economic conditions as well as access to capital at reasonable cost . in particular , demand for our industrials products generally correlates with the rate of total industrial capacity utilization and the rate of change of industrial production . capacity utilization rates above 80 % have historically indicated a strong demand environment for industrial equipment . in our energy segment , demand for our products that serve upstream energy end-markets are influenced heavily by energy prices and the expectation as to future trends in those prices . energy prices have historically been cyclical in nature and are affected by a wide range of factors . in addition to energy prices , demand for our upstream energy products are positively impacted by increasing global land rig count , drilled but uncompleted wells , the level of hydraulic fracturing intensity and activity measured by horsepower utilization and lateral lengths as well as drilling and completion capital expenditures . in the midstream and downstream portions of our energy segment , overall economic growth and industrial production , as well as secular trends , impact demand for our products . in our medical segment we expect demand for our products to be driven by favorable trends , including the growth in healthcare spend and expansion of healthcare systems due to an aging population requiring medical care and increased investment in health solutions and safety infrastructures in emerging economies . over longer time periods , we believe that demand for all of our products also tends to follow economic growth patterns indicated by the rates of change in the gdp around the world , as augmented by secular trends in each segment . our ability to grow and our financial performance will also be affected by our ability to address a variety of challenges and opportunities that are a consequence of our global operations , including efficiently utilizing our global sales , manufacturing and distribution capabilities and engineering innovative new product applications for end-users in a variety of geographic markets . foreign currency fluctuations a significant portion of our revenues , approximately 52 % for the year ended december 31 , 2018 , was denominated in currencies other than the u.s. dollar . because much of our manufacturing facilities and labor force costs are outside of the united states , a significant portion of our costs are also denominated in currencies other than the u.s. dollar .
| 40 segment adjusted ebitda in 2017 was $ 242.7 million , an increase of $ 25.1 million , or 11.5 % , from $ 217.6 million in 2016. segment adjusted ebitda margin increased 140 bps to 21.5 % from 20.1 % in 2016. the increase in segment adjusted ebitda was due primarily to improved pricing ( $ 16.1 million ) , higher volume including acquisitions and net of divestitures ( $ 6.0 million , including $ 13.0 million from upstream energy exposed markets ) , and the favorable impact of foreign currencies ( $ 2.8 million ) . energy segment results replace_table_token_10_th 2018 vs. 2017 segment revenues for 2018 were $ 1,121.1 million , an increase of $ 106.6 million , or 10.5 % , compared to $ 1,014.5 million in 2017. the increase in segment revenues was primarily due to higher revenues from upstream energy exposed markets ( 8.9 % or $ 90.2 million ) and higher volume and pricing in other markets in our energy segment ( 1.5 % or $ 15.1 million ) the percentage of segment revenues derived from aftermarket parts and service was 56.6 % in 2018 compared to 58.0 % in 2017. segment adjusted ebitda in 2018 was $ 337.8 million , an increase of $ 41.7 million , or 14.1 % , from $ 296.1 million in 2017. segment adjusted ebitda margin increased 90 bps to 30.1 % in 2018 from 29.2 % in 2017. the increase in segment adjusted ebitda was primarily due to higher revenues from upstream energy exposed markets ( $ 44.2 million ) and higher volume and pricing in other markets in our energy segment ( $ 8.1 million ) , partially offset by higher material and manufacturing costs and unfavorable product sales mix in other markets in our energy segment ( $ 11.2 million ) . 2017 vs. 2016 segment revenues for 2017 were $ 1,014.5 million , an increase of $ 386.1 million , or 61.4 % , compared to $ 628.4 million in 2016. the increase in segment revenues was due to higher revenues from upstream energy exposed markets ( 61.5 % or $ 386.6 million ) ,
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the amount and timing of future funding requirements will depend on many factors , including capital market conditions , regulatory requirements and outcomes related to tlando including our abpm clinical study , regulatory requirements related to our other development programs , the timing and results of our ongoing development efforts , the potential expansion of our current development programs , potential new development programs , the pursuit of various potential commercial activities and strategies associated with our development programs and related general and administrative support . we anticipate that we will seek to fund our operations through public or private equity or debt financings or other sources , such as potential license , partnering and collaboration agreements . we can not be certain that anticipated additional financing will be available to us on favorable terms , or at all . although we have previously been successful in obtaining financing through public and private equity securities offerings and our license and collaboration agreements , there can be no assurance that we will be able to do so in the future . our product candidates our current portfolio , shown below , includes our lead product candidate , tlando , an oral testosterone replacement therapy that is currently under review by the fda with a pdufa goal date of may 8 , 2018. additionally , we are in the process of establishing our pipeline of other clinical candidates including a next generation potential once daily oral testosterone replacement therapy , lpcn 1111 , and an oral therapy for the prevention of preterm birth , lpcn 1107 . 50 our development pipeline tlando : an oral product candidate for testosterone replacement therapy our lead product , tlando , is an oral formulation of the chemical , testosterone undecanoate ( “ tu ” ) , an eleven carbon side chain attached to testosterone . tu is an ester prodrug of testosterone . an ester is chemically formed by bonding an acid and an alcohol . upon the cleavage , or breaking , of the ester bond , testosterone is formed . tu has been approved for use outside the united states for many years for delivery via intra-muscular injection and in oral dosage form and recently tu has received regulatory approval in the united states for delivery via intra-muscular injection . we are using our proprietary technology to facilitate steady gastrointestinal solubilization and absorption of tu . proof of concept was initially established in 2006 , and subsequently tlando was licensed in 2009 to solvay pharmaceuticals , inc. which was then acquired by abbott products , inc. ( `` abbott '' ) . following a portfolio review associated with the spin-off of abbvie by abbott in 2011 , the rights to tlando were reacquired by us . all obligations under the prior license agreement have been completed except that lipocine will owe abbott a perpetual 1 % royalty on net sales . such royalties are limited to $ 1 million in the first two calendar years following product launch , after which period there is not a cap on royalties and no maximum aggregate amount . if generic versions of any such product are introduced , then royalties are reduced by 50 % . nda resubmission we resubmitted our nda to the fda in august 2017 based on the results of the dv study . the dv study confirmed the efficacy of tlando with a fixed dose regimen without need for dose adjustment . tlando was well tolerated upon 52-week exposure with no reports of drug related serious adverse events ( “ saes ” ) . the fda accepted our nda as a complete response to their crl and assigned a pdufa goal date of may 8 , 2018 for completion of the review . on january 10 , 2018 , the brudac of the fda voted six in favor and thirteen against the benefit/risk profile of tlando . discussion topics during the brudac included whether the safety of tlando is adequately characterized and whether additional data is need pre-approval or post approval , including the need for an ambulatory blood pressure ( “ abpm ” ) study . additional areas discussed included the potential to increase cardiovascular risk , lipid changes , hematocrit increase , levels of dihydro-testosterone and estradiol , cosynotropin stimulation results , cmax excursions , the stopping criteria for use in clinical practice , and whether testosterone concentrations measured in serum tubes are reliable in patients treated with tlando . particularly the fda may be concerned with tlando 's potential for increased adverse cardiovascular outcomes in the population that will likely use the drug , if approved , and observed treatment emergent adverse reactions . we continue to work with the fda in addressing topics discussed by brudac . the fda may or may not view brudac 's tlando advice/recommendation similarly . we have submitted two protocols to the fda under our tlando investigational new drug ( “ ind ” ) application . the first protocol is for the conduct of an abpm clinical study and the second protocol is for a phlebotomy clinical study to confirm no ex-vivo conversion of tu to t. we plan to initiate both clinical studies ahead of our pdufa date . although there is no guarantee of fda approval of tlando , we believe the results from the dv study confirm the validity of a fixed dose approach without the need for dose titration to orally administering tlando . however , approval of our nda on our pdufa date is not guaranteed and we may receive another crl . receipt of another crl would result in substantial delays which may include additional studies and expense before we would be in a position to re-submit an nda responsive to such additional crl . previously on june 28 , 2016 , we received a crl from the fda on our original nda submission . a crl is a communication from the fda that informs companies that an application can not be approved in its present form . the crl identified deficiencies related to the dosing algorithm for the label . story_separator_special_tag specifically , the proposed titration scheme for clinical practice was significantly different from the titration scheme used in the phase 3 trial leading to discordance in titration decisions between the phase 3 trial and real-world clinical practice . in response to the crl , we met with the fda in a post action meeting and proposed a dosing regimen to the fda based on analyses of existing data . the fda noted that while the proposed dosing regimen might be acceptable , validation in a clinical trial would be needed prior to resubmission . the dv study was in response to the fda 's request . we also initiated the dosing flexibility ( “ df ” ) study to assess tlando in hypogonadal males on a fixed daily dose of 450 mg divided into three equal doses . 51 results from dv and df studies the dv and df studies were both an open-label , fixed dose ( no titration ) , single treatment clinical study of oral trt in hypogonadal males with low testosterone ( t ) ( < 300 ng/dl ) that assessed tlando in hypogonadal males on a fixed daily dose of 450 mg divided into two equal doses ( “ bid ” ) in the dv study and into three equal doses ( “ tid ” ) in the df study . in total , 95 and 100 subjects were enrolled into dv and df studies , respectively , with 94 and 98 subjects completing the dv and df studies , respectively . on june 19 , 2017 , we announced top-line results of the dv and df studies . although there is no guarantee of fda approval of tlando , we believe the results from the dv study confirm the validity of a fixed dose approach without the need for dose titration to orally administering tlando . the dv study will be considered our pivotal efficacy clinical study for the nda resubmission . tlando successfully met the fda primary efficacy guidelines in the dv study safety statistical analysis set ( “ ss ” ) where 80 % of the subjects achieved average testosterone levels ( “ cavg ” ) within the normal range with a lower bound confidence interval ( “ ci ” ) of 72 % . the df study restored 70 % of the subjects ' average testosterone levels within the normal range ( cavg ) confirming that twice daily ( “ bid ” ) dosing is the appropriate dosing regimen for tlando and was the basis for resubmission . the safety set is defined as any subject that was randomized into the study and took at least one dose ( n=95 subjects in the dv study and n=100 in the df study ) . a baseline carried forward approach was used to account for missing data as a result of subject discontinuation . the primary efficacy endpoint is the percentage of subjects with cavg within the normal range , which is defined as 300-1080 ng/dl . the fda guidelines for primary efficacy success is that at least 75 % of the subjects on active treatment achieve a testosterone cavg within the normal range ; and the lower bound of the 95 % ci must be greater than or equal to 65 % . the adverse event profile of tlando in both the dv and df studies was consistent with the previously conducted 52-week phase 3 study of androgen replacement ( “ soar ” ) clinical trial . all drug related adverse events ( “ aes ” ) were either mild or moderate in intensity and none were severe . to date , the safety database of tlando includes ~525 unique hypogonadal men demonstrating a profile consistent with other trt products . the secondary endpoints assessed the maximum total testosterone concentration ( “ cmax ” ) post dosing using predetermined limits developed by the fda for transdermals . the fda guidelines for secondary efficacy success is that at least 85 % of the subjects achieve cmax less than 1500 ng/dl ; no greater than 5 % of the subjects have cmax between 1800 ng/dl and 2500 ng/dl ; and zero percent of the subjects have cmax greater than 2500 ng/dl . consistent with the definition of cmax and the pharmacokinetic profile of multiple times a day dosing , two pre-specified analyses were performed , cmax per dose and cmax per day . in the dv study ss cmax per dose analysis , the percentage of subjects with cmax less than 1500 ng/dl and between 1800 ng/dl and 2500 ng/dl were 85 % and 7 % , respectively . deviations from the predetermined limits in the dv study were observed in the cmax per day dose analysis for these thresholds . only one subject , who was a major protocol violator , exceeded the 2500 ng/dl limit independent of per dose or per day dose analyses . the df study ss met all cmax thresholds in per dose and per day dose analyses . prior to conducting the dv study and the df study , we completed our soar pivotal phase 3 clinical study evaluating efficacy and 52-week safety of tlando . the soar study is considered our pivotal safety clinical study for the nda resubmission . results from soar soar was a randomized , open-label , parallel-group , active-controlled , phase 3 clinical study of tlando in hypogonadal males with low testosterone ( < 300 ng/dl ) . in total , 315 subjects at 40 active sites were assigned , such that 210 were randomized to tlando and 105 were randomized to the active control , androgel 1.62 % ® , for 52 weeks of treatment . the active control is included for safety assessment .
| we did not incur similar charges in the year ended december 31 , 2017. other income , net the increase in other income , net , primarily reflects increased interest income earned as a result of increased interest rates and corresponding earnings on average balances in cash , cash equivalents and marketable investment securities in 2017 as compared to 2016 . 57 comparison of the years ended december 31 , 2016 and 2015 the following table summarizes our results of operations for the years ended december 31 , 2016 and 2015 : replace_table_token_7_th research and development expenses the decrease in research and development expenses during the year ended december 31 , 2016 was primarily due to decreased contract research organization and consultant costs of $ 3.8 million due to the completion of our phase 3 soar clinical study of tlando during 2015. in addition , during the year ended december 31 , 2015 , we incurred a $ 2.3 million fee to file our nda for tlando with the fda . these decreases were offset by an increase in validation and commercial batch manufacturing costs during 2016 for tlando of $ 1.7 million . general and administrative expenses the increase in general and administrative expenses during the year ended december 31 , 2016 was primarily due to an increase of $ 1.2 million for pre-commercialization marketing and sales activities related to tlando , an increase of $ 750,000 in legal costs for class action defense and patent interference and an increase of $ 2.0 million in personnel costs due primarily to increased salaries and stock-based compensation related to higher average headcount . the remaining increase relates to several other items including increased director fees , increased audit fees , increased d & o insurance costs , increased rent cost related to our new jersey location and overall higher allocated overhead costs to general and administrative expense . restructuring charges the increase in restructuring charges in the year ended december 31 , 2016 was the result of our 2016 restructuring plan . the charge related to restructuring during the year ended
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upon the occurrence of an event of default under the senior secured note , rockmore may , among other things , declare the senior secured note and all accrued and unpaid interest thereon and all other amounts owing under the senior secured note to be due and payable . if the maturity date of the senior secured note is accelerated as a result of the event of default referenced above , an event of default under the convertible notes would be triggered . if an event of default under the convertible notes occurs , the outstanding principal amount of the convertible notes , liquidated damages and other amounts owing in respect thereof through the date of acceleration , shall become , at the holder 's election , immediately due and payable in cash . we have taken actions to improve our overall cash position and access to liquidity by exploring valuable strategic partnerships , right-sizing our corporate structure , and stream-lining our operations . we expect that the actions taken in 2018 and early 2019 will enhance our liquidity and financial environment . in addition , we expect to generate additional liquidity through the monetization of certain investments and other assets . we expect that these actions will be executed in alignment with the anticipated timing of our liquidity needs . there can be no assurance , however , that any such opportunities will materialize . our historical operating results indicate that there is substantial doubt related to the company 's ability to continue as a going concern . we believe it is probable that the actions discussed above will transpire and will successfully mitigate the substantial doubt raised by our historical operating results and will satisfy our liquidity needs 12 months from the issuance of the financial statements . however , we can not reasonably predict with any certainty that the results of our planned actions will generate the expected liquidity required to satisfy our liquidity needs . if we continue to experience operating losses , and we are not able to generate additional liquidity through the actions described above or through some combination of other actions , while not expected , we may not be able to access additional funds and we might need to secure additional sources of funds , which may or may not be available to us . additionally , a failure to generate additional liquidity could negatively impact our access to inventory or services that are important to the operation of our business . recent developments ceo transition on february 8 , 2019 , edward jankowski resigned as chief executive officer of the company and as a director of the company . mr. jankowski 's resignation was not as a result of any disagreement with the company on any matters related to the company 's operations , policies or practices . mr. jankowski will receive termination benefits including $ 375,000 payable in equal installments over a twelve-month term commencing on february 13 , 2019 and cobra continuation coverage paid in full by the company for up to a maximum of twelve months . effective as of february 11 , 2019 , douglas satzman was appointed by our board of directors as the chief executive officer of the company and as a director of the company . reverse stock split on february 22 , 2019 , we filed a certificate of amendment to our amended and restated certificate of incorporation with the secretary of state of the state of delaware to effect a 1-for-20 reverse stock split of our shares of common stock . such amendment and ratio were previously approved by our stockholders and board of directors , respectively . as a result of the reverse stock split , every twenty ( 20 ) shares of our pre-reverse split common stock were combined and reclassified into one ( 1 ) share of common stock . proportionate voting rights and other rights of common stock holders were affected by the reverse stock split . stockholders who would have otherwise held a fractional share of common stock received payment in cash in lieu of any such resulting fractional shares of common stock as the post-reverse split amounts of common stock were rounded down to the nearest full share . such cash payment in lieu of a fractional share of common stock was calculated by multiplying such fractional interest in one share of common stock by the closing trading price of our common stock on february 22 , 2019 , and rounded to the nearest cent . no fractional shares were issued in connection with the reverse stock split . our common stock began trading on the nasdaq capital market on a post-reverse split basis at the open of business on february 25 , 2019 . 35 dispositions on october 20 , 2017 , we sold fli charge to a group of private investors and fli charge management , who now own and operate fli charge . in february 2019 , the company entered into an agreement to release fli charge 's obligation to pay any royalties on fli charge 's perpetual gross revenues with regard to conductive wireless charging , power , or accessories , and to cancel its warrants exercisable in fli charge in exchange for cash proceeds of $ 1,100,000 which were received in full on february 15 , 2019. on march 22 , 2018 , we sold group mobile to a third party . we have not provided any continued management or financing support to fli charge or group mobile . rebranding on january 5 , 2018 , we changed our name to xpresspa group , inc. from form holdings corp , which aligned our corporate strategy to build a pure-play health and wellness services company . story_separator_special_tag our common stock , par value $ 0.01 per share , which had previously been listed under the trading symbol “ fh ” on the nasdaq capital market , has been listed under the trading symbol “ xspa ” since january 8 , 2018. sale of patents in january 2018 , we sold certain patents to crypto currency patent holdings company llc , a unit of marathon patent group , inc. ( “ marathon ” ) , for approximately $ 1,250,000 , comprised of $ 250,000 in cash and 250,000 shares of marathon common stock valued at approximately $ 1,000,000 ( the “ marathon common stock ” ) at the time of the transaction . the marathon common stock was subject to a lockup period ( the “ lockup period ” ) which commenced on the transaction date and ended on july 11 , 2018 , subject to a leak-out provision . collaboration agreement on november 12 , 2018 , we entered into a product sale and marketing agreement ( the “ collaboration agreement ” ) with calm.com , inc. ( “ calm ” ) primarily related to the display , marketing , promotion , offer for sale and sale of calm 's products in each of our branded stores throughout the united states . the collaboration agreement will remain in effect until july 31 , 2019 , unless terminated earlier in accordance with its terms , and automatically renew for successive terms of six months unless either party provides written notice of termination no later than thirty days prior to any such automatic renewal . financings secured convertible notes on may 15 , 2018 , we entered into a securities purchase agreement ( the “ securities purchase agreement ” ) with certain institutional investors ( the “ investors ” ) , pursuant to which we agreed to sell up to ( i ) an aggregate principal amount of $ 4,438,000 in 5 % secured convertible notes due on november 16 , 2019 , which included $ 88,000 issued to palladium capital advisors as placement agent ( the “ convertible notes ” ) , convertible into shares of our common stock , par value $ 0.01 per share ( the “ common stock ” ) at a conversion price of $ 12.40 per share , ( ii ) class a warrants ( the “ class a warrants ” ) to purchase 357,862 shares of common stock at an exercise price of $ 12.40 per share and ( iii ) class b warrants ( the “ class b warrants , ” and together with the class a warrants , the “ warrants ” ) to purchase 178,931 shares of common stock at an exercise price of $ 12.40 per share . the convertible notes bear interest at a rate of 5 % per annum . the convertible notes are senior secured obligations of ours and are secured by certain of our personal property . unless earlier converted or redeemed , the convertible notes will mature on november 16 , 2019. the transaction closed on may 17 , 2018 , at which time we received $ 4,350,000 in gross proceeds from the investors . 36 the principal amount of the outstanding convertible notes is to be repaid monthly in the amount of approximately $ 296,000 , beginning on september 17 , 2018 , and we may make such payments and related interest payments in cash or , subject to certain conditions , in registered shares of our common stock ( or a combination thereof ) , at our election . if we choose to repay the convertible notes in shares of our common stock , the shares will be issued at a 10 % discount to the volume weighted average price of our common stock for the five ( 5 ) trading days commencing eight ( 8 ) days prior to the relevant repayment date and ending on the fourth ( 4 th ) trading day prior to such repayment date , subject to a minimum floor price of not less than 20 % of the conversion price of the convertible notes on the issue date . we may also repay the convertible notes in advance of the maturity schedule subject to an early repayment penalty of 15 % . on august 14 , 2018 , we entered into an amendment agreement ( “ amendment agreement ” ) whereby the initial monthly principal repayment and accrued interest due on the convertible notes of $ 351,000 was settled in 103,350 shares of common stock on august 15 , 2018. all other material terms of the securities purchase agreement remained unchanged . during the year ended december 31 , 2018 , several of the investors converted their monthly principal payments and accrued interest due on the convertible notes into shares of common stock pursuant to the amendment agreement , resulting in the issuance of an additional 377,109 shares of common stock . on december 11 , 2018 , we entered into a second amendment agreement ( “ second amendment agreement ” ) whereby each holder waived the company 's obligation to make any monthly payments for the months of january , february and march 2019. pursuant to the second amendment agreement , each holder was permitted to convert its pro-rata share of the convertible notes , at a conversion price of $ 4.00 per share of common stock , such that the maximum number of shares to be issued pursuant to this amendment shall not exceed 250,000 shares of common stock . all other material terms of the securities purchase agreement remained unchanged . during the three-month period ended december 31 , 2018 , one of the investors converted a portion of their allotted shares , in settlement of $ 23,000 , into shares of common stock pursuant to the second amendment agreement , resulting in the issuance of an additional 5,627 shares of common stock .
| revenue from patent licensing is recognized when we transfer promised intellectual property rights to purchasers in an amount that reflects the consideration to which we expect to be entitled in exchange for those intellectual property rights . currently , revenue arrangements related to intellectual property provide for the payment of contractually determined fees and other consideration for the grant of certain intellectual property rights related to our patents . these rights typically include some combination of the following : ( i ) the grant of a non-exclusive , retroactive and future license to manufacture and or sell products covered by patents , ( ii ) the release of the licensee from certain claims , and ( iii ) the dismissal of any pending litigation . the intellectual property rights granted typically extend until the expiration of the related patents . pursuant to the terms of these agreements , we have no further obligation with respect to the grant of the non-exclusive retroactive and future licenses , covenants-not-to-sue , releases , and other deliverables , including no express or implied obligation on our part to maintain or upgrade the related technology , or provide future support or services . generally , the agreements provide for the grant of the licenses , covenants-not-to-sue , releases , and other significant deliverables upon execution of the agreement , or upon receipt of the upfront payment . as such , the earnings process is complete and revenue is recognized upon the execution of the agreement , receipt of the upfront fee , and transfer of the promised intellectual property rights . cost of sales cost of sales consists of store-level costs . store-level costs include all costs that are directly attributable to the store operations and include : · payroll and related benefits for store operations and store-level management ; · rent , percentage rent and occupancy costs ; · the cost of merchandise ; · freight , shipping and handling costs ; · production costs ; · inventory shortage and valuation adjustments , including purchase price allocation increase in fair values which was recorded as part
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our broad product portfolio serves a diverse set of end-use applications including paints and coatings , textiles , automotive applications , consumer and medical applications , performance industrial applications , filtration applications , paper and packaging , chemical additives , construction , consumer and industrial adhesives , and food and beverage applications . our products enjoy leading global positions due to our large global production capacity , operating efficiencies , proprietary production technology and competitive cost structures . our large and diverse global customer base primarily consists of major companies in a broad array of industries . we hold geographically balanced global positions and participate in diversified end-use applications . we combine a demonstrated track record of execution , strong performance built on shared principles and objectives , and a clear focus on growth and value creation . known for operational excellence and execution of our business strategies , we deliver value to customers around the globe with best-in-class technologies and solutions . we are organized around two complementary cores , materials solutions and the acetyl chain . together , these two value drivers share technology , fully integrated systems and research resources to increase efficiency and quickly respond to market needs . within materials solutions and the acetyl chain , we operate principally through four business segments : materials solutions includes advanced engineered materials and consumer specialties business segments , and the acetyl chain includes industrial specialties and acetyl intermediates business segments . 34 story_separator_special_tag assuming no material changes to tax rules and regulations or cash repatriation plans , we expect to realize operational savings in connection with the establishment of our centralized european headquarters , which will directly impact the mix of our earnings and may result in favorable income tax impacts in subsequent years . our effective tax rate will vary based on the jurisdictions in which income is actually generated and remains subject to potential volatility from changing tax legislation in the us and other tax jurisdictions . we continue to assess our business model and its impact in various jurisdictions . 39 year ended december 31 , 2014 compared to year ended december 31 , 2013 net sales increased $ 292 million , or 4.5 % , for the year ended december 31 , 2014 compared to the same period in 2013 primarily due to : higher vam pricing in our acetyl intermediates segment ; higher acetic acid pricing in our acetyl intermediates segment ; and higher volume globally in our advanced engineered materials segment fueled by growth in automotive , medical and industrial applications . selling , general and administrative expenses increased $ 447 million , or 143.7 % , for the year ended december 31 , 2014 compared to the same period in 2013 primarily due to : an increase in pension and other postretirement plan net periodic benefit cost of $ 379 million ; higher functional and project spending of $ 43 million ; and higher incentive compensation costs of $ 25 million . other ( charges ) gains , net changed $ 173 million , or 109.5 % , for the year ended december 31 , 2014 compared to the same period in 2013 primarily due to : $ 138 million of lower charges in our acetyl intermediates segment as a result of the closure of our acetic anhydride facility in roussillon , france and our vam facility in tarragona , spain , as well as long-lived impairment losses related to our singapore acetic acid production unit during the three months ended december 30 , 2013. see note 18 - other ( charges ) gains , net in the accompanying consolidated financial statements for further information . operating profit decreased $ 750 million , or 49.7 % , for the year ended december 31 , 2014 compared to the same period in 2013 primarily due to : higher selling , general and administrative expenses ; and the recognition of a gain of $ 742 million during the three months ended december 31 , 2013 , which represented the deferred proceeds in excess of divested assets as a result of the 2006 settlement agreement with the frankfurt , germany airport ( `` fraport '' ) to move our german pom operations . the proceeds were included in our advanced engineered materials segment . see note 4 - acquisitions , dispositions and plant closures in the accompanying consolidated financial statements for further information ; partially offset by : an increase in net sales , as well as the impact of permanent capacity reductions in europe in december 2013. operating margin for the year ended december 31 , 2014 decreased to 11.1 % from 23.2 % in 2013 . equity in net earnings of affiliates increased $ 66 million for the year ended december 31 , 2014 compared to the same period in 2013 primarily due to : a $ 48 million gain resulting from restructuring the debt of a subsidiary of infraserv gmbh & co. hoechst kg during the three months ended june 30 , 2014 ; and an increase in equity investment earnings of $ 13 million from our polyplastics co. , ltd. ( `` polyplastics '' ) strategic affiliate . our effective income tax rate for the year ended december 31 , 2014 was 33 % compared to 32 % for the year ended 2013 . 40 business segments advanced engineered materials replace_table_token_17_th our advanced engineered materials segment includes our engineered materials business and certain strategic affiliates . our engineered materials business develops , produces and supplies a broad portfolio of high performance specialty polymers for automotive and medical applications , as well as industrial products and consumer electronics . together with our strategic affiliates , our engineered materials business is a leading participant in the global specialty polymers industry . the primary products of advanced engineered materials are polyoxymethylene , also commonly known as pom , ultra-high molecular weight polyethylene ( `` uhmw-pe '' ) , polybutylene terephthalate ( `` pbt '' ) , long-fiber reinforced thermoplastics ( `` lfrt '' ) and liquid crystal polymers ( `` lcp '' ) . story_separator_special_tag pom , lfrt and pbt are used in automotive and medical applications as well as consumer electronics , appliances and industrial products . uhmw-pe , sold under the gur ® trademark , is used in battery separators , conveyor belts , filtration equipment , coatings and medical applications . primary end uses for lcp are electrical applications or products and consumer electronics . pps , sold under the fortron ® brand , is a key product of fortron industries llc , one of our strategic affiliates . pps is used in a wide variety of automotive and other applications , especially those requiring heat and or chemical resistance . year ended december 31 , 2015 compared to year ended december 31 , 2014 net sales decreased for the year ended december 31 , 2015 compared to the same period in 2014 primarily due to : an unfavorable currency impact resulting from a strong us dollar relative to the euro . operating profit increased for the year ended december 31 , 2015 compared to the same period in 2014 primarily due to : lower energy and raw material costs , primarily for ethylene and polypropylene , which more than offset the decrease in net sales ; partially offset by : an increase in net periodic benefit cost of $ 54 million . equity in net earnings ( loss ) of affiliates decreased for the year ended december 31 , 2015 compared to the same period in 2014 primarily due to : a decrease in equity investment earnings of $ 27 million from our ibn sina strategic affiliate as a result of lower pricing for mtbe and methanol ; partially offset by : 41 an increase in equity investment earnings from our polyplastics and korea engineering plastics co. , ltd. strategic affiliates of $ 8 million and $ 6 million , respectively , primarily as a result of lower raw material costs . year ended december 31 , 2014 compared to year ended december 31 , 2013 net sales increased for the year ended december 31 , 2014 compared to the same period in 2013 primarily due to : higher volume in europe from strong growth in nearly all product lines ; higher volume in the americas primarily driven by growth in pom in automotive applications and gur ® in medical and industrial applications ; and higher volume in asia across all product lines resulting from targeted customer focus and the implementation of growth strategies ; partially offset by : lower pricing for pom and gur ® due to shifts in product and geographic sales mix . operating profit decreased for the year ended december 31 , 2014 compared to the same period in 2013 primarily due to : the recognition of a gain of $ 742 million during the three months ended december 31 , 2013 , which represents the deferred proceeds in excess of divested assets as a result of the 2006 settlement agreement with fraport to move our german pom operations ; lower pricing ; a $ 16 million negative impact from inventory build in the same period in 2013 in response to a planned turnaround during the three months ended september 30 , 2014 ; and higher expenses of $ 11 million related to plant maintenance ; partially offset by : higher net sales , as well as lower net periodic benefit cost of $ 38 million ; and an increase of $ 12 million from other ( charges ) gains , net , primarily due to a decrease in costs associated with the relocation and expansion of our german pom operations . equity in net earnings ( loss ) of affiliates increased for the year ended december 31 , 2014 compared to the same period in 2013 primarily due to : an increase in equity investment earnings of $ 13 million from our polyplastics strategic affiliate as a result of higher volume , lower turnaround expenses and lower restructuring charges related to one of their affiliates . 42 consumer specialties replace_table_token_18_th our consumer specialties segment includes our cellulose derivatives and food ingredients businesses , which serve consumer-driven applications . our cellulose derivatives business is a leading global producer and supplier of acetate flake , acetate film and acetate tow , primarily used in filtration applications . our food ingredients business is a leading international supplier of premium quality ingredients for the food and beverage and pharmaceuticals industries and is a leading producer of food protection ingredients , such as potassium sorbate and sorbic acid . our food ingredients business produces and sells the qorus ® sweetener system and sunett ® high intensity sweeteners . year ended december 31 , 2015 compared to year ended december 31 , 2014 net sales decreased for the year ended december 31 , 2015 compared to the same period in 2014 primarily due to : lower acetate tow volume driven by customer destocking ; and lower acetate tow pricing driven by reduced industry utilization . operating profit decreased for the year ended december 31 , 2015 compared to the same period in 2014 primarily due to : a decrease in net sales ; an unfavorable impact in other ( charges ) gains , net due to employee termination costs of $ 24 million and accelerated depreciation expense of $ 10 million which were recorded as a result of a 50 % capacity reduction at our acetate tow facility in lanaken , belgium in december 2015. see note 4 - acquisitions , dispositions and plant closures in the accompanying consolidated financial statements for further information ; other ( charges ) gains , net was also unfavorably impacted by an arbitration recovery in 2014 against a former utility operator at our cellulose derivatives manufacturing facility in narrows , virginia , which did not recur in the current year ; and an increase in net periodic benefit cost of $ 32 million ; partially offset by : lower wood pulp and energy costs .
| ( 2 ) primarily relates to a decrease in the weighted average discount rate used to determine benefit obligations from 4.6 % to 3.7 % and a loss of $ 52 million reflecting the incorporation of the rp-2014 mortality tables into the actuarial assumptions for the us pension plans as of december 31 , 2014 . ( 3 ) primarily relates to actions taken in 2014 to offer a limited-time , voluntary buyout to certain participants of our us qualified defined benefit pension plan with a vested benefit . replace_table_token_16_th see note 15 - benefit obligations in the accompanying consolidated financial statements for further information . consolidated results year ended december 31 , 2015 compared to year ended december 31 , 2014 net sales decreased $ 1.1 billion , or 16.6 % , for the year ended december 31 , 2015 compared to the same period in 2014 primarily due to : unfavorable currency impacts across all our business segments resulting from a strong us dollar relative to the euro ; lower pricing and volume in our acetyl intermediates segment for vinyl acetate monomer ( `` vam '' ) and acetic acid ; and lower acetate tow volume and pricing in our consumer specialties segment driven by customer destocking and reduced industry utilization , respectively . selling , general and administrative expenses decreased $ 252 million , or 33.2 % , for the year ended december 31 , 2015 compared to the same period in 2014 primarily due to : a decrease in pension and other postretirement plan net periodic benefit cost of $ 164 million ; cost savings of $ 50 million related to productivity initiatives across all of our business segments ; and 38 lower functional spending and incentive compensation costs of $ 41 million . operating profit decreased $ 432 million , or 57.0 % , for the year ended december 31 , 2015 compared to the same period in 2014 primarily due to : a decrease in net sales ; and an unfavorable impact from other ( charges ) gains , net . in december 2015 , we terminated our existing agreement with a raw materials supplier in singapore .
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our audit also included performing such other procedures as we considered necessary in the circumstances . we believe that our audit provides a reasonable basis for our opinion . a company 's internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of story_separator_special_tag overview we operate in one reportable segment : as a distributor of products and services to the industrial , commercial , institutional , and governmental maintenance , repair and operations ( `` mro '' ) marketplace . certain reclassifications have been made to prior period amounts to conform to the current period presentation . such reclassifications have no effect on net income as previously reported . the north american mro industry is highly fragmented . we compete for business with several national distributors as well as a large number of regional and local distributors . the mro business is significantly influenced by the overall strength of the manufacturing sector of the u.s. economy . one measure used to evaluate the strength of the industrial products market is the pmi index published by the institute for supply management . the pmi index is a composite index of economic activity in the united states manufacturing sector . it is published by the institute for supply management and is available at https : //www.instituteforsupplymanagement.org . a measure of that index above 50 generally indicates expansion of the manufacturing sector while a measure below 50 generally represents contraction . the average monthly pmi was 51.4 for the year ended december 31 , 2015 compared to 55.7 for the year ended december 31 , 2014 indicating slower growth in 2015 in the u.s. manufacturing economy compared to the prior year which manifested during the second half of the year . the average pmi in the fourth quarter of 2015 and in january of 2016 has continued to decline . the mro distribution industry slowed due to many factors with the most prominent factor impacting lawson being a slow-down in the oil and gas end markets due to lower oil prices and a general slowdown in the mro marketplace . our sales are also affected by the number of sales representatives and the amount of sales each representative can generate , which we measure as average sales per day per sales representative . in 2015 , we increased the number of sales representatives , by 21 net new sales representatives , to a total of 937 at december 31 , 2015. we plan to continue to expand our sales representative count by 5 % to 10 % by the end of 2016. while we anticipate future sales growth from our expanded sales force , we also anticipate a short-term decrease in average sales per day per sales representative , as new representatives build up customer relationships in their territories . results of operations are examined in detail following a recap of our major activities in 2015 . 2015 activities north american sales meeting - this meeting provided our sales representatives with product and sales training , improved awareness of our strategies and allowed them to network with their peers and share best practices . the cost of the 4-day event is viewed as a long-term investment in our sales team . although our north american sales meeting is not an annual event , we do plan to hold meetings in the future as we value the long-term benefit on our organization . increased sales team - we increased the number of net active sales representatives from 916 on december 31 , 2014 to 937 on december 31 , 2015. roll out of new sales ordering tool - during 2015 , we completed the introduction of a new sales ordering tool allowing our sales team to access real time product pricing and availability in the field . acquisition - we completed an acquisition of a small family-owned auto body parts distributor to complement our kent automotive business and increase our presence in western canada . lean six sigma - we successfully completed six lean six sigma projects including standardizing the training received by all new sales representatives . improved operational performance - we continued to improve the fundamentals of our business , measured as improved customer service levels to our customers as well as reduced customer backorders . we believe we have created a scalable infrastructure that will allow us to take full advantage of future growth opportunities . we continue to strive to be our customers ' first choice for maintenance , repair and operational solutions . 14 story_separator_special_tag stages of developing customer relationships in their territories . gross profit gross profit increased 7.0 % in 2014 to $ 172.5 million from $ 161.3 million in 2013 and increased as a percent of net sales to 60.4 % from 59.8 % in 2013 . the improved gross margin was primarily driven by lower outbound freight expense , leveraging distribution center efficiencies , improved purchasing costs and better alignment of our gross margin with the commissions paid to our sales representatives . selling expenses selling expenses increased $ 6.5 million to $ 90.8 million in 2014 from $ 84.3 million in 2013 and increased as a percent of net sales to 31.8 % from 31.3 % in 2013. increased costs associated with new sales representatives including compensation , hiring and onboarding expenses were offset partially by expenses incurred in 2013 related to a north american sales meeting which was not held in 2014 . story_separator_special_tag 17 general and administrative expenses general and administrative expenses increased $ 3.0 million to $ 83.4 million in 2014 from $ 80.4 million in 2013. an increase in stock-based compensation of $ 4.1 million in 2014 was offset partially by the additional costs associated with opening the mccook distribution facility in 2013 which were not present in 2014. other operating expenses , net in 2014 , we completed the sale of our reno , nevada , distribution center . as part of the review of the impact of a prospective sale , we determined that the full carrying amount of the asset was not recoverable . therefore , we recorded a $ 3.0 million non-cash impairment charge prior to the sale . in conjunction with the sale , we entered into an agreement to leaseback , for a 10-year term , approximately one-half of the building that we were previously using . also , in 2014 we accrued $ 0.3 million related to the estimated future remediation of an environmental matter involving land owned in decatur , alabama , that was part of a division that was previously sold in 2014. in 2013 we entered into an agreement to sub-lease a portion of our leased headquarters . under lease accounting rules we recorded a $ 2.9 million charge , primarily representing the net difference between the company 's future scheduled lease payments and the expected proceeds from the sub-lease , as well as related asset write-downs . also in 2013 , we recorded a benefit of $ 0.4 million related to the settlement of an employment tax matter with the irs for $ 0.8 million , as we had originally accrued $ 1.2 million in 2011 as our best estimate of the outcome . interest and other expenses , net interest and other expenses , net decreased to $ 0.9 million in 2014 from $ 1.3 million in 2013 primarily due to a lower average debt balance which led to decreased interest expense . income tax ( benefit ) expense due to historical cumulative losses , in 2012 , we determined that it was more likely than not that we would not be able to utilize our deferred tax assets to offset future taxable income . therefore , substantially all of our deferred tax assets are subject to a tax valuation allowance . although we are in a full tax valuation allowance position , an income tax expense of $ 0.2 million and an income tax benefit of $ 0.1 million were recorded in 2014 and 2013 , respectively . the 2014 tax expense was related to reserves for uncertain tax positions , partially offset by the allocation of income taxes between continuing and discontinued operations . loss from continuing operations we reported losses from continuing operations of $ 6.1 million and $ 7.0 million in 2014 and 2013 , respectively . 2014 earnings were negatively affected by the one-time $ 3.0 million impairment charge related to the sale of the reno , nevada , distribution center and a $ 6.4 million charge related to stock-based compensation primarily due to the increase in our stock price during the year . the loss recorded in 2013 was due partially to the loss of $ 2.9 million recorded on the sub-lease of a portion of our headquarters and costs associated with the opening of the mccook distribution center . 18 liquidity and capital resources cash provided by operating activities was $ 9.3 million , $ 2.3 million and $ 0.5 million in 2015 , 2014 and 2013 , respectively . the year over year increases primarily reflect improved operating results . capital expenditures were $ 2.3 million , $ 2.8 million and $ 2.9 million in 2015 , 2014 and 2013 , respectively . capital expenditures in 2015 were primarily for improvements to our distribution centers and information technology . capital expenditures in 2014 were primarily for reconfiguration of our reno , nevada , distribution center , facility improvements and upgrades to our information technology capabilities . capital expenditures in 2013 were primarily for warehouse equipment to support operations in our mccook facility , and for improvements to our sales order entry system and our redesigned website . we have the ability to borrow funds through the loan agreement which consists of a $ 40.0 million revolving credit facility which includes a $ 10.0 million sub-facility for letters of credit . the terms of the loan agreement as amended are more fully detailed in note 8 – loan agreement of the consolidated financial statements included in item 8 of this form 10-k. at december 31 , 2015 , we had borrowings of $ 0.9 million on our revolving line of credit and had additional borrowing availability of $ 30.0 million . in addition to other customary representations , warranties and covenants , we are required to meet a minimum trailing twelve month ebitda to fixed charges ratio and a minimum quarterly tangible net worth level as defined in the second amendment of the loan agreement . on december 31 , 2015 , we were in compliance with all financial covenants as detailed below : quarterly financial covenants requirement actual ebitda to fixed charges ratio 1.10 : 1.00 3.12 : 1.00 minimum tangible net worth $ 45.0 million $ 54.0 million we have met the minimum financial covenant levels for all quarters since the loan agreement was put in place including the quarter ended december 31 , 2015 . failure to meet these covenant requirements in future quarters could lead to higher financing costs , increased restrictions , or reduce or eliminate our ability to borrow funds .
| general and administrative expenses decreased $ 7.4 million to $ 76.0 million in 2015 from $ 83.4 million in 2014. a decrease of $ 4.3 million in stock-based compensation of which a portion varies with our stock price , and a decrease in other compensation of $ 3.2 million , combined with decreases across many other expense categories as a result of cost reduction efficiencies , were offset partially by an increase of $ 0.6 million in severance expense and a favorable legal settlement of $ 0.7 million in 2014. other operating expenses in 2015 and 2014 we accrued $ 0.9 million and $ 0.3 million , respectively , related to estimated future remediation of an environmental matter involving land owned in decatur , alabama , that was part of a division that was previously sold in 2014. in 2014 , we completed the sale of our reno , nevada , distribution center . as part of the review of the impact of a prospective sale , we determined that the full carrying amount of the asset was not recoverable . therefore , we recorded a $ 3.0 million non-cash impairment charge prior to the sale . in conjunction with the sale , we entered into an agreement to leaseback , for a 10-year term , approximately one-half of the building that we were previously using . interest and other expenses , net interest and other expenses , net increased to $ 1.0 million in 2015 from $ 0.9 million in 2014 due primarily to $ 0.2 million of interest recorded in 2015 related to the settlement of a canadian tax matter ( see note 11 - commitments and contingencies of the consolidated financial statements included in item 8 of this form 10-k for further details ) partially offset by a decrease in interest expense from our revolving credit facility due to a lower average debt balance during 2015. income tax expense due to historical cumulative losses , in 2012 , we determined it was
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we estimate the value of such end customer contracts based on a combination of factors , including the value of end customer contracts made available to us by customers in past periods , the minimum value of end customer contracts that our customers are required to give us the opportunity to sell pursuant to the terms of their contracts with us , periodic internal business reviews of our expectations as to the value of end customer contracts that will be made available to us by customers , the value of end customer contracts included in the service performance analysis ( “ spa ” ) and collaborative discussions with our customers assessing their expectations as to the value of service contracts that they will make available to us for sale . while the minimum value of end customer contracts that our customers are required to give us represents a portion of our estimated opportunity under management , a significant portion of the opportunity under management is estimated based on the other factors described above . as our experience with our business , our customers and their contracts has grown , we have continually refined the process , improved the assumptions and expanded the data related to our calculation of opportunity under management . when estimating recurring revenue opportunity under management , we must , to a large degree , rely on the assumptions described above , which may prove incorrect . these assumptions are inherently subject to significant business and economic uncertainties and contingencies , many of which are beyond our control . our estimates therefore may prove inaccurate , causing the actual value of end customer contracts delivered to us in a given twelve-month period to differ from our estimate of opportunity under management . these factors include : the extent to which customers deliver a greater or lesser value of end customer contracts than may be required or otherwise expected ; roll-overs of unsold service contract renewals from prior periods to the current period or future periods ; changes in the pricing or terms of service contracts offered by our customers ; increases or decreases in the end customer base of our customers ; the extent to which the renewal rates we achieve on behalf of a customer early in an engagement affect the amount of opportunity that the customer makes available to us later in the engagement ; customer cancellations of their contracts with us ; and changes in our customers ' businesses , sales organizations , management , sales processes or priorities . our managed services revenue also depends on our close rates and commissions . our close rate is the percentage of opportunity under management that we renew on behalf of our customers . our commission rate is an agreed-upon percentage of the renewal value of end customer contracts that we sell on behalf of our customers . our close rate is impacted principally by our ability to successfully sell service contracts on behalf of our customers . other factors impacting our close rate include : the manner in which our customers price their service contracts for sale to their end customers ; the stage of life-cycle associated with the products and underlying technologies covered by the service contracts offered to the end customer ; the extent to which our customers or their competitors introduce new products or underlying technologies ; the nature , size and age of the service contracts ; and the extent to which we have managed the renewals process for similar products and underlying technologies in the past . in determining commission rates for an individual engagement , various factors , including our close rates , as described above , are evaluated . these factors include : historical , industry-specific and customer-specific renewal rates for similar service contracts ; the magnitude of the opportunity under management in a particular engagement ; the number of end customers associated with these opportunities ; and the opportunity to receive additional performance commissions when we exceed certain renewal levels . we endeavor to set our commission rates at levels commensurate with these factors and other factors that may be relevant to a particular engagement . accordingly , our commission rates vary , often significantly , from engagement to engagement . in addition , we sometimes agree to lower commission rates for engagements with significant opportunity under management . number of engagements . we track the number of engagements we have with our customers . we often have multiple engagements with a single customer , particularly where we manage the sales of service renewals relating to different product lines , technologies , types of contracts or geographies for the customer . when the set of renewals we manage on behalf of a customer is associated with a separate customer contract or a distinct product set , type of end customer contract or geography and therefore requires us to assign a service sales team to manage the renewals , we designate the set of renewals , and associated revenues and costs to us as a unique engagement . for example , we may have one engagement consisting of a service sales team selling maintenance contract renewals of a particular product for a customer in the united states and another engagement consisting of a sales team selling warranty contract renewals of a different product for the same customer in europe . these 32 would count as two engagements . we had approximately 191 , 150 and 145 engagements as of december 31 , 2014 , 2013 and 2012 respectively . in 2014 , we experienced a decline in opportunity under management ( `` oum '' ) for our managed services business due to a number of contractions and nonrenewal by some of our customers . we expect that the oum reduction in 2014 will further impact our 2015 results since the company 's 2014 results were not fully impacted since the business reflected it for a portion of the year . factors affecting our performance sales cycle . we sell our integrated solution through our sales organization . story_separator_special_tag at the beginning of the sales process , our quota-carrying sales representatives contact prospective customers and educate them about our offerings . educating prospective customers about the benefits of our solution can take time , as many of these prospects have not historically relied upon integrated solutions like ours for service revenue management , nor have they typically put out a formal request for proposal or otherwise made a decision to focus on this area . as part of our sales process , we utilize our solutions design team to perform a spa of our prospect 's service revenue . the spa includes an analysis of best practices and benchmarks the prospect 's service revenue against industry peers . through the spa process , which typically takes several weeks , we are able to assess the characteristics and size of the prospect 's service revenue , identify potential areas of performance improvement , and formulate our proposal for managing the prospect 's service revenue . the length of our sales cycle for a new customer , inclusive of the spa process and measured from our first formal discussion with the customer until execution of a new customer contract , is typically longer than six months and has increased in recent periods . we generally contract with new customers to manage a specified portion of their service revenue opportunity , such as the opportunity associated with a particular product line or technology , contract type or geography . we negotiate the engagement specific terms of our customer contracts , including commission rates , based on the output of the spa , including the areas identified for improvement . once we demonstrate success to a customer with respect to the opportunity under contract , we seek to expand the scope of our engagement to include other opportunities with the customer . for some customers , we manage all or substantially all of their service contract renewals . for cloud offerings , the spa may be more limited and focused on the benefits of the respective technology and therefore may take less time . implementation cycle . after entering into an engagement with a new customer , and to a lesser extent after adding an engagement with an existing customer , we incur sales and marketing expenses related to the commissions owed to our sales personnel . the commissions are based on the estimated total contract value , with a material portion of the commission expensed upfront with the remaining portion expensed ratably over a period of twelve to fourteen months . we also make upfront investments in technology and personnel to support the engagement . these expenses are typically incurred one to three months before we begin generating sales and recognizing revenue . accordingly , in a given quarter , an increase in new customers , and , to a lesser extent , an increase in engagements with existing customers , or a significant increase in the contract value associated with such new customers and engagements , will negatively impact our gross margin and operating margins until we begin to achieve anticipated sales levels associated with the new engagements , which is typically two-to-three quarters after we begin selling contracts on behalf of our customers . although we expect new customer engagements to contribute to our operating profitability over time , in the initial periods of a customer relationship , the near term impact on our profitability can be negatively impacted by slower-than anticipated growth in revenues for these engagements as well as the impact of the upfront costs we incur , the lower initial level of associated service sales team productivity and lack of mature data and technology integration with the customer . as a result , an increase in the mix of new customers as a percentage of total customers may initially have a negative impact on our operating results . similarly , a decline in the ratio of new customers to total customers may positively impact our near-term operating results . contract terms . substantially all of our managed services revenue comes from our pay-for-performance model . under our pay-for-performance model , we earn commissions based on the value of service contracts we sell on behalf of our customers . in some cases , we earn additional performance-based commissions for exceeding pre-determined service renewal targets . our new customer contracts have typically had a term of approximately 36 months , although we sometimes have contract terms of up to 60 months . our contracts generally require our customers to deliver a minimum value of qualifying service revenue contracts for us to renew on their behalf during a specified period . to the extent that our customers do not meet their minimum contractual commitments over a specified period , they may be subject to fees for the shortfall . our customer 33 contracts are cancelable on relatively short notice , subject in most cases to the payment of an early termination fee by the customer . the amount of this fee is based on the length of the remaining term and value of the contract . we invoice our customers on a monthly basis based on commissions we earn during the prior month , and with respect to performance-based commissions , on a quarterly basis based on our overall performance during the prior quarter . amounts invoiced to our customers are recognized as revenue in the period in which our services are performed or , in the case of performance commissions , when the performance condition is determinable . because the invoicing for our services generally coincides with or immediately follows the sale of service contracts on behalf of our customers , we do not generate or report a significant deferred revenue balance . however , the combination of minimum contractual commitments , our success in generating improved renewal rates for our customers , our customers ' historical renewal rates and the performance improvement potential identified by our spa process , provides us with revenue visibility . m & a activity .
| our working capital management , particularly around accounts receivable and accrued compensation and benefits , contributed to an improvements in our net cash flows from operations in 2013. in 2012 , net cash provided by operating activities was $ 10.5 million . our net loss during the period was $ 42.8 million , which was impacted by a non-cash valuation allowance of $ 33.1 million for a substantial portion of our deferred tax assets and adjusted by non-cash charges of $ 10.0 million for depreciation and amortization and $ 20.9 million for stock-based compensation . cash provided for operations resulted from changes in our working capital , including a $ 7.5 million increase in other accrued liabilities and a $ 3.8 million decrease in prepaid balances . uses of cash were related to an $ 11.2 million increase in accounts receivable , a $ 6.2 million decrease in accrued compensation and benefits and a $ 2.5 million decrease in accounts payable . investing activities in 2014 cash used for investing activities was principally to purchase of short-term investments , net sales and maturities of $ 20.0 million , acquisition of scout analytics of $ 32.6 million and to a lesser extent for purchases of property and equipment of $ 9.4 million . 46 in 2013 cash used for investing activities was principally to purchase of short-term investments , net sales and maturities of $ 72.7 million , and to a lesser extent for purchases of property and equipment of $ 5.3 million and as investments of $ 4.5 million in a privately held company . in 2012 cash used for investing activities related to purchases of property and equipment totaled $ 20.0 million , including costs capitalized for development of internal-use software and leasehold improvements associated with our offices , partially offset by net proceeds from sales and maturities of short-term of investments $ 9.5 million . financing activities cash provided by financing activities was $ 4.2 million during 2014 and comprised primarily from option exercises and the purchase of common stock under our employee stock purchase plan of $ 4.4
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despite a concerted effort to improve consumer takeaway of the products through product , packaging and placement changes , as well as aggressive promotions , we continued to experience weak consumer sales of the products in their second season . late in the third quarter of fiscal 2014 , major retailers indicated that they would not support the products going forward . consequently , we made the decision to discontinue the two products at the end of the 2014 garden season . as a result , we recorded a $ 16.9 million charge ( garden charge ) to operating income in the quarter ended june 28 , 2014 to write off the remaining inventory of these products and to account for product returns , promotional allowances and other costs related to the discontinuance of the products . 32 gain on sale of manufacturing plant assets during fiscal 2014 , we recorded a $ 4.9 million gain in our garden segment from the sale of manufacturing plant assets related to a seasonal product we intend to purchase rather than produce . replace_table_token_7_th replace_table_token_8_th 33 replace_table_token_9_th replace_table_token_10_th ( a ) in fiscal 2015 , we recognized a non-cash intangible asset impairment charge within our pet segment . garden segment fiscal 2015 net sales fiscal 2014 net sales fiscal year as reported ( gaap ) $ 756,188 $ 758,852 garden charge ( b ) 7,035 fiscal year as adjusted $ 756,188 $ 765,887 replace_table_token_11_th ( b ) the garden charges reflect the impact of a garden segment charge in fiscal 2014 related to the discontinuance of certain products introduced in 2013 . ( c ) in fiscal 2014 , we recognized a gain from the sale of manufacturing plant assets related to a product the garden segment will now purchase rather than produce . 34 results of operations ( gaap ) the following table sets forth , for the periods indicated , the relative percentages that certain income and expense items bear to net sales : replace_table_token_12_th fiscal 2015 compared to fiscal 2014 net sales net sales for fiscal 2015 increased $ 46.3 million , or 2.9 % , to $ 1650.7 million from $ 1604.4 million in fiscal 2014. our branded product sales increased $ 10.3 million , and sales of other manufacturers ' products increased $ 36.0 million . branded product sales include products we produce under central brand names and products we produce under third party brands . sales of our branded products represented 79.7 % of our total sales in fiscal 2015 compared with 81.3 % in fiscal 2014. private label sales represented less than 10 % of our consolidated net sales . the following table indicates each class of similar products which represented approximately 10 % or more of our consolidated net sales in the fiscal years presented ( in millions ) : replace_table_token_13_th our pet segment 's net sales for fiscal 2015 increased $ 49.0 million , or 5.8 % , to $ 894.5 million from $ 845.5 million in fiscal 2014. pet branded product sales increased $ 25.3 million from fiscal 2014 due principally to a $ 20.7 million increase in our animal health category due primarily to growth in active ingredient sales and our envincio acquisition in the prior year . also , our dog and cat category net sales increased approximately $ 12.5 million due primarily to our fourth quarter fiscal 2015 ims acquisition . collectively , the acquisition of ims in fiscal 2015 and envincio in fiscal 2014 contributed $ 17.3 million of the $ 25.3 million increase in our pet branded product sales in fiscal 2015. these increases were partially offset by a $ 4.6 million price driven decrease in wild bird feed . sales of other manufacturers ' products increased approximately $ 23.7 million in fiscal 2015 benefitting from expanded distribution . 35 our garden segment 's net sales for fiscal 2015 decreased $ 2.7 million , or 0.4 % , to $ 756.2 million from $ 758.9 million in fiscal 2014. garden branded product sales decreased $ 15.0 million due primarily to decreases of $ 21.0 million in grass seed and $ 11.1 million in décor . grass seed sales declined due primarily to weather related lower volumes and the impact of the strong dollar on export sales . lower volumes in décor were due primarily to higher promotional sales in the prior year along with an unfavorable change in product mix due to lost distribution . these declines were partially offset by a $ 23.8 million increase in our controls and fertilizers category . the increase in controls and fertilizers was primarily volume related and reflects a $ 7.0 million charge to sales in the prior year for the impact on sales for two discontinued garden products . excluding the $ 7.0 million charge in the prior year , controls and fertilizer sales increased $ 16.8 million . sales of other manufacturers ' products increased approximately $ 12.3 million compared to fiscal 2014 due primarily to increased distribution to existing customers . gross profit gross profit for fiscal 2015 increased $ 34.0 million , or 7.5 % , to $ 488.0 million from $ 454.0 million in fiscal 2014. gross margin increased to 29.6 % in fiscal 2015 from 28.3 % in fiscal 2014 , with improvement in both our garden and pet segments . gross profit for fiscal 2015 increased $ 17.1 million , or 3.6 % , from adjusted gross profit of $ 470.9 million in fiscal 2014 , which was impacted by the $ 16.9 million prior year garden charge . gross margin for fiscal 2015 increased to 29.6 % from the adjusted gross margin of 29.2 % for fiscal 2014. in the pet segment , gross profit increased in fiscal 2015 due to a $ 49.0 million increase in sales and an improved gross margin . the improvement in gross profit was due primarily to increased sales in our animal health category , which includes our professional business , and our dog and cat category . story_separator_special_tag because our animal health sales tend to be higher margin , the animal health category 's increased sales had a positive impact on both our product mix and our gross margin . gross margin also improved in our dog and cat category , although the improvement was partially offset by the lower margin of the increased sales . in the garden segment , gross profit increased in fiscal 2015 due to an improved gross margin which was partially offset by a $ 2.7 million decrease in sales . the garden segment gross profit and gross margin were impacted in fiscal 2014 by the garden charge . after adjusting for the fiscal 2014 garden charge , the gross margin in the garden segment was the same in both fiscal years 2015 and 2014. within the garden segment , the garden controls and fertilizer gross profit improved , even after adjusting for the prior year garden charge , primarily due to increased volumes and favorable product mix . these improvements were partially offset by a decreased gross margin in décor that , in addition to the decrease in sales , was also impacted in fiscal 2015 by an increase in excess and obsolete inventories . selling , general and administrative selling , general and administrative expenses decreased $ 8.5 million , or 2.1 % , from $ 397.8 million in fiscal 2014 to $ 389.3 million in fiscal 2015. as a percentage of net sales , selling , general and administrative expenses decreased from 24.8 % in fiscal 2014 to 23.6 % in fiscal 2015. excluding the gain on the sale of plant assets in fiscal 2014 , selling , general and administrative expenses decreased $ 13.4 million from fiscal 2014 , and the expenses as a percentage of net sales decreased from 25.0 % in fiscal 2014. the change in selling , general and administrative expenses , discussed further below , was due primarily to decreased selling and delivery expense . corporate expenses are included within administrative expense and relate to the costs of unallocated executive , administrative , finance , legal , human resource , and information technology functions . selling and delivery expense decreased $ 6.2 million , or 2.9 % , from $ 216.4 million in fiscal 2014 to $ 210.2 million in fiscal 2015 and as a percentage of net sales decreased from 13.5 % in fiscal 2014 to 12.7 % in fiscal 2015. the decrease was due primarily to decreased marketing expenditures and headcount reductions in our garden segment . 36 warehouse and administrative expense decreased $ 2.3 million , or 1.3 % , from $ 181.4 million in fiscal 2014 to $ 179.1 million in fiscal 2015. a $ 5.9 million decrease in corporate costs was partially offset by increased costs in both our operating segments . corporate administrative expense decreased due primarily to the non-recurrence of a $ 5.9 million long-lived software charge in fiscal 2014. increased costs in our operating segments were due primarily to the non-recurrence of a $ 4.9 million gain recorded in fiscal 2014 in our garden segment from the sale of plant assets and increased payroll related and third party provider costs in our pet segment . impairment we evaluate long-lived assets , including amortizable and indefinite-lived intangible assets , for impairment whenever events or changes in circumstances indicate the carrying value may not be recoverable . additionally , we evaluate indefinite-lived intangible assets on an annual basis . in fiscal 2015 , we recognized a non-cash $ 7.3 million impairment charge in our pet segment related to certain indefinite-lived intangible assets as a result of increased competition and an expected decline in the volume of sales . the fair value of the indefinite-lived intangible assets exceeded the remaining $ 15.0 million carrying value at september 26 , 2015. operating income operating income increased $ 35.2 million in fiscal 2015 , or 62.7 % , to $ 91.4 million from $ 56.2 million in fiscal 2014. increased sales of $ 46.3 million , a 130 basis point gross margin improvement and an $ 8.5 million decrease in selling , general and administrative costs all contributed to the increase in operating income . partially offsetting these improvements was a $ 7.3 million intangible asset impairment charge . operating margin was 5.5 % for fiscal 2015 and 3.5 % for fiscal 2014. adjusting for the current year intangible asset impairment charge in our pet segment and for the prior year garden charge and the gain on the sale of plant assets in our garden segment , operating income increased $ 30.5 million to $ 98.7 million in fiscal 2015 from $ 68.2 million in fiscal 2014. adjusted operating margin improved to 6.0 % from 4.2 % in fiscal 2014. pet operating income increased $ 10.7 million , or 12.2 % , to $ 98.8 million for fiscal 2015 from $ 88.1 million for fiscal 2014. the increase was due primarily to increased sales and improved gross margin , which were partially offset by an intangible impairment charge and a slight increase in selling , general and administrative expenses . pet operating margin increased to 11.0 % for fiscal 2015 from 10.4 % for fiscal 2014. adjusting for the current year intangible asset impairment charge , fiscal 2015 operating income was $ 106.1 million and the operating margin was 11.9 % . garden operating income increased $ 19.1 million , or 46.6 % , to $ 60.1 million for fiscal 2015 from $ 41.0 million for fiscal 2014. garden operating margin increased to 8.0 % for fiscal 2015 from 5.4 % for fiscal 2014. adjusting the prior year for the garden charge and the gain on the sale of plant assets , garden operating income increased $ 7.1 million from $ 53.0 million in fiscal 2014 and the operating margin increased from 6.9 % to 8.0 % .
| on an adjusted basis , net income increased to $ 36.6 million , or $ 0.74 per share , in fiscal 2015 from $ 16.4 million , or $ 0.33 per share , in fiscal 2014. our net cash provided by operating activities was $ 87.4 million in fiscal 2015 , compared to $ 126.5 million in fiscal 2014. recent developments leadership in july 2015 , we amended the employment agreement of john r. ranelli , our chief executive officer . under the amended agreement , mr. ranelli has agreed to continue as chief executive officer until his planned retirement at the end of fiscal 2016 and to continue to consult for the company for an additional four years . in order to facilitate an orderly transition , we plan to launch a search in the near future for our next chief executive officer . our former chief financial officer , lori varlas , resigned effective september 2 , 2015 to accept a senior level position at another company . the board of directors named david n. chichester as acting chief financial officer through february 2016. mr. chichester has served for 13 years on central 's board and as our audit committee financial expert . he brings significant financial management , accounting , disclosure , and risk assessment experience to the acting chief financial officer role . we are in the process of positioning our key senior financial officers to assume mr. chichester 's responsibilities in an orderly fashion when he completes his tenure as acting chief financial officer in february 2016. our chairman of the board , bill brown , commenced a leave of absence in july as he continues to recover from injuries he sustained in an accident in his home earlier in the year . jack balousek , our lead independent director , is acting as interim non-executive chairman until mr. brown returns . ims trading corp. acquisition on july 31 , 2015 , we purchased substantially all of the assets of ims trading corp. ( ims ) for a purchase price of approximately $ 23 million . ims was a manufacturer , importer and distributor of rawhide , natural dog treats and pet products throughout the united states and internationally . this acquisition is expected to complement our
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the preparation of these consolidated financial statements requires management to make estimates and assumptions that affect the reported amounts of assets , liabilities , revenues and expenses . note 1 of notes to consolidated financial statements describes the significant accounting policies used in the preparation of the consolidated financial statements . certain of these significant accounting policies are considered to be critical accounting policies , as defined below . a critical accounting policy is defined as one that is both material to the presentation of our consolidated financial statements and requires management to make difficult , subjective or complex judgments that could have a material effect on our financial condition and results of operations . specifically , critical accounting estimates have the following attributes : ( i ) we are required to make assumptions about matters that are highly uncertain at the time of the estimate ; and ( ii ) different estimates we could reasonably have used , or changes in the estimate that are reasonably likely to occur , would have a material effect on our financial condition or results of operations . estimates and assumptions about future events and their effects can not be determined with certainty . we base our estimates on historical experience and on various other assumptions believed to be applicable and reasonable under the circumstances . these estimates may change as new events occur , as additional information is obtained and as our operating environment changes . these changes have historically been minor and have been included in the consolidated financial statements as soon as they became known . based on a critical assessment of our accounting policies and the underlying judgments and uncertainties affecting the application of those policies , management believes that our consolidated financial statements are fairly stated in accordance with accounting principles generally accepted in the united states , and meaningfully present our financial condition and results of operations . 50 we believe the following critical accounting policies reflect our more significant estimates and assumptions used in the preparation of our consolidated financial statements : fair value of financial instruments we categorize financial instruments recorded at fair value on our consolidated balance sheet based upon the level of judgment associated with inputs used to measure their fair value . the categories are as follows : level 1inputs are unadjusted , quoted prices in active markets for identical assets or liabilities at the measurement date . an active market for the asset or liability is a market in which transactions for the asset or liability occur with sufficient frequency and volume to provide pricing information on an ongoing basis . level 2inputs ( other than quoted market prices included in level 1 ) are either directly or indirectly observable for the asset or liability through correlation with market data at the measurement date and for the duration of the instrument 's anticipated life . level 3inputs reflect management 's best estimate of what market participants would use in pricing the asset or liability at the measurement date . consideration is given to the risk inherent in the valuation technique and the risk inherent in the inputs to the model . a financial instrument 's categorization within the valuation hierarchy is based upon the lowest level of input that is significant to the fair value measurement . following is a description of the valuation methodologies used for instruments measured at fair value on our consolidated balance sheet , including the category for such instruments . we classify inputs to derive fair values for marketable securities available-for-sale as level 1 and 2. instruments classified as level 1 include money market funds , representing 17 % of our total financial instruments measured at fair value classified as assets as of december 31 , 2012. instruments classified as level 2 include u.s. government-sponsored enterprise securities , commercial paper and corporate notes , representing 83 % of our total financial instruments measured at fair value classified as assets as of december 31 , 2012. the price for each security at the measurement date is derived from various sources . periodically , we assess the reasonableness of these sourced prices by comparing them to the prices provided by our portfolio managers from broker quotes as well as reviewing the pricing methodologies used by our portfolio managers . historically , we have not experienced significant deviation between the sourced prices and our portfolio manager 's prices . warrants to purchase common stock and non-employee options are normally traded less actively , have trade activity that is one way , and or traded in less-developed markets and are therefore valued based upon models with significant unobservable market parameters , resulting in level 3 categorization . instruments classified as level 3 include derivative liabilities from non-employee options , representing all of our financial instruments measured at fair value classified as liabilities as of december 31 , 2012. the fair value for these instruments is calculated using the black scholes option-pricing model . the model 's inputs reflect assumptions that market participants would use in pricing the instrument in a current period transaction . use of this model requires us to make assumptions regarding stock volatility , dividend yields , expected term of the non-employee options and risk-free interest rates . changes to the model 's inputs are not changes to valuation methodologies , but instead reflect direct or indirect impacts from changes in market conditions . accordingly , results from the valuation model in one period may not be indicative of future period measurements . expected volatilities are based on historical volatilities of our stock . the expected term of non-employee options represents the remaining contractual term of the instruments . the risk-free interest rate is based on the u.s. zero coupon treasury strip yields for the remaining term of the instrument . story_separator_special_tag if factors change and we employ different assumptions in future periods , the fair value of these non-employee options reflected as of 51 each balance sheet date and the resulting change in fair value that we record may differ significantly from what we have recorded in previous periods . as of december 31 , 2012 , we have not revised the method in which we derive assumptions in order to estimate fair values of non-employee options classified as assets or liabilities , and we do not expect revisions in the future . for a further discussion regarding fair value measurements , see note 2 on fair value measurements in notes to consolidated financial statements of this form 10-k. revenue recognition since our inception , a substantial portion of our revenues has been generated from collaboration agreements and licensing arrangements . revenue under such agreements typically includes upfront signing or license fees , cost reimbursements , milestone payments and royalties on future product sales . we recognize upfront non-refundable signing , license or non-exclusive option fees as revenue when rights to use the intellectual property related to the license have been delivered and over the term of the agreement if we have continuing performance obligations . we recognize cost reimbursement revenue under collaborative agreements as the related research and development costs for services are rendered . we recognize revenue from milestone payments , which are subject to substantive contingencies , upon completion of specified milestones , which represents the culmination of an earnings process , according to contract terms . royalties are generally recognized as revenue upon the receipt of the related royalty payment . deferred revenue represents the portion of research or license payments received which has not been earned . when payments are received in equity securities , we do not recognize any revenue unless such securities are determined to be realizable in cash . we estimate the projected future term of license agreements over which we recognize revenue . our estimates are based on contractual terms , historical experience and general industry practice . revisions in the estimated terms of these license agreements have the effect of increasing or decreasing license fee revenue in the period of revision . as of december 31 , 2012 , no revisions to the estimated future terms of license agreements have been made and we do not expect revisions to the currently active agreements in the future . clinical trial accruals substantial portions of our preclinical studies and all of our clinical trials have been performed by third-party contract research organizations , or cros , and other vendors . we accrue expenses for preclinical studies performed by our vendors based on certain estimates over the term of the service period and adjust our estimates as required . we accrue expenses for clinical trial activities performed by cros based upon the estimated amount of work completed on each study . for clinical trial expenses , the significant factors used in estimating accruals include the number of patients enrolled , the number of active clinical sites , and the duration for which the patients will be enrolled in the study . we monitor patient enrollment levels and related activities to the extent possible through internal reviews , review of contractual terms and correspondence with cros . we base our estimates on the best information available at the time . however , additional information may become available to us which will allow us to make a more accurate estimate in future periods . in this event , we may be required to record adjustments to research and development expenses in future periods when the actual level of activity becomes more certain . valuation of stock-based compensation we measure and recognize compensation expense for all stock-based awards to our employees and directors , including stock options , restricted stock awards and employee stock purchases related to our employee stock purchase plan , or espp , based on estimated fair values . we use the black scholes option-pricing model to estimate the grant-date fair value of our stock options and employee stock plan purchases . option-pricing valuation model assumptions such as expected volatility , risk-free interest rate and expected term impact the fair value estimate . 52 further , the estimated forfeiture rate impacts the amount of aggregate stock-based compensation expense recognized during the period . the fair value of stock options and employee stock purchases is amortized over the vesting period of the awards using a straight-line method . expected volatilities are based on historical volatilities of our stock since traded options on geron stock do not correspond to option terms and trading volume of options is limited . the expected term of options represents the period of time that options granted are expected to be outstanding . in deriving this assumption , we reviewed actual historical exercise and cancellation data and the remaining outstanding options not yet exercised or cancelled . the expected term of employees ' purchase rights under our espp is equal to the purchase period . the risk-free interest rate is based on the u.s. zero coupon treasury strip yields for the expected term in effect on the date of grant . forfeiture rates are estimated based on historical data and are adjusted , if necessary , over the requisite service period based on the extent to which actual forfeitures differ , or are expected to differ , from their estimate . we grant restricted stock awards to employees and non-employee directors with three types of vesting schedules : ( i ) service-based , ( ii ) performance-based or ( iii ) market-based . service-based restricted stock awards generally vest annually over four years . performance-based stock awards vest only upon achievement of discrete strategic goals within a specified performance period , generally three years . market-based stock awards vest only upon achievement of certain market price thresholds of our common stock within a specified performance period , generally three years .
| substantially all of our revenues to date have been research support payments under collaboration agreements and milestones , royalties and other revenues from our licensing arrangements . revenues generated from these arrangements will not be sufficient alone to continue or expand our research or development activities and otherwise sustain our operations . as of december 31 , 2012 , we had cash , restricted cash , cash equivalents and marketable securities of $ 96.3 million compared to $ 154.2 million at december 31 , 2011 and $ 221.3 million at december 31 , 2010. we estimate that our existing capital resources , amounts available to us under our equipment financing facility and future interest income will be sufficient to fund our current level of operations through at least the next 12 months . 2012 phase 2 top-line results : hematologic malignancies we evaluated imetelstat in two single-arm phase 2 trials in hematologic , or blood-based , cancers : essential thrombocythemia , or et , and multiple myeloma . top-line data from the et trial that we 47 presented in december 2012 at the american society of hematology annual meeting showed durable hematologic and molecular responses in patients , suggesting that imetelstat inhibited the progenitor cells of the malignant clone believed to be responsible for the underlying disease in a relatively selective manner . in addition , preliminary data from the multiple myeloma trial showed a rapid and significant decrease in myeloma progenitor cells that were detected in blood over the course of imetelstat treatment . the phase 2 trials of imetelstat in et and multiple myeloma are no longer enrolling patients and we are continuing to follow patients previously enrolled in the trials . we believe the clinical results in et provide the rationale to pursue development of imetelstat in other hematologic myeloid malignancies , most of which are driven by clonal proliferation of malignant progenitor cells . 2012 phase 2 top-line results : solid tumors we also evaluated imetelstat
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the optima study was designed to enroll up to 550 patients globally at approximately 65 clinical sites in the u.s. , canada , european union ( eu ) , china and other countries in the asia-pacific region and will evaluate thermodox® in combination with standardized rfa , which will require a minimum of 45 minutes across all investigators and clinical sites for treating lesions three to seven centimeters , versus standardized rfa alone . the primary endpoint for this clinical trial is overall survival ( “ os ” ) , and the secondary endpoints are progression free survival and safety . the statistical plan calls for two interim efficacy analyses by an independent data monitoring committee ( “ dmc ” ) . we completed enrollment of 556 patients in the phase iii optima study in august 2018. data for the study will be reviewed as it matures up to two interim analyses expected to be conducted in the second half of 2019 and in mid-2020 . we expect that the final efficacy analysis , if necessary , will be completed in early 2021. thermodox® has received u.s. fda fast track designation and has been granted orphan drug designation for primary liver cancer in both the u.s. and the eu . additionally , the u.s. fda has provided thermodox® with a 505 ( b ) ( 2 ) registration pathway . subject to a successful trial , the optima study has been designed to support registration in all key primary liver cancer markets . we fully expect to submit registrational applications in the u.s. , europe and china . we expect to submit and believe that applications will be accepted in south korea , taiwan and vietnam , three other significant markets for thermodox® if it were to receive approval in europe , china or the u.s. on december 18 , 2018 , we announced that the dmc for the optima study completed its last scheduled review of all patients enrolled in the trial and unanimously recommended that the optima study continue according to protocol to its final data readout . the dmc 's recommendation was based on the committee 's assessment of safety and data integrity of all patients randomized in the trial as of october 4 , 2018. the dmc reviewed study data at regular intervals throughout the patient enrollment period , with the primary responsibilities of ensuring the safety of all patients enrolled in the study , the quality of the data collected , and the continued scientific validity of the study design . as part of its review of all 556 patients enrolled into the trial , the dmc evaluated a quality matrix relating to the total clinical data set , confirming the timely collection of data , that all data are current as well as other data collection and quality criteria . on august 5 , 2019 , the company announced that the prescribed number of os events had been reached for the first prespecified interim analysis of the optima phase iii study . following preparation of the data , the first interim analysis was conducted by the dmc on november 1 , 2019. this timeline was consistent with the company 's stated expectations and is necessary to provide a full and comprehensive data set that may represent the potential for a successful trial outcome . in accordance with the statistical plan , this initial interim analysis has a target of 118 events , or 60 % of the total number required for the final analysis . at the time of the data cutoff , the company received reports of 128 events . the hazard ratio for success at 128 events is approximately 0.63 , which represents a 37 % reduction in the risk of death compared with rfa alone and is consistent with the 0.65 hazard ratio that was observed in the prospective heat study subgroup , which demonstrated a two-year overall survival advantage and a median time to death of more than seven and a half years . on november 4 , 2019 , the company announced that the dmc unanimously recommended the optima study continue according to protocol . the recommendation was based on a review of blinded safety and data integrity from 556 patients enrolled in the company 's multinational , double-blind , placebo-controlled pivotal phase iii optima study . the dmc 's pre-planned interim efficacy review followed 128 patient events , or deaths , which occurred in august 2019. data presented demonstrated that pfs and os data appear to be tracking with patient data observed at a similar point in the company 's subgroup of patients followed prospectively in the earlier phase iii heat study , upon which the optima study is based . the data review demonstrated the following : ● the optima study patient demographics and risk factors are consistent with what the company observed in the heat study subgroup with all data quality metrics meeting expectations . ● median pfs for the optima study reached 17 months as of august 2019. these blinded data compare favorably with 16 months median pfs for all 285 patients in the heat study subgroup of patients treated with rfa > 45 minutes . ● median os for the optima study has not been reached as of august 5 , 2019 , however median os appears to be consistent with the heat study subgroup of patients treated with rfa > 45 minutes and followed prospectively for overall survival . ● the optima study has lost only 4 patients to follow-up from the initiation of the trial in september 2014 through august 2019 while the trial design allows for 3 % risk for loss per year , which at this point would have exceeded 60 patients . 48 while the company has not unblinded the study to report a hazard ratio , pfs and os are tracking similarly to the subgroup of patients who received more than 45 minutes of rfa in our heat study and followed prospectively for more than three years . story_separator_special_tag this subgroup in the heat study demonstrated a 2-year overall survival advantage and a median time to death of more than 7 ½ years . this tracking appears to bode well for success at the second of two pre-planned interim efficacy analysis , which is intended after a minimum of 158 patient deaths and is projected to occur during the second quarter of 2020. the hazard ratio for success at 158 events is 0.70. this is below the hazard ratio of 0.65 observed in the heat study subgroup of patients treated with rfa > 45 minutes . the heat study . on january 31 , 2013 , we announced that thermodox ® in combination with radio frequency ablation ( “ rfa ” ) did not meet the primary endpoint of progression free survival ( “ pfs ” ) for the 701-patient clinical trial in patients with hepatocellular carcinoma ( hcc ) , also known as primary liver cancer ( the heat study ) . we determined , after conferring with the heat study 's independent dmc , that the heat study did not meet the goal of demonstrating persuasive evidence of clinical effectiveness , that being a clinically meaningful improvement in progression free survival ( pfs ) , that could form the basis for regulatory approval . in the trial , thermodox ® was well-tolerated with no unexpected serious adverse events . following the announcement of the heat study results , we continued to follow patients for overall survival ( os ) , the secondary endpoint of the heat study . we have conducted a comprehensive analysis of the data from the heat study to assess the future strategic value and development strategy for thermodox ® . findings from the heat study post-hoc data analysis suggest that thermodox ® may substantially improve overall survival , when compared to the control group , in patients if their lesions undergo a 45-minute rfa procedure standardized for a lesion greater than 3 cm in diameter . data from nine os sweeps have been conducted since the top line pfs data from the heat study were announced in january 2013 , with each data set demonstrating progressive improvement in clinical benefit and statistical significance . on august 15 , 2016 , the company announced the most recent post-hoc os analysis from the heat study . these results demonstrated that in a large , well bounded subgroup of patients with a single lesion ( n=285 , 41 % of the heat study patients ) , the combination of thermodox® and optimized rfa provided an average 54 % risk improvement in os compared to optimized rfa alone . the hazard ratio at this latest os analysis is 0.65 ( 95 % ci 0.45 - 0.94 ) with a p-value of 0.02. median os for the thermodox® group has been reached which translates into a two-year survival benefit over the optimized rfa group ( projected to be greater than 80 months for the thermodox® plus optimized rfa group compared to less than 60 months projection for the optimized rfa only group ) . these data continue to strongly suggest that thermodox ® may significantly improve overall survival compared to an rfa control in patients whose lesions undergo optimized rfa treatment for 45 minutes or more as well as support the protocol for our phase iii optima study as described below . findings from the heat study post-hoc data analysis have shown to be well balanced and not diminished in anyway by other factors . supplementary computational modeling and prospective preclinical animal studies have shown additional support the relationship between heating duration and clinical outcomes . these data have been presented , without objection , at multiple scientific and medical conferences in 2013 through 2016 by key heat study investigators and leading liver cancer experts . on october 16 , 2017 , the company announced the publication of the manuscript , “ phase iii heat study adding lyso-thermosensitive liposomal doxorubicin to radiofrequency ablation in patients with unresectable hepatocellular carcinoma lesions , ” in clinical cancer research , a peer-reviewed medical journal . the article reports on one of the largest controlled studies in hepatocellular carcinoma . it provides a comprehensive review of thermodox ® for the treatment of primary liver cancer . the article details learnings from the company 's 701 patient heat study and includes results from computer simulation studies and includes findings from a post hoc subgroup analysis , all of which are consistent with each other and which - when examined together - suggests a clearer understanding of a key thermodox® heat-based mechanism of action : the longer the target tissue is heated , the greater the doxorubicin tissue concentration . additionally , the article explores a new hypothesis prompted by these findings : thermodox® when used in combination with radiofrequency ablation ( rfa ) standardized to a minimum dwell time of 45 minutes ( srfa > 45 minutes ) , may increase the overall survival ( os ) of patients with hcc . the lead author is won young tak , m.d. , ph.d. , professor internal medicine , gastroenterology & hepatology , kyungpook national university hospital daegu , republic of korea , and there are 22 heat study co-authors along with nicholas borys , m.d. , celsion 's senior vice president and chief medical officer . 49 immuno-oncology program on june 20 , 2014 , we completed the acquisition of substantially all of the assets of egen , a private company located in huntsville , alabama . pursuant to the asset purchase agreement , clsn laboratories acquired all of egen 's right , title and interest in and to substantially all of the assets of egen , including cash and cash equivalents , patents , trademarks and other intellectual property rights , clinical data , certain contracts , licenses and permits , equipment , furniture , office equipment , furnishings , supplies and other tangible personal property . a key asset acquired from egen was the theraplas technology platform and the first drug developed from it is gen-1 .
| 's lead contract research organization ( cro ) for the optima study . excluding this one-time credit , clinical development costs for the phase iii optima study decreased $ 1.4 million in 2019 , due to the completion of enrollment of the study in august 2018. the company continues to follow patients on the study through the two preplanned efficacy analyses and the final efficacy analysis after 197 os events . costs associated with the ovation 2 study were $ 0.6 million in 2019 compared to $ 0.4 million in 2018. regulatory costs were $ 1.1 million in 2019 compared to $ 0.3 million in 2018. other clinical costs were $ 2.5 million in each of 2019 and 2018. costs associated with the production of thermodox® were $ 1.5 million during 2019 compared to $ 1.1 million in 2018 as the company is preparing registration batches at its three cmos assuming a successful outcome of the optima study . r & d costs associated with the development of gen-1 to support the ovation program increased by $ 0.5 million to $ 3.3 million in 2019 compared to $ 2.8 million in 2018 . 58 general and administrative expenses general and administrative expenses decreased to $ 8.0 million in 2019 compared to $ 9.7 million in 2018. this decrease is primarily attributable to lower personnel costs of approximately $ 1.6 million which included a $ 1.7 million decrease in non-cash stock compensation expense partially offset by an increase in salary and benefits in 2019 compared to 2018. change in earn-out milestone liability the total aggregate purchase price for the acquisition of assets from egen included potential future earn-out payments contingent upon achievement of certain milestones . the difference between the aggregate $ 30.4 million in future earn-out payments and the $ 13.9 million included in the fair value of the acquisition consideration at june 20 , 2014 was based on
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this concession , comprising of an area of 3,919 hectares , was registered with the national mining registry on april 18 , 2013 and expires in 2043. following the announcement of the sale of sunward investments ( see “ corporate developments – sale of sunward investments ltd. ” ) , and its ownership of the titiribi project , we have accounted for it as a discontinued operation . the financial results have been adjusted retrospectively for the treatment as a discontinued operation . corporate developments name change in september 2016 , we changed our name to trilogy metals inc. to better reflect our company 's naturally diversified resource base . the ukmp is located in the ambler mining district in northwest alaska ; a region known to host deposits rich in copper , zinc , lead , gold and silver . the company controls the mineral rights to approximately 353,000 acres of land containing two known mineral belts , the ambler schist belt and the bornite carbonate sequence . the ambler schist belt hosts vms type mineralization occurring as a series of high-grade polymetallic copper-lead-zinc-gold-silver deposits along the entire 100 kilometer ( 70 mile ) long belt . the bornite carbonate sequence hosts several copper replacement targets around the aurora and pardner hill prospects , in addition to an established resource identified at bornite . mineralization at bornite is open to further exploration . upon opening of the markets on september 8 , 2016 , our shares began trading on the tsx and the nyse-mkt under the symbol “ tmq ” . shareholders approved the name change to trilogy at our annual and special meeting of shareholders held on may 18 , 2016 . 69 sale of sunward investments on september 1 , 2016 , trilogy completed the sale of all of the issued and outstanding shares of sunward investments to brazil resources inc. ( “ bri ” ) for consideration of 5,000,000 common shares of bri , of which 2,500,000 common shares are subject to a six month holding period , and 1,000,000 bri warrants , with each warrant exercisable into one common share of bri for a period of two years from the completion date at an exercise price of cdn $ 3.50. the total consideration was valued at approximately $ 8.1 million . sunward investments , through a subsidiary , owns 100 % of the titiribi gold-copper exploration project . on december 7 , 2016 bri changed its name to goldmining inc. the company reclassified the operations of sunward investments as a discontinued operation , retrospectively , and recognized a gain on the sale of $ 4.4 million in the fourth quarter of 2016. long-term incentives during the year ended november 30 , 2016 , the board of directors approved the granting of 1,785,000 stock options to employees , consultants and directors with various vesting terms over two years and 600,000 restricted share units ( “ rsus ” ) to officers vesting equally in thirds on the grant date , the first anniversary of the grant date , and the second anniversary of the grant date . project activities in the spring of 2016 we announced the release of an updated resource estimate and national instrument 43-101 technical report on the bornite project . the update incorporated a new 3d lithology , alteration and structural model for the bornite deposit , as well as results from previously un-sampled or partially sampled historical kennecott drill core . a positive update with contained copper in indicated resources increasing from 334 to 913 million pounds constituting a 173 % increase in contained metal . total contained copper in inferred resources decreased from 5.7 to 5.5 billion pounds ( 1.8blbs in-pit and 3.7blbs below-pit ) which constitutes a 4 % decrease in contained metal due principally to moving in-pit inferred resources to the indicated category . we continue to evaluate geological and hydrogeological data to support internal desktop evaluations and planning of future field investigations at the bornite project . in fiscal 2016 , we expended $ 5.0 million on the ukmp projects , mainly at arctic , consisting of $ 1.3 million in wages and benefits , $ 0.7 million in drilling , $ 0.7 million in engineering expenses , $ 1.3 million in project support expenses , $ 0.4 million in land maintenance and permit expenses , and $ 0.3 million in environmental studies . the company completed another successful field season in 2016 advancing the arctic deposit towards pre-feasibility . we accomplished a 3,058 meter drill program at the arctic project , significant baseline environmental data collection , and furthered the engineering of the project . the summer field season was completed on time and 10 % under budget , with a total spend of $ 5.0 million in 2016. the 2016 drill program was designed to collect data for geotechnical , hydrological , waste rock characterization and metallurgical studies as well as further resource definition . three drill holes representing 822 meters drilled were designed to collect geotechnical and hydrological data within the proposed arctic open-pit . data collected from the geotechnical/hydrological drill program was used to update a 3d structure model , rock mass model , and hydrogeology model and these results have been integrated into a combined geotechnical model that will be used for characterization of geotechnical domains and slope stability evaluation in a future pre-feasibility study . four drill holes representing 1,030 meters drilled were designed to collect metallurgical samples , specifically targeting material within the initial production years of the arctic open-pit . a metallurgical test work program is currently underway and expected to be complete in q1-2017 . six drill holes representing 1,206 meters drilled were designed to evaluate vertical and lateral continuity of the high grade polymetallic copper , gold , silver , lead , and zinc mineralization , and support upgrading of inferred resources to measured and indicated resource classification within the area of the proposed arctic open-pit . we are pleased to announce that all six infill holes encountered mineralized intervals consistent with previous drilling conducted within the resource area on the property . story_separator_special_tag data collected from the drill program was used to update the 3d geology model . the updated geology domains and drill data will be incorporated into an updated resource estimate that will support a future pre-feasibility study . 70 substantial field work was also completed to support the continuation of baseline environmental data collection . during the course of the field season , data collection was completed to support an aquatic survey , an avian and large mammal habitat survey , an archaeological survey and expansion of the wetlands delineation and surface quality work . an aquatics survey of rivers and creeks over the ukmp included identification of fish species present and tissues metals testing . an avian survey over the ukmp was conducted in may to identify bird nest locations , with a follow-up survey in july to measure fledging success . a habitat survey was completed in conjunction with the wetlands survey and will be used to inform future biological surveys . approximately 2,400 acres were surveyed for archaeological resources in or around the potential arctic open-pit and facilities locations . approximately 2,900 acres of wetlands were delineated using techniques approved by the army corps of engineers . on-going baseline environmental data collection included maintenance of three hydrologic gauging stations and one meteorological station . surface water quality samples were taken from sixteen surface water locations and analyzed for a full suite of parameters including total and dissolved metals . we continue to advance the acid-base-accounting static and kinetic test work at arctic . continuous down-hole samples were collected from this year 's drill program to support static testing coverage over the arctic deposit . on-site barrel sampling was successfully completed in the spring and fall of 2016 to support the kinetics program , and in august we achieved the 40-week milestone for the parallel laboratory humidity cells ; maintenance and monitoring of all kinetic tests will continue into 2017. the lidar survey that was incomplete last year due to weather conditions was also completed during the summer . final deliverables were received this fall has have already proven helpful in supporting on-going engineering design and geological modeling . we continued our efforts on supporting the alaska industrial development export authority ( `` aidea ” ) throughout 2016 towards drafting an environmental impact statement ( “ eis ” ) as prescribed under the national environmental policy act process to permit the ambler mining district industrial access project ( “ amdiap ” ) . the amdiap is anticipated to provide surface access to the ambler mining district and our ukmp projects – arctic and bornite . the project design is modeled on aidea 's successful delong mountain transportation system ( “ dmts ” ) , which includes an industrial access road from the red dog mine to the dmts port . aidea worked with private industry to develop the dmts industrial access road , and the costs of road construction were paid back through tolls on road use . amdiap , once complete , will provide access to the ambler mining district through gates of the arctic national preserve . this access is guaranteed in the alaska national interest lands conservation act ( “ anilca ” ) . on october 21 , 2015 , alaska 's governor authorized aidea to begin the eis process and shortly thereafter , the consolidated sf299 anilca applications were submitted by aidea to the relevant federal agencies , including the national park service ( “ nps ” ) , the u.s. army corp of engineers ( “ usace ” ) , bureau of land management ( “ blm ” ) , u.s. coast guard ( “ uscg ” ) , and the u.s. federal highway administration ( “ fhwa ” ) . nps , usace , blm , and fhwa have accepted the application to move forward and have determined that blm will be the lead federal agency for the eis , along with nps taking the lead on the environmental and economic analysis ( “ eea ” ) per anilca section 201.4 ( d ) . a project kickoff meeting with state of alaska and federal agencies was held in early december 2016 to discuss next steps which include the scope of work for the third party eis contractor , anticipated timing of blm issuance of the notice of intent between march 2017 and may 2017 , and nps and fhwa working on the eea . more information on the amdiap and the anilca permitting process is available on aidea 's website at www.ambleraccess.org , which website is not incorporated by reference . outlook in 2017 , we will continue to advance the development of our ukmp projects . we are currently working on incorporating new surface mapping , a lidar survey , and drill hole information into an updated 3d geology model for the arctic deposit . the new 3d geology model will update structural , lithology , mineralization and alteration domains into an integrated geology model that can support pre-feasibility level resource evaluations and mine planning . in the first quarter of 2017 , we expect to complete a resource model update for the arctic project that will include new assays collected from 2015 and 2016 drill core , specific gravity determinations collected from waste and mineralized material , and aba static analyses collected from the hanging wall of the arctic deposit – these data will support upgrading of inferred resources to measured and indicated resource classification as well as future pre-feasibility level mine planning and open-pit design . during summer 2016 , five drill holes were completed at the arctic project to support a pre-feasibility level metallurgical test program . we retained als metallurgy of kamloops , british columbia to complete the test work .
| in addition to the gain recognized on the sale , we also realized $ 0.1 million in gains on the sale of investments received as consideration for the year ended november 30 , 2016. professional fees for the year ended november 30 , 2016 were $ 0.4 million , a reduction of $ 0.9 million from the $ 1.3 million incurred for the year ended november 30 , 2015 , and a reduction from the $ 1.0 million incurred for the year ended november 30 , 2014. expenses in 2016 were down significantly due to less corporate transaction activity as well as $ 0.2 million in costs related to the sale of sunward recorded in discontinued operations . in 2015 , expenses were incurred for legal and technical due diligence and regulatory approvals associated with the acquisition of sunward and , in 2014 , legal costs associated with private placement financing were incurred for which there is no comparable amount in the current year . the variance in the mineral properties expense was primarily due to the differing magnitude of the field programs at our ukmp project in 2016 , 2015 and 2014. in 2016 , we completed a similar-sized drill program consisting of 3,058 meters at the arctic project , however , we significantly increased the environmental baseline data collection and engineering site investigations compared to the 2015 program . in 2015 , we completed fourteen diamond drill holes amounting to 3,056 meters at the arctic project , as well as engineering and environmental site investigations . in 2014 , we completed a re-sampling and re-assaying program of approximately 13,000 meters of historical drill core from bornite . mineral property expenses consist of direct drilling , personnel , community , resource reporting and other exploration expenses , as well as indirect project support expenses such as fixed wing charters , helicopter support , fuel , and other camp operation costs . the other reduction in expenses is from a charge of $ 0.6 million in stock-based compensation in 2016 compared to $ 0.8 million in 2015 , and $ 0.9 million in 2014. the expense recognized for the current year includes $ 0.4 million in expense relating to stock options and $ 0.3 million in expense relating to rsus and deferred share units ( “ dsus ” ) . the 2015 expense included $
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we do not currently operate our own facilities for manufacturing , storing , or distributing our product candidates . we utilize third-party contract manufacturing organizations , or cmos , to manufacture and supply our preclinical and clinical materials during the development of our product candidates . we believe the synthesis of ath-1017 is reliable and reproducible and the synthetic methods can be further optimized to enable large-scale production that continues to avoid use of toxic materials or specialized equipment or handling during the manufacturing process . we plan to continue to optimize the manufacturing process to support future large-scale and commercial supply . our 110 goal is to identify and develop small molecule product candidates that are cost-effective to manufacture and easily transferable to third party cmos . we expect to use similar contract resources for commercialization of our products , at least until our resources and operations are at a scale that justifies investment in internal manufacturing capabilities . given our stage of development , we have not yet established a commercial organization or distribution capabilities . we intend to build a commercial infrastructure to support sales of our product candidates . we expect to manage sales , marketing and distribution through internal resources and third-party relationships . while we may commit significant financial and management resources to commercial activities , we will also consider collaborating with one or more pharmaceutical companies to enhance our commercial capabilities . to date , we have funded our operations primarily through proceeds from the sale of equity securities , including proceeds from the sale and issuance of common stock in our ipo , the sale and issuance of convertible preferred stock , common stock warrants , and convertible notes , and to a lesser extent from grant income and stock option exercises . from inception to december 31 , 2020 , we have raised aggregate net cash proceeds of approximately $ 310.6 million primarily from the issuance of our common stock , convertible preferred stock , common stock warrants , and convertible notes . we have incurred significant operating losses to date . our net losses were $ 19.9 million and $ 5.2 million for the years ended december 31 , 2020 and 2019 , respectively . as of december 31 , 2020 , we had an accumulated deficit of $ 41.0 million and cash , cash equivalents and investments of $ 268.2 million . we expect to continue to incur increasing operating losses for the foreseeable future as we : continue to advance ath-1017 and our other product candidates through preclinical studies and clinical trials , including our phase 2/3 clinical trial for ath-1017 for the treatment of mild-to-moderate ad ; expand our pipeline of product candidates ; continue to grow our discovery organization and invest in the ath platform ; ramp up manufacturing activities ; attract , hire and retain additional personnel ; obtain , maintain , expand and protect our intellectual property portfolio ; operate as a public company ; relocate to our new facility and build out lab space ; implement operational , financial and management information systems ; seek regulatory approval for any product candidates that successfully complete clinical trials ; and establish a sales , marketing and distribution infrastructure to commercialize any product candidate for which we may obtain marketing approval . our net losses may fluctuate significantly from quarter-to-quarter and year-to-year , depending on the timing of our clinical trials and our expenditures on other research and development activities . we will require substantial additional funding to support our continuing operations and further the development of our product candidates . 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 , which could include income from collaboration , licensing or similar arrangements , for the foreseeable future . adequate funding may not be available when needed or on terms acceptable to us , or at all . if we are unable to raise additional capital as needed , we may have to significantly delay , scale back or discontinue development of our product candidates . our ability to raise additional funds may be adversely impacted by potential worsening global economic conditions and the recent disruptions to , and 111 volatility in , the credit and financial markets in the united states and worldwide resulting from the ongoing covid-19 pandemic and otherwise . if we fail to obtain necessary capital when needed on acceptable terms , or at all , it could force us to delay , limit , reduce or terminate our product development programs , commercialization efforts or other operations . insufficient liquidity may also require us to relinquish rights to product candidates at an earlier stage of development or on less favorable terms than we would otherwise choose . we can not assure you that we will ever be profitable or generate positive cash flow from operating activities . based upon our current operating plan , we estimate that our existing cash , cash equivalents and investments will be sufficient to fund our operating expenses and capital expenditure requirements at least through 2022. the global covid-19 pandemic continues to rapidly evolve , and we will continue to monitor the covid-19 situation closely . the extent of the impact of covid-19 on our business , supply chain , operations and clinical development timelines and plans remains uncertain , and will depend on certain developments , including the duration and spread of the outbreak and its impact on our clinical trial enrollment , trial sites , contract research organizations , or cros , third-party manufacturers , and other third parties with whom we do business , as well as its impact on regulatory authorities and our key scientific and management personnel . the ultimate impact of the covid-19 pandemic or a similar health epidemic is highly uncertain and subject to change . story_separator_special_tag to the extent possible , we are conducting business as usual , with necessary or advisable modifications to employee travel and most of our employees working remotely . we will continue to actively monitor the rapidly evolving situation related to covid-19 and may take further actions that alter our operations , including those that may be required by federal , state or local authorities , or that we determine are in the best interests of our employees and other third parties with whom we do business . at this point , the extent to which the covid-19 pandemic may affect our business , operations and clinical development timelines and plans , including the resulting impact on our expenditures and capital needs , remains uncertain . initial public offering in september 2020 , we completed an initial public offering of our common stock . as part of the ipo , we issued and sold 12,000,000 shares of our common stock at a public offering price of $ 17.00 per share . we received net proceeds of approximately $ 186.4 million from the ipo , after deducting underwriting discounts and commissions of $ 14.3 million and offering costs of approximately $ 3.3 million . in october 2020 , we sold an additional 1,397,712 shares of common stock to the underwriters of the ipo upon partial exercise of the underwriters ' option to purchase additional shares at the initial public offering price of $ 17.00 per share , less underwriting discounts and commissions , and offering costs of approximately $ 1.7 million resulting in net proceeds to us of approximately $ 22.1 million . recent developments follow-on public offering in january 2021 , we completed a follow-on public offering of our common stock . as part of the follow-on offering , we issued and sold 4,000,000 shares of our common stock at a public offering price of $ 22.50 per share . we received net proceeds of approximately $ 84.1 million from the follow-on offering , after deducting underwriting discounts and commissions and offering costs . in february 2021 , we sold an additional 600,000 shares of common stock to the underwriters of the follow-on public offering upon full exercise of the underwriters ' option to purchase additional shares at the follow-on public offering price of $ 22.50 per share , less underwriting discounts and commissions and offering costs resulting in net proceeds to use of approximately $ 12.7 million . our collaboration and grant agreements washington state university research foundation license agreement and amended and restated washington state university license agreement in december 2011 , we entered into an exclusive license agreement with washington state university research fund , or wsurf , which , after the dissolution of wsurf in 2013 , was superseded by an 112 amended and restated exclusive license agreement with washington state university , or wsu , in september of 2015. under this agreement , wsu granted us an exclusive license to make , use , sell , and offer for sale licensed products and licensed processes that embody the licensed patents ( including wsu 's rights to a patent jointly owned with pacific northwest biotechnology , inc. ) and that form the underlying technology of the drug therapies we are developing . the term of the license begins on the effective date and continues until the earlier of the date in which no valid claim remains enforceable and the payment of royalties ceases for more than four consecutive quarters after such royalty payments begin . the initiation of our first phase 2 clinical trial in september 2020 triggered a $ 50,000 liability to wsu , which was repaid in full as of december 31 , 2020. we are obligated to pay to wsu the following if the related milestones are reached : $ 300 , 000 – at initiation of the first phase 3 clinical trial in the united states , european union or japan for the first licensed product . $ 600,000 – marketing approval in the united states , european union or japan for the first licensed product . we are obligated to pay wsu a royalty in the mid-single digits of net sales . additionally , under the agreement we have the right to sublicense the licensed rights , subject to additional payments to wsu for sublicense consideration received . such amounts are dependent on the terms of the underlying sublicense , and range from the mid-single digits to mid tens of any non-sales based payments received , and low twenties of net sales based sublicense royalties . grant liability in 2014 and 2015 , we received $ 250,000 and $ 500,000 , respectively , from the washington life sciences discovery fund , or lsdf , under the terms of two matching grant award agreements . the consummation of our initial public offering in september 2020 was a triggering event under the terms of the grant and the liability was remeasured to the pay-off amount of $ 1.5 million as of september 30 , 2020 and repaid in full as of december 31 , 2020. national institutes of health grant in december 2020 , we determined that we would accept a grant from the national institutes of health , or nih , to support our act-ad phase 2 clinical trial for ath-1017 . under the terms of the agreement , we may receive approximately $ 7.8 million with the potential for an additional $ 7.4 million up to an aggregate of $ 15.2 million . for additional information regarding this grant , see the section of this annual report on form 10-k titled “ business—our collaboration and grant agreements. ” we recognized $ 1.1 million of income related to our nih grant in 2020 and at december 31 , 2020 , carried on the accompanying balance sheet an unbilled receivable of $ 1.1 million for reimbursable expenses . part the cloud in january 2019 , the alzheimer 's association awarded us a $ 1.0 million part the cloud research grant .
| other income ( expense ) , net other income ( expense ) , net , changed from expense of $ 0.5 million for the year ended december 31 , 2019 to expense of $ 1.3 million for the year ended december 31 , 2020. the change was primarily due to an increase of $ 1.0 million in losses of liabilities recorded at fair value during the year ended december 31 , 2020 compared to the year ended december 31 , 2019 , offset by a gain of $ 0.2 million recognized during the year ended december 31 , 2020 upon extinguishment of convertible notes . liquidity and capital resources sources of liquidity since our inception , we have funded our operations primarily with proceeds from the sale and issuance of common stock , convertible preferred stock , common stock warrants , and convertible notes , and to a lesser extent from grant income and stock option exercises . from our inception through december 31 , 2020 , we have raised aggregate net cash proceeds of $ 310.6 million primarily from the issuance of our common stock , convertible preferred stock , common stock warrants , and convertible notes . net cash proceeds in 2020 totaled $ 294.3 million . recent sales of our common stock were as follows : replace_table_token_3_th as of december 31 , 2020 , we had $ 268.2 million in cash , cash equivalents and investments and have not generated positive cash flows from operations . since our inception , we have devoted substantially all of our resources to our research and development efforts such as small molecule compound discovery , nonclinical studies and clinical trials , as well as manufacturing activities , establishing and maintaining our intellectual property portfolio , hiring personnel , raising capital , and providing general and administrative support for these operations . future funding requirements based upon our current operating plan , we estimate that our $ 268.2 million of cash , cash equivalents , and investments at december 31 , 2020 will be sufficient to
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21 source : rig counts are per baker hughes ( www.bakerhughes.com ) ; rig counts are the annual average of the reported weekly rig count activity . completions are per the u.s. energy information administration ( https : //www.eia.gov/petroleum/drilling/ ) as of january 16 , 2018 . average u.s. rig activity increased by 72.1 % in 2017 compared to 2016 , and decreased 48.0 % from 2015 to 2016 . according to data collected by the u.s. energy information administration ( “ eia ” ) as reported on january 16 , 2018 , completions in the seven most prolific areas in the lower 48 states increased 39.9 % in 2017 compared to 2016 and decreased 38.1 % from 2015 to 2016 . outlook for 2018 after a continuous decline in u.s. drilling rig activity beginning in mid-2014 , the market began to gradually recover in the second quarter of 2016. although a continuing recovery appears to be underway , the level of drilling and completion activity remains lower than previous levels experienced before the downturn in 2014. assuming the price for crude oil remains relatively stable and regulatory impediments are limited , the company expects u.s. oilfield activity to remain in a state of modest recovery . during 2017 , the company continued to promote the efficacy of its complex nano-fluid ® ( “ cnf ® ” ) chemistries . although quarter to quarter performance may vary , the company expects its energy chemistry technologies sales to outperform market activity metrics over time by continuing to demonstrate the efficacy of its cnf ® chemistries through comparative analysis of wells with and without cnf ® chemistries , field validation results conducted by exploration and production ( “ e & p ” ) companies , and the continuation of its direct-to-operator sales program known as the flotek store ® . whether operators purchase directly from flotek or continue to purchase from oilfield distribution and service companies , e & p operators are benefiting from increased price transparency and a more direct relationship with flotek 's technical expertise and supply chain . the company continues to promote its patented and proprietary chemistries through its industry leading research and innovation staff who provide customer responsive product innovation , as well as development of new products which are expected to expand the company 's future product lines . during the third quarter of 2016 , the company completed its new global research & innovation center in houston . this state-of-the-art facility permits the development of next-generation innovative energy chemistries , as well as expanded collaboration between clients , leaders from academia , and company scientists . these collaborative opportunities are an important and distinguishing capability within the industry . the outlook for the company 's consumer and industrial chemistries will be driven by the availability and demand for citrus oils , industrial solvents , and flavor and fragrance ingredients . although current inventory and crop expectations are sufficient to meet the company 's needs to supply its flavor and fragrance business , as well as both internal and external industrial markets , the market supply of citrus oils has declined in recent years due to the reduction in citrus crops caused by the citrus greening disease , and further impacted by recent hurricane events . this reduced supply has resulted in higher citrus oil prices and increased price volatility . however , the company expects its strong market position to enable it to maintain a stable supply of citrus oils for internal use and external sales . the company expects to manage the impact of volatile terpene costs through the development of new product formulations and pricing strategies . 22 during the fourth quarter 2016 , the company implemented a strategic restructuring of its business to enable a greater focus on its core businesses in energy chemistry and consumer and industrial chemistry and initiated a process to identify potential buyers for its drilling technologies and production technologies segments . during 2017 , the company completed the sale or disposal of the assets and transfer or liquidation of liabilities and obligations of the drilling technologies and production technologies segments . the company continues to focus on maximizing the profitability of its product and business portfolio , which may result in exiting or entering new product lines or businesses . capital expenditures for continuing operations totaled $ 9.0 million in 2017 . the company expects capital spending to be between $ 12 million and $ 16 million in 2018 . the company will remain nimble in its core capital expenditure plans , adjusting as market conditions warrant , and will focus its capital spending program on positive returns on capital and or pose strategic benefit for the long term . changes to geopolitical , global economic , and industry trends could have an impact , either positive or negative , on the company 's business . in the event of significant adverse changes to the demand for oil and gas production , the market price for oil and gas , weather patterns , and or the availability of citrus crops , the market conditions affecting the company could change rapidly and materially . should such adverse changes to market conditions occur , management believes the company has access to adequate liquidity to withstand the impact of such changes while continuing to make strategic capital investments and acquisitions , if opportunities arise . in addition , management believes the company is well-positioned to take advantage of significant increases in demand for its products should market conditions improve dramatically in the near term . results of continuing operations ( in thousands ) : replace_table_token_5_th story_separator_special_tag and consumer and industrial chemistry . the company initiated a process to market for sale the drilling technologies and production technologies segments and has identified potential buyers . story_separator_special_tag the company completed the sale or disposal of the assets and transfer or liquidation of liabilities and obligations of the drilling technologies and production technologies segments during 2017. the company recorded a net loss from discontinued operations of $ 51.0 million in 2016 for the classification of the drilling technologies and production technologies segments as held for sale . results by segment replace_table_token_6_th results for 2017 compared to 2016 —energy chemistry technologies ect revenue for the year ended december 31 , 2017 , increased $ 54.9 million , or 29.2 % , from 2016 , compared to a 39.9 % increase in completion activity as measured by the eia . ect performed along these market indicators by continuing to promote the benefits of its cnf ® chemistries . revenues increased with the increased customer demand resulting from improved oilfield market conditions . income from operations for the ect segment increased $ 4.6 million , or 15.8 % , for the year ended december 31 , 2017 , compared to 2016 . this increase is primarily attributable to an increase in gross profit , increased activity associated with sales and marketing efforts in pursuit of growth opportunities , and cost reductions . the company continues its commitment to research and innovation efforts within energy chemistry technologies . results for 2016 compared to 2015 —energy chemistry technologies ect revenue for the year ended december 31 , 2016 , decreased $ 25.4 million , or 11.9 % , from 2015 , compared to a 45.4 % decline in market activity as measured by average north american rig count . flotek 's ect segment outperformed these market indicators by continuing to aggressively promote the benefits of its cnf ® chemistries . revenues declined due to reduced customer demand resulting from oilfield market conditions . income from operations for the energy chemistry technologies segment decreased $ 14.9 million , or 33.9 % , for the year ended december 31 , 2016 , compared to 2015. this decrease is primarily attributable to the decrease in revenue , increased costs associated with sales and marketing efforts in pursuit of growth opportunities , and increased costs associated with the company 's continued commitment to its research and innovation efforts within energy chemistry technologies . replace_table_token_7_th 25 results for 2017 compared to 2016 —consumer and industrial chemistry technologies cict revenue for the year ended december 31 , 2017 , decreased $ 0.6 million , or 0.8 % , from 2016 , primarily due to a decline in sales volumes . the high price for citrus oils limited market activity and top line revenue . citrus greening and adverse weather reduced citrus crops globally , thereby limiting the company 's performance in comparison to the growth experienced in 2016 and 2015. income from operations for the cict segment decreased $ 2.2 million , or 22.8 % , for the year ended december 31 , 2017 , from 2016 , primarily due to higher raw material costs and increased headcount to facilitate growth in the food and beverages market through new research activities and the opening of a sales office in japan . results for 2016 compared to 2015 —consumer and industrial chemistry technologies cict revenue for the year ended december 31 , 2016 , increased $ 18.2 million , or 32.3 % , from 2015. this increase is due to higher terpene prices associated with limited availability of citrus oils globally and volume increases in the flavor and fragrance product line . income from operations for the cict segment increased $ 0.9 million , or 10.5 % , for the year ended december 31 , 2016 , from 2015 , primarily due to increased sales , partially offset by increased raw material cost and higher operating expenses associated with growth in the segment 's flavor activities . discontinued operations during the fourth quarter of 2016 , the company classified the drilling technologies and production technologies segments as held for sale based on management 's intention to sell these businesses . during 2017 , the company completed the sale or disposal of the assets and transfer or liquidation of liabilities and obligations of the drilling technologies and production technologies segments . the company 's historical financial statements have been revised to present the operating results of the drilling technologies and production technologies segments as discontinued operations . replace_table_token_8_th results for 2017 compared to 2016 —drilling technologies on may 22 , 2017 , the company completed the sale of substantially all of the assets and transfer of certain specified liabilities and obligations of the company 's drilling technologies segment to national oilwell varco , l.p. ( “ nov ” ) for $ 17.0 million in cash consideration . on august 16 , 2017 , the company completed the sale of substantially all of the remaining assets of the company 's drilling technologies segment to galleon mining tools , inc. for $ 1.0 million in cash consideration and a note receivable of $ 1.0 million due in one year . upon completion of these sales , the company ceased all operations for the drilling technologies segment . results for 2016 compared to 2015 —drilling technologies drilling technologies revenue for the year ended december 31 , 2016 , decreased $ 24.5 million , or 47.0 % , from 2015. the revenue decline was primarily related to the decrease in drilling rig activity and significant pricing pressure during the year . revenue improved 5.6 % for the quarter ended december 31 , 2016 , compared to the quarter ended september 30 , 2016 , as market conditions continue to improve . during the first quarter of 2016 , as a result of the sequential decline in segment revenue and expectations for future drilling activity , the company determined the carrying amount of certain long-lived assets exceeded their respective fair values and that some inventory was either not usable in future operations or the carrying amount exceeded its market value .
| % for the year ended december 31 , 2017 , compared to 2016 . the increase in ss & a costs was primarily due to increased head count in the energy chemistry technologies sales and support staff for new business lines . depreciation and amortization expense for the year ended december 31 , 2017 , increased by $ 1.7 million , or 16.6 % , from 2016 . this increase was primarily attributable to the completion and equipping of the global research & innovation center in august 2016 , along with other improvements to manufacturing facilities . research and innovation ( “ r & i ” ) expense for the year ended december 31 , 2017 , increased $ 4.3 million , or 46.4 % , from 2016 . the increase in r & i is primarily attributable to increased personnel for new product development and flotek 's commitment to remaining responsive to customer needs , increased demand , continued growth and refining of existing product lines , and the development of new chemistries which are expected to expand the company 's intellectual property portfolio . interest and other expense decreased $ 0.9 million for the year ended december 31 , 2017 , compared to 2016 , primarily due to the repayment of the term loan in may 2017 , as well as decreasing the outstanding balance of the revolving credit facility throughout 2017. the company recorded an income tax provision of $ 8.8 million , yielding an effective tax provision rate of 210.0 % , for the year ended december 31 , 2017 , compared to an income tax provision of $ 1.2 million , yielding an effective tax rate of 39.3 % , in 2016 . as part of the company 's strategic restructuring of its business to enable a greater focus on its core businesses in energy chemistry and consumer and industrial chemistry , the company completed the sale or disposal of the assets and transfer or liquidation of liabilities and obligations of the drilling technologies and production technologies segments
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industry collections provide our customers with increased access to a broader selection of autodesk solutions and services that exceeds those previously available in suites - simplifying the customers ' ability to get access to a complete set of tools for their industry . we discontinued the sale of new commercial licenses of most individual software products in fiscal 2016. additionally , in fiscal 2018 , we commenced a program to incentivize maintenance plan customers to move to subscription plan offerings , maintenance-to-subscription ( `` m2s '' ) , while at the same time increasing maintenance plan pricing over time for customers that remain on maintenance plans . since launching the program , a substantial majority of maintenance plan customers have converted to subscription plan offerings . we will be retiring maintenance offerings as of augest 7 , 2021. customers will have a one-year period starting august 7 , 2020 , to convert a maintenance seat to subscription plan offerings . to support our strategic priority of re-imagining construction , in fiscal 2019 , we strengthened the foundation of our construction solutions with both organic and inorganic investments . in addition to investing in our bim 360 portfolio , we acquired assemble systems for quantity take off functionality , plangrid for document-centric workflows and field execution , and buildingconnected for bidding and estimation processes . the broadened product portfolio , the autodesk construction cloud , has helped us expand our presence with sub-contractors , trades people , and building owners . as part of our manufacturing strategy , we continue to attract both global manufacturing leaders and disruptive startups with our generative design and our fusion 360 technology enhancements . our strategy includes improving our product functionality and expanding our product offerings through internal development as well as through the acquisition of products , technology , and businesses . for example , in fiscal 2019 , we acquired assemble systems , a leading provider of key workflow software solutions , plangrid , a leading provider of construction productivity software , and buildingconnected , a leading pre-construction platform . we believe that these acquisitions have enabled us to offer a more comprehensive , cloud-based construction platform . acquisitions often increase the speed at which we can deliver product functionality to our customers ; however , they entail cost and integration challenges and may , in certain instances , negatively impact our operating margins . we continually review these factors in making decisions regarding acquisitions . we currently anticipate that we will continue to acquire products , technology , and businesses as compelling opportunities become available . we evaluate annualized recurring revenue ( `` arr '' ) , growth of billings , and remaining performance obligations in determining business momentum . to analyze progress , we have disaggregated our growth between the original maintenance model and the subscription plan model . maintenance plan subscriptions peaked in the fourth quarter of fiscal 2016 as we discontinued selling new maintenance plan subscriptions in fiscal 2017 , and we expect the number of these subscriptions to keep declining over time as maintenance plan customers continue to convert to our subscription plans . we will be retiring maintenance offerings as of august 7 , 2021. customers will have a one-year period starting august 7 , 2020 to convert a maintenance seat to subscription plan offerings . global reach we sell our products and services globally , through a combination of indirect and direct channels . our indirect channels include value added resellers , direct market resellers , distributors , computer manufacturers , and other software developers . our direct channels include internal sales resources dedicated to selling in our largest accounts , our highly specialized solutions , and business transacted through our online autodesk branded store . see note 2 , `` revenue recognition `` in the notes to the consolidated financial statements for further detail on the results of our indirect and direct channel sales for the fiscal years ended january 31 , 2020 , 2019 , and 2018 . we anticipate that our channel mix will continue to change as we scale our online autodesk branded store business and our largest accounts shift towards direct-only business models . however , we expect our indirect channel will continue to transact and support the majority of our customers and revenue . we employ a variety of incentive programs and promotions to 2020 form 10-k 35 align our direct and indirect channels with our business strategies . in addition , we have a worldwide user group organization and we have created online user communities dedicated to the exchange of information related to the use of our products . one of our key strategies is to maintain an open-architecture design of our software products to facilitate third-party development of complementary products and industry-specific software solutions . this approach enables customers and third parties to customize solutions for a wide variety of highly specific uses . we offer several programs that provide strategic investment funding , technological platforms , user communities , technical support , forums , and events to developers who develop add-on applications for our products . for example , we have established the autodesk forge developer program to support innovators that build solutions to facilitate the development of a single connected ecosystem for the future of how things are designed , made , and used as well as support ideas that push the boundaries of 3d printing . in addition to the competitive advantages afforded by our technology , our large global network of distributors , resellers , third-party developers , customers , educational institutions , educators , and students is a key competitive advantage which has been cultivated over an extensive period . this network of partners and relationships provides us with a broad and deep reach into volume markets around the world . our distributor and reseller network is extensive and provides our customers with the resources to purchase , deploy , learn , and support our solutions quickly and easily . story_separator_special_tag we have a significant number of registered third-party developers who create products that work well with our solutions and extend them for a variety of specialized applications . better world to help our customers imagine , design , and make a better world , our sustainability initiatives focus our efforts on the areas where we can have the greatest positive impact : products and support , catalyzing impact and innovation in our future markets , and leading by example with our 100 % renewable and sustainable business practices . through our products and services , we are supporting our customers to better understand and improve the environmental performance of everything they make and mitigate the causes and effects of climate change . the autodesk foundation ( the `` foundation '' ) , a privately funded 501 ( c ) ( 3 ) charity organization established and solely funded by us , leads our philanthropic efforts . the purpose of the foundation is twofold : to support employees to make a better world by matching employees ' volunteer time and or donations to nonprofit organizations ; and to support organizations and individuals using design to drive positive social and environmental impact . on our behalf , the foundation also administers a discounted software donation program to nonprofit organizations , social and environmental entrepreneurs , and others who are developing design solutions that will shape a more sustainable future . assumptions behind our strategy our strategy depends upon a number of assumptions , including : making our technology available to mainstream markets ; leveraging our large global network of distributors , resellers , third-party developers , customers , educational institutions , and students ; improving the performance and functionality of our products ; and adequately protecting our intellectual property . if the outcome of any of these assumptions differs from our expectations , we may not be able to implement our strategy , which could potentially adversely affect our business . for further discussion regarding these and related risks , see part i , item 1a , “ risk factors . ” critical accounting policies and estimates our consolidated financial statements are prepared in accordance with u.s. generally accepted accounting principles . in preparing our consolidated financial statements , we make assumptions , judgments , and estimates that can have a significant impact on amounts reported in our consolidated financial statements . we evaluate our estimates and assumptions on an ongoing basis . we base our assumptions , judgments , and estimates on historical experience and various other factors that we believe to be reasonable under the circumstances . actual results could differ materially from these estimates under different assumptions or conditions . our significant accounting policies are described in part ii , item 8 , note 1 , “ business and summary of significant accounting policies , ” in the notes to consolidated financial statements . an accounting policy is deemed to be critical if it requires an accounting estimate to be made based on assumptions about matters that are highly uncertain at the time the estimate is made , if different estimates reasonably could have been used , or if changes in the estimate that are reasonably possible could materially impact the financial statements . we believe that of all our significant accounting policies , the following accounting policies and specific estimates involve a greater degree of judgment and complexity . accordingly , these 2020 form 10-k 36 are the accounting policies we believe are the most critical to aid in fully understanding and evaluating our financial condition and results of operations . revenue recognition - judgments with multiple performance obligations . our contracts with customers may include promises to transfer multiple products and services to a customer . a performance obligation is a promise in a contract with a customer to transfer products or services that are distinct . determining whether products and services are distinct performance obligations that should be accounted for separately or combined as a single performance obligation may require significant judgment that requires us to assess the nature of the promise and value delivered to the customer and the interaction of the desktop applications and cloud functionalities . for our product subscriptions , cloud service offerings , and flexible enterprise business arrangements , the functional nature of the promise , as well as the customers ' value expectations , led us to conclude desktop applications and cloud functionalities are not distinct in the context of the contract and should be accounted for as a single performance obligation . there is a high degree of interaction of the desktop applications and cloud functionalities , which is not available with the desktop applications alone or in conjunction with third-party cloud service providers . furthermore , customers are not able to use the desktop applications for its intended purpose without our cloud functionalities . for contracts with more than one performance obligation , the transaction price is allocated among the performance obligations in an amount that depicts the relative standalone selling price ( `` ssp '' ) of each obligation . judgment is required to determine the ssp for each distinct performance obligation . we use a range of amounts to estimate ssp when we sell each of the products and services separately and need to determine whether there is a discount that should be allocated based on the relative ssp of the various products and services . in instances where ssp is not directly observable , such as when we do not sell the product or service separately , we determine the ssp using information that includes market conditions and other observable inputs . we typically have more than one ssp for individual products and services due to the stratification of those products and services by customer and circumstance . in these instances , we use relevant information such as the sales channel and geographic region to determine the ssp . privately held company investments .
| maintenance revenue consists of renewal fees for existing maintenance plan agreements that were initially purchased with a perpetual software license . under our maintenance plan , customers are eligible to receive unspecified upgrades , when and if available , and technical support . we recognize maintenance revenue ratably over the term of the agreements , which is generally one year . other revenue consists of revenue from consulting , training and other services , and is recognized over time as the services are performed . other revenue also includes software license revenue from the sale of certain products which do not incorporate substantial cloud functionalities and are recognized as the licenses are delivered to our customers . 2020 form 10-k 41 fiscal year ended january 31 , 2020 change compared to prior fiscal year fiscal year ended january 31 , 2019 management comments ( in millions , except percentages ) $ % net revenue : subscription $ 2,751.9 $ 949.6 53 % $ 1,802.3 up due to growth across all subscription plan types , led by renewal product subscription revenue , which benefited from the success of the m2s program . also contributing to the increase was growth in new product subscriptions , cloud service offerings ( which benefited from our acquisitions in the fourth quarter of fiscal year 2019 ) and eba offerings . maintenance ( 1 ) 386.6 ( 248.5 ) ( 39 ) % 635.1 down primarily due to the migration of maintenance plan subscriptions to subscription plan subscriptions with the m2s program . total subscription and maintenance revenue 3,138.5 701.1 29 % 2,437.4 other 135.8 3.4 3 % 132.4 $ 3,274.3 $ 704.5 27 % $ < td style= '' vertical-align : bottom ; border-bottom:3px double
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net sales decreased by $ 60.1 million , or 8 % , for the year ended december 31 , 2016 compared to the prior year , largely due to a $ 43.4 million net sales decrease within the environmental solutions group , resulting from lower sales of vacuum trucks and street sweepers in the u.s , as well as fewer international shipments of street sweepers and sewer cleaners . partially offsetting these reductions were $ 65.5 million of incremental net sales resulting from the jje acquisition . in the safety and security systems group , net sales decreased by $ 16.7 million , primarily due to lower sales into global industrial markets , partially offset by improved global sales of outdoor warning systems and higher sales into domestic public safety markets . operating income for the year ended december 31 , 2016 decreased by $ 45.5 million , or 44 % , to $ 57.7 million , primarily driven by a $ 42.8 million reduction within the environmental solutions group , associated with negative operating leverage resulting from lower sales volumes , unfavorable sales mix effects , with fewer sales into industrial markets and a higher percentage of sales of products manufactured by other companies , which tend to carry a lower margin , as well as additional operating expenses incurred in support of current-year acquisitions , the inclusion of $ 3.9 million of expense relating to purchase accounting effects of current-year acquisitions and $ 0.5 million of acquisition-related expenses . also contributing to the lower operating income in the current year was a $ 5.3 million decrease in operating income within the safety and security systems group , inclusive of a $ 1.3 million increase in restructuring expenses . partially offsetting the operating income reductions in each of our groups was a $ 2.6 million reduction in corporate operating expenses , in spite of a $ 0.9 million increase in expenses associated with acquisition and integration-related activity . consolidated operating margin for the year ended december 31 , 2016 , inclusive of the aforementioned purchase accounting effects , restructuring charges and acquisition costs , was 8.2 % , down from 13.4 % in the prior year . income before income taxes for the year ended december 31 , 2016 decreased by $ 43.1 million as compared to the prior year . the decrease resulted from the reduced operating income , as well as a $ 0.3 million write-off of deferred financing fees resulting from the debt refinancing completed in january 2016 , partially offset by a $ 2.3 million favorable change in other ( income ) expense , net and a $ 0.4 million reduction in interest expense . net income from continuing operations for the year ended december 31 , 2016 also benefited from a $ 16.7 million reduction in income tax expense , largely due to lower pre-tax income levels and an aggregate net benefit of $ 2.2 million resulting from valuation allowance changes . the effective tax rate for the year ended december 31 , 2016 was 30.6 % , compared to 34.1 % in the prior year . total orders for the year ended december 31 , 2016 decreased by $ 11.7 million compared to the prior year , largely due to a $ 25.6 million improvement in orders within our environmental solutions group that was more than offset by a $ 37.3 million order reduction in the safety and security systems group . within our environmental solutions group , increased orders from canada , inclusive of orders acquired in , and received subsequent to , the jje acquisition , were largely offset by reduced domestic orders for vacuum trucks , sewer cleaners , street sweepers and waterblasting equipment . the decrease in orders within our safety and security systems group was primarily due to lower orders from global industrial markets , reflective of reduced demand from oil and gas markets . our consolidated backlog at december 31 , 2016 was $ 137.0 million , down $ 34.3 million , from $ 171.3 million at december 31 , 2015 . 18 story_separator_special_tag href= '' https : //www.sec.gov/archives/edgar/data/0000277509/000027750917000008/ # s731a657979ff36b1fe9e0f78459a004c '' style= '' font-family : inherit ; font-size:8pt ; '' > gain ( loss ) from discontinued operations and disposal , net of tax for the year ended december 31 , 2016 , the company recorded a net gain from discontinued operations and disposal of $ 4.4 million , primarily driven by the $ 4.2 million net gain on disposal of the fire rescue group , which was discontinued in 2015 , partially offset by the $ 0.6 million net loss that the fire rescue group realized in its 2016 operations up to the january 29 , 2016 sale completion date . the net gain on disposal includes a $ 1.3 million charge to recognize a liability in connection with a latvian commercial dispute . also contributing to the net gain in 2016 was a reduction in uncertain tax position reserves of approximately $ 1.0 million , as well as adjustments of estimated product liability obligations of previously discontinued businesses , resulting from updated actuarial valuations . for the year ended december 31 , 2015 , the company recorded a net loss from discontinued operations and disposal of $ 2.3 million , which was primarily driven by tax expense associated with recording a net deferred tax liability of $ 6.3 million associated with recognizing the outside basis differences of entities being sold in connection with the sale of bronto . partially offsetting this tax expense was $ 1.2 million of net income generated by the fire rescue group . the company also received $ 4.0 million from the general escrow funds originally established in connection with the company 's 2012 sale of the former federal signal technologies group ( “ fstech ” ) , and recorded this income as a component of gain ( loss ) from discontinued operations and disposal , net of tax of $ 1.5 million . story_separator_special_tag for further discussion of the loss from discontinued operations and disposals , see note 18 – discontinued operations to the accompanying consolidated financial statements . year ended december 31 , 2015 vs. year ended december 31 , 2014 net sales net sales decreased by $ 11.1 million , or 1 % , for the year ended december 31 , 2015 compared to the prior year . net sales in the environmental solutions group decreased by $ 2.5 million , with lower sales of vacuum trucks and sewer cleaners being partially offset by improved sales of street sweepers . in the safety and security systems group , net sales were down $ 8.6 million , largely due to an $ 11.4 million reduction in sales of industrial products associated with lower demand within oil and gas markets , as well as an unfavorable foreign currency impact of $ 8.2 million , partially offset by a $ 10.9 million improvement in sales into european public safety markets . cost of sales for the year ended december 31 , 2015 , cost of sales decreased by $ 28.0 million , or 5 % , compared to the prior year , largely driven by a decrease of $ 18.0 million within the environmental solutions group , principally associated with favorable product mix , as well as productivity and capacity improvements at our manufacturing facilities . the safety and security systems group also reported a $ 10.0 million cost of sales reduction , primarily due to a favorable foreign currency impact of $ 6.2 million , as well as favorable sales mix effects . gross profit for the year ended december 31 , 2015 , gross profit increased by $ 16.9 million , or 8 % , compared to the prior year . gross margin for the year ended december 31 , 2015 was 29.4 % , up from 26.8 % in the prior year . the improvement in gross margin was primarily the result of productivity and facilities utilization improvements and improved pricing within the environmental solutions group , as well as favorable product mix and lower costs in the safety and security systems group . selling , engineering , general and administrative expenses seg & a expenses increased by $ 2.0 million for the year ended december 31 , 2015 compared to the prior year , largely due to increases of $ 0.8 million within the safety and security systems group , associated with higher engineering expenses for new product development , and $ 0.7 million within corporate , primarily due to increased employee costs . the environmental solutions group also reported a $ 0.5 million increase , primarily due to higher employee compensation costs , partially offset by decreased product liability and workers ' compensation expenses . operating income operating income for the year ended december 31 , 2015 increased by $ 14.5 million , or 16 % , to $ 103.2 million , reflecting an operating margin of 13.4 % compared to 11.4 % in the prior year . the increase was primarily attributable to improved operating leverage and favorable pricing within the environmental solutions group , which contributed to a $ 15.5 million improvement in gross profit , and improved performance in the safety and security systems group , resulting in a $ 1.4 million increase in gross profit . these increases were partially offset by higher seg & a expenses and $ 0.4 million of restructuring expenses in the 21 safety and security systems group associated with severance costs incurred in connection with the completion of a voluntary reduction-in-force at our u.k. coal-mining business . interest expense interest expense for the year ended december 31 , 2015 decreased by $ 1.3 million , or 36 % , compared to the prior year , primarily due to significant reductions in debt levels . other expense , net other expense , net totaled $ 1.0 million for the year ended december 31 , 2015 , as compared to $ 1.7 million in the prior year . the decrease was largely driven by a $ 0.6 million gain on a foreign currency forward contract entered into in connection with the sale of the fire rescue group . income tax expense the company recognized income tax expense of $ 34.1 million in the year ended december 31 , 2015 , compared to $ 23.7 million in the prior year . the company 's effective tax rate for the year ended december 31 , 2015 was 34.1 % , compared to 28.4 % in 2014 . the increase in tax expense in the current year was primarily due to higher pre-tax income levels and the absence of certain tax benefits in the prior year that did not recur , described further below . the company 's effective tax rate for the year ended december 31 , 2015 was favorably impacted by a $ 4.2 million net tax benefit associated with tax planning strategies , partially offset by a $ 2.4 million adjustment of deferred tax assets and $ 0.4 million of expense associated with a change in the enacted tax rate in the u.k. the company 's effective tax rate for the year ended december 31 , 2014 was favorably impacted by a $ 1.0 million net reduction in unrecognized tax benefits , primarily related to the completion of an irs audit , a $ 3.5 million release of valuation allowance that was previously recorded against the company 's spanish deferred tax assets and a $ 0.4 million benefit attributable to a change in the enacted tax rate in spain . income from continuing operations income from continuing operations was $ 65.8 million for the year ended december 31 , 2015 , compared with $ 59.7 million in the prior year . the $ 6.1 million increase was largely due to increased operating income and reductions in interest expense and other expense , net , as explained above , partially offset by an increase in income tax expense .
| within the safety and security systems group , cost of sales decreased by $ 10.6 million , or 7 % , largely driven by lower sales volume . gross profit for the year ended december 31 , 2016 , gross profit decreased by $ 42.5 million , or 19 % , consisting of reductions within the environmental solutions group and the safety and security systems group of $ 36.4 million and $ 6.1 million , respectively . 19 gross margin for the year ended december 31 , 2016 decreased to 25.9 % , from 29.4 % in the prior year , largely due to reduced operating leverage due to lower sales volumes , unfavorable sales mix , with fewer sales into industrial markets and a higher concentration of sales of products manufactured by other companies , which tend to carry lower margins , as well as purchase accounting expense effects , within the environmental solutions group . selling , engineering , general and administrative expenses seg & a expenses increased by $ 0.3 million for the year ended december 31 , 2016 compared to the prior year . the addition of expenses of businesses acquired in the current year contributed to a $ 5.9 million increase within the environmental solutions group . this increase was partially offset by reductions in seg & a expenses of $ 3.5 million and $ 2.1 million within corporate and the safety and security systems group , respectively . the decrease within the safety and security systems group was largely due to lower employee costs , inclusive of the effects of previously implemented restructuring activities and cost reduction initiatives , whereas the reduction in corporate seg & a expenses was primarily due to lower employee incentive and stock compensation costs . operating income operating income for the year ended december 31 , 2016 decreased by $ 45.5 million , or 44 % , to $ 57.7 million , primarily driven by a $ 42.8 million reduction within the environmental solutions group , associated with negative operating leverage resulting from lower sales volumes , unfavorable sales mix effects , with fewer sales into industrial
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( 2 ) global equities include emerging markets strategies , which accounted for 9 % and 8 % of our aggregate assets under management as of december 31 , 2017 and 2018 , respectively . 21 the following table presents changes in our assets under management by active , return-oriented strategy : replace_table_token_3_th ( 1 ) foreign exchange reflects the impact of translating into u.s. dollars the assets under management of our affiliates whose functional currency is not the u.s. dollar . ( 2 ) other primarily includes the assets under management attributable to affiliate product transitions and transfers of our interests in our affiliates . the following charts present information regarding the composition of our assets under management by client type as of december 31 , 2017 and 2018 : assets under management by client type ( in billions ) 22 the following table presents changes in our assets under management by client type : replace_table_token_4_th _ ( 1 ) foreign exchange reflects the impact of translating into u.s. dollars the assets under management of our affiliates whose functional currency is not the u.s. dollar . ( 2 ) other primarily includes the assets under management attributable to affiliate product transitions and transfers of our interests in our affiliates . in addition to assets under management , we also report average assets under management . this measure provides a more meaningful relationship to aggregate fees as it reflects both the particular billing patterns of affiliate sponsored products and client accounts and corresponds with the timing of the inclusion of an affiliate 's results in our operating performance measures and consolidated financial statements . average assets under management was $ 819.9 billion in 2018 , an increase of $ 40.7 billion or 5 % compared to 2017. aggregate fees aggregate fees consists of the total asset and performance based fees earned by all of our affiliates . asset based fees include advisory and other fees earned by our affiliates for services provided to their clients and are typically determined as a percentage of the value of a client 's assets under management . performance based fees are based on investment performance , typically on an absolute basis or relative to a benchmark , and are recognized when they are earned ( i.e. , when they become billable to customers and are not subject to claw-back ) . performance based fees are generally billed less frequently than asset based fees , and although performance based fees inherently depend on investment performance and will vary from period to period , we anticipate performance based fees will be a recurring component of our aggregate fees . aggregate fees are generally determined by the level of our average assets under management , the composition of these assets across our active , return-oriented strategies that realize different asset based fee ratios , and performance based fees . our asset based fee ratio is calculated as asset based fees divided by average assets under management . aggregate fees were $ 5,442.4 million in 2018 , a decrease of $ 103.4 million or 2 % as compared to 2017. the decrease in our aggregate fees was primarily due to a decrease in performance based fees of $ 213.5 million or 4 % as a result of a broad decline in equity markets in the three months ended december 31 , 2018 , which resulted in negative performance for most asset classes . the decrease from performance based fees was partially offset by an increase in asset based fees of $ 90.5 million or 2 % . the increase in asset based fees was primarily due to a 5 % increase in our average assets under management ( primarily alternative strategies and global equities strategies ) , partially offset by a 3 % decline in our asset based fee ratio due to a change in the composition of our average assets under management and fee rate reductions at certain affiliate products . the decrease in aggregate fees was also partially offset by a $ 19.6 million or less than 1 % increase from our adoption of accounting standard update ( “ asu ” ) 2014-09 , revenue from contracts with customers . financial and supplemental financial performance measures the following table presents our key financial and supplemental financial performance measures : 23 replace_table_token_5_th ( 1 ) adjusted ebitda ( controlling interest ) and economic net income ( controlling interest ) are non-gaap performance measures and are discussed in “ supplemental financial performance measures. ” adjusted ebitda ( controlling interest ) is an important supplemental financial performance measure for management as it provides a comprehensive view of our share of the financial performance of our business before interest , taxes , depreciation , amortization , impairments , and adjustments to our contingent payment arrangements . while our aggregate fees decreased $ 103.4 million or 2 % in 2018 , our adjusted ebitda ( controlling interest ) decreased $ 154.4 million or 14 % . this decrease was primarily due to decreases in performance based fees , which were predominantly at our equity method affiliates in which we share in the affiliate 's revenue less agreed-upon expenses . the expense bases of these affiliates are generally less variable and , therefore , when performance based fees decline the percentage impact is greater on the affiliate 's earnings relative to the impact on the affiliate 's revenue . the decrease in our adjusted ebitda ( controlling interest ) was also due to a decrease of $ 22.5 million in investment and other income attributable to the controlling interest and a $ 20.0 million charitable contribution . while adjusted ebitda ( controlling interest ) decreased $ 154.4 million or 14 % in 2018 , our net income ( controlling interest ) decreased $ 445.9 million or 65 % . this decrease was primarily due to a $ 207.6 million ( net of tax ) increase in expenses to reduce the carrying value to fair value of one of our non-u.s. alternative affiliates and to reduce the carrying value to zero of one of our u.s. story_separator_special_tag alternative affiliates , both accounted for under the equity method . this decrease was also due to a $ 194.1 million one-time tax benefit recognized in 2017 as a result of changes in u.s. tax laws , primarily due to the re-measurement of our deferred tax assets and liabilities , which did not recur in 2018. these decreases were partially offset by a lower u.s. corporate income tax rate from the changes in u.s. tax laws and a $ 7.2 million or 8 % reduction in interest expense . we consider economic net income ( controlling interest ) to be an important measure of our financial performance , as we believe it best represents our performance after tax and before our share of non-cash expenses relating to our acquisition of interests in our affiliates . while adjusted ebitda ( controlling interest ) decreased $ 154.4 million or 14 % in 2018 , our economic net income ( controlling interest ) decreased $ 43.7 million or 5 % , primarily due to a reduction in our effective tax rate from changes in u.s. tax laws and a $ 28.2 million tax benefit recognized on the liquidation of the u.s. alternative affiliate accounted for under the equity method . story_separator_special_tag style= '' font-family : inherit ; font-size:10pt ; '' > in 2017 , primarily due to a $ 15.0 million or 4 % decrease in expenses associated with legal claims and a $ 5.7 million or 1 % reduction in distribution expenses related to commissions at certain of our uk affiliates , both attributable to the non-controlling interests . the decrease was also due to a $ 5.8 million or 1 % reduction in expenses related to wealth management initiatives attributable to the controlling interest . intangible amortization and impairments increased $ 28.4 million or 33 % in 2018 , due to a $ 30.1 million or 35 % increase from a change in the pattern of economic benefit for certain assets , partially offset by a $ 1.7 million or 2 % decrease from certain assets being fully amortized . these changes were primarily attributable to the controlling interest . intangible amortization and impairments decreased $ 23.8 million or 22 % in 2017 , due to a $ 16.0 million or 15 % decrease from a change in the pattern of economic benefit for certain assets and a $ 7.8 million or 7 % decrease from certain assets being fully amortized . these changes were primarily attributable to the controlling interest . interest expense decreased $ 7.2 million or 8 % in 2018 , primarily due to an $ 8.6 million or 10 % decrease from the redemption of our 6.375 % senior unsecured notes due 2042 in august 2017 and a $ 3.8 million or 4 % decrease due to our pound sterling-denominated forward foreign currency contracts . these decreases were partially offset by a $ 4.0 million or 5 % increase in interest expense on our credit facilities due to an increase in the applicable borrowing rates . these changes were attributable to the controlling interest . interest expense decreased $ 3.9 million or 4 % in 2017 , primarily due to a $ 5.3 million or 6 % decrease from the redemption of our 6.375 % senior unsecured notes due 2042 in august 2017. this change was attributable to the controlling interest . there were no significant changes in depreciation and other amortization in 2018 or 2017. other expenses ( net ) increased $ 11.7 million or 20 % in 2018 , primarily due to a $ 20.0 million or 34 % increase in charitable contributions and a $ 3.0 million or 5 % increase in rent expense . these increases were partially offset by a $ 6.3 million or 11 % decrease in losses resulting from changes in the value of contingent payment arrangements and a $ 6.2 million or 11 % decrease in expenses from changes in the value of affiliate equity repurchase obligations . these changes were primarily attributable to the controlling interest . other expenses ( net ) increased $ 14.7 million or 34 % in 2017 , primarily due to a $ 9.3 million or 21 % increase in losses resulting from the changes in the value of contingent payment arrangements , a $ 2.1 million or 5 % increase in expenses from changes in the value of affiliate equity repurchase obligations and a $ 2.0 or 5 % increase in rent expense . these changes were primarily attributable to the controlling interest . equity method income ( loss ) ( net ) when we do not own a controlling interest in an affiliate , but have significant influence , we account for our interest in the affiliate under the equity method . our share of earnings or losses from these affiliates , net of amortization and impairments , is included in equity method income ( loss ) ( net ) in our consolidated statements of income . for a majority of these affiliates , we use structured partnership interests in which we contractually share in the affiliate 's revenue less agreed-upon expenses . this type of partnership interest allows us to benefit from any increase in revenue or any decrease in the agreed-upon expenses , but also exposes us to any decrease in revenue or any increase in such expenses . the degree of our exposure to expenses from these structured partnership interests varies by affiliate and includes affiliates in which we fully share in the expenses of the business . we also use structured partnership interests in which we contractually share in the affiliate 's revenue without regard to expenses , and in this type of partnership interest , our contractual share of revenue generally has priority over distributions to affiliate management . our equity method revenue is derived primarily from asset and performance based fees from investment management services .
| our consolidated revenue increased $ 110.4 million or 5 % in 2017 , due to a $ 129.1 million or 6 % increase from asset based fees , partially offset by a $ 18.7 million or 1 % decrease from performance based fees . the increase in asset based fees was due to a 9 % increase in consolidated affiliate average assets under management , primarily in our global equity strategies and multi-asset and other strategies . the increase in asset based fees was partially offset by a 3 % decline in our consolidated affiliate asset based fee ratio due to a change in the composition of our average assets under management . consolidated expenses the following table presents our consolidated expenses : replace_table_token_7_th our consolidated expenses are primarily attributable to the non-controlling interests of our consolidated affiliates in which we share in revenue without regard to expenses . for these affiliates , the amount of expenses attributable to the non-controlling interests , including compensation , is generally determined by the percentage of revenue allocated to expenses as part of the structured partnership interests in place at the respective affiliate . accordingly , increases in revenue generally will increase a consolidated affiliate 's expenses attributable to the non-controlling interest and decreases in revenue will generally decrease a consolidated affiliate 's expenses attributable to the non-controlling interest . compensation and related expenses increased $ 8.2 million or 1 % in 2018 , primarily due to a $ 4.3 million or less than 1 % increase in share-based compensation expense and a $ 3.0 million or less than 1 % increase in compensation expenses associated with affiliate equity transactions . these changes were primarily attributable to the controlling interest . compensation and related expenses increased $ 46.6 million or 5 % in 2017 , primarily due to a $ 35.0 million or 4 % increase in compensation expenses at affiliates and a $ 8.5 million or 1 % increase in compensation expenses associated with affiliate equity transactions . these changes were primarily attributable to the non-controlling interests . selling , general and administrative expenses increased $ 44.6 million or 12 %
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▪ non-gaap core fee income ( deposit service charges , letters of credit fees , credit card fees , lending related fees , client investment fees , and foreign exchange fees ) of $ 175.5 million , an increase of $ 17.1 million , or 10.8 percent . this increase reflects increased client activity and continued growth in our business , primarily from credit card fees , foreign exchange fees and lending related fees . see “ results of operations—noninterest income ” for a description and reconciliation of non-gaap core fee income . ▪ non-gaap net gains on investment securities , net of noncontrolling interests and excluding gains on sales of certain-available-for-sale securities of $ 77.3 million compared to $ 31.5 million . the increase was primarily related to strong ipo and m & a activity with primary contributions from fireeye and twitter . see “ results of operations—noninterest income—gains on investment securities , net ” for further details and a reconciliation of non-gaap net gains on investment securities , net of noncontrolling interests . ▪ gains of $ 46.1 million from equity warrant assets , an increase of $ 26.7 million , or 137.8 percent . the increase was primarily driven by healthy ipo and m & a activity , including the fireeye and twitter ipos . ▪ noninterest expense of $ 621.7 million , an increase of $ 75.7 million , or 13.9 percent . the increase was primarily due to increases in incentive compensation and other employee benefits as a result of the strong performance in 2013 relative to our internal performance targets . ▪ overall , our liquidity remained strong based on the attributes of our period-end available-for-sale securities portfolio , which totaled $ 12.0 billion at december 31 , 2013 , compared to $ 11.3 billion at december 31 , 2012. our available-for-sale securities portfolio continued to be a good source of liquidity as it was invested in high quality investments and generated steady monthly cash flows . additionally , our available-for-sale securities portfolio continued to provide us with the ability to secure wholesale borrowings , as needed . 33 a summary of our performance in 2013 compared to 2012 is as follows : replace_table_token_3_th ( 1 ) see `` non-gaap net income and non-gaap diluted earnings per common share ” below for a description and reconciliation of non-gaap net income available to common stockholders and non-gaap diluted earnings per share . ( 2 ) see “ results of operations–noninterest income ” below for a description and reconciliation of non-gaap noninterest income . ( 3 ) see “ results of operations–noninterest expense ” below for a description and reconciliation of non-gaap noninterest expense and non-gaap operating efficiency ratio . ( 4 ) ratio represents consolidated net income available to common stockholders divided by average assets . ( 5 ) ratio represents consolidated net income available to common stockholders divided by average svbfg stockholders ' equity . 34 ( 6 ) see “ capital resources–capital ratios ” for a reconciliation of non-gaap tangible common equity to tangible assets and tangible common equity to risk-weighted assets . ( 7 ) the operating efficiency ratio is calculated by dividing total noninterest expense by total taxable-equivalent net interest income plus noninterest income . ( 8 ) book value per common share is calculated by dividing total svbfg stockholders ' equity by total outstanding common shares at period-end . non-gaap net income and non-gaap diluted earnings per common share we use and report non-gaap net income and non-gaap diluted earnings per common share , which excludes , in the year applicable , gains from sales of certain available-for-sale securities as well as gains from the sale of certain assets related to our equity management services business . we believe these non-gaap financial measures , when taken together with the corresponding gaap financial measures , provide meaningful supplemental information regarding our performance by excluding certain items that do not occur every reporting period . our management uses , and believes that investors benefit from referring to , these non-gaap financial measures in assessing our operating results and related trends , and when planning , forecasting and analyzing future periods . however , these non-gaap financial measures should be considered in addition to , not as a substitute for or preferable to , financial measures prepared in accordance with gaap . a reconciliation of gaap to non-gaap net income available to common stockholders and non-gaap diluted earnings per common share for 2013 and 2012 is as follows : replace_table_token_4_th ( 1 ) gains on the sales of $ 316 million in certain available-for-sale securities in the second quarter of 2012 . ( 2 ) net gains of $ 4.2 million from the sale of certain assets related to our equity management services business in the second quarter of 2012. critical accounting policies and estimates our accounting policies are fundamental to understanding our financial condition and results of operations . we have identified four policies as being critical because they require us to make particularly difficult , subjective and or complex judgments about matters that are inherently uncertain , and because it is likely that materially different amounts would be reported under different conditions or using different assumptions . we evaluate our estimates and assumptions on an ongoing basis and we base these estimates on historical experiences and various other factors and assumptions that are believed to be reasonable under the circumstances . actual results may differ materially from these estimates under different assumptions or conditions . our critical accounting policies include those that address the adequacy of the allowance for loan losses and reserve for unfunded credit commitments , measurements of fair value , the valuation of equity warrant assets and the recognition and measurement of income tax assets and liabilities . our senior management has discussed and reviewed the development , selection , application and disclosure of these critical accounting policies with the audit committee of our board of directors . story_separator_special_tag 35 allowance for loan losses and reserve for unfunded credit commitments allowance for loan losses the allowance for loan losses is management 's estimate of credit losses inherent in the loan portfolio at the balance sheet date . we consider our accounting policy for the allowance for loan losses to be critical as estimation of the allowance involves material estimates by us and is particularly susceptible to significant changes in the near term . determining the allowance for loan losses requires us to make forecasts that are highly uncertain and require a high degree of judgment . our loan loss reserve methodology is applied to our loan portfolio and we maintain the allowance for loan losses at levels that we believe are appropriate to absorb estimated probable losses inherent in our loan portfolio . our allowance for loan losses is established for loan losses that are probable but not yet realized . the process of anticipating loan losses is inherently imprecise . we apply a systematic process for the evaluation of individual loans and pools of loans for inherent risk of loan losses . on a quarterly basis , each loan in our portfolio is assigned a credit risk rating through an evaluation process , which includes consideration of such factors as payment status , the financial condition of the borrower , borrower compliance with loan covenants , underlying collateral values , potential loan concentrations , and general economic conditions . the allowance for loan losses is based on a formula allocation for similarly risk-rated loans by client industry sector and individually for impaired loans . our formula allocation is determined on a quarterly basis by utilizing a historical loan loss migration model , which is a statistical model used to estimate an appropriate allowance for outstanding loan balances by calculating the likelihood of a loan being charged-off based on its credit risk rating using historical loan performance data from our portfolio . the formula allocation provides the average loan loss experience for each portfolio segment , which considers our quarterly historical loss experience since the year 2000 , both by risk-rating category and client industry sector . the resulting loan loss factors for each risk-rating category and client industry sector are ultimately applied to the respective period-end client loan balances for each corresponding risk-rating category by client industry sector to provide an estimation of the allowance for loan losses . we apply qualitative allocations to the results we obtained through our historical loan loss migration model to ascertain the total allowance for loan losses . these qualitative allocations are based upon management 's assessment of the risks that may lead to a loan loss experience different from our historical loan loss experience . these risks are aggregated to become our qualitative allocation . based on management 's prediction or estimate of changing risks in the lending environment , the qualitative allocation may vary significantly from period to period and includes , but is not limited to , consideration of the following factors : changes in lending policies and procedures , including underwriting standards and collections , and charge-off and recovery practices ; changes in national and local economic business conditions , including the market and economic condition of our clients ' industry sectors ; changes in the nature of our loan portfolio ; changes in experience , ability , and depth of lending management and staff ; changes in the trend of the volume and severity of past due and classified loans ; changes in the trend of the volume of nonaccrual loans , troubled debt restructurings , and other loan modifications ; reserve floor for portfolio segments that would not draw a minimum reserve based on the lack of historical loan loss experience ; reserve for large funded loan exposure ; and other factors as determined by management from time to time . a committee comprised of senior management evaluates the adequacy of the allowance for loan losses . reserve for unfunded credit commitments the level of the reserve for unfunded credit commitments is determined following a methodology that parallels that used for the allowance for loan losses . we consider our accounting policy for the reserve for unfunded credit commitments to be critical as estimation of the reserve involves material estimates by our management and is particularly susceptible to significant changes in the near term . we record a liability for probable and estimable losses associated with our unfunded credit commitments . each quarter , every unfunded client credit commitment is allocated to a credit risk-rating category in accordance with each client 's credit risk rating . we use the historical loan loss factors described under our allowance for loan losses to calculate the possible loan loss experience if unfunded credit commitments are funded . separately , we use historical trends to calculate the probability of an unfunded credit commitment being funded . we apply the loan funding probability factor to risk- 36 factor adjusted unfunded credit commitments by credit risk-rating to derive the reserve for unfunded credit commitments . the reserve for unfunded credit commitments also includes certain qualitative allocations as deemed appropriate by management . fair value measurements we use fair value measurements to record fair value for certain financial instruments and to determine fair value disclosures . our available-for-sale securities , derivative instruments , marketable securities and certain non-marketable and other securities are financial instruments recorded at fair value on a recurring basis . we disclose our method and approach for fair value measurements of assets and liabilities in note 2— “ summary of significant accounting policies ” of the “ notes to consolidated financial statements ” under part ii , item 8 in this report . fair value is defined as the price that would be received to sell an asset or paid to transfer a liability ( the “ exit price ” ) in an orderly transaction between market participants at the measurement date . asc 820 , fair value measurements and disclosures , establishes a three-level hierarchy for disclosure of assets and liabilities recorded at fair value .
| changes in an individual client 's primary relationship designation have resulted , and in the future may result , in the inclusion of certain clients in different segments in different periods . the following is our reportable segment information for 2013 , 2012 and 2011 : global commercial bank replace_table_token_21_th nm—not meaningful income before income tax expense from our global commercial bank ( “ gcb ” ) increased to $ 343.8 million in 2013 , compared to $ 340.1 million in 2012 and $ 303.3 million in 2011 , which reflects the continued growth of our core commercial business and clients , with an increase in pressure on overall loan yields as a result of the low interest rate environment and increased competition . the key components of gcb 's performance are discussed below : 2013 compared to 2012 net interest income from our gcb increased by $ 47.9 million in 2013 , primarily due to a $ 70.8 million increase in loan interest income resulting mainly from an increase in average loan balances , partially offset by lower loan yields . additionally , our gcb had a $ 13.0 million increase in the ftp earned for deposits due to average deposit growth . these increases were partially offset by a $ 38.7 million decrease in the ftp earned for deposits from decreases in market interest rates . we had a provision for loan losses for gcb of $ 65.3 million in 2013 , compared to $ 45.4 million in 2012 . the provision of $ 65.3 million was primarily due to net charge-offs and period-end loan growth of $ 2.0 billion resulting in a provision of $ 21.9m . noninterest income increased by $ 13.6 million in 2013 , primarily due to higher credit card fees and foreign exchange fees . the increase in credit card fees reflect increased client awareness of our credit card products and the introduction of custom payment solutions , which has resulted in new credit card clients and an increase in client activity . custom payment solutions primarily utilize virtual cards for clients with high volume payment processing needs . the increase in foreign
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we evaluate each expansion project on the basis of its ability to produce sustained returns in excess of our cost of capital and its ability to improve efficiency or reduce operating costs . we also regularly look at acquisition opportunities that would be consistent with , or complimentary to , our overall business strategies . depending on the size of the acquisition , any such acquisitions could require external financing . as noted above in item 1a , `` risk factors , '' we are subject to extensive environmental regulations , which may impose significant additional costs on our operations in the future . further , concerns about ghg emissions and their possible effects on climate change has led to the enactment of regulations , and to proposed legislation and additional regulations , that could affect us in the form of increased cost of feedstocks and fuel , other increased costs of production and decreased demand for our products . while we do not expect any of these enactments or proposals to have a material adverse effect on us in the near term , we can not predict the longer-term effect of any of these regulations or proposals on our future financial condition , results of operations or cash flows . non-gaap financial measures the body of accounting principles generally accepted in the united states is commonly referred to as `` gaap . '' for this purpose , a non-gaap financial measure is generally defined by the sec as one that purports to measure historical or future financial performance , financial position or cash flows , but excludes or includes amounts that would not be so adjusted in the most comparable gaap measures . in this report , we disclose non-gaap financial measures , primarily earnings before interest , taxes , depreciation and amortization ( `` ebitda '' ) . ebitda is calculated as net income before interest expense , income taxes , depreciation and amortization . the non-gaap financial measures described in this form 10-k are not substitutes for the gaap measures of earnings and cash flows . ebitda is included in this form 10-k because our management considers it an important supplemental measure of our performance and believes that it is frequently used by securities analysts , investors and other interested parties in the evaluation of companies in our industry , some of which present ebitda when reporting their results . we regularly evaluate our performance as compared to other companies in our industry that have different financing and capital structures and or tax rates by using ebitda . in addition , we utilize ebitda in evaluating acquisition targets . management also believes that ebitda is a useful tool for measuring our ability to meet our future debt service , capital expenditures and working capital requirements , and ebitda is commonly used by us and our investors to measure our ability to service indebtedness . ebitda is not a substitute for the gaap measures of earnings or of cash flows and is not necessarily a measure of our ability to fund our cash needs . in addition , it should be noted that companies calculate ebitda differently and , therefore , ebitda as presented for us may not be comparable to ebitda reported by other companies . ebitda has material limitations as a performance measure because it excludes interest expense , depreciation and amortization , and income taxes . recent developments on january 2 , 2019 , we completed the acquisition of nakan , a global compounding solutions business , for approximately $ 250 million . nakan 's products are used in a wide-variety of applications , including in the automotive , building and construction , and medical industries . on october 4 , 2018 , westlake chemical partners lp ( `` westlake partners '' ) and westlake chemical partners gp llc , the general partner of westlake partners , entered into an equity distribution agreement ( the `` atm agreement '' ) with ubs securities llc , barclays capital inc. , citigroup global markets inc. , deutsche bank securities inc. , rbc capital markets , llc , merrill lynch , pierce , fenner & smith incorporated and wells fargo securities , llc ( collectively , the `` managers '' ) . pursuant to the terms of the atm agreement , westlake partners may offer and sell common units representing limited partner interests in westlake partners from time to time to , or through , the managers , as westlake partners ' sales agents or as principals , having an aggregate offering amount of up to $ 50 million . westlake partners intends to use the net proceeds of sales of the common units for general partnership purposes , including the funding of potential future drop-downs and other acquisitions . 30 on august 17 , 2018 , our board of directors authorized us to repurchase an additional $ 150 million of shares of our common stock under our 2014 share repurchase program . see `` liquidity and capital resources—liquidity and financing arrangements '' below for further discussions . we have an 81.7 % limited partner interest in westlake chemical opco lp ( `` opco '' ) , a 43.8 % limited partner interest in westlake partners , a general partner interest in westlake partners and incentive distribution rights ( `` idrs '' ) . on july 27 , 2018 , the westlake partners ' partnership agreement was amended to revise the minimum quarterly distribution thresholds for westlake partners ' idrs . for more information on the amendment , see note 18 to the consolidated financial statements included in item 8 of this form 10-k. on july 24 , 2018 , we entered into a new $ 1 billion revolving credit facility that is scheduled to mature on july 24 , 2023. see `` liquidity and capital resources — debt — credit agreement '' for more information . story_separator_special_tag on may 15 , 2018 , we redeemed all of the outstanding westlake 4.875 % senior notes due 2023 ( $ 434 million aggregate principal amount ) and all of the outstanding axiall corporation 4.875 % senior notes due 2023 ( $ 16 million aggregate principal amount ) ( collectively , the `` 2023 notes '' ) at a redemption price equal to 102.438 % of the principal amount of the 2023 notes plus accrued and unpaid interest on the 2023 notes to the redemption date . on february 15 , 2018 , we redeemed all of the outstanding westlake 4.625 % senior notes due 2021 ( $ 625 million aggregate principal amount ) and all of the outstanding eagle spinco inc. 4.625 % senior notes due 2021 ( $ 63 million aggregate principal amount ) ( collectively , the `` 2021 notes '' ) at a redemption price equal to 102.313 % of the principal amount of the 2021 notes plus accrued and unpaid interest on the 2021 notes to the redemption date . 31 results of operations segment data replace_table_token_5_th replace_table_token_6_th replace_table_token_7_th 32 ( 1 ) industry pricing data was obtained through ihs markit ( `` ihs '' ) . we have not independently verified the data . ( 2 ) represents average north american spot prices of ethylene over the period as reported by ihs . ( 3 ) represents average north american net transaction prices of polyethylene low density gp-film grade over the period as reported by ihs . ( 4 ) represents average north american contract prices of styrene over the period as reported by ihs . ( 5 ) represents average north american united states gulf coast undiscounted contract prices of caustic soda over the period as reported by ihs . during the first quarter of 2018 , ihs discontinued the previous caustic soda index that we used . for comparability , the average 2017 caustic soda is based on the current index . ( 6 ) represents average north american contract prices of chlorine ( into chemicals ) over the period as reported by ihs . ( 7 ) represents average north american contract prices of polyvinyl chloride ( pvc ) over the period as reported by ihs . effective january 1 , 2017 , ihs made a non-market downward adjustment of 15 cents per pound to pvc prices . for comparability , we adjusted each prior-year period 's pvc price downward by 15 cents per pound consistent with the ihs non-market adjustment . story_separator_special_tag style= '' font-family : inherit ; font-size:10pt ; '' > in 2018 from $ 2,051 million in 2017 . the decrease was mainly due to lower sales volumes for styrene as a result of a planned turnaround in the second quarter of 2018 and lower polyethylene sales prices , partially offset by higher sales volumes for polyethylene and higher sales prices for styrene , as compared to 2017 . average sales prices for the olefins segment decreased by 1 % in 2018 as compared to 2017 , while average sales volumes in 2018 were consistent with 2017 . income from operations . income from operations was $ 573 million in 2018 as compared to $ 655 million in 2017 . the decrease was primarily due to lower margins resulting from higher ethane feedstock costs and lower polyethylene sales prices , partially offset by higher polyethylene sales volumes . vinyls segment net sales . net sales increase d by $ 626 million , or 10 % , to $ 6,616 million in 2018 from $ 5,990 million in 2017 . this increase was mainly attributable to higher sales prices and volumes for caustic soda and higher sales volumes for pvc resin as compared to 2017 . average sales volumes increased by 4 % in 2018 , as compared to 2017 , and average sales prices increased by 7 % in 2018 as compared to 2017 . income from operations . income from operations was $ 913 million in 2018 as compared to $ 639 million in 2017 . this increase was mainly attributable to higher sales prices and volumes for caustic soda , lower purchased ethylene costs , improved operating rates and lower costs associated with planned turnarounds and unplanned outages , as compared to 2017 . 2017 compared with 2016 net sales . net sales increased by $ 2,965 million , or 58 % , to $ 8,041 million in 2017 from $ 5,076 million in 2016 , primarily attributable to higher sales volume contributed by axiall and higher sales prices for our major products . overall sales volumes increased by 46 % in 2017 as compared to 2016 , primarily attributable to higher sales contributed by axiall . average sales prices for 2017 increased by 12 % as compared to 2016 . gross profit . gross profit margin percentage increased to 22 % in 2017 from 19 % in 2016 . the gross profit margin for 2017 was higher primarily due to higher sales prices for our major products and higher sales volumes for caustic soda , chlorine and pvc resin contributed primarily by axiall , as compared to 2016 . these increases were offset by higher unabsorbed fixed manufacturing and other costs associated with turnarounds and unplanned outages and a proportionately larger sales volume for the vinyls segment , for which industry margins in 2017 and 2016 were lower as compared to the olefins industry . selling , general and administrative expenses . selling , general and administrative expenses increased by $ 141 million , or 55 % , in 2017 as compared to 2016 , primarily because a full year of axiall 's expenses were included in 2017 , as compared to only four months in 2016 and an increase in employee compensation . amortization of intangibles . amortization of intangibles are comprised of amortization expense for customer relationships , trade name and other intangible assets .
| income from operations was $ 1,408 million for the year ended december 31 , 2018 as compared to $ 1,225 million for the year ended december 31 , 2017 , an increase of $ 183 million . the increase in income from operations for the year ended december 31 , 2018 was mainly a result of higher sales prices and volumes for caustic soda and improved operating rates in the vinyls segment due to fewer planned turnarounds and unplanned outages , partially offset by higher ethane feedstock costs , as compared to the year ended december 31 , 2017 . pre-tax transaction and integration-related costs for the year ended december 31 , 2018 were $ 33 million , or $ 0.19 per diluted share after tax , as compared to $ 29 million in 2017 . 2018 compared with 2017 net sales . net sales increase d by $ 594 million , or 7 % , to $ 8,635 million in 2018 from $ 8,041 million in 2017 , primarily attributable to higher sales prices and volumes for caustic soda and higher sales volumes for pvc resin and polyethylene , partially offset by lower polyethylene sales prices and lower styrene sales volumes . average sales prices for 2018 increased by 5 % as compared to 2017 . overall sales volumes increased by 3 % in 2018 as compared to 2017 . gross profit . gross profit margin percentage increase d to 23 % in 2018 from 22 % in 2017 . the gross profit margin for 2018 was higher primarily due to higher sales prices and volumes for caustic soda , lower purchased ethylene costs and improved operating rates in the vinyls segment due to fewer planned turnarounds and unplanned outages , partially offset by higher ethane feedstock costs , as compared to 2017 . selling , general and administrative expenses . selling , general and administrative expenses increase d by $ 46 million to $ 445 million in 2018 from $ 399 million in 2017 . this increase was mainly due to an increase in
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our second drug candidate , bp1002 , targets the protein bcl-2 , which is responsible for driving cell survival in up to 60 % of all cancers . on november 21 , 2019 , we announced that the fda cleared an ind application for bp1002 . an initial phase 1 clinical trial will evaluate the ability of bp1002 to treat refractory/relapsed lymphoma and chronic lymphocytic leukemia patients . the phase 1 clinical trial is being conducted at several leading cancer centers , including md anderson , the georgia cancer center and the sarah cannon research institute . ian w. flynn , md will be the national coordinating principal investigator for the phase 1 trial . dr. flynn serves as the director of lymphoma research at the sarah cannon research institute . on november 19 , 2020 , we announced the enrollment and dosing of the first patient in the phase 1 clinical trial . 53 our third drug candidate , bp1003 , targets the stat3 protein and is currently in ind enabling studies as a potential treatment of pancreatic cancer , nsclc and aml . preclinical models have shown bp1003 to inhibit cell viability and stat3 protein expression in nsclc and aml cell lines . further , bp1003 successfully penetrated pancreatic tumors and significantly enhanced the efficacy of gemcitabine , a treatment for patients with advanced pancreatic cancer , in a pancreatic cancer patient derived tumor model . our lead indication for bp1003 is pancreatic cancer due to the severity of this disease and the lack of effective , life-extending treatments . for example , pancreatic adenocarcinoma is projected to be the second most lethal cancer behind lung cancer by 2030. typical survival for a metastatic pancreatic cancer patient is about three to six months from diagnosis . we expect to complete several ind enabling studies of bp1003 in 2021. if those studies are successful , our goal is to file an ind in 2021 for the first-in-humans phase 1 study of bp1003 in patients with refractory , metastatic solid tumors , including pancreatic cancer and nsclc . in addition , a modified product named prexigebersen-a , bio-path 's fourth drug candidate , has shown to enhance chemotherapy efficacy in preclinical solid tumor models . prexigebersen-a incorporates the same drug substance as prexigebersen but has a slightly modified formulation designed to enhance nanoparticle properties . in late 2019 , we filed an ind application to initiate a phase 1 clinical trial of prexigebersen-a in patients with solid tumors , including ovarian , endometrial , pancreatic and breast cancer . ovarian cancer is one of the most common type of gynecologic malignancies , with approximately 50 % of all cases occurring in women older than 63 years . this trial is expected to commence after the ind has been cleared by the fda , which we currently anticipate being in 2021. our dnabilize® technology-based products are available for out-licensing or partnering . we intend to apply our drug delivery technology template to new disease-causing protein targets to develop new nanoparticle antisense rnai drug candidates . we have a new product identification template in place to define a process of scientific , preclinical , commercial and intellectual property evaluation of potential new drug candidates for inclusion into our drug product development pipeline . as we expand , we will look at indications where a systemic delivery is needed and antisense rnai nanoparticles can be used to slow , reverse or cure a disease , either alone or in combination with another drug . on september 25 , 2019 , we announced that the uspto issued a patent for claims related to dnabilize® , including its use in the treatment of cancers , autoimmune diseases and infectious diseases . on october 22 , 2020 , we announced that the uspto issued a notice of allowance for u.s. patent application no . 16/333,221 entitled “ combination therapy with liposomal antisense oligonucleotides. ” in addition , on february 10 , 2021 , we announced that the uspto granted u.s. patent no . 10,898,506 titled , “ p-ethoxy nucleic acids for liposomal formulation. ” the new patent builds on earlier patents granted that protect the platform technology for dnabilize ® , the company 's novel rnai nanoparticle drugs . the new patent is the third patent in our family of platform intellectual property and offers expanded defense of our dnabilize ® platform technology .. we have certain intellectual property as the basis for our current drug products in clinical development , prexigebersen , prexigebersen-a , bp1002 and bp1003 . we are developing rnai antisense nanoparticle drug candidates based on our own patented technology to treat cancer and autoimmune disorders where targeting a single protein may be advantageous and result in reduced patient adverse effects as compared to small molecule inhibitors with off-target and non-specific effects . we have composition of matter and method of use intellectual property for the design and manufacture of antisense rnai nanoparticle drug products . as of december 31 , 2020 , we had an accumulated deficit of $ 67.2 million . our net loss was $ 10.9 million and $ 8.6 million for the years ended december 31 , 2020 and 2019 , respectively . we expect to continue to incur significant operating losses , and we anticipate that our losses may increase substantially as we expand our drug development programs and commercialization efforts . to achieve profitability , we must enter into license or development agreements with third parties , or successfully develop and obtain regulatory approval for one or more of our drug candidates and effectively commercialize any drug candidates we develop . in addition , if we obtain regulatory approval of one or more of our drug candidates , we expect to incur significant commercialization expenses related to product sales , marketing , manufacturing and distribution . even if we succeed in developing and commercializing one or more of our drug candidates , we may not be able to generate sufficient revenue and we may never be able to achieve or sustain profitability . story_separator_special_tag we expect to finance our foreseeable cash requirements through cash on hand , cash from operations , debt financings and public or private equity offerings . we may seek to access the public or private equity markets whenever conditions are favorable ; however , there can be no assurance that we will be able to raise additional capital when needed or on terms that are favorable to us , if at all . additionally , we may seek collaborations and license arrangements for our drug candidates . we currently have no lines of credit or other arranged access to debt financing . 54 financial operations overview revenue we have not generated significant revenues to date . our ability to generate revenues from our drug candidates , which we do not expect will occur for many years , if ever , will depend heavily on the successful development and eventual commercialization of our drug candidates . in the future , we may generate revenue from a combination of product sales , third-party grants , service agreements , strategic alliances and licensing arrangements . we expect that any revenue we generate will fluctuate due to the timing and amount of services performed , milestones achieved , license fees earned and payments received upon the eventual sales of our drug candidates , in the event any are successfully commercialized . if we fail to complete the development of any of our drug candidates or obtain regulatory approval for them , our ability to generate future revenue will be adversely affected . research and development expenses research and development expenses consist of costs associated with our research activities , including the development of our drug candidates . our research and development expenses consist of : expenses related to research and development personnel , including salaries and benefits , travel and stock-based compensation ; external research and development expenses incurred under arrangements with third parties , such as contract research organizations , clinical investigative sites , laboratories , manufacturing organizations and consultants ; and costs of materials used during research and development activities . costs and expenses that can be clearly identified as research and development are charged to expense as incurred . advance payments , including nonrefundable amounts , for goods or services that will be used or rendered for future research and development activities are deferred and capitalized . such amounts will be recognized as an expense as the related goods are delivered or the related services are performed . if the goods will not be delivered , or services will not be rendered , then the capitalized advance payment is charged to expense . we expect research and development expenses associated with the completion of the associated clinical trials to be substantial and to increase over time . the successful development of our drug 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 drug candidates or the period , if any , in which material net cash inflows from our drug candidates may commence . this is due to the numerous risks and uncertainties associated with developing drugs , including the uncertainty of : the rate of progress , results and costs of completion of ongoing clinical trials of our drug candidates ; the size , scope , rate of progress , results and costs of completion of any potential future clinical trials and preclinical tests of our drug candidates that we may initiate ; competing technological and market developments ; the performance of third-party manufacturers and suppliers ; the ability of our drug candidates , if they receive regulatory approval , to achieve market success ; disputes or other developments relating to proprietary rights , including patents , litigation matters and our ability to obtain patent protection for our drug candidates ; and the impact , risks and uncertainties related to covid-19 and actions taken by governmental authorities or others in connection therewith . 55 a change in the outcome of any of these variables with respect to the development of a drug candidate could mean a significant change in the costs and timing associated with the development of that drug candidate . for example , if the fda or other regulatory authority were to require us to conduct clinical trials beyond those which we currently anticipate will be required for the completion of clinical development of a drug 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 . general and administrative expenses our general and administrative expenses consist primarily of salaries and benefits for management and administrative personnel , professional fees for legal , accounting and other services , travel costs and facility-related costs such as rent , utilities and other general office expenses . story_separator_special_tag style= '' border-collapse : collapse ; width : 100 % ; font-size : 10pt '' > 57 2019 shelf registration statement on may 16 , 2019 , we filed a shelf registration statement on form s-3 with the sec , which was declared effective by the sec on june 5 , 2019 ( file no . 333-231537 ) ( the “ 2019 shelf registration statement ” ) , at which time the offering of unsold securities under a previous shelf registration statement on form s-3 filed with the sec , which was declared effective by the sec on january 9 , 2017 ( file no . 333-215205 ) ( the “ 2017 shelf registration statement ” ) , was deemed terminated pursuant to rule 415 ( a ) ( 6 ) under the securities act .
| net loss per share , both basic and diluted , was $ 2.83 per share for the year ended december 31 , 2020 , compared to $ 3.24 per share for the year ended december 31 , 2019. net loss per share is calculated using the weighted average number of shares of common stock outstanding during the applicable periods and excludes stock options and warrants because they are antidilutive . liquidity and capital resources overview we have not generated significant revenues to date . since our inception , we have funded our operations primarily through public and private offerings of our capital stock and other securities . we expect to finance our foreseeable cash requirements through cash on hand , cash from operations , debt financings and public or private equity offerings . we may seek to access the public or private equity markets whenever conditions are favorable ; however , there can be no assurance that we will be able to raise additional capital when needed or on terms that are favorable to us , if at all . additionally , we may seek collaborations and license arrangements for our drug candidates . we currently have no lines of credit or other arranged access to debt financing . we had a cash balance of $ 13.8 million at december 31 , 2020 , a decrease of $ 6.7 million compared to december 31 , 2019. we believe that our available cash at december 31 , 2020 , together with the net proceeds received from the 2021 registered direct offering and sales of our common stock under the offering agreement , each as described below , in addition to net proceeds received from warrant exercises subsequent to december 31 , 2020 , will be sufficient to meet obligations and fund our liquidity and capital expenditure requirements for at least the next 12 months from the date of this annual report on form 10-k. cash flows for the year ended december 31 , 2020 operating activities . net cash used in operating activities for the year ended december 31 , 2020 was $
| 15,979 |
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