document stringlengths 8.64k 13.4k | summary stringlengths 179 2.97k | __index_level_0__ int64 0 16.8k |
|---|---|---|
in our opinion , the consolidated financial statements present fairly , in all material respects , the financial position of the story_separator_special_tag you should read the following discussion and analysis of our financial condition and results of operations together with our financial statements and related notes appearing elsewhere in this annual report on form 10-k , or this annual report . in addition to historical information , this discussion and analysis contains forward-looking statements that involve risks , uncertainties and assumptions . our actual results may differ materially from those anticipated in these forward-looking statements as a result of certain factors . we discuss factors that we believe could cause or contribute to these differences below and elsewhere in this report , including those set forth under item 1a . `` risk factors '' and under `` cautionary note regarding forward-looking statements '' in this annual report . overview we are a commercial-stage biopharmaceutical company with a marketed product , nurtec odt ( rimegepant ) , for the acute treatment of migraine and a portfolio of innovative product candidates targeting neurological diseases , including rare disorders . nurtec odt , was approved by the u.s. food and drug administration ( `` fda '' ) on february 27 , 2020 , and became available by prescription in u.s. pharmacies on march 12 , 2020. nurtec odt is the first and only calcitonin gene-related peptide ( `` cgrp '' ) receptor antagonist available in a quick-dissolve orally dissolving tablet ( `` odt '' ) formulation that is approved by the fda for the acute treatment of migraine in adults . our other product candidates are based on multiple mechanisms —cgrp receptor antagonists , glutamate modulators and myeloperoxidase inhibition—which we believe have the potential to significantly alter existing treatment approaches across a diverse set of neurological indications with high unmet need in both large and orphan indications . our late-stage programs include the following : product platform indication development stage nurtec odt cgrp acute treatment of migraine approved by the fda on february 27 , 2020 and commercialization began in march 2020. phase 3 trial for china and korea ongoing . nurtec odt cgrp prevention of migraine positive results for phase 3 trial for prevention reported in the first quarter of 2020. fda accepted supplemental new drug application ( `` snda '' ) with pdufa goal date set for the second quarter of 2021. rimegepant cgrp pediatric acute treatment of migraine phase 3 trial ongoing . zavegepant cgrp acute treatment of migraine intranasal phase 3 trial ongoing . zavegepant cgrp prevention of migraine oral phase 3 trial planned to begin in the first quarter of 2021. troriluzole glutamate ataxias phase 2/3 randomization phase in spinocerebellar ataxia ( `` sca '' ) complete and multi-year extension trial ongoing . phase 3 trial completed enrollment and ongoing . troriluzole glutamate obsessive compulsive disorder ( “ ocd ” ) two phase 3 trials ongoing . verdiperstat mpo multiple system atrophy ( `` msa '' ) phase 3 trial completed enrollment and ongoing . results expected in fourth quarter of 2021. verdiperstat mpo amyotrophic lateral sclerosis ( `` als '' ) phase 3 healey als platform trial ongoing . results expected in fourth quarter of 2021. cgrp platform in july 2016 , we acquired exclusive , worldwide rights to our cgrp receptor antagonist platform , including rimegepant and zavegepant ( previously known as bhv-3500 and vazegepant ) , through a license agreement , as amended , with bristol-myers squibb company ( “ bms ” ) . rimegepant the most advanced product candidate from our cgrp receptor antagonist platform is rimegepant , an orally available , potent and selective small molecule human cgrp receptor antagonist that we are developing for the acute and preventive treatment of migraine . during the second quarter of 2019 , we submitted ndas for the acute treatment of migraine to the fda for the zydis odt and tablet formulations of rimegepant . the nda submission of the zydis odt formulation of rimegepant was submitted using an fda priority review voucher , purchased in march 2019 , providing for an expedited 6-month review . nurtec odt ( rimegepant ) was approved by the fda on february 27 , 2020 and was available by prescription in u.s. 59 table of contents pharmacies on march 12 , 2020. due to the early success and life-cycle benefits for nurtec odt , we determined that there were no significant added benefits to patients for the tablet formulation and that it was in the company 's best interests not to expend the resources to commercialize the tablet formulation of rimegepant for the acute treatment of migraine . in may 2020 , we withdrew the rimegepant tablet nda that was pending with the fda . a summary of key rimegepant studies is described below . the company remains focused on investing in the long-term success of the launch by driving trial , and ultimately market share , in this rapidly growing oral cgrp market and is continuing to observe a positive return on investment with increasing physician advocacy and attracting a greater pool of patients . we believe that the rapid adoption of nurtec odt is evidence of significant unmet need among people with migraine and an associated large acute therapy market opportunity . it is important to note that the injectable anti-cgrp prevention market has not been negatively impacted by the oral anti-cgrp ( or gepant ) class growth , which signifies two distinct and sizable migraine market segments . the company continues to expand commercial payer coverage , with nurtec odt now covered by insurance providers reflecting 89 % of commercial lives . study 301/study 302 in march 2018 , we announced positive topline data from our first two pivotal phase 3 trials ( “ study 301 and study 302 ” ) for the acute treatment of migraine . story_separator_special_tag if approved , vydura will be the commercial name for rimegepant in the eu . filings in israel and the middle east began in 2020 and will continue in 2021 with approvals following . in the second quarter of 2020 , we entered into agreements with genpharm services and medison pharma to distribute nurtec odt in the middle east & gulf countries and israel , respectively . with respect to japan , we are engaging the pharmaceuticals and medical devices agency ( `` pmda '' ) on a path forward , and initiation of phase 2/3 bridging studies are anticipated to begin in the fourth quarter of 2021. in january 2019 , we and our subsidiary , bioshin ( shanghai ) consulting services company ltd. ( “ bioshin shanghai ” ) , a shanghai based limited liability company , jointly announced that the national medical products administration ( “ nmpa , ” formerly , the china fda ) had accepted the investigational new drug ( “ ind ” ) application for rimegepant for the treatment of migraine . as previously announced , bioshin shanghai was established to develop and potentially commercialize our late-stage migraine and neurology portfolio in china and other asia-pacific markets . following the results of study 303 , we submitted a second ind application to the nmpa for the zydis odt formulation of rimegepant for the acute treatment of migraine . the ind application for the zydis odt formulation of rimegepant was accepted by the nmpa in the fourth quarter of 2019. in september 2020 , bioshin limited ( `` bioshin '' ) , our subsidiary and the parent organization of bioshin shanghai , raised $ 60.0 million in series a funding which is being used to build out bioshin in china and advance the biohaven clinical portfolio in the asia-pacific region . in november 2020 , bioshin initiated a double-blind , randomized phase 3 clinical trial evaluating the safety and efficacy of nurtec odt ( rimegepant ) in the acute treatment of migraine in china and korea . zavegepant bhv-3500 , formerly `` vazegepant '' , is now referred to as `` zavegepant '' ( za ve ' je pant ) . the world health organization ( who ) international nonproprietary names ( inn ) expert committee revised the name to `` zavegepant '' which was accepted by the united states adopted names council for use in the u.s. and is pending formal adoption by the inn for international use . administration of intranasal zavegepant in a phase 1 clinical trial was initiated in october 2018 and has achieved targeted therapeutic exposures . we advanced zavegepant into a phase 2/3 trial to evaluate its efficacy for the acute treatment of migraine in the first quarter of 2019. we believe that intranasal zavegepant may provide an ultra-rapid onset of action that could be used in a complimentary fashion with other migraine treatments when the speed of onset is critical to a patient . in december 2019 , we announced positive topline results from the phase 2/3 trial . zavegepant 10 and 20 mg was statistically superior to placebo on the co-primary endpoints of pain freedom and freedom from the mbs at two hours using a single dose . in january 2021 , we announced the initiation of the phase 3 clinical trial . in april 2020 , biohaven announced its plan to study intranasal zavegepant in pulmonary complications of covid-19 disease . the ind was approved by the division of pulmonary , allergy , and critical care at fda in april 2020 , and a phase 2 trial began in april 2020 in collaboration with thomas jefferson university and other academic medical institutions . the clinical trial will assess the potential benefits of cgrp receptor-blockade in mitigating an excessive immune response which in some cases can be fatal in covid-19 patients . in september 2020 , the company announced that the fda authorized the initiation of clinical trials for oral zavegepant and that the company has achieved first in human dosing in a phase 1 trial designed to assess the safety and pharmacokinetics of oral formulations of zavegepant . in addition , our phase 3 clinical program to assess the efficacy of oral zavegepant in the preventive treatment of migraine is expected to begin enrollment in the first quarter of 2021 . 61 table of contents glutamate platform the most advanced product candidate from our glutamate receptor antagonist platform is troriluzole ( previously referred to as trigriluzole and bhv-4157 ) , which is in multiple phase 3 trials . other product candidates include sublingual riluzole ( bhv-0223 ) and bhv-5500 which is an antagonist of the glutamate n-methyl-d-aspartate ( “ nmda ” ) receptor . troriluzole ataxias we are developing troriluzole for the treatment of ataxias ; our initial focus has been spinocerebellar ataxia ( `` sca '' ) . we have received both orphan drug designation and fast track designation from the fda for troriluzole for the treatment of sca . a phase 3 trial began enrollment in march 2019 to evaluate the efficacy of troriluzole in sca . we believe that the non-statistically significant clinical observations from our first phase 2/3 trial and open-label extension phase in sca support our decision to advance troriluzole into a phase 3 trial that could provide the data needed to serve as the basis for an nda . we completed enrollment in the phase 3 trial of troriluzole in sca in the first quarter of 2021. results are expected in the fourth quarter of 2021 or early 2022. other indications a phase 2/3 double-blind , randomized , controlled trial to assess the efficacy of troriluzole in ocd commenced in december 2017. enrollment in this study was completed in the first quarter of 2020. the phase 2/3 study results were announced in june 2020. troriluzole 200 mg administered once daily as adjunctive therapy in ocd patients with inadequate response to standard of care treatment showed consistent numerical improvement over placebo on the yale-brown obsessive compulsive scale ( y-bocs ) at all study timepoints ( weeks 4 to 12 ) but did not meet the
| results of operations comparison of the years ended december 31 , 2020 and 2019 the following table summarizes our results of operations for the years ended december 31 , 2020 and 2019 : replace_table_token_1_th product revenue , net we began recording product revenues in the first quarter of 2020 following the approval of nurtec odt by the fda on february 27 , 2020 and its subsequent commercial launch in the u.s. in march 2020. during the year ended december 31 , 2020 , we recognized $ 63.6 million of net product revenues related to sales of nurtec odt . sales allowances and accruals mostly consisted of co-pay card discounts , distribution fees and rebates . cost of goods sold cost of goods sold of $ 17.7 million for the year ended december 31 , 2020 is related to royalties on net sales payable to bms under a license agreement ( see note 20 `` commitments and contingencies '' to our consolidated financial statements ) , product costs incurred after fda approval , certain distribution costs and amortization of intangible assets related to milestone payments to bms and catalent , inc. ( `` catalent '' ) . see note 17 `` license and other agreements '' to our consolidated financial statements . prior to receiving initial fda approval for nurtec odt on february 27 , 2020 , we manufactured nurtec odt inventory to be sold upon commercialization and recorded all costs incurred as research and development expense . as a result , the manufacturing costs related to the nurtec inventory build-up incurred before fda approval were already expensed in a prior period and are therefore excluded from the cost of goods sold for the year ended december 31 , 2020. these previously expensed costs were not material for the year ended december 31 , 2020. the inventory build-up incurred before fda approval was sold prior to the start of the fourth quarter of 2020 .
| 4,000 |
the company recognizes certain significant claims for recovery of incurred costs when it is probable that the claim will result in additional contract revenue and when the amount of the claim can be reliably estimated . when the customer or other parties agree in writing to the amount of the claim to be recovered by the company , the amount of the claim becomes contractual and is accounted for as an increase in the contract 's total estimated revenue and estimated cost . as actual costs are incurred and revenues are recognized under percentage-of-completion accounting , a corresponding percentage of the revised total estimated profit will therefore be recognized . should it story_separator_special_tag financial condition and results of operations management 's discussion and analysis ( “ md & a ” ) should be read in conjunction with the consolidated financial statements and accompanying notes included in item 8 of this annual report on form 10-k , which include additional information about our accounting policies , practices and the transactions underlying our financial results . the preparation of our consolidated financial statements in conformity with gaap requires us to make estimates and assumptions that affect the reported amounts in our consolidated financial statements and the accompanying notes including various claims and contingencies related to lawsuits , taxes , environmental and other matters arising during the normal course of business . we apply our best judgment , our knowledge of existing facts and circumstances and actions that we may undertake in the future in determining the estimates that affect our consolidated financial statements . we evaluate our estimates on an ongoing basis using our historical experience , as well as other factors we believe appropriate under the circumstances , such as current economic conditions , and adjust or revise our estimates as circumstances change . as future events and their effects can not be determined with precision , actual results may differ from these estimates . overview business overview ceco environmental is a global leader in industrial air quality and fluid handling serving the energy , industrial and other niche markets through an attractive asset-light business model . ceco provides innovative technology and application expertise that helps companies grow their businesses with safe , clean , and more efficient solutions to help protect our shared environment . ceco serves both established and emerging industries in regions around the world working to improve air quality , optimize the energy value chain , and provide customized engineered solutions in multiple applications that include oil and gas , power generation , water and wastewater , battery production , poly silicon fabrication , chemical and petrochemical processing , along with a wide range of other industries . industry trends and corporate strategy we are a global corporation with worldwide operations . as a global business , our operations are affected by worldwide , regional and industry-specific economic factors , wherever we operate or do business . our geographic and industry diversity , and the breadth of our product and services portfolios , have helped mitigate the impact of any one industry or the economy of any single country on our consolidated operating results . we believe growth for our products and services is driven by the increasing demand for energy consumption and a shift towards cleaner sources such as natural gas , nuclear , and renewable sources . these trends should stimulate investment in new power generation facilities , pipeline expansion and related infrastructure , and in upgrading of existing facilities . with a shift to cleaner , more environmentally responsible power generation , power providers and industrial power consumers are building new facilities that use cleaner fuels . in developed markets , natural gas is increasingly becoming one of the energy sources of choice . we supply product offerings throughout the entire natural gas infrastructure value chain and believe expansion will drive growth within our energy segment for our pressure products and scr systems for natural-gas-fired power plants . increased global natural gas production as a percent of total energy consumption , miles of new pipeline being added globally , and an increase in liquification capacity all stand to drive the need for our products . we also believe there is a trend in both developed and emerging markets to control and reduce emissions of harsher fuel sources for which our air pollution control equipment is required . in emerging markets including china , india , and south east asia our business is positioned to benefit from tightening of air pollution standards . in developed markets , growth of industrialization will drive greater output of emissions requiring our equipment as well . in both markets , we expect capital expenditures for our equipment to increase and the need for our aftermarket services to grow as companies seek to meet new standards . we continue to focus on increasing revenues and profitability globally while continuing to strengthen and expand our presence domestically . our operating strategy has historically involved horizontally expanding our scope of technology , products , and services through selective acquisitions and the formation of new business units that are then vertically integrated into our growing group of turnkey system providers . our continuing focus will be on global growth , market coverage , and expansion of our asia operations . operational excellence , margin expansion , after-market recurring revenue growth , and safety leadership are also critical to our growth strategy . 27 operations overview during 2017 , the company concluded its strategic plan assessment and made several decisions to transform the business to win market share and create value . the company implemented a restructuring program during the second half of 2017 to reduce costs by approximately $ 7 million per annum and refocus the company 's portfolio including exiting non-core and low critical mass products . story_separator_special_tag a charge of $ 4.5 million was r ecorded to fully impair the carrying value of the goodwill at the company 's zhongli reporting unit in china . this impairment was recorded due to lower operating performance at this reporting unit due to the declining coal market in china . an additional charge of $ 2.7 million was recorded to reduce the carrying value of four tradenames within the energy segment to their fair value . in 2016 , after conducting the annual impairment testing for goodwill and indefinite lived intangible assets , the company recorded a total impairment charge of $ 57.9 million . a charge of $ 53.8 million was recorded to reduce the carrying value of the goodwill at three reporting units to their fair value . the first step of the impairment test indicated potential impairment for one of the reporting units due to lower operating performance as a result of increased competition caused by market and pricing pressures . this impairment was measured in the second step . the first step of the impairment test indicated potential impairment for the remaining two reporting units due to changes in sales forecasts for future years in the fourth quarter of fiscal 2016. these changes were influenced by weaker market conditions , partially due to depressed oil prices . this impairment was measured in the second step . an additional charge of $ 4.2 million was recorded to reduce the carrying value of four tradenames to their fair value . the company concluded its strategic plan assessment in the third quarter of fiscal 2017 and made several decisions to transform the business to win market share and create value . the company also implemented a restructuring program during the fourth quarter of 2017 to reduce costs by approximately $ 7 million per annum and refocus the company 's portfolio including exiting non-core and low critical mass products . the company incurred restructuring expenses of $ 1.9 million in 2017 , as a result of implementing the restructuring program . operating income for 2017 was $ 8.0 million , an increase of $ 33.6 million from a ( loss ) of $ ( 25.6 ) million in 2016. operating income as a percentage of sales for 2017 was 2.3 % compared with a negative ( 6.1 ) % for 2016. the increase in operating income was attributable to the prior year intangible asset and goodwill impairment of $ 57.9 million , compared to intangible asset and goodwill impairment recorded in the current year of $ 7.2 million . the increase in operating income was partially offset by decreased gross profit of $ 21.7 million , primarily due to a sales volume decline period over period . on an as adjusted basis , non-gaap operating income was $ 28.3 million for 2017 , a decrease of $ 24.4 million from $ 52.7 million in 2016. non-gaap operating income as a percentage of sales for 2017 was 8.2 % compared with 12.6 % for 2016. the decrease in non-gaap operating income was due to decreased gross profit , which is the result of a sales volume decline period over period . other income for 2017 was $ 0.1 million of income compared with $ 0.3 million of income in 2016 , and was comprised primarily of foreign currency transaction gains and losses . interest expense decreased to $ 6.7 million in 2017 from $ 7.7 million in 2016. the decrease is attributable to debt repayments made throughout 2016 and 2017 that decreased the amount of outstanding debt throughout 2017. income tax expense was $ 4.4 million and $ 5.3 million in 2017 and 2016 , respectively . the effective tax rate for 2017 was 315.0 % compared with ( 16.0 ) % in 2016. income tax expense and the effective tax rate for 2017 were significantly impacted by certain aspects of the tax cuts and jobs act ( “ tax act ” ) , which was enacted on december 22 , 2017. as a result of the tax act , the effective tax rate was adversely impacted in 2017 by a $ 6.4 million charge related to the deemed , one-time repatriation of foreign earnings , but it was favorably impacted by a $ 4.8 million benefit related to the revaluation of net deferred tax assets and liabilities as a result of the reduction in the u.s. corporate income tax rate from 35 % to 21 % . other significant impacts to the 2017 effective tax rate include the adverse effect of nondeductible $ 1.8 million of intangible asset and goodwill impairment charges , as well as a benefit of nondeductible $ 1.8 million related to an adjustment to estimated earnout expenses . the amounts reported related to changes brought about by the tax act are provisional amounts , subject to change within the measurement period ending one year from the december 22 , 2017 effective date of the tax act . comparison of the years ended december 31 , 2016 and 2015 consolidated sales in 2016 were $ 417.0 million compared with $ 367.4 million in 2015 , an increase of $ 49.6 million . the increase in sales was due primarily to the acquisition of pmfg at the beginning of september 2015. this acquisition contributed an incremental $ 60.9 million of sales in 2016. this increase is partially offset by a decreased volume of sales of the company 's air pollution control equipment . 32 gross profit increased by $ 25.7 million , or 23.5 % , to $ 1 34.9 million in 2016 compared with $ 109.2 million in 2015. gross profit as a percentage of sales was 32.4 % in 2016 compared with 29.7 % in 2015. the increase in gross profit on a dollar basis was the result of the aforementioned acquisition , which contribut ed an incremental $ 25.0 million .
| consolidated results our consolidated statements of operations for the years ended december 31 , 2017 , 2016 and 2015 are as follows : replace_table_token_4_th 29 to compare operating performance between the years ended december 31 , 2017 , 2016 and 2015 , the company has adjusted gaap operating income to exclude ( 1 ) executive transition expenses , including severance for its former chief executive officer , fees incurred in the search for a new chief executive officer , and expenses associated with hiring a new chief financial officer , ( 2 ) acquisition and integration related expenses , including legal , accounting , and banking expenses , ( 3 ) amortization and contingent acquisition expenses , including amortization of acquisition related intangibles , retention , severance , and earnout expenses , ( 4 ) gain on insurance settlement , ( 5 ) facility exit expenses associated with the closure of certain leased facilities , ( 6 ) legacy design repair expenses related to costs to rectify issues on products that are no longer in production , ( 7 ) restructuring expenses primarily relating to severance , facility exit , legal and property , plant and equipment impairment , ( 8 ) intangible asset and goodwill impairment , and ( 9 ) inventory valuation and plant , property and equipment valuation adjustments related to acquisitions . see “ note regarding use of non-gaap financial measures ” above . the following tables present the reconciliation of gaap gross profit and gaap gross profit margin to non-gaap gross profit and non-gaap gross profit margin , gaap operating ( loss ) income and gaap operating margin to non-gaap operating income and non-gaap operating margin , and gaap net ( loss ) income attributable to ceco environmental corp. to non-gaap net income attributable to ceco environmental corp. : replace_table_token_5_th replace_table_token_6_th 30 replace_table_token_7_th comparison of the years ended december 31 , 2017 and 2016 consolidated sales in 2017 were $ 345.1 million compared with $ 417.0 million in 2016 , a decrease of $ 71.9 million .
| 4,001 |
the company assigns the cost of an acquisition , including the assumption of liabilities , to the acquired tangible assets and identifiable intangible assets and liabilities based on their estimated fair values in accordance with gaap . the company assesses story_separator_special_tag the following discussion relates to our consolidated financial statements and should be read in conjunction with the financial statements and notes thereto appearing elsewhere in this report . statements contained in this item 7 : management 's discussion and analysis of financial condition and results of operations that are not historical facts may be forward-looking statements . such statements are subject to certain risks and uncertainties , which could cause actual results to differ materially from those projected . some of the information presented is forward-looking in nature , including information concerning projected future occupancy rates , rental rate increases , property development timing and investment amounts . although the information is based on our current expectations , actual results could vary from expectations stated in this report . numerous factors will affect our actual results , some of which are beyond our control . these include the breadth and duration of the current economic recession and its impact on our tenants , the strength of commercial and industrial real estate markets , market conditions affecting tenants , competitive market conditions , interest rate levels , volatility in our stock price and capital market conditions . you are cautioned not to place undue reliance on this information , which speaks only as of the date of this report . we assume no obligation to update publicly any forward-looking information , whether as a result of new information , future events , or otherwise , except to the extent we are required to do so in connection with our ongoing requirements under federal securities laws to disclose material information . for a discussion of important risks related to our business , and related to investing in our securities , including risks that could cause actual results and events to differ materially from results and events referred to in the forward-looking information , see item 1a : risk factors and the discussion under the captions “ —forward-looking statements ” above and “ —liquidity and capital resources ” below . in light of these risks , uncertainties and assumptions , the forward-looking events discussed in this report might not occur . executive summary through our interest in hudson pacific properties , l.p. ( our operating partnership ) and its subsidiaries , at december 31 , 2012 our consolidated office portfolio consisted of approximately 4.5 million square feet , and our media and entertainment portfolio consisted of 0.9 million square feet . as of december 31 , 2012 , our consolidated stabilized office portfolio was 93.5 % leased ( including leases not yet commenced ) . our media and entertainment properties were 73.7 % leased for the trailing 12-month period ended december 31 , 2012 . current year acquisitions , repositionings and financings . acquisitions . on april 5 , 2012 , we acquired 10900 washington boulevard in culver city , for a total gross purchase price of $ 2.6 million ( before closing costs and prorations ) . 10900 washington boulevard is an approximately 9,919-square-foot office project immediately adjacent to our 10950 washington boulevard property . 36 on june 1 , 2012 , we acquired 901 market street property in san francisco , for a total gross purchase price of $ 90.0 million ( before closing costs and prorations ) . 901 market is an approximately 212,319 square foot historic landmark building consisting of approximately 122,319 square feet of office space and approximately 90,000 square feet of retail space . on september 5 , 2012 , we acquired the olympic bundy media campus located at 1901 , 1925 , and 1933 south bundy drive and 12333 west olympic boulevard in los angeles , for a total gross purchase price of $ 89.0 million ( before closing costs and prorations ) . the olympic bundy media campus is comprised of 11.55 acres , with four existing buildings totaling approximately 241,427 square feet . the site also benefits from zoning that could potentially support up to an additional 500,000 square feet of future improvements . on november 8 , 2012 , a wholly-owned subsidiary of the company , hudson jw , llc , a delaware limited liability company ( “ hjw ” ) , entered into a joint venture , p1 hudson mc partners , llc , a delaware limited liability company ( the “ pinnacle jv ” ) , with media center partners , llc , a california limited liability company ( “ mcp ” ) , to acquire the pinnacle , a two-building ( pinnacle i and pinnacle ii ) , 625,640 square foot , office property located in burbank , california . pinnacle i is a 393,776 square foot building that , immediately prior to the transactions described below , was held in a joint venture between mcp and an unrelated entity ( the “ prior p1 majority owner ” ) , in which mcp held approximately 5 % of the ownership interests . pinnacle ii is a 231,864 square foot building owned by an affiliate of mcp , media center development , llc , a delaware limited liability company ( “ mcd ” ) . the pinnacle i building was purchased by the pinnacle jv for a total gross purchase price of $ 212.5 million ( before closing costs and prorations ) . in order to effectuate that purchase , hjw contributed approximately $ 83.9 million to the pinnacle jv and the pinnacle jv obtained a $ 129.0 million ten-year project loan . the new project loan bears interest at a fixed annual rate of 3.954 % and matures on november 7 , 2022. mcd is expected to contribute the pinnacle ii to the pinnacle jv building upon the satisfaction of certain closing conditions , including lender approval of the assumption of an existing $ 89.2 million project loan . the existing project loan bears interest at a fixed annual rate of 6.313 story_separator_special_tag the results of the properties described under “ —acquisitions ” above are included in our consolidated results as of the date of their respective acquisition . similarly , the financings described under “ —financings ” above are included in our consolidated results on the date that the asset as to which a loan has been assumed was acquired or as of the date of the applicable loan draw in the case of draws under our unsecured credit facility . all significant intercompany balances and transactions have been eliminated in our consolidated financial statements . for periods prior to 2010 , we have reclassified certain other property-related revenue and tenant recoveries relating to our media and entertainment properties that had been included as an offset to corresponding operating expenses , such that our media and entertainment rental revenue , other property-related revenue , and tenant recoveries , and our media and entertainment operating expenses reflect the gross revenue and gross expenses , as applicable , without regard to such offset . in addition , for periods prior to 2011 , we have reclassified office related parking revenue from tenant recoveries to parking and other . these reclassifications conform the periods prior to 2011 with the current period presentation . the accompanying financial statements have been prepared pursuant to the rules and regulations of the sec , and they include , in our opinion , all adjustments , consisting of normal recurring adjustments , necessary to present fairly the financial information set forth therein . factors that may influence our operating results business and strategy we focus our investment strategy on office properties located in submarkets with growth potential as well as on underperforming properties or portfolios that provide opportunities to implement a value-add strategy to increase occupancy rates and cash flow . additionally , we intend to acquire properties or portfolios that are distressed due to near-term debt maturities or underperforming properties where we believe better management , focused leasing efforts and or capital improvements would improve the property 's operating performance and value . our strategy also includes active management , aggressive leasing efforts , focused capital improvement programs , the reduction and containment of operating costs and an emphasis on tenant satisfaction , which we believe will minimize turnover costs and improve occupancy . 38 from the acquisition of our first property in february 2007 through december 2012 , we have acquired or developed properties totaling an aggregate of approximately 5.3 million square feet . we intend to pursue acquisitions of additional properties as a key part of our growth strategy , often including properties that may have substantial vacancy , which enables us to increase cash flow through lease-up . we expect to continue to acquire properties subject to existing mortgage financing and other indebtedness or to incur indebtedness in connection with acquiring or refinancing these properties . debt service on such indebtedness will have a priority over any dividends with respect to our common or series b preferred stock and our common and series a preferred units . rental revenue the amount of net rental revenue generated by the properties in our portfolio depends principally on our ability to maintain the occupancy rates of currently leased space and to lease currently available space and space that becomes available from lease terminations . as of december 31 , 2012 , the percent leased for our stabilized office properties was approximately 93.5 % ( or 88.3 % , excluding leases signed but not commenced as of that date ) , and the percent leased for the media and entertainment properties ( based on 12-month trailing average ) was approximately 73.7 % . the amount of rental revenue generated by us also depends on our ability to maintain or increase rental rates at our properties . we believe that the average rental rates for our office properties are generally below the current average quoted market rate . we believe the average rental rates for our media and entertainment properties are generally equal to current average quoted market rates . negative trends in one or more of these factors could adversely affect our rental revenue in future periods . future economic downturns or regional downturns affecting our submarkets or downturns in our tenants ' industries that impair our ability to renew or re-let space and the ability of our tenants to fulfill their lease commitments , as in the case of tenant bankruptcies , could adversely affect our ability to maintain or increase rental rates at our properties . in addition , growth in rental revenue will also partially depend on our ability to acquire additional properties that meet our investment criteria . conditions in our markets the properties in our portfolio are all located in california submarkets . positive or negative changes in economic or other conditions in california , including the state budgetary shortfall , employment rates , natural hazards and other factors , may impact our overall performance . operating expenses our operating expenses generally consist of utilities , property and ad valorem taxes , insurance and site maintenance costs . increases in these expenses over tenants ' base years are generally passed on to tenants in our full-service gross leased properties and are generally paid in full by tenants in our net lease properties . certain of our properties have been reassessed for property tax purposes as a result of our initial public offering or their subsequent acquisition and other reassessments remain pending . in the case of completed reassessments , the amount of property taxes we pay reflects the valuations established with the county assessors for the relevant locations of each property as of the initial public offering or their subsequent acquisition . with respect to pending reassessments , we similarly expect the amount of property taxes we pay to reflect the valuations established with such county assessors . taxable reit subsidiary as part of the formation transactions , we formed hudson pacific services , inc. , or our services company , a maryland corporation that is wholly owned by our operating partnership .
| results of operations the following table identifies each of the properties in our portfolio acquired through december 31 , 2012 and their date of acquisition . replace_table_token_12_th ( 1 ) we acquired a 51 % joint venture interest in the rincon center property on december 16 , 2010. on april 29 , 2011 we acquired the remaining 49 % interest in the rincon center property for approximately $ 38.7 million ( before closing costs and prorations ) . ( 2 ) we acquired a 98.25 % joint venture interest in pinnacle i property on november 8 , 2012. all amounts and percentages used in this discussion of our results of operations are calculated using the numbers presented in the financial statements contained in this report rather than the rounded numbers appearing in this discussion . comparison of the year ended december 31 , 2012 to the year ended december 31 , 2011 revenue total office revenue . total office revenue consists of rental revenue , tenant recoveries , and parking and other revenue . total office revenues increased $ 20.8 million , or 19.8 % , to $ 126.0 million for the twelve months ended december 31 , 2012 compared to $ 105.2 million for the twelve months ended december 31 , 2011 . the period-over-period changes in the items that comprise total revenue are attributable primarily to the factors discussed below . 42 office rental revenue . office rental revenue includes rental revenues from our office properties and percentage rent on retail space contained within those properties . total office rental revenue increased $ 18.6 million , or 24.7 % , to $ 93.9 million for the twelve months ended december 31 , 2012 compared to $ 75.3 million for the twelve months ended december 31 , 2011 .
| 4,002 |
factors that could cause or contribute to these differences include , but are not limited to , those discussed below and those listed under risks factors. we have attempted to identify forward-looking statements in this report by placing an asterisk ( * ) before paragraphs containing such material . executive level overview trimble 's focus is on combining positioning technology with wireless communication and application capabilities to create system-level solutions that enhance productivity and accuracy for our customers . the majority of our markets are end-user markets , including engineering and construction firms , governmental organizations , public safety workers , farmers , and companies who must manage fleets of mobile workers and assets . we also provide components to original equipment manufacturers to incorporate into their products . in the end user markets , we provide a system that includes a hardware platform that may contain software and customer support . some examples of our solutions include products that automate and simplify the process of surveying land , products that automate the utilization of equipment such as tractors and bulldozers , products that enable a company to manage its mobile workforce and assets , and products that allow municipalities to manage their fixed assets . in addition , we also provide software applications on a stand-alone basis . for example , we provide software for project management on construction sites . to achieve distribution , marketing , production , and technology advantages in our targeted markets , we manage our operations in the following four segments : engineering and construction , field solutions , mobile solutions , and advanced devices . solutions targeted at the end-user make up a significant majority of our revenue . to create compelling products , we must attain an understanding of the end users ' needs and work flow , and how location-based technology can enable that end user to work faster , more efficiently , and more accurately . we use this knowledge to create highly innovative products that change the way work is done by the end-user . with the exception of our mobile solutions and advanced devices segments , our products are generally sold through a dealer channel , and it is crucial that we maintain a proficient , global , third-party distribution channel . we continued to execute our strategy with a series of actions that can be summarized in three categories . reinforcing our position in existing markets * we believe these markets continue to be underpenetrated and provide us with additional , substantial potential for substituting our technology for traditional methods . we are continuing to develop new products and to strengthen our distribution channels in order to expand our market . in our engineering and construction segment , we demonstrated our leadership in technology innovation by introducing a breakthrough high accuracy global navigation satellite system ( gnss ) correction technology with the trimble rtx technology . rtx combines real-time data with innovative positioning and compression algorithms to deliver better than 4 centimeter ( 1.5 inch ) repeatable accuracy with as little as one minute convergence in selected areas , enabling work to start immediately . we introduced our next generation tsc3 handheld controller which provides surveyors with a range of new features and functions from multiple devices into a single handheld : a digital camera , integrated communications as well as a gnss navigator , compass and accelerometer . we also released the next generation of trimble ranger 3 rugged handheld computer which meets or exceeds rigorous military standards for temperature extremes , drops , vibration , humidity and altitude . we continued to expand our network of sitech technology dealers with the expansion of this dealer network almost complete . these dealers represent trimble and caterpillar machine control systems for the contractor 's entire fleet of heavy equipment regardless of machine brand . in our field solutions segment , the agriculture division introduced additional capabilities for the field-iq crop input control system that allows operators to control the application rate of seed , liquid or granular materials , 33 saving costs by preventing seed and fertilizer overlap . we also introduced the cfx-750 display , our newest touch screen display which offers affordable guidance , steering , and precision agriculture functionality and is compatible with the field-iq system . in the water management sector , we introduced ez-surface for farm surface and sub-surface drainage applications that will allow farmers and drainage contractors to analyze fields surveyed by viewing 3d models , as well as ez-sync , which will allow farmers and drainage contractors to wirelessly deliver completed drainage designs to the fmx displays via trimble 's connected farm solutions . in our mobile solutions segment , we introduced a new cloud-based field service solution to manage fleet productivity through the trimble geomanager workmanagementa software solution that provides on-demand visibility into vehicle and mobile worker utilization . our acquisition of peoplenet strengthens our strategy for addressing the complex regulatory and operational demands of enterprise companies in the transportation and logistics market . peoplenet is a leading provider of integrated onboard computing and mobile communications systems for effective fleet management that help manage regulatory compliance , fuel costs , driver safety and customer visibility . in our advanced devices segment , to support a growing number of applications demanding high-performance under diverse operating conditions , we expanded the functionality of our line of thingmagic embedded rfid readersmercury6e ( m6e ) , mercury5e ( m5e ) , and mercury5e-compact ( m5e-c ) , by releasing a firmware upgrade that optimizes several rfid tag read/write operations resulting in an overall performance improvement . our acquisition of beartooth also expands trimble 's ability to offer unique map content and new outdoor-centric products while simultaneously enhancing current popular applications . extending our position in new and existing markets through new product categories * we are utilizing the strength of the trimble brand in our markets to expand our revenue by bringing new products to new and existing users . story_separator_special_tag the 35 remaining value of the software arrangement is allocated to the license fee using the residual method . license revenue is primarily recognized when the software has been delivered and fair value has been established for all remaining undelivered elements . some of our subscription product offerings include hardware , subscription services and extended warranty . under our hosted arrangements , the customer typically does not have the contractual right to take possession of the software at any time during the hosting period without incurring a significant penalty and it is not feasible for the customer to run the software either on its own hardware or on a third-party 's hardware . upfront fees related to our hosted solutions typically consist of amounts for the in-vehicle enabling hardware device and peripherals . our multiple deliverable product offerings include hardware with embedded firmware , extended warranty and pcs services , which are considered separate units of accounting . for certain of our products , software and non-software components function together to deliver the tangible product 's essential functionality . in evaluating the revenue recognition for agreements which contain multiple deliverable arrangements , under the new accounting guidance , we determined that in certain instances we were not able to establish vsoe for some or all deliverables in an arrangement as we infrequently sold each element on a standalone basis , did not price products within a narrow range , or had a limited sales history . when vsoe can not be established , we attempt to establish the selling price of each element based on relevant third-party evidence ( tpe ) . tpe is determined based on competitor prices for similar deliverables when sold separately . generally , our go-to-market strategy differs from that of competitors , and offerings may contain a significant level of proprietary technology , customization or differentiation such that the comparable pricing of products with similar functionality can not be obtained . furthermore , we are unable to reliably determine what similar competitor products ' selling prices are on a stand-alone basis . therefore , we typically are not able to establish the selling price of an element based on tpe . when we are unable to establish selling price using vsoe or tpe , we use our best estimate of selling price ( besp ) in our allocation of arrangement consideration . the objective of besp is to determine the price at which we would transact a sale if the product or service were sold on a stand-alone basis . besp is generally used for offerings that are not typically sold on a stand-alone basis or for new or highly customized offerings . we determine besp for a product or service by considering multiple factors including , but not limited to , pricing practices , market conditions , competitive landscape , internal costs , geographies and gross margin . the determination of besp is made through consultation with and formal approval by our management , taking into consideration our go-to-market strategy . allowance for doubtful accounts our accounts receivable balance , net of allowance for doubtful accounts and sales returns reserve , was $ 275.2 million at the end of fiscal 2011 , as compared with $ 222.8 million at the end of fiscal 2010. the allowance for doubtful accounts was $ 6.7 million and $ 3.4 million at the end of fiscal 2011 and 2010 , respectively . we evaluate ongoing collectibility of our trade accounts receivable based on a number of factors such as age of the accounts receivable balances , credit quality , historical experience , and current economic conditions that may affect a customer 's ability to pay . in circumstances where we are aware of a specific customer 's inability to meet its financial obligations to us , a specific allowance for bad debts is estimated and recorded which reduces the recognized receivable to the estimated amount we believe will ultimately be collected . in addition to specific customer identification of potential bad debts , bad debt charges are recorded based on our recent past loss history and an overall assessment of past due trade accounts receivable amounts outstanding . inventory valuation our inventories , net balance were $ 232.1 million at the end of fiscal 2011 as compared with $ 192.9 million at the end of fiscal 2010. our inventory allowances at the end of fiscal 2011 were $ 37.6 million , as compared with $ 31.8 million at the end of fiscal 2010. our inventories are stated at the lower of standard cost ( which 36 approximates actual cost on a first-in , first-out basis ) or market . adjustments to reduce the cost of inventory to its net realizable value , if required , are made for estimated excess , or obsolescence balances . factors influencing these adjustments include decline in demand , technological changes , product life cycle and development plans , component cost trends , product pricing , physical deterioration , and quality issues . if actual factors are less favorable than those projected by us , additional inventory write-downs may be required . income taxes income taxes are accounted for under the liability method whereby deferred tax asset or liability account balances are calculated at the balance sheet date using current tax laws and rates in effect for the year in which the differences are expected to affect taxable income . a valuation allowance is recorded to reduce the carrying amounts of deferred tax assets if it is more likely than not such assets will not be realized . relative to uncertain tax positions , we only recognize the tax benefit if it is more likely than not that the tax position will be sustained on examination by the taxing authorities , based on the technical merits of the position . the tax benefits recognized in the financial statements from such positions are then measured based on the largest benefit that has a greater than 50 % likelihood of being realized upon ultimate settlement .
| results of operations overview the following table is a summary of revenue , gross margin and operating income for the periods indicated and should be read in conjunction with the narrative descriptions below . replace_table_token_5_th basis of presentation we have a 52-53 week fiscal year , ending on the friday nearest to december 31 , which for fiscal 2011 was december 30 , 2011. fiscal 2011 , 2010 , and 2009 were all 52-week years . revenue in fiscal 2011 , total revenue increased by $ 350.1 million , or 27 % , to $ 1.64 billion from $ 1.29 billion in fiscal 2010. the increase in fiscal 2011 was primarily due to stronger performances in the engineering and construction and field solutions segments . engineering and construction revenue increased $ 187.4 million , or 26 % , field solutions increased $ 95.6 million , or 30 % , mobile solutions increased $ 64.3 million , or 41 % , and advanced devices increased $ 2.8 million , or 3 % , as compared to fiscal 2010. revenue growth within engineering and construction was driven by strong organic growth due to expanded distribution and improved 39 end user markets and acquisitions , including tekla . sales were strong in the u.s. and europe for heavy and highway and survey products . additionally , field solutions revenue increased primarily due to the increase in demand for agricultural products as relatively high commodity prices led to good farmer income and spending . mobile solutions revenue increased primarily due to the peoplenet acquisition and growth within the existing business , partially offset by the loss of a large customer in the second quarter of 2010. in fiscal 2010 , total revenue increased by $ 167.7 million , or 15 % , to $ 1.29 billion from $ 1.13 billion in fiscal 2009. the increase in fiscal 2010 was primarily due to stronger performances in the engineering and construction and field solutions segments .
| 4,003 |
66 for each of the ischemic stroke indication and the ards indication , we may receive success-based regulatory filing and approval and sales milestones aggregating up to $ 225 million in aggregate for each indication , subject to potential milestone credits . milestone payments are non-refundable and story_separator_special_tag you should read the following discussion and analysis in conjunction with “ item 8. financial statements and supplementary data ” included below in this annual report on form 10-k. overview we are an international biotechnology company that is focused primarily in the field of regenerative medicine . our multistem ® cell therapy , a patented and proprietary allogeneic stem cell product , is our lead platform product and is currently in clinical development in several areas , the most advance of which is an ongoing phase 3 clinical trial for the treatment of ischemic stroke . our current clinical development programs are focused on treating neurological conditions , cardiovascular disease , inflammatory and immune disorders , and certain pulmonary conditions where the current standard of care is limited or inadequate for many patients , particularly in the critical care segment . current programs our multistem cell therapy product development programs in the clinical development stage include the following : ischemic stroke : we launched our pivotal phase 3 clinical trial of multistem cell therapy for the treatment of ischemic stroke , referred to as masters-2 , and enrollment commenced in the third quarter of 2018. we initiated the study with a small number of high-enrolling sites and plan to bring on additional sites over time in line with clinical product supply and clinical operations objectives . our masters-2 clinical trial is a randomized , double-blind , placebo-controlled clinical trial designed to enroll 300 patients primarily in north america and europe who have suffered moderate to moderate-severe ischemic stroke . the enrolled subjects are receiving either a single intravenous dose of multistem cell therapy or placebo , administered within 18-36 hours of the occurrence of the stroke , in addition to the standard of care . the primary endpoint will evaluate disability using modified rankin scale , or mrs , scores at three months , comparing the distribution , or the “ shift , ” between the multistem treatment and placebo groups . the study will also assess excellent outcome ( the achievement of mrs ≤1 , nihss ≤1 , and barthel index ≥95 ) at three months and one year as key secondary endpoints . additionally , the study will consider other measures of functional recovery , biomarker data and clinical outcomes , including hospitalization , mortality and life-threatening adverse events , and post-stroke complications such as infection . the masters-2 study has received several regulatory distinctions including spa designation , fast track designation and rmat designation , which was established under the 21st century cures legislation from the fda , as well as a final scientific advice positive opinion from the ema . in addition , healios has an ongoing clinical trial , treasure , evaluating the safety and efficacy of administration of multistem cell therapy for the treatment of ischemic stroke in japan , and enrollment continues . treasure will be evaluated under the progressive framework for regenerative medicine therapies in japan . under the new framework , healios ' ischemic stroke program has been awarded the sakigake designation by the pmda , which is designed to expedite regulatory review and approval , and is analogous to fast track designation from the fda . we look forward to completing both the masters-2 and treasure trials and using the accelerated pathway afforded to us by the regulators in the united states , europe and japan upon study completion . ards : in january 2019 , we announced summary results from our exploratory clinical study of the intravenous administration of multistem cell therapy to treat patients who are suffering from ards . the study results provide further confirmation of tolerability and a favorable safety profile associated with multistem treatment . importantly , multistem subjects had lower mortality and a greater number of ventilator-free and icu-free days in the first month following diagnosis compared to patients receiving placebo . furthermore , analysis of initial biomarker data reflects lower levels of inflammatory markers/cytokines following multistem treatment , an expected mechanism of action in this patient population . we will continue to evaluate the data as the one-year follow-up period is completed for all patients in the trial and plan to present additional results after further analyses . healios has a license to develop and commercialize ards in japan and announced in november 2018 its plans to initiate in the first half of 2019 a clinical trial of multistem for patients with pneumonia-induced ards . 41 trauma : in 2018 , we announced with uthealth our plans to conduct a phase 2 clinical trial evaluating multistem cell therapy for early treatment and prevention of complications after severe traumatic injury . this first-ever study of a cell therapy for treatment of a wide range of traumatic injuries is intended to be conducted at memorial hermann-texas medical center , one of the busiest level 1 trauma centers in the united states . the study has grant support from the medical technology enterprise consortium and the memorial hermann foundation . we intend to provide the clinical product for the conduct of the trial , as well as regulatory and operational support . we and uthealth are in the planning and preparation stage for this study and will provide further updates as preparations for the trial progress . ami : we are conducting an ongoing phase 2 clinical study in the united states for the administration of multistem cell therapy to patients that have suffered a heart attack . in a previously completed phase 1 clinical study , the results demonstrated a favorable safety profile and encouraging signs of improvement in heart function among patients that exhibited severely compromised heart function prior to treatment . story_separator_special_tag each license agreement with healios has defined economic terms , and we may receive success-based milestone payments . while there is no assurance that we will receive milestone proceeds under the healios collaboration , any milestone payment we receive is non-refundable and non-creditable towards future royalties or any other payment due from healios . also , we are entitled to receive tiered royalties on net product sales , as defined in the license agreements . the rofn period , as extended , with respect to the option for a license in china expires in june 2019 , and we received a $ 2.0 million payment from healios in december 2018 for the most recent extension . furthermore , healios may make an additional payment of $ 3.0 million to extend the rofn period for another six months through december 31 , 2019. all such extension payments would be creditable against the option fee payable by healios upon execution of the china option agreement , if applicable , or otherwise , against milestone payments under the licensed programs . in march 2018 , healios purchased 12,000,000 shares of our common stock and a warrant to purchase up to an additional 20,000,000 shares of common stock for $ 21.1 million , or approximately $ 1.76 per share . the healios warrant is ( i ) not exercisable with respect to 16,000,000 shares unless during the rofn period , we and healios have entered into a china option agreement , and ( ii ) exercisable with respect to 4,000,000 shares at an exercise price equal to a reference price , as defined , but no less than $ 1.76 per share . as of december 31 , 2018 , 1,500,000 of the 16,000,000 shares underlying the healios warrant will no longer be exercisable according to the terms of the healios warrant . in february 2017 , we completed a public offering generating net proceeds of approximately $ 20.9 million through the issuance of 22,772,300 shares of common stock at an offering price of $ 1.01 per share . we have had equity purchase agreements in place since 2011 with aspire capital , which provide us the ability to sell shares to aspire capital from time-to-time , as appropriate . the current agreement was entered into in february 2018 and includes aspire capital 's commitment to purchase up to an aggregate of $ 100 million of shares of common stock over a three-year period . the terms of the 2018 equity facility are similar to the previous arrangements , and we issued 450,000 shares of our common stock to aspire capital as a commitment fee in february 2018 and filed a registration statement for the resale of 24,700,000 shares of common stock in connection with the new equity facility . also in connection with the new equity facility , aspire capital invested $ 1.0 million to purchase 500,000 shares of common stock at $ 2.00 per share . during the years ended december 31 , 2018 , 2017 and 2016 , we sold 8,708,582 , 9,400,000 , and 2,191,418 shares , respectively , to aspire capital at average prices of $ 1.78 , $ 1.75 and $ 1.84 per share , respectively . as of february 28 , 2019 , we had 18,050,000 million shares remaining to sell to aspire capital under the 2018 agreement . during the year ended december 31 , 2017 , we received proceeds of approximately $ 1.9 million from the exercise of warrants . all of our previously outstanding warrants were either exercised prior to expiration or expired in march 2017 , and we had only the healios warrant outstanding at december 31 , 2018. in 2016 , a flood caused damage to our primary facilities that required the reconstruction of certain laboratory space and was covered by insurance at replacement cost . insurance recovery proceeds of $ 0.7 million were received in 2016. in 2018 , we received an additional $ 0.6 million in insurance proceeds , net of associated expenses . 43 story_separator_special_tag style= '' line-height:120 % ; padding-top:16px ; font-size:10pt ; '' > gain from insurance proceeds , net . in 2016 , a flood caused damage to our primary facilities that required the reconstruction of certain laboratory space and was covered by insurance at replacement cost . in 2018 , we received an additional $ 0.6 million in insurance proceeds , net of associated expenses , which concluded the insurance claim . 44 other income , net . other income , net , for the years ended december 31 , 2018 and 2017 was $ 0.8 million and $ 0.3 million , respectively , and was comprised of interest income and expense , refundable foreign tax credits and foreign currency gains and losses . year ended december 31 , 2017 compared to year ended december 31 , 2016 revenues . revenues decreased to $ 3.7 million for the year ended december 31 , 2017 from $ 17.3 million in 2016 , related primarily to the $ 15.0 million payment received from the healios collaboration in january 2016 that was recognized as revenue in the first quarter of 2016 , partially offset by 2017 revenues , including a $ 1.0 million milestone payment from rti and other proceeds from our collaboration with healios . grant revenue decreased by $ 0.2 million in the year ended december 31 , 2017 compared to the year ended december 31 , 2016 , primarily due to completed grants and the timing of grant-funded projects . research and development expenses . research and development expenses increased to $ 27.8 million for the year ended december 31 , 2017 from $ 24.8 million for the year ended december 31 , 2016. in 2017 , approximately $ 4.7 million was expensed ( of which $ 3.2 million was non-cash ) related to a settlement and license agreement with garnet to resolve a long-standing intellectual property dispute .
| results of operations since our inception , our revenues have consisted of license fees , contract revenues and milestone payments from our collaborators , and grant proceeds primarily from federal , state and foundation grants . we have derived no revenue from the commercial sale of therapeutic products to date , but we have received royalties on commercial sales by a licensee of products using our technologies , which we expect to cease in connection with the licensees strategic transformation . research and development expenses consist primarily of external clinical and preclinical study fees , manufacturing costs , salaries and related personnel costs , legal expenses resulting from intellectual property prosecution processes , facility costs , and laboratory supply and reagent costs . we expense research and development costs as they are incurred . we expect to continue to make significant investments in research and development to enhance our technologies , advance clinical trials of our product candidates , expand our regulatory affairs and product development capabilities , conduct preclinical studies of our product , manufacture our product candidates and prepare for potential commercialization of our multistem cell therapy product . general and administrative expenses consist primarily of salaries and related personnel costs , professional fees and other corporate expenses . we expect to continue to incur substantial losses through at least the next several years . year ended december 31 , 2018 compared to year ended december 31 , 2017 revenues . revenues increased to $ 24.3 million for the year ended december 31 , 2018 from $ 3.7 million in 2017 . our contract revenues from our collaboration with healios increased $ 21.4 million year-over-year , reflecting the expansion of our collaboration in june 2018 to include several additional licensed indications , among other things . absent any new collaborations , we expect our future contract revenue to be comprised primarily of revenues associated with our healios collaboration .
| 4,004 |
overview we develop and manufacture a broad line of pre-programmed universal remote control products , av accessories , software and intelligent wireless security , sensing and automation components dedicated to redefining the home entertainment and automation experience . our customers operate primarily in the consumer electronics market and include subscription broadcasters , oems , international retailers , private label brands , pro-security installers and companies in the computing industry . we also sell integrated circuits , on which our software and device control database is embedded , and license our device control database to oems that manufacture televisions , digital audio and video players , streamer boxes , cable converters , satellite receivers , set-top boxes , room air conditioning equipment , game consoles , and wireless mobile phones and tablets . since our beginning in 1986 , we have compiled an extensive device control database that covers over one million individual device functions and approximately 8,100 unique consumer electronic brands . quickset® , our proprietary software , can automatically detect , identify and enable the appropriate control commands for home entertainment , automation and appliances like air conditioners . our library is regularly updated with new control functions captured directly from devices , remote controls and manufacturer specifications to ensure the accuracy and integrity of our database and control engine . our universal remote control library contains device codes that are capable of controlling virtually all set-top boxes , televisions , audio components , dvd players , blu-ray players , and cd players , as well as most other remote controlled home entertainment devices and home automation control modules worldwide . with the wider adoption of more advanced control technologies , emerging rf technologies , such as rf4ce , bluetooth , and bluetooth smart , have increasingly become a focus in our development efforts . several new recently released platforms utilize rf to effectively implement popular features like voice search . we operate as one business segment . we have 24 international subsidiaries located in argentina , brazil , british virgin islands , cayman islands , france , germany , hong kong ( 3 ) , india , italy , japan , korea , mexico , the netherlands , people 's republic of china ( 6 ) , singapore , spain and the united kingdom . to recap our results for 2017 : net sales increased 6.8 % to $ 695.8 million in 2017 from $ 651.4 million in 2016 . our gross margin percentage decreased from 25.2 % in 2016 to 23.8 % in 2017 . operating expenses , as a percent of sales , increased from 21.3 % in 2016 to 22.3 % in 2017 operating income decreased 58.0 % to $ 10.7 million in 2017 from $ 25.4 million in 2016 , and our operating margin percentage decreased to 1.5 % in 2017 , compared to 3.9 % in 2016 . our effective tax rate increased to 241.6 % in 2017 from 19.1 % in 2016 . our strategic business objectives for 2018 include the following : continue to develop and market the advanced remote control products and technologies our customer base is adopting ; continue to broaden our home control and automation product offerings ; further penetrate international subscription broadcasting markets ; acquire new customers in historically strong regions ; increase our share with existing customers ; and continue to seek acquisitions or strategic partners that complement and strengthen our existing business . we intend for the following discussion of our financial condition and results of operations to provide information that will assist in understanding our consolidated financial statements , the changes in certain key items in those financial statements from period to period , and the primary factors that accounted for those changes , as well as how certain accounting principles , policies and estimates affect our consolidated financial statements . 27 critical accounting policies and estimates the preparation of financial statements in conformity with gaap requires us to make estimates and judgments that affect the reported amounts of assets and liabilities , disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period . on an on-going basis , we evaluate our estimates and judgments , including those related to revenue recognition , allowances for sales returns and doubtful accounts , inventory valuation , our review for impairment of long-lived assets , intangible assets and goodwill , business combinations , income taxes , stock-based compensation expense and performance-based common stock warrants . actual results may differ from these judgments and estimates , and they may be adjusted as more information becomes available . any adjustment may be significant and may have a material impact on our consolidated financial position or results of operations . 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 may have been used , or if changes in the estimate that are reasonably likely to occur may materially impact the financial statements . management believes the following critical accounting policies affect our more significant judgments and estimates used in the preparation of our consolidated financial statements . in addition to the accounting policies mentioned below , see `` item 8. financial statements and supplementary data — notes to consolidated financial statements — note 2 '' for other significant accounting policies . revenue recognition we recognize revenue on the sale of products when title of the goods has transferred , there is persuasive evidence of an arrangement ( such as a purchase order from the customer ) , the sales price is fixed or determinable and collectability is reasonably assured . a provision is recorded for estimated sales returns and allowances and is deducted from gross sales to arrive at net sales in the period the related revenue is recorded . story_separator_special_tag goodwill we evaluate the carrying value of goodwill on december 31 of each year and between annual evaluations if events occur or circumstances change that would more likely than not reduce the fair value of the reporting unit below its carrying amount . such circumstances may include , but are not limited to : ( 1 ) a significant adverse change in legal factors or in business climate , ( 2 ) unanticipated competition or ( 3 ) an adverse action or assessment by a regulator . to evaluate whether goodwill is impaired , we conduct a two-step quantitative goodwill impairment test . in the first step we compare the estimated fair value of our single reporting unit to the reporting unit 's carrying amount , including goodwill . we estimate the fair value of our reporting unit based on income and market approaches . under the income approach , we calculate the fair value based on the present value of estimated future cash flows . under the market approach , we estimate the fair value based on market multiples of enterprise value to ebitda for comparable companies . if the carrying value of the net assets assigned to the reporting unit exceeds the fair value of the reporting unit , then we perform the second step of the impairment test in order to determine the implied fair value of the reporting unit 's goodwill . to calculate the implied fair value of the reporting unit 's goodwill , the fair value of the reporting unit is first allocated to all of the other assets and liabilities of that unit based on their fair values . the excess of the reporting unit 's fair value over the amount assigned to its other assets and liabilities is the implied fair value of goodwill . an impairment loss would be recognized equal to the amount by which the carrying value of goodwill exceeds its implied fair value . determining the fair value of a reporting unit is judgmental in nature and involves the use of significant estimates and assumptions . these estimates and assumptions include revenue growth rates and operating margins used to calculate projected future cash flows , risk-adjusted discount rates , future economic and market conditions and the determination of appropriate market comparables . in addition , we make certain judgments and assumptions in determining our reporting units . we base our fair value estimates on assumptions we believe to be reasonable but that are unpredictable and inherently uncertain . actual future results may differ from those estimates . business combinations we allocate the purchase price of acquired businesses to the tangible and intangible assets and the liabilities assumed based on their estimated fair values on the acquisition date . the excess of the purchase price over the fair value of net assets acquired is recorded as goodwill . we engage independent third-party appraisal firms to assist us in determining the fair values of assets 29 acquired and liabilities assumed . such valuations require management to make significant fair value estimates and assumptions , especially with respect to intangible assets and contingent consideration . management estimates the fair value of certain intangible assets and contingent consideration by utilizing the following ( but not limited to ) : future cash flow from customer contracts , customer lists , distribution agreements , acquired developed technologies , trademarks , trade names and patents ; expected costs to complete development of in-process technology into commercially viable products and cash flows from the products once they are completed ; brand awareness and market position as well as assumptions regarding the period of time the brand will continue to be used in our product portfolio ; and discount rates utilized in discounted cash flow models . in those circumstances where an acquisition involves a contingent consideration arrangement , we recognize a liability equal to the fair value of the contingent payments we expect to make as of the acquisition date . we re-measure this liability at each reporting period and record changes in the fair value within operating expenses . increases or decreases in the fair value of the contingent consideration liability can result from changes in discount periods and rates , as well as changes in the timing and amount of earnings estimates or in the timing or likelihood of achieving earnings-based milestones . our estimates are based upon assumptions believed to be reasonable ; however , unanticipated events or circumstances may occur which may affect the accuracy of our fair value estimates , including assumptions regarding industry economic factors and business strategies . results of operations and cash flows of acquired businesses are included in our operating results from the date of acquisition . income taxes we calculate our current and deferred tax provisions based on estimates and assumptions that may differ from the actual results reflected in our income tax returns filed during the subsequent year . we record adjustments based on filed returns when we have identified and finalized them , which is generally in the third and fourth quarters of the subsequent year . we recognize deferred tax assets and liabilities for the expected tax consequences of temporary differences between the tax basis of assets and liabilities and their reported amounts using enacted tax rates in effect for the year in which we expect the differences to reverse . we record a valuation allowance to reduce the deferred tax assets to the amount that we are more likely than not to realize . we have considered future market growth , forecasted earnings and tax rates , future taxable income , the mix of earnings in the jurisdictions in which we operate and prudent tax planning strategies in determining the need for a valuation allowance . in the event we were to determine that we would not be able to realize all or part of our net deferred tax assets in the future , we would increase the valuation allowance and make a corresponding charge to earnings in the period in which we make such determination .
| results of operations the following table sets forth our results of operations expressed as a percentage of net sales for the periods indicated . replace_table_token_6_th year ended december 31 , 2017 ( `` 2017 `` ) compared to year ended december 31 , 2016 ( `` 2016 `` ) net sales . net sales for 2017 were $ 695.8 million , an increase of 6.8 % compared to $ 651.4 million in 2016 . net sales by our business and consumer lines were as follows : replace_table_token_7_th net sales in our business lines ( subscription broadcasting , oem , and computing companies ) were 92.3 % of net sales in 2017 compared to 92.4 % in 2016 . net sales in our business lines in 2017 increased by 6.7 % to $ 642.2 million from $ 601.7 million in 2016 driven primarily by the rollout of higher end platforms in europe , increased sales of home security products and increased sales to consumer electronics companies in asia . these increases were partially offset by a decrease in sales to north american satellite broadcasting customers as certain customers were depleting existing prior generation inventory in preparation for the launch of their new advanced platforms . net sales in our consumer lines ( one for all ® retail and private label ) were 7.7 % of net sales in 2017 compared to 7.6 % in 2016 . net sales in our consumer lines in 2017 increased by 7.8 % to $ 53.6 million from $ 49.7 million in 2016 driven primarily by growth in markets outside of europe . gross profit . gross profit in 2017 was $ 165.7 million compared to $ 164.1 million in 2016 . gross profit as a percent of sales decreased to 23.8 % in 2017 from 25.2 % in 2016 .
| 4,005 |
accordingly , the restated consolidated financial statements for 2008 do not consolidate changsha jingli 's financial statements . the previously reported financial statements accounted for the acquisition in accordance with asc topic 805 , business combinations ( formerly sfas no . 141 ) story_separator_special_tag the financial information presented in this management 's discussion and analysis of financial condition and results of operations has been adjusted to reflect the restatement of our consolidated financial statements as of and for the fiscal year ended december 31 , 2008. specifically , we have restated our consolidated balance sheet and the related consolidated statement of operations , consolidated statement of stockholders ' equity and consolidated statement of cash flows as of and for the year ended december 31 , 2008. the restatement is more fully described in the explanatory note immediately preceding part i , item 1 and in note 3 restatement of consolidated financial statements of our consolidated financial statements , which is included in financial statements and supplementary data in item 8 of this annual report on form 10-k. you should read the following discussion in conjunction with our consolidated financial statements and related notes included in item 8 of this annual report on form 10-k. this annual report on form 10-k contains certain forward-looking statements within the meaning of the private securities litigation reform act of 1995 ( pslra ) , section 27a of the securities act of 1933 , as amended ( the securities act ) , and section 21e of the securities exchange act of 1934 , as amended , ( the exchange act ) , about our expectations , beliefs , or intentions regarding our business , financial condition , results of operations , strategies , or prospects . you can identify forward-looking statements by the fact that these statements do not relate strictly to historical or current matters . rather , forward-looking statements relate to anticipated or expected events , activities , trends , or results as of the date they are made . because forward-looking statements relate to matters that have not yet occurred , these statements are inherently subject to risks and uncertainties that could cause our actual results to differ materially from any future results expressed or implied by the forward-looking statements . many factors could cause our actual activities or results to differ materially from the activities and results anticipated in forward-looking statements . these factors include those contained in part i , item 1a risk factors of this annual report on form 10-k. we do not undertake any obligation to update forward-looking statements . we intend that all forward-looking statements be subject to the safe harbor provisions of pslra . these forward-looking statements are only predictions and reflect our views as of the date they are made with respect to future events and financial performan ce . overview we are a multi-platform media company operating primarily in the out-of-home advertising industry . out-of-home advertising typically refers to advertising media in public places , such as billboards , in-elevator displays , street furniture and transit area displays . we are one of the largest operators of integrated outdoor billboard and in-elevator advertising networks in china . our core outdoor billboard and in-elevator platforms are complemented by our transit advertising platform , which together enables us to provide multi-platform , one-stop shop services for our local , national and international clients . targeting the rapidly growing number of urban and increasingly affluent consumers in china , we deploy our advertising network across the following select media platforms : outdoor billboard platform . as of march 31 , 2010 , we operate a network of over 1,500 high-impact billboards with over 500,000 square feet of surface display area in 15 cities , including beijing , hong kong , qingdao , shanghai , shenyang , shenzhen , guangzhou , chongqing and chengdu . our billboards are mostly deployed in commercial centers and other desirable areas with heavy vehicle or foot traffic . 48 in-elevator platform . as of march 31 , 2010 , our network of over 125,000 printed and digital poster frames delivered targeted advertising messages inside elevators to captive audiences in high-rise residential and office buildings in 50 major cities in china . the in-elevator platform is characterized by its low cost structure and minimal capital requirements and targets the affluent urban population that is highly desired by advertisers . transit advertising platform . as of march 31 , 2010 , we operate a network of large-format light boxes in concourses of 11 major subway lines in shanghai . according to the metro authority of shanghai , in march 2010 , these subway lines carried an aggregate average daily traffic of approximately 5.65 million commuters . in addition , we also operate a bus advertising network of 5,000 buses in beijing . our multi-platform offerings are cross-marketed by a sales force located in 23 offices across china . our advertising clients are from industries ranging from telecommunications , insurance and banking , to automobile , real estate , electronics and fast moving consumer goods . since 2005 , we have achieved significant growth through acquisitions and organic expansion . we expect to continue expanding our billboard holdings through acquisitions and organic expansion while utilizing organic growth to grow our elevator and transit holdings , and capitalize on the growth opportunities in china 's out-of-home advertising and other emerging media markets . in october 2009 , we completed the business combination . see part i , item 1 business business overview of this annual report on form 10-k for a description of the business combination . the business combination is accounted for as a reverse recapitalization because it fails to meet the criteria to be considered as a business combination described in accounting standards codification ( asc ) section 805-20-55 , business combination . pursuant to these accounting standards , searchmedia international is considered to be the accounting acquirer because it obtained control of ideation as a result of the transaction . story_separator_special_tag in 2009 , we did not pay our lease payment obligations for many of the elevator leases in our jingli shanghai elevator operations , which resulted in termination of many of these elevator leases . if a significant number of our elevator leases are terminated and we fail to develop relationships with potential lessors and sublessors of new sites , our business could suffer as a result . as there is a limited supply of billboards at desirable locations and a limited number of subway stations , the termination of a significant number of the leases for billboards and light boxes at subway stations could harm our multi-platform growth and operation strategies and our business and prospects could suffer as a result . ability to integrate acquired companies . we acquired a number of advertising businesses in 2008. we have been trying to integrate and centralize the operational accounting , legal , human resource and administrative functions of the acquired companies . such efforts , to date , have not been successful and our failure to successfully integrate the acquired businesses creates a substantial risk that we may not be able to fully realize the anticipated benefits of these acquisitions . the extent to which we are able to successfully integrate the acquired companies into our business , in terms of sales and marketing , client service , growth strategy and corporate culture , will impact our results of operations . ability to shorten accounts receivable collection period . as is consistent with the payment terms and collection practice of the advertising industry in china , the collection period of our accounts receivable is relatively long , which generally range from three months to six months or longer from the invoicing date . relative to direct advertising clients , the collection period is longer for accounts receivable from advertising agency clients . we expect such practice to continue in the foreseeable future . the onset and deepening of the recent global financial and economic crises could negatively impact the cash flows of our multinational and local clients and , in turn , the amount and timing of the collection of accounts receivable from them . 51 ability to cross-sell . our ability to increase revenues by effectively leveraging our multi-platform advertising network will be determined by our ability to integrate our sales efforts and successfully implementing cross-selling sales initiatives . to further implement cross-selling initiatives , we plan to employ an integrated sales approach under which we will coordinate the sales and maintenance teams across platforms and geographic regions and provide them with the proper incentive structure to encourage more cohesive and consistent services to our clients and a heightened awareness of opportunities to cross-sell our media offerings while optimizing advertising solutions for our clients . ability to retain key employees and sales people . recruiting and retaining a team of senior executives , key employees and sales team with industry knowledge and experience is essential to our continued success . critical accounting policies and estimates the preparation of consolidated financial statements in conformity with gaap requires us to make estimates and assumptions that affect the reported amounts of assets , liabilities , revenues and expenses . on an ongoing basis , we evaluate our estimates , including those related to allowance for doubtful accounts , estimate of useful lives of intangible assets , impairment of goodwill and other intangibles , cash flow forecasts , share-based compensation expense , and contingencies and litigation liabilities . we base our estimates on historical experience , known or expected trends , independent valuations and various other assumptions that are believed to be reasonable under the circumstances based on information available as of the date of the issuance of these financial statements . the results of such assumptions form the basis for making estimates about the carrying amounts of assets and liabilities that are not readily apparent from other sources . the current economic environment and its potential effect on us and our clients have combined to increase the uncertainty inherent in such estimates and assumptions . future results could be significantly affected if actual results were to be different from these estimates and assumptions . we believe the following critical accounting policies govern our more significant judgments and estimates used in the preparation of our consolidated financial statements . revenue recognition we recognize advertising service revenue on a straight-line basis over the period in which the customer advertisement is to be displayed , which typically ranges from 1 month to 2 years , starting from the date we first display the advertisement . written contracts are entered into between us and our customers to specify the price , the period and the location at which the advertisement is to be displayed . revenue is only recognized if the collectability of the advertising service fee is probable . we generate advertising service revenues from the sales of frame space on the poster frame network , advertising time slots on traditional billboard networks and the sale of advertising services through our transit based media . in the majority of advertising arrangements , we act as a principal in the transaction and record advertising revenues on a gross basis . the associated expenses are recorded as cost of revenues . in some instances we are considered an agent and recognize revenue on a net basis . customer payments received in excess of the amount of revenue recognized are recorded as deferred revenue in the consolidated balance sheet , and are recognized as revenue when the advertising services are rendered . 52 accounts receivable and allowance for doubtful accounts accounts receivable consist of amounts billed but not yet collected and unbilled receivables . unbilled receivables relate to revenues earned and recognized , but which have not been billed by us in accordance with the terms of the advertising service contract .
| results of operations for the year ended december 31 , 2009 compared to the year ended december 31 , 2008 the following table sets forth the amounts and the percentage relationship to revenues of certain items in our consolidated statements of income for the years ended december 31 , 2009 and 2008 : replace_table_token_11_th revenue . we generate our revenues from providing advertising services over our network which consists primarily of the following platforms : outdoor billboard platform . we typically sign advertising contracts with terms ranging from 6 to 24 months for billboard advertisements . each contract will typically specify the billboard location , measurement and the price . the contract price varies substantially from contract to contract , based on the location and measurement of the billboard . deposits or progress payments are typically required at various stages of the contract performance , such as signing of contract , confirmation of content and completion of service period . 66 in-elevator platform . we typically sign advertising contracts with terms ranging from one to six months for in-elevator advertisements . typically , we negotiate for a contract price for covering a set of cities or districts within cities . we may sometimes help certain clients design a detailed plan , based on the contract price and targeted demographics , with particular buildings where the advertisements will be displayed within the cities or districts specified under the contract . progress payments are typically required at various stages of the contract performance . subway and bus advertising platform . we typically sign advertising contracts with terms ranging from one to three months for subway and bus advertisements . the price typically consists of advertising fees and production fees for subway and bus advertisements . typically , the contracts specify a certain combination of subway stations and bus lines and we have the discretion to assign specific subway light boxes and bus lines for each contract .
| 4,006 |
45 ( 15 ) comprehensive loss the accumulated other comprehensive loss was comprised of the adjustment to the defined benefit plan liability as follows : replace_table_token_40_th 46 ( 16 ) other financial data balance sheet information : replace_table_token_41_th 47 ( 17 ) rights agreement on april 26 , 1999 , the company 's board of directors declared a dividend distribution of one right per share of the company 's outstanding common stock as of may 17 , 1999 pursuant to a rights agreement , dated as of april 27 , 1999. the rights agreement also provides that one right will attach story_separator_special_tag the matters discussed in this section include forward-looking statements that are subject to numerous risks . you should carefully read the “ cautionary note regarding forward-looking statements ” and “ risk factors ” in this form 10-k. overview our operations are entirely focused on the manufacture and marketing of concrete reinforcing products for the concrete construction industry . our business strategy is focused on : ( 1 ) achieving leadership positions in our markets ; ( 2 ) operating as the lowest cost producer ; and ( 3 ) pursuing growth opportunities within our core businesses that further our penetration of the markets we currently serve or expand our geographic footprint . on november 19 , 2010 , we , through our wholly-owned subsidiary , iwp , purchased certain assets of ivy for approximately $ 50.3 million , after giving effect to post-closing adjustments . ivy was one of the nation 's largest producers of wwr and wire products for concrete construction applications ( see note 4 to the consolidated financial statements ) . among other assets , we acquired ivy 's production facilities located in arizona , florida , missouri and pennsylvania ; production equipment located at a leased facility in texas ; and certain related inventories . we also entered into a short-term sublease with ivy for the texas facility . subsequent to the acquisition , we elected to consolidate certain of our wwr operations in order to reduce our operating costs , which involved the closure of facilities in wilmington , delaware and houston , texas . these actions were taken in response to the close proximity of ivy 's facilities in hazleton , pennsylvania and houston , texas to our existing facilities in wilmington , delaware and dayton , texas . critical accounting policies our financial statements have been prepared in accordance with accounting principles generally accepted in the united states ( “ gaap ” ) . our discussion and analysis of our financial condition and results of operations are based on these financial statements . the preparation of our financial statements requires the application of these accounting principles in addition to certain estimates and judgments based on current available information , actuarial estimates , historical results and other assumptions believed to be reasonable . actual results could differ from these estimates . following is a discussion of our most critical accounting policies , which are those that are both important to the depiction of our financial condition and results of operations and that require judgments , assumptions and estimates . revenue recognition . we recognize revenue from product sales when products are shipped and risk of loss and title has passed to the customer . sales taxes collected from customers are recorded on a net basis and as such , are excluded from revenue . 12 concentration of credit risk . financial instruments that subject us to concentrations of credit risk consist principally of cash and cash equivalents and trade accounts receivable . our cash is concentrated primarily at one financial institution , which at times exceeds federally insured limits . we are exposed to credit risk in the event of default by institutions in which our cash and cash equivalents are held and by customers to the extent of the amounts recorded on the balance sheet . we invest excess cash primarily in money market funds , which are highly liquid securities that bear minimal risk . most of our accounts receivable are due from customers that are located in the u.s. and we generally require no collateral depending upon the creditworthiness of the account . we provide an allowance for doubtful accounts based upon our assessment of the credit risk of specific customers , historical trends and other information . there is no disproportionate concentration of credit risk . allowance for doubtful accounts . we maintain allowances for doubtful accounts for estimated losses resulting from the potential inability of our customers to make required payments on outstanding balances owed to us . significant management judgments and estimates are used in establishing the allowances . these judgments and estimates consider such factors as customers ' financial position , cash flows and payment history as well as current and expected business conditions . it is reasonably likely that actual collections will differ from our estimates , which may result in increases or decreases in the allowances . adjustments to the allowances may also be required if there are significant changes in the financial condition of our customers . inventory valuation . we periodically evaluate the carrying value of our inventory . this evaluation includes assessing the adequacy of allowances to cover losses in the normal course of operations , providing for excess and obsolete inventory , and ensuring that inventory is valued at the lower of cost or estimated net realizable value . our evaluation considers such factors as the cost of inventory , future demand , our historical experience and market conditions . in assessing the realization of inventory values , we are required to make judgments and estimates regarding future market conditions . because of the subjective nature of these judgments and estimates , it is reasonably likely that actual outcomes will differ from our estimates . adjustments to these reserves may be required if actual market conditions for our products are substantially different than the assumptions underlying our estimates . long-lived assets . story_separator_special_tag we regularly review our actual asset allocation and , when appropriate , rebalance the investments in the plan to more accurately reflect the targeted allocation . for 2013 , 2012 and 2011 , the assumed long-term rate of return utilized for plan assets of the delaware plan was 8 % . we currently expect to use the same assumed rate for the long-term return on plan assets in 2014. in determining the appropriateness of this assumption , we considered the historical rate of return of the plan assets , the current and projected asset mix , our investment objectives and information provided by our third-party investment advisors . the projected benefit obligations and net periodic pension cost for the serps are based in part on expected increases in future compensation levels . our assumption for the expected increase in future compensation levels is based upon our average historical experience and management 's intentions regarding future compensation increases , which generally approximates average long-term inflation rates . assumed discount rates and rates of return on plan assets are reevaluated annually . changes in these assumptions can result in the recognition of materially different pension costs over different periods and materially different asset and liability amounts in our consolidated financial statements . a reduction in the assumed discount rate generally results in an actuarial loss , as the actuarially-determined present value of estimated future benefit payments will increase . conversely , an increase in the assumed discount rate generally results in an actuarial gain . in addition , an actual return on plan assets for a given year that is greater than the assumed return on plan assets results in an actuarial gain , while an actual return on plan assets that is less than the assumed return results in an actuarial loss . other actual outcomes that differ from previous assumptions , such as individuals living longer or shorter lives than assumed in the mortality tables that are also used to determine the actuarially-determined present value of estimated future benefit payments , changes in such mortality tables themselves or plan amendments will also result in actuarial losses or gains . under gaap , actuarial gains and losses are deferred and amortized into income over future periods based upon the expected average remaining service life of the active plan participants ( for plans for which benefits are still being earned by active employees ) or the average remaining life expectancy of the inactive participants ( for plans for which benefits are not still being earned by active employees ) . however , any actuarial gains generated in future periods reduce the negative amortization effect of any cumulative unamortized actuarial losses , while any actuarial losses generated in future periods reduce the favorable amortization effect of any cumulative unamortized actuarial gains . the amounts recognized as net periodic pension cost and as pension assets or liabilities are based upon the actuarial assumptions discussed above . we believe that all of the actuarial assumptions used for determining the net periodic pension costs and pension assets or liabilities related to the delaware plan are reasonable and appropriate . the funding requirements for the delaware plan are based upon applicable regulations , and will generally differ from the amount of pension cost recognized under asc topic 715 for financial reporting purposes . during 2013 , 2012 and 2011 , we made contributions totaling $ 307,000 , $ 206,000 and $ 478,000 , respectively , to the delaware plan . we currently expect net periodic pension costs for 2014 to be $ 12,000 for the delaware plan and $ 588,000 for the serps . cash contributions to the plans during 2014 are expected to be $ 247,000 for the delaware plan and $ 290,000 for the serps . 14 a 0.25 % decrease in the assumed discount rate for the delaware plan would have increased our projected and accumulated benefit obligations as of september 28 , 2013 by approximately $ 80,000 and have no impact on the expected net periodic pension cost for 2014. a 0.25 % decrease in the assumed discount rate for our serps would have increased our projected and accumulated benefit obligations as of september 28 , 2013 by approximately $ 224,000 and $ 172,000 , respectively , and the net periodic pension cost for 2014 by approximately $ 19,000. a 0.25 % decrease in the assumed long-term rate of return on plan assets for the delaware plan would have increased the expected net periodic pension cost for 2014 by approximately $ 5,000. recent accounting pronouncements . current adoptions in june 2011 , the fasb issued accounting standards update ( “ asu ” ) no . 2011-05 “ comprehensive income – presentation of comprehensive income. ” asu no . 2011-05 changes the presentation of comprehensive income in the financial statements for all periods reported and eliminates the option under the previous guidance that allowed for the presentation of other comprehensive income as part of the statement of shareholders ' equity . the update allows two options for the presentation of comprehensive income : ( 1 ) a single statement of comprehensive income , which includes all components of net income and other comprehensive income ; or ( 2 ) a statement of income followed immediately by a statement of comprehensive income , which includes summarized net income and all components of other comprehensive income . the amendments in this update are effective retrospectively for annual reporting periods , and interim periods within those years , beginning after december 15 , 2011. we adopted asu no . 2011-05 in the first quarter of fiscal 2013 and chose to present a single statement of comprehensive income for our interim reporting periods and separate statements of income and comprehensive income for our annual reporting periods . the adoption of asu 2011-05 did not impact our consolidated financial statements except for the change in presentation . future adoptions in february 2013 , the fasb issued asu no . 2013-02 “ reporting of amounts reclassified out of accumulated other comprehensive income. ” asu no .
| results of operations statements of operations – selected data ( dollars in thousands ) replace_table_token_3_th 2013 compared with 2012 net sales net sales for 2013 were relatively flat at $ 363.9 million compared with $ 363.3 million in 2012. shipments for the year increased 4.6 % while average selling prices decreased 4.3 % from the prior year levels . the increase in shipments was primarily due to modest improvement in market conditions and demand for our products relative to the prior year . the decrease in average selling prices was driven by competitive pricing pressures . sales for both years reflect severely depressed volumes due to the continuation of recessionary conditions in our construction end-markets . 15 gross profit gross profit increased 74.7 % to $ 39.2 million , or 10.8 % of net sales , in 2013 from $ 22.5 million , or 6.2 % of net sales , in 2012. the year-over-year increase was primarily due to wider spreads between average selling prices and raw material costs relative to the prior year together with higher shipments . gross profit for both years was unfavorably impacted by depressed shipment volumes and elevated unit conversion costs largely driven by reduced operating schedules . selling , general and administrative expense selling , general and administrative expense ( “ sg & a expense ” ) increased 9.4 % to $ 20.7 million , or 5.7 % of net sales , in 2013 from $ 18.9 million , or 5.2 % of net sales , in 2012 primarily due to higher compensation expense ( $ 1.5 million ) , a reduction in the gain on the settlement of life insurance policies ( $ 460,000 ) and the relative year-over-year change in the cash surrender value of life insurance policies ( $ 155,000 ) . the increase in compensation expense was primarily driven by higher incentive plan expense due to our improved financial results in the current year .
| 4,007 |
this management 's discussion and analysis of financial condition and results of operations should be read in conjunction with the “ selected historical consolidated financial data , ” our audited consolidated annual financial statements and the related notes thereto and other information included in this report . overview we are one of the fastest growing construction materials companies in the united states , with a 74 % increase in revenue between the year ended december 29 , 2014 and the year ended december 29 , 2018 . within our markets , we offer customers a single-source provider for construction materials and related downstream products through our vertical integration . our materials include aggregates , which we supply across the united states , and in british columbia , canada , and cement , which we supply to surrounding states along the mississippi river from minnesota to louisiana . in addition to supplying aggregates to customers , we use our materials internally to produce ready-mix concrete and asphalt paving mix , which may be sold externally or used in our paving and related services businesses . our vertical integration creates opportunities to increase aggregates volumes , optimize margin at each stage of production and provide customers with efficiency gains , convenience and reliability , which we believe gives us a competitive advantage . since our inception in 2009 , we have completed dozens of acquisitions , which are organized into 12 operating companies that make up our three distinct operating segments—west , east and cement . we operate in 23 u.s. states and in british columbia , canada and currently have assets in 22 u.s. states and british columbia , canada . the map below illustrates our geographic footprint : 39 business trends and conditions the u.s. construction materials industry is composed of four primary sectors : aggregates ; cement ; ready-mix concrete ; and asphalt paving mix . each of these materials is widely used in most forms of construction activity . participants in these sectors typically range from small , privately-held companies focused on a single material , product or market to multinational corporations that offer a wide array of construction materials and services . competition is constrained in part by the distance materials can be transported efficiently , resulting in predominantly local or regional operations . due to the lack of product differentiation , competition for all of our products is predominantly based on price and , to a lesser extent , quality of products and service . as a result , the prices we charge our customers are not likely to be materially different from the prices charged by other producers in the same markets . accordingly , our profitability is generally dependent on the level of demand for our materials and products and our ability to control operating costs . our revenue is derived from multiple end-use markets including public infrastructure construction and private residential and nonresidential construction . public infrastructure includes spending by federal , state , provincial and local governments for roads , highways , bridges , airports and other infrastructure projects . public infrastructure projects have historically been a relatively stable portion of state and federal budgets . residential and nonresidential construction consists of new construction and repair and remodel markets . any economic stagnation or decline , which could vary by local region and market , could affect our results of operations . our sales and earnings are sensitive to national , regional and local economic conditions and particularly to cyclical changes in construction spending , especially in the private sector . from a macroeconomic view , we see positive indicators for the construction sector , including positive trends in highway obligations , housing starts and construction employment . 40 transportation infrastructure projects , driven by both federal and state funding programs , represent a significant share of the u.s. construction materials market . federal funds are allocated to the states , which are required to match a portion of the federal funds they receive . federal highway spending uses funds predominantly from the federal highway trust fund , which derives its revenue from taxes on diesel fuel , gasoline and other user fees . the dependability of federal funding allows the state departments of transportation to plan for their long term highway construction and maintenance needs . funding for the existing federal transportation funding program extends through 2020. with the nation 's infrastructure aging , there is increased demand by states and municipalities for long-term federal funding to support the construction of new roads , highways and bridges in addition to the maintaining the existing infrastructure . in addition to federal funding , state , county and local agencies provide highway construction and maintenance funding . our four largest states by revenue , texas , utah , kansas and missouri , represented approximately 23 % , 13 % , 12 % and 8 % , respectively , of our total revenue in 2018 . the following is a summary of key funding initiatives in those states : according to the texas department of transportation ( “ txdot ” ) total annual funding available for transportation infrastructure , including state and federal funding , is estimated to be approximately $ 13.9 billion in fiscal year 2019 ( which commenced september 1 , 2018 ) , increasing to $ 14.3 billion by fiscal year 2020. further , the 2019 unified transportation program ( “ utp ” ) plans for $ 75 billion to fund transportation projects from 2019 through 2028 , which is up from the 2018 utp of $ 71 billion and more than double the previous utp , proposition 1 and proposition 7 funding initiatives . the funding available in any given year is separate and distinct from lettings , or the process of providing notice , issuing proposals , receiving proposals , and awarding contracts . story_separator_special_tag financial highlights— year ended december 29 , 2018 the principal factors in evaluating our financial condition and operating results for the year ended december 29 , 2018 are : net revenue increased $ 156.8 million in 2018 as compared to 2017 , primarily resulting from contributions from our acquisitions , offset by the impact of less favorable weather conditions in 2018. our operating income decreased $ 58.4 million in 2018 as compared to 2017 , primarily due to higher labor and transportation costs included in our cost of revenue , as well as higher levels of depreciation and amortization in 2018 resulting from our acquisitions . further , our general and administrative expenses in 2018 were higher than in 2017 due to the acquisitions which occurred during late 2017 and 2018 , as well as increased stock-based compensation charges in 2018. we paid $ 246.0 million in cash for 12 acquisitions , net of cash acquired . five of these acquisitions were in the west segment and seven were in the east segment . in september 2018 , we sold a non-core business in the west segment , resulting in cash proceeds of $ 21.6 million and a total gain on the disposition of the business of $ 12.1 million . 42 components of operating results total revenue we derive our revenue predominantly by selling construction materials and products and providing paving and related services . construction materials consist of aggregates and cement . products consist of related downstream products , including ready-mix concrete , asphalt paving mix and concrete products . paving and related services that we provide are primarily asphalt paving services . revenue derived from the sale of construction materials are recognized when risks associated with ownership have passed to unaffiliated customers . typically this occurs when products are shipped . product revenue generally includes sales of aggregates , cement and related downstream products and other materials to customers , net of discounts or allowances and taxes , if any . revenue derived from paving and related services are recognized on the percentage-of-completion basis , measured by the cost incurred to date compared to estimated total cost of each project . this method is used because management considers cost incurred to be the best available measure of progress on these contracts . due to the inherent uncertainties in estimating costs , it is at least reasonably possible that the estimates used will change over the life of the contract . operating costs and expenses the key components of our operating costs and expenses consist of the following : cost of revenue ( excluding items shown separately ) cost of revenue consists of all production and delivery costs and primarily includes labor , repair and maintenance , utilities , raw materials , fuel , transportation , subcontractor costs , royalties and other direct costs incurred in the production and delivery of our products and services . our cost of revenue is directly affected by fluctuations in commodity energy prices , primarily diesel fuel , liquid asphalt and other petroleum-based resources . as a result , our operating profit margins can be significantly affected by changes in the underlying cost of certain raw materials if they are not recovered through corresponding changes in revenue . we attempt to limit our exposure to changes in commodity energy prices by entering into forward purchase commitments when appropriate . in addition , we have sales price adjustment provisions that provide for adjustments based on fluctuations outside a limited range in certain energy-related production costs . these provisions are in place for most of our public infrastructure contracts , and we seek to include similar price adjustment provisions in our private contracts . general and administrative expenses general and administrative expenses consist primarily of salaries and personnel costs , including stock-based compensation charges , for our sales and marketing , administration , finance and accounting , legal , information systems , human resources and certain managerial employees . additional expenses include audit , consulting and professional fees , travel , insurance , rental costs , property taxes and other corporate and overhead expenses . depreciation , depletion , amortization and accretion our business is capital intensive . we carry property , plant and equipment on our balance sheet at cost , net of applicable depreciation , depletion and amortization . depreciation on property , plant and equipment is computed on a straight-line basis or based on the economic usage over the estimated useful life of the asset . the general range of depreciable lives by category , excluding mineral reserves , which are depleted based on the units of production method on a site-by-site basis , is as follows : 43 buildings and improvements 10 - 30 years plant , machinery and equipment 15 - 20 years office equipment 3 - 7 years truck and auto fleet 5 - 8 years mobile equipment and barges 6 - 8 years landfill airspace and improvements 10 - 30 years other 4 - 20 years amortization expense is the periodic expense related to leasehold improvements and intangible assets . the intangible assets were recognized with certain acquisitions and are generally amortized on a straight-line basis over the estimated useful lives of the assets . leasehold improvements are amortized over the lesser of the life of the underlying asset or the remaining lease term . accretion expense is the periodic expense recorded for the accrued mining reclamation liabilities and landfill closure and post-closure liabilities using the effective interest method . transaction costs transaction costs consist primarily of third party accounting , legal , valuation and financial advisory fees incurred in connection with acquisitions . results of operations the following discussion of our results of operations is focused on the key financial measures we use to evaluate the performance of our business from both a consolidated and operating segment perspective . operating income and margins are discussed in terms of changes in volume , pricing and mix of revenue source ( i.e. , type of product sales or service revenue ) .
| consolidated results of operations the table below sets forth our consolidated results of operations for the periods indicated : replace_table_token_8_th ( 1 ) the statement of operations above is based on the financial results of summit inc. and its subsidiaries , which was $ 27.5 million , $ 8.3 million and $ 16.0 million less than summit llc and its subsidiaries in the years ended december 29 , 2018 , december 30 , 2017 and december 31 , 2016 , respectively , due to interest expense associated with a deferred consideration obligation , tra expense and income tax benefit are obligations of summit holdings and summit inc. , respectively and are thus excluded from summit llc 's consolidated net income . 45 fiscal year 2018 compared to 2017 replace_table_token_9_th ( 1 ) adjusted ebitda is a non-gaap measure that we find helpful in monitoring the performance of our business . see the definition of and the reconciliation below of adjusted ebitda to net income , which is the most directly comparable gaap measure . net revenue increased $ 156.8 million for the year ended december 29 , 2018 , primarily resulting from our acquisition program , offset by the impact of less favorable weather conditions in 2018. of the increase in net revenue , $ 37.3 million was from increased sales of materials , $ 112.9 million was from increased sales of products and $ 6.6 million was from increased service revenue . additional discussion about the impact of acquisitions on each segment is presented in more detail below . for the year ended december 29 , 2018 , our net revenue growth was due to our 2018 and 2017 acquisitions .
| 4,008 |
as a result of the second step conversion , the esop became a stock benefit plan of the company and the mid-tier company 's stock was exchanged for shares of the company . story_separator_special_tag general our profitability depends primarily on our net interest income , which is the difference between interest and dividend income on interest-earning assets , principally loans , investment securities and interest-earning deposits in other institutions , and interest expense on interest-bearing deposits and borrowings from the federal home loan bank of dallas . net interest income is dependent upon the level of interest rates and the extent to which such rates are changing . our profitability also depends , to a lesser extent , on non-interest income , provision for loan losses , non-interest expenses and federal income taxes . home federal bancorp , inc. of louisiana had net income of $ 2.7 million in fiscal 2014 compared to net income of $ 3.1 million in fiscal 2013. our business consists primarily of originating single-family real estate loans secured by property in our market area and to a lesser extent , commercial real estate loans , commercial business loans and real estate secured lines of credit which typically have higher rates and shorter terms than single-family loans . although our loans are primarily funded by certificates of deposit , which typically have a higher interest rate than passbook accounts , it is our policy to require commercial customers to have a deposit relationship with us , which primarily consist of now accounts . due to the continued low interest rate environment , we have sold a substantial amount of our fixed rate single-family residential loan originations in recent periods . we have also sold investment securities available-for-sale to realize gains in the portfolio . because of a decrease in our average rate of return and volume increase of interest earning assets , our net interest margin decreased from 4.06 % to 3.92 % during fiscal 2014 compared to 2013 and our net interest income increased to $ 10.8 million for fiscal 2014 as compared to $ 10.6 million for fiscal 2013. we expect to continue to emphasize consumer and commercial lending in the future in order to improve the yield on our portfolio . since 2009 , we have offered security brokerage and advisory services at our agency office through tipton wealth management . 30 home federal bancorp 's operations and profitability are subject to changes in interest rates , applicable statutes and regulations and general economic conditions , as well as other factors beyond our control . business strategy our business strategy is focused on operating a growing and profitable community-oriented financial institution . our current business strategy includes : · continuing to grow and diversify our loan portfolio . we intend to grow and continue to diversify of loan portfolio by , among other things , emphasizing the origination of commercial real estate and business loans . at june 30 , 2014 , our commercial real estate loans amounted to $ 56.3 million , or 23.2 % of the total loan portfolio . our commercial business loans amounted to $ 25.7 million or 10.6 % of the total loan portfolio . commercial real estate , commercial business , construction and development and consumer loans all typically have higher yields and are more interest sensitive than long-term single-family residential mortgage loans . · diversify our products and services . we intend to continue to emphasize our commercial business products to provide a full-service banking relationship to our commercial customers . we have introduced mobile and internet banking and remote deposit capture , to better serve our commercial clients . additionally , we have developed new deposit products focused on expanding our deposit base to new types of customers . · managing our expenses . we have incurred significant additional expenses related to personnel and infrastructure in recent periods as we implemented our business strategy . our total non-interest expense increased $ 250,000 , or 2.9 % , in fiscal 2014 compared to 2013. our efficiency ratio for 2014 was 67.8 % compared to 62.0 % for fiscal 2013 . · enhancing core earnings . we expect to continue to emphasize commercial real estate and business loans which generally bear interest rates higher than residential real estate loans and sell a substantial part of our fixed rate residential mortgage loan originations . · expanding our franchise in our market area and contiguous communities . we intend to pursue opportunities to expand our market area by opening additional de novo banking offices and possibly , through acquisitions of other financial institutions and banking related businesses ( although we have no current plans , understandings or agreements with respect to any specific acquisitions ) . we expect to focus on contiguous areas to our current locations in caddo and bossier parishes . · maintain our asset quality . at june 30 , 2014 , our non-performing assets totaled $ 178,000 , or 0.05 % of total assets . we had no real estate owned and no troubled debt restructurings at june 30 , 2014. we intend to continue to stress maintaining high asset quality even as we continue to grow our institution and diversity our loan portfolio . · cross-selling products and services and emphasizing local decision making . we have promoted cross-selling products and services in our branch offices and emphasized our local decision making and streamlined loan approval process . critical accounting policies in reviewing and understanding financial information for home federal bancorp , you are encouraged to read and understand the significant accounting policies used in preparing our consolidated financial statements . these policies are described in note 1 of the notes to our consolidated financial statements included in item 8 of this document . our accounting and financial reporting policies conform to accounting principles generally accepted in the united states of america and to general practices within the banking industry . story_separator_special_tag securities available-for-sale increased $ 473,000 , or 1.0 % , from $ 48.0 million at june 30 , 2013 to $ 48.4 million at june 30 , 2014. this increase resulted primarily from new investment acquisitions of $ 23.2 million and an increase in market value partially offset by the sale of securities and normal principal pay downs . in recent years , there have been significant loan prepayments due to the heavy volume of loan refinancing , however , the rate of prepayments began to slow in fiscal 2014. with interest rates at historical lows , management is reluctant to invest in long-term , fixed rate mortgage loans for the portfolio and instead sells the majority of the long-term , fixed rate mortgage loan production . cash and cash equivalents increased $ 9.9 million , or 270.0 % , from $ 3.7 million at june 30 , 2013 to $ 13.6 million at june 30 , 2014. the net increase in cash and cash equivalents was attributable to an $ 8.1 million increase in federal funds sold . total liabilities increased $ 51.6 million , or 21.9 % , from $ 235.2 million at june 30 , 2013 to $ 286.8 million at june 30 , 2014 due primarily to an increase of $ 60.4 million , or 28.5 % , in deposits , partially offset by a decrease in advances from the federal home loan bank of $ 8.8 million , or 40.5 % . the increase in deposits was attributable primarily to an increase of $ 32.8 million in our money market accounts . certificates of deposit increased $ 8.2 million , or 7.3 % , from $ 112.3 million at june 30 , 2013 to $ 120.4 million at june 30 , 2014. non-interest bearing deposit accounts increased $ 17.4 million from $ 26.0 million at june 30 , 2013 to $ 43.4 million at june 30 , 2014 and savings accounts increased $ 2.6 million from $ 9.5 million at june 30 , 2013 to $ 12.2 million at june 30 , 2014. the increase in money market deposits was primarily due to a transitory deposit in the fourth quarter which had a balance of approximately $ 30.6 million at june 30 , 2014. this deposit was short-term in nature and had been fully withdrawn as of july 31 , 2014. at june 30 , 2014 , we held $ 12.7 million in brokered certificates of deposit , the same amount as of june 30 , 2013. shareholders ' equity increased $ 797,000 or 1.9 % , to $ 42.8 million at june 30 , 2014 from $ 42.0 million at june 30 , 2013. the primary reasons for the increase in shareholders ' equity from june 30 , 2013 , were net income of $ 2.7 million , an increase in the company 's accumulated other comprehensive income of $ 128,000 , proceeds from the issuance of common stock from the exercise of stock options of $ 385,000 , and the vesting of restricted stock awards , stock options and the release of employee stock ownership plan shares totaling $ 621,000. these increases were partially offset by dividends paid of $ 551,000 and the acquisition of treasury stock in the amount of $ 2.5 million . the change in accumulated other comprehensive income was primarily due to the change in net unrealized gain or loss on securities available for sale . the net unrealized gain or loss on securities available-for-sale is affected by interest rate fluctuations . generally , an increase in interest rates will have an adverse impact while a decrease in interest rates will have a positive impact . 33 average balances , net interest income , yields earned and rates paid . the following table shows for the periods indicated the total dollar amount of interest from average interest-earning assets and the resulting yields , as well as the interest expense on average interest-bearing liabilities , expressed both in dollars and rates , and the net interest margin . tax-exempt income and yields have not been adjusted to a tax-equivalent basis . all average balances are based on monthly balances . management does not believe that the monthly averages differ significantly from what the daily averages would be . replace_table_token_26_th ( 1 ) includes loans held for sale . ( 2 ) includes retained earnings and accumulated other comprehensive loss . ( 3 ) interest rate spread represents the difference between the weighted-average yield on interest-earning assets and the weighted-average rate on interest-bearing liabilities . ( 4 ) net interest margin is net interest income divided by net average interest-earning assets . 34 rate/volume analysis . the following table describes the extent to which changes in interest rates and changes in volume of interest-related assets and liabilities have affected home federal bancorp 's interest income and interest expense during the periods indicated . for each category of interest-earning assets and interest-bearing liabilities , information is provided on changes attributable to ( i ) changes in volume ( change in volume multiplied by prior year rate ) , ( ii ) changes in rate ( change in rate multiplied by current year volume ) , and ( iii ) total change in rate and volume . the combined effect of changes in both rate and volume has been allocated proportionately to the change due to rate and the change due to volume . replace_table_token_27_th comparison of operating results for the years ended june 30 , 2014 and 2013 story_separator_special_tag ended june 30 , 2013. the increase was primarily due to a $ 1.0 million decrease in gain on sale loans . non-interest expense .
| general . net income amounted to $ 2.7 million for the year ended june 30 , 2014 , reflecting a decrease of $ 386,000 compared to net income of $ 3.1 million for the year ended june 30 , 2013. this decrease was due to a $ 1.1 million decrease in non-interest income and a $ 250,000 increase in non-interest expense , partially offset by an increase of $ 262,000 in net interest income , a decrease of $ 296,000 in the provision for income taxes , and a $ 390,000 decrease in the provision for loan losses . net interest income . net interest income amounted to $ 10.8 million for fiscal year 2014 , an increase of $ 262,000 , or 2.5 % , compared to $ 10.6 million for fiscal year 2013. the increase was due primarily to an increase of $ 19,000 in total interest income and a $ 243,000 decrease in interest expense . the average interest rate spread decreased from 3.80 % for fiscal 2013 to 3.69 % for fiscal 2014 while the average balance of interest-earning assets increased from $ 260.7 million to $ 276.6 million during the same periods . the percentage of average interest-earning assets to average interest-bearing liabilities increased slightly to 126.91 % for fiscal 2014 compared to 126.77 % for fiscal 2013. the decrease in the average interest rate spread reflects the 29 basis point decline in average yield on interest earning assets which offset a 15 basis point decrease in average cost of funds in fiscal 2014 compared to fiscal 2013. lower certificate of deposit interest rates in our market area led to a decrease in the average rates paid on certificates of deposit 20 basis points in fiscal 2014 compared to fiscal 2013. net interest margin decreased to 3.92 % in fiscal 2014 compared to 4.06 % for fiscal 2013. interest income remained constant at $ 13.2 million for both
| 4,009 |
our consolidated financial statements have been prepared and , unless otherwise stated , the information derived therefrom as presented in this discussion and analysis is presented , in accordance with accounting principles generally accepted in the united states ( gaap ) . in addition to historical information , the following discussion contains forward-looking statements based upon our current views , expectations and assumptions that are subject to risks and uncertainties . actual results may differ substantially from those expressed or implied by any forward-looking statements due to a number of factors , including , among others , the risks described in the “ risk factors ” section and elsewhere in this annual report . as used in this discussion and analysis , unless the context indicates otherwise , the terms the “ company ” , “ harrow ” “ we ” , “ us ” and “ our ” refer to harrow health , inc. and its consolidated subsidiaries , consisting of park compounding , inc. , imprimis rx nj , llc , imprimis njof , llc , imprimisrx , llc , radley pharmaceuticals , inc. , stowe pharmaceuticals , inc. and mayfield pharmaceuticals , inc. overview our business specializes in the development , production and sale of innovative medications that offer unique competitive advantages and serve unmet needs in the marketplace through our subsidiaries and deconsolidated companies . we own one of the nation 's leading ophthalmology pharmaceutical businesses , imprimisrx . in addition to wholly owning imprimisrx , we also have equity positions in eton pharmaceuticals , inc. ( “ eton ” ) , surface pharmaceuticals , inc. ( “ surface ” ) , and melt pharmaceuticals , inc. ( “ melt ” ) , all companies that began as subsidiaries of harrow . more recently , we founded drug development subsidiaries mayfield pharmaceuticals , inc. ( “ mayfield ” ) , radley pharmaceuticals , inc. ( “ radley ” ) , and stowe pharmaceuticals , inc. ( “ stowe ” ) . during 2020 , we intend to launch a new business and subsidiary called visionology . we also own royalty rights in various drug candidates being developed by surface , melt , radley and mayfield . we intend to continue to create and hold equity and royalty rights in new businesses that commercialize drug candidates that are internally developed or otherwise acquired or licensed from third parties . imprimisrx imprimisrx is our ophthalmology focused pharmaceutical compounding business . we offer to over 7,000 physician customers and their patients critical medicines to meet their needs that are unmet by commercially available drugs . we make our formulations available at prices that are , in most cases , lower than non-customized commercial drugs . our current ophthalmology formulary includes over twenty compounded formulations , many of which are patented or patent-pending , and are customizable for the specific needs of a patient . some examples of our compounded medications are various combinations of drugs formulated into one bottle and numerous preservative free formulations . depending on the formulation , the regulations of a specific state and ultimately the needs of the patient , imprimisrx products may be dispensed as patient-specific medications from our 503a pharmacy , or for in-office use , made according to current good manufacturing practices ( or cgmps ) or other u.s. food and drug administration ( “ fda ” ) guidance documents , in our fda-registered njof outsourcing facility . visionology visionology is expected to be an online eye health platform , trusted by both physicians and patients . in addition to allowing physicians to communicate with pharmacists , and patients to communicate with physicians , it will offer a variety of high quality , affordable , chronic care ophthalmic pharmaceutical products using a state of the art proprietary it platform . we expect to launch a proof-of-concept model for visionology in the first half of 2020 within a certain region of the u.s. , and if successful , expand the launch on a nationwide basis later in 2020 and 2021. pharmaceutical compounding businesses pharmaceutical compounding pharmaceutical compounding is the science of combining different active pharmaceutical ingredients ( apis ) , all of which are approved by the fda ( either as a finished form product or as a bulk drug ingredient ) and excipients , to create specialized pharmaceutical preparations . physicians and healthcare institutions use compounded drugs when commercially available drugs do not optimally treat a patient 's needs . in many cases , compounded drugs , such as ours , have wide market utility and may be clinically appropriate for large patient populations . examples of compounded formulations include medications with alternative dosage strengths or unique dosage forms , such as topical creams or gels , suspensions , or solutions with more tolerable drug delivery vehicles . almost all of our sales revenue is derived from making , selling and dispensing our compounded prescription drug formulations as cash pay transactions between us and our end-user customer . as such , the majority of our commercial transactions do not involve distributors , wholesalers , insurance companies , pharmacy benefit managers or other middle parties . by not being reliant on insurance company formulary inclusion and pharmacy benefit manager payment clawbacks , we are able to simplify the prescription transaction process . we believe the outcome of our business model is a simple transaction , involving a patient-in-need , a physician 's diagnosis , a fair price and great service for a quality pharmaceutical product . we sell our products through a network of employees and independent contractors and we dispense our formulations in all 50 states , puerto rico and in selected markets outside the united states . 35 our compounding facilities pharmaceutical compounding businesses are governed by sections 503a and 503b of the federal food drug and cosmetic act ( the “ fdca ” ) . story_separator_special_tag during january 2020 , and prior to initiating significant development activities and costs related to these drug programs , we met with the fda to establish and understand the expected clinical and regulatory path to approval for radley 's lead drug program . conceptually , the fda agreed with our clinical program design , and we are currently considering options related to the next steps of the drug candidates development . we are also pursuing investigator-initiated studies for some of radley 's drug candidates with two well-known healthcare institutions based in the new york and boston areas . we believe this approach will allow us to better understand and weigh the economic costs , clinical feasibility and potential benefits associated with pursuing development activities associated with these drug programs . radley is also pursuing additional asset acquisition and licensing opportunities with a focus in oncology-related therapies . de-consolidated businesses eton pharmaceuticals , inc. eton is a pharmaceutical company focused on developing and commercializing innovative products utilizing the fda 's 505 ( b ) ( 2 ) regulatory pathway . its pipeline includes several products and drug candidates in various stages of development across a variety of dosage forms . eton 's pipeline is focused on innovative 505 ( b ) ( 2 ) products and obtaining fda marketing approval for currently marketed but unapproved drugs . in may 2017 , eton closed an offering of its series a preferred stock and we lost our controlling interest in it . in november 2018 , eton completed an initial public offering of its common stock . we own 3,500,000 shares of eton common stock , which we estimate is less than 20 % of the equity and voting interests issued and outstanding of eton as of december 31 , 2019. surface pharmaceuticals , inc. surface is a development-stage pharmaceutical company focused on development and commercialization of innovative therapeutics for ocular surface diseases and is seeking fda approval for the commercialization of its drug candidates through the section 505 ( b ) ( 2 ) regulatory pathway under the fdca . in 2017 and amended in april 2018 , harrow entered into asset purchase and license agreements ( the “ surface license agreements ” ) and transferred to surface its current drug pipeline , which consists of three proprietary drug candidates . surface 's patent-pending topical eye drop drug candidates , surf-100 and surf-200 , utilize a patented delivery vehicle known as klarity drops ( “ klarity ” ) , that was invented by harrow board member and surface 's chairman of the board , renowned ophthalmologist dr. richard lindstrom . klarity is designed to protect and rehabilitate the ocular surface pathology for patients with dry eye disease , or ded . during the fourth quarter of 2019 , surface filed an investigational new drug application ( “ ind ” ) for its drug program surf-201 . surf-201 is a novel steroid topical eye drop drug candidate for treating pain and inflammation post-ocular surgery . surface expects to submit an ind for its lead drug candidate , surf-100 , during the first half of 2020 , for treating signs and symptoms associated with chronic dry eye disease . we expect surface to release certain clinical data related to these programs near the end of 2020 and beginning of 2021. in may and july 2018 , surface closed on an offering of its series a preferred stock . at that time , we lost our controlling interest and deconsolidated surface from our consolidated financial statements . we own 3,500,000 shares of surface which we estimate is approximately 30 % of the equity and voting interests as of december 31 , 2019 . 37 melt pharmaceuticals , inc. melt is a development-stage pharmaceutical company focused on the development and commercialization of proprietary non-intravenous , sedation and anesthesia therapeutics for human medical procedures in hospital , outpatient , and in-office settings . melt intends to seek regulatory approval through the fda 's 505 ( b ) ( 2 ) regulatory pathway for its proprietary technologies , where possible . in december 2018 , we entered into an asset purchase agreement with melt ( the “ melt asset purchase agreement ” ) , and harrow assigned to melt the underlying intellectual property for melt 's current pipeline , including its lead drug candidate melt-100 . the core intellectual property melt owns is a patented series of combination non-opioid sedation drug formulations that we estimate to have multitudinous applications . pursuant to the terms of the melt asset purchase agreement , melt is required to make royalty payments to the company equal to five percent ( 5 % ) of net sales of melt-100 , while any patent rights remain outstanding , subject to other conditions . melt-100 is a novel , sublingually delivered , non-iv , opioid-free drug candidate being developed for procedural sedation . melt is expecting to file an ind and begin its clinical program for melt-100 in the summer of 2020 , and if successful , begin enrollment for its phase 3 studies for melt-100 during 2021. in january 2019 , melt closed an offering of its series a preferred stock and we lost our controlling interest in it . we own 3,500,000 shares of melt common stock , which we estimate is 44 % of the equity and voting interests issued and outstanding of melt as of december 31 , 2019. factors affecting our performance we believe the primary factors affecting our performance are our ability to increase revenues of our proprietary compounded formulations and certain non-proprietary products , grow and gain operating efficiencies in our pharmacy operations , optimize pricing and obtain reimbursement options for our proprietary compounded formulations , and continue to pursue development and commercialization opportunities for certain of our ophthalmology and other assets that we have not yet made commercially available as compounded formulations . we believe we have built a tangible and intangible infrastructure that will allow us to scale revenues efficiently in the long-term .
| results of operations the following period-to-period comparisons of our financial results are not necessarily indicative of results for the current period or any future period . comparison of years ended december 31 , 2019 and 2018 revenues our revenues include amounts recorded from sales of proprietary and non-proprietary pharmaceutical compounded drug formulations and revenues received from royalty and milestone payments owed to us pursuant to out-license arrangements . the following presents our revenues for the years ended december 31 , 2019 and 2018 : replace_table_token_0_th the increase in revenue between periods was largely attributable to increased sales of our proprietary formulations and furtherance of our ophthalmology related compounded formulations . our gross ophthalmology related sales were approximately $ 47,692,000 for the year ended december 31 , 2019 , compared to $ 34,135,000 in 2018. net revenues generated from our new jersey based outsourcing facility ( “ njof ” ) ( which include certain ophthalmology related sales ) totaled $ 33,240,000 for the year ended december 31 , 2019 , compared to $ 22,490,000 in 2018. cost of sales our cost of sales includes direct and indirect costs to manufacture formulations and sell products , including active pharmaceutical ingredients , personnel costs , packaging , storage , royalties , shipping and handling costs , manufacturing equipment and tenant improvements depreciation , the write-off of obsolete inventory and other related expenses . the following presents our cost of sales for the years ended december 31 , 2019 and 2018 : for the year ended december 31 , $ 2019 2018 variance cost of sales $ 16,749,000 $ 16,521,000 $ 228,000 the increase in our cost of sales between periods was largely attributable to an increase in the volume of unit sales of our formulations and products and our associated costs of such sales .
| 4,010 |
our portfolio of power semiconductors is extensive , with over 1,000 products , and has grown rapidly with the introduction of over 240 new products during the past fiscal year , and over 140 and 190 new products in the fiscal years 2011 and 2010 , respectively . our teams of scientists and engineers have developed an extensive intellectual property and technical knowledge that encompass major aspects of power semiconductors , which we believe enables us to introduce innovative products to address the increasingly complex power requirements of advanced electronics . our patent portfolio has grown to include 242 patents and 203 patents applications in the united states as of june 30 , 2012. we differentiate ourselves by integrating our expertise in technology , design and advanced packaging to optimize product performance and cost . our portfolio of products targets high-volume applications , including portable computers , flat panel tvs , led lighting , smart phones , battery packs , consumer and industrial motor controls and power supplies for tvs , computers , servers and telecommunications equipment . during the fiscal year ended june 30 , 2012 , we launched several key product families and technologies to enable high efficiency power conversion solutions . our metal-oxide-semiconductor field-effect transistors ( `` mosfet '' ) portfolio expanded significantly across a full range of voltage applications . for example , we introduced our next generation of low-voltage mosfet products , or the gen5 series , that feature a 56 % reduction of on-resistance compared to prior-generation products . in august 2012 we released new mosfet products with smaller form factors based on our proprietary “ molded chip scale packaging ” technology , which is capable of reducing the amount of utilized board space by approximately 70 % and package height by 50 % , and targets a variety of mobile applications . recently we developed a new technology platform , the alphaigbt technology , that meets the growing demand for energy efficient switching devices for motor control and power conversion applications . we believe this technology allows us to develop new lines of high-voltage products that target markets for industrial motor control , household appliances , renewable energy systems and advanced power supplies . we also added a medium voltage mosfet product line that allows significant improvements in power supply efficiency . in addition , we continued to expand our power ic family by introducing new solutions that feature higher efficiency and a smaller footprint in thermally enhanced packages that can be used in a wide range of networking , computing and consumer applications . our business model leverages global resources , including research and development expertise in the united states and asia , cost-effective semiconductor manufacturing in the united states and asia and localized sales and technical support in several fast-growing electronics hubs . our core research and development team , based in silicon valley and hillsboro , oregon , is complemented by our design center in taiwan and process , packaging and testing engineers in china . in january 2012 , we completed the acquisition of a 200mm wafer fabrication facility located in hillsboro , oregon , or the oregon fab , from integrated device technology , inc , or idt . given the highly unique nature of discrete power technology , this acquisition was critical for us to accelerate proprietary technology development , speed up new product introduction , reduce manufacturing costs and improve our long-term financial performance . to meet market demand , we allocate our wafer manufacturing requirements to in-house capacity for newer products and selected third-party foundries for more mature high volume products . since the acquisition , we have created our next generation of low voltage mosfet products , our gen 5 alphamos , developed a new technology platform , ( alphaigbt ) and introduced new medium voltage products at the oregon fab . additionally , we have made significant progress in ramping production at our oregon fab . for assembly and test , we primarily rely upon our in-house facilities in china . in addition , we utilize subcontracting partners for industry standard packages . we believe our in-house packaging and testing capability provides us with a competitive advantage in proprietary packaging technology , product quality , cost and cycle time . our in-house packaging capability together with the oregon fab , position us to drive towards technology leadership in a broad range of power semiconductors . on december 3 , 2010 , we acquired control of apm in a cash and stock transaction with a purchase price of $ 40.0 million . we had a 43.0 % equity interest in apm prior to the acquisition and the equity investment was accounted for under the equity method of accounting . after the acquisition , apm became our wholly-owned subsidiary . our revenue was $ 342.3 million for the fiscal year ended june 30 , 2012 , which represented a decrease of $ 19.0 million or 5.3 % , from $ 361.3 million for the fiscal year ended june 30 , 2011 . our net income was $ 12.9 million , or $ 0.50 per diluted share , for the fiscal year ended june 30 , 2012 , compared to a net income of $ 37.8 million , or $ 1.51 per diluted share , for the fiscal year ended june 30 , 2011 . 35 factors affecting our performance our performance is affected by several key factors , including the following : global and regional economic conditions : because our products primarily serve consumer electronic applications , a deterioration of the global and regional economic conditions could materially affect our revenue and results of operations . for example , we experienced a general slowdown of global and regional economic conditions , particularly in our core computing and consumer markets , in the first three quarters of the fiscal year 2012 , which have adversely affected our results of operations for the year . story_separator_special_tag accordingly , we have converted our consolidated financial statements from ifrs to u.s. gaap . see `` item 6. selected financial data '' for a discussion of relevant differences of individual items in the financial statements between ifrs and u.s. gaap . principal line items of statements of income the following describes the principal line items set forth in our consolidated statements of income : revenue we generate revenue primarily from the sale of power semiconductors , consisting of power discretes and power ics . historically , a majority of our revenue was derived from power discrete products and a small amount was derived from power ic products . because our products typically have three-year to five-year life cycles , the rate of new product introduction is an important driver of revenue growth over time . we believe that expanding the breadth of our product portfolio is important to our business prospects , because it provides us with an opportunity to increase our total bill-of-materials within an electronic system and to address the power requirements of additional electronic systems . in addition , a small percentage of our total revenue is generated by providing packaging and testing services to third-parties through one of our subsidiaries . our product revenue includes the effect of the estimated stock rotation returns and price adjustments that we expect to provide to our distributors . stock rotation returns are governed by contract and are limited to a specified percentage of the monetary value of products purchased by the distributor during a specified period . at our discretion or upon our direct negotiations with the odms or oems , we may elect to grant special pricing that is below the prices at which we sold our products to the distributors . in these situations , we will grant price adjustments to the distributors reflecting such special pricing . we estimate the price adjustments for inventory at the distributors based on factors such as distributor inventory levels , pre-approved future distributor selling prices , distributor margins and demand for our products . cost of goods sold our cost of goods sold primarily consists of costs associated with semiconductor wafers , packaging and testing , personnel , including share-based compensation expense , overhead attributable to manufacturing , operations and procurement , and cost associated with yield improvements , capacity utilization , warranty and inventory reserves . as the volume of sales increases , we expect cost of goods sold to increase . operating expenses our operating expenses consist of research and development and selling , general and administrative expenses . we expect that our total operating expenses will generally increase in absolute dollar amount over time due to our belief that our business will continue to grow . however , our operating expenses as a percentage of revenue may fluctuate from period to period . research and development expenses . our research and development expenses consist primarily of salaries , bonuses , benefits , share-based compensation expense , expenses associated with new product prototypes , travel expenses , fees for engineering services provided by outside contractors and consultants , amortization of software and design tools , depreciation of equipment and overhead costs for research and development personnel . as we continue to invest significant resources in developing new technologies and products , we expect our research and development expenses to increase . selling , general and administrative expenses . our selling , general and administrative expenses consist primarily of salaries , bonuses , benefits , share-based compensation expense , product promotion costs , occupancy costs , travel expenses , expenses related to sales and marketing activities , amortization of software , depreciation of equipment , maintenance costs and other expenses for general and administrative functions as well as costs for outside professional services , including legal , audit and accounting services . we expect our selling , general and administrative expenses to increase as we expand our business . 37 income on equity investment in apm we had a 40.3 % equity interest in apm as of september 30 , 2010. in october , 2010 , we made an additional equity investment of $ 1.8 million in apm which resulted in aggregate a 43.0 % equity interest in apm prior to the apm acquisition on december 3 , 2010. our investment in apm was accounted for under the equity method of accounting prior to december 3 , 2010 and we recorded income on equity investment in apm prior to the apm acquisition . apm 's operating results were consolidated in our financial statements since the acquisition . income tax expense we are subject to income taxes in various jurisdictions . significant judgment and estimates are required in determining our worldwide income tax expense . the calculation of tax liabilities involves dealing with uncertainties in the application of complex tax regulations of different jurisdictions globally . we establish accruals for potential liabilities and contingencies based on a more likely than not threshold to the recognition and de-recognition of uncertain tax positions . if the recognition threshold is met , the applicable accounting guidance permits us to recognize a tax benefit measured at the largest amount of tax benefit that is more than likely to be realized upon settlement . if the actual tax outcome of such exposures is different from the amounts that were initially recorded , the differences will impact the income tax and deferred tax provisions in the period in which such determination is made . changes in the location of taxable income ( loss ) could result in significant changes in our income tax expense . we record deferred tax assets to the extent it is more likely than not that we will be able to utilize them , based on historical profitability and our estimate of future taxable income in a particular jurisdiction . our judgments regarding future taxable income may change due to changes in market conditions , changes in tax laws , tax planning strategies or other factors .
| operating results the following tables set forth our results of operations and as a percentage of revenue for the fiscal years ended june 30 , 2012 , 2011 and 2010. our historical results of operation are not necessarily indicative of the results for any future period . replace_table_token_3_th ( 1 ) includes share-based compensation expense allocated as follows : replace_table_token_4_th revenue the following is a summary of revenue by product type : replace_table_token_5_th 39 fiscal 2012 vs 2011 total revenue was $ 342.3 million for fiscal year 2012 , a decrease of $ 19.0 million , or 5.3 % as compared to $ 361.3 million for fiscal year 2011. the decrease consisted of $ 17.0 million and $ 9.3 million decrease in sales of power discrete and power ic products , respectively , partially offset by $ 7.3 million increase in packaging and testing services revenue due to only seven months service revenue recognition for fiscal 2011 prior to the acquisition of apm in december 2010. the decrease in sales of power discrete and power ic products was primarily due to the semiconductor industry downturn in the first half of fiscal year 2012 which resulted in a 11.3 % decline in average selling prices . in response to the softened demand , we introduced more than 240 new products during the year as well as further expanded our high- and medium-voltage product portfolio to successfully gain market share in certain areas , which resulted in a 4.1 % increase in unit shipments during the year . during fiscal year 2012 , we introduced 125 medium and high voltage mosfett products , targeting the high-value communication and industrial markets , as well as 76 low voltage mosfett products for our existing computing markets .
| 4,011 |
deferred commission costs ( contract acquisition costs ) in connection with the adoption of asc 606 , the company is required to capitalize certain contract acquisition costs primarily consisting of commissions . as of april 1 , 2018 , the date of adoption of asc story_separator_special_tag the following discussion and analysis of our financial condition and results of operations should be read in conjunction with our consolidated financial statements and related notes appearing elsewhere in this annual report on form 10-k. the following discussion and analysis contains forward-looking statements that involve risks and uncertainties . when reviewing the discussion below , you should keep in mind the substantial risks and uncertainties that could impact our business . in particular , we encourage you to review the risks and uncertainties described in part i , item 1a “ risk factors ” included elsewhere in this report . these risks and uncertainties could cause actual results to differ materially from those projected in forward-looking statements contained in this report or implied by past results and trends . forward-looking statements are statements that attempt to forecast or anticipate future developments in our business , financial condition or results of operations . see the section titled “ special note regarding forward-looking statements ” in this report . these statements , like all statements in this report , speak only as of their date ( unless another date is indicated ) , and we undertake no obligation to update or revise these statements in light of future developments . overview new relic is a strategic platform that companies use to monitor , manage , and operate their digital businesses . our mission is to instrument , measure , and improve the internet to help our customers create more perfect software , experiences , and businesses . our platform and suite of products enables users to collect , store , and analyze massive amounts of data in real time . we offer our customers a fully integrated software solution that provides visibility into every layer of the modern software stack , from infrastructure to the end-user experience , with an application-centric perspective . we believe that the application tier is the most strategic layer for delivering business value in modern software stacks , since the application is closest to the end-user . in addition , our cloud-based platform provides out-of-the-box curated experiences for our customers , enabling them to scale to meet the ever-changing needs of their business . our most notable products include new relic apm , new relic mobile , new relic browser , new relic synthetics , new relic infrastructure , and new relic insights . we employ a land , expand , and standardize go-to-market strategy , which combines grassroots user adoption with both customized low-touch and high-touch sales approaches . we often land in new accounts to support grassroots projects , and because our products are easy to download and use , users within larger organizations often grow our footprint within their companies , as they increase the number of applications monitored and expand their use of our products . this allows customers to develop into accounts with hundreds of users across multiple roles , each accessing a common set of data through the new relic platform to deliver real-time visibility into the operations of their digital business . we have grown rapidly in recent periods , with revenue for the fiscal years ended march 31 , 2019 and 2018 of $ 479.2 million and $ 355.1 million , respectively , representing 35 % growth from 2018 to 2019 . we expect that the rate of growth in our revenue will continue to decline over the long term as our business scales , even if our revenue continues to grow in absolute terms . we have continued to make significant expenditures and investments , including in personnel-related costs , sales and marketing , infrastructure and operations , and have incurred net losses in each period since our inception , including net losses attributable to new relic of $ 40.9 million and $ 45.3 million for the fiscal years ended march 31 , 2019 and 2018 , respectively . our accumulated deficit as of march 31 , 2019 was $ 305.6 million . internationally , we currently offer our products in europe , middle east , and africa , or emea ; asia-pacific , or apac ; and other non-u.s. locations , as determined based on the billing address of our customers , and our revenue from those regions constituted 18 % , 8 % , and 5 % , respectively , of our revenue for the fiscal year ended march 31 , 2019 , and 18 % , 7 % , and 6 % , respectively , of our revenue for the fiscal year ended march 31 , 2018 . we believe there is further opportunity to increase our international revenue overall and as a proportion of our revenue , and we are increasingly investing in our international operations and intend to invest in further expanding our footprint in international markets . our employee headcount has increased to 1,774 employees as of march 31 , 2019 from 1,284 as of march 31 , 2018 and we plan to continue to invest aggressively in the growth of our business to take advantage of our market opportunity . for example , we intend to continue to increase our investment in sales and marketing , including further expanding our sales teams , increasing our marketing activities , and growing our international operations , particularly as we increase our sales to larger organizations . in addition , we plan to continue to invest in research and development to enhance and further develop our products and platform capabilities . 35 factors affecting our performance market adoption of our products . we continue to define a new category of enterprise software that is designed to make every aspect of modern software and infrastructure observable . story_separator_special_tag our percentage of annualized recurring revenue from enterprise paid business accounts was 61 % as of march 31 , 2019 , compared to 54 % as of march 31 , 2018. during the fiscal quarter ended march 31 , 2019 , we conducted our periodic review of the categorization of our existing paid business accounts , and the impact of these reclassifications is reflected in the period-over-period increase . we expect the percentage of annualized recurring revenue from enterprise paid business accounts to continue to increase over time . replace_table_token_6_th annualized revenue per average paid business account . we believe that our annualized revenue per average paid business account is another indicator of our business as it relates to the acquisition of larger accounts within our overall customer base , including our market penetration of larger mid-market and enterprise customers , as well as deeper penetration into our existing customer base . we define our annualized revenue per average paid business account as the annualized revenue for the current period divided by the average of the number of paid business accounts at the end of the current period and the end of the prior period . we round down our annualized revenue per average paid business account to the nearest $ 500. our annualized revenue per average paid business account for the quarter ended march 31 , 2019 grew to over $ 31,000 , which was an increase of 34.8 % compared to over $ 23,000 for the quarter ended march 31 , 2018. we believe this increase reflects our continued focus on larger mid-market and enterprise customers . we have experienced an increase in the rate of growth of our annualized revenue per average paid business account year-over-year but we expect this rate to decrease over time as our business scales and we introduce alternative pricing options for our products . dollar-based net expansion rate . our ability to generate revenue is dependent on our ability to maintain and grow our relationships with our existing customers . we track our performance in this area by measuring our dollar-based net expansion rate . our dollar-based net expansion rate increases when customers increase their use of our products , use additional products , or upgrade to a higher subscription tier . our dollar-based net expansion rate is reduced when customers cease using our products , use fewer products , or downgrade to a lower subscription tier . our dollar-based net expansion rate compares our recurring subscription revenue from customers from one period to the next . we measure our dollar-based net expansion rate on a monthly basis because many of our customers change their subscriptions more frequently than quarterly or annually . to calculate our annual dollar-based net expansion rate , we first establish the base period monthly recurring revenue from all our customers at the end of a month . this represents the revenue we would contractually expect to receive from those customers over the following month , without any increase or reduction in any of their subscriptions . we then ( i ) calculate the actual monthly recurring revenue from those same customers at the end of that following month ; then ( ii ) divide that following month 's recurring revenue by the base month 's recurring revenue to arrive at our monthly net expansion rate ; then ( iii ) calculate a quarterly net expansion rate by compounding the net expansion rates of the three months in the quarter ; and then ( iv ) calculate our annualized net expansion rate by compounding our quarterly net expansion rate over an annual period . the quarterly fluctuations in our dollar-based net expansion rate are primarily driven by transactions within a particular quarter in which certain larger subscription customers either significantly upgrade or significantly downgrade their subscriptions and by increased sales to existing customers in particular quarters due to sales and marketing campaigns in a particular quarter . in addition , we believe that the composition of our customer base also has an impact on the net expansion rate , such that a relative increase in the number of customers from larger enterprises versus small to medium-sized organizations will tend to increase our quarterly net expansion rate , while a relative increase in the number of customers from small to medium-sized organizations versus larger enterprises will tend to decrease the quarterly net expansion rate , as smaller businesses tend to cancel subscriptions more frequently than larger enterprises . this rate is also impacted by factors including , but not limited to , new product introductions , promotional activity , mix of customer size , and the variable timing of renewals . our annualized dollar-based net expansion rate declined to 130.9 % for the three-month period ended march 31 , 2019 from 141.2 % for the three month period ended march 31 , 2018. although we drove larger upsell activity in absolute dollars during the fiscal quarter , we saw a lower amount of upsell activity relative to our total installed base than the comparable period in the prior year , which had a moderating effect on our annualized dollar-based net expansion rate . replace_table_token_7_th 37 key components of results of operations revenue we offer access to our products under subscription plans that include service and support for one or more of our products . for our paying customers , we offer a variety of pricing plans based on the particular product purchased by an account , number of servers monitored , number of applications monitored , or number of mobile devices monitored . our plans typically have terms of one year , although some of our customers commit for shorter or longer periods . historically , most of our customers have paid us on a monthly basis . as a result , our deferred revenue at any given period of time had been relatively low . in recent periods we have secured an increased percentage of longer-duration commitments , largely because we have sold more to larger organizations .
| results of operations for fiscal years ended march 31 , 2019 and 2018 the following tables summarize our consolidated statements of operations data for the fiscal years ended march 31 , 2019 and march 31 , 2018 and as a percentage of our revenue for those periods . for a discussion of our consolidated statement of operations data for the fiscal year ended march 31 , 2017 and as a percentage of revenue for that period , see “ results of operations for fiscal years ended march 31 , 2018 , 2017 , and 2016 ” in part ii , item 7 of our annual report on form 10-k for the fiscal year ended march 31 , 2018 , filed with the sec on may 11 , 2018. the period to period comparison of results is not necessarily indicative of results for future periods . on april 1 , 2018 , we adopted asc 606 using the modified retrospective method . results as of and for the fiscal year ended march 31 , 2019 are presented under asc 606 , while prior period amounts are not adjusted and continue to be reported under the accounting standards in effect for the period presented , asc 605 , revenue recognition . replace_table_token_8_th ( 1 ) includes stock-based compensation expense as follows : replace_table_token_9_th 40 replace_table_token_10_th ( 1 ) includes stock-based compensation expense as follows : replace_table_token_11_th revenue replace_table_token_12_th revenue increased $ 124.2 million , or 35 % , in the fiscal year ended march 31 , 2019 compared to the fiscal year ended march 31 , 2018 . the increase was primarily due to an increase in product adoption by existing paid business accounts .
| 4,012 |
the energy waste business that was acquired through the nrc merger now comprises our energy waste segment . prior to this change , the energy waste business was included in the waste solutions segment ( formerly “ environmental services ” ) . throughout this annual report on form 10-k , all periods presented have been recast to reflect these changes . under our new structure our operations are managed in three reportable segments reflecting our internal management reporting structure and nature of services offered as follows : waste solutions ( formerly “ environmental services ” ) —this segment provides safe and compliant specialty waste management services including treatment , disposal , beneficial re-use , and recycling of hazardous , non-hazardous , and other specialty waste at company-owned treatment , storage , and disposal facilities , excluding the services within our energy waste segment . field services ( formerly “ field & industrial services ” ) —this segment provides safe and compliant logistics and response solutions focusing on “ in-field ' service offerings through our network of 10-day transfer facilities . our logistics solutions include specialty waste packaging , collection , transportation , and total waste management . our response solutions include land and marine based emergency response , osro standby compliance , remediation , and industrial services . the field services segment completes our vertically integrated model and serves to increase waste volumes into our waste solutions segment . energy waste —this segment provides safe and compliant energy waste management and critical support services to up-stream oil and gas customers in the permian and eagle ford basins primarily operating in texas . services include spill containment and site remediation , equipment cleaning & maintenance services , specialty equipment rental , including tanks , pumps and containment , safety monitoring and management and transportation and disposal . this segment includes all of the energy waste business of the legacy nrc operations and none of the legacy us ecology operations . in order to provide insight into the underlying drivers of our waste volumes and related t & d revenues , we evaluate period-to-period changes in our t & d revenue for our waste solutions segment based on the industry of the waste generator , based on north american industry classification system ( “ naics ” ) codes . the composition of the waste solutions segment t & d revenues by waste generator industry for the years ended december 31 , 2020 and 2019 were as follows : replace_table_token_2_th ( 1 ) excludes all transportation service revenue . ( 2 ) includes retail and wholesale trade , rate regulated , construction and other industries . we also categorize our waste solutions t & d revenue as either “ base business ” or “ event business ” based on the underlying nature of the revenue source . 52 base business consists of waste streams from ongoing industrial activities and tends to be reoccurring in nature . we define event business as non-recurring projects that are expected to equal or exceed 1,000 tons , with base business defined as all other business not meeting the definition of event business . the duration of event business projects can last from a several-week cleanup of a contaminated site to a multiple year cleanup project . during 2020 , base business revenue declined 7 % compared to 2019. base business revenue was approximately 73 % of total 2020 t & d revenue , down from 78 % in 2019. our business is highly competitive and no assurance can be given that we will maintain these revenue levels or increase our market share . a significant portion of our disposal revenue is attributable to discrete event business projects which vary widely in size , duration and unit pricing . for the year ended december 31 , 2020 , approximately 27 % of our t & d revenue was derived from event business projects . the one-time nature of event business , diverse spectrum of waste types received and widely varying unit pricing necessarily creates variability in revenue and earnings . this variability may be influenced by general and industry-specific economic conditions , funding availability , changes in laws and regulations , government enforcement actions or court orders , public controversy , litigation , weather , commercial real estate , closed military bases and other project timing , government appropriation and funding cycles and other factors . the types and amounts of waste received from base business also vary from quarter to quarter . this variability can also cause significant quarter-to-quarter and year-to-year differences in revenue , gross profit , gross margin , operating income and net income . while we pursue many projects months or years in advance of work performance , cleanup project opportunities routinely arise with little or no prior notice . these market dynamics are inherent to the waste disposal business and are factored into our projections and externally communicated business outlook statements . our projections combine historical experience with identified sales pipeline opportunities , new or expanded service line projections and prevailing market conditions . we serve oil refineries , chemical production plants , steel mills , waste brokers/aggregators serving small manufacturers and other industrial customers that are generally affected by the prevailing economic conditions and credit environment . adverse conditions may cause our customers as well as those they serve to curtail operations , resulting in lower waste production and or delayed spending on off-site waste shipments , maintenance , waste cleanup projects and other work . factors that can impact general economic conditions and the level of spending by customers include , but are not limited to , consumer and industrial spending , increases in fuel and energy costs , conditions in the real estate and mortgage markets , labor and healthcare costs , access to credit , consumer confidence and other global economic factors affecting spending behavior . market forces may also induce customers to reduce or cease operations , declare bankruptcy , liquidate or relocate to other countries , any of which could adversely affect our business . story_separator_special_tag 2019 events nrc merger : on november 1 , 2019 , the company completed its merger with nrc , a leader in comprehensive environmental , compliance and waste management services to the marine and rail transportation , general industrial and energy industries . the addition of nrc 's substantial service network strengthened and expanded us ecology 's suite of environmental services , including oil and gas exploration and production landfill disposal capabilities , and expanded opportunities to establish us ecology as a leader in standby and emergency response services . the total merger consideration was $ 1,008.2 million , net of cash acquired , and was funded through the issuance of equity and with proceeds 54 under a new $ 450.0 million seven-year term loan . the nrc merger affects the comparability of 2019 with previous years , including as follows : ● revenue and operating losses from the legacy nrc business for the period from november 1 , 2019 to december 31 , 2019 included in the company 's consolidated statements of operations for the year ended december 31 , 2019 were $ 70.2 million and $ 9.1 million , respectively . ● we incurred $ 24.4 million of business development expenses during the year ended december 31 , 2019 in connection with the nrc merger , primarily for due diligence , transaction expenses and business integration purposes . ● we recorded $ 309.5 million of intangible assets and $ 577.4 million of goodwill on our consolidated balance sheet as a result of the nrc merger . acquired finite-lived intangibles will be amortized over their estimated useful life ranging from two to 16 years . goodwill and indefinite-lived intangibles are tested for impairment at least annually . acquisition of w.i.s.e . environmental solutions inc. ( now known as us ecology sarnia ) : on august 1 , 2019 , the company acquired us ecology sarnia , an equipment rental and waste services company based in sarnia , ontario , canada . the total purchase price was 23.5 million canadian dollars , which translated to $ 17.9 million at the time of the transaction . we recorded $ 6.2 million of intangible assets and $ 7.7 million of goodwill on the consolidated balance sheets as a result of the acquisition . amortizing intangible assets will be amortized over a weighted average life of approximately 14 years . the acquisition of us ecology sarnia was not material to our consolidated financial position or results of operations . 2018 events explosion at grand view , idaho facility : on november 17 , 2018 , an explosion occurred at our grand view , idaho facility , resulting in one employee fatality and injuries to other employees . the incident severely damaged the facility 's primary waste-treatment building as well as surrounding waste handling , waste storage , maintenance and administrative support structures , resulting in the closure of the entire facility that remained in effect through january 2019. the facility resumed limited operations in february 2019 and regained additional capabilities throughout the remainder of 2019. we expect the completion of the construction of a new treatment building and resumption of full capabilities in late 2020. in addition to initiating and conducting our own investigation into the incident , we fully cooperated with ideq , the usepa and osha to support their comprehensive and independent investigations of the incident . on january 10 , 2020 , we entered into a settlement agreement with osha settling a complaint made by osha relating to the incident for $ 50,000. on january 28 , 2020 , the occupational safety and health review commission issued an order terminating the proceeding relating to such osha complaint . we have not otherwise been named as a defendant in any action relating to the incident . we maintain workers ' compensation insurance , business interruption insurance and liability insurance for personal injury , property and casualty damage . we believe that any potential third-party claims associated with the explosion , in excess of our deductibles , are expected to be resolved primarily through our insurance policies . although we carry business interruption insurance , a disruption of our business caused by a casualty event , including the full and partial closure of our grand view , idaho facility , may result in the loss of business , profits or customers during the time of such closure . accordingly , our insurance policies may not fully compensate us for these losses . acquisition of ecoserv industrial disposal , llc : on november 14 , 2018 , the company acquired ecoserv industrial disposal , llc ( “ winnie ” ) , which provides non-hazardous industrial wastewater disposal solutions and employs deep-well injection technology in the southern united states . the total purchase price was $ 87.2 million . we recorded $ 66.5 million of intangible assets and $ 16.4 million of goodwill on the consolidated balance sheets as a result of the acquisition . amortizing intangible assets will be amortized over a weighted average life of approximately 52 years . the acquisition of winnie was not material to our consolidated financial position or results of operations either individually or when aggregated with other acquisitions completed in 2018. acquisition of es & h of dallas , llc : on august 31 , 2018 , the company acquired es & h of dallas , llc ( “ es & h dallas ” ) , which provides emergency and spill response , light industrial services and transportation and logistics for waste disposal and recycling from locations in dallas and midland , texas . the total purchase price was $ 21.3 million . we recorded $ 4.2 55 million of intangible assets and $ 7.1 million of goodwill on the consolidated balance sheets as a result of the acquisition . amortizing intangible assets will be amortized over a weighted average life of approximately 13 years .
| results of operations our operating results and percentage of revenues for the years ended december 31 , 2020 , 2019 and 2018 were as follows : replace_table_token_3_th management uses adjusted ebitda as a financial measure to assess segment performance . adjusted ebitda is defined as net ( loss ) income before interest expense , interest income , income tax expense , depreciation , amortization , share-based compensation , accretion of closure and post-closure liabilities , foreign currency gain/loss , non-cash property and equipment impairment charges , non-cash goodwill and intangible asset impairment charges , gain on property insurance recoveries , business development and integration expenses and other income/expense . the reconciliation of net ( loss ) income to adjusted ebitda for the years ended december 31 , 2020 , 2019 and 2018 is as follows : replace_table_token_4_th adjusted ebitda is a complement to results provided in accordance with accounting principles generally accepted in the united states ( “ gaap ” ) and we believe that such information provides additional useful information to analysts , stockholders and other users to understand the company 's operating performance . since adjusted ebitda is not a 57 measurement determined in accordance with gaap and is thus susceptible to varying calculations , adjusted ebitda as presented may not be comparable to other similarly titled measures of other companies . items excluded from adjusted ebitda are significant components in understanding and assessing our financial performance . adjusted ebitda should not be considered in isolation or as an alternative to , or substitute for , net ( loss ) income , cash flows generated by operations , investing or financing activities , or other financial statement data presented in the consolidated financial statements as indicators of financial performance or liquidity . adjusted ebitda has limitations as an analytical tool and should not be considered in isolation or a substitute for analyzing our results as reported under gaap .
| 4,013 |
8. intangible assets a summary of the activity and balances in intangible assets is as follows : replace_table_token_42_th ( 1 ) as of the first day of fiscal 2019 , the favorable leasehold interest balance was reclassified into the new operating lease asset balance due to the adoption of asc 842. as a result , the amortization of these assets is recorded as part of the single rent expense to be recorded on a monthly basis for each lease . refer to note 7 , “ leases ” , for further details . 74 replace_table_token_43_th amortization expense was ( $ 0.4 ) million , $ 0.2 million and $ 1.4 million for 2020 , 2019 , and 2018 , respectively . 9. goodwill the company 's goodwill balance was $ 368.9 million and $ 368.1 million as of story_separator_special_tag you should read the following discussion and analysis of our financial condition and results of operations together with the consolidated financial statements and related notes that are included elsewhere in this annual report on form 10-k. this discussion contains forward-looking statements based upon current expectations that involve risks and uncertainties . our actual results may differ materially from those anticipated in these forward-looking statements as a result of various factors , including those set forth under “ risk factors ” or in other parts of this annual report on form 10-k. please also see the section entitled “ special note regarding forward-looking statements. ” business overview sprouts farmers market offers a unique grocery experience featuring an open layout with fresh produce at the heart of the store . sprouts inspires wellness naturally with a carefully curated assortment of better-for-you products paired with purpose-driven people . we continue to bring the latest in wholesome , innovative products made with lifestyle-friendly ingredients such as organic , plant-based and gluten-free . since our founding in 2002 , we have grown rapidly , significantly increasing our sales , store count and profitability . headquartered in phoenix with 362 stores in 23 states as of january 3 , 2021 , we are one of the largest specialty retailers of fresh , natural and organic food , and fastest growing retailers in the united states . our heritage in 2002 , we opened the first sprouts farmers market store in chandler , arizona . from our founding in 2002 through january 3 , 2021 , we have grown rapidly , significantly increasing our sales , store count and profitability , including successfully rebranding 43 henry 's farmers market and 39 sunflower farmers market stores added in 2011 and 2012 , respectively , through acquisitions to the sprouts banner . these three businesses all trace their lineage back to henry 's farmers market and were built with similar store formats and operations including a strong emphasis on value , produce and service in smaller , convenient locations . the consistency of these formats and operations was an important factor that allowed us to rapidly and successfully rebrand and integrate each of these businesses under the sprouts banner and on a common platform . outlook in 2020 , we announced the initial steps of our new long-term growth strategy that we believe will transform our company and drive profitable growth . this strategy focuses on the following areas : win with target customers . we plan to refocus attention on our target customers , where there is ample opportunity to gain share within these customer segments . our business can grow by leveraging existing strengths in a unique assortment of better-for-you , quality products and by expanding ecommerce capabilities to allow customers easy access to differentiated products through delivery or pickup . update format and expand in select markets . we plan to deliver unique smaller stores with expectations of stronger returns , while maintaining the approachable , fresh-focused farmer 's market heritage sprouts is known for . our geographic store expansion and new store placement will intersect where our target customers live , in markets with growth potential and supply chain support , providing a long runway of at least 10 % annual unit growth beginning in 2022 . 35 create an advantaged fresh supply chain . we believe our network of fresh distribution centers can drive efficiencies across the chain and support growth plans . to further deliver on our fresh commitment and reputation , as well as to improve financial results , we will aspire to ultimately position fresh distribution centers within a 250-mile radius of stores . refine brand and marketing approach . we believe we can elevate our national brand recognition and positioning by telling our unique product innovation and differentiation story . increased customer engagement through digital and social connections will drive additional sales growth and loyalty . deliver on financial targets and box economics . we will measure and report on the success of this strategy against a number of long-term financial and operational targets . components of operating results we report our results of operations on a 52- or 53-week fiscal year ending on the sunday closest to december 31 , with each fiscal quarter generally divided into three periods consisting of two four-week periods and one five-week period . fiscal 2020 was a 53-week year ending on january 3 , 2021. fiscal 2019 was a 52-week year ending on december 29 , 2019 , and fiscal 2018 was a 52-week year ending on december 30 , 2018. net sales we recognize sales revenue at the point of sale , with discounts provided to customers reflected as a reduction in sales revenue . proceeds from sales of gift cards are recorded as a liability at the time of sale and recognized as sales when they are redeemed by the customer . see note 3 , “ significant accounting policies ” for additional information on revenue recognition related to gift cards . we do not include sales taxes in net sales . we monitor our comparable store sales growth to evaluate and identify trends in our sales performance . story_separator_special_tag ” income tax provision replace_table_token_22_th the effective tax rate increased to 23.7 % in 2019 primarily due to the prior year excess tax benefits for the exercise of expiring pre-ipo options in the first half of fiscal year 2018. net income replace_table_token_23_th net income decreased $ 8.9 million primarily due to higher occupancy costs related to the adoption of the new lease standard that went into effect at the beginning of 2019 , as well as cycling a lower effective tax rate in 2018. diluted earnings per share replace_table_token_24_th earnings per share included a benefit of $ 0.06 per share for 2019 and 2018 , respectively , related to the share repurchase program . 43 return on invested capital in addition to reporting financial results in accordance with generally accepted accounting principles , or gaap , we provide information regarding return on invested capital ( “ roic ” ) as additional information about our operating results . roic is a non-gaap financial measure and should not be reviewed in isolation or considered as a substitute for our financial results as reported in accordance with gaap . roic is an important measure used by management to evaluate our investment returns on capital and provides a meaningful measure of the effectiveness of our capital allocation over time . we define roic as net operating profit after-tax ( “ nopat ” ) , including the effect of capitalized operating leases , divided by average invested capital . operating lease interest r epresents the add-back to operating income driven by the hypothetical interest expense we would incur if the property under our operating leases were owned or accounted for as a finance lease ( capital lease prior to adoption of asc 842 ) . the assumed ownership and associated interest expense are calculated using the discount rate for each lease as recorded as a component of rent expense within selling , general and administrative expenses . invested capital reflects a trailing twelve-month average . as numerous methods exist for calculating roic , our method may differ from methods used by other companies to calculate their roic . it is important to understand the methods and the differences in those methods used by other companies to calculate their roic before comparing our roic to that of other companies . our calculation of roic for the fiscal years indicated was as follows : replace_table_token_25_th ( 1 ) fiscal 2020 includes 53 weeks . ( 2 ) $ 2.6 million income tax benefit related to a tax calculation method change recognized in the third quarter of 2018 ; see note 17 , “ income taxes. ” 44 ( 3 ) 2020 special items include professional fees related to our ongoing strategic initiatives . 2019 special items include the direct costs associated with store closure . 2018 special items include the direct costs associated with store closure and executive severance costs . ( 4 ) net of tax amounts are calculated using the normalized effective tax rate for the periods presented . ( 5 ) 2020 and 2019 estimated interest on operating leases is calculated by multiplying operating leases by the 7.2 % and 7.5 % discount rate , respectively , for each lease recorded as rent expense within direct store expense . ( 6 ) 2018 estimated interest on capitalized operating leases is calculated as the trailing four quarters ' rent expense multiplied by eight and by a 7.0 % interest rate factor . ( 7 ) 2020 average operating leases represents the average net present value of outstanding lease obligations over the trailing four quarters . 2019 average operating leases represents the net present value of outstanding operating lease obligations . 2018 average operating leases is calculated as the trailing four quarters ' rent expense multiplied by eight . liquidity and capital resources the following table sets forth the major sources and uses of cash for each of the periods set forth below , as well as our cash , cash equivalents and restricted cash at the end of each period ( in thousands ) : replace_table_token_26_th we have generally financed our operations principally through cash generated from operations and borrowings under our credit facilities . our primary uses of cash are for purchases of inventory , operating expenses , capital expenditures primarily for opening new stores , remodels and maintenance , repurchases of our common stock and debt service . we believe that our existing cash , cash equivalents and restricted cash , and cash anticipated to be generated from operations will be sufficient to meet our anticipated cash needs for at least the next 12 months . our future capital requirements will depend on many factors , including new store openings , remodel and maintenance capital expenditures at existing stores , store initiatives and other corporate capital expenditures and activities . our cash , cash equivalents and restricted cash position benefits from the fact that we generally collect cash from sales to customers the same day or , in the case of credit or debit card transactions , within days from the related sale . operating activities cash flows from operating activities increased $ 138.8 million to $ 494.0 million in 2020 compared to $ 355.2 million in 2019. the increase in cash flows from operating activities is primarily a result of cash generated from net income of $ 287.5 million in 2020 compared to net income of $ 149.6 million in 2019. net income growth in 2020 is primarily due to increased net sales and favorable margin impact related to covid-19 , as well as the benefit of the 53 rd week . cash flows from operating activities increased $ 60.8 million to $ 355.2 million in 2019 compared to $ 294.4 million in 2018. the increase in cash flows from operating activities is primarily a result of changes in working capital .
| factors affecting comparability of results of operations covid-19 pandemic our results of operations for the year ended january 3 , 2021 were impacted by increased demand from our customers initially stockpiling groceries and wellness products at the onset of the covid-19 pandemic and continuing to consume more food at home throughout the year as restaurants have not fully reopened to pre-pandemic levels , and we in turn have made significant investments in compensation , benefits and personal protective equipment for our front-line store team members , as well as enhanced store sanitation procedures . we have also incurred increased ecommerce fees as consumers have increasingly used online shopping alternatives to purchase our products during the pandemic . additional week in 2020 fiscal 2020 consisted of 53 weeks . the 53rd week resulted in additional sales and expenses as further discussed in “ —comparison of fiscal 2020 to fiscal 2019 ” below . march 2018 refinancing in march 2018 , we completed a transaction in which we refinanced our debt ( referred to as the “ march 2018 refinancing ” ) , as further discussed in “ —liquidity and capital resources ” below . the march 2018 refinancing resulted in an increase in borrowing capacity , a reduction in interest rate and the recording of a loss on early extinguishment of debt ( see note 13 , “ long-term debt and finance lease liabilities ” ) . 37 results of operations for fiscal 2020 , 2019 and 2018 the following tables set forth our results of operations and other operating data for the periods presented . the period-to-period comparison of financial results is not necessarily indicative of financial results to be achieved in future periods . fiscal 2020 consisted of 53 weeks , while each of fiscal 2019 and fiscal 2018 consisted of 52 weeks .
| 4,014 |
uncertainties are inherent in estimating quantities of proved reserves , including many factors beyond the estimator 's control . reserve engineering is a subjective process of estimating subsurface accumulations of oil and gas that can not be measured in an exact manner , and the accuracy of any reserve estimate is a function of the quality of available data and the interpretation thereof . as a result , assessments story_separator_special_tag story_separator_special_tag times , serif ; font-weight : normal ; font-style : normal '' > the sale of retired equipment produced gains of $ 0.4 million in 2016. the company 's predominate customers are the domestic petrochemical industry . contributing to customer demand is low natural gas prices ( a basic feedstock cost for the petrochemical industry ) and high export demand for petrochemicals . increased operating expenses and an industry wide shortage of qualified drivers affected the company by suppressing revenues and results of operations during the heavy demand cycle of 2014 and early 2015. during 2016 , the competitive landscape in the transportation sector remained difficult and led to lower revenues in this segment . - oil and gas oil and gas segment revenues and operating earnings are primarily a function of crude oil and natural gas production volumes and prices . comparative amounts for revenues , operating earnings and selected expenses were as follows ( in thousands ) : replace_table_token_15_th ( 1 ) represents the percentage increase ( decrease ) from the prior year . ( 2 ) includes gains from property sales of $ 2.5 million in 2014 . 20 as shown in the table below , declining crude oil and natural gas prices coupled with declining volumes acted to reduce revenues for the comparative years presented . the sales volume decrease followed normal production declines as persistently low prices curtailed the development of natural gas and crude oil properties in 2015 and 2016. contributing to operating losses were property impairments as shown above . property impairments resulted in 2015 and 2014 following fourth quarter declines in crude oil prices . comparative volumes and prices were as follows : replace_table_token_16_th during 2016 , the company participated in the drilling of 7 wells in permian basin with no dry holes . there were 9 wells in process as of december 31 , 2016. an independent evaluation of estimated oil and gas reserves and the estimated future income derived from our properties is prepared on an annual basis . see note ( 12 ) to consolidated financial statements . the following estimates of future undiscounted net income before taxes from oil and gas properties based on average prices during 2016 is presented in such report as of december 31 , 2016 as follows ( in thousands ) : replace_table_token_17_th net capitalized oil and gas property costs ( remaining net book value ) associated with the projected future net income stream as of december 31 , 2016 was as follows ( in thousands ) : as of december 31 , 2016 net capitalized cost of oil and gas properties $ 6,358 impairment charges for oil and gas properties were not significant during the year ended december 31 , 2016 as the forward curve as of december 31 , 2016 was positively correlated to the average prices ( as required by sec regulations ) used to develop the future undiscounted net income before taxes from oil and gas properties shown above . capitalized oil and gas property costs are amortized in expense as the underlying oil and gas reserves are produced ( units-of-production method ) . 21 - oil and gas property sales during 2014 , the company sold its interest in certain oklahoma and texas properties for proceeds totaling $ 2.5 million and half of its interest in certain south texas ( lavaca county ) properties for proceeds totaling $ 1.5 million . combined , the company recorded a $ 2.5 million pre-tax gain from these transactions . the company retained an interest in the south texas properties as development continues . the other texas and oklahoma properties were sold because they were nearing the end of their economic life . - general and administrative expense and income tax general and administrative expenses were slightly elevated in 2016 as a result of increased use of outside consultants in the fourth quarter of 2016. expenses in 2015 were elevated due to a $ 1.1 million lump sum payment made during the first quarter of 2015 to the company 's former president upon retirement and termination of his previous employment agreement . the provision for income taxes is based on federal and state tax rates and variations are consistent with taxable income in the respective accounting periods . - discontinued operations in 2014 , the company sold the warehouse and real estate used by the discontinued petroleum refined products marketing business operation for $ 0.6 million in cash resulting in a pre-tax gain on sale of $ 0.5 million , with such gain reported in discontinued operations for 2014. liquidity and capital resources the company 's liquidity derives from net cash provided by operating activities and is dependent on the success of future operations . see discussion under ‟item 1a . risk factors ” . the most significant source of liquidity , over time , is the cash yield from annual net earnings factoring in the non-cash book expense items for depreciation , depletion , amortization and impairments . the company has no debt and funds the majority of its capital projects from this annual cash flow . in most annual periods , the cash inflow from this source exceeds capital spending outflows . should cash inflow subside or turn negative , the company will evaluate its investments accordingly . cash provided from operating activities was as follows ( in thousands ) : 2016 2015 2014 net cash provided by operating activities $ 6,944 $ 25,477 $ 47,133 as of december 31 , 2016 and 2015 , the company had no bank debt or other forms of debenture obligations . story_separator_special_tag the company 's primary insurance needs are workers ' compensation , automobile and umbrella coverage for its trucking fleet and medical insurance for its employees . insurance costs are as follows ( in thousands ) : 2016 2015 2014 insurance costs $ 13,330 $ 15,570 $ 14,800 competition in all phases of its operations , the company encounters strong competition from a number of entities . many of these competitors possess financial resources substantially in excess of those of the company . the company faces competition principally in establishing trade credit , pricing of available materials and quality of service , as well as for the acquisition of mineral properties . the company 's marketing division competes with major oil companies and other large industrial concerns that own or control significant refining and marketing facilities . these major oil companies may offer their products to others on more favorable terms than those available to the company . from time to time in recent years , there have been supply imbalances for crude oil and natural gas in the marketplace . this in turn has led to significant fluctuations in prices for crude oil and natural gas . as a result , there is a high degree of uncertainty regarding both the future market price for crude oil and natural gas and the available margin spread between wholesale acquisition costs and sales realization . outlook persistently low crude oil prices , coupled with declining oil production , are expected to adversely impact the company 's crude oil marketing operation . demand for transportation services remains uncertain . the focus in transportation , therefore , is on both aggressive marketing , diversification strategies and cost containment . for the oil and gas segment , the effort is to reduce cost and optimize cash flow as reserves are produced . during 2017 , the company will be focused on improving our core businesses and working on strategic business development . the company has the following major objectives for 2017 : - marketing—manage declining supply volumes and unit margins to maximize cash flow , while looking to expand into new regions . - transportation—increase truck utilization , enhance diversification strategies and improve cost efficiencies . - strategic business development – deploy a disciplined investment approach to growing existing core areas and funding new growth opportunities . - oil and gas— continue to de-emphasize this business unit while preserving the resource value of our oil and gas properties . 25 critical accounting policies and use of estimates fair value accounting the company enters into certain forward commodity contracts that are required to be recorded at fair value and such contracts are recorded as either an asset or liability measured at its fair value . changes in fair value are recognized immediately in earnings unless the derivatives qualify for , and the company elects , cash flow hedge accounting . the company had no contracts designated for hedge accounting during 2016 , 2015 and 2014. the company utilizes a market approach to valuing its commodity contracts . on a contract by contract , forward month by forward month basis , the company obtains observable market data for valuing its contracts that typically have durations of less than 18 months . as of december 31 , 2016 , all of the company 's market value measurements were based on inputs based on observable market data ( level 2 inputs ) . see discussion under ‟fair value measurements ” in note ( 1 ) to the consolidated financial statements . the company 's fair value contracts give rise to market risk , which represents the potential loss that may result from a change in the market value of a particular commitment . the company monitors and manages its exposure to market risk to ensure compliance with the company 's risk management policies . such policies are regularly assessed to ensure their appropriateness given management 's objectives , strategies and current market conditions . trade accounts due to the volume and complexity of transactions and the high degree of interdependence with third parties , this is a difficult area to control and manage . the company manages this process by participating in a monthly settlement process with each of its counterparties . ongoing account balances are monitored monthly and the company attempts to gain the cooperation of such counterparties to reconcile outstanding balances . the company also places great emphasis on collecting cash balances due and paying only bonafide and properly supported claims . in addition , the company maintains and monitors its bad debt allowance . nevertheless a degree of risk remains due to the custom and practices of the industry . oil and gas reserve estimate the value of the capitalized cost of oil and natural gas exploration and production related assets are dependent on underlying oil and natural gas reserve estimates . reserve estimates are based on many subjective factors . the accuracy of these estimates depends on the quantity and quality of geological data , production performance data , reservoir engineering data , the pricing assumptions utilized as well as the skill and judgment of petroleum engineers in interpreting such data . the process of estimating reserves requires frequent revision ( usually on an annual basis ) as additional information becomes available . calculations of estimated future oil and natural gas revenues are also based on estimates of the timing of oil and natural gas production , and there are no assurances that the actual timing of production will conform to or approximate such estimates . also , certain assumptions must be made with respect to pricing . the company 's calculations assume prices will remain constant from the date of the engineer 's estimates , except for changes reflected under natural gas sales contracts .
| results of operations - marketing crude oil marketing revenues , operating earnings and selected costs were as follows ( in thousands ) : replace_table_token_9_th supplemental volume and price information : replace_table_token_10_th ( 1 ) reflects the volume purchased from third parties at the field level of operations . beginning in november 2014 , crude oil prices began to decline significantly and the company 's average crude oil purchase price dropped to $ 54 per barrel by december 2014 from $ 90 per barrel in september 2014. crude oil prices remained low during 2015 and 2016 leading to curtailed drilling efforts in most areas . the combination of reduced prices and volumes caused revenues to fall 44 percent in 2016 relative to 2015 . - field level operating earnings ( non gaap measure ) two significant factors affecting comparative crude oil segment operating earnings are inventory valuations and forward commodity contract ( derivatives or mark-to-market ) valuations . as a purchaser and shipper of crude oil , the company holds inventory in storage tanks and third-party pipelines . inventory sales turnover occurs approximately every three days , but the quantity held in stock at the end of a given period is reasonably consistent . during periods of increasing crude oil prices , the company recognizes inventory liquidation gains while during periods of falling prices , the company recognizes inventory liquidation and valuation losses . 17 crude oil marketing operating earnings are also affected by the valuations of the company 's forward month commodity contracts ( derivative instruments ) as of the various report dates . such non-cash valuations are calculated and recorded at each period end based on the underlying data existing as of such date . the company generally enters into these derivative contracts as part of a pricing strategy based on crude oil purchases at the wellhead ( field level ) .
| 4,015 |
conditional redemption period at our option ( 1 ) unconditional redemption period at our option redemption period requiring make-whole 2032d notes on or after may 1 , 2017 on or after may 4 , 2021 prior to may 4 , 2021 ( 2 ) 2033f notes n/a on or after feb. 20 , 2020 n/a ( 1 ) we may redeem for cash on or after the applicable dates if the volume weighted average price of our common stock has been at least 130 % of the conversion price for at least 20 trading days during any 30 consecutive trading day period . ( 2 ) if we redeem prior to the applicable date , we will pay a make-whole premium in cash equal to the present value of the remaining scheduled interest payments from the redemption date to may 4 , 2021. cash repurchase at the option of the holders : we may be required by the holders of our convertible notes to repurchase for cash all or a portion of the notes on the `` holder put date `` listed in the table above . the repurchase price would equal the principal amount plus accrued and unpaid interest . also , upon a change in control or a termination of trading , as defined in the respective indentures , holders of our story_separator_special_tag this discussion should be read in conjunction with the consolidated financial statements and accompanying notes for the year ended august 29 , 2019 . all period references are to our fiscal periods unless otherwise indicated . our fiscal year is the 52 or 53-week period ending on the thursday closest to august 31. our fiscal 2019 , 2018 , and 2017 each contain 52 weeks . all tabular dollar amounts are in millions , except per share amounts . for an overview of our business , see `` part i – item 1. business – overview . '' 31 story_separator_special_tag by declines in sbu nand component sales from a strategic reallocation of supply from component sales to ssd and mobile managed nand products . increases in sbu sales volumes for 2018 resulting from strong demand for cloud and enterprise ssd markets more than offset declines in selling prices . ebu revenue for 2018 increased 29 % as compared to 2017 primarily due to strong demand across ebu 's primary markets including consumer , industrial multimarkets , and automotive . operating income ( loss ) by business unit replace_table_token_7_th percentages reflect operating income ( loss ) as a percentage of revenue for each business unit . 33 cnbu operating income for 2019 decreased from 2018 primarily due to declines in pricing and higher r & d costs , partially offset by cost reductions . mbu operating income for 2019 decreased from 2018 primarily due to declines in pricing partially offset by increases in sales of high-value managed nand products and manufacturing cost reductions . sbu operating margin for 2019 declined from 2018 primarily due to declines in pricing , which were partially offset by manufacturing cost reductions and increases in sales volumes . sbu operating results for 2019 and 2018 were adversely impacted by the underutilization charges at imft . ebu operating income for 2019 decreased from 2018 as a result of declines in pricing and higher r & d costs partially offset by manufacturing cost reductions and increases in sales volumes . cnbu operating income for 2018 improved from 2017 primarily due to improved pricing and higher sales volumes resulting from strong demand for our products combined with manufacturing cost reductions . mbu operating income for 2018 improved from 2017 primarily due to increases in pricing and sales volumes for lpdram products , higher sales of high-value managed nand products , and manufacturing cost reductions . sbu operating income for 2018 improved from 2017 primarily due to manufacturing cost reductions enabled by our execution in transitioning to 64-layer tlc 3d nand products and improvements in product mix . sbu operating income for 2018 was adversely impacted by higher costs associated with imft 's production of 3d xpoint memory products at less than full capacity . ebu operating income for 2018 increased as compared to 2017 as a result of increases in average selling prices , manufacturing cost reductions , and increases in sales volumes , partially offset by higher r & d costs . operating expenses and other selling , general , and administrative sg & a expenses for 2019 were 3 % higher than 2018 primarily due to increases in legal costs and consulting fees , partially offset by a reduction in employee compensation and sales commissions . sg & a expenses for 2018 were 9 % higher than 2017 primarily due to increases in legal costs , consulting fees , and employee compensation . research and development r & d expenses vary primarily with the number of development wafers processed , amounts reimbursed under r & d cost-sharing agreements , the cost of advanced equipment dedicated to new product and process development , and personnel costs . because of the lead times necessary to manufacture our products , we typically begin to process wafers before completion of performance and reliability testing . development of a product is deemed complete when it is qualified through reviews and tests for performance and reliability . r & d expenses can vary significantly depending on the timing of product qualification . r & d expenses for 2019 were 14 % higher than 2018 primarily due to decreases in reimbursements from our r & d cost-sharing arrangements as described below , increases in depreciation expense as a result of increases in capital spending , and increases in employee compensation . r & d expenses for 2018 were 17 % higher than 2017 primarily due to increases in employee compensation , volumes of development and pre-qualification wafers , and depreciation expense as a result of increases in capital spending . we share the cost of certain product and process development activities under development agreements with partners , including agreements to jointly develop nand and 3d xpoint technologies with intel . story_separator_special_tag to develop new product and process technology , support future growth , achieve operating efficiencies , and maintain product quality , we must continue to invest in manufacturing technologies , facilities and equipment , and r & d . we estimate that capital expenditures in 2020 for property , plant , and equipment , net of partner contributions , to be $ 7 billion to $ 8 billion , focused on technology transitions and product enablement . the actual amounts for 2020 will vary depending on market conditions . as of august 29 , 2019 , we had commitments of approximately $ 4.3 billion for the acquisition of property , plant , and equipment , approximately $ 3.2 billion is expected to be paid in 2020 and the remainder in 2021. our board of directors has authorized the discretionary repurchase of up to $ 10 billion of our outstanding common stock beginning in 2019 , which we may purchase on a discretionary basis through open-market purchases , block trades , privately-negotiated transactions , derivative transactions , and or pursuant to a rule 10b5-1 trading plan , subject to market conditions and our ongoing determination of the best use of available cash . the repurchase authorization does not obligate us to acquire any common stock . in 2019 , we repurchased 67 million shares of our common stock for $ 2.66 billion under an accelerated share repurchase agreement , rule 10b5-1 plans , and through open market repurchases . see `` item 8. financial statements and supplementary data – notes to consolidated financial statements – equity . '' in january 2019 , we exercised our option to acquire intel 's interest in imft . intel has set the closing date to occur on october 31 , 2019. in connection with our acquisition , in the first quarter of 2020 , we expect to pay intel approximately $ 1.4 billion for intel 's interest in imft as well as imft member debt owed to intel . as of august 29 , 2019 , current debt included $ 693 million of imft member debt . cash and marketable investments totaled $ 9.12 billion as of august 29 , 2019 and $ 7.28 billion as of august 30 , 2018 . our investments consist primarily of money market funds and liquid investment-grade , fixed-income securities , diversified among industries and individual issuers . to mitigate credit risk , we invest through high-credit-quality financial institutions and by policy generally limit the concentration of credit exposure by restricting the amount of investments with any single obligor . as of august 29 , 2019 , $ 2.50 billion of our cash and marketable investments was held by our foreign subsidiaries . limitations on the use of cash and investments mmj group : cash and marketable investments as of august 29 , 2019 included $ 536 million held by the mmj group . as a result of the corporate reorganization proceedings of mmj initiated in march 2012 , and for so long as such proceedings are continuing , the mmj group is prohibited from paying dividends to us . in addition , pursuant to an order of the tokyo district court , the mmj group can not make loans or advances , other than certain ordinary course advances , to us without the consent of the tokyo district court and may , under certain circumstances , be subject to the approval of the legal trustee . as a result , the assets of the mmj group are not available for use by us in our other operations . furthermore , certain uses of the assets of the mmj group , including investments in certain capital expenditures , may require consent of mmj 's trustees and or the tokyo district court . imft : cash and marketable investments included $ 130 million held by imft as of august 29 , 2019 . our ability to access funds held by imft to finance our other operations is subject to agreement by intel and contractual limitations . amounts held by imft are not anticipated to be available to finance our other operations . 36 cash flows replace_table_token_9_th operating activities : for 2019 , cash provided by operating activities was due primarily to cash generated by our operations and the effect of working capital adjustments , which included a $ 2.43 billion decrease in receivables due to a lower level of net sales and a $ 1.53 billion increase in inventory due to higher levels of work in process and raw materials inventories . for 2018 , cash provided by operating activities was due primarily to cash generated by our operations and the effect of working capital adjustments , which included a $ 1.73 billion increase in receivables due to a higher level of net sales . for 2017 , cash provided by operating activities was due primarily to cash generated by our operations and the effect of working capital adjustments , which included a $ 1.65 billion increase in receivables due to a higher level of net sales , $ 361 million of payments attributed to intercompany balances in connection with the inotera acquisition , and a $ 456 million increase in accounts payable and accrued expenses . investing activities : for 2019 , net cash used for investing activities consisted primarily of $ 9.03 billion of expenditures for property , plant , and equipment ( net of partner contributions ) and $ 1.17 billion of net outflows from sales , maturities , and purchases of available-for-sale securities . for 2018 , net cash used for investing activities consisted primarily of $ 7.99 billion of expenditures for property , plant , and equipment ( net of partner contributions ) , partially offset by $ 164 million of net inflows from sales , maturities , and purchases of available-for-sale securities .
| results of operations consolidated results replace_table_token_5_th total revenue total revenue for 2019 decreased 23 % as compared to 2018 primarily due to pricing declines resulting from the challenging memory market environment in 2019. sales of dram products for 2019 decreased 28 % as compared to 2018 primarily due to declines in average selling prices of approximately 30 % resulting from supply and demand imbalances , customer inventory corrections , and cpu shortages . sales of nand products for 2019 decreased 12 % as compared to 2018 primarily due to declines in average selling prices in the mid-40 % range resulting from supply and demand imbalances , which were partially offset by significant increases in sales volumes . in addition , demand for our nand products was adversely affected by the transition from sata ssds to nvme ssds . the higher nand sales volumes in 2019 were driven by increases in sales of high-value mobile managed nand products as well as discrete nand products enabled by our execution in ramping 64- and 96-layer tlc 3d nand . total revenue for 2018 increased 50 % as compared to 2017. higher revenue in 2018 for both dram and nand as compared to 2017 were driven by strong execution in delivering high-value products featuring our 1xnm dram and 64-layer 3d nand technologies combined with strong demand for products across our primary markets . sales of dram products for 2018 increased 64 % from 2017 primarily due to an increase in average selling prices of approximately 35 % and an increase in sales volumes of approximately 20 % as a result of strong market conditions , particularly for cloud , enterprise , mobile , and graphics markets , combined with increased sales into high-value markets .
| 4,016 |
during the period from january 1 , 2011 to june 30 , 2013 , story_separator_special_tag the following discussion and analysis of our financial condition and results of operations should be read in conjunction with `` selected consolidated financial data '' and the consolidated financial statements and related notes included in items 6 and 8 of this form 10-k. this discussion contains forward-looking statements that involve risks and uncertainties . such statements , which include statements concerning future revenue sources and concentration , gross profit margins , selling and marketing expenses , research and development expenses , general and administrative expenses , capital resources , additional financings or borrowings and additional losses , are subject to risks and uncertainties , including , but not limited to , those discussed below and elsewhere in this form 10-k , particularly in item 1a `` risk factors , '' that could cause actual results to differ materially from those projected . the forward-looking statements set forth in this form 10-k are as of the close of business on march 28 , 2014 , and we undertake no duty and do not intend to update this information . overview we develop , manufacture , market , sell and support veterinary products . our business is comprised of two reportable segments , core companion animal health ( `` cca '' ) , which represented 85 % of pro forma 2013 revenue and other vaccines , pharmaceuticals and products ( `` ovp '' ) , which represented 15 % of pro forma 2013 revenue . the core companion animal health segment ( `` cca '' ) includes , primarily for canine and feline use , blood testing instruments and supplies , digital imaging products , software and services , and single use products and services such as heartworm diagnostic tests , heartworm preventive products , allergy immunotherapy products and allergy testing . blood testing and other non-imaging instruments and supplies represented approximately 34 % of our pro forma 2013 revenue . many products in this area involve placing an instrument in the field and generating future revenue from consumables , including items such as supplies and service , as that instrument is used . approximately 28 % of our pro forma 2013 revenue resulted from the sale of such consumables to an installed base of instruments and approximately 6 % of our pro forma 2013 revenue was from new hardware sales . a loss of or disruption in supply of consumables we are selling to an installed base of instruments could substantially harm our business . all of our blood testing and other non-imaging instruments and supplies are supplied by third parties , who typically own the product rights and supply the product to us under marketing and or distribution agreements . in many cases , we have collaborated with a third party to adapt a human instrument for veterinary use . major products in this area include our chemistry instruments , our hematology instruments and our blood gas instruments and their affiliated operating consumables . revenue from products in these three areas , including revenues from consumables , represented approximately 30 % of our pro forma 2013 revenue . imaging hardware , software and services represented approximately 17 % of pro forma 2013 revenue . digital radiography is the largest product offering in this area , which also includes ultrasound instruments . digital radiography solutions typically consist of a combination of hardware and software placed with a customer , often combined with an ongoing service and support contract . it has been our experience that most of the economic benefit is generated at the time of sale in this area , in contrast to the blood testing category discussed above where ongoing consumable revenue is often a larger component of economic value . other cca revenue , including single use diagnostic and other tests , pharmaceuticals and biologicals as well as research and development , licensing and royalty revenue , represented approximately 33 % of our pro forma 2013 revenue . since items in this area are often single use by their nature , our typical aim is to build customer satisfaction and loyalty for each product , generate repeat annual sales from existing customers and expand our customer base in the future . products in this area are both supplied by third parties and -29- provided by us . major products in this area include our heartworm diagnostic tests , our heartworm preventives , our allergy test kits , our allergy immunotherapy and our allergy tests . combined revenue from heartworm-related products and allergy-related products represented 30 % of our pro forma 2013 revenue . we consider the cca segment to be our core business and devote most of our management time and other resources to improving the prospects for this segment . maintaining a continuing , reliable and economic supply of products we currently obtain from third parties is critical to our success in this area . virtually all of our sales and marketing expenses occur in the cca segment . the majority of our research and development spending is dedicated to this segment as well . all our cca products are ultimately sold primarily to or through veterinarians . in many cases , veterinarians will mark up their costs to the end user . the acceptance of our products by veterinarians is critical to our success . cca products are sold directly to end users by us as well as through distribution relationships , such as our corporate agreement with merck animal health , the sale of kits to conduct blood testing to third-party veterinary diagnostic laboratories and independent third-party distributors . revenue from direct sales and distribution relationships represented approximately 68 % and 32 % , respectively , of cca pro forma 2013 revenue . we intend to sustain profitability over the long term through a combination of revenue growth , gross margin improvement and expense control . accordingly , we closely monitor revenue growth trends in our cca segment . story_separator_special_tag the primary estimate made by management is determining the useful life of the related agreement , product , -31- patent or technology . we evaluate all of our licensing arrangements by estimating the useful life of either the product or the technology , the length of the agreement or the legal patent life and defer the revenue for recognition over the appropriate period . occasionally we enter into arrangements that include multiple elements . such arrangements may include the licensing of technology and manufacturing of product . in these situations we must determine whether the various elements meet the criteria to be accounted for as separate elements . if the elements can not be separated , revenue is recognized once revenue recognition criteria for the entire arrangement have been met or over the period that the company 's obligations to the customer are fulfilled , as appropriate . if the elements are determined to be separable , the revenue is allocated to the separate elements based on relative fair value and recognized separately for each element when the applicable revenue recognition criteria have been met . in accounting for these multiple element arrangements , we must make determinations about whether elements can be accounted for separately and make estimates regarding their relative fair values . allowance for doubtful accounts we maintain an allowance for doubtful accounts receivable based on client-specific allowances , as well as a general allowance . specific allowances are maintained for clients which are determined to have a high degree of collectability risk based on such factors , among others , as : ( i ) the aging of the accounts receivable balance ; ( ii ) the client 's past payment history ; ( iii ) a deterioration in the client 's financial condition , evidenced by weak financial condition and or continued poor operating results , reduced credit ratings , and or a bankruptcy filing . in addition to the specific allowance , the company maintains a general allowance for credit risk in its accounts receivable which is not covered by a specific allowance . the general allowance is established based on such factors , among others , as : ( i ) the total balance of the outstanding accounts receivable , including considerations of the aging categories of those accounts receivable ; ( ii ) past history of uncollectable accounts receivable write-offs ; and ( iii ) the overall creditworthiness of the client base . a considerable amount of judgment is required in assessing the realizability of accounts receivable . should any of the factors considered in determining the adequacy of the overall allowance change , an adjustment to the provision for doubtful accounts receivable may be necessary . inventories inventories are stated at the lower of cost or market , cost being determined on the first-in , first-out method . inventories are written down if the estimated net realizable value of an inventory item is less than its recorded value . we review the carrying cost of our inventories by product each quarter to determine the adequacy of our reserves for excess/obsolescence inventory . in accounting for inventories we must make estimates regarding the estimated net realizable value of our inventory . this estimate is based , in part , on our forecasts of future sales and shelf life of product . deferred tax assets – valuation allowance our deferred tax assets , such as a domestic net operating loss ( `` nol '' ) , are reduced by an offsetting valuation allowance based on judgmental assessment of available evidence if we are unable to conclude that it is more likely than not that some or all of the related deferred tax assets will be realized . if we are able to conclude it is more likely than not that we will realize a future benefit from a deferred tax asset based upon our estimates of future taxable income , we will reduce the related valuation allowance by an amount equal to the estimated quantity of income -32- taxes we would pay in cash if we were not to utilize the deferred tax asset in the future . the first time this occurs in a given jurisdiction , it will result in a net deferred tax asset on our consolidated balance sheets and an income tax benefit of equal magnitude in our statement of operations in the period we make the determination . in future periods , we will then recognize as income tax expense the estimated quantity of income taxes we would have paid in cash had we not utilized the related deferred tax asset . the corresponding journal entry will be a reduction of our deferred tax asset . if there is a change regarding our tax position in the future , we will make a corresponding adjustment to the related valuation allowance . for example , if we were to conclude our estimates of future taxable income were not sufficient and thus we were no longer more likely than not to utilize deferred tax assets recognized on our consolidated balance sheets , we would increase the valuation allowance affiliated with these deferred tax assets and recognize an income tax expense of an equal magnitude in our statement of operations . at december 31 , 2013 , we had generated cumulative three year income before income taxes as well as eight consecutive years of federal taxable income and concluded we were more likely than not to utilize deferred tax assets recognized on our consolidated balance sheets as of such date . if we were to experience another loss before income taxes in 2014 , we expect we would conclude we were not more likely than not to utilize deferred tax assets recognized on our consolidated balance sheets , increase our valuation allowance affiliated with these deferred tax assets to an amount equal to the deferred tax assets and recognize an income tax expense of equal magnitude in our statement of operations .
| results of operations the following table summarizes our results of operations for the three most recent fiscal years : replace_table_token_3_th revenue total revenue increased 8 % to $ 78.3 million in 2013 compared to $ 72.8 million in 2012. total revenue increased 4 % to $ 72.8 million in 2012 compared to $ 70.1 million in 2011. cca segment revenue increased 8 % to $ 66.4 million in 2013 compared to $ 61.5 million in 2012. the largest factor in the increase was $ 12.7 million in revenue from heska imaging , which represents the revenue from sales after our acquisition of heska imaging on february 24 , 2013. we also generated greater revenue from sales of our heartworm preventive to merck animal health . these were somewhat offset by lower revenue from domestic sales of our heartworm diagnostic tests , our chemistry instruments , our hematology instruments , our instrument consumables and our international allergy business . cca segment revenue increased 7 % to $ 61.5 million in 2012 compared to $ 57.5 million in 2011. greater revenue from instrument consumables was a factor in the increase . -34- ovp segment revenue increased 6 % to $ 11.9 million in 2013 compared to $ 11.3 million in 2012. increased revenue from sponsored research and development activities was the largest factor in the increase . ovp segment revenue decreased 10 % to $ 11.3 million in 2012 compared to $ 12.6 million in 2011. lower sales of cattle vaccines under our contract with agrilabs and lower international sales of cattle vaccines were factors in the decline . cost of revenue 2013 cost of revenue was $ 47.7 million , an increase of 14 % compared to $ 41.7 million in 2012. gross profit decreased 2 % to $ 30.6 million in 2013 from $ 31.1 million in 2012 . 2013 gross profit included $ 5.1 million in gross profit from heska imaging . gross margin , i.e
| 4,017 |
our products are derived from our core competencies in pressure measurement and control , materials delivery , gas composition analysis , control and information technology , power and reactive gas generation and vacuum technology . our products are used in diverse markets , applications and processes . our primary served markets are manufacturers of capital equipment for semiconductor devices , and for other thin film applications including flat panel displays , solar cells light emitting diodes ( leds ) , data storage media , and other advanced coatings . we also leverage our technology in other markets with advanced manufacturing applications including medical equipment , pharmaceutical manufacturing , energy generation and environmental monitoring . we have a diverse base of customers that includes manufacturers of semiconductor capital equipment and semiconductor devices ; thin film capital equipment used in the manufacture of flat panel displays ; leds , solar cells , data storage media and other coating applications ; and general industrial , medical , energy generation , environmental monitoring and manufacturing companies , and university , government and industrial research laboratories . during the years 2015 , 2014 and 2013 , approximately 69 % , 70 % and 68 % of our net revenues , respectively , were from sales to semiconductor capital equipment manufacturers and semiconductor device manufacturers . we expect that sales to semiconductor capital equipment manufacturers and semiconductor device manufacturers will continue to account for a substantial portion of our sales . effective january 1 , 2015 , we changed the structure of our reportable segments based upon how the information is provided to our chief operating decision maker . our four reportable segments prior to the change in structure were : advanced manufacturing capital equipment , analytical solutions group , europe region sales & service and asia region sales & service . our current structure still reflects four reportable segments , however the composition of the segments has changed . our current reportable segments are advanced manufacturing capital equipment , global service , asia region sales and other . the primary change to the segment structure was to separate worldwide service from product sales and create a separate reportable segment known as global service . product sales in the advanced manufacturing capital equipment segment remained with that segment . asia product sales became a separate reportable segment . the product sales from the operating segments that made up the analytical solutions group and europe region sales were combined into the other segment and are not reported separately as they are individually immaterial and collectively remain below the separate segment guidelines . we report corporate expenses and certain intercompany pricing transactions in a corporate and eliminations reconciling column . the advanced manufacturing capital equipment segment includes the development , manufacture and sales of instruments , control and vacuum products , and power and reactive gas products , all of which are utilized in semiconductor processing and other similar advanced manufacturing processes . sales in this segment include both external sales and intercompany product sales , which are recorded at transfer prices in accordance with applicable tax requirements . the global service segment includes the worldwide servicing of instruments , control and vacuum products , power and reactive gas products and certain other product groups , all of which are utilized in semiconductor processing and other similar advanced manufacturing processes . the asia region sales segment mainly includes sales of products that are re-sold from the advanced manufacturing capital equipment and other segments into asia regions . the other segment includes operating segments that are not required to be reported separately as reportable segments and includes sales of products that are re-sold from the advanced manufacturing capital equipment into europe regions as well as sales from other operating segments . 28 we group our products into three groups of products , based upon the similarity of the product function , type of product and manufacturing processes . these three groups of products are : instruments , control and vacuum products ; power and reactive gas products ; and analytical solutions products . net revenues to semiconductor capital equipment manufacture and semiconductor device manufacture customers increased by 3 % in 2015 compared to 2014 , after increasing by 19 % in 2014 compared to 2013. we had sequential revenue increases in each quarter since the third quarter of 2014 and into the second quarter of 2015. semiconductor revenues increased from $ 126 million in the third quarter of 2014 to $ 154 million in the second quarter of 2015. in the third and fourth quarters of 2015 , there was a pause in spending and we saw a decrease in semiconductor revenues to $ 143 million and $ 114 million , respectively . the semiconductor capital equipment industry is subject to rapid demand shifts , which are difficult to predict , and we are uncertain as to the timing or extent of future demand or any future weakness in the semiconductor capital equipment industry . our net revenues from other advanced markets , which exclude semiconductor capital equipment and semiconductor device product applications , increased 6 % in 2015 compared to 2014 and increased 12 % in 2014 compared to 2013. we saw eight consecutive quarters of growth in our other advanced markets starting in the quarter ended december 31 , 2013 through the third quarter of 2015. in the fourth quarter of 2015 , revenue for our other advanced markets decreased by 12 % compared to the third quarter of 2015. revenues from customers in other advanced markets are made up of many different markets including general industrial , solar , film , medical , analysis metrology and other markets . the increase in net revenues from other advanced markets in 2015 compared to the prior year is primarily attributed to increases in the solar , data storage and analysis metrology markets , partially offset by decreases in the general industrial and led markets . story_separator_special_tag any significant increase in product return rates could have a material adverse impact on our operating results for the period or periods in which such returns materialize . while we maintain a credit approval process , significant judgments are made by management in connection with assessing our customers ' ability to pay at the time of shipment . despite this assessment , from time to time , our customers are unable to meet their payment obligations . we continuously monitor our customers ' credit worthiness , and use our judgment in establishing a provision for estimated credit losses based upon our historical experience and any specific customer collection issues that we have identified . while such credit losses have historically been within our expectations and the provisions established , there is no assurance that we will continue to experience the same credit loss rates that we have in the past . a significant change in the liquidity or financial position of our customers could have a material adverse impact on the collectability of accounts receivable and our future operating results . 30 inventory . we value our inventory at the lower of cost ( first-in , first-out method ) or market . we regularly review inventory quantities on hand and record a provision to write-down excess and obsolete inventory to its estimated net realizable value , if less than cost , based primarily on our estimated forecast of product demand . once our inventory value is written-down and a new cost basis has been established , the inventory value is not increased due to demand increases . demand for our products can fluctuate significantly . a significant increase in the demand for our products could result in a short-term increase in the cost of inventory purchases as a result of supply shortages or a decrease in the cost of inventory purchases as a result of volume discounts , while a significant decrease in demand could result in an increase in the charges for excess inventory quantities on hand . in addition , our industry is subject to technological change , new product development and product technological obsolescence that could result in an increase in the amount of obsolete inventory quantities on hand . therefore , any significant unanticipated changes in demand or technological developments could have a significant impact on the value of our inventory and our reported operating results . for 2015 , 2014 and 2013 , our total charges for excess and obsolete inventory totaled $ 13.6 million , $ 12.1 million and $ 21.7 million , respectively . included in our total charges for excess and obsolete inventory in 2013 is $ 6.4 million of special charges for obsolete inventory related to a unique product in a solar application as a result of slowing market conditions , which provided uncertainty as to the net realizable value of this inventory . warranty costs . we provide for the estimated costs to fulfill customer warranty obligations upon the recognition of the related revenue . we provide warranty coverage for our products ranging from 12 to 36 months , with the majority of our products ranging from 12 to 24 months . we estimate the anticipated costs of repairing our products under such warranties based on the historical costs of the repairs and any known specific product issues . the assumptions we use to estimate warranty accruals are re-evaluated periodically in light of actual experience and , when appropriate , the accruals are adjusted . our determination of the appropriate level of warranty accrual is based upon estimates . should product failure rates differ from our estimates , actual costs could vary significantly from our expectations . stock-based compensation expense . we record compensation expense for all share-based payment awards to employees and directors based upon the estimated fair market value of the underlying instrument . accordingly , share-based compensation cost is measured at the grant date , based upon the fair value of the award . we typically issue restricted stock units ( rsus ) as stock-based compensation . we also provide employees the opportunity to purchase shares through an employee stock purchase plan ( espp ) . for rsus , the fair value is the stock price on the date of grant . for shares issued under our espp , we have estimated the fair value on the date of grant using the black scholes pricing model , which is affected by our stock price as well as assumptions regarding a number of complex and subjective variables . these variables include our expected stock price volatility over the term of the awards , expected life , risk free interest rate and expected dividends . management determined that blended volatility , a combination of historical and implied volatility , is more reflective of market conditions and a better indicator of expected volatility than historical or implied volatility alone . we are also required to estimate forfeitures at the time of grant and revise those estimates in subsequent periods if actual forfeitures differ from those estimates . certain rsus involve stock to be issued upon the achievement of performance conditions ( performance shares ) under our stock incentive plans . such performance shares become available subject to time-based vesting conditions if , and to the extent that , financial or operational performance criteria for the applicable period are achieved . accordingly , the number of performance shares earned will vary based on the level of achievement of financial or operational performance objectives for the applicable period . until such time that our performance can ultimately be determined , each quarter we estimate the number of performance shares to be earned based on an evaluation of the probability of achieving the performance objectives . such estimates are revised , if necessary , in subsequent periods when the underlying factors change our evaluation of the probability of achieving the performance objectives . accordingly , share-based compensation expense associated with performance shares may differ significantly from the amount recorded in the current period .
| results of operations the following table sets forth , for the periods indicated , the percentage of total net revenues of certain line items included in our consolidated statements of operations and comprehensive income data : replace_table_token_5_th year ended december 31 , 2015 compared to 2014 and 2013 net revenues replace_table_token_6_th product revenues increased $ 23.3 million during 2015 compared to 2014. product revenues related to our semiconductor capital equipment manufacturer and semiconductor device manufacturer customers increased by $ 9.4 million in 2015 compared to 2014 , mainly as a result of volume increases . our product revenues for all other markets which exclude semiconductor capital equipment and semiconductor device product applications , increased by $ 13.9 million in 2015 compared to 2014. the increase in our non-semiconductor markets was primarily attributed to volume increases of $ 13.2 million in our solar market and $ 12.3 million in our data storage market . these increases were partially offset by a decrease of $ 11.8 million in our general industrial markets . product revenues increased $ 105.5 million during 2014 compared to 2013. product revenues related to our semiconductor capital equipment manufacturer and semiconductor device manufacturer customers increased by $ 83.5 million in 2014 compared to 2013 , mainly the result of volume increases . product revenues for all other 34 markets , which exclude semiconductor capital equipment and semiconductor device product applications , increased by $ 22.0 million . the increase in our non-semiconductor markets was primarily attributed to volume increases of $ 15.4 million in our general industrial markets . service revenues consisted mainly of fees for services related to the repair of our products , software license and maintenance , installation services and training . service revenues increased $ 9.3 million during 2015 compared to 2014. this increase was primarily attributed to increases in the semiconductor markets , which increased $ 8.1 million .
| 4,018 |
the following discussion and analysis of the company 's financial condition and results of operations should be read in conjunction with the financial statements and the notes thereto contained elsewhere in this report . certain information contained in the discussion and analysis set forth below includes forward-looking statements that involve risks and uncertainties , including but not limited to those in the risk factors section of this annual report on form 10-k. overview until january 17 , 2019 , we were a blank check company , originally incorporated as a cayman islands exempted company on july 26 , 2017 and formed for the purpose of effecting a merger , share exchange , asset acquisition , share purchase , reorganization or similar business combination with one or more businesses . effective december 21 , 2018 , we changed our jurisdiction of incorporation from cayman islands to the state of delaware . on january 17 , 2020 ( the closing date ) , we consummated the previously announced merger pursuant to that certain agreement and plan of merger , dated september 15 , 2019 , by and among the company , maiden merger sub , inc. , a subsidiary of the company ( merger sub ) , and legacy vivint smart home , inc. ( f/k/a vivint smart home , inc. ) ( legacy vivint smart home ) , as amended by amendment no . 1 to the agreement and plan of merger ( the amendment and as amended , the merger agreement ) , dated as of december 18 , 2019 , by and among the company , merger sub and legacy vivint smart home . pursuant to the terms of the merger agreement , a business combination between the company and legacy vivint smart home was effected through the merger of merger sub with and into legacy vivint smart home , with legacy vivint smart home surviving as the surviving company ( the merger ) . at the effective time of the merger ( the effective time ) , each stockholder of legacy vivint smart home received 84.5320916792 shares of the company 's class a common stock , par value $ 0.0001 per share ( the common stock ) , for each share of legacy vivint smart home common stock , par value $ 0.01 per share ( the legacy vivint smart home common stock ) , that such stockholder owned . pursuant in each case to a subscription agreement entered into in connection with the merger agreement , certain investment funds managed by affiliates of fortress investment group llc ( fortress ) and certain investment funds affiliated with the blackstone group inc. ( such investment funds , collectively , blackstone ) purchased , respectively , 12,500,000 and 10,000,000 newly-issued shares of common stock ( such purchases , the fortress pipe and the blackstone pipe , respectively , and together , the pipe ) concurrently with the completion of the merger ( the closing ) on the closing date for an aggregate purchase price of $ 125,000,000 and $ 100,000,000 , respectively . in connection with the execution of the amendment , the company entered into a subscription and backstop agreement ( the fortress subscription and backstop agreement ) with fortress , pursuant to which fortress committed to ( i ) purchase $ 50,000,000 in aggregate purchase price of shares of mosaic 's common stock in the open market , subject to applicable law , ( ii ) backstop redemptions by subscribing for a number of shares of newly-issued shares of mosaic 's common stock at a purchase price per share equal to the per-share value of the company 's trust account at the time of any such redemptions and ( iii ) subscribe for up to $ 50,000,000 ( less the aggregate purchase price of the shares purchased by it in the open market and to backstop redemptions ) in aggregate purchase price of newly-issued shares of mosaic 's common stock at a purchase price of $ 10.00 per share to be issued at the election of the company at the closing . on the closing date , pursuant to the fortress subscription and backstop agreement , fortress purchased 2,698,753 shares of common stock for an aggregate of approximately $ 27.8 million in addition , the company entered into an additional subscription agreement ( the additional forward purchaser subscription agreement ) with one of the forward purchasers ( the forward purchaser ) . pursuant to the additional forward purchaser subscription agreement , immediately prior to the effective time , the forward 56 purchaser purchased from the company 5,000,000 shares of common stock at a purchase price of $ 10.00 per share . as consideration for the additional investment , 25 % of mosaic sponsor llc 's shares of the company 's class f common stock , par value $ 0.0001 per share ( the founder shares ) and private placement warrants ( the private placement warrants ) were forfeited to the company and the company issued to the forward purchaser an equal number of shares of common stock and warrants concurrently with the closing . in connection with the closing , the registrant changed its name from mosaic acquisition corp. to vivint smart home , inc. the audited financial statements included herein are those of the company prior to the merger . prior to the merger , the company neither engaged in any operations nor generated any revenue . until the merger , based on the company 's business activities , it was a shell company as defined under the securities exchange act of 1934 , as amended ( the exchange act ) . the audited consolidated financial statements of legacy vivint smart home , which is considered the company 's accounting predecessor , are included in amendment no . 2 to the company 's current report on form 8-k , which is anticipated to be filed with the securities and exchange commission ( the sec ) on or about march 13 , 2020. following the merger , we are a smart home technology company . story_separator_special_tag we generate this revenue from selling our solution and accompanying smart home devices to our subscribers . therefore , we focus our investment decisions on acquiring new subscribers in the most cost-effective manner , while striving to maximize existing subscriber retention and lifetime value . legacy vivint smart home has experienced significant historical subscriber growth . for example , its total subscribers increased by 95 % from december 31 , 2013 to december 31 , 2019. to drive this growth , legacy vivint smart home has made significant upfront investments in its various sales channels , as well as technology and infrastructure to support its growing subscriber base . as a result of these investments , legacy vivint smart home has incurred losses and used significant amounts of cash to fund operations . 58 as we scale our business a greater percentage of our net acquisition costs for new subscribers may be funded through revenues generated by our existing subscriber base . although we anticipate the absolute number of new subscribers to grow over time , we expect the number of new subscribers to decrease as a percentage of our total subscribers . we believe this decrease in new subscribers as a percentage of the total , along with the expected growth in revenue , will improve our operating results and operating cash flows over time . our ability to improve our operating results and cash flows , however , is subject to a number of risks and uncertainties as described in greater detail elsewhere in this filing and there can be no assurance that we will achieve such improvements . to the extent that we do not scale our business efficiently , we will continue to incur losses and require a significant amount of cash to fund our operations , which in turn could have a material adverse effect on our business , cash flows , operating results and financial condition . we seek to increase our average monthly revenue per user , or amru , by continually innovating and offering new smart home solutions that further leverage the investments made to date in our existing platform and sales channels . since 2010 , legacy vivint smart home has successfully expanded its smart home platform , which has allowed it to charge higher recurring subscription fees and generate higher smart home device revenue from new subscribers for these additional offerings . for example , the introduction of legacy vivint smart home 's proprietary vivint smart hub , vivint skycontrol panel , vivint glance display , vivint smart drive , vivint doorbell camera , vivint ping camera , vivint outdoor camera , vivint element thermostat , vivint smart sensor and vivint motion sensor has expanded its smart home platform . due to the high rate of adoption of additional smart home devices and tech-enabled services , legacy vivint smart home 's amru has increased from $ 56.14 in 2013 to $ 64.44 for the year ended december 31 , 2019 , an increase of 15 % . our shaas business model generates subscription-based , high-margin recurring revenue from subscribers who contract for our smart home services . we continue to focus on technology , service , and business model innovation to provide superior subscriber experience , from the time of first contact to the day-to-day experience . in 2017 , legacy vivint smart home made a strategic decision to offer vivint flex pay to the market as a part of its business model innovation , providing benefits to both its subscribers and the company . vivint flex pay provides greater subscriber accessibility and affordability by enabling qualified subscribers to purchase our products and related installation through unsecured financing provided either by a third party financing partner or by us , in most cases at zero-percent apr . under the consumer financing program ( the cfp ) , qualified subscribers are eligible for installment loans of up to $ 4,000 for either 42 or 60 months . these installment loans are between the subscriber and citizens bank , n.a. , or citizens , as the exclusive third party provider of the installment loans under vivint flex pay . customers not eligible for the cfp , but who qualify under the company 's underwriting criteria , may enter into a ric directly with vivint . because we directly fund product purchases financed through rics , the mix of financing methods between cfp and rics affects the amount of cash we receive at the time of subscriber origination to offset this upfront investment . pursuant to the agreement between citizens ( the cfp agreement ) and legacy vivint smart home , we pay a monthly fee to citizens based on the average daily outstanding balance of the loans provided by citizens to our subscribers , and we share with citizens the liability for credit losses , with our company being responsible for between 5 % to 100 % of lost principal balances , depending on factors specified in the cfp agreement . additionally , we are responsible for reimbursing citizens for the credit card transaction fees associated with these loans . the present value of the estimated total fees owed by us to citizens , based on current loans outstanding , are recorded as a derivative liability on our consolidated balance sheet . the initial term of the cfp agreement is five years , subject to automatic , one-year renewals unless terminated by either party in accordance with its terms . because the vivint flex pay plan separates payments for our smart home devices from payments for our smart home services , under the plan agreements , following the expiration of the term of subscribers ' initial contract term , annual revenues will primarily be limited to fees from our 59 services . thus , our revenues and margins are expected to be lower over the life of the subscriber than under our historical service contracts . the launch of vivint flex pay enables us to accelerate the acquisition of new subscribers and expand our market opportunity by reducing upfront cash requirements associated with new subscriber acquisitions .
| results of operations our entire activity from inception up to december 31 , 2019 related to our formation , commencement of the initial public offering , entering into forward purchase agreements , and , since the offering , our activity has been limited to the search for a prospective initial business combination , which we completed on january 17 , 2020. for the year ended december 31 , 2019 , we incurred expenses as a result of being a public company ( for legal , financial reporting , accounting and auditing compliance ) , as well as for due diligence expenses . for the year ended december 31 , 2019 , we had a net income of approximately $ 4.2 million , which consisted of approximately $ 1.3 million in general and administrative expenses , approximately $ 195,000 in franchise tax expense , approximately $ 1.5 million in income tax expense , offset by approximately $ 7.2 million in interest income . for the year ended december 31 , 2018 , we had a net income of approximately $ 5.3 million , which consisted of approximately $ 871,000 in general and administrative expenses , approximately $ 5,500 in franchise tax expense , approximately $ 44,000 in income tax expense , offset by approximately $ 6.2 million in interest income . a discussion of our results of operations for the period from july 26 , 2017 ( inception ) through december 31 , 2017 has been omitted from this form 10-k , but may be found in management 's discussion and analysis of financial condition and results of operations in part ii , item 7 of the company 's annual report on form 10-k for the year ended december 31 , 2018 , which specific discussion is incorporated by reference herein .
| 4,019 |
derivative liabilities the company accounted for the series a and b warrants and the adjustment shares feature pursuant to the amended securities purchase agreement in accordance with accounting guidance for derivatives . the accounting guidance provides a two-step model to be applied in determining whether a financial instrument or an embedded feature in a financial instrument is indexed to an entity 's own stock that would qualify such financial instruments or embedded features for a scope exception . this scope exception specifies that a contract that would otherwise meet the definition of a derivative financial instrument would not be considered as such if the contract is both ( i ) indexed to the entity 's own stock and ( ii ) classified in the stockholders ' equity section of the balance story_separator_special_tag the following discussion and analysis should be read in conjunction with item 8. financial statements and supplementary data included below in this annual report on form 10-k. operating results are not necessarily indicative of results that may occur in future periods . this discussion and analysis contains forward-looking statements that involve a number of risks , uncertainties and assumptions . actual results may differ materially from those anticipated in the forward-looking statements as a result of many factors including , but not limited to , those set forth under cautionary statement about forward-looking statements and risk factors in item 1a . included above in this annual report on form 10-k. all forward-looking statements included in this annual report are based on the information available to us as of the time we file this annual report , and except as required by law , we undertake no obligation to update publicly or revise any forward-looking statements . overview and recent developments our business purpose is the development of drugs for the treatment of cancer . we are currently focused on the clinical development of our three lead drug candidates , me-143 , me-344 and pracinostat . we acquired me-143 and me-344 in may 2011 from novogen and novogen research pty limited , a wholly-owned subsidiary of novogen , in exchange for 1,000 shares of our series a convertible preferred stock and the assumption of specified potential liabilities related to these assets . we acquired pracinostat in august 2012 from s * bio , a privately held biotechnology company in exchange for 1,174,536 shares of common stock , valued at $ 500,000 , and the assumption of specified liabilities . the agreement with s * bio also provides for potential success-based clinical , regulatory and sales milestone payments of up to $ 75.2 million , as well as low single-digit contingent earn-out payments based on net sales . we believe that our existing cash balances , which were approximately $ 6.2 million as of june 30 , 2012 , will be sufficient to fund our operations until early calendar year 2013. changes in our research and development plans or other changes affecting our operating expenses may affect actual future use of existing cash resources . in any event , however , we will need additional financing to fund our operations in the future , including the continued development of our lead drug candidates . to date , our operations have been funded primarily through the sale of equity securities . we have not generated any revenues from operations since inception and we expect to incur operating losses and generate negative cash flows from operations for the foreseeable future . as of june 30 , 2012 , we had accumulated losses of $ 85.1 million since our inception in december 2000. expenses to date have consisted primarily of costs associated with the development of me-143 and me-344 , as well as with conducting clinical trials of phenoxodiol , and costs incurred under various product license and services agreements with novogen . the services agreements were terminated in december 2010. in connection with the consummation of the isoflavone transaction , the license agreements , and other key agreements with novogen , were terminated . clinical developments our investigational new drug ( ind ) application for me-143 was approved by the u.s. food and drug administration ( fda ) in august 2011. in september 2011 , we initiated a phase i open label , multi-center , dose escalation study of intravenous me-143 in patients with refractory solid tumors . results from the trial were presented at the american society of clinical oncology annual meeting in june 2012. a total of 15 patients were enrolled in escalating dose cohorts of 2.5 mg/kg , 5 mg/kg , 10 mg/kg and 20 mg/kg . with the exception of a serious infusion reaction in one patient at the highest dose level , me-143 was generally well tolerated with minimal toxicity . the maximum tolerated dose was defined as 20 mg/kg . 29 we completed the necessary pre-clinical animal toxicity studies to support submission of an ind application for me-344 in the first calendar quarter of 2012. we received fda approval of the ind application in april 2012 and initiated a phase i clinical trial of intravenous me-344 in patients with refractory solid tumors shortly thereafter . the phase i trial is evaluating the safety and tolerability of intravenous me-344 in escalating dose cohorts of 1.2 mg/kg , 2.5 mg/kg , 5 mg/kg , 10 mg/kg and 20 mg/kg . in addition , the trial is designed to characterize the pharmacokinetic profile of me-344 and describe any preliminary clinical anti-tumor activity observed . the trial is expected to enroll up to 24 patients with final safety and pharmacokinetic data expected in the second quarter of calendar year 2013. if we can not raise adequate additional capital , we will be required to delay , reduce the scope of , or eliminate one or more of our research or development programs . story_separator_special_tag pursuant to the amended securities purchase agreement , in may 2011 we issued to the investors : ( i ) 835,217 shares ( the initial shares ) of common stock , at a purchase price of $ 1.333 per share ; ( ii ) series a warrants ( the series a warrants ) which initially represented the right to purchase up to 626,413 shares of common stock , up to a maximum of 2,250,564 shares ; and ( iii ) series b warrants ( the series b warrants ) which initially represented the right to purchase up to 2,165,534 shares of common stock . in addition , we agreed to issue certain additional shares of common stock ( the adjustment shares ) to the extent the price of the common stock is below $ 1.333 per share , but greater than or equal to $ 0.75 per share , on certain dates ( adjustment dates ) during the period ended june 26 , 2012 , including as a result of a subsequent offering by us of our securities at a price below the purchase price of the initial shares . the number of adjustment shares issuable was initially limited to 649,242 , subject to proportionate increases to the extent the series b warrants have been exercised prior to the applicable adjustment date , up to a maximum of 2,332,583 shares . if the trading price of our common stock were to be below $ 0.75 per share on any adjustment date , we agreed , in addition to issuing the applicable number of adjustment shares , to refund to the investors an amount per share of common stock received by the investors in the transaction equal to the difference between $ 0.75 and the price of the common stock on such adjustment date . the transactions contemplated by the amended securities purchase agreement are referred to as the may 2011 private placement . upon the closing of the may 2011 private placement , the company also issued warrants to the placement agent for the purchase of up to 210,053 shares of common stock , which warrants were exercisable on the same terms as the series a warrants . on december 29 , 2011 , the company issued an aggregate of 667,272 adjustment shares to the investors in accordance with the calculation of the applicable price , based on the trading price of the company 's common stock , with respect to the first adjustment date . additionally , on december 29 , 2011 , the company issued an aggregate of 245,700 adjustment shares to the investors in connection with the private placement of common stock to novogen that closed on december 29 , 2011. terms of series a and series b warrants the series a warrants became exercisable on the six month anniversary of the may 18 , 2011 closing of the may 2011 private placement . the series a warrants will expire on the fifth anniversary of the date on which the series a warrants first became exercisable . prior to the amendment of the warrant terms in september 2011 in conjunction with the supplemental agreement , as defined and described below , the series a warrants were initially exercisable at an exercise price of $ 1.57 per share , subject to adjustment as provided in the series a 31 warrant agreements . under the terms of the warrant agreements , the number of shares of common stock issuable upon exercise of the series a warrants would be increased by an amount equal to 75 % of the number of shares of common stock issued upon each exercise of the series b warrants . prior to the amendment of the warrant terms in september 2011 in conjunction with the supplemental agreement , as described below , the initial exercise price per share of the series b warrants was equal to the lower of ( i ) $ 1.333 , and ( ii ) 85 % of the arithmetic average of the lowest eight weighted average prices of the common stock during the 20 consecutive trading day period in the case of a voluntary exercise by the holders , ending on the trading day immediately preceding the date of delivery of a notice of exercise . in july and august 2011 , the investors exercised an aggregate of 1,294,000 series b warrants for 1,294,000 shares of common stock . the company received net proceeds of $ 1,094,000 in conjunction with the exercise of the series b warrants . pursuant to the terms of the amended securities purchase agreement , an additional 970,500 series a warrants became exercisable as a result of these series b warrant exercises . supplemental agreement on september 28 , 2011 , the company entered into a supplemental agreement ( the supplemental agreement ) with each of the investors party to the amended securities purchase agreement . pursuant to the supplemental agreement , each of the series a warrants and the series b warrants issued pursuant to the amended securities purchase agreement were amended and restated ( the amended series a warrants and amended series b warrants , respectively ) . the exercise price of each of the series a warrants and series b warrants was reduced to $ 1.00 per share . as amended , the exercise price of the amended series a warrants is no longer subject to further adjustment upon the occurrence of certain events , including the subsequent sale or deemed sale by the company of shares of common stock at a price per share below the exercise price of the amended series a warrants ; however , the amended series a warrants continue to provide for certain customary anti-dilution adjustments . the series b warrants were amended to permit the exercise of such warrants on a cashless basis .
| results of operations we are providing the following summary of our research and development expenses and general and administrative expenses to supplement the more detailed discussions below . the dollar values in the following tables are in thousands . replace_table_token_2_th comparison of years ended june 30 , 2012 and 2011 research and development : research and development expenses consist primarily of clinical trial costs ( including payments to contract research organizations or cros ) , pre-clinical study costs , cost to manufacture our drug candidates for pre-clinical and clinical studies , related party service charges paid to novogen and salaries and other personnel costs . research and development expenses increased $ 2,800,000 to $ 4,915,000 for the year ended june 30 , 2012 compared to $ 2,115,000 for the year ended june 30 , 2011. the increase was primarily due to an increase in clinical and drug development costs associated with pre-clinical and clinical work for the development of me-143 and me-344 , increased patent costs associated with the isoflavone transaction in fiscal year 2011 , and higher levels of salaries and benefits due to hiring of additional employees . additionally , during the year ended 34 june 30 , 2012 there were no longer any related party service charges payable for novogen providing us with research and development services , as the related service agreements terminated effective december 31 , 2010. general and administrative : general and administrative expenses decreased by $ 857,000 to $ 3,479,000 for the year ended june 30 , 2012 compared to $ 4,336,000 for the year ended june 30 , 2011. the decrease primarily relates to legal and professional fees which were higher during the year ended june 30 , 2011 for services associated with the isoflavone transaction .
| 4,020 |
( 3 ) includes 120,000 shares held by inbalance network inc. , and 25,000 shares held by four front investments . mr. dhillon is a stockholder and managing partner of inbalance network , inc. and four front investments . also includes 607,000 shares held by mr. dhillon 's spouse . ( 4 ) includes 330,000 shares of common stock issuable upon exercise of options exercisable within 60 days of september 25 , 2013 . ( 5 ) includes 275,000 shares of common stock issuable upon exercise of options exercisable within 60 days of september 25 , 2013 . ( 6 ) includes 99,000 shares of common stock issuable upon exercise of options exercisable within 60 days of september 25 , 2013. item 13. certain relationships and related transactions , and director independence transactions with related persons since august 1 , 2011 , there have been no transactions , or currently proposed transactions , in which we were or are to be a participant and the amount involved exceeds the lesser of $ 120,000 or one percent of the average of our total assets at year-end for the last two completed fiscal years and in which any related person had or will have a direct or indirect material interest . director independence we are not currently listed on any national securities exchange that has a requirement that the majority of our board of directors be independent . however , our board of directors has determined that all of the current members of our board of directors would be considered independent under rule 803a of the nyse mkt llc company guide as applied to directors and to members of audit , nominating and corporate governance and compensation committees of the board of directors , except that punit dhillon would not be considered independent because he is our president and chief executive officer . 39 item 14. principal accounting fees and services the following table presents the aggregate fees billed to the company for fiscal 2013 and fiscal 2012 for the indicated services rendered by mayer hoffman mccann p.c . and silberstein ungar , pllc during those periods : replace_table_token_9_th silberstein ungar , pllc was our independent registered public accounting firm through may 27 , 2011 , at which time mayer hoffman mccann p.c . was appointed as our independent registered public accounting firm . audit fees . the fees identified under this caption were for professional services rendered by mayer hoffman mccann p.c . for the audits of our annual financial statements . the fees identified under this caption also include fees for professional services rendered by mayer hoffman mccann p.c . for the review of the financial statements included in our quarterly reports on forms 10-q . in addition , the amounts include fees for services that are normally provided by the auditor in connection with statutory and regulatory filings and engagements for the years identified . audit fees in 2013 and 2012 include an aggregate of $ 32,000 and $ 17,000 , respectively , in fees paid to mayer hoffman mccann p.c . and silberstein ungar , pllc in connection with the filing of registration statements on form s-1 to register the shares of common stock and common stock underlying warrants issued in the december 2012 public offering and the march 2012 public offering . tax fees . tax fees consist principally of assistance related to tax compliance and reporting . all other fees . these fees consist primarily of consultation fees for the calculation , documentation and disclosure requirements under financial accounting standards board asc 740. pre-approval policy our audit committee 's charter requires our audit committee to pre-approve all audit and permissible non-audit services to be performed for the company by our independent registered public accounting firm , giving effect to the de minimus exception for ratification of certain non-audit services allowed by the applicable rules of the sec , in order to assure that the provision of such services does not impair the auditor 's independence . subsequent to the establishment of our audit committee on june 30 , 2011 , the audit committee approved in advance all services provided by our independent registered public accounting firms . mhm has advised the company that mhm leases substantially all of its personnel , who work under the control of mhm 's shareholders , from wholly-owned subsidiaries of cbiz , inc. , in an alternative practice structure . accordingly , substantially all of the hours expended on mhm 's engagement to audit the company 's financial statements for the year ended july 31 , 2013 and 2012 , were attributed to work performed by persons other than mhm 's full-time , permanent employees . 40 part iv item 15. exhibits , financial statement schedules ( a ) documents filed as part of this report . 1. the following consolidated financial statements of oncosec medical incorporated and subsidiary are filed as part of this report under item 8 financial statements and supplementary data : report of independent registered public accounting firm 43 consolidated balance sheets at july 31 , 2013 and 2012 44 consolidated statements of operations for the years ended july 31 , 2013 and 2012 and for the period from inception ( february 8 , 2008 ) to july 31 , 2013 45 consolidated statements of stockholders ' equity ( deficit ) for the period from inception ( february 8 , 2008 ) to july 31 , 2013 46 consolidated statements of cash flows for the years ended july 31 , 2013 and 2012 and for the period from inception ( february 8 , 2008 ) to july 31 , 2013 47 notes to consolidated financial statements 48 2. financial statement schedules these schedules story_separator_special_tag we agreed to pay inovio $ 3,000,000 in scheduled payments beginning on the closing date as well as certain royalties in the event we commercialize our oms technology . we have entered into amendments to the asset purchase agreement with inovio in september 2011 ( the first amendment ) and in march 2012 ( the second amendment ) to modify the terms of our payment obligations ( among other modifications ) . we recently made a payment of $ 1 million to inovio in may 2013 and we are required to make a final payment to inovio of $ 1 million on december 31 , 2013. in consideration for the first amendment we issued to inovio a warrant to purchase 1,000,000 shares of common stock with an exercise price of $ 1.20 per share . in consideration for the second amendment , we issued to inovio a warrant to purchase 3,000,000 shares of our common stock with an exercise price of $ 1.00 per share . each of the warrants is subject to a five year term . each of the warrants also contains a mandatory exercise provision allowing us to request the exercise of the warrant in whole provided that our daily market price ( as defined in the warrant ) is equal to or greater than $ 2.40 for twenty consecutive trading days . we completed an evaluation of the warrants issued to inovio and determined the warrants should be classified as equity within our consolidated balance sheet . we are also party to a cross-license agreement with inovio , which we entered into concurrently with the closing of our asset acquisition . this agreement provides for the exclusive license to inovio of rights related to certain oms technology patents in the field of gene or nucleic acids , outside of those encoding cytokines , delivered by electroporation and for the non-exclusive cross-license by inovio to us of rights related to certain non-oms technology patents in the oms field in exchange for specified sublicensing and other licensing fees and royalties . we are focused on designing , developing and commercializing innovative and proprietary medical approaches for the treatment of solid tumors where currently approved therapies are inadequate based on their therapeutic benefit or side-effect profile . our therapies are based on the use of electroporation to deliver either an approved chemotherapeutic agent ( neopulse ) , or a dna plasmid construct that encodes for a cytokine ( immunopulse ) to treat solid tumors . neopulse and immunopulse specifically target destruction of cancerous cells and not healthy normal tissues . our goal is to improve the lives of people suffering from the life-altering effects of cancer through the development of our novel treatment approaches . we have initiated three phase ii clinical trials for the use of our therapies to treat metastatic melanoma , merkel cell carcinoma and cutaneous t-cell lymphoma . university of south florida license on august 24 , 2012 , we secured an exclusive license for specific patented technology from the university of south florida research foundation relating to the delivery of gene-based therapeutics via intratumoral and intramuscular electroporation . this patent is directly supports our clinical development focus in solid tumor applications and specifically metastatic melanoma , merkel cell carcinoma and cutaneous t-cell lymphoma using our immunopulse therapy , and extends patent protection for the immunopulse technology to the year 2024 . 25 facility lease on may 31 , 2013 , we entered into a thirty-eight month lease agreement for office space to serve as our corporate headquarters . our lease commenced on july 1 , 2013 and is subject to an initial base monthly rent of approximately $ 8,000. the lease calls for annual increases to the base rent of three percent . recent equity financings september 2013 public offering on september 18 , 2013 , we closed the september 2013 public offering , which is described above under the heading recent events september 2013 public offering december 2012 public offering on december 17 , 2012 , we completed a registered public offering of an aggregate of 28,800,000 shares of our common stock and warrants to purchase an aggregate of 14,400,000 shares of common stock for gross proceeds of $ 7.2 million ( the december 2012 public offering ) . after deducting for fees and expenses , the aggregate net proceeds to us from the sale of the common stock and the warrants in the december 2012 public offering were approximately $ 6.7 million . in connection with the offering , we paid placement agent fees consisting of ( i ) a cash fee equal to 6 % of the gross proceeds of the offering , as well as a non-accountable expense allowance equal to 1 % of the gross proceeds and ( ii ) warrants to purchase up to an aggregate of 5 % of the aggregate number of shares of common stock sold in the offering , or 1,440,000 shares of our common stock ( the december 2012 placement agent warrants ) . the december 2012 placement agent warrants have substantially the same terms as the warrants issued to the purchasers in the offering , except that such warrants have an exercise price of $ 0.3125 and expire on december 11 , 2017. march 2012 public offering in march 2012 , we completed a registered public offering of an aggregate of 31,000,000 shares of common stock and warrants to purchase an aggregate of 31,000,000 shares of common stock at an aggregate purchase price of $ 7.75 million ( the march 2012 public offering ) . after deducting for fees and expenses , the aggregate net proceeds to us from the march 2012 public offering were approximately $ 7.2
| results of operations comparison of fiscal years ended july 31 , 2013 and 2012 the audited consolidated financial data for the years ended july 31 , 2013 and july 31 , 2012 is presented in the following table and the results of these two periods are used in the discussion thereafter . replace_table_token_2_th * * percentage increase/ ( decrease ) is greater than 100 % . research and development expenses the $ 791,000 increase in research and development expenses for the year ended july 31 , 2013 as compared to the year ended july 31 , 2012 was mainly the result of increased clinical trial expenses of $ 723,000. we expect research and development to account for a significant portion of our total expenses in the future as we continue to focus on designing and developing our therapies . 27 general and administrative the $ 747,000 increase in general and administrative expenses for the year ended july 31 , 2013 as compared to the year ended july 31 , 2012 was primarily the result of increased corporate communications costs of $ 160,000 consisting primarily of investor relation services , contract labor costs of $ 40,000 , rental expense of $ 72,000 , salaries and wage expense of $ 67,000 , information technology costs of $ 53,000 , conference registration fees of $ 58,000 , share based compensation expense of $ 168,000 as well as other general corporate matters and increased travel and associated costs of $ 29,000. other income ( expense ) the $ 3,082,000 decrease in other income for the year ended july 31 , 2013 as compared to the year ended july 31 , 2012 was primarily due to the recording of other income of $ 4,193,000 as a result of the adjustment to fair value of the derivative liabilities as of april 30 , 2012. in connection with the june 2011 private placement , we issued warrants to purchase 240,000 shares of our common
| 4,021 |
this md & a is provided as a supplement to , and should be read together with , our audited consolidated financial statements and the related notes thereto and other disclosures included elsewhere in this annual report on form 10-k. some of the information contained in this md & a , including information with respect to our plans and strategy for our business , includes forward-looking statements that involve risks and uncertainties . you should review the information contained in part i , item 1a . “ risk factors ” of this annual report on form 10-k for a discussion of important factors that could cause actual results to differ materially from the results described in or implied by the forward-looking statements contained in this md & a . overview we offer responsible consumer credit through our a.i.-driven digital platform at a lower cost compared to market alternatives available to individuals that are not well served by the financial mainstream . in our 15-year lending history , we have originated more than 4.1 million loans , representing over $ 9.8 billion of credit extended , to more than 1.8 million customers . we have developed a deep data-driven understanding of our customers ' needs through a combination of the rigorous application of machine learning , the use of alternative data sets and continuous customer engagement . we have been certified as a community development financial institution ( `` cdfi '' ) by the u.s. department of the treasury since 2009. our core offering is a simple-to-understand , affordable , unsecured , fully amortizing personal installment loan with fixed payments and fixed interest rates throughout the life of the loan . our personal loans do not have prepayment penalties or balloon payments and range in size from $ 300 to $ 10,000 with terms ranging from six to 51 months . as part of our commitment to be a responsible lender , we verify income for 100 % of our personal loan customers and only make loans to customers that our ability-to-pay model indicates should be able to afford a loan after meeting their other debts and regular living expenses . we execute our sales and marketing strategy through a variety of acquisition channels including our digital platform , retail locations , direct mail and digital marketing , and partnerships . we also benefit from customers learning about oportun from friends or family members and other word-of-mouth referrals . our omni-channel network enables us to serve our customers in the way they prefer and when it is convenient for them , online , over-the-phone , and in person . we have seen our customers ' usage and preference for our digital channels accelerate during 2020 and we are continuing to invest in our digital origination and servicing platform , as well as building out customer self-service capabilities . our personal loan serves as an alternative to high-cost installment , auto title , payday and pawn lenders . according to the financial health network study that we commissioned , we estimate that , as of december 31 , 2020 , our customers have saved more than $ 1.8 billion in aggregate interest and fees compared to alternative products available to them . through our recently announced partnership with metabank , n.a , , a national bank , we will be able to offer a uniform product across the nation , while minimizing operational complexity and generating cost savings that can be passed on to our customers . we plan to offer loan products that are the same as our unsecured personal loans with aprs capped at 36 % . we are currently working on the technology that will enable the rollout of our metabank , n.a . partnership by mid-2021 . in november 2020 , we began the application process to obtain a national bank charter . beyond our core direct-to-consumer lending business , we believe that our proprietary credit scoring and underwriting model can be offered as a service to other companies . this lending as a service model is currently being piloted with our strategic partner , dolex . in this partnership , dolex will market loans and enter customer applications into oportun 's system , and oportun will underwrite , originate and service the loans . if successful , we believe we will be able to offer lending as a service to additional partners and thereby expand our reach into new consumer markets . we have begun expanding beyond our core offering of unsecured installment loans into other financial services that a significant portion of our customers already use and have asked us to provide , such as auto loans and credit cards . we launched the oportun visa credit card , issued by webbank , member fdic , in 2019 and offered credit cards in 33 states as of december 31 , 2020. in april 2020 , we launched a personal installment loan secured by an automobile , which we refer to as secured personal loans . 46 the map below show the states in which we offer our products as of december 31 , 2020 . to fund our growth at a low and efficient cost , we have built a diversified and well-established capital markets funding program , which allows us to partially hedge our exposure to rising interest rates or credit spreads by locking in our interest expense for up to three years . over the past seven years , we have executed 14 bond offerings in the asset-backed securities market , the last 11 of which include tranches that have been rated investment grade . we issued two- and three-year fixed rate bonds which have provided us committed capital to fund future loan originations at a fixed cost of debt . in november 2014 , we entered into a whole loan sale agreement with an institutional investor , which agreement has been amended from time to time . story_separator_special_tag as of december 31 , 2020 , 99 % of our retail locations were open to serve customers . while we recognize and still believe that our retail channel is a key differentiator in our customer experience , a shift from in-store to mobile was occurring gradually prior to 2020. the pandemic further accelerated the adoption of our digital channels , and we believe that for many of our customers , this shift will be permanent . our investment in digital capabilities gives us a path for continued growth in a more capital efficient manner . in the fourth quarter of 2020 , 65 % of new applicants chose to apply online , up from 46 % in the fourth quarter of 2019. additionally , 73 % of all payments were made outside of our stores whereas this figure was 60 % as of december 31 , 2019. improving credit trends deferrals we believe that our rapid implementation of emergency hardship programs and reduced payment plans have been effective in providing impacted customers sufficient time to return to repayment status . we may consider emergency hardship deferrals , granted one month at a time , for borrowers who continue to be impacted by the covid-19 pandemic . as of december 31 , 2020 , 1.4 % of our owned principal balance at end of period was in active deferral status under the emergency hardship deferral program , down from a peak of 14.6 % at the end of april 2020. we believe that our customers are currently managing through the crisis and most have returned to repayment status . delinquencies we ended the fourth quarter of 2020 with a 30+ day delinquency rate of 3.7 % , compared to 4.0 % at the end of the fourth quarter of 2019. borrowers who are less than 30 days delinquent when they received an emergency hardship deferral are counted at zero days delinquent , and customers that were more than 30 days delinquent continue to be in the same delinquency status as they were prior to receiving an emergency hardship deferral . as a standard practice , we offer a grace period ranging between 7 and 15 days before a late fee is assessed , allowing customers extra time to make a payment if needed . we monitor our early stage delinquencies very closely and attempt to contact delinquent customers before the grace period expires to provide them with payment options . 48 delinquencies and deferrals ( percentage of outstanding principal balance of owned receivables ) days delinquent as of 3/31/2020 as of 4/30/2020 as of 5/31/2020 as of 6/30/2020 as of 7/31/2020 as of 8/31/2020 as of 9/30/2020 as of 10/31/2020 as of 11/30/2020 as of 12/31/2020 0 88.9 % 90.2 % 87.8 % 89.5 % 90.8 % 90.0 % 90.3 % 91.3 % 90.0 % 90.7 % 1-7 3.3 2.6 3.5 3.2 2.6 3.2 2.9 2.4 3.3 2.6 8-14 2.2 1.6 1.9 1.8 1.5 1.5 1.6 1.2 1.6 1.5 15-29 1.8 1.6 2.8 1.9 1.8 1.8 1.7 1.5 1.6 1.6 30-59 1.7 1.8 1.7 1.7 1.6 1.8 1.7 1.7 1.5 1.6 60-89 1.2 1.3 1.3 1.0 1.0 1.0 1.1 1.1 1.1 1.1 90-119 0.9 1.0 1.0 1.0 0.8 0.7 0.7 0.8 0.9 0.9 120+ ( 1 ) — — — — — — — — — — 30+ 3.8 4.0 4.0 3.7 3.4 3.5 3.5 3.6 3.5 3.7 emergency hardship deferrals ( 2 ) 6.1 14.6 7.6 5.0 3.9 2.8 1.5 1.0 0.9 1.4 ( 1 ) the 120+ delinquent balances are excluded from the 30+ delinquency rate and percent current rate calculations because these balances are charged off on the last day of a given month . ( 2 ) emergency hardship deferrals excluded from delinquent balances . net charge-offs our annualized net charge-off rate for the fourth quarter ended december 31 , 2020 was 9.4 % , down from 10.4 % for the third quarter ended september 30 , 2020. consistent with our charge-off policy , we evaluate our loan portfolio and charge a loan off at the earlier of when the loan is determined to be uncollectible or when loans are 120 days contractually past due . as a result of the pandemic and based upon our analysis of loan performance following natural disasters or other emergencies , more loans have been determined to be uncollectible prior to reaching 120 days contractually past due , resulting in $ 6.3 million and $ 21.6 million of higher charge-offs for the three months and year ended december 31 , 2020 , respectively . 49 steadily increasing originations loan originations in the fourth quarter ended december 31 , 2020 increased 48.3 % as compared to the third quarter ended september 30 , 2020 due to increasing approval rates , the refinement of our marketing efforts , including increased digital initiatives and optimization of direct mail , and by maintaining the availability of our omni-channel network . we have seen a rebound in originations following the decline that began in the second-half of march 2020 as a result of the covid-19 pandemic . originations for the month of december 2020 were down 28 % year over year ; however , we have seen steady improvement in each month following the low in april 2020. replace_table_token_1_th credit trends of new originations due to our credit tightening in mid-march , loans originated after that time had first payment defaults below pre-pandemic levels . based upon this performance , we prudently increased our approval rates in mid-june and have focused on increasing approval rates for our returning customers . first payment defaults on newly-originated loans are normalizing to 2019 levels . we calculate first payment defaults , shown below , as the principal balance of any loan whose first payment becomes 30 days past due , divided by the aggregate principal balance of all loans originated during that same week .
| results of operations the following tables and related discussion set forth our consolidated statements of operations for the years ended december 31 , 2020 and 2019. for a discussion regarding our operating and financial data for the year ended december 31 , 2019 , as compared to the same period in 2018 , refer to part ii , item 7 . “ management 's discussion and analysis of financial condition and results of operations ” of our annual report on form 10-k for the year ended december 31 , 2019 , as filed with the sec on february 28 , 2020 ( file no . 001-39050 ) . replace_table_token_4_th total revenue replace_table_token_5_th total revenue . total revenue decreased by $ 16.4 million , or 2.7 % , from $ 600.1 million for 2019 to $ 583.7 million for 2020. interest income . total interest income increased by $ 1.3 million , or 0.2 % , from $ 544.1 million for 2019 to $ 545.5 million for 2020. the increase is primarily attributable to growth in our average daily principal balance , which grew from $ 1.62 billion for 2019 to $ 1.70 billion for 2020 , an increase of 4.8 % . the increase is the result of the stabilization of the portfolio subsequent to the issuance of shelter in place orders whi ch began in march 2020 as a result of the onset of the covid-19 pandemic and a strong rebound in originations beginning in the second quarter of 2020 and continuing through year-end . this was offset by a decrease in portfolio yield of 143 basis points as we originated more loans to returning customers , who generally receive lower rates , due to having tightened our underwriting criteria in response to the covid-19 pandemic and our decision to cap the apr at 36 % on all new originations as of august 6 , 2020 , which reduced the interest rates and origination fees on new loans . non-interest income .
| 4,022 |
deferred tax assets are subject to management 's judgment based upon available evidence that future realizations are likely . if management determines that the company may not be able to realize some or all of the net deferred tax asset in the future , a charge to income story_separator_special_tag this discussion should be read in conjunction with the consolidated financial statements , notes and tables included elsewhere in this report . throughout the following sections , the “ company ” refers to 1 st constitution bancorp and , as the context requires , its wholly-owned subsidiary , 1 st constitution bank ( the “ bank ” ) and the bank 's wholly-owned subsidiaries as of december 31 , 2014 , which were 1 st constitution investment company of new jersey , inc. , fcb assets holdings , inc. , 204 south newman street corp. and 249 new york avenue , llc . 1 st constitution capital trust ii ( “ trust ii ” ) , a subsidiary of the company as of december 31 , 2014 , is not included in the company 's consolidated financial statements as it is a variable interest entity and the company is not the primary beneficiary . the purpose of this discussion and analysis is to assist in the understanding and evaluation of the company 's financial condition , changes in financial condition and results of operations . critical accounting policies and estimates “ management 's discussion and analysis of financial condition and results of operations ” is based upon the company 's 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 the company to make estimates and judgments that affect the reported amounts of assets , liabilities , revenues and expenses . note 1 to the company 's consolidated financial statements for the year ended december 31 , 2014 contains a summary of the company 's significant accounting policies . 25 management believes the company 's policies with respect to the methodologies for the determination of the allowance for loan losses and for determining other-than-temporary security impairment involve a higher degree of complexity and requires management to make difficult and subjective judgments which often require assumptions or estimates about highly uncertain matters . changes in these judgments , assumptions or estimates could materially impact results of operations . these critical policies and their application are periodically reviewed with the audit committee and the board of directors . the provision for loan losses is based upon management 's evaluation of the adequacy of the allowance , including an assessment of known and inherent risks in the portfolio , giving consideration to the size and composition of the loan portfolio , actual loan loss experience , level of delinquencies , detailed analysis of individual loans for which full collectability may not be assured , the existence and estimated net realizable value of any underlying collateral and guarantees securing the loans , and current economic and market conditions . although management uses the best information available to it , the level of the allowance for loan losses remains an estimate which is subject to significant judgment and short-term change . various regulatory agencies , as an integral part of their examination process , periodically review the company 's allowance for loan losses . such agencies may require the company to make additional provisions for loan losses based upon information available to them at the time of their examination . furthermore , the majority of the company 's loans are secured by real estate in the state of new jersey . accordingly , the collectibility of a substantial portion of the carrying value of the company 's loan portfolio is susceptible to changes in local market conditions and may be adversely affected should real estate values decline or should the central new jersey area experience an adverse economic shock . future adjustments to the allowance for loan losses may be necessary due to economic , operating , regulatory and other conditions beyond the company 's control . real estate acquired through foreclosure , or a deed-in-lieu of foreclosure is recorded at fair value less estimated selling costs at the date of acquisition or transfer , and subsequently at the lower of its new cost or fair value less estimated selling costs . adjustments to the carrying value at the date of acquisition or transfer are charged to the allowance for loan losses . the carrying value of the individual properties is subsequently adjusted to the extent it exceeds estimated fair value less estimated selling costs , at which time a provision for losses on such real estate is charged to operations . appraisals are critical in determining the fair value of the other real estate owned amount . assumptions for appraisals are instrumental in determining the value of properties . overly optimistic assumptions or negative changes to assumptions could significantly affect the valuation of a property . the assumptions supporting such appraisals are carefully reviewed by management to determine that the resulting values reasonably reflect amounts realizable . management utilizes various inputs to determine the fair value of its investment portfolio . to the extent they exist , unadjusted quoted market prices in active markets ( level 1 ) or quoted prices on similar assets ( level 2 ) are utilized to determine the fair value of each investment in the portfolio . in the absence of quoted prices , valuation techniques would be used to determine fair value of any investments that require inputs that are both significant to the fair value measurement and unobservable ( level 3 ) . valuation techniques are based on various assumptions , including , but not limited to cash flows , discount rates , rate of return , adjustments for nonperformance and liquidity , and liquidation values . a significant degree of judgment is involved in valuing investments using level 3 inputs . story_separator_special_tag the average rates are derived by dividing interest income and expense by the average balance of assets and liabilities , respectively . 29 average balance sheets with resultant interest and rates replace_table_token_6_th ( 1 ) loan origination fees are considered an adjustment to interest income . for the purpose of calculating loan yields , average loan balances include nonaccrual loans with no related interest income . please refer to item 7. management 's discussion and analysis of financial condition and results of operations under the heading “ non-performing assets ” for a discussion of the bank 's policy with regard to non-accrual loans . ( 2 ) the interest rate spread is the difference between the average yield on interest earning assets and the average rate paid on interest bearing liabilities . ( 3 ) the net interest margin is equal to net interest income divided by average interest earning assets . ( 4 ) tax- equivalent basis . changes in net interest income and net interest margin result from the interaction between the volume and composition of interest earning assets , interest bearing liabilities , related yields , and associated funding costs . the rate/volume table demonstrates the impact on net interest income of changes in the volume of interest earning assets and interest bearing liabilities and changes in interest rates earned and paid . 30 as indicated in the rate/volume table , the principal factor contributing to the increase in net interest income for the year ended december 31 , 2014 was an increase in the volume of loans in the loan portfolio , partially offset by the lower yield earned on loans . replace_table_token_7_th as of december 31 , 2014 loans were $ 654 million and had increased $ 281 million compared to $ 373 million at december 31 , 2013. the primary driver of the 75 % increase in loans during 2014 was the origination of new loans and the $ 163 million of internal growth of the bank 's loan portfolio . loans acquired in the rfhb merger were $ 118 million at the end of 2014. average interest-earning assets increased by $ 129.8 million , or 17.3 % , to $ 880.8 million for the year ended december 31 , 2014 from $ 751.0 million for the year ended december 31 , 2013. overall , the yield on interest-earning assets , on a tax-equivalent basis , increased 37 basis points to 4.37 % for the year ended december 31 , 2014 compared to 4.00 % for the year ended december 31 , 2013 due primarily to the increase in construction , residential , commercial real estate and commercial business loans resulting from the internal growth of loans and the inclusion of the operations of rfhb . the growth in average interest-earning assets and the increase in loans as a percentage of average interest-earning assets generated an $ 8.4 million increase in total interest income for 2014. interest expense increased by $ 403,000 , or 9.5 % , to $ 4.7 million for the year ended december 31 , 2014 from $ 4.3 million for the year ended december 31 , 2013. this increase in interest expense was principally attributable to the increase in money market , now account and certificate of deposit balances that were assumed as a result of the rfhb merger . money market and now accounts increased on average by $ 63.7 million in 2014 , or 28.6 % , as compared to 2013 , and the cost on these deposits decreased one basis point in 2014 as compared to 2013. average interest-bearing liabilities increased 18.2 % in 2014 compared to 2013 principally due to the rfhb merger . the cost of total interest-bearing liabilities decreased 5 basis points to 0.67 % in 2014 from 0.72 % in 2013. average interest earning assets increased by $ 34.8 million , or 4.9 % , to $ 751.0 million for the year ended december 31 , 2013 from $ 716.2 million for the year ended december 31 , 2012. the average loan portfolio decreased by $ 64.1 million , or 13.9 % , to $ 399.5 million for the year ended december 31 , 2013 compared to $ 463.6 million for the year ended december 31 , 2012. the second half of 2013 saw an increase in long-term interest rates that resulted in the decrease in the balance of outstanding mortgage warehouse lines due to a significant decline in the volume of residential mortgages originated by mortgage warehouse customers . the average balance of mortgage warehouse lines decreased by $ 53.5 million , or 26.1 % , to $ 151.3 million for the year ended december 31 , 2013 compared to an average balance of $ 204.9 million for the year ended december 31 , 2012. overall , the yield on interest-earning assets , on a tax-equivalent basis , decreased 70 basis points to 4.00 % for the year ended december 31 , 2013 compared to 4.70 % for the year ended december 31 , 2012 . 31 the company 's net interest income decreased on a tax-equivalent basis by $ 2.7 million , or 9.5 % , to $ 25.8 million for the year ended december 31 , 2013 from $ 28.5 million reported for the year ended december 31 , 2012. as indicated in the rate/volume table , the principal factor contributing to the decrease in net interest income for the year ended december 31 , 2013 was a decrease in the volume of loans in the loan portfolio , combined with lower rates earned on interest-earning assets . interest expense decreased by $ 896,000 , or 17.4 % , to $ 4.3 million for the year ended december 31 , 2013 from $ 5.2 million for the year ended december 31 , 2012. this decrease in interest expense was principally attributable to higher levels of interest-bearing liabilities priced at a significantly lower market interest rate level .
| summary the company reported net income of $ 4.4 million or $ 0.61 per diluted share for the year ended december 31 , 2014 compared to net income of $ 5.8 million or $ 0.95 per diluted share for the year ended december 31 , 2013. the results of operations for 2014 were impacted by two events during the first and second quarters of 2014. for the first quarter ended march 31 , 2014 , the company completed the merger of rfhb with and into the bank and incurred $ 1.4 million of merger-related expenses that reduced net income by $ 0.9 million or $ 0.13 per diluted share . for the second quarter ended june 30 , 2014 , a loan for approximately $ 3.7 million was fully charged off and the provision for loan losses was increased by a similar amount due to an apparent fraud by the borrower and its principals . the additional provision for loan losses reduced net income by $ 2.2 million or $ 0.30 per diluted share . 27 net income adjusted for the effect of these events ( adjusted net income ) was $ 7.5 million for the year ended december 31 , 2014 and earnings per diluted share , as adjusted ( adjusted earnings per diluted share ) , was $ 1.05. for the year ended december 31 , 2013 , net income as adjusted for the after-tax cost of rfhb merger-related expenses of $ 0.3 million was $ 6.1 million or $ 1.00 per diluted share . these adjusted measures are considered non-gaap measures . the following is a reconciliation of the non-gaap measures to reported net income and net income per diluted share .
| 4,023 |
in the case of the company 's health care coverage for employees , the company has a managed self insurance program related to claims filed . expenses related to this self insured program are computed on an actuarial basis , based on claims experience , regulatory requirements , an estimate of claims incurred but not yet reported ( “ ibnr ” ) and other relevant factors . the projections involved in this process are subject to uncertainty related to the timing and amount of claims filed , levels of ibnr , fluctuations in health care costs and changes to regulatory requirements . the company had liabilities of $ 2.8 million and $ 2.1 million related to health care coverage as of january 28 , 2017 and january 30 , 2016 , respectively . the company is self-insured for all workers ' compensation claims related to incidents incurred after november 1 , 2013 and prior to november 1 , 2007. the company had liabilities of $ 3.1 million and $ 3.0 million related to workers ' compensation claims as of january 28 , 2017 and january 30 , 2016 , respectively . stock-based compensation the company recognizes the fair value of stock-based compensation in the consolidated financial statements as compensation expense over the requisite service period . in addition , excess tax benefits related to stock-based compensation awards are reflected as financing cash flows . for service-only awards , compensation expense is recognized on a straight-line basis , net of forfeitures , over the story_separator_special_tag , our consolidated financial statements and the notes to our consolidated financial statements . replace_table_token_7_th replace_table_token_8_th ( 1 ) as of the end of fiscal 2012 , our u.s. operations achieved a position of cumulative profits ( adjusted for permanent differences ) for the most recent three-year period . we concluded that this record of cumulative profitability in recent years , coupled with our business plan for profitability in future periods , provided assurance that our future tax benefits more likely than not would be realized . accordingly , in the year ended february 2 , 2013 , we released all of our u.s. valuation allowance of $ 57.2 million against net deferred tax assets . ( 2 ) direct revenues include sales through our source books , websites , and trade and contract businesses . 32 ( 3 ) stores data represents retail st ores , including waterworks showrooms , plus outlet stores . ( 4 ) comparable brand revenue growth includes direct net revenues and retail comparable store sales , including rh baby & child and rh modern galleries . comparable brand revenue growth excludes retail non-comparable store sales , closed store sales and outlet store net revenues . comparable store sales have been calculated based upon retail stores , excluding outlet stores , that were open at least fourteen full months as of the end of the reporting period and did not change square footage by more than 20 % between periods . if a store is closed for seven days during a month , that month will be excluded from comparable store sales . waterworks revenue is excluded from comparable brand revenue growth and will be added in the first full month following the anniversary of the acquisition . membership revenue is excluded from comparable brand revenue growth and will be added in the first full month following the anniversary of the program launch . the impact on net revenues related to the product recalls in fiscal 2016 has been excluded from comparable brand revenue growth . because fiscal 2012 was a 53-week year , comparable brand revenue growth percentage for fiscal 2012 excludes the extra week of revenue . ( 5 ) capital expenditures include the acquisition of buildings and land in fiscal 2015. there was no acquisition of buildings and land in any of the other periods presented . ( 6 ) construction related deposits relate to payments to escrow accounts for future construction of next generation design galleries . ( 7 ) adjusted net income is a supplemental measure of financial performance that is not required by , or presented in accordance with , generally accepted accounting principles ( “ gaap ” ) . we define adjusted net income as net income ( loss ) , adjusted for the impact of certain non-recurring and other items that we do not consider representative of our ongoing operating performance . adjusted net income is included in this filing because management believes that adjusted net income provides meaningful supplemental information for investors regarding the performance of our business and facilitates a meaningful evaluation of actual results on a comparable basis with historical results . our management uses this non-gaap financial measure in order to have comparable financial results to analyze changes in our underlying business from quarter to quarter . the following table presents a reconciliation of net income ( loss ) , the most directly comparable gaap financial measure , to adjusted net income for the periods indicated below . replace_table_token_9_th ( a ) under gaap , certain convertible debt instruments that may be settled in cash on conversion are required to be separately accounted for as liability and equity components of the instrument in a manner that reflects the issuer 's non-convertible debt borrowing rate . accordingly , in accounting for gaap purposes for the $ 350 million aggregate principal amount of convertible senior notes that were issued in june 2014 ( the “ 2019 notes ” ) and for the $ 300 million aggregate principal amount of convertible senior notes that were issued in june and july 2015 ( the “ 2020 notes ” ) , we separated the 2019 notes and 2020 notes into liability ( debt ) and equity ( conversion option ) components and we are amortizing as debt discount an amount equal to the fair value of the equity components as interest expense on the 2019 notes and 2020 notes over their respective terms . story_separator_special_tag ( 8 ) as of fiscal 2016 , fiscal 2015 and fiscal 2014 , $ 142.7 million , $ 130.8 million and $ 62.2 million , respectively , of our investments are due within one year . as of fiscal 2016 , fiscal 2015 and fiscal 2014 , $ 33.2 million , $ 22.1 million and $ 18.3 million , respectively , of our investments are due within two years . ( 9 ) working capital is defined as current assets , less current liabilities , excluding the current portion of long-term debt . ( 10 ) represents our obligations , net of debt discount , related to the 2019 notes and 2020 notes . the aggregate principal amounts due under the 2019 notes and 2020 notes are $ 350 million and $ 300 million , respectively . ( 11 ) total debt ( including current portion ) includes the 2019 notes and 2020 notes , net of debt discount , revolving line of credit , term loan , notes payable for share repurchases and capital lease obligations . 35 item 7. manage ment 's discussion and analysis of financial condition and results of operations overview we are a leading luxury retailer in the home furnishings marketplace . our curated and fully-integrated assortments are presented consistently across our sales channels in sophisticated and unique lifestyle settings that we believe are on par with world-class interior designers . we offer dominant merchandise assortments across a growing number of categories , including furniture , lighting , textiles , bathware , décor , outdoor and garden , tableware , and child and teen furnishings . we position our galleries as showrooms for our brand , while our source books and websites act as virtual extensions of our stores . our business is fully integrated across our multiple channels of distribution , consisting of our stores , source books and websites . as of january 28 , 2017 , we operated a total of 85 retail galleries , consisting of 50 legacy galleries , 6 larger format design galleries , 8 next generation design galleries , 1 rh modern gallery and 5 rh baby & child galleries throughout the united states and canada , and 15 waterworks showrooms in the united states and in the u.k. in addition , as of january 28 , 2017 , we operated 28 outlet stores throughout the united states and canada . in fiscal 2016 , we have experienced a slowdown in sales and substantially lower level of profits than in prior periods . we have undertaken initiatives to specifically address the temporal factors affecting our results in fisc al 2016 , in addition to the other numerous initiatives we are undertaking to improve our business and financial performance in fiscal 2017 and beyond . if these initiatives are successful , we may return to rates of growth in revenues and improvements in mar gins and profitability that are more in line with our historical growth patterns prior to the downturn that we experienced in fiscal 2016. however , there can be no assurance that these efforts will be successful or that we will not encounter other operational difficulties during fiscal 2017 and future time periods that may have a negative impact on growth and profitability . for further information on the temporal factors affecting our results and our initiatives , see item 7—management 's discussion and analysis of financial condition and results of operations—overview—key value driving strategies and item 7—management 's discussion and analysis of financial condition and results of operations—factors affecting our results of operations . we have also decided to lower our new gallery opening cadence to three to five galleries per year , which we believe will drive high-quality , sustainable growth and lower our capital requirements and execution risk over the course of our real estate transformation . we also believe the slower opening cadence will put less pressure on our infrastructure , enabling greater capital discipline throughout the organization . acquisition of waterworks on may 27 , 2016 , we acquired a controlling interest in design investors ww acquisition company , llc , which owns the business operating under the name “ waterworks , ” for consideration consisting of approximately $ 119.9 million , consisting of $ 118.4 million funded with available cash and $ 1.5 million representing the fair value of rollover units , which amount is subject to adjustment for changes in working capital and other items . after the transaction , and giving effect to equity interests acquired by management in the business , we own in excess of 90 % of the total equity interests in waterworks . waterworks has long been the definition of the well-appointed bath , and is the only complete bath and kitchen business offering fittings , fixtures , furniture , furnishings , accessories , lighting , hardware and surfaces under one brand in the market . waterworks is composed of the waterworks , waterworks kitchen and waterworks studio brands , all built on a foundation of impeccable style , design integrity , quality and craftsmanship . waterworks prides itself on its deep relationships in the design community and the technical expertise and tenure of its people . waterworks products are sold through its 15 showrooms in the united states and in the u.k. , as well as through its boutique retail partners , hospitality division and online . key value driving strategies in order to drive growth across our business , we are focused on the following long-term key strategies : transform our real estate platform . we believe we have an opportunity to significantly increase our sales by transforming our real estate platform from our existing legacy retail footprint to a portfolio of next generation design galleries that are sized to the potential of each market and the size of our assortment .
| basis of presentation and results of operations the following table sets forth our consolidated statements of income and other financial and operating data . replace_table_token_10_th ( 1 ) direct revenues include sales through our source books , websites , and phone orders , including our contract business and a portion of our trade business . ( 2 ) stores data represents retail stores , including waterworks showrooms , plus outlet stores . net revenues for outlet stores , which includes warehouse sales , for fiscal 2016 , fiscal 2015 and fiscal 2014 were $ 144.6 million , $ 142.8 million and $ 121.6 million , respectively . ( 3 ) comparable brand revenue growth includes direct net revenues and retail comparable store sales , including rh baby & child and rh modern galleries . comparable brand revenue growth excludes retail non-comparable store sales , closed store sales and outlet store net revenues . comparable store sales have been calculated based upon retail stores , excluding outlet stores , that were open at least fourteen full months as of the end of the reporting period and did not change square footage by more than 20 % between periods . if a store is closed for seven days during a month , that month will be excluded from comparable store sales . waterworks revenue is excluded from comparable brand revenue growth and will be added in the first full month following the anniversary of the acquisition . membership revenue is excluded from comparable brand revenue growth and will be added in the first full month following the anniversary of the program launch . the impact on net revenues related to the product recalls in fiscal 2016 has been excluded from comparable brand revenue growth . ( 4 ) capital expenditures include the acquisition of buildings and land in fiscal 2015. there was no acquisition of buildings and land in fiscal 2016 or fiscal 2014 .
| 4,024 |
as a result of the business combination ( as defined in note 1 to the consolidated financial statements included in this annual report on form 10-k ) , we are the acquirer for accounting purposes , and del taco holdings , inc. ( `` dth '' ) is the acquiree and accounting predecessor . our financial statement presentation distinguishes a `` predecessor '' for dth for periods prior to the closing date . we are the `` successor '' for periods after the closing date , which includes consolidation of dth subsequent to the business combination on june 30 , 2015. the application of acquisition accounting for the business combination significantly affected certain assets , liabilities and expenses . as a result , financial information as of january 3 , 2017 and for the fifty-three weeks ended january 3 , 2017 may not be comparable to del taco 's financial information for the fifty-two weeks ended december 29 , 2015 , which includes del taco 's predecessor financial information for the twenty-six weeks ended june 30 , 2015 .. therefore , we did not combine certain financial information for the twenty-six weeks ended december 29 , 2015 with del taco 's predecessor financial information for the twenty-six weeks ended june 30 , 2015 for comparison purposes . we have combined our same store sales , company restaurant sales , franchise revenue , franchise sublease income , food and paper costs , labor and related expenses , general and administrative expenses , occupancy and other – franchise subleases , pre-opening costs , impairment of long-lived assets , restaurant closure charges and loss on disposal of assets for the twenty-six weeks ended december 29 , 2015 with del taco 's predecessor same store sales , company restaurant sales , franchise revenue , franchise sublease income , food and paper costs , labor and related expenses , general and administrative expenses , occupancy and other – franchise subleases , pre-opening costs , impairment of long-lived assets , restaurant closure charges and loss on disposal of assets for the twenty-six weeks ended june 30 , 2015. same store sales , company restaurant sales , franchise revenue , franchise sublease income , food and paper costs , labor and related expenses , general and administrative expenses , occupancy and other – franchise subleases , pre-opening costs , restaurant closure and loss on disposal of assets were not affected by acquisition accounting . refer to notes 2 and 3 to the consolidated financial statements included elsewhere in this annual report on form 10-k for additional information on the acquisition accounting for the business combination . fiscal year we operate on a 52- or 53-week fiscal year ending on the tuesday closest to december 31 for financial reporting purposes . fiscal year 2016 is the 53-week period ended january 3 , 2017 ( `` fiscal 2016 '' ) . fiscal year 2015 is the 52-week period ended december 29 , 2015 ( `` fiscal 2015 '' ) . fiscal year 2014 is the 52-week period ended december 30 , 2014 ( `` fiscal 2014 '' ) . for fiscal 2016 , the company 's financial statements reflect the fifty-three weeks ended january 3 , 2017 ( successor ) . for fiscal 2015 , the company 's financial statements reflect the twenty-six weeks ended december 29 , 2015 ( successor ) and twenty-six weeks ended june 30 , 2015 ( predecessor ) . for fiscal 2014 , the company 's financial statements reflect the fifty-two weeks ended december 30 , 2014 ( predecessor ) . overview we are a nationwide operator and franchisor of restaurants featuring fresh and fast cuisine , including both mexican inspired and american classic dishes . as of january 3 , 2017 , we have 551 del taco restaurants , a majority of these in the pacific southwest . in each of our restaurants , our food is made to order in working kitchens . we serve our customers fresh and high-quality food typical of fast casual restaurants but with the speed , convenience and value associated with traditional quick service restaurants ( “ qsrs ” ) . with attributes of both a fast casual restaurant and a qsr — a combination we call qsr+ — we occupy a place in the restaurant market distinct from our competitors . with a menu designed to appeal to a wide variety of budgets and tastes and recently updated interior and exterior designs across most of our entire system , we believe that we are poised for growth , operating within the fastest growing segment of the restaurant industry , the limited service restaurant ( “ lsr ” ) segment . with an average system check of $ 7.13 during fiscal 2016 , we offer a compelling value proposition relative to both qsr and fast casual peers . 42 highlights and trends same store sales same store sales growth reflects the change in year-over-year sales for the same store base . we include a restaurant in the same store base in the accounting period following its 18 th full month of operations and exclude restaurant closures . same store sales growth for the 53rd week was calculated by comparing it to the “ like week ” in the prior year . the following table shows the same store sales growth for the fifty-three weeks ended january 3 , 2017 and the fifty-two weeks ended december 29 , 2015 and december 30 , 2014 , respectively : replace_table_token_9_th the increase in company-operated same store sales in the fifty-three weeks ended january 3 , 2017 was driven by an increase in average check size of 4.5 % and an increase in traffic of 0.2 % compared to the fifty-two weeks ended december 29 , 2015 . the increase in company-operated same store sales in the fifty-two weeks ended december 29 , 2015 was driven by an increase in average check size of 4.8 % and an increase in traffic of 1.6 % compared to the fifty-two weeks ended december 30 , 2014 . story_separator_special_tag number of new restaurant openings the number of restaurant openings reflects the number of new restaurants opened by us and our franchisees during a particular reporting period . before a new restaurant opens , we and our franchisees incur pre-opening costs , as described below . some new restaurants open with an initial start-up period of higher than normal sales volumes , which subsequently decrease to stabilized levels . typically new restaurants experience normal inefficiencies in the form of higher food and paper , labor and other direct operating expenses and , as a result , restaurant contribution margins are generally lower during the start-up period of operation . typically , the average start-up period after which new company restaurant sales and restaurant operating expenses normalize is approximately 26 to 52 weeks . in new markets , the length of time before average company restaurant sales and restaurant operating expenses for new restaurants stabilize is less predictable and can be longer as a result of limited knowledge of these markets and consumers ' limited awareness of our brand . when we enter new markets , we may be exposed to start-up times that are longer and restaurant contribution margins that are lower than typical historical experience , and these new restaurants may not be profitable and their sales performance may not follow historical patterns . ebitda and adjusted ebitda ebitda represents net income ( loss ) before interest expense , provision for income taxes , depreciation and amortization . adjusted ebitda represents net income ( loss ) before interest expense , provision for income taxes , depreciation , amortization and items that we do not consider representative of ongoing operating performance , as identified in the reconciliation table below . ebitda and adjusted ebitda as presented in this annual report are supplemental measures of performance that are neither required by , nor presented in accordance with u.s. gaap . ebitda and adjusted ebitda are not measurements of financial performance under u.s. gaap and should not be considered as alternatives to net income ( loss ) , income from operations or any other performance measures derived in accordance with u.s. gaap or as alternatives to cash flow from operating activities as a measure of liquidity . in addition , in evaluating ebitda and adjusted ebitda , you should be aware that in the future we may incur expenses or charges such as those added back to calculate ebitda and adjusted ebitda . our presentation of ebitda and adjusted ebitda should not be construed as an inference that future results will be unaffected by unusual or nonrecurring items . ebitda and adjusted ebitda have limitations as analytical tools , and you should not consider them in isolation , or as substitutes for analysis of results as reported under u.s. gaap . some of these limitations include but are not limited to : ( i ) they do not reflect cash expenditures , or future requirements for capital expenditures or contractual commitments ; ( ii ) they do not reflect changes in , or cash requirements for , working capital needs ; ( iii ) they do not reflect the significant interest expense , or the cash requirements necessary to service interest or principal payments , on debt ; ( iv ) although depreciation and amortization are non-cash charges , the assets being depreciated and amortized will often have to be replaced in the future , and ebitda and adjusted ebitda do not reflect any cash requirements for such replacements ; ( v ) they do not adjust for all non-cash income or expense items that are reflected in the statements of cash flows ; ( vi ) they do not reflect the impact of earnings or charges resulting from matters we consider not to be indicative of ongoing operations ; and ( vii ) other companies in the industry may calculate these measures differently than we do , limiting their usefulness as comparative measures . we compensate for these limitations by providing specific information regarding the u.s. gaap amounts excluded from such non-gaap financial measures . we further compensate for the limitations in the use of non-gaap financial measures by presenting comparable u.s. gaap measures more prominently . we believe ebitda and adjusted ebitda facilitate operating performance comparisons from period to period by isolating the effects of some items that vary from period to period without any correlation to core operating performance or that vary widely among similar companies . these potential differences may be caused by variations in capital structures ( affecting interest expense ) , tax positions ( such as the impact on periods or changes in effective tax rates or net operating losses ) and the 45 age and book depreciation of facilities and equipment ( affecting relative depreciation expense ) . we also present ebitda and adjusted ebitda because ( i ) we believe these measures are frequently used by securities analysts , investors and other interested parties to evaluate companies in their industry , ( ii ) we believe investors will find these measures useful in assessing our ability to service or incur indebtedness , and ( iii ) we use ebitda and adjusted ebitda internally as benchmarks to compare performance to that of competitors . see the heading entitled `` management 's use of non-gaap financial measures '' for the reconciliation of ebitda and adjusted ebitda to net income ( loss ) . key financial definitions company restaurant sales company restaurant sales represents sale of food and beverages in company-operated restaurants , net of promotional allowances , employee meals and other discounts . company restaurant sales in any period is directly influenced by the number of operating weeks in such period , the number of open restaurants , same store sales performance and per restaurant sales . franchise revenue franchise revenue consists of franchise royalty income from the franchisee and , to a lesser extent , renewal fees and franchise fees from franchise owners for new franchise restaurant openings .
| results of operations comparison of results of operations for the fifty-three weeks ended january 3 , 2017 ( successor ) , twenty-six weeks ended december 29 , 2015 ( successor ) , and twenty-six weeks ended june 30 , 2015 ( predecessor ) the following table presents operating results for the fifty-three weeks ended january 3 , 2017 ( successor ) , twenty-six weeks ended december 29 , 2015 ( successor ) , and twenty-six weeks ended june 30 , 2015 ( predecessor ) in absolute terms and expressed as a percentage of total revenue ( or company restaurant sales ) , as compared below : replace_table_token_11_th ( 1 ) as a percentage of company restaurant sales . * immaterial/not meaningful 49 combined financial data : replace_table_token_12_th ( 1 ) as a percentage of company restaurant sales . * immaterial/not meaningful company restaurant sales company restaurant sales increased $ 26.4 million , or 6.5 % , for the fifty-three weeks ended january 3 , 2017 ( successor ) , primarily due to an increase in company-operated same store sales of $ 18.1 million , or 4.7 % , a $ 8.0 million increase from the impact of the 53rd week and $ 0.3 million from the net impact of restaurant openings , transfers and closures since the beginning of the first quarter of 2015. the growth in company-operated same store sales was primarily the result of an increase in average check size of 4.5 % and an increase in traffic of 0.2 % compared to the prior period . franchise revenue franchise revenue increased $ 1.7 million , or 11.8 % , for the fifty-three weeks ended january 3 , 2017 ( successor ) , primarily due to an increase in franchise-operated same store sales of 4.9 % , a $ 0.3 million increase from the impact of the 53rd week and an increase in initial fees .
| 4,025 |
we use the majority of our internally-produced basic chemicals to produce higher value-added chemicals and building products . consumption of the basic chemicals that we manufacture in the commodity portions of our olefins and vinyls processes has increased significantly since we began operations in 1986. our olefins and vinyls products are some of the most widely used chemicals in the world and are upgraded into a wide variety of higher value-added chemical products used in many end-markets . petrochemicals are typically manufactured in large volume by a number of different producers using widely available technologies . the petrochemical industry exhibits cyclical commodity characteristics , and margins are influenced by changes in the balance between supply and demand and the resulting operating rates , the level of general economic activity and the price of raw materials . due to the significant size of new plants , capacity additions are built in large increments and typically require several years of demand growth to be absorbed . the cycle is generally characterized by periods of tight supply , leading to high operating rates and margins , followed by a decline in operating rates and margins primarily as a result of excess new capacity additions . ethane-based ethylene producers have in the recent past experienced a cost advantage over naphtha-based ethylene producers during periods of higher crude oil prices . this cost advantage has resulted in a strong export market for polyethylene and other ethylene derivatives and has benefited operating margins and cash flows for our olefins segment during such periods . however , we have seen a significant reduction in the cost advantage enjoyed by north american ethane-based ethylene producers due to lower crude oil prices from the third quarter of 2014 through 2019 , which has resulted in reduced prices and lower margins for our olefins segment . further , our olefins segment has experienced lower profitability in recent periods due to several new ethylene and polyethylene capacity additions in north america and asia that have led to additional supply of ethylene and polyethylene . in recent months , we have seen volatility in ethane and ethylene prices , primarily due to changes in the anticipated timing for some of the new ethylene capacity additions and availability of natural gas liquids , as well as fluctuation in the price of crude oil . looking forward , new ethylene and polyethylene capacity additions in north america , asia and the middle east will add additional supply and may continue to contribute to periods of lower profitability in our olefins segment . since late 2010 , the pvc industry in the u.s. has experienced an increase in pvc resin exports , driven largely by more competitive feedstock and energy cost positions in the u.s. as a consequence , the u.s. pvc resin industry operating rates have improved since 2010. westlake is the second-largest chlor-alkali producer and the second-largest pvc producer in the world . globally , there were large chlor-alkali capacity additions between 2008 and 2015 resulting in excess capacity and lower industry operating rates which exerted downward pressure on caustic soda pricing . from 2015 through the end of 2018 , the capacity additions have been outpaced by an increase in demand driven by improving economic growth and u.s. producers ' competitive export position , which resulted in improved operating rates and caustic soda pricing . since the end of 2018 , the uncertainties surrounding international trade have impacted both domestic and export prices for our products . depending on the performance of the global economy , potential changes in international trade and tariffs policies , the trend of crude oil prices and the timing of the new ethylene capacity additions in 2020 and beyond , our financial condition , results of operations or cash flows could be negatively or positively impacted . we purchase significant amounts of ethane feedstock , natural gas , ethylene and salt from external suppliers for use in production of basic chemicals in the olefins and vinyls chains . we also purchase significant amounts of electricity to supply the energy required in our production processes . while we have agreements providing for the supply of ethane feedstock , natural gas , ethylene , salt and electricity , the contractual prices for these raw materials and energy vary with market conditions and may be highly volatile . factors that have caused volatility in our raw material prices in the past , and which may do so in the future include : the availability of feedstock from shale gas and oil drilling ; supply and demand for crude oil ; shortages of raw materials due to increasing demand ; ethane and liquefied natural gas exports ; capacity constraints due to higher construction costs for investments , construction delays , strike action or involuntary shutdowns ; the general level of business and economic activity ; and the direct or indirect effect of governmental regulation . 30 significant volatility in raw material costs tends to put pressure on product margins as sales price increases could lag behind raw material cost increases . conversely , when raw material costs decrease , customers may seek immediate relief in the form of lower sales prices . we currently use derivative instruments to reduce price volatility risk on feedstock commodities and lower overall costs . normally , there is a pricing relationship between a commodity that we process and the feedstock from which it is derived . when this pricing relationship deviates from historical norms , we have from time to time entered into derivative instruments and physical positions in an attempt to take advantage of this relationship . our historical results have been significantly affected by our plant production capacity , our efficient use of that capacity and our ability to increase capacity . since our inception , we have followed a disciplined growth strategy that focuses on plant acquisitions , new plant construction and internal expansion . story_separator_special_tag effective january 1 , 2019 , ihs made a non-market average downward adjustment of $ 172.50 per short ton to chlorine prices . for comparability , we adjusted the prior period 's chlorine price downward by $ 172.50 per short ton consistent with the ihs non-market adjustment . ( 9 ) average north american contract prices of pipe grade pvc over the period . as stated by ihs , `` the contract resin prices posted reflect an `` index '' or `` market '' for prices before discounts , rebates , incentives , etc . '' ( 10 ) average north american export price for low density polyethylene gp-film grade over the period . ( 11 ) average north american low spot export prices of caustic soda over the period . ( 12 ) average north american spot export prices of pvc over the period . 33 story_separator_special_tag to $ 260 million in 2019 from $ 573 million in 2018 . the decrease in income from operations was primarily due to the lower sales prices for our major products , partially offset by higher sales volumes for our major products and lower feedstock and fuel costs . trading activity in 2019 resulted in a loss of approximately $ 26 million as compared to a gain of $ 3 million in 2018. vinyls segment net sales . net sales decrease d by $ 280 million , or 4 % , to $ 6,336 million in 2019 from $ 6,616 million in 2018 . average sales prices for the vinyls segment decreased by 8 % in 2019 , as compared to 2018 , mainly due to lower sales prices for caustic soda and lower sales prices and volumes for pvc resins , partially offset by higher pvc compounds sales volumes . average sales volumes increased by 3 % in 2019 , as compared to 2018 . income from operations . income from operations decreased by $ 462 million to $ 451 million in 2019 from $ 913 million in 2018 . this decrease in income from operations was primarily due to lower caustic soda and pvc resin sales prices , partially offset by lower purchased ethylene , ethane feedstock and fuel costs . 2018 compared with 2017 net sales . net sales increased 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. sales volumes increased by 3 % in 2018 as compared to 2017 . gross profit . gross profit margin percentage increased 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 increased by $ 46 million , or 12 % , to $ 445 million in 2018 from $ 399 million in 2017 . this increase was mainly due to an increase in employee compensation and professional consulting fees . amortization of intangibles . amortization expense for 2018 was comparable to 2017 . restructuring , transaction and integration-related costs . restructuring , transaction and integration-related costs were $ 33 million in 2018 as compared to $ 29 million in 2017 . the restructuring , transaction and integration-related costs primarily consisted of integration-related consulting fees , severance benefits provided in conjunction with acquisition and reorganization charges . interest expense . interest expense decreased by $ 33 million to $ 126 million in 2018 from $ 159 million in 2017 , primarily as a result of lower average debt outstanding for 2018 as compared to 2017 . the lower average debt balance in 2018 was mainly due to the redemption of the 2023 notes in may 2018 and the 2021 notes in february 2018. see `` liquidity and capital resources—debt '' below for further discussion of our indebtedness . other income , net . other income , net increased by $ 37 million to $ 52 million in 2018 from $ 15 million in 2017 . the increase was primarily attributable to a one-time pension settlement gain of $ 14 million , an increase in interest income of $ 13 million , a net gain of $ 6 million recognized on the redemption of the 2021 notes and an increase in income from unconsolidated subsidiaries of $ 6 million . income taxes . the effective income tax rate was an expense of 22 % in 2018 as compared to a benefit of 24 % in 2017 . the effective tax rate in 2018 was higher as compared to 2017 , primarily due to the recognition of a $ 591 million income tax benefit in 2017 as a result of the revaluation of deferred tax assets and liabilities . in addition , the u.s. corporate income tax rate was lower in 2018 as compared to 2017 . the effective income tax rate in 2018 was above the u.s. federal statutory rate of 21 % primarily due to state and foreign taxes . olefins segment net sales . net sales decreased by $ 32 million , or 2 % , to $ 2,019 million in 2018 from $ 2,051 million in 2017 .
| summary for the year ended december 31 , 2019 , net income attributable to westlake chemical corporation was $ 421 million , or $ 3.25 per diluted share , on net sales of $ 8,118 million . this represents a decrease in net income attributable to westlake chemical corporation of $ 575 million , or $ 4.37 per diluted share , compared to 2018 net income attributable to westlake chemical corporation of $ 996 million , or $ 7.62 per diluted share , on net sales of $ 8,635 million . net income for the year ended december 31 , 2019 decreased versus the prior year primarily due to lower sales prices for our major products resulting from international trade uncertainties and slower global economic growth , partially offset by lower purchased ethylene , feedstock and fuel costs and a lower effective income tax rate . net sales for the year ended december 31 , 2019 decrease d $ 517 million to $ 8,118 million compared to net sales for the year ended december 31 , 2018 of $ 8,635 million , mainly due to lower sales prices for our major products and lower sales volumes for pvc resin , partially offset by an increase in sales volumes for polyethylene , styrene and pvc compounds . income from operations was $ 656 million for the year ended december 31 , 2019 as compared to $ 1,408 million for the year ended december 31 , 2018 , a decrease of $ 752 million . the decrease in income from operations versus the prior year was primarily due to lower sales prices for our major products , partially offset by lower purchased ethylene , ethane and fuel costs . pre-tax restructuring , transaction and integration-related costs for the year ended december 31 , 2019 were $ 37 million , or $ 0.23 per diluted share after tax , as compared to $ 33 million in 2018 .
| 4,026 |
in fiscal 2014 , our business performance continued to be driven by growth from our medical device hydrophilic coatings royalty revenue , product sales and contract coating services included in research and development revenue . our in vitro diagnostics segment realized decreased demand in the first six months of fiscal 2014 driven primarily by a shift in order patterns in the second quarter of fiscal 2014 by a few key customers who initiated inventory rebalancing programs , a slowdown in european sales , which continued throughout the remainder of the fiscal year , and recent increased competition related to our biofx product offerings . operating segments are defined as components of an enterprise about which separate financial information is available that is evaluated regularly by the chief operating decision maker , or decision making group , in deciding how to allocate resources and in assessing performance . for financial accounting and reporting purposes , we report our results for the two reportable segments as follows : ( 1 ) the medical device unit , which is comprised of surface modification coating technologies to improve access , deliverability , and predictable deployment of medical devices , as well as drug delivery coating technologies to provide site-specific drug delivery from the surface of a medical device , with end markets that include coronary , peripheral , and neurovascular , and urology , among others , and ( 2 ) the in vitro diagnostics unit , which consists of component products and technologies for diagnostic immunoassay and molecular tests and biomedical research applications , with products that include protein stabilization reagents , substrates , antigens and surface coatings . we made this determination based on how we manage our operations and the information provided to our chief operating decision maker who is our chief executive officer . we derive our revenue from three primary sources : ( 1 ) royalties and license fees from licensing our proprietary surface modification and device drug delivery technologies and in vitro diagnostic formats to customers ; the vast majority ( typically in excess of 90 % ) of revenue in the royalties and license fees category is in the form of royalties ; ( 2 ) the sale of reagent chemicals to licensees and the sale of stabilization products , antigens , substrates and surface coatings on microarray slides to the diagnostic and biomedical research markets ; and ( 3 ) research and commercial development fees generated on customer projects . revenue fluctuates from quarter to quarter depending on , among other factors : our customers ' success in selling products incorporating our technologies ; the timing of introductions of licensed products by our customers ; the timing of introductions of products that compete with our customers ' products ; the number and activity level associated with customer development projects ; the number and terms of new license agreements that are finalized ; and the value of reagent chemicals and other products sold to our customers . we have several u.s. and international issued patents and pending international patent applications protecting various aspects of these technologies , including compositions , methods of manufacture and methods of coating devices . the expiration dates for these patents and the anticipated expiration dates of the patent applications range from 2015 to 2033. among these , the third generation of our photolink hydrophilic technology is protected by a family of patents that are expected to expire in november 2015 ( in the u.s. ) and october 2016 ( in certain other countries ) . the royalty revenue associated with our third generation technology that has not yet converted , or that is not in the process of converting , to one of our advanced generation technologies was approximately 19 % of our fiscal 2014 revenue . a majority of the customer products utilizing this early generation technology ( representing approximately 14 % of our fiscal 2014 revenue ) will continue to generate royalty revenue at a reduced royalty rate beyond the expiration of these patents . the royalty obligation for these customer products extends beyond the expiration of these patents because the license also includes rights to our know-how or other proprietary rights . while we are actively seeking to convert our customers to one of our advanced generations of our hydrophilic coating technology , there can be no assurance that we will be successful in doing so , or that those customers that have converted , or will convert , will sell products utilizing our technology which will generate earned royalty revenue for us . on november 1 , 2011 , we entered into a purchase agreement to sell substantially all of the assets of surmodics pharmaceuticals to evonik . under the terms of the purchase agreement , the entire portfolio of products and services of surmodics pharmaceuticals , including its cgmp development and manufacturing facility located 33 in birmingham , alabama , were sold . the sale closed on november 17 , 2011. we retained all accounts receivable and the majority of liabilities associated with the surmodics pharmaceuticals business incurred prior to the closing . the total consideration received from the sale was $ 30.0 million in cash . we have reported the pharmaceuticals segment as discontinued operations beginning in the first quarter of fiscal 2012. accordingly , all results of operations , cash flows , assets and liabilities of surmodics pharmaceuticals for all periods presented are classified as discontinued operations . all information in this management 's discussion and analysis of financial condition and results of operations and elsewhere in this form 10-k includes only results from continuing operations ( excluding surmodics pharmaceuticals ) for all periods presented , unless otherwise noted . overview of research and development activities we manage our customer-sponsored r & d programs based largely on the requirements of our customers . in this regard , our customers typically establish the various measures and metrics that are used to monitor a program 's progress , including key deliverables , milestones , timelines , and an overall program budget . story_separator_special_tag multiple deliverable revenue arrangements require us to : ( i ) disclose whether multiple deliverables exist , how the deliverables in an arrangement should be separated , and how the consideration should be allocated ; ( ii ) allocate revenue in an arrangement using estimated selling prices ( esp ) of deliverables if a vendor does not have vendor-specific objective evidence of selling price ( vsoe ) or third-party evidence of selling price ( tpe ) ; and ( iii ) eliminate the use of the residual method and require an entity to allocate revenue using the relative selling price method . we account for revenue using a multiple attribution model in which consideration allocated to r & d activities is recognized as performed , and milestone payments are recognized when the milestone events are achieved , when such activities and milestones are deemed substantive . accordingly , in situations where a unit of accounting includes both a license and r & d activities , and when a license does not have stand-alone value , we apply a multiple attribution model in which consideration allocated to the license is recognized ratably , consideration allocated to r & d activities is recognized as performed and milestone payments are recognized when the milestone events are achieved , when such activities and milestones are deemed substantive . we enter into license and development arrangements that may consist of multiple deliverables which could include a license ( s ) to our technology , r & d activities , manufacturing services , and product sales based on the customer needs . for example , a customer may enter into an arrangement to obtain a license to our intellectual property which may also include r & d activities , and supply of products manufactured by us . for these services 35 provided , we could receive upfront license fees upon signing of an agreement and granting the license , fees for r & d activities as such activities are performed , milestone payments contingent upon advancement of the product through development and clinical stages to successful commercialization , fees for manufacturing services and supply of product , and royalty payments based on customer sales of product incorporating our technology . our license and development arrangements generally do not have refund provisions if the customer cancels or terminates the agreement . typically all payments made are non-refundable . we are required to evaluate each deliverable in a multiple element arrangement for separability . we are then required to allocate revenue to each separate deliverable using a hierarchy of vsoe , tpe , or esp . in many instances , we are not able to establish vsoe for all deliverables in an arrangement with multiple elements . this may be a result of us infrequently selling each element separately or having a limited history with multiple element arrangements . when vsoe can not be established , we attempt to establish a selling price of each element based on tpe . tpe is determined based on competitor prices for similar deliverables when sold separately . when we are unable to establish a selling price using vsoe or tpe , we use esp in our allocation of arrangement consideration . the objective of esp is to determine the price at which surmodics would transact a sale if the product or service were sold on a stand-alone basis . esp is generally used for highly customized offerings . we determine esp for undelivered elements by considering multiple factors including , but not limited to , market conditions , competitive landscape and past pricing arrangements with similar features . the determination of esp is made through consultation with management , taking into consideration the marketing strategies for each business unit . customer advances are accounted for as a liability until all criteria for revenue recognition have been met . valuation of long-lived assets . accounting guidance requires us to evaluate periodically whether events and circumstances have occurred that may affect the estimated useful life or the recoverability of the remaining balance of long-lived assets , such as property and equipment and intangibles with finite lives . if such events or circumstances were to indicate that the carrying amount of these assets may not be recoverable , we would estimate the future cash flows expected to result from the use of the assets and their eventual disposition . if the sum of the expected future cash flows ( undiscounted and without interest charges ) were less than the carrying amount of the assets , we would recognize an impairment charge to reduce such assets to their fair value . in fiscal 2014 , 2013 and 2012 , there were no impairment charges relating to our long-lived assets as there were no events or circumstances that occurred that affected the recoverability of such assets . goodwill . we record all assets and liabilities acquired in purchase acquisitions , including goodwill , at fair value as required by accounting guidance for business combinations . the initial recognition of goodwill requires management to make subjective judgments concerning estimates of how the acquired assets will perform in the future using valuation methods including discounted cash flow analysis . goodwill is not amortized but is subject , at a minimum , to annual tests for impairment in accordance with accounting guidance for goodwill . under certain situations , interim impairment tests may be required if events occur or circumstances change that would more likely than not reduce the fair value of a reporting unit below its carrying amount . goodwill is evaluated for impairment based on an assessment of qualitative factors to determine whether the existence of events or circumstances leads to a determination that it is more likely than not that the fair value of a reporting unit is less than its carrying amount ( step 0 ) .
| results of operations years ended september 30 , 2014 , 2013 and 2012 revenue . fiscal 2014 revenue was $ 57.4 million , a $ 1.3 million , or 2 % increase from fiscal 2013 revenue of $ 56.1 million . fiscal 2013 revenue increased $ 4.2 million , or 8 % , from fiscal 2012. the table below provides a summary of each operating segment 's annual revenue for the three-year period ended september 30 , 2014. replace_table_token_3_th medical device . revenue in medical device was $ 43.1 million in fiscal 2014 a 5 % increase from $ 41.2 million in fiscal 2013. the increase in revenue in fiscal 2014 was generated by each of our revenue categories with increased reagent product sales of $ 0.8 million and an increase in r & d revenue of $ 0.7 million . of our royalty revenue recognized during fiscal 2014 , $ 10.7 million was generated from our third generation of our photolink technology whose family of patents is expected to expire in november 2015 ( in the u.s. ) and october 2016 ( in certain other countries ) . the royalty obligation in our typical license agreement is generally for a specified number of years or the life of our patents , whichever is longer . in cases where the royalty obligation extends beyond the life of the applicable patent , it is because the license also includes rights to our know-how or other proprietary rights , in which case , the royalty rate is also reduced . under these circumstances , the royalty obligation will continue at a reduced royalty rate for a specified number of years , as determined based on the specific terms and conditions of the applicable customer agreement , the date on which the customer 's product was first sold , and other factors . we are actively seeking to migrate customers using this generation of photolink to our serene coating technologies .
| 4,027 |
goodwill and other intangible assets goodwill , which represents the excess of cost over the fair value of net assets acquired in purchased businesses , is tested for impairment at least annually , or more story_separator_special_tag story_separator_special_tag june 2011. as a result of the economic downturn , consumer saving and debt reduction have increased steadily over the past four years while consumer spending has reflected restraint and uncertainty . there are many components to a sustainable economic recovery , including improved consumer spending , a stable housing market , expansion of employment , and a low level of inflation . stable energy costs and governmental support through sound monetary and fiscal policy are also key contributors . on the whole , economic conditions are currently positive , but the recovery to pre-downturn levels is expected to continue at a slower and more uneven pace than historical periods of recovery . as the recession began to emerge in 2007 , residential mortgage foreclosures began to escalate and real estate values began to decline . these factors expanded as the u.s. economy reached a confirmed recessionary trend and significantly impacted the performance of synovus ' residential construction and real estate and land acquisition loan portfolios . other segments of synovus ' commercial loan portfolio were impacted as well , particularly in industries that were adversely impacted by the changes in commercial real estate and residential development . as a result , synovus experienced significant increases in its credit costs , elevated levels of loan charge-offs , non-performing asset inflows , significant losses on distressed asset dispositions , and further valuation adjustments on existing non-performing assets . synovus ' loan portfolio contracted during this period due to loan charge-offs , distressed asset sales , and weak demand for new loans . as the economy transitioned into recovery during the second half of 2010 , certain segments of the economy began to stabilize , yet the supply of low cost housing due to cumulative foreclosures and distressed sales continued to exceed demand . while the housing market has lagged behind the general economic recovery to date as a whole , the decline in residential real estate prices has begun to stabilize in certain areas of the u.s. though still at elevated levels as compared to historical periods , synovus ' rate of non-performing asset inflows has declined , total credit costs have decreased , and loan charge-offs have declined as the economy moved into a period of recovery . bank failures reached elevated levels over the past few years , particularly in synovus ' southeastern market . during 2011 , the national trend improved significantly as bank failures decreased approximately 41 % to 92. however , almost half of the 2011 failures occurred in synovus ' five-state footprint , with 23 in georgia , 13 in florida , three in south carolina and two in alabama . 46 the total number of failures in synovus ' five state footprint declined from 55 in 2010 to 41 in 2011 . mortgage loan repurchase obligations and foreclosure practices since 2010 , financial institutions have experienced a dramatic increase in the number of mortgage loan repurchase demands they received , including from government-sponsored entities , mortgage insurers , and other purchasers of residential mortgage-backed securitizations , due to findings of mortgage fraud and underwriting deficiencies in the mortgage origination process , and misrepresentations in the packaging of mortgages by certain mortgage lenders . also since 2010 , foreclosure practices of financial institutions nationwide have come under scrutiny due to the discovery of fraudulent documentation and questionable residential foreclosure procedures of certain financial institutions . to date , synovus has experienced minimal repurchase activity in its consumer mortgage lending operations . additionally , foreclosure activity in the home equity and consumer mortgage loan portfolios has been low . see `` mortgage banking '' in this report for further discussion of synovus ' experience with residential mortgage repurchase obligations and foreclosure activity in its home equity and consumer mortgage loan portfolios . overview of 2011 financial results for the year ended december 31 , 2011 , synovus reported a net loss attributable to common shareholders of $ 118.7 million , or $ 0.15 per common share , as compared to $ 848.2 million , or $ 1.24 per common share , for the year ended december 31 , 2010 . the improved results are primarily due to a $ 761.6 million decline in credit costs ( provision for loan losses , losses on foreclosed real estate , and other credit costs ) which was partially offset by income from discontinued operations of $ 43.2 million reported in 2010 . the 2011 results include $ 75.0 million in net investment securities gains while the 2010 results include a $ 69.5 million pre-tax gain from the sale of the merchant services business . although credit costs , charge-offs , and non-performing asset levels remain elevated , most credit quality measures have continued to show improvement during 2011. total provision for loan losses in 2011 was $ 418.8 million , a $ 712.5 million or 63.0 % improvement from 2010 . net charge-offs declined $ 785.6 million , from $ 1.37 billion in 2010 to $ 585.8 million in 2011. non-performing assets declined 12.7 % from $ 1.28 billion at december 31 , 2010 to $ 1.12 billion at december 31 , 2011 . the decline in provision for loan losses from 2010 is primarily due to continued improvement in credit quality trends during 2011 including reduced net charge-offs , npl inflows , and special mention and accruing substandard loans as well as continued migration in the mix of the loan portfolio to reduced levels of higher credit risk loan types . while the provision for loan losses and loan charge-offs in 2011 declined from 2010 levels , these amounts continued to remain elevated when compared to historical levels . the elevated level of the provision for loan losses and loan charge-offs in 2011 was primarily driven by commercial credits , particularly in the commercial real estate segment . story_separator_special_tag please refer to note 1 - summary of significant accounting policies to the consolidated financial statements for an expanded discussion of the company 's methodologies , qualitative considerations , and key assumptions . other real estate other real estate , consisting of properties obtained through a foreclosure proceeding or through an in-substance foreclosure in satisfaction of loans , is reported at the lower of cost or fair value less costs to sell , determined on the basis of current appraisals , comparable sales , and other estimates of fair value obtained principally from independent sources , adjusted for estimated selling costs . management also considers other factors or recent developments , such as changes in absorption rates or market conditions from the time of valuation and anticipated sales values considering management 's plans for disposition , which could result in adjustments to the collateral value estimates indicated in the appraisals . significant judgments and complex estimates are required in estimating the fair value of other real estate , and the period of time within which such estimates can be considered current is significantly shortened during periods of market volatility . in response to market conditions and other economic factors , management may utilize liquidation sales as part of its distressed asset disposition strategy . as a result of the significant judgments required in estimating fair value and the variables involved in different methods of disposition , the net proceeds realized from sales transactions could differ significantly from appraisals , comparable sales , and other estimates used to determine the fair value of other real estate . management reviews the value of other real estate each quarter and adjusts the values as appropriate . deferred tax assets valuation allowance asc 740-30-25 provides accounting guidance for determining when a company is required to record a valuation allowance on its deferred tax assets . a valuation allowance is required for deferred tax assets if , based on available evidence , it is more likely than not that all or some portion of the asset may not be realized due to the inability to generate sufficient taxable income in the period and or of the character necessary to utilize the benefit of the deferred tax asset . in making this assessment , all sources of taxable income available to realize the deferred tax asset are considered , including taxable income in prior carry-back years , future reversals of existing temporary differences , tax planning strategies , and future taxable income exclusive of reversing temporary differences and carry-forwards . the predictability that future taxable income , exclusive of reversing temporary differences , will occur is the most subjective of these four sources . the presence of cumulative losses in recent years is considered significant negative evidence , making it difficult for a company to rely on future taxable income , exclusive of reversing temporary differences and carry-forwards , as a reliable source of taxable income to realize a deferred tax asset . judgment is a critical element in making this assessment . changes in the valuation allowance that result from favorable changes in those circumstances that cause a change in judgment about the realization of deferred tax assets in future years are recorded through income tax expense . in assessing the need for a valuation allowance , synovus considered all available evidence about the realization of dtas , both positive and negative , that could be objectively verified . synovus ' positive evidence considered in support of its use of 49 forecasted future earnings as a source of realizing dtas was insufficient to overcome the negative evidence associated with its pre-tax cumulative loss position . the total valuation allowance on deferred income tax assets was $ 821.4 million at december 31 , 2011 . reversal of the dta valuation allowance balance is subject to considerable judgment . however , synovus expects to reverse substantially all ( or approximately $ 800.4 million of the current balance of $ 821.4 million ) of the dta valuation allowance once it has demonstrated a sustainable return to profitability and experienced consecutive profitable quarters coupled with a forecast of sufficient continuing profitability . this reversal could occur as a single event or over a period of time depending upon the level of forecasted taxable income , the degree of probability related to realizing the forecasted taxable income , and the estimated risk related to credit quality . in that event , there will remain limitations on the ability to include the deferred tax assets for regulatory capital purposes . pursuant to regulatory requirements , as taxes paid in carryback periods are exhausted , financial institutions must deduct from tier i capital the greater of ( 1 ) the amount by which net deferred tax assets exceed what they would expect to realize within one year or ( 2 ) the amount by which the net deferred tax assets exceeds 10 % of tier i capital . fair value measurements synovus reviews assets and liabilities that are either required or elected to be carried , reported , or disclosed at fair value ; and determines the valuation of these instruments in accordance with fasb asc topic 820 , fair value measurements . we assess the fair value measurements of each instrument on a periodic basis , but no less than quarterly . these fair value measurements consider the guidance in asc 820 , which provides a three-level framework for determining the appropriate fair value for a particular asset or liability . these levels require consideration of information , such as observable market prices , reported trades , broker quotes , various modeling techniques , including , in some cases , unobservable inputs . the company selects the most appropriate technique for determining the fair value of the asset or liability . the various techniques described by asc 820 require significant judgment , and results could vary materially , depending on the valuation method selected .
| executive summary the following financial review provides a discussion of synovus ' financial condition , changes in financial condition , and results of operations as well as a summary of synovus ' critical accounting policies . this section should be read in conjunction with the audited consolidated financial statements and accompanying notes . economic overview the overall improvement of the u.s. economy appears to have gained momentum during the fourth quarter of 2011 , building on moderate improvement in the third quarter of 2011. the initial stages of economic recovery emerged during the latter half of 2010 , but softened during the first and second quarters of 2011 in response to a series of global events , including the earthquake and tsunami in japan , geo-political unrest in the middle east , the mid-year elevation in energy costs , continued concerns over the debt of certain european nations , and the u.s. congressional battle over raising the u.s. debt ceiling . the economic progress achieved in the latter half of 2011 is anchored in an improved job market and indications that the housing market may be stabilizing . additionally , consumer spending and consumer confidence strengthened during the fourth quarter of 2011. certain european nations continue to wrestle with debt and budget deficit issues . there is a concern of the potential impact on the global economies beyond europe if the european central bank and eurozone nations are unable to implement appropriate changes and solutions . the ultimate outcome ; however , can not presently be determined . furthermore , there can be no guarantee that the domestic economy will continue to improve . the improvement in economic measures during 2011 has been positive in the aggregate , but progress during the year has been uneven at times with mixed messages in many economic measures . inflation remains subdued ; however , energy prices continue to show volatility .
| 4,028 |
at nearly $ 5.6 billion in assets and $ 13.2 billion in fiduciary assets , wsfs bank is also the largest bank and trust company headquartered in delaware and the delaware valley . as a federal savings bank , which was formerly chartered as a state mutual savings bank , the bank enjoys broader fiduciary powers than most other financial institutions . a fixture in the community , the bank has been in operation for more than 184 years . in addition to its focus on stellar customer service , the bank has continued to fuel growth and remains a leader in our community . we are a relationship-focused , locally-managed , banking institution . we state our mission simply : we stand for service. our strategy of engaged associates delivering stellar service growing customer advocates and value for our owners focuses on exceeding customer expectations , delivering stellar service and building customer advocacy through highly-trained , relationship-oriented , friendly , knowledgeable and empowered associates . our core banking business is commercial lending funded by customer-generated deposits . we have built a $ 3.1 billion commercial loan portfolio by recruiting the best seasoned commercial lenders in our markets and by offering the high level of service and flexibility typically associated with a community bank . we fund this business primarily with deposits generated through commercial relationships and retail deposits . we service our customers primarily from our 63 offices located in delaware ( 44 ) , pennsylvania ( 17 ) , virginia ( 1 ) and nevada ( 1 ) and through our website at www.wsfsbank.com . we also offer a broad variety of consumer loan products , retail securities and insurance brokerage services through our retail branches and mortgage and title services through those branches and through pennsylvania-based wsfs mortgage/array financial . wsfs mortgage/array financial is a mortgage banking and abstract and title company specializing in a variety of residential mortgage and refinancing solutions . on october 9 , 2015 we completed the acquisition of alliance bancorp , inc. of pennsylvania ( alliance ) and its wholly owned subsidiary , alliance bank , headquartered in broomall , pennsylvania . we expect this acquisition to build our market share , expand our customer base and enhance our fee income . the results of alliance 's operations are included in our consolidated financial statements since the date of the acquisition . our cash connect segment manages $ 581 million in vault cash in over 16,000 non-bank atms nationwide and provides related services such as , online reporting and atm cash management , predictive cash ordering , armored carrier management , atm processing equipment sales and deposit safe cash logistics . cash connect also operates 467 atms for the bank , which has , by far , the largest branded atm network in delaware . as a provider of atm vault cash to the u.s. atm industry , cash connect is exposed to substantial operational risk , including theft of cash from atms , armored vehicles , or armored carrier terminals , as well as general risk of accounting errors or fraud . this risk is managed through a series of financial controls , automated tracking and settlement systems , contracts , and other risk mitigation strategies , including both loss prevention and loss recovery strategies . throughout its 15-year history , cash connect periodically has been exposed to theft from armored courier companies and consistently has been able to recover any losses through its risk management strategies . the wealth management segment provides a broad array of fiduciary , investment management , credit and deposit products to clients through four businesses . wsfs wealth investments provides insurance and brokerage products primarily to our retail banking clients . cypress capital management , llc ( cypress ) is a registered investment advisor with $ 637.8 million in assets under management . cypress ' primary market segment is high net worth individuals , offering a balanced ' investment style focused on preservation of capital and current income . christiana trust , with $ 12.58 billion in assets under administration , provides fiduciary and investment services to personal trust clients , and trustee , agency , bankruptcy administration , custodial and commercial domicile services to corporate and institutional clients . wsfs 38 private banking serves high net worth clients by delivering credit and deposit products and partnering with other business units to deliver investment management and fiduciary products and services . the company has two consolidated subsidiaries , wsfs bank and cypress , and one unconsolidated subsidiary , wsfs capital trust iii ( the trust ) . wsfs bank has three wholly owned subsidiaries , wsfs wealth investments , 1832 holdings , inc. and monarch entity services , llc ( monarch ) . story_separator_special_tag of unearned income . 41 ( 3 ) includes securities available-for-sale at fair value . ( 4 ) includes federal funds purchased and securities sold under agreement to repurchase . provision for loan losses we maintain an allowance for loan losses at an appropriate level based on our assessment of estimable and probable losses in the loan portfolio , which we evaluate in accordance with applicable accounting principles , as discussed further in nonperforming assets . our evaluation is based upon a review of the portfolio and requires significant , complex and difficult judgments . for the year ended december 31 , 2015 we recorded a provision for loan losses of $ 7.8 million compared to $ 3.6 million in 2014 and $ 7.2 million in 2013. the increase was primarily due to a $ 9.1 million c & i problem loan relationship previously classified as an accruing tdr , which was moved to nonaccruing status during the second quarter of 2015 and resulted in an incremental increase in the provision for loan losses of $ 3.8 million during 2015. noninterest ( fee ) income fee income increased $ 10.0 million to $ 88.3 million in 2015 from $ 78.3 million in 2014. excluding the non-routine and other one-time items listed in the table below , noninterest income increased $ 9.6 million , story_separator_special_tag the increase in net interest income was partially offset by an increase in external operating expenses driven by increased compensation expense tied to organic and acquisition growth as well as improved core performance . also contributing to the increase in operating expenses were increased costs to support the infrastructure from the segment 's significant organic and acquisition growth . the wsfs bank segment income before taxes decreased $ 1.7 million , or 3 % , in 2014 compared to 2013 due primarily to higher non-routine gains of $ 6.3 million in 2013 from the sale of securities and the execution of a clean-up call on the underlying collateral for our pool of reverse mortgages , as well as the impact of increased non-routine corporate development expenses of $ 3.3 million in 2014 , largely related to our acquisition of fnbw . external net interest income increased $ 12.8 million in 2014 , or 10 % , reflecting both organic and acquisition growth , improvement in our balance sheet mix , as well as additional income from reverse mortgage related assets . excluding the impact of the aforementioned gains in 2013 , noninterest income increased slightly , or 1 % , year-over-year . these increases were partially offset by an increase in external operating expenses driven by organic and acquisition growth . the cash connect segment income before taxes grew $ 486,000 , or 7 % , in 2015 compared to 2014 due primarily to a $ 2.7 million , or 11 % , increase in external fee income reflecting growth of the segment through continued market penetration of its core business offerings of atm vault cash and related total cash management services . the increase in fee income was partially offset by a $ 1.8 million , or 12 % , increase in external operating expenses reflecting investments in new products and infrastructure to support growth . during 2015 , cash connect introduced wsfs mobile cash , which allows customers to securely withdraw cash from atms by using our wsfs mobile bank app , and launched a new smart safe service that allows merchants to place their cash into a smart safe which communicates the amount of cash deposited to cash connect . the cash connect segment income before taxes decreased $ 485,000 , or 6 % , in 2014 compared to 2013 mainly due to a $ 2.5 million , or 19 % , increase in external noninterest expenses to support growth and new product introductions . the increase in noninterest expenses was mostly offset by a $ 2.0 million increase in external noninterest income reflecting growth of the segment through organic growth and new product offerings . the wealth management segment income before taxes grew $ 552,000 , or 5 % , in 2015 compared to 2014. external fee income grew $ 4.7 million , or 26 % , reflecting growth in several business lines , with particular strength in bankruptcy administration , trustee securitization appointments and retail brokerage services . the growth in fee income was offset by an increase in external operating expenses primarily due to increased legal and consulting fees and higher compensation expense to support the significant growth and volume-related commissions and transaction charges . total net interest income increased $ 1.1 million , or 10 % , when compared to 2014 , due primarily to growth in private banking and the partnership with wsfs mortgage/array financial in the delivery of mortgage products to private banking clients . the wealth management segment income before taxes grew $ 2.0 million , or 20 % , in 2014 compared to 2013 , reflecting the continued expansion of the corporate and personal trust business lines as well as an increase in private banking jumbo mortgage products provided by the wsfs mortgage/array financial acquisition in 2013. segment financial information for the years ended december 31 , 2015 , 2014 and 2013 is provided in note 20 to the consolidated financial statements in this report . financial condition our total assets increased $ 732.6 million , or 15 % , to $ 5.59 billion as of december 31 , 2015 , compared to $ 4.85 billion as of december 31 , 2014. included in this increase was a $ 572.4 million , or 18 % , increase in net loans which was nearly equally split between the $ 291.1 million in net loans from the alliance acquisition and $ 281.3 million of organic loan growth during 2015 . 44 total liabilities increased $ 641.2 million during the year to $ 5.01 billion at december 31 , 2015. this increase was primarily the result of an increase in total customer deposits of $ 397.6 which includes $ 339.3 million in customer deposits from the alliance acquisition . fhlb advances also increased $ 263.6 million due to the aforementioned loan growth and the expected outflow of temporary trust-related money market deposits in early 2015. cash in non-owned atms during 2015 , cash managed by cash connect in non-owned atm 's increased $ 63.7 million , or 15 % , to $ 477.9 million . at december 31 , 2015 , cash connect serviced over 16,000 atms as well as 467 wsfs-owned atms to serve customers in our markets . investment securities , available-for-sale investment securities , available-for-sale decreased $ 19.1 million to $ 721.0 million during 2015. this was due to a $ 20.0 million decrease in mortgage-backed securities as a result of ongoing portfolio management . investment securities , held-to-maturity investment securities , held-to-maturity increased $ 39.7 million to $ 165.9 million during 2015. this increase was mainly in our portfolio of municipal bonds which reflects our recent investment strategy of reducing our investments in mortgage-backed securities and increasing our investment in tax-exempt securities . at december 31 , 2014 , 257 municipal securities with a fair value of $ 340.3 million were transferred from available-for-sale to held-to-maturity . the reclassification was permitted as the company has appropriately determined the ability and intent to hold these securities as an investment until maturity .
| results of operations we recorded net income of $ 53.5 million , or $ 1.85 per share for the year ended december 31 , 2015 a $ 224,000 decrease compared to $ 53.8 million , or $ 1.93 per share for the year ended december 31 , 2014. results for 2014 included a one-time tax benefit of $ 6.7 million , or $ 0.24 per share and $ 3.6 million ( pre-tax ) , or $ 0.08 per share , less in corporate development expenses . earnings for 2015 were impacted by a significant increase in net interest income driven by both organic growth and the acquisition of alliance in october 2015. additionally , our trust and wealth management business and mortgage banking business continued to see significant growth over the prior year . offsetting the growth in interest income was an increase to the provision for loan losses of $ 4.2 million for the full year 2015 compared to the full year 2014 driven by one large c & i credit that had a net charge-off of $ 5.7 million during 2015. lastly , we saw an increase of $ 16.9 million in our operating expenses during the year , reflecting growth in ongoing operating costs from our recent acquisition of alliance and the investment in the related infrastructure and staffing costs to support our growth . we recorded net income of $ 53.8 million for the year ended december 31 , 2014 , a $ 6.9 million or 15 % increase compared to $ 46.9 million for the year ended december 31 , 2013. income allocable to common stockholders was $ 53.8 million , or $ 1.93 per diluted common share for the year ended december 31 , 2014 , compared to income allocable to common shareholders of $ 45.2 million , or $ 1.69 per diluted common share ( a 14.2 % increase in diluted eps ) for the year ended december 31 , 2013.
| 4,029 |
fair value of equity compensation the black-scholes option-pricing model assumptions for stock options were as follows : replace_table_token_27_th the black-scholes option-pricing model assumptions for purchase rights under the espp were as follows : replace_table_token_28_th stock awards a summary of the company 's stock option activity and related information was as follows : replace_table_token_29_th replace_table_token_30_th 46 as of december 31 , 2019 , there was $ 1.4 million of unrecognized compensation expense related to stock options , which is expected to be recognized over a weighted-average period of 2.4 years . a summary of the company 's rsu and psu activity and related information was as follows : replace_table_token_31_th ( 1 ) 1,814 shares of common stock were issued for rsus and psus vested and the remaining 124 shares were withheld for taxes . for the year ended december 31 , 2019 2018 ( in thousands ) fair value of rsus and psus vested $ 2,076 $ 8,626 as of december story_separator_special_tag the following management 's discussion and analysis of financial condition and results of operations ( “ md & a ” ) should be read in conjunction with our annual consolidated financial statements and notes thereto appearing elsewhere in this annual report on form 10-k. md & a contains forward-looking statements . see “ forward-looking statements ” and “ item 1a . risk factors ” for a discussion of the uncertainties , risks and assumptions associated with these statements . actual results may differ materially from those contained in any forward-looking statements . overview servicesource is a leading provider of bpaas solutions that enable the transformation of go-to-market organizations and functions for global technology clients . we design , deploy , and operate a suite of innovative solutions and complex processes that support and augment our clients ' b2b customer acquisition , engagement , expansion and retention activities . our clients - ranging from fortune 500 technology titans to high-growth disruptors and innovators - rely on our holistic customer engagement methodology and process excellence , global scale and delivery footprint , and data analytics and business insights to deliver trusted business outcomes that have a meaningful and material positive impact to their long-term revenue and profitability objectives . through our unique integration of people , process and technology - leveraged against our 20 years of experience and domain expertise in the cloud , software , hardware , medical device and diagnostic equipment , and industrial iot sectors - we effect and transact billions of dollars of b2b commerce in more than 175 countries on our clients ' behalf annually . factors affecting our performance we generate a significant portion of our revenue from a limited number of clients . the loss of revenue from any of our top clients for any reason , including the failure to renew our contracts , termination of some or all of our services , or a change of relationship with any of our key clients or their acquisition , can cause a significant decrease in our revenue . our business is geographically diversified . during 2019 , 58 % of our net revenue was earned in nala , 26 % in emea and 16 % in apj , compared to 60 % in nala , 25 % in emea and 15 % in apj during 2018 . net revenue for a particular geography generally reflects commissions earned from sales of service contracts managed from our revenue delivery center in that geography . predominantly all of the service contracts sold and managed by our revenue delivery centers relate to end customers located in the same geography . sales cycle . we sell our integrated solution through our sales organization . at the beginning of the sales process , our quota-carrying sales representatives contact prospective clients and educate them about our offerings . educating prospective clients about the benefits of our solutions 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 , our solutions design team performs a service performance analysis of our prospect 's service revenue . this includes an analysis of best practices , and benchmarks the prospect 's service revenue against industry peers . through this 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 client , inclusive of the service performance analysis process and measured from our first formal discussion with the client until execution of a new client contract , is typically longer than six months and has increased in recent periods . implementation cycle . after entering into an engagement with a new client , and to a lesser extent after adding an engagement with an existing client , we incur sales and marketing expenses related to the commissions owed to our sales personnel . these commissions are based on realized revenue that the contract delivers over time and on the estimated total annual contract value . commission amounts based on realized revenue are expensed in the period the related revenue is recognized by the company . upfront commissions based on estimated total annual contract value are capitalizable as contract acquisition costs and expensed ratably over the expected life of the applicable contract or five years if the contract is between the company and one of its long-standing clients . we also make upfront investments in technology and personnel to support the engagement . these upfront commissions and investments are typically incurred one to three months before we begin generating sales and recognizing revenue . story_separator_special_tag we do not set the price , terms or scope of services in the service contracts with end customers and do not have any obligations related to the underlying service contracts between our clients and their end customers . we also generate revenues from selling professional services for which we are the principal . professional services involves providing data integration at scale with our systems and processes , combined with client data enhancement , enablement and optimization . we typically invoice our clients for professional services on a monthly basis . 18 historically , we earned a small percentage of our total revenue from the sale of subscriptions to our cloud-based applications . we terminated most of our subscription contracts and expect revenues generated from subscriptions to continue to be insignificant in 2020. cost of revenue and gross profit our cost of revenue includes employee compensation , technology costs , including those related to the delivery of our cloud-based technologies , and allocated overhead costs . employee compensation includes salary , bonus , benefits and stock-based compensation for our dedicated service sales teams . our allocated overhead includes costs for facilities , information technology and depreciation , including amortization of internal-use software associated with our selling services revenue technology platform and cloud applications . allocated costs for facilities consist of rent , maintenance and compensation of personnel in our facilities departments . our allocated costs for information technology include costs associated with third-party data centers where we maintain our data servers , compensation of our information technology personnel and the cost of support and maintenance contracts associated with computer hardware and software . to the extent our client base or business with our existing client base expands , we may need to hire additional service sales personnel and invest in infrastructure to support such growth . our cost of revenue may fluctuate significantly and increase or decrease on an absolute basis and as a percentage of revenue in the near term , including for the reasons discussed under , “ factors affecting our performance-implementation cycle. ” operating expenses sales and marketing sales and marketing expenses consist primarily of compensation expenses and sales commissions for our sales and marketing staff , amortization of contract acquisition costs , allocated expenses and marketing programs and events . we sell our solutions through our global sales organization , which is organized across three geographic regions : nala , emea and apj . our commission plans generally provide multiple payments of commissions to our sales representatives based in part on the execution of a client contract and then on a percentage of revenue recorded during the first one to three years of the contract term . commissions paid as a percentage of recorded revenue is contingent on the sales representatives ' continued employment . we generally capitalize the amounts payable for obtaining a contract and amortize ratably to sales and marketing expense over the estimated contract term for new clients or estimated life of the client for long-standing client relationships . revenue based commissions are generally expensed to sales and marketing expense each quarter as revenue is recorded . research and development research and development expenses consist primarily of employee compensation expense , allocated costs and the cost of third-party service providers . we focus our research and development efforts on developing new products and applications related to our technology platform . we capitalize certain expenditures related to the development and enhancement of internal-use software related to our technology platform . general and administrative general and administrative expenses consist primarily of employee compensation expense for our executive , human resources , finance and legal functions and related expenses for professional fees for accounting , tax and legal services , as well as allocated expenses , which consist of depreciation , amortization of internally developed software , facility and technology costs . restructuring and other related costs restructuring and other related costs consist primarily of employees ' severance payments and related employee benefits , related legal fees and charges related to lease termination costs . during 2019 , the company announced a restructuring effort resulting in a reduction of headcount and office lease costs . in connection with this restructuring effort , the company is expected to incur additional costs through 2020. interest and other expense , net interest and other expense , net consists of interest expense associated with our convertible notes and revolver , imputed interest from finance lease payments , interest income earned on our cash and cash equivalents and marketable securities , accretion of the debt discount , amortization of debt issuance costs and foreign exchange gains and losses . interest expense and other , net decreased significantly in 2019 due to the maturity and payoff of our $ 150.0 million convertible notes in august 2018 and minimal activity on our revolver . 19 provision for income tax expense we account for income taxes using an asset and liability method , which requires the recognition of taxes payable or refundable for the current year and deferred tax assets and liabilities for the expected future tax consequences of temporary differences that currently exist between the tax basis and the financial reporting basis of our taxable subsidiaries ' assets and liabilities using the enacted tax rates in effect for the year in which the differences are expected to reverse . the effect of a change in tax rates on deferred tax assets and liabilities is recognized in operations in the period that includes the enactment date . the measurement of deferred tax assets is reduced , if necessary , by the amount of any tax benefits that , based on available evidence , are not expected to be realized . we evaluate our ability to realize the tax benefits associated with deferred tax assets on a jurisdictional basis . this evaluation utilizes the framework contained in asc 740 wherein management analyzes all positive and negative evidence available at the balance sheet date to determine whether all or some portion of our deferred tax assets will not be realized .
| results of operations for the year ended december 31 , 2019 compared to the year ended december 31 , 2018 net revenue , cost of revenue and gross profit replace_table_token_2_th net revenue decreased by $ 22.2 million , or 9 % , for the year ended december 31 , 2019 compared to the same period in 2018 , primarily due to client churn and lower bookings . cost of revenue decreased $ 11.5 million , or 7 % , for the year ended december 31 , 2019 compared to the same period in 2018 , primarily due to the following : $ 9.5 million decrease in employee related costs driven by reduction in headcount , lower revenue attainment and lower travel and entertainment expenditures ; $ 3.7 million decrease in depreciation and amortization expense primarily due to internally developed software fully amortized as of july 2018 ; and 20 $ 0.6 million decrease in professional service fees ; partially offset by $ 2.2 million increase in information technology support and facilities costs . operating expenses replace_table_token_3_th * not considered meaningful . sales and marketing sales and marketing expense decreased $ 5.6 million , or 16 % , for the year ended december 31 , 2019 compared to the same period in 2018 , primarily due to a decrease in employee related costs driven by lower revenue attainment , reduction in headcount and lower travel and entertainment expenditures . research and development research and development expense decreased $ 1.6 million , or 25 % , for the year ended december 31 , 2019 compared to the same period in 2018 , primarily due to a decrease in employee related costs driven by our restructuring effort to better align our cost structure with current business and market conditions as well as a reduction in it spend .
| 4,030 |
the bank comprises almost all of the consolidated assets and liabilities of the company and the company is dependent primarily upon the performance of the bank for the results of its operations . because of this relationship , references to management actions , strategies and results of actions apply to both the bank and the company . story_separator_special_tag increase in the deposit portfolio . the growth in deposits was primarily in the retail certificate of deposit , checking , and wholesale certificate of deposit portfolios , which increased $ 137.4 million , $ 75.6 million , and $ 57.6 million , respectively . cash flows received from the deposit portfolio were used to pay off certain maturing fhlb advances . stockholders ' equity was $ 1.39 billion at september 30 , 2016 compared to $ 1.42 billion at september 30 , 2015. the $ 23.3 million decrease was due primarily to the payment of $ 111.8 million in cash dividends , partially offset by net income of $ 83.5 million . cash dividends paid during the current fiscal year totaled $ 0.84 per share . critical accounting policies our most critical accounting policies are the methodologies used to determine the acl and fair value measurements . these policies are important to the presentation of our financial condition and results of operations , involve a high degree of complexity , and require management to make difficult and subjective judgments that may require assumptions or estimates about highly uncertain matters . the use of different judgments , assumptions , and estimates could cause reported results to differ materially . these critical accounting policies and their application are reviewed at least annually by our audit committee . the following is a description of our critical accounting policies and an explanation of the methods and assumptions underlying their application . allowance for credit losses . the company maintains an acl to absorb inherent losses in the loan portfolio based upon ongoing quarterly assessments of the loan portfolio . the acl is maintained through provisions for credit losses which are either charged or credited to income . the methodology for determining the acl is considered a critical accounting policy by management because of the high degree of judgment involved , the subjectivity of the assumptions used , and the potential for changes in economic conditions that could result in changes to the amount of the recorded acl . additionally , bank regulators review the acl and could have a differing view from management regarding the acl balance , which could result in an increase in the acl and or the recognition of additional charge-offs . although management believes that the bank has established and maintained the acl at appropriate levels , additions may be necessary if economic and other conditions worsen substantially from the current operating environment , and or if bank regulators have a differing view from management regarding the acl balance . 43 our primary lending emphasis is the origination and purchase of one- to four-family loans and , to a lesser extent , consumer loans secured by one- to four-family residential properties , resulting in a loan concentration in residential mortgage loans . we believe the primary risks inherent in our one- to four-family and consumer loan portfolios are a decline in economic conditions , elevated levels of unemployment or underemployment , and declines in residential real estate values . changes in any one or a combination of these events may adversely affect borrowers ' ability to repay their loans , resulting in increased delinquencies , non-performing assets , loan losses , and future loan loss provisions . although the commercial real estate loan portfolio is subject to the same risk of declines in economic conditions , the primary risk characteristics inherent in this portfolio include the ability of the borrower to sustain sufficient cash flows from leases and to control expenses to satisfy their contractual debt payments , and or the ability to utilize personal and or business resources to pay their contractual debt payments if the cash flows are not sufficient . additionally , if the bank were to repossess the secured collateral of a commercial real estate loan , the pool of potential buyers is limited more than that for a residential property . therefore , the bank could hold the property for an extended period of time and or potentially be forced to sell at a discounted price , resulting in additional losses . each quarter , we prepare a formula analysis model which segregates our loan portfolio into categories based on certain risk characteristics such as loan type ( one- to four-family , commercial real estate , etc . ) , interest payments ( fixed-rate and adjustable-rate ) , loan source ( originated , correspondent purchased , or bulk purchased ) , ltv ratios , borrower 's credit score and payment status ( i.e . current or number of days delinquent ) . consumer loans , such as second mortgages and home equity lines of credit , with the same underlying collateral as a one- to four-family loan are combined with the one- to four-family loan in the formula analysis model to calculate a combined ltv ratio . historical loss factors are applied to each loan category in the formula analysis model . additionally , qualitative loss factors that management believes impact the collectability of the loan portfolio as of the evaluation date are applied to each loan category . qualitative loss factors increase as loans are classified or become delinquent . see `` part ii , item 8. financial statements and supplementary data – notes to consolidated financial statements – note 1. summary of significant accounting policies '' for additional information related to the loss factors utilized in the formula analysis model . the loss factors applied in the formula analysis model are reviewed quarterly by management to assess whether the factors adequately cover probable and estimable losses inherent in the loan portfolio . story_separator_special_tag we rely on our marketing efforts and customer service reputation to attract mortgage business from walk-in customers , customers that apply online , and existing customers . retail financial services . we offer a wide array of deposit products and retail services . these products include checking , savings , money market , certificates of deposit , and retirement accounts . they are provided through a branch network of 47 locations , including traditional branches and retail in-store locations , our call center which operates on extended hours , mobile banking , and online banking and bill payment services . cost control . we generally are very effective at controlling our costs of operations . by using technology , we are able to centralize our loan servicing and deposit support functions for efficient processing . we have located our branches to serve a broad range of customers through relatively few branch locations . our average deposit base per traditional branch at september 30 , 2016 was approximately $ 122.0 million . this large average deposit base per branch helps to control costs . our one- to four-family lending strategy and our effective management of credit risk allows us to service a large portfolio of loans at efficient levels because it costs less to service a portfolio of performing loans . asset quality . we utilize underwriting standards for our lending products that are designed to limit our exposure to credit risk . we require complete documentation for both originated and purchased loans , and make credit decisions based on our assessment of the borrower 's ability to repay the loan in accordance with its terms . capital position . our policy has always been to protect the safety and soundness of the bank through credit and operational risk management , balance sheet strength , and sound operations . the end result of these activities has been a capital ratio in excess of the well-capitalized standards set by the occ . we believe that maintaining a strong capital position safeguards the long-term interests of the bank , the company , and our stockholders . stockholder value . we strive to enhance stockholder value while maintaining a strong capital position . one way that we continue to provide returns to stockholders is through our dividend payments . total dividends declared and paid during fiscal year 2016 were $ 111.8 million , including a $ 0.25 per share , or $ 33.3 million , true blue® capitol dividend paid in june 2016. the company 's cash dividend payout policy is reviewed quarterly by management and the board of directors , and the ability to pay dividends under the policy depends upon a number of factors , including the company 's financial condition and results of operations , regulatory capital requirements , regulatory limitations on the bank 's ability to make capital distributions to the company , and the amount of cash at the holding company level . it is the intent of the board of directors to continue to pay regular quarterly and special cash dividends each year , and for fiscal year 2017 , it is the intent of the board of directors and management to continue with the payout of 100 % of the company 's earnings to its stockholders . interest rate risk management . changes in interest rates are our primary market risk as our balance sheet is almost entirely comprised of interest-earning assets and interest-bearing liabilities . as such , fluctuations in interest rates have a significant impact not only upon our net income but also upon the cash flows related to those assets and liabilities and the market value of our assets and liabilities . in order to maintain what we believe to be acceptable levels of net interest income in varying interest rate environments , we actively manage our interest rate risk and assume a moderate amount of interest rate risk consistent with board policies . 46 financial condition assets . total assets were $ 9.27 billion at september 30 , 2016 compared to $ 9.84 billion at september 30 , 2015. the $ 576.9 million decrease was due primarily to a $ 490.9 million decrease in cash and cash equivalents and a $ 40.6 million decrease in fhlb stock , both due primarily to the removal of the entire daily leverage strategy at september 30 , 2016 compared to $ 700.0 million of the daily leverage strategy that remained in place at september 30 , 2015. loans receivable . loans receivable , net , increased $ 333.0 million to $ 6.96 billion at september 30 , 2016 from $ 6.63 billion at september 30 , 2015. the growth in the loan portfolio was mainly funded with cash flows from the securities portfolio and was primarily in the correspondent one- to four-family purchased loan portfolio . the following table presents the balance and weighted average rate of our loan portfolio as of the dates indicated . within the one- to four-family loan portfolio at september 30 , 2016 , 60 % of the loans had a balance at origination of less than $ 417 thousand . replace_table_token_20_th 47 loan activity - the following tables summarize activity in the loan portfolio , along with weighted average rates where applicable , for the periods indicated , excluding changes in acl , discounts/unearned loan fees , and premiums/deferred costs . loans that were paid-off as a result of refinances are included in repayments . loan endorsements are not included in the activity in the following tables because a new loan is not generated at the time of the endorsement . the endorsed balance and rate are included in the ending loan portfolio balance and rate . during the fiscal years ended september 30 , 2016 and 2015 , the bank endorsed $ 160.0 million and $ 121.6 million of one- to four-family loans , respectively , reducing the average rate on those loans by 91 and 98 basis points , respectively .
| executive summary the company provides a full range of retail banking services through the bank , which is a wholly-owned subsidiary of the company , headquartered in topeka kansas . the bank has 37 traditional and 10 in-store banking offices serving primarily the metropolitan areas of topeka , wichita , lawrence , manhattan , emporia and salina , kansas and portions of the metropolitan area of greater kansas city . we have been , and intend to continue to be , a community-oriented financial institution offering a variety of financial services to meet the needs of the communities we serve . the company 's results of operations are primarily dependent on net interest income , which is the difference between the interest earned on loans , mbs , investment securities , and cash , and the interest paid on deposits and borrowings . on a weekly basis , management reviews deposit flows , loan demand , cash levels , and changes in several market rates to assess all pricing strategies . the bank 's pricing strategy for first mortgage loan products includes setting interest rates based on secondary market prices and local competitor pricing for our local lending markets , and secondary market prices and national competitor pricing for our correspondent lending markets . generally , deposit pricing is based upon a survey of competitors in the bank 's market areas , and the need to attract funding and retain maturing deposits . the majority of our loans are fixed-rate products with maturities up to 30 years , while the majority of our retail deposits have stated maturities or repricing dates of less than two years . economic conditions in the bank 's local market areas have a significant impact on the ability of borrowers to repay loans and the value of the collateral securing these loans .
| 4,031 |
at may 27 , 2018 , we operated 1,746 restaurants through subsidiaries in the united states and canada under the olive garden ® , longhorn steakhouse ® , cheddar 's scratch kitchen ® , yard house ® , the capital grille ® , bahama breeze ® , seasons 52 ® and eddie v 's prime seafood ® trademarks . we own and operate all of our restaurants in the united states and canada , except for 3 joint venture restaurants managed by us and 36 franchised restaurants . we also have 35 franchised restaurants in operation located in latin america , the middle east and malaysia . all intercompany balances and transactions have been eliminated in consolidation . on april 24 , 2017 , we completed the acquisition of cheddar 's scratch kitchen for $ 799.8 million in total consideration . the acquired operations of cheddar 's scratch kitchen included 140 company-owned restaurants and 25 franchised restaurants . on august 28 , 2017 , we completed the acquisition of 11 cheddar 's scratch kitchen franchised restaurants from an existing franchisee . the results of operations , financial position and cash flows of cheddar 's scratch kitchen are included in our consolidated financial statements as of the date of acquisition . see note 2 of the notes to consolidated financial statements ( part ii , item 8 of this report ) for further details . we believe that capable operators of strong , multi-unit brands have the opportunity to increase their share of the restaurant industry 's full-service segment . generally , the restaurant industry is considered to be comprised of three segments : quick service , fast casual , and full service . all of our restaurants fall within the full-service segment , which is highly fragmented and includes many independent operators and small chains . we believe we have strong brands and that the breadth and depth of our experience and expertise sets us apart in the full-service segment of the restaurant industry . this collective capability is the product of investments over many years in areas that are critical to success in our business , including restaurant operations excellence , brand management excellence , supply chain , talent management and information technology , among other things . with a focus on growing same-restaurant sales , we 've implemented a “ back-to-basics ” approach rooted in strong operating fundamentals . we 're focused on improving culinary innovation and execution inside each of our brands , delivering attentive service to each and every one of our guests , and creating an inviting and engaging atmosphere inside our restaurants . we support these priorities with smart and relevant integrated marketing programs that resonate with our guests . by delivering on these operational and brand-building imperatives , we expect to increase our market share through new restaurant and same-restaurant sales growth and deliver best-in-class profitability . the darden support structure enables our brands to achieve their ultimate potential through : ( 1 ) driving advantages in supply chain and general and administrative support ; ( 2 ) applying insights collected from our significant guest and transactional databases to enhance guest relationships and identify new opportunities to drive sales growth ; ( 3 ) relentlessly driving operating efficiencies and continuous improvement , operating with a sense of urgency and inspiring a performance-driven culture ; and ( 4 ) our commitment to rigorous strategic planning . we seek to increase profits by leveraging our fixed and semi-fixed costs with sales from new restaurants and increased guest traffic and sales at existing restaurants . to evaluate our operations and assess our financial performance , we monitor a number of operating measures , with a special focus on two key factors : same-restaurant sales – which is a year-over-year 52-week comparison of each period 's sales volumes for restaurants open at least 16 months , including recently acquired restaurants , regardless of when the restaurants were acquired ; and segment profit – which is restaurant sales , less food and beverage costs , restaurant labor costs , restaurant expenses and marketing expenses ( sometimes referred to as restaurant-level earnings ) . increasing same-restaurant sales can improve segment profit because these incremental sales provide better leverage of our fixed and semi-fixed restaurant-level costs . a restaurant brand can generate same-restaurant sales increases through increases in guest traffic , increases in the average guest check , or a combination of the two . the average guest check can be impacted by menu price changes and by the mix of menu items sold . for each restaurant brand , we gather daily sales data and regularly analyze the guest traffic counts and the mix of menu items sold to aid in developing menu pricing , product offerings and promotional strategies . we focus on balancing our pricing and product offerings with other initiatives to produce sustainable same-restaurant 27 sales growth . we compute same-restaurant sales using restaurants open at least 16 months because this period is generally required for new restaurant sales levels to normalize . sales at newly opened restaurants generally do not make a significant contribution to profitability in their initial months of operation due to operating inefficiencies . our sales and expenses can be impacted significantly by the number and timing of new restaurant openings and closings , and relocations and remodeling of existing restaurants . pre-opening expenses each period reflect the costs associated with opening new restaurants in current and future periods . story_separator_special_tag style= '' font-family : inherit ; font-size:10pt ; '' > 2017 and fiscal 2016 , respectively . the sales increase for fiscal 2018 was primarily driven by the cheddar 's scratch kitchen acquisition and the incremental sales from new yard house , bahama breeze and eddie v 's restaurants . story_separator_special_tag while we are able to make a reasonable estimate of the impacts of the tax act , adjustments may occur and may be affected by other factors , including , but not limited to , further refinement of our calculations , changes in interpretations and assumptions and regulatory changes from the internal revenue service ( irs ) , the sec , the financial accounting standards board and various tax jurisdictions . the effective income tax rates for fiscal 2018 , 2017 and 2016 for continuing operations were 0.3 percent , 24.3 percent and 20.0 percent , respectively . the decrease in the effective income tax rate for fiscal 2018 compared to fiscal 2017 was primarily due to the tax act and lower earnings before income taxes for fiscal 2018 driven primarily by debt retirement costs . the increase in our effective income tax rate for fiscal 2017 compared to fiscal 2016 was primarily due to higher earnings before income taxes . net earnings and net earnings per share from continuing operations net earnings from continuing operations for fiscal 2018 were $ 603.8 million ( $ 4.79 per diluted share ) compared with net earnings from continuing operations for fiscal 2017 of $ 482.5 million ( $ 3.83 per diluted share ) and net earnings from continuing operations for fiscal 2016 of $ 359.7 million ( $ 2.78 per diluted share ) . net earnings and diluted net earnings per share from continuing operations for fiscal 2018 increased 25.1 percent compared with fiscal 2017 . our diluted per share results from continuing operations for fiscal 2018 were positively impacted by the tax act , by approximately $ 0.30 due to the lower federal corporate tax rate enacted during the third quarter of fiscal 2018 , partially offset by approximately $ 0.10 related to workforce investments . our diluted per share results from continuing operations for fiscal 2018 were also positively impacted by the tax act , by approximately $ 0.62 due to a net benefit from deferred tax revaluation . our diluted per share results from continuing operations for fiscal 2018 were adversely impacted by approximately $ 0.54 related to debt retirement costs and approximately $ 0.10 related to costs associated with the integration of cheddar 's scratch kitchen . net earnings from continuing operations for fiscal 2017 increased 34.1 percent and diluted net earnings per share from continuing operations increased 37.8 percent compared with fiscal 2016 . our diluted per share results from continuing operations for fiscal 2017 were adversely impacted by approximately $ 0.10 due to a non-cash pension settlement charge and approximately $ 0.09 related to the acquisition and integration of cheddar 's scratch kitchen . 32 earnings ( loss ) from discontinued operations on an after-tax basis , results from discontinued operations for fiscal 2018 were a net loss of $ 7.8 million ( $ 0.06 per diluted share ) compared with a net loss for fiscal 2017 of $ 3.4 million ( $ 0.03 per diluted share ) and earnings from discontinued operations for fiscal 2016 of $ 15.3 million ( $ 0.12 per diluted share ) . earnings from discontinued operations in fiscal 2016 reflect pre-tax gains of $ 17.9 million related to the sale of red lobster . segment results we manage our restaurant brands , olive garden , longhorn steakhouse , cheddar 's scratch kitchen , the capital grille , yard house , bahama breeze , seasons 52 and eddie v 's in the u.s. and canada as operating segments . we aggregate our operating segments into reportable segments based on a combination of the size , economic characteristics and sub-segment of full-service dining within which each brand operates . our four reportable segments are : ( 1 ) olive garden , ( 2 ) longhorn steakhouse , ( 3 ) fine dining and ( 4 ) other business . see note 6 of the notes to consolidated financial statements ( part ii , item 8 of this report ) for further details . our management uses segment profit as the measure for assessing performance of our segments . the following table presents segment profit margin for the periods indicated : replace_table_token_14_th the increase in the olive garden segment profit margin for fiscal 2018 was driven primarily by leveraging positive same-restaurant sales . the decrease in olive garden 's segment profit margin for fiscal 2017 was driven primarily by additional rent expense resulting from the real estate transactions . the increase in the longhorn segment profit margin for fiscal 2018 was driven primarily by leveraging positive same-restaurant sales . longhorn 's segment profit margins for fiscal 2017 were flat as additional rent expense resulting from the real estate transactions was offset by food cost deflation . the increase in the fine dining segment profit margin for fiscal 2018 was driven primarily by leveraging positive same-restaurant sales . the increase in fine dining 's segment profit margins for fiscal 2017 was driven primarily by food cost deflation , primarily beef , partially offset by higher restaurant expenses . the decrease in other business ' segment profit margin for fiscal 2018 was primarily driven by the impact of cheddar 's scratch kitchen 's margin mix and the shift of consumer-packaged goods revenue from the other business segment to primarily the olive garden segment . the other business segment profit margins for fiscal 2017 were flat as food cost deflation was offset by higher labor costs . seasonality our sales volumes fluctuate seasonally . typically , our average sales per restaurant are highest in the winter and spring , followed by the summer , and lowest in the fall . holidays , changes in the economy , severe weather and similar conditions may impact sales volumes seasonally in some operating regions . because of the seasonality of our business , results for any quarter are not necessarily indicative of the results that may be achieved for the full fiscal year . impact of inflation we attempt to minimize the annual effects of inflation through appropriate planning , operating practices and menu price increases .
| fiscal 2018 financial highlights our sales from continuing operations were $ 8.08 billion in fiscal 2018 compared to $ 7.17 billion in fiscal 2017 . the 12.7 percent increase in sales from continuing operations was primarily driven by revenue from the 151 acquired cheddar 's scratch kitchen restaurants , a combined darden same-restaurant sales increase of 2.3 percent , excluding cheddar 's scratch kitchen , and the addition of 40 net new company-owned restaurants . net earnings from continuing operations for fiscal 2018 were $ 603.8 million ( $ 4.79 per diluted share ) compared with net earnings from continuing operations for fiscal 2017 of $ 482.5 million ( $ 3.83 per diluted share ) . net earnings and diluted net earnings per share from continuing operations for fiscal 2018 increased 25.1 percent compared with fiscal 2017 . our net loss from discontinued operations was $ 7.8 million ( $ 0.06 per diluted share ) for fiscal 2018 , compared with a net loss from discontinued operations of $ 3.4 million ( $ 0.03 per diluted share ) for fiscal 2017 . when combined with results from continuing operations , our diluted net earnings per share were $ 4.73 and $ 3.80 for fiscal 2018 and 2017 , respectively . outlook we expect fiscal 2019 sales from continuing operations to increase between 4.0 percent and 5.0 percent driven by combined darden same-restaurant sales growth of 1.0 percent to 2.0 percent and approximately 45 to 50 new restaurants . in fiscal 2019 , we expect our annual effective tax rate to be between 11.0 percent and 12.0 percent and we expect capital expenditures incurred to build new restaurants , remodel and maintain existing restaurants and technology initiatives to be between $ 425.0 million and $ 475.0 million . in june 2018 , we announced a quarterly dividend of $ 0.75 per share , payable on august 1 , 2018 .
| 4,032 |
the company and pure energy entered into a revised convertible promissory note to replace the power up convertible promissory note in the amount of $ 78,427 , with a maturity date of september 27 , 2018 , and bears interest of 8 % . in conjunction with this purchase by pure energy , the power up had a prepayment penalty of $ 28,496 , which pure energy paid to power up . the company issued a second convertible promissory note for $ 33,842 , which included the prepayment penalty and legal fees of $ 5,346 . the second convertible promissory note matures on september 27 , 2018 and bears interest of 8 % . on june 20 , 2017 , the company executed a convertible promissory note with power up for $ 38,000 . the note has a conversion discount of 35 % based on the lowest closing price of the 20 days prior to conversion . the company recorded a debt discount of $ 38,000 and as of june 30 , 2017 , had recorded $ 19,107 of amortization . the note matures on february 23 , 2018 and bears interest at 8 % . as of june 30 , 2017 , there is $ 137 of accrued interest . note 7 – stockholders ' equity series a preferred stock on may 24 , 2016 , the board of directors of the company authorized amending the company 's articles of incorporation to authorize 10,000,000 shares of “ blank check ” preferred stock and designate 1,000,000 of the shares as series a preferred stock . each share of the series a preferred stock is entitled to 500 votes and is convertible into 100 shares of common stock . on may 25 , 2016 , perry converted 68,401,200 shares of common stock into 684,012 shares of series a preferred stock . see note 5. on may 25 , 2016 , cowan converted 26,401,000 shares of common stock into 264,010 shares of series a preferred stock . see note 5. common stock the company was authorized to issue up to 75,000,000 shares of common stock , par value $ 0.001 per share . on january 21 , 2015 , the company increased its authorized capital to 500,000,000 shares of common stock . each outstanding share of common stock entitles the holder to one vote per share on all matters submitted to a stockholder vote . all shares of common stock are non-assessable and non-cumulative , with no pre-emptive rights . on november 6 , 2014 , the company merged with freedom leaf inc. , a private nevada corporation ( see note 1 ) . after the completion of the merger , there were 173,401,200 shares of common stock issued , issuable and outstanding . on november 10 , 2014 , the company issued 780,000 shares of common stock to vincent moreno for consulting services from november 10 , 2014 through april 10 , 2015. the company 's stock is thinly traded therefore the valuation of the issuance was based on the value of the services , which was $ 12,500 . on october 12 , 2015 , the company issued 1,700,000 shares of common stock to various employees as part of compensation . the current price at that date was $ 0.20 . our common stock is thinly traded therefore our price , as management has determined , may not be indicative of our valuation . previously , the company issued common stock for services to unrelated parties and the common stock was valued at $ 0.20 , therefore , the stock was valued at $ 0.20 or $ 340,000 was recorded . on october 12 , 2015 , the company issued 2,000,000 shares of common stock to raymond medeiros , a director of the company , for his past services . the current price at that date was $ 0.20 . our common stock is thinly traded therefore our price , as management has determined , may not be indicative of our valuation . previously , the company issued common stock for services to unrelated parties and the common stock was valued at $ 0.20 , therefore , the stock was valued at $ 0.20 or $ 400,000 was recorded . on october 12 , 2015 , the company issued 3,000,000 shares of common stock to raymond medeiros , a director of the company , for his future services . the issuance will vest over a period of twelve months . the current price at that date was $ 0.20 . our common stock is thinly traded therefore our price , as management has determined , may not be indicative of our valuation . previously , the company issued common stock for services to unrelated parties and the common stock was valued at $ 0.20 , therefore , the stock was valued at $ 0.20 or $ 600,000 was recorded . f- 17 on october 12 , 2015 , the company issued 2,010,000 shares of common stock to various subcontractors for their services . the current price at that date was $ 0.20 . our common stock is thinly traded therefore our price , as management has determined , may not be indicative of our valuation . previously , the company issued common stock for services to unrelated parties and the common stock was valued at $ 0.20 , therefore , the stock was valued at $ 0.20 or $ 402,000 , was recorded . story_separator_special_tag upon conversion or exercise of a derivative instrument , the instrument is marked to fair value at the conversion date and then that fair value is reclassified to equity . equity instruments that are initially classified as equity that become subject to reclassification under this accounting standard are reclassified to liability at the fair value of the instrument on the reclassification date . impairment of long-lived assets . the company accounts for long-lived assets in accordance with the provisions of statement of financial accounting standards asc 360-10 , “ accounting for the impairment or disposal of long-lived assets ” . this statement requires that long-lived assets and certain identifiable intangibles be reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable . recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to future undiscounted net cash flows expected to be generated by the asset . if such assets are considered to be impaired , the impairment to be recognized is measured by the amount by which the carrying amount of the assets exceeds the fair value of the assets . assets to be disposed of are reported at the lower of the carrying amount or fair value less costs to sell . fair value of financial instruments and fair value measurements . the company measures their financial assets and liabilities in accordance with generally accepted accounting principles . for certain of our financial instruments , including cash , accounts payable , accrued expenses escrow liability and short-term loans the carrying amounts approximate fair value due to their short maturities . we have adopted accounting guidance for financial and non-financial assets and liabilities . the adoption did not have a material impact on our results of operations , financial position or liquidity . this standard defines fair value , provides guidance for measuring fair value and requires certain disclosures . this standard does not require any new fair value measurements , but rather applies to all other accounting pronouncements that require or permit fair value measurements . this guidance does not apply to measurements related to share-based payments . this guidance discusses valuation techniques , such as the market approach ( comparable market prices ) , the income approach ( present value of future income or cash flow ) , and the cost approach ( cost to replace the service capacity of an asset or replacement cost ) . the guidance utilizes a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value into three broad levels . the following is a brief description of those three levels : 17 level 1 : observable inputs such as quoted prices ( unadjusted ) in active markets for identical assets or liabilities . level 2 : inputs other than quoted prices that are observable , either directly or indirectly . these include quoted prices for similar assets or liabilities in active markets and quoted prices for identical or similar assets or liabilities in markets that are not active . level 3 : unobservable inputs in which little or no market data exists , therefore developed using estimates and assumptions developed by us , which reflect those that a market participant would use . revenue recognition . the company recognizes revenue for our services in accordance with asc 605-10 , `` revenue recognition in financial statements . '' under these guidelines , revenue is recognized on transactions when all of the following exist : persuasive evidence of an arrangement did exist , delivery of service has occurred , the sales price to the buyer is fixed or determinable and collectability is reasonably assured . the company has five primary revenue operating classes as follows : consulting services . advertising services . branding , marketing and selling products for companies . educational seminars . selling branded products . stock-based compensation . the company accounts for stock-based instruments issued to employees in accordance with asc topic 718. asc topic 718 requires companies to recognize in the statement of operations the grant-date fair value of stock options and other equity based compensation issued to employees . the company accounts for non-employee share-based awards in accordance with asc topic 505-50. the value of the portion of an award that is ultimately expected to vest is recognized as an expense over the requisite service periods using the straight-line attribution method . the company estimates the fair value of each stock option at the grant date by using the black-scholes option-pricing model . the company estimates the fair value of each stock option at the grant date by using the black-scholes option-pricing model . non-gaap financial measures adjusted net earnings in addition to reporting net loss from operations as defined under generally accepted accounting principles ( “ gaap ” ) , the company presents adjusted net earnings from operations ( adjusted net earnings ) , which is a non-gaap performance measure . adjusted net earnings consist of net loss from operations after adjustment for those items shown in the table below . adjusted net earnings does not represent , and should not be considered an alternative to , gaap measurements such as net loss from operations ( its most comparable gaap financial measure ) , and the company 's calculations thereof may not be comparable to similarly titled measures reported by other companies . by eliminating the items shown below , the company believes that the measure is useful to investors because similar measures are frequently used by securities analysts , investors , and other interested parties in their evaluation of companies . the company 's management does not view adjusted net earnings in isolation and also uses other measurements , such as net loss from operation and revenues to measure operating performance . the following table provides a reconciliation of net loss from operations , the most directly comparable gaap measure ,
| results of operations revenue . for the year ended june 30 , 2017 , our revenue was $ 817,457 , compared to $ 118,473 for the same period in 2016. this increase in revenue was attributable to increased sales related to increased magazine subscriptions and licensing fees . operating expenses : direct costs of revenue . for the year ended june 30 , 2017 , direct costs of revenue were $ 124,290 compared to $ 132,381 for the same period in 2016. as a percent of revenue , direct costs of revenue were 15.2 % and 111.7 % , respectively , for 2017 and 2016. general and administrative expenses . for the year ended june 30 , 2017 , general and administrative expenses were $ 1,421,224 compared to $ 2,685,025 for the same period in 2016. the increase was due to the increase in operations and stock-based compensation ( $ 750,990 compared to $ 2,258,863 for the years ended june 30 , 2017 and 2016 , respectively ) . net loss . we generated net losses of $ 910,650 for the year ended june 30 , 2017 , compared to $ 3,011,220 for the same period in 2016. liquidity and capital resources general . at june 30 , 2017 , we had cash and cash equivalents of $ 2,498. we have historically met our cash needs through a combination of cash flows from operating activities and proceeds from private placements of our securities and loans . our cash requirements are generally for selling , general and administrative activities . we believe that our cash balance is not sufficient to finance our cash requirements for expected operational activities , capital improvements , and partial repayment of debt through the next 12 months .
| 4,033 |
factors that might cause such differences include , but are not limited to , those discussed in part i , item 1a of this form 10-k under the heading “ risk factors , ” which are incorporated herein by reference . the following discussion should be read in conjunction with the consolidated financial statements and notes thereto included in part ii , item 8 of this form 10-k. all information presented herein is based on the company 's fiscal calendar . unless otherwise stated , references to particular years , quarters , months or periods refer to the company 's fiscal years ended in september and the associated quarters , months and periods of those fiscal years . each of the terms the “ company ” and “ apple ” as used herein refers collectively to apple inc. and its wholly-owned subsidiaries , unless otherwise stated . the company assumes no obligation to revise or update any forward-looking statements for any reason , except as required by law . story_separator_special_tag style= '' font-family : helvetica , sans-serif ; font-size:9pt ; font-style : italic ; '' > iphone the following table presents iphone net sales and unit sales information for 2017 , 2016 and 2015 ( dollars in millions and units in thousands ) : replace_table_token_5_th iphone net sales increased during 2017 compared to 2016 due to higher iphone unit sales and a different mix of iphones with higher average selling prices . the weakness in foreign currencies relative to the u.s. dollar had an unfavorable impact on iphone net sales during 2017 compared to 2016. iphone net sales decreased during 2016 compared to 2015. the company believes the sales decline was due primarily to a lower rate of iphone upgrades during 2016 compared to 2015 and challenging macroeconomic conditions in a number of major markets in 2016. average selling prices for iphone were lower year-over-year during 2016 due primarily to a different mix of iphones , including the iphone se introduced in 2016 , and the effect of weakness in most foreign currencies relative to the u.s. dollar . ipad the following table presents ipad net sales and unit sales information for 2017 , 2016 and 2015 ( dollars in millions and units in thousands ) : replace_table_token_6_th ipad net sales decreased during 2017 compared to 2016 due to lower ipad unit sales and a different mix of ipads with lower average selling prices . the weakness in foreign currencies relative to the u.s. dollar had an unfavorable impact on ipad net sales during 2017 compared to 2016. ipad net sales decreased during 2016 compared to 2015 primarily due to lower unit sales and the effect of weakness in most foreign currencies relative to the u.s. dollar , partially offset by higher average selling price due to a shift in mix to higher-priced ipads . mac the following table presents mac net sales and unit sales information for 2017 , 2016 and 2015 ( dollars in millions and units in thousands ) : replace_table_token_7_th mac net sales increased during 2017 compared to 2016 due primarily to a different mix of macs with higher average selling prices and higher mac unit sales . the weakness in foreign currencies relative to the u.s. dollar had an unfavorable impact on mac net sales during 2017 compared to 2016. mac net sales decreased during 2016 compared to 2015 primarily due to lower year-over-year mac unit sales , which declined at rates similar to the overall market . the effect of weakness in most foreign currencies relative to the u.s. dollar also negatively impacted mac net sales . apple inc. | 2017 form 10-k | 24 services the following table presents services net sales information for 2017 , 2016 and 2015 ( dollars in millions ) : replace_table_token_8_th the year-over-year growth in services net sales in 2017 was due primarily to increases in app store and licensing sales . services net sales in the fourth quarter of 2017 included a favorable one-time adjustment of $ 640 million due to a change in estimate based on the availability of additional supporting information . the year-over-year increase in services net sales in 2016 was due primarily to growth from the app store , licensing and applecare sales , partially offset by the effect of weakness in most foreign currencies relative to the u.s. dollar . during the first quarter of 2016 , the company received $ 548 million from samsung electronics co. , ltd. related to its patent infringement lawsuit , which was recorded as licensing net sales within services . segment operating performance the company manages its business primarily on a geographic basis . the company 's reportable segments consist of the americas , europe , greater china , japan and rest of asia pacific . americas includes both north and south america . europe includes european countries , as well as india , the middle east and africa . greater china includes china , hong kong and taiwan . rest of asia pacific includes australia and those asian countries not included in the company 's other reportable segments . although the reportable segments provide similar hardware and software products and similar services , each one is managed separately to better align with the location of the company 's customers and distribution partners and the unique market dynamics of each geographic region . further information regarding the company 's reportable segments can be found in part ii , item 8 of this form 10-k in the notes to consolidated financial statements in note 11 , “ segment information and geographic data. ” americas the following table presents americas net sales information for 2017 , 2016 and 2015 ( dollars in millions ) : replace_table_token_9_th americas net sales increased during 2017 compared to 2016 due primarily to higher net sales of iphone , services and mac . americas net sales decreased during 2016 compared to 2015 due primarily to lower net sales of iphone . story_separator_special_tag other income/ ( expense ) , net other income/ ( expense ) , net for 2017 , 2016 and 2015 was as follows ( dollars in millions ) : replace_table_token_16_th the year-over-year increase in other income/ ( expense ) , net during 2017 was due primarily to higher interest income and the favorable impact of foreign exchange-related items , partially offset by higher interest expense on debt . the year-over-year increase in other income/ ( expense ) , net during 2016 was due primarily to higher interest income , partially offset by higher interest expense on debt and the unfavorable impact of foreign exchange-related items . the weighted-average interest rate earned by the company on its cash , cash equivalents and marketable securities was 1.99 % , 1.73 % and 1.49 % in 2017 , 2016 and 2015 , respectively . apple inc. | 2017 form 10-k | 27 provision for income taxes provision for income taxes and effective tax rates for 2017 , 2016 and 2015 were as follows ( dollars in millions ) : replace_table_token_17_th the company 's effective tax rates for 2017 , 2016 and 2015 differ from the statutory federal income tax rate of 35 % due primarily to certain undistributed foreign earnings , a substantial portion of which was generated by subsidiaries organized in ireland , for which no u.s. taxes are provided when such earnings are intended to be indefinitely reinvested outside the u.s. the lower effective tax rate in 2017 compared to 2016 was due to a different geographic mix of earnings and higher u.s. r & d tax credits . the lower effective tax rate in 2016 compared to 2015 was due primarily to greater r & d tax credits . as of september 30 , 2017 , the company had deferred tax assets arising from deductible temporary differences , tax losses and tax credits of $ 3.9 billion and deferred tax liabilities of $ 31.5 billion . management believes it is more likely than not that forecasted income , including income that may be generated as a result of certain tax planning strategies , together with future reversals of existing taxable temporary differences , will be sufficient to fully recover the deferred tax assets . the company will continue to evaluate the realizability of deferred tax assets quarterly by assessing the need for and the amount of a valuation allowance . the irs concluded its review of the years 2010 through 2012 during the third quarter of 2017. all years prior to 2013 are closed , and the irs is currently examining the years 2013 through 2015. the company is also subject to audits by state , local and foreign tax authorities . in major states and major foreign jurisdictions , the years subsequent to 2003 generally remain open and could be subject to examination by the taxing authorities . management believes that adequate provisions have been made for any adjustments that may result from tax examinations . however , the outcome of tax audits can not be predicted with certainty . if any issues addressed in the company 's tax audits are resolved in a manner not consistent with management 's expectations , the company could be required to adjust its provision for income taxes in the period such resolution occurs . on august 30 , 2016 , the european commission announced its decision that ireland granted state aid to the company by providing tax opinions in 1991 and 2007 concerning the tax allocation of profits of the irish branches of two subsidiaries of the company ( the “ state aid decision ” ) . the state aid decision orders ireland to calculate and recover additional taxes from the company for the period june 2003 through december 2014. irish legislative changes , effective as of january 2015 , eliminated the application of the tax opinions from that date forward . the company believes the state aid decision to be without merit and appealed to the general court of the court of justice of the european union . ireland has also appealed the state aid decision . although ireland is still computing the recovery amount , the company expects the amount to be in line with the european commission 's announced recovery amount of 13 billion , plus interest of 1 billion . once the recovery amount is finalized by ireland , the company anticipates funding it , including interest , out of foreign cash . these amounts are expected to be placed into escrow in 2018 , where they will remain pending conclusion of all appeals . the company believes that any incremental irish corporate income taxes potentially due related to the state aid decision would be creditable against u.s. taxes . recent accounting pronouncements hedging in august 2017 , the financial accounting standards board ( “ fasb ” ) issued accounting standards update ( “ asu ” ) no . 2017-12 , derivatives and hedging ( topic 815 ) : targeted improvements to accounting for hedging activities ( “ asu 2017-12 ” ) . asu 2017-12 expands component and fair value hedging , specifies the presentation of the effects of hedging instruments , and eliminates the separate measurement and presentation of hedge ineffectiveness . the company will adopt asu 2017-12 in its first quarter of 2020 utilizing the modified retrospective transition method and is currently evaluating the impact of adoption on its consolidated financial statements . restricted cash in november 2016 , the fasb issued asu no . 2016-18 , statement of cash flows ( topic 230 ) : restricted cash ( “ asu 2016-18 ” ) , which enhances and clarifies the guidance on the classification and presentation of restricted cash in the statement of cash flows . the company will adopt asu 2016-18 in its first quarter of 2019 utilizing the retrospective transition method . currently , the company 's restricted cash balance is not significant . apple inc. | 2017 form 10-k | 28 income taxes in october 2016 , the fasb issued asu no .
| overview and highlights the company designs , manufactures and markets mobile communication and media devices and personal computers , and sells a variety of related software , services , accessories , networking solutions and third-party digital content and applications . the company 's products and services include iphone , ipad , mac , apple watch , apple tv , a portfolio of consumer and professional software applications , ios , macos , watchos and tvos operating systems , icloud , apple pay and a variety of accessory , service and support offerings . the company sells and delivers digital content and applications through the itunes store , app store , mac app store , tv app store , ibooks store and apple music ( collectively “ digital content and services ” ) . the company sells its products worldwide through its retail stores , online stores and direct sales force , as well as through third-party cellular network carriers , wholesalers , retailers and value-added resellers . in addition , the company sells a variety of third-party apple-compatible products , including application software and various accessories through its retail and online stores . the company sells to consumers , small and mid-sized businesses and education , enterprise and government customers . fiscal period the company 's fiscal year is the 52 or 53-week period that ends on the last saturday of september . the company 's fiscal year 2017 included 53 weeks and ended on september 30 , 2017 . a 14th week was included in the first quarter of 2017 , as is done every five or six years , to realign the company 's fiscal quarters with calendar quarters . the company 's fiscal years 2016 and 2015 ended on september 24 , 2016 and september 26 , 2015 , respectively , and spanned 52 weeks each .
| 4,034 |
the approximate redemption value of the non-controlling interests is equivalent to the units outstanding valued at the closing common share price at the end of the period , which we assume would be equal to the value provided to the limited partners upon liquidation of the operating partnership . the company 's revenues , expenses and net income or loss will include amounts attributable to both the controlling and non-controlling interests . amounts attributable to non-controlling interests will be deducted from net income or loss to arrive at net income or loss attributable to common shareholders on the statement of operations . earnings per share basic earnings per share ( eps ) is computed by dividing the net income ( loss ) attributable to common shareholders by the weighted average number of common shares outstanding for the period . diluted eps is computed by dividing net income ( loss ) available for common shareholders adjusted for dividends on unvested restricted shares , by the weighted average number of common shares outstanding plus potentially dilutive securities . any anti-dilutive securities are excluded from the diluted per share calculation . recently issued accounting standards in december 2010 , the fasb issued updated accounting guidance to clarify that pro forma disclosures should be presented as if a business combination occurred at the beginning of the prior annual period for purposes of preparing both the current reporting period and the prior reporting period pro forma financial information . these disclosures should be accompanied by a narrative description f-11 about the nature and amount of material , nonrecurring pro forma adjustments . the new accounting guidance is effective for business combinations consummated in periods beginning after december 15 , 2010 , and should be applied prospectively as of the date of adoption . early adoption is permitted . we will adopt the new disclosures in the first quarter of 2011. we do not believe that the adoption of this guidance will have a material impact to our consolidated financial statements . note 3. acquisition of hotel properties on june 4 , 2010 , the company acquired the 269-room doubletree by hilton bethesda-washington dc located in bethesda , maryland for $ 67.1 million . the acquisition was funded with available cash . thayer lodging group was retained to manage the property . on june 22 , 2010 , the company acquired the 416-room sir francis drake located in san francisco , california for $ 90.0 million . the acquisition was funded with available cash . kimpton hotels and restaurants ( kimpton ) was retained to manage the story_separator_special_tag overview the lodging industry began 2010 in the midst of the second-worst recession in the history of the united states . from 2008 to 2009 , the industry saw the most significant year-over-year decline in occupancy , adr and revpar . there was , however , cautious optimism for recovery in the lodging industry and its recovery in 2010 proved to be much stronger than anticipated . year-over-year revpar increased 5.6 % from 2009 , marking the first positive annual growth in revpar since 2007 and substantially outperforming industry-wide growth expectations . leading the recovery in hotel room demand was the corporate transient segment , which has been fueled by increasingly encouraging corporate profits and , while tentative , a growing sentiment of stability in the marketplace . as a result , overall hotel room demand is now within 1.5 % of prior peak levels and the capital markets have seen increased activity over the last three to six months . while the industry has seen a sharp change in sentiment over the past year , it has also offered mixed signals . group demand has lagged with a more protracted and plodding recovery , having only recovered approximately 40 % of the overall decline from the last downturn , and while unemployment continues to remain stagnant , consumer spending has started to rebound , particularly in the fourth quarter of 2010. these mixed signals continue to present opportunities in the acquisition market , particularly as prior or pending debt maturities at un-financeable levels put pressure on owners to sell their properties . we believe acquisition opportunities from distressed owners will continue throughout 2011 , as the loan balance in special servicing now approaches $ 12 billion , and hotel transaction volume as a whole is expected to increase significantly over the next 12 to 18 months as a result of the encouraging fundamental operating outlook . along with expected increasing transaction volume , 2011 is expected to yield increased pricing power across much of the industry . as much as 60 % of revpar growth in 2011 could come from rate improvement , a development that is largely attributable to the rapid recovery of demand in 2010 , particularly in high barriers-to-entry major u.s. cities and their urban cores . we believe this pricing power , combined with improved group bookings and better overall visibility in the economy , continues to support healthier operating fundamentals and a continued industry recovery . as a result , we continue to believe we are in a strong position to take advantage of opportunities in 2011 , both in the acquisition market and through continued operating improvement of our current portfolio . significant highlights of our activities for the year ended december 31 , 2010 are as follows : acquisitions we acquired eight properties in 2010 for purchase prices aggregating $ 614.7 million . story_separator_special_tag in the evaluation of impairment of its hotel properties , the company makes many assumptions and estimates including projected cash flows both from operations and eventual disposition , expected useful life and holding period , future required capital expenditures , and fair values , including consideration of capitalization rates , discount rates , and comparable selling prices . we will adjust our assumptions with respect to the remaining useful life of the hotel property when circumstances changes , such as an expiring ground lease or it is more likely than not that the hotel property will be sold prior to its previously expected useful life . revenue recognition revenue consists of amounts derived from hotel operations , including the sales of rooms , food and beverage and other ancillary amenities . revenue is recognized when rooms are occupied and services have been rendered . these revenue sources are affected by conditions impacting the travel and hospitality industry as well as competition from other hotels and businesses in similar markets . share-based compensation we have adopted an equity incentive plan that provides for the grant of common share options , share awards , share appreciation rights , performance units and other equity-based awards . equity-based compensation is measured at the fair value of the award on the date of grant and recognized as an expense on a straight-line basis over the vesting period . the determination of fair value of these awards is subjective and involves significant estimates . the long-term incentive partnership ( ltip ) units were valued using a monte carlo simulation method model , which requires a number of assumptions including expected volatility of our stock , expected dividend yield , expected term , and assumptions of whether these awards will achieve parity with other operating partnership units . we believe that the assumptions and estimates utilized are appropriate based on the information available to management at the time of grant . income taxes to qualify as a reit , we must meet a number of organizational and operational requirements , including a requirement that it currently distribute at least 90 percent of its adjusted taxable income to its shareholders . as a reit , we generally will not be subject to federal corporate income tax on that portion of its taxable income that is currently distributed to shareholders . we may be subject to certain state and local taxes on its income and property , and to federal income and excise taxes on its undistributed taxable income . in addition , our wholly owned taxable reit subsidiary , which leases our hotels from the operating partnership , is subject to federal and state income taxes . we account for income taxes using the asset and liability method under which 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 . valuation allowances are provided if , based upon the weight of the available evidence , it is more likely than not that some or all of the deferred tax assets will not be realized . recently issued accounting standards in december 2010 , the fasb issued updated accounting guidance to clarify that pro forma disclosures should be presented as if a business combination occurred at the beginning of the prior annual period for purposes of preparing both the current reporting period and the prior reporting period pro forma financial information . these disclosures should be accompanied by a narrative description about the nature and amount of material , nonrecurring pro forma adjustments . the new accounting guidance is effective for business 33 combinations consummated in periods beginning after december 15 , 2010 , and should be applied prospectively as of the date of adoption . early adoption is permitted . we will adopt the new disclosures in the first quarter of 2011. we do not believe that the adoption of this guidance will have a material impact to our consolidated financial statements . liquidity and capital resources on december 14 , 2009 , we raised approximately $ 379.6 million , net of underwriting discounts and offering costs , in an initial public offering and concurrent private placement of our common shares . on july 28 , 2010 , we raised approximately $ 318.3 million , net of underwriting discounts and offering-related costs , in a follow-on offering of common shares . we expect to meet our short-term liquidity requirements generally through net cash provided by operations , existing cash balances and , if necessary , short-term borrowings under our senior secured revolving credit facility . our existing cash balances will fund our operating costs in the near term . as we acquire additional hotel properties , we believe that our net cash provided by operations will be adequate to fund operating requirements , pay interest on any borrowings and fund dividends in accordance with the reit requirements of the federal income tax laws . we expect to meet our long-term liquidity requirements , such as hotel property acquisitions and property redevelopment , through the net proceeds from additional issuances of common shares , issuances of preferred shares , issuances of units of limited partnership interest in our operating partnership , secured and unsecured borrowings , and cash provided by operations . the success of our business strategy may depend in part on our ability to access additional capital through issuances of debt and equity securities , which is dependent on favorable market conditions . over the long-term , we intend to limit the sum of the outstanding principal amount of our consolidated net indebtedness to not more than 4.5x the proforma annualized ebitda for the 12-month period preceding the incurrence of that debt . net indebtedness consists of total debt less cash and cash equivalents and investments .
| results of operations results of operations for the year ended december 31 , 2010 include the operating activities of our eight hotels owned since their respective dates of acquisition and are not indicative of the results we expect when our investment strategy has been more fully executed . our net loss for the year ended december 31 , 2010 was $ 6.6 million compared to a net loss of $ 147,000 for the year ended december 31 , 2009. year ended december 31 , 2010 prior to the acquisition of our first hotel property in june 2010 , we had no revenues and incurred general and administrative expenses and acquisition costs . for the year ended december 31 , 2010 , we had total revenue of $ 57.8 million , which includes room , food and beverage , and other revenue from our eight hotels owned since their respective dates of acquisition . hotel operating expenses , which include direct and indirect expenses , were $ 42.8 million . revenues and operating expenses for our hotels for the year ended december 31 , 2010 ( in thousands ) are as follows : replace_table_token_7_th depreciation and amortization depreciation and amortization expense was $ 5.8 million . real estate taxes , personal property taxes and property insurance real estate taxes , personal property taxes and property insurance incurred were $ 2.2 million . corporate general and administrative total corporate general and administrative expenses were $ 8.3 million , which consist of employee compensation costs ( including non-cash share-based compensation cost of $ 2.0 million ) , professional fees , insurance and other expenses . hotel acquisition costs hotel acquisition costs incurred for the acquisition of our eight owned hotels and the pursuit of other acquisition opportunities were $ 6.6 million . interest income interest income on cash and cash equivalents was $ 3.0 million .
| 4,035 |
55 one story_separator_special_tag certain statements in this annual report on form 10-k , including , without limitation , statements regarding the following matters are forward-looking statements made pursuant to the safe harbor provisions of the private securities litigation reform act of 1995 : our business strategy ; our plans for future operations ; industry conditions ; our expectations about 2013 earnings per share and segment operating results , and the factors underlying those expectations , including our expectations about demand for our deepwater oilfield services and products as a result of the factors we specify in `` overview '' and `` results of operations '' below ; projections relating to floating rigs to be placed in service and subsea tree orders ; the adequacy of our liquidity and capital resources to support our operations and internally generated growth initiatives ; our projected capital expenditures for 2013 ; our plans to add rovs to our fleet ; our belief that our goodwill will not be impaired during 2013 ; the adequacy of our accruals for uninsured expected liabilities from workers ' compensation , maritime employer 's liability and general liability claims ; our belief that our total unrecognized tax benefits will not significantly increase or decrease in the next 12 months ; our expectations about the cash flows from our investment in medusa spar llc , and the factors underlying those expectations ; our backlog ; and our expectations regarding the effect of inflation in the near future . these forward-looking statements are subject to various risks , uncertainties and assumptions , including those we refer to under the headings `` risk factors '' and `` cautionary statement concerning forward-looking statements '' in part i of this report . although we believe that the expectations reflected in such forward-looking statements are reasonable , because of the inherent limitations in the forecasting process , as well as the relatively volatile nature of the industries in which we operate , we can give no assurance that those expectations will prove to have been correct . accordingly , evaluation of our future prospects must be made with caution when relying on forward-looking information . overview the table that follows sets out our revenue and operating results for 2012 , 2011 and 2010 . replace_table_token_10_th during 2012 , we generated approximately 90 % of our revenue , and 96 % of our operating income before unallocated expenses , from services and products we provided to the oil and gas industry . in 2012 , our revenue increased by 27 % , with the largest increase occurring in our subsea projects segment , which increased 127 % , principally from our field service contract offshore angola that began during the first quarter of 2012 . the $ 289 million consolidated net income we earned in 2012 was the highest in our history . the $ 53 million increase from 2011 net income was attributable to higher profit contributions from all of our operating segments : our subsea projects segment , which had $ 31 million more operating income on $ 212 million more revenue ; our subsea products segment , which had $ 29 million more operating income on $ 59 million more revenue ; our rov segment , which had $ 24 million more operating income on $ 98 million more revenue ; our asset integrity segment , which had $ 15 million more operating income on $ 169 million more revenue ; and our advanced technologies segment , which had $ 5 million more operating income on $ 52 million more revenue . 21 in 2012 , we invested in the following major capital projects : additions of and upgrades to our work-class rovs ; and expansion in our subsea products segment , including the addition of more umbilical plant capabilities and an expansion of our rental tooling suite . we expect our 2013 diluted earnings per share to be in the range of $ 3.00 to $ 3.25 , as compared to $ 2.66 in 2012 . we anticipate continued global demand growth to support deepwater drilling , field development , and inspection , maintenance and repair activities . compared to 2012 , in 2013 we are forecasting an increase in all our operating business segments , including : rov , on greater service demand to support drilling and vessel-based projects ; subsea products , on higher demand for all our major product lines , led by subsea hardware ; and subsea projects , on a full year of operations under our field service contract offshore angola . we use our rovs to provide drilling support , vessel-based inspection , maintenance and repair , subsea hardware installation , construction , pipeline inspection , and survey services to customers in the oil and gas industry . the largest percentage of our rovs has historically been used to provide drill support services . therefore , the number of floating drilling rigs on hire is a leading market indicator for this business . the following table shows average floating rigs under contract and our rov utilization . replace_table_token_11_th demand for floating rigs is our primary driver of future growth prospects . according to industry data published by ihs-petrodata , at the end of 2012 , there were 301 floating drilling rigs in the world , with 271 of the rigs under contract . of the 271 rigs under contract , 78 % are contracted through 2013 . ninety-three additional floating rigs were on order , and 57 of these 93 have been contracted long-term , for an average term of approximately 10 years . we estimate approximately 18 floating rigs will be placed in service during 2013 , and we have rov contracts on four of those . competitors have the rov contracts on four rigs , leaving 10 contract opportunities . in addition to floating rig demand , subsea tree completions are another leading indicator of the strength of the deepwater market and the primary demand driver for our subsea products lines . story_separator_special_tag under the update , an entity has the option to first assess qualitative factors to determine whether the existence of events or circumstances leads to a determination that it is more likely than not that the fair value of a reporting unit is less than its carrying amount . if , after assessing the totality of events or circumstances , an entity determines it is more likely than not that the fair value of a reporting unit exceeds its carrying amount , performing the two-step impairment test is unnecessary . however , if an entity concludes otherwise , then it is required to perform the first step of the two-step impairment test . this update was effective for us january 1 , 2012 , and earlier adoption was permitted . we have applied this update commencing in 2011. the provisions of the update have not had a material effect on our financial position or results of operations . prior to 2011 , we tested the goodwill attributable to each of our reporting units for impairment annually , or more frequently whenever events or changes in circumstances indicated that the carrying amounts may not have been appropriate . we estimated fair value of the reporting units using both an income approach , which considers a discounted cash flow model , and a market approach . for reporting units with significant goodwill , we do not believe our goodwill will be impaired during 2013 . loss contingencies . we self-insure for workers ' compensation , maritime employer 's liability and comprehensive general liability claims to levels we consider financially prudent , and beyond the self-insurance level of exposure we carry insurance , which can be by occurrence or in the aggregate . we determine the level of accruals for claims exposure by reviewing our historical experience and current year claim activity . we do not record accruals on a present-value basis . we review larger claims with insurance adjusters and establish specific reserves for known liabilities . we establish an additional reserve for incidents incurred but not reported to us for each year using our estimates and based on prior experience . we believe we have established adequate accruals for uninsured expected liabilities arising from those obligations . however , it is possible that future earnings could be affected by changes in our estimates relating to these matters . 23 we are involved in various claims and actions against us , most of which are covered by insurance . we believe that our ultimate liability , if any , that may result from these claims and actions will not materially affect our financial position , cash flows or results of operations . income taxes . our tax provisions are based on our expected taxable income , statutory rates and tax-planning opportunities available to us in the various jurisdictions in which we operate . determination of taxable income in any jurisdiction requires the interpretation of the related tax laws . we are at risk that a taxing authority 's final determination of our tax liabilities may differ from our interpretation . our effective tax rate may fluctuate from year to year as our operations are conducted in different taxing jurisdictions , the amount of pre-tax income fluctuates and our estimates regarding the realizability of items such as foreign tax credits may change . in 2012 , 2011 and 2010 , we recorded reductions of income tax expense of $ 3.0 million , $ 0.9 million and $ 1.0 million , respectively , resulting from a combination of expiring statutes of limitations and the resolution of uncertain tax positions related to certain tax liabilities we recorded in prior years . current income tax expense represents either nonresident withholding taxes or the liabilities expected to be reflected on our income tax returns for the current year , while the net deferred income tax expense or benefit represents the change in the balance of deferred tax assets or liabilities as reported on our balance sheet . we establish valuation allowances to reduce deferred tax assets when it is more likely than not that some portion or all of the deferred tax assets will not be realized in the future . we currently have no valuation allowances . while we have considered estimated future taxable income and ongoing prudent and feasible tax-planning strategies in assessing the need for the valuation allowances , changes in these estimates and assumptions , as well as changes in tax laws , could require us to provide for valuation allowances for our deferred tax assets . these provisions for valuation allowances would impact our income tax provision in the period in which such adjustments are identified and recorded . we account for any applicable interest and penalties on uncertain tax positions as a component of our provision for income taxes on our financial statements . we reduced our provision for income taxes in 2012 by $ 2.7 million for penalties and interest for uncertain tax positions , which brought our total liabilities for penalties and interest on uncertain tax positions to $ 1.7 million on our balance sheet at december 31 , 2012 . including associated foreign tax credits and penalties and interest , we have accrued a net total of $ 6.5 million in the caption `` other long-term liabilities '' on our balance sheet at december 31 , 2012 for unrecognized tax benefits . all additions or reductions to those liabilities affect our effective income tax rate in the periods of change . we do not believe that the total of unrecognized tax benefits will significantly increase or decrease in the next 12 months . for a summary of our major accounting policies and a discussion of recently adopted accounting standards , please see note 1 to our consolidated financial statements . liquidity and capital resources we consider our liquidity and capital resources adequate to support our operations and growth initiatives . at december 31 , 2012 , we had working capital of $ 586 million , including cash and cash equivalents of $ 121 million .
| results of operations additional information on our business segments is shown in note 7 of the notes to consolidated financial statements included in this report . oil and gas . the table that follows sets out revenue and profitability for the business segments within our oil and gas business . replace_table_token_12_th in response to continued increasing demand to support deepwater drilling and vessel-based inspection , maintenance and repair ( `` imr '' ) and installation work , we have continued to build new rovs . these new vehicles are designed for use around the world in water depths of 10,000 feet or more . we added 37 , 24 and 22 rovs in 2012 , 2011 and 2010 , respectively , while retiring 41 units over the three-year period and transferring one to our advanced technologies segment in 2011. we have grown our rov fleet size at december 31 to 289 for 2012 from 267 at 2011 and 260 at 2010 . we plan to continue adding rovs at levels we determine appropriate to meet market opportunities . 27 for 2012 , our rov revenue and operating income improved over 2011 from ( 1 ) higher demand , particularly offshore africa and in the u.s. gulf of mexico for the provision of drill support and vessel-based services , and ( 2 ) the expansion of our fleet to meet the increased demand . for 2011 , our rov revenue and operating income increased over 2010 from increased days on hire , as we had more systems available and had higher utilization due to increased international demand . our operating income margin decreased as a result of geographic mix , as our aggregate international rov operations have lower margins than our u.s. gulf of mexico operations .
| 4,036 |
as a result of the enacted law , we were required to revalue deferred tax assets and liabilities as of december 22 , 2017 using the new statutory rate and have reflected this revaluation in our effective tax rate reconciliation . as we are subject to a valuation allowance , there was no material impact to our tax provision . the other provisions of the tax act did not have a material impact on the fiscal y ear 2018 financial statements . deferred income tax balances reflect the effects of temporary differences between the carrying amounts of assets and liabilities and their tax basis , as well as from net operating loss and tax credit carryforwards , and are stated at enacted tax rates expected to be in effect when taxes are actually paid or recovered . deferred income tax assets and liabilities represent amounts available to reduce or increase taxes payable on taxable income in future years . management evaluates the recoverability of these future tax deductions and credits by assessing the adequacy of future expected taxable income from all sources , including carrybacks ( if applicable ) , reversal of taxable temporary differences , forecasted operating earnings and available tax planning strategies . to the extent the company does not consider it more likely than not that a deferred tax asset will be recovered , a valuation allowance is established . goodwill recorded as part of an asset purchase agreement is deductible for tax purposes and only recorded as a book charge if it is impaired . a deferred tax liability is recorded as the tax deduction is realized , which will not be reversed 57 unless and until the goodwill is disposed of or impaired . due to the goodwill impairments recognized during fiscal year 2017 , there was no deferred tax liability at june 30 , 2017. significant components of the company 's deferred tax assets at june 30 , 2018 and 2017 are shown below . a valuation allowance has been established as realization of such deferred tax assets has not met the more likely-than-not threshold requirement . the company has recognized a valuation allowance to an amount it expects to realize via carry-back based on fiscal year 2018 operations and the reversal of existing temporary differences . the increase in the valuation allowance in fiscal year 2018 represents the increase in deferred tax assets that the company has determined is not more likely than not of being recovered . if the company 's judgment changes and it is determined that the company will be able to realize these deferred tax assets , the tax benefits relating to any reversal of the valuation allowance on deferred tax assets will be accounted for as a reduction to income tax expense . components of our deferred tax assets and liabilities were as follows ( in thousands ) : replace_table_token_24_th as of june 30 , 2018 and 2017 , the income tax receivable was $ 0.5 million and $ 0.5 million , respectively , which were recorded in other current assets . as of june 30 , 2018 and 2017 , the deferred tax asset of zero and $ 0.3 million is included in other long-term assets , respectively . as of june 30 , story_separator_special_tag the following discussion is intended to assist in understanding our business and the results of our operations . it should be read in conjunction with the consolidated financial statements and the related notes included in part ii , item 8 , 27 “ financial statements and supplementary data ” . certain statements made in our discussion may be forward-looking . forward-looking statements involve risks and uncertainties and a number of factors could cause actual results or outcomes to differ materially from our expectations . see “ cautionary statement concerning forward-looking statements ” at the beginning of this report for additional discussion of some of these risks and uncertainties . unless the context requires otherwise , when we refer to “ we , ” “ us ” and “ our , ” we are describing arc group worldwide , inc. and its subsidiaries on a consolidated basis . story_separator_special_tag impairment charge of $ 3.3 million to eliminate the carrying value of goodwill for these entities . for further discussion of goodwill impairment charges , see note 6 , goodwill and intangible assets , of the accompanying notes to consolidated financial statements in part ii , item 8. other income , net other income , net for the year ended june 30 , 2018 was $ 0.3 million , compared to $ 0.7 million in the prior year period . the decrease in other income , net was primarily due to a non-recurring gain of $ 0.4 million related to a reduction in the kecy escrow recorded during fiscal year 2017. interest expense , net interest expense , net during fiscal year 2018 was $ 3.6 million , compared to $ 4.0 million in the prior year period . the decrease in expense was primarily due to a reduction in the principal balances outstanding under our senior abl credit facility resulting from proceeds from our rights offering in the third quarter of the current fiscal year . loss on extinguishment of debt during the first quarter of fiscal 2017 , approximately $ 0.7 million of unamortized deferred financing costs were expensed as a result of the extinguishment of our first amended and restated credit agreement . discontinued operations in september 2016 , the company sold its subsidiary tekna seal llc pursuant to the terms and conditions of a membership interests purchase agreement . the sale covered all of the membership interests of tekna seal , including 95.7 % owned by the company and 4.3 % held by the tekna seal minority stakeholders . story_separator_special_tag of its common stock pursuant to a registration statement on form s-1 , as amended , that was previously filed and declared effective by the sec on february 9 , 2018. the company received net proceeds of approximately $ 9.8 million from the rights offering after deducting offering costs payable by the company . the proceeds were used for general corporate purposes . · receipt of $ 0.2 million from the issuance of stock through our employee stock purchase plan . debt and credit arrangements for a discussion of our long-term debt , see note 7 , debt , of the accompanying notes to consolidated financial statements in part ii , item 8. the descriptions of the senior abl credit facility and the subordinated loan agreement ( together , our “ credit facilities ” ) do not purport to be complete and are subject to , and are qualified in their entirety by , the full text of the respective documents . financial ratio covenants the terms and conditions of the credit facilities require us to comply with a number of financial and other covenants , such as maintaining debt service coverage and leverage ratios in certain situations and maintaining insurance coverage . these covenants may limit our flexibility in our operations , and breaches of these covenants could result in defaults under the instruments governing the applicable indebtedness even if we had satisfied our payment obligations . if we were to default on the credit agreements or other debt instruments , our financial condition would be adversely affected . non-compliance by us with any of the covenants would constitute events of default under both of the credit facilities pursuant to cross-default provisions and could result in acceleration of payment obligations for all outstanding principal and interest for loans made under both of the credit facilities , unless such defaults were waived or subject to forbearance by the respective creditors . 32 subordinated loan agreement financial ratios . our subordinated loan agreement contains the following financial ratio covenants , summarized as follows : minimum fixed charge coverage ratio . we may not permit the minimum fixed charge coverage ratio , as of the last day of any fiscal quarter ending during any period set forth in the table below , to be less than the ratio set forth opposite such period in the table below . the fixed charge coverage ratio is defined as the ratio of ( a ) consolidated ebitda minus the unfinanced portion of capital expenditures , excluding tooling , minus expense for taxes paid in cash ( other than certain federal and state taxes excluded under the mclarty second amendment ) ; to ( b ) fixed charges , all calculated on a consolidated basis in accordance with gaap . replace_table_token_3_th the summary calculation of our subordinated loan agreement fixed charge coverage ratio as of june 30 , 2018 is as follows : ( in thousands , except ratio ) amount consolidated ebitda $ 11,112 less unfinanced portion of capital expenditures ( 1,935 ) less taxes paid in cash ( 47 ) coverage amount ( a ) $ 9,130 fixed charges ( b ) $ 6,424 fixed charge coverage ratio ( a : b ) 1.42:1.00 maximum total leverage ratio . we may not have a total leverage ratio , as of the last day of any fiscal quarter ending during any period set forth in the table below , to exceed the ratio set forth opposite such period in the table below . the total leverage ratio means the ratio of ( a ) our funded indebtedness as of such date , to ( b ) consolidated ebitda for the test period ended as of such date . replace_table_token_4_th the summary calculations of our subordinated loan agreement total leverage ratio as of june 30 , 2017 is as follows : ( in thousands , except ratio ) amount funded indebtedness ( a ) $ 41,964 consolidated ebitda ( b ) $ 11,112 maximum total leverage ratio ( a : b ) 3.77:1.00 33 compliance with financial ratio covenants as of june 30 , 2018 , we were in compliance with our debt covenants under our senior credit facility and subordinated loan agreement . gaap to non-gaap reconciliation fixed charges and consolidated ebitda used in our debt covenant calculations are non-gaap financial measures . we have provided this non-gaap financial information to aid in better understanding of our financial ratios as used in our debt covenant calculation . the methodology used is defined in our debt agreements . non-gaap financial measures are not in accordance with , or an alternative for , gaap . the non-gaap financial measures are not meant to be considered in isolation or as a substitute for comparable gaap financial measures , and should be read only in conjunction with our consolidated financial statements prepared in accordance with gaap . fixed charges consist of interest payments , principal payments on our debt , and capital lease payments for the prior four quarters . consolidated ebitda used in our debt covenant calculations is based on the sum of the prior four quarter actual amounts . the reconciliation of gaap net income to consolidated ebitda under our subordinated loan agreement is as follows ( in thousands ) : replace_table_token_5_th ( 1 ) other non-recurring expenses relate to certain capitalized tooling costs , an insurance claim for lost production at our kecy facility , costs incurred to relocate our plastic injection molding operations , and certain projected cost reductions allowed as an adjustment to ebitda . off balance sheet arrangements we had no off-balance sheet arrangements that would have a material effect on our financial position , results of operations , or cash flows as of june 30 , 2018 . 34 contractual obligations and commitments we have various contractual obligations impacting our liquidity .
| overview arc group worldwide , inc. is a global advanced manufacturer offering a full suite of products and services to our customers , with specific expertise in metal injection molding ( “ mim ” ) . to further advance and support this core capability , the company also offers complementary services associated with : ( i ) precision metal stamping ; ( ii ) traditional and clean room plastic injection molding ; and ( iii ) advanced rapid and conformal tooling . through our diverse product offering , we provide our customers with a holistic prototyping and full-run production solution for both precision metal and plastic fabrication . we further differentiate ourselves from our competitors by providing innovative , custom capabilities , which improve high-precision manufacturing efficiency and speed-to-market for our customers . during fiscal 2017 , we sold our non-core subsidiaries , tekna seal and arc wireless . separately , we classified gf & f as held for sale as of june 30 , 2017 , which was subsequently sold on september 15 , 2017. the completed and planned divestiture of these non-core businesses h as changed the way in which we evaluate performance and allocate resources . as a result , during the quarter ended june 30 , 2017 , we revised our business segments , consistent with our management of the business and internal financial reporting structure . specifically , the precision components group now includes the results of our plastic injection molding operations and our tooling product line , which were previously included within the 3dmt group . results depicted in our 3dmt group business unit now solely reflect those operations associated with metal 3d printing and associated services . in addition , our precision metal stamping operations are now reported within the newly created stamping group , which were previously included in the precision components group . these reporting segments were continued in the year ended june 30 , 2018 .
| 4,037 |
net deferred translation gains and losses are included as a component of accumulated other comprehensive income . loss contingencies in the ordinary course of business , we are routinely defendants in , or party to , a number of pending and threatened legal actions . on a quarterly basis , we review the status of each significant matter and assess the potential financial exposure . if the potential loss from any claim or legal action is considered probable and can be reasonably estimated , we establish a liability for the estimated loss . the assessment of the ultimate outcome of each claim or legal action and the determination of the potential financial exposure requires significant 49 pitney bowes inc. notes to consolidated financial statements ( tabular dollars in thousands , except per share amounts ) judgment . estimates of potential liabilities for claims or legal actions are based only on information that is available at that time . as additional information becomes available , we may revise our estimates , and these revisions could have a material impact on our results of operations and financial position . legal fees are expensed as incurred . reclassification in 2015 , we determined that certain investments were classified as cash and cash equivalents . accordingly , story_separator_special_tag operations the following discussion and analysis should be read in conjunction with our consolidated financial statements and related notes . this discussion and analysis contains forward-looking statements based on management 's current expectations , estimates and projections and involve risks and uncertainties . our actual results may differ significantly from those currently expressed in our forward-looking statements as a result of various factors , including those factors described under `` forward-looking statements '' and `` risk factors '' contained elsewhere in this annual report . all table amounts are presented in thousands of dollars , unless otherwise stated . overview during 2015 , we continued to execute on our strategic priorities to stabilize our mail business , drive operational excellence and grow our business through digital commerce . we expanded our marketing efforts to build awareness of our unique capabilities and refreshed our brand identity , completed our transition to a larger inside sales organization ( part of our changes in our go-to-market strategy ) in major markets , launched several new products and repositioned our portfolio through acquisitions and divestitures . we acquired a provider of cross-border ecommerce solutions through a proprietary technology and services platform that enables retailers to transact with consumers around the world , a provider of technology that enables clients to provide personalized interactive video communications to their customers , and expanded our presort sites . we also sold our marketing services business , imagitas , and exited certain geographic markets as part of our initiative to simplify our geographic footprint . we also continued to reduce costs through our restructuring initiatives and worked to implement our new global enterprise resource planning ( erp ) system , which was launched in canada in the fourth quarter of 2015. the u.s. dollar remained strong against other currencies throughout the year , which adversely affected our reported revenues and profitability , both from a translation perspective as well as a competitive perspective , as the cost of our international competitors ' products and solutions improved relative to products and solutions manufactured or sold from the u.s. the current strength of the dollar relative to other currencies also affected demand for u.s. goods sold to consumers in other countries through our global ecommerce operations . in the second quarter , we acquired borderfree and sold imagitas . as a result we realigned our segment reporting . our business continues to be organized around three distinct sets of solutions - small and medium business ( smb ) solutions , enterprise business solutions and digital commerce solutions ( dcs ) . there were no changes to smb solutions or enterprise business solutions . within dcs , we now report software solutions and global ecommerce as reportable segments . imagitas , previously included in dcs , is now reported in other . revenue for 2015 decreased 6 % to $ 3,578 million compared to $ 3,822 million in 2014 . revenue was negatively impacted by 3 % due to foreign currency translation , 2 % from the sale of imagitas and 1 % from the exit of non-core product lines in norway and the transition in certain european countries to a dealer network in the third quarter of 2014 ( divested businesses ) . revenue benefited by 2 % from the acquisition of borderfree . on a reported basis , equipment sales declined 10 % , support services declined 11 % , software declined 10 % , rentals revenue declined 9 % , financing declined 5 % and supplies declined 4 % . partially offsetting these declines , was revenue growth in business services of 3 % . excluding the impacts of foreign currency , equipment sales declined 5 % , primarily due to continued weakness in our international markets reflecting difficult economic circumstances and productivity disruptions caused by the implementation of our go-to-market strategy primarily in france . support services revenue declined 7 % and rentals revenue declined 6 % due to fewer mailing machines in service and a shift by customers to lower cost , less featured mailing machines . support services revenue was also impacted by lower maintenance contracts on production mail equipment as some in-house mailers moved their mail processing to third-party service bureaus who service some of their own equipment . software revenue declined 5 % primarily due to the inclusion of significant north america licensing deals in 2014. these declines were partially offset by revenue growth in business services of 3 % primarily due to the acquisition of borderfree and higher volumes of mail processed in presort services . story_separator_special_tag cost of equipment sales as a percentage of equipment sales revenue decreased to 47.5 % compared to 48.7 % in the prior year primarily due to the decline in sales of production printers , which have a lower margin relative to other products . supplies supplies revenue decreased 4 % in 2015 compared to 2014. foreign currency translation adversely impacted supplies revenue by 6 % . excluding the impact of foreign currency , supplies revenue increased 2 % due to productivity improvements and pricing actions in our north america mailing business and higher sales of supplies for production printers . cost of supplies as a percentage of supplies revenue improved to 30.8 % in 2015 compared to 31.2 % in 2014 primarily due to a greater mix of higher margin core supplies . supplies revenue increased 5 % in 2014 compared to 2013. targeted outreach to customers and pricing actions contributed to a 3 % increase and the remaining 2 % was due to the growing base of production print equipment . cost of supplies as a percentage of supplies revenue was virtually unchanged at 31.2 % in 2014 compared to 31.3 % in 2013 . 19 software software revenue decreased 10 % in 2015 compared to 2014. foreign currency translation adversely impacted software revenue by 5 % . software revenue in 2015 compared to 2014 was also impacted by 4 % due to more significant licensing deals in 2014 compared to 2015. excluding the impact of foreign currency and the significant licensing deals in 2014 , software revenue declined 1 % , primarily due to declines in maintenance , data and services revenue . cost of software as a percentage of software revenue increased to 29.4 % in 2015 compared to 28.8 % in 2014 primarily due to the decline in high-margin licensing revenue . software revenue increased 8 % in 2014 compared to 2013 , primarily due to a 33 % increase in worldwide licensing revenue from our software solutions products , particularly enterprise location intelligence . cost of software as a percentage of software revenue increased to 28.8 % compared to 27.8 % in the prior year primarily due to investments in the specialization of the software sales channel and higher production costs . rentals rentals revenue decreased 9 % in 2015 compared to 2014. foreign currency translation adversely impacted rentals revenue by 3 % . excluding the impact of foreign currency , rentals revenue declined 6 % primarily due to the continuing decline in the number of installed meters and shift by clients to less-featured , lower cost machines . cost of rentals as a percentage of rentals revenue improved to 19.1 % in 2015 compared to 20.1 % in 2014 primarily due to lower depreciation . rentals revenue decreased 5 % in 2014 compared to 2013. rentals revenue declined 4 % due to a reduction in the number of installed meters and clients downgrading to lower cost , less functional machines and 1 % due to lower rentals revenue in france . cost of rentals as a percentage of rentals revenue increased to 20.1 % compared to 19.6 % in the prior year primarily due to a higher proportion of fixed costs as a percentage of revenue . financing financing revenue decreased 5 % in 2015 compared to 2014. foreign currency translation accounted for 3 % of the decrease and lower equipment sales in prior periods and a declining lease portfolio accounted for the remaining decrease . financing revenue decreased 4 % in 2014 compared to 2013 as a result of declining equipment sales in prior years . we allocate a portion of our total cost of borrowing to financing interest expense . in computing financing interest expense , we assume a 10:1 debt to equity leverage ratio and apply our overall effective interest rate to the average outstanding finance receivables . due to declining equipment sales in prior periods , average outstanding finance receivables declined . as a result , financing interest expense declined 9 % in 2015 compared to 2014. financing interest expense as a percentage of financing revenue improved to 17.5 % in 2015 compared to 18.1 % in 2014. financing interest expense as a percentage of financing revenue increased in 2014 as compared to 2013 due to an increase in our overall effective interest rate . support services support services revenue decreased 11 % in 2015 compared to 2014 , primarily due to 5 % from foreign currency translation and 2 % from divested businesses . support services revenue was also impacted by lower maintenance contracts on production mail equipment as some in-house mailers moved their mail processing to third-party service bureaus who service some of their own equipment . cost of support services as a percentage of support services revenue decreased to 58.2 % in 2015 compared to 60.3 % in 2014 primarily due to expense reductions and productivity initiatives . support services revenue decreased 3 % in 2014 compared to 2013 primarily due to declines in our mailing business due to fewer installed mailing machines in north america and the impact of divested businesses . cost of support services as a percentage of support services revenue improved to 60.3 % in 2014 compared to 61.9 % in 2013 primarily due to continued focus on expense reductions and productivity initiatives . business services business services revenue increased 3 % in 2015 compared to 2014. business services revenue for 2015 was impacted by the sale of imagitas in may 2015 and the acquisition of borderfree in june 2015. excluding the impacts of these transactions , business services revenue increased 5 % in 2015 compared to 2014. higher volumes of mail processed in presort services increased business services revenue 2 % and additional volumes of packages shipped from our u.k. outbound cross-border service facility increased business services revenue 4 % . cost of business services as a percentage of business services revenue improved to 68.1 % in 2015 and compared to 70.0 % in 2014 , primarily due to operational efficiencies in presort services and higher revenue .
| cash flow summary the change in cash and cash equivalents is as follows : replace_table_token_8_th cash flows from operations decreased $ 141 million in 2015 compared to 2014 , primarily due to the timing of payments of accounts payable and accrued liabilities including , higher employee-related payments , and higher inventory purchases , primarily for parts and supplies in the u.s. and u.k. , lower collections of accounts receivable due to timing and amounts received in the prior year for transition services in connection with the sale of our management services business . these decreases were partially offset by lower interest and tax payments . cash flows from operations increased $ 30 million in 2014 compared to 2013 , primarily due to higher income and lower tax and interest payments partially offset by higher cash payments related to the early repayment of debt and changes in working capital accounts , primarily due to lower cash flows from changes in inventory and accounts receivable . cash management initiatives implemented in 2013 significantly improved working capital and cash flows from operations . in 2014 , we continued to see benefits from changes in accounts receivable and inventory ; however , the benefits were not as dramatic as in 2013. the timing of payments for accounts payables and accrued liabilities partially offset these reductions in cash flow from working capital . cash flows used by investing activities were $ 156 million higher in 2015 compared to 2014 . in 2015 , we paid $ 394 million for acquisitions , purchased short term investments of $ 69 million , received proceeds of $ 292 million from the sale of imagitas and $ 52 million from the sale of our former corporate headquarters building and other assets . during 2014 , we received proceeds of $ 102 million from the sale of businesses .
| 4,038 |
financial instruments used for asset and liability management the company utilizes derivative financial instruments to manage its various exposures to changes in fair value of certain assets and liabilities , variability in future cash flows arising from changes in interest rates , or other story_separator_special_tag the following discussion and analysis of our financial condition and results of operations should be read in conjunction with our audited consolidated financial statements and related notes included elsewhere in this annual report on form 10-k. some of the information contained in this discussion and analysis constitutes forward-looking statements that involve risks and uncertainties . actual results could differ materially from those discussed in these forward-looking statements . factors that could cause or contribute to these differences include , but are not limited to , those discussed below and elsewhere in this annual report on form 10-k particularly under “ risk factors ” and “ special note regarding forward-looking statements , ” which immediately follows “ risk factors. ” unless otherwise specified , references to notes to our consolidated financial statements are to the notes to our audited consolidated financial statements as of december 31 , 2014 and 2013 and for calendar years ended december 31 , 2014 and 2013 , fiscal year ended november 30 , 2012 and one month ended december 31 , 2012 . introduction and overview discover financial services is a direct banking and payment services company . we provide direct banking products and services and payment services through our subsidiaries . we offer our customers credit card loans , private student loans , personal loans , home loans , home equity loans and deposit products . we also operate the discover network , the pulse network ( “ pulse ” ) and diners club international ( “ diners club ” ) . the discover network processes transactions for discover-branded credit cards and provides payment transaction processing and settlement services . pulse operates an electronic funds transfer network , providing financial institutions issuing debit cards on the pulse network with access to atms domestically and internationally , as well as point-of-sale terminals at retail locations throughout the u.s. for debit card transactions . diners club is a global payments network of licensees , which are generally financial institutions , that issue diners club branded charge cards and or provide card acceptance services . our primary revenues consist of interest income earned on loan receivables and fees earned from customers , merchants and issuers . the primary expenses required to operate our business include funding costs ( interest expense ) , loan loss provisions , customer rewards , and expenses incurred to grow , manage and service our loan receivables and networks . our business activities are funded primarily through consumer deposits , securitization of loan receivables and the issuance of unsecured debt . change in fiscal year on december 3 , 2012 , our board of directors approved a change in our fiscal year end from november 30 to december 31 of each year . this fiscal year change was effective january 1 , 2013. as a result of the change , we had a one month transition period in december 2012. the audited results for the one month ended december 31 , 2012 is included in this report . 2014 highlights net income was $ 2.3 billion , compared to $ 2.5 billion in the prior year . total loans grew $ 4.2 billion , or 6.4 % , from the prior year to $ 70.0 billion . credit card loans grew $ 3.0 billion , or 5.6 % , to $ 56.1 billion and discover card sales volume increased 5.1 % from the prior year . net charge-off rate for credit card loans increased 6 basis points from the prior year to 2.27 % and the delinquency rate for credit card loans over 30 days past due increased 1 basis point to 1.73 % . payment services transaction dollar volume for the segment was $ 202.3 billion , up 3 % from the prior year . we incurred a $ 178 million charge to earnings to enhance our rewards program by allowing easier redemption of rewards , which resulted in the elimination of our current estimate of customer rewards forfeiture . our capital market activities included issuances of approximately $ 5.0 billion in public credit card asset-backed securities . discover bank issued $ 1.1 billion in senior bank notes and discover financial services issued $ 500 million of senior notes . we repurchased approximately 25 million shares , or 5 % , of our outstanding common stock for $ 1.5 billion . - 49 - 2013 and 2012 highlights during the 2013 calendar year , our capital market activities included issuances of approximately $ 4.7 billion in public credit card asset-backed securities . discover bank issued $ 1.7 billion in senior bank notes . we repurchased approximately 27 million shares of common stock for $ 1.3 billion , reducing our number of shares outstanding by 5 % during the calendar year ended december 31 , 2013. we began offering residential mortgage loans through discover home loans following our june 2012 acquisition of substantially all of the operating and related assets of home loan center , a subsidiary of tree.com , inc. we repurchased 34 million shares , or approximately 6 % , of our outstanding common stock for $ 1.2 billion during the fiscal year ended november 30 , 2012. during the 2012 fiscal year , our capital market activities included issuances of approximately $ 5.4 billion in public credit card asset-backed securitizations and a $ 560 million preferred stock issuance . we also completed two private debt exchange offers involving an aggregate $ 822 million of outstanding debt . outlook the growth of our existing direct banking products remains a priority as we continue to enhance our offerings to customers . we anticipate that investments in marketing and the fourth quarter 2014 changes we made to simplify and ease reward redemption will contribute to new card account growth and wallet share gains with existing customers . story_separator_special_tag several of our products , including credit cards , private student loans and home loans , are areas of focus by the cfpb . in addition , the cfpb has an online complaint system that allows consumers to log public complaints with respect to the products we offer . the cfpb has proposed making consumer narratives available to the public . the financial services industry is concerned that the publication of detailed unverified consumer narratives could lead to reputational injury to consumer lenders . the cfpb 's analysis of account data and complaints could inform future decisions with respect to regulatory , enforcement or examination focus , and influence consumers ' attitudes about doing business with discover . credit cards the cfpb has been focused recently on online credit card disclosures , the clarity and transparency of credit card rewards and grace period disclosures , and debt collection practices . in september 2014 , the cfpb issued guidance on the marketing of credit card promotional interest rate offers that will require enhanced consumer disclosures . the cfpb is currently collecting data about reward program marketing practices , which may result in additional guidance . further , the cfpb continues to collect data regarding consumers ' experiences with debt collectors and plans to use the data to help develop debt collection regulations . courts and legislators have also been focused on the debt collection practices of consumer financial services providers . the ultimate impact of the increased scrutiny of these areas is uncertain at this time . private student loans there continues to be significant legislative and regulatory focus on the private student loan market , including by the cfpb and the fdic . this regulatory focus has resulted in an increase in supervisory examinations of discover related to private student loans . the cfpb is currently investigating certain student loan servicing practices of discover bank . see note 19 : litigation and regulatory matters to our consolidated financial statements for more information . the - 51 - recent legislative and regulatory areas of focus include servicing practices with respect to assisting student borrowers with economic hardships , refinancing of private student loans , the liability of student borrowers in the event of cosigner death or bankruptcy , the standard for discharging student loans in bankruptcy , loan payment allocation , and requirements related to borrower military service . in october 2014 , the cfpb student loan ombudsman for the private student loan market issued the 2014 annual report required by the dodd-frank act , which referenced these issues and others . the enactment of new legislation or the adoption of new regulations or guidance may increase the complexity and expense of servicing student loans . legislators and regulators may take additional actions that impact the student loan market in the future , which could cause us to restructure our private student loan product in ways that we may not currently anticipate . mortgage lending the cfpb has indicated that the mortgage industry is an area of supervisory focus and that it will concentrate its examinations and rulemaking efforts on the variety of mortgage-related topics required under the dodd-frank act including steering consumers to less favorable products , discrimination , abusive or unfair lending practices , predatory lending , origination disclosures , minimum mortgage underwriting standards , mortgage loan origination compensation and servicing practices . the cfpb has published several final rules impacting the mortgage industry , including rules related to ability-to-repay , mortgage servicing and integrated mortgage origination disclosures . failure to comply with the ability-to-repay rule could result in possible cfpb enforcement action and special statutory damages plus actual , class action and attorney fee damages , all of which a borrower may claim in defense of a foreclosure action at any time . the new integrated mortgage origination disclosures rule , effective august 2015 , requires combining disclosures currently provided under the truth in lending act and the real estate settlement procedures act , resulting in significant effort by the mortgage industry to test and implement as well as process changes with third-party settlement agents . in addition , congressional committees have approved legislation that could significantly affect the single family housing finance market in the united states , including proposals to wind down the government-sponsored enterprises , fannie mae and freddie mac , to which we currently sell our mortgages . it is uncertain what the ultimate impact of these developments will be on our mortgage business . in october 2014 , the federal reserve , fdic , sec and other federal regulatory agencies adopted a final rule to implement requirements under the securities exchange act of 1934 , as added under the dodd-frank act , exempting `` qualified residential mortgages '' from the requirement that the sponsor of an asset-backed securitization retain not less than five percent of the credit risk of the underlying assets . because most of the mortgages we offer are `` qualified residential mortgages '' as defined in the exemption , we do not expect the final rule to impact the pricing and depth of the secondary mortgage market to which we sell our mortgages . payment networks the dodd-frank act contains several provisions impacting the debit card market , including network participation requirements and interchange fee limitations . the changing debit card environment , including competitor actions related to merchant and acquirer pricing and transaction routing strategies , has adversely affected and is expected to continue to adversely affect our pulse network 's business practices , network transaction volume , revenue and prospects for future growth . we continue to closely monitor competitor strategies in order to assess their impact on our business and on competition in the marketplace . the u.s. department of justice is examining some of these competitor pricing strategies . in addition , the dodd-frank act 's network participation requirements impact pulse 's ability to enter into exclusivity arrangements , which affect pulse 's current business practices and may materially adversely affect its network transaction volume and revenue .
| results of operations the discussion below provides a summary of our results of operations for the calendar year ended december 31 , 2014 compared to our results of operations for the calendar year ended december 31 , 2013 and fiscal year ended november 30 , 2012 . the discussion also provides information about our loan receivables as of december 31 , 2014 compared to december 31 , 2013 and december 31 , 2012 . segments we manage our business activities in two segments : direct banking and payment services . in compiling the segment results that follow , our direct banking segment bears all corporate overhead costs that are not specifically associated with a particular segment and all costs associated with discover network marketing , servicing and infrastructure , with the exception of an allocation of direct and incremental costs driven by our payment services segment . direct banking our direct banking segment includes discover-branded credit cards issued to individuals on the discover network and other consumer products and services , including private student loans , personal loans , home loans , home equity loans , prepaid cards and other consumer lending and deposit products . the majority of direct banking revenues relate to interest income earned on the segment 's loan products . additionally , our credit card products generate substantially all of our revenues related to discount and interchange , protection products and loan fee income . payment services our payment services segment includes pulse , an automated teller machine , debit and electronic funds transfer network ; diners club , a global payments network ; and our network partners business , which provides payment transaction processing and settlement services on the discover network . this segment also includes the business operations of diners club italy , which primarily consist of issuing diners club charge cards .
| 4,039 |
the registration statement includes prospectuses covering the 75 offer , issuance and sale of up to 50 million shares of our common stock from time to time in “ at-the-market offerings ” pursuant to an at market issuance sales agreement ( the “ sales agreement ” ) with b. riley fbr , inc. as our sales agent . as of december 31 , 201 9 , approximately 34.1 million shares remain ed available for sale under the sales agreement . during the period between january 1 , 2020 and march 13 , 2020 , we sold approximately 23.8 million shares of our common stock pursuant to the sales agreement and received aggregate net proceeds totaling $ 62.9 million . as of december 31 , 2019 , we had debt outstanding of $ 14.1 million in principal . in february 2015 , we issued subordinated notes in the aggregate principal amount of $ 14.0 million with annual interest at 8 % ( the “ 2015 subordinated notes ” ) . the 2015 subordinated notes were due in february 2020. in february 2020 , we amended $ 13.5 million of the 2015 subordinated notes , extending the due date by three years to february 2023. the remaining $ 0.5 million of the 2015 subordinated notes were repaid in february 2020. our cash and cash equivalents at december 31 , 2019 were $ 61.8 million , an increase of $ 8.8 million from december 31 , 2018 , principally as a result of amounts received under our gilead collaboration agreement . during the past five years , we have financed our operations primarily through funding from corporate partnerships and novel financing mechanisms . based on our current plans and projections , we believe that our cash resources of $ 61.8 million as of december 31 , 2019 combined with cash from partnership milestones already triggered and expected later this year , as well as proceeds from financing transactions already completed in the first quarter of 2020 , will be sufficient to satisfy our liquidity requirements through the fourth quarter of 2020. we are presently in multiple partnership and out licensing discussions which , if consummated , could extend our cash resources into and beyond next year . until we are successful in our efforts for capital infusion through these transactions or other financing options , and because the completion of such transactions is not entirely within our control , in accordance with accounting guidance we are required to disclose that substantial doubt exists about our ability to continue as a going concern for a period of one year after the date of filing of this annual report on form 10-k. management continues to address the company 's liquidity position and will adjust spending as needed in order to preserve liquidity . we also continue to monitor the likelihood of success of our key initiatives and have a plan to discontinue funding of such activities if they do not prove to be successful , or , if by the second quarter of 2020 the anticipated additional cash resources are not put into place , restrict funding of non-core programs , restrict capital expenditures and or reduce the scale of our operations as necessary to ensure sufficient cash resources through the fourth quarter of 2020. our future liquidity needs will be determined primarily by the success of our operations with respect to the progression of our product candidates and key development and regulatory events in the future . potential sources of additional funding include : ( 1 ) pursuing collaboration , out-licensing and or partnering opportunities for our portfolio programs and product candidates with one or more third parties , ( 2 ) renegotiating third party agreements , ( 3 ) selling assets , ( 4 ) securing additional debt financing and or ( 5 ) selling equity securities . our future cash requirements include , but are not limited to , supporting clinical trial and regulatory efforts and continuing our other research and development programs . since inception , we have entered into various agreements with contract manufacturers , institutions , and clinical research organizations ( collectively `` third party providers '' ) to perform pre-clinical activities and to conduct and monitor our clinical studies . under these agreements , subject to the enrollment of patients and performance by the applicable third-party provider , we have estimated our total payments to be $ 319.8 million over the term of the related activities . through december 31 , 2019 , we have expensed $ 254.0 million as research and development expenses and $ 239.6 million has been paid under these agreements . the timing of expense recognition and future payments related to these agreements is subject to the enrollment of patients and performance by the applicable third-party provider . we have also entered into sponsored research agreements related to our product candidates that required payments of $ 9.8 million , $ 9.0 million of which have been paid as of december 31 , 2019. we plan to enter into additional agreements with third party providers as well as sponsored research agreements , and we anticipate significant additional expenditures will be required to initiate and advance our various programs . part of our strategy is to develop and commercialize some of our product candidates by continuing our existing collaboration arrangements with academic and collaboration partners and licensees and by entering into new collaborations . as a result of our collaboration agreements , we will not completely control the efforts to attempt to bring those product candidates to market . for example , our collaboration with incyte for the development , manufacture and commercialization of cpm antibodies against certain targets is managed by a joint steering committee , which is controlled by incyte . net cash used in operating activities for the years ended december 31 , 2019 and 2018 was $ 18.7 million and $ 131.1 million , respectively . our future ability to generate cash story_separator_special_tag the registration statement includes prospectuses covering the 75 offer , issuance and sale of up to 50 million shares of our common stock from time to time in “ at-the-market offerings ” pursuant to an at market issuance sales agreement ( the “ sales agreement ” ) with b. riley fbr , inc. as our sales agent . as of december 31 , 201 9 , approximately 34.1 million shares remain ed available for sale under the sales agreement . during the period between january 1 , 2020 and march 13 , 2020 , we sold approximately 23.8 million shares of our common stock pursuant to the sales agreement and received aggregate net proceeds totaling $ 62.9 million . as of december 31 , 2019 , we had debt outstanding of $ 14.1 million in principal . in february 2015 , we issued subordinated notes in the aggregate principal amount of $ 14.0 million with annual interest at 8 % ( the “ 2015 subordinated notes ” ) . the 2015 subordinated notes were due in february 2020. in february 2020 , we amended $ 13.5 million of the 2015 subordinated notes , extending the due date by three years to february 2023. the remaining $ 0.5 million of the 2015 subordinated notes were repaid in february 2020. our cash and cash equivalents at december 31 , 2019 were $ 61.8 million , an increase of $ 8.8 million from december 31 , 2018 , principally as a result of amounts received under our gilead collaboration agreement . during the past five years , we have financed our operations primarily through funding from corporate partnerships and novel financing mechanisms . based on our current plans and projections , we believe that our cash resources of $ 61.8 million as of december 31 , 2019 combined with cash from partnership milestones already triggered and expected later this year , as well as proceeds from financing transactions already completed in the first quarter of 2020 , will be sufficient to satisfy our liquidity requirements through the fourth quarter of 2020. we are presently in multiple partnership and out licensing discussions which , if consummated , could extend our cash resources into and beyond next year . until we are successful in our efforts for capital infusion through these transactions or other financing options , and because the completion of such transactions is not entirely within our control , in accordance with accounting guidance we are required to disclose that substantial doubt exists about our ability to continue as a going concern for a period of one year after the date of filing of this annual report on form 10-k. management continues to address the company 's liquidity position and will adjust spending as needed in order to preserve liquidity . we also continue to monitor the likelihood of success of our key initiatives and have a plan to discontinue funding of such activities if they do not prove to be successful , or , if by the second quarter of 2020 the anticipated additional cash resources are not put into place , restrict funding of non-core programs , restrict capital expenditures and or reduce the scale of our operations as necessary to ensure sufficient cash resources through the fourth quarter of 2020. our future liquidity needs will be determined primarily by the success of our operations with respect to the progression of our product candidates and key development and regulatory events in the future . potential sources of additional funding include : ( 1 ) pursuing collaboration , out-licensing and or partnering opportunities for our portfolio programs and product candidates with one or more third parties , ( 2 ) renegotiating third party agreements , ( 3 ) selling assets , ( 4 ) securing additional debt financing and or ( 5 ) selling equity securities . our future cash requirements include , but are not limited to , supporting clinical trial and regulatory efforts and continuing our other research and development programs . since inception , we have entered into various agreements with contract manufacturers , institutions , and clinical research organizations ( collectively `` third party providers '' ) to perform pre-clinical activities and to conduct and monitor our clinical studies . under these agreements , subject to the enrollment of patients and performance by the applicable third-party provider , we have estimated our total payments to be $ 319.8 million over the term of the related activities . through december 31 , 2019 , we have expensed $ 254.0 million as research and development expenses and $ 239.6 million has been paid under these agreements . the timing of expense recognition and future payments related to these agreements is subject to the enrollment of patients and performance by the applicable third-party provider . we have also entered into sponsored research agreements related to our product candidates that required payments of $ 9.8 million , $ 9.0 million of which have been paid as of december 31 , 2019. we plan to enter into additional agreements with third party providers as well as sponsored research agreements , and we anticipate significant additional expenditures will be required to initiate and advance our various programs . part of our strategy is to develop and commercialize some of our product candidates by continuing our existing collaboration arrangements with academic and collaboration partners and licensees and by entering into new collaborations . as a result of our collaboration agreements , we will not completely control the efforts to attempt to bring those product candidates to market . for example , our collaboration with incyte for the development , manufacture and commercialization of cpm antibodies against certain targets is managed by a joint steering committee , which is controlled by incyte . net cash used in operating activities for the years ended december 31 , 2019 and 2018 was $ 18.7 million and $ 131.1 million , respectively . our future ability to generate cash
| financial condition and results of operations overview agenus inc. ( including its subsidiaries , collectively referred to as “ agenus , ” the “ company , ” “ we , ” “ us , ” and “ our ” ) is a clinical-stage immuno-oncology ( “ i-o ” ) company advancing an extensive pipeline of immune checkpoint antibodies , adoptive cell therapies and neoantigen cancer vaccines , to fight cancer . our business is designed to drive success in i-o through speed , innovation and effective combination therapies . we believe that combination therapies and a deep understanding of each patient 's cancer will drive substantial expansion of the patient population benefiting from current i-o therapies . in addition to a diverse pipeline , we have assembled fully integrated end-to-end capabilities including novel target discovery , antibody generation , cell line development and good manufacturing practice ( “ gmp ” ) manufacturing . we believe that these fully integrated capabilities enable us to produce novel candidates on timelines that are shorter than the industry standard . leveraging from our science and capabilities , we have forged important partnerships to advance our innovation . we are developing a comprehensive i-o portfolio driven by the following platforms and programs , which we intend to utilize individually and in combination : our multiple antibody discovery platforms , including our proprietary display technologies , designed to drive the discovery of future cpm antibody candidates ; our antibody candidate programs , including our cpm programs ; our vaccine programs , including prophage , autosynvax and phosphosynvax ; our saponin-based vaccine adjuvants , principally our qs-21 stimulon adjuvant , or qs-21 stimulon ; and our cell therapy subsidiary , agentus therapeutics , inc. , which is designed to drive the discovery of future adoptive cell therapy , or “ living drugs ” ( activated , car-t and tcr ) programs . we assess development , commercialization and partnering strategies for each of our product candidates periodically based on several factors , including pre-clinical and clinical trial results , competitive positioning and funding requirements and resources .
| 4,040 |
the note bears interest at 10 % , matures on july 24 , 2018 , and is convertible into common stock at 50 % of the lowest 3 closing market prices of the previous 20 trading days prior to conversion . the company recorded a debt discount equal to $ 40,000 due to this conversion feature . the note had accrued interest of $ 7,917 as of august 31 , 2019 and $ 2,821 at august 31 , 2018. the debt discounts had a balance at august 31 , 2019 and august 31 , 2018 of $ 0 . the company recorded debt discount amortization expense of $ 0 during the year ended august 31 , 2019 and $ 35,836 during the year ended august 31 , 2018. during the year ended august 31 , 2018 , the company converted $ 17,106 in principal and $ 2,544 of accrued interest into shares ; see note 3 for more information . this note is currently in default . the company evaluated the convertible note and determined that the shares issuable pursuant to the conversion option were determinate due to the conversion price floor and , as such , does not constitute a derivative liability as the company has sufficient authorized shares and a conversion floor of $ 0.00005 . in the event that the authorized shares were not sufficient , the company has obtained authorization from a majority of shareholders such that the appropriate number of shares will be available or issuable for settlement to occur . promissory notes payable – third party iou financial on march 30 , 2018 , the company issued a promissory note to iou financial for $ 120,000 of cash consideration . the note bears interest at 32 % and matures on march 30 , 2019. the company recorded a debt discount equal to $ 38,630 due to the unpaid interest which was added to the principal balance to be repaid during the 12 month note . during the year ended august 31 , 2018 , the company amortized $ 16,299 of the debt discount into interest expense leaving a remaining total debt discount on the note of $ 22,331 as of august 31 , 2018. during the year ended august 31 , 2018 , the company repaid $ 69,206 in principal on the note in cash leaving a balance on the note of $ 73,200 owed as of august 31 , 2018. during the year ended august 31 , 2019 , the company amortized $ 22,331 of the debt discount into interest expense leaving a remaining total debt discount on the note of $ 0 as of august 31 , 2019. during the year ended august 31 , 2019 , the company repaid $ 89,424 in principal on the note in cash leaving a balance on the note of $ 0 owed as of august 31 , 2019. on january 22 , 2019 , the company issued a promissory note to iou financial for $ 75,000 of cash consideration . the note bears interest at 32 % , matures on october 23 , 2019. the company recorded a debt discount equal to $ 16,954 due to the unpaid interest which was added to the principal balance to be repaid during the 9 month note . during the year ended august 31 , 2019 , the company amortized $ 13,675 of the debt discount into interest expense leaving a remaining total debt discount on the note of $ 3,279 as of august 31 , 2019. the proceeds of the loan were used to pay $ 27,244 to iou financial to pay the note dated march 30 , 2018 in full . and the remaining amount $ 47,776 was added to working capital . during the period ended august 31 , 2019 , the company repaid $ 74,400 in principal on the note in cash leaving a balance on the note of $ 16,999 owed as of august 31 , 2019 this note was paid in full on december 12 , 2019 . 34 note 5- related party transactions convertible note payable – related party preferred stock issued for services on july 25 , 2017 , the articles of incorporation were amended to increase the voting rights of preferred shares to 100,000 votes per share . the series a share amendments valued according to the additional voting rights and dividend rights assigned . the value assigned to the dividend rights was derived from a model utilizing future economic value of the dividends and was $ 0 which was recorded on the grant date as stock-based compensation . the value assigned to the voting rights was derived from a model utilizing control premiums to value the voting control of the preferred stock and was $ 54,000 which was recorded on the grant date as stock-based compensation . on december 4 , 2017 , the company granted 50,000 additional series a preferred stock shares to robert cashman , a related party . the value assigned to the new shares was derived from a model utilizing control premiums to value the voting control of the preferred stock and was $ 1,000 which was recorded on the grant story_separator_special_tag overview service team inc. ( the `` company '' ) was incorporated pursuant to the laws of the state of nevada on june 6 , 2011. on august 22 , 2017 , the company changed its state of domicile to wyoming . the company was organized to comply with the warranty obligations of electronic devices manufactured by companies outside of the united states . the business proved to be unprofitable and the company discontinued its warranty and repair operations . on june 5 , 2013 , service team inc. acquired 100 percent of the outstanding stock of trade leasing , inc. for 4,000,000 shares of its common stock . trade leasing , inc. , a california corporation , was incorporated on november 1 , 2011 , and commenced business january 1 , story_separator_special_tag the note bears interest at 10 % , matures on july 24 , 2018 , and is convertible into common stock at 50 % of the lowest 3 closing market prices of the previous 20 trading days prior to conversion . the company recorded a debt discount equal to $ 40,000 due to this conversion feature . the note had accrued interest of $ 7,917 as of august 31 , 2019 and $ 2,821 at august 31 , 2018. the debt discounts had a balance at august 31 , 2019 and august 31 , 2018 of $ 0 . the company recorded debt discount amortization expense of $ 0 during the year ended august 31 , 2019 and $ 35,836 during the year ended august 31 , 2018. during the year ended august 31 , 2018 , the company converted $ 17,106 in principal and $ 2,544 of accrued interest into shares ; see note 3 for more information . this note is currently in default . the company evaluated the convertible note and determined that the shares issuable pursuant to the conversion option were determinate due to the conversion price floor and , as such , does not constitute a derivative liability as the company has sufficient authorized shares and a conversion floor of $ 0.00005 . in the event that the authorized shares were not sufficient , the company has obtained authorization from a majority of shareholders such that the appropriate number of shares will be available or issuable for settlement to occur . promissory notes payable – third party iou financial on march 30 , 2018 , the company issued a promissory note to iou financial for $ 120,000 of cash consideration . the note bears interest at 32 % and matures on march 30 , 2019. the company recorded a debt discount equal to $ 38,630 due to the unpaid interest which was added to the principal balance to be repaid during the 12 month note . during the year ended august 31 , 2018 , the company amortized $ 16,299 of the debt discount into interest expense leaving a remaining total debt discount on the note of $ 22,331 as of august 31 , 2018. during the year ended august 31 , 2018 , the company repaid $ 69,206 in principal on the note in cash leaving a balance on the note of $ 73,200 owed as of august 31 , 2018. during the year ended august 31 , 2019 , the company amortized $ 22,331 of the debt discount into interest expense leaving a remaining total debt discount on the note of $ 0 as of august 31 , 2019. during the year ended august 31 , 2019 , the company repaid $ 89,424 in principal on the note in cash leaving a balance on the note of $ 0 owed as of august 31 , 2019. on january 22 , 2019 , the company issued a promissory note to iou financial for $ 75,000 of cash consideration . the note bears interest at 32 % , matures on october 23 , 2019. the company recorded a debt discount equal to $ 16,954 due to the unpaid interest which was added to the principal balance to be repaid during the 9 month note . during the year ended august 31 , 2019 , the company amortized $ 13,675 of the debt discount into interest expense leaving a remaining total debt discount on the note of $ 3,279 as of august 31 , 2019. the proceeds of the loan were used to pay $ 27,244 to iou financial to pay the note dated march 30 , 2018 in full . and the remaining amount $ 47,776 was added to working capital . during the period ended august 31 , 2019 , the company repaid $ 74,400 in principal on the note in cash leaving a balance on the note of $ 16,999 owed as of august 31 , 2019 this note was paid in full on december 12 , 2019 . 34 note 5- related party transactions convertible note payable – related party preferred stock issued for services on july 25 , 2017 , the articles of incorporation were amended to increase the voting rights of preferred shares to 100,000 votes per share . the series a share amendments valued according to the additional voting rights and dividend rights assigned . the value assigned to the dividend rights was derived from a model utilizing future economic value of the dividends and was $ 0 which was recorded on the grant date as stock-based compensation . the value assigned to the voting rights was derived from a model utilizing control premiums to value the voting control of the preferred stock and was $ 54,000 which was recorded on the grant date as stock-based compensation . on december 4 , 2017 , the company granted 50,000 additional series a preferred stock shares to robert cashman , a related party . the value assigned to the new shares was derived from a model utilizing control premiums to value the voting control of the preferred stock and was $ 1,000 which was recorded on the grant story_separator_special_tag overview service team inc. ( the `` company '' ) was incorporated pursuant to the laws of the state of nevada on june 6 , 2011. on august 22 , 2017 , the company changed its state of domicile to wyoming . the company was organized to comply with the warranty obligations of electronic devices manufactured by companies outside of the united states . the business proved to be unprofitable and the company discontinued its warranty and repair operations . on june 5 , 2013 , service team inc. acquired 100 percent of the outstanding stock of trade leasing , inc. for 4,000,000 shares of its common stock . trade leasing , inc. , a california corporation , was incorporated on november 1 , 2011 , and commenced business january 1 ,
| results of operations the company had sales of $ 3,913,174 for the fiscal year ended august 31 , 2019 , compared to $ 3,329,876 during the fiscal year ended august 31 , 2018 , an increase of $ 583,298. this represents an increase of 17.5 percent . all of the sales are generated by trade leasing , inc. the service products division had no sales . cost of sales increased by $ 424,736 from $ 2,723,653 to $ 3,148,389 which was due to increased volume during the 2019 fiscal year . gross margins increased by $ 158,562 from $ 606,223 in 2018 to $ 764,785 in 2019 , primarily due to the increase in revenues and cost of sales during 2019. operating and other expenses increased by $ 14,607 from $ 643,675 to $ 625,938 from 2018 to 2019 primarily due to an increase in work force . interest expense decreased by $ 211,688 from $ 331,922 to $ 120,234 from 2018 to 2019 primarily due to no longer financing withconvertible note .
| 4,041 |
in many cases , these forward-looking statements may be identified by the use of words such as `` will , '' `` may , '' `` should , '' `` could , '' `` believes , '' `` expects , '' `` anticipates , '' `` estimates , '' `` intends , '' `` projects , '' `` goals , '' `` objectives , '' `` targets , '' `` predicts , '' `` plans , '' `` seeks , '' or similar expressions . any forward-looking statement speaks only as of the date on which it is made and is qualified in its entirety by reference to the factors discussed throughout this report . although we believe the expectations reflected in any forward-looking statements are based on reasonable assumptions , forward-looking statements are not guarantees of future performance or results and we can give no assurance that these expectations will be attained . our actual results may differ materially from those indicated by these forward-looking statements due to a variety of known and unknown risks and uncertainties . such risks and uncertainties include , without limitation , the risk factors discussed in part i , item 1a of this report . we disclaim any obligation to update or revise any forward-looking statements to reflect actual results or changes in the factors affecting the forward-looking information . business objective we are a publicly traded reit focused on energy infrastructure . our business strategy is to own and operate or lease critical energy midstream infrastructure connecting the upstream and downstream sectors within the industry . beginning in february 2021 , we currently generate revenue from the transportation , via pipeline , of natural gas and crude oil for our customers in missouri and california . the pipelines are located in areas where it would be difficult to replicate rights of way or transport natural gas or crude oil via non-pipeline alternatives resulting in our assets providing utility-like criticality in the midstream supply chain for our customers . prior to february 2021 , we generated long-term contracted revenue from operators of our assets , primarily under triple-net participating leases without direct commodity price exposure . basis of presentation the consolidated financial statements include corenergy infrastructure trust , inc. , as of december 31 , 2020 , and its direct and indirect wholly-owned subsidiaries . all significant intercompany accounts and transactions have been eliminated in consolidation . story_separator_special_tag 1pt 2px 0 ; text-align : right ; vertical-align : bottom '' > $ 1,328,853 $ 106,795 net realized and unrealized loss on other equity securities — — ( 1,845,309 ) interest expense ( 10,301,644 ) ( 10,578,711 ) ( 12,759,010 ) gain on the sale of leased property , net — — 11,723,257 gain ( loss ) on extinguishment of debt 11,549,968 ( 33,960,565 ) — total other income ( expense ) 1,719,773 ( 43,210,423 ) ( 2,774,267 ) income ( loss ) before income taxes ( 306,152,437 ) 4,314,113 41,293,150 income tax expense ( benefit ) , net ( 84,858 ) 234,618 ( 2,418,726 ) net income ( loss ) attributable to corenergy stockholders $ ( 306,067,579 ) $ 4,079,495 $ 43,711,876 preferred dividend requirements 9,189,809 9,255,468 9,548,377 net income ( loss ) attributable to common stockholders $ ( 315,257,388 ) $ ( 5,175,973 ) $ 34,163,499 other financial data ( 1 ) adjusted ebitda re $ 23,623,711 $ 71,435,331 $ 69,395,739 nareit ffo ( 14,800,449 ) 16,962,000 46,888,133 ffo ( 14,939,667 ) 16,949,416 48,051,243 affo 7,076,213 53,012,786 49,024,120 ( 1 ) refer to the `` non-gaap financial measures '' section that follows for additional details . year ended december 31 , 2020 compared to year ended december 31 , 2019 revenue . consolidated revenues were $ 11.3 million for the year ended december 31 , 2020 compared to $ 85.9 million for the year ended december 31 , 2019 , representing a decrease of $ 74.6 million . lease revenue was $ 21.4 million and was fully offset by the non-cash write-off of the deferred rent receivable of $ 30.1 million related to the grand isle lease agreement , resulting in a loss of $ 8.7 million for the year ended december 31 , 2020. lease revenue was $ 67.1 million for the year ended december 31 , 2019 , resulting in a decrease of $ 75.8 million . the decrease in lease revenue was primarily driven by ( i ) the non-cash write-off of the deferred rent receivable ( $ 30.1 million ) , which was determined to be no longer probable of collection in the first quarter of 2020 , ( ii ) the non-payment of rent due for the gigs asset in the second , third and fourth quarters of 2020 ( $ 30.5 million ) , ( iii ) the decrease in rent resulting from the sale of our pinedale lgs asset during the second quarter of 2020 ( $ 10.7 million ) and ( iv ) the decrease in participating rent at pinedale ( $ 4.5 million ) . refer to part iv , item 15 , note 3 ( `` leased properties and leases '' ) for further discussion of the impairment of the deferred rent receivable , nonpayment of rent by the egc tenant and the sale of the pinedale lgs asset . transportation and distribution revenue from our subsidiaries mogas and omega was $ 20.0 million and $ 18.8 million for the years ended december 31 , 2020 and 2019 , respectively . the $ 1.2 million increase was primarily driven by increased system maintenance revenue projects at omega . 51 glossary of defined terms transportation and distribution expenses . transportation and distribution expenses were $ 6.1 million and $ 5.2 million for the years ended december 31 , 2020 and 2019 , respectively , representing an increase of $ 0.8 million . the increase was primarily driven by higher system maintenance expense at omega due to the timing of projects , partially offset by lower legal , real estate taxes and maintenance costs at mogas . general and administrative expenses . story_separator_special_tag refer to part iv , item 15 , note 3 ( `` leased properties and leases '' ) for further discussion of the sale of the pinedale lgs asset and lease termination . net distributions and other income . net distributions and other income for the year ended december 31 , 2020 was $ 0.5 million compared to $ 1.3 million for the year ended december 31 , 2019. the decrease was primarily related to interest income , which decreased approximately $ 781 thousand from the prior-year period due to a reduction in cash and declining interest rates during the year ended december 31 , 2020. interest expense . for the years ended december 31 , 2020 and 2019 , interest expense totaled approximately $ 10.3 million and $ 10.6 million , respectively . the decrease was primarily attributable to lower interest expense due to ( i ) the exchanges completed during the first and third quarters of 2019 and maturity of the remaining outstanding 7.00 % convertible notes during the second quarter of 2020 and ( ii ) the settlement of the amended pinedale term credit facility at the end of the second quarter of 2020 , partially offset by ( iii ) additional interest expense incurred as a result of the 5.875 % convertible notes offering in august of 2019. for additional information , see part iv , item 15 , note 11 ( `` debt '' ) . gain ( loss ) on extinguishment of debt . for the year ended december 31 , 2020 , a gain on extinguishment of debt of $ 11.5 million was recognized for ( i ) the release agreement entered into with prudential for the amended pinedale term credit facility in connection with the sale of the pinedale lgs on june 30 , 2020 ( $ 11.0 million ) and ( ii ) the repurchase of the 5.875 % convertible notes completed in april of 2020 ( $ 576 thousand ) . for the year ended december 31 , 2019 , a loss on extinguishment of debt totaling approximately $ 34.0 million was recorded in connection with the 7.00 % convertible notes exchanges completed during the first and third quarters of 2019. for additional information , see part iv , item 15 , note 11 ( `` debt '' ) . income tax expense ( benefit ) . income tax benefit was $ 85 thousand for the year ended december 31 , 2020 compared to income tax expense of $ 235 thousand for the year ended december 31 , 2019. the income tax benefit recorded in the current year is primarily the result of carryback of net operating losses against net operating income in prior periods and additional net operating losses generated by certain of our trs entities , partially offset by certain fixed asset , deferred contract revenue and loan loss activities . the income tax expense recorded in the prior year is primarily the result of ( i ) a change in our state effective rate due to changes in state law and state operations by certain of our trs entities , ( ii ) certain fixed asset , deferred contract revenue and loan loss activities , partially offset by ( iii ) the impact of the refund liability related to the ferc rate case settlement and ( iv ) capital losses generated from the lightfoot liquidation that were carried back against capital gains from prior years . net income ( loss ) . net income ( loss ) was $ ( 306.1 ) million and $ 4.1 million for the years ended december 31 , 2020 and 2019 , respectively , representing a decrease of $ 310.1 million . after deducting $ 9.2 million and $ 9.3 million for the portion of preferred dividends that are allocable to each respective period , net loss attributable to common stockholders for the year ended december 31 , 2020 was $ ( 315.3 ) million , or $ ( 23.09 ) per basic and diluted common share , as compared to $ ( 5.2 ) million , or $ ( 0.40 ) per basic and diluted common share , for the prior year . year ended december 31 , 2019 compared to year ended december 31 , 2018 revenue . consolidated revenues were $ 85.9 million for the year ended december 31 , 2019 compared to $ 89.2 million for the year ended december 31 , 2018 , representing a decrease of $ 3.3 million . lease revenue was $ 67.1 million and $ 72.7 million for the years ended december 31 , 2019 and 2018 , respectively , with the decrease of approximately $ 5.7 million driven primarily by ( i ) the sale of the portland terminal facility , partially offset by ( ii ) an increase in variable rent collected on the pinedale lease during the year ended december 31 , 2019 . 53 glossary of defined terms transportation and distribution revenue from our subsidiaries mogas and omega was $ 18.8 million and $ 16.5 million for the years ended december 31 , 2019 and 2018 , respectively . the $ 2.3 million increase primarily resulted from higher rates going into effect on december 1 , 2018 related to the rate case filed by mogas with the ferc , net of the final refund liability . the ferc rate case settlement was approved in august of 2019. transportation and distribution expenses . transportation and distribution expenses were $ 5.2 million and $ 7.2 million for the years ended december 31 , 2019 and 2018 , respectively , representing a decrease of $ 2.0 million . the increase relates primarily to lower legal , consulting and maintenance costs at mogas . general and administrative expenses . general and administrative expenses were $ 10.6 million for the year ended december 31 , 2019 compared to $ 13.0 million for the year ended december 31 , 2018. the most significant components of the variance from the prior year are outlined in the following table and explained below : replace_table_token_4_th management fees are directly proportional to our asset base .
| results of operations the following table summarizes the financial data and key operating statistics for corenergy for the years ended december 31 , 2020 , 2019 and 2018. we believe the operating results detail presented below provides investors with information that will assist them in analyzing our operating performance . however , the operations of the company going forward in 2021 may differ significantly due to the losses experienced in 2020 and resulting disposition of assets . the following data should be read in conjunction with our consolidated financial statements and the notes thereto included in part iv , item 15 of this report . 50 glossary of defined terms the following table and discussion are a summary of our results of operations for the years ended december 31 , 2020 , 2019 and 2018 : for the years ended december 31 , 2020 2019 2018 revenue lease revenue $ 21,351,123 $ 67,050,506 $ 72,747,362 deferred rent receivable write-off ( 30,105,820 ) — — transportation and distribution revenue 19,972,351 18,778,237 16,484,236 financing revenue 120,417 116,827 — total revenue 11,338,071 85,945,570 89,231,598 expenses transportation and distribution expenses 6,059,707 5,242,244 7,210,748 general and administrative 12,231,922 10,596,848 13,042,847 depreciation , amortization and aro accretion expense 13,654,429 22,581,942 24,947,453 loss on impairment of leased property 140,268,379 — — loss on impairment and disposal of leased property 146,537,547 — — loss on termination of lease 458,297 — — provision for loan gain — — ( 36,867 ) total expenses 319,210,281 38,421,034 45,164,181 operating income ( loss ) $ ( 307,872,210 ) $ 47,524,536 $ 44,067,417 other income ( expense ) net distributions and other income $ 471,449 < td style= '' background-color : # ffffff ; padding:2px
| 4,042 |
the following discussion and analysis should be read in conjunction with our consolidated financial statements and related notes contained herein . cautionary note regarding forward-looking statements this report contains forward-looking statements within the meaning of section 27a of the securities act and section 21e of the exchange act . these forward-looking statements reflect our current views with respect to , among other things , future events and our financial performance . these statements are often , but not always , made through the use of words or phrases such as “ may , ” “ should , ” “ could , ” “ predict , ” “ potential , ” “ believe , ” “ will likely result , ” “ expect , ” “ continue , ” “ will , ” “ anticipate , ” “ seek , ” “ estimate , ” “ intend , ” “ plan , ” “ projection , ” “ would ” and “ outlook , ” or the negative version of those words or other comparable of a future or forward-looking nature . these forward-looking statements are not historical facts , and are based on current expectations , estimates and projections about our industry , management 's beliefs and certain assumptions made by management , many of which , by their nature , are inherently uncertain and beyond our control . accordingly , we caution you that any such forward-looking statements are not guarantees of future performance and are subject to risks , assumptions and uncertainties that are difficult to predict . although we believe that the expectations reflected in these forward-looking statements are reasonable as of the date made , actual results may prove to be materially different from the results expressed or implied by the forward-looking statements . there are or will be important factors that could cause our actual results to differ materially from those indicated in these forward-looking statements , including , but not limited to , the following : deterioration of our asset quality ; our ability to prudently manage our growth and execute our strategy ; changes in the value of collateral securing our loans ; business and economic conditions generally and in the financial services industry , nationally and within our local market area ; changes in management personnel ; our ability to maintain important deposit customer relationships , our reputation and otherwise avoid liquidity risks ; our ability to provide investment management performance competitive with our peers and benchmarks ; operational risks associated with our business ; volatility and direction of market interest rates ; increased competition in the financial services industry , particularly from regional and national institutions ; changes in the laws , rules , regulations , interpretations or policies relating to financial institutions , accounting , tax , trade , monetary and fiscal matters ; further government intervention in the u.s. financial system ; natural disasters and adverse weather , acts of terrorism , an outbreak of hostilities or other international or domestic calamities , and other matters beyond our control ; and other factors that are discussed in the section entitled “ risk factors , ” in part i - item 1a . the foregoing factors should not be construed as exhaustive and should be read together with the other cautionary statements included in this document . if one or more events related to these or other risks or uncertainties materialize , or if our underlying assumptions prove to be incorrect , actual results may differ materially from what we anticipate . accordingly , you should not place undue reliance on any such forward-looking statements . any forward-looking statement speaks only as of the date on which it is made , and we do not undertake any obligation to publicly update or review any forward-looking statement , whether as a result of new information , future developments or otherwise . new factors emerge from time to time , and it is not possible for us to predict which will arise . in addition , we can not assess the impact of each factor on our business or the extent to which any factor , or combination of factors , may cause actual results to differ materially from those contained in any forward-looking statements . 51 general we are a bank holding company that operates through two reporting segments : bank and investment management . the bank segment provides commercial banking to middle-market businesses and private banking services to high-net-worth individuals through our tristate capital bank subsidiary . the bank segment generates most of its revenue from interest on loans and investments , loan-related fees including swap fees , and deposit-related fees . its primary source of funding for loans is deposits . its largest expenses are interest on these deposits and salaries and related employee benefits . the investment management segment provides advisory and sub-advisory investment management services primarily to institutional plan sponsors through our chartwell investment partners , llc subsidiary and also will facilitate marketing efforts for chartwell 's proprietary investment products through our chartwell tsc securities corp. subsidiary , once it is registered as a broker/dealer with the sec and finra . the investment management segment generates most of its revenue from investment management fees earned on assets under management and its largest expenses are salaries and related employee benefits . the following discussion and analysis presents our financial condition and results of operations on a consolidated basis , except where significant segment disclosures are necessary to better explain the operations of each segment and related variances . in particular , the discussion and analysis of non-interest income and non-interest expense is reported by segment . we measure our performance primarily through our earnings per share ; total revenue ; and pre-tax , pre-provision net revenue . other salient metrics include the ratio of allowance for loan losses to loans ; net interest margin ; the efficiency ratio of the bank segment ; assets under management ; return on average assets ; return on average equity ; and regulatory leverage and risk-based capital ratios . story_separator_special_tag 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 . 2015 compared to 2014 operating performance for the year ended december 31 , 2015 , our net income was $ 22.5 million compared to $ 15.9 million for the same period in 2014 , an increase of $ 6.6 million , or 41.2 % , primarily due to the net impact of ( 1 ) a $ 2.1 million , or 3.2 % , increase in our net interest income due largely to our continued loan growth ; ( 2 ) a decrease in provision for loan losses of $ 10.1 million ; ( 3 ) an increase of $ 3.9 million in non-interest income largely related to higher investment management fees with two additional months of chartwell 's operating results and higher swap fees offset by lower net gain on the sale of investment securities available-for-sale ; ( 4 ) an increase of $ 5.7 million in our non-interest expense largely related to two additional months of chartwell expense ; and ( 5 ) a $ 3.9 million increase in income taxes . our diluted eps was $ 0.80 for the year ended december 31 , 2015 , compared to $ 0.55 for the same period in 2014 . the increase is a result of an increase of $ 6.6 million , or 41.2 % , in our net income and lower dilutive average shares largely related to the purchase of treasury stock . for the year ended december 31 , 2015 , total revenue increased $ 7.4 million , or 7.8 % , to $ 103.4 million from $ 96.0 million for the same period in 2014 , driven by two additional months of chartwell 's revenue and growth in our loan income and swap fees . p re-tax , pre-provision net revenue increased $ 1.7 million , or 5.5 % , to $ 33.4 million for the year ended december 31 , 2015 , from $ 31.6 million for the same period in 2014 , primarily resulting from two additional months of chartwell 's operating results . our net interest margin was 2.36 % for the year ended december 31 , 2015 , as compared to 2.62 % for the same period in 2014 . the most significant factor driving net interest margin compression has been our shift toward lower-risk assets , most notably the marketable-securities-backed private banking margin loan portfolio that the bank has made its fastest growing channel . in addition , net interest margin for the year ended december 31 , 2015 , was impacted by the additional interest expense from our june 2014 subordinated debt placement . for the year ended december 31 , 2015 , the bank 's efficiency ratio was 62.30 % , as compared to 59.93 % for the same period in 2014 , ( adjusted for acquisition related items ) , primarily as a result of higher compensation expense for the bank offset partially by higher total revenue for the year ended december 31 , 2015 . our non-interest expense to average assets for the year ended december 31 , 2015 , was 2.32 % , compared to 2.44 % for the same period in 2014 . our return on average assets was 0.74 % for the year ended december 31 , 2015 , as compared to 0.61 % for the same period in 2014 . our return on average equity was 7.13 % for the year ended december 31 , 2015 , as compared to 5.25 % for the same period in 2014 . the increase in both ratios is the result of the higher net income for the year ended december 31 , 2015 , as discussed above . tristate capital holdings ' total risk-based capital ratio increased to 13.88 % as of december 31 , 2015 , from 11.02 % as of december 31 , 2014. tristate capital bank 's total risk-based capital ratio increased to 13.35 % as of december 31 , 2015 , from 10.69 % as of december 31 , 2014. the increase in the risk-based capital ratios are primarily due to the new basel iii capital rules effective january 1 , 2015. the company benefits from risk-weighted capital treatment recognizing the lower-risk profile of our private banking margin loans , which are collateralized by cash and marketable securities that are monitored daily . this implementation had the favorable net effect of making approximately $ 70 million of regulatory capital available to the bank in the first quarter of 2015. total assets of $ 3.30 billion as of december 31 , 2015 , increased $ 456.2 million , or 16.0 % , from december 31 , 2014 . loans held-for-investment grew by $ 441.2 million to $ 2.84 billion as of december 31 , 2015 , an increase of 18.4 % from december 31 , 2014 , primarily 53 as a result of growth in our private banking and commercial real estate loan portfolios . total deposits increased $ 352.9 million , or 15.1 % , to $ 2.69 billion as of december 31 , 2015 , from $ 2.34 billion , as of december 31 , 2014 . non-performing assets to total assets decreased to 0.56 % as of december 31 , 2015 , from 1.11 % as of december 31 , 2014 , due to $ 13.4 million in reductions related to paydowns , a sale , charge-offs and two payoffs on non-performing loans during the year partially offset by an addition of a $ 228,000 non-performing loan . net charge-offs to average loans for the year ended december 31 , 2015 , was 0.09 % , as compared to 0.41 % for the same period in 2014 .
| results of operations net interest income net interest income represents the difference between the interest received on interest-earning assets and the interest paid on interest-bearing liabilities . net interest income is affected by changes in the volume of interest-earning assets and interest-bearing liabilities and changes in interest yields earned and rates paid . maintaining consistent spreads between earning assets and interest-bearing liabilities is significant to our financial performance because net interest income comprised 61.7 % , 65.7 % and 68.6 % of total revenue for the years ended december 31 , 2016 , 2015 and 2014 , respectively . the table below reflects an analysis of net interest income , on a fully taxable equivalent basis , for the periods indicated . the adjustment to convert certain income to a fully taxable equivalent basis consists of dividing tax exempt income by one minus the statutory federal income tax rate of 35.0 % . replace_table_token_16_th ( 1 ) net interest margin is calculated on a fully taxable equivalent basis . the following table provides information regarding the average balances and yields earned on interest-earning assets and the average balances and rates paid on interest-bearing liabilities for the years ended december 31 , 2016 , 2015 and 2014 . non-accrual loans are included in the calculation of the average loan balances , while interest payments collected on non-accrual loans is recorded as a reduction to principal . where applicable , interest income and yield are reflected on a fully taxable equivalent basis , and have been adjusted based on the statutory federal income tax rate of 35.0 % . 54 replace_table_token_17_th ( 1 ) net interest income and net interest margin are calculated on a fully taxable equivalent basis . net interest income for the years ended december 31 , 2016 and 2015 .
| 4,043 |
during the years ended december 31 , 2013 , 2012 and 2011 , the company did not recognize interest or penalties on any unrecognized tax benefits . the company files income tax returns in the u.s. federal jurisdiction as well as multiple state jurisdictions . the company is not currently under examination by the irs . the company 's federal income tax returns for 2011 and 2012 remain open to examination . various state and local tax returns remain open to examination . the company believes that any potential assessment would be immaterial . note 10 — related party transactions the building where the company maintains its headquarters is leased from a limited liability company in which our chief executive officer owns a significant interest as non-controlling member . the company leases additional office space for use as its training facility which is located in a building adjacent to the company 's headquarters . the second building is also owned by a limited liability company in which the company 's chief executive officer owns a significant interest as non-controlling member . under the terms of these agreements , the company made rent story_separator_special_tag the following discussion and analysis presents factors that had a material effect on our results of operations during the years ended december 31 , 2013 , 2012 and 2011 . also discussed is our financial position as of december 31 , 2013 and 2012 . investors should read this discussion in conjunction with our consolidated financial statements , including the notes thereto , appearing elsewhere in this annual report . this discussion and analysis contains forward- looking statements . please refer to the section entitled “ special note about forward-looking statements ” for a discussion of the uncertainties , risks and assumptions associated with these statements . 2013 results during 2013 , we completed our 11th straight profitable year , with net income of $ 92.3 million or $ 4.82 earnings per share ( diluted ) on operating revenues of $ 996.2 million . net income was 17.0 percent higher compared to 2012 results of $ 78.6 million . earnings per share of $ 4.82 were 18.7 percent higher in 2013 when compared to 2012 results of $ 4.06 . operating revenue in 2013 grew by 9.6 percent compared to operating revenue of $ 908.7 million in 2012. we achieved an operating margin of 15.5 percent in 2013 primarily driven by our highest ever annual ancillary revenue per passenger of $ 45.73 , an 11.0 percent increase compared to 2012. our total operating revenue in 2013 increased $ 87.4 million or 9.6 percent over 2012 due to a 7.8 percent increase in scheduled service passengers and a 5.6 percent increase in total average fare to $ 137.43 in 2013 from $ 130.10 in 2012. total average fare rose as ancillary revenue per passenger increased by 11.0 percent and scheduled service average base fare increased by 3.1 percent . an increase in charges for bags resulting from the implementation of a new carry-on bag fee in april 2012 which was in effect for the full year during 2013 , the ability to sell additional assigned seats as all of our in-service md-80 aircraft were reconfigured to 166 seats , and new boarding procedures were the main drivers of the increase in ancillary 25 revenue per passenger . our load factor remained relatively unchanged at 88.9 percent in 2013 compared to 89.4 percent in 2012. trasm improved to 12.23¢ in 2013 from 12.14¢ in 2012 despite capacity growth driven by an increase in our average number of aircraft , larger gauge aircraft and a longer stage length . our average number of aircraft in revenue service increased by 4.5 percent from 60.2 aircraft during 2012 to 62.9 aircraft during 2013. we added additional capacity with the introduction of used a320 series airbus aircraft into our operating fleet , additional seats from our md-80 seat reconfiguration program and having six boeing 757-200 aircraft in revenue service for the majority of 2013. we had two boeing 757-200 aircraft in revenue service for the majority of 2012 compared to six in 2013. year-over-year , the additional capacity coupled with a 3.7 percent increase in our scheduled service average stage length drove a 13.5 percent increase in scheduled service asms . this asm growth was despite a year-over-year 3.5 percent decline in our overall fleet average block hours per aircraft per day . our fuel cost per asm declined 6.3 percent from 5.05¢ in 2012 to 4.73¢ in 2013 as a result of larger gauge aircraft , which are more efficient on a per seat fuel basis , and the introduction of the airbus a320 series aircraft in our fleet which led to a 7.3 percent increase in asms per gallon of fuel . casm , excluding fuel , rose by 5.3 percent due to a decline in our aircraft utilization rate , and the de-funding of the us government starting october 1 , 2013 until october 16 , 2013. the faa shutdown delayed us from placing a320 airbus aircraft into service as anticipated and also delayed the progress needed to train the necessary number of crews to operate our full flying schedule . the delayed placing of airbus a320 series aircraft in our fleet resulted in higher aircraft lease rental expense as we contracted with other carriers for sub-service to fly scheduled flights , reduced crew productivity for in transit crews , and increased expenses to temporarily assign flight crews to bases to support unplanned md-80 flying in place of planned airbus a320 series flying . as of december 31 , 2013 , we had $ 387.1 million in unrestricted cash and investment securities . our liquidity position continues to provide us opportunities to invest in the growth of our fleet , with $ 177.5 million in capital expenditures during 2013. in 2013 , we purchased and took delivery of seven airbus a320 aircraft and one airbus a319 aircraft under existing purchase agreements . story_separator_special_tag faa approval was required for recently hired and trained crews , operation of purchased airbus a320 aircraft and completion of certain activities necessary for operation at recently announced airports . the faa shutdown delayed us from placing airbus a320 aircraft into service as anticipated and caused increased aircraft lease rental expense as we contracted with other carriers for sub-service of scheduled flights for which we originally planned to use airbus a320 aircraft . the faa shutdown also reduced crew productivity and increased expenses to temporarily assign flight crews to bases to support unplanned md-80 flying in place of planned airbus a320 flying . we expect additional costs in the first quarter of 2014 but otherwise do not believe these setbacks will have a significant impact on our financial results as we implemented alternatives to mitigate the risks of the faa delays . currently , we are not anticipating additional costs associated with the aircraft and crew training delays will extend past april 2014. we have three employee groups which have voted for union representation ; pilots , flight attendants , and flight dispatchers . these three employee groups make up approximately 50 percent of our total employees . we are currently in various stages of negotiations for a collective bargaining agreement with the labor organizations representing these employee groups . any labor actions following an inability to reach collective bargaining agreements could materially impact our operations during the continuance of any such activity . during 2013 , we acquired and placed into service three airbus a319 and five a320 airbus aircraft under operating leases and purchase agreements entered into in 2012. we believe the introduction of these airbus aircraft into our operating fleet will provide a good fit for our existing business model . when compared to our md-80 aircraft , we expect the additional cost of ownership of these aircraft will be offset by cost savings from increased fuel efficiency and the ability to generate 28 additional revenue with the higher capacity airbus a320 series aircraft . during 2013 we incurred costs related to the introduction of the aircraft and incurred additional training and pre-operating costs as we added the aircraft type to our operating certificate . during 2013 , we removed five md-80 aircraft from service , comprised of one 130 seat md-87 aircraft and four 150 seat md-83 aircraft . two of the md-83 aircraft and the md-87 aircraft were permanently retired . the remaining two md-83 aircraft were placed in temporary storage . as of december 31 , 2013 , 51 md-80 aircraft had been modified to 166 seats as part of our seat reconfiguration program . in the first quarter of 2014 , we expect to complete the seat reconfiguration for two additional md-80 aircraft at which time , they will be returned to revenue service . we expect our md-80 aircraft fleet to remain at 53 aircraft during 2014. we believe our six boeing 757-200 aircraft , our md-80 aircraft fleet , and the purchase and acquisition of used airbus a320 series aircraft will meet our aircraft needs to support our planned growth through 2015. our network grew from 195 total routes as of december 31 , 2012 , to 226 total routes at december 31 , 2013 , and we have announced additional service to increase the number of routes to 231 routes by the end of the first quarter of 2014. we expect to continue to aggressively manage capacity in our markets in an attempt to maximize profitability . trasm improved to 12.23¢ in 2013 compared to 12.14¢ in 2012 despite our significant capacity growth in 2013 , primarily due to increased ancillary per-passenger revenues . casm , excluding fuel , rose by 5.3 percent due to a decline in aircraft utilization , costs related to the operational disruption in september 2013 and the effects of the faa shutdown relating to the delays in flying our airbus a320 aircraft in the fourth quarter . we continue to focus on operating a higher percentage of our flights during peak windows and a lower percentage of flights during off-peak windows . we believe this approach with our planned departure and asm growth , primarily in our florida markets , will contribute to the achievement of our profitability goals in the current operating environment . our operating revenue our operating revenue is comprised of both air travel on a stand-alone basis and bundled with hotels , rental cars and other travel-related services . we believe our diversified revenue streams distinguish us from other u.s. airlines and other travel companies . scheduled service revenue . scheduled service revenue consists of base air fare . ancillary revenue . our ancillary revenue is generated from air-related charges and third party products . air-related revenue is generated through charges for baggage , carrier usage charges , advance seat assignments , travel protection product , change fees , use of our call center for purchases , priority boarding and other services provided in conjunction with our scheduled air service . we also generate revenue from third party products through the sale of hotel rooms , ground transportation ( rental cars and hotel shuttle products ) , attraction and show tickets and fees we receive from other merchants selling products through our website . we recognize our ancillary revenues net of amounts paid to wholesale providers , travel agent commissions and payment processing fees . fixed fee contract revenue . our fixed fee contract revenue is generated from fixed fee agreements and charter service on a year-round and ad-hoc basis . other revenue . other revenue is primarily generated from aircraft and flight equipment leased to third parties . seasonality . our results of operations for interim periods are not necessarily indicative of those for the entire year because our business is subject to seasonal fluctuations . we can be adversely impacted during periods with reduced leisure travel spending . traffic demand for our business historically has been weaker in the third quarter and stronger in the first quarter .
| results of operations 2013 compared to 2012 the table below presents our operating expenses as a percentage of operating revenue for the periods indicated : replace_table_token_10_th operating revenue our operating revenue increased 9.6 percent to $ 996.2 million in 2013 , up from $ 908.7 million in 2012 , primarily due to a 19.6 percent increase in ancillary revenue and an 11.1 percent increase in scheduled service revenue . scheduled service revenue and ancillary revenue increases were driven by a 7.8 percent increase in scheduled service passengers and a 5.6 percent increase in our total average fare to $ 137.43 in 2013 compared to $ 130.10 in 2012. scheduled service revenue . scheduled service revenue increased 11.1 percent to $ 651.3 million for 2013 , up from $ 586.0 million in 2012. the increase was driven by a 7.8 percent increase in the number of scheduled service passengers and a 3.1 percent increase in our scheduled service average base fare . passenger growth was attributable to a 5.0 percent increase in 30 the average number of passengers per departure , associated with a 5.4 percent growth in scheduled service seats per departure , and a 3.0 percent increase in the number of scheduled service departures . we added 44 new routes in 2013 which increased the number of passengers as our load factor remained relatively unchanged at 88.9 percent in 2013 compared to 89.4 percent in 2012. ancillary revenue . ancillary revenue increased 19.6 percent to $ 324.9 million for 2013 , up from $ 271.6 million in 2012 , driven by an 11.0 percent increase in ancillary revenue per scheduled passenger from $ 41.20 to $ 45.73 and a 7.8 percent increase in the number of scheduled service passengers .
| 4,044 |
kingsway conducts its business through the following two reportable segments : insurance underwriting and insurance services . effective march 31 , 2014 , the company 's wholly owned subsidiary , 1347 property insurance holdings , inc. ( `` pih '' ) , formerly known as maison insurance holdings , inc. , completed an initial public offering of its common stock . upon completion of the transaction , the company maintained a minority ownership interest in the common shares of pih . the earnings of pih are included in the consolidated statements of operations through the march 31 , 2014 transaction date . prior to the transaction , pih was included in the insurance underwriting segment . as a result of the disposal of the company 's majority interest in pih on march 31 , 2014 , all segmented information has been adjusted to exclude pih from the insurance underwriting segment . insurance underwriting includes the following subsidiaries of the company : mendota insurance company ( `` mendota '' ) , mendakota insurance company ( `` mendakota '' ) , universal casualty company ( `` ucc '' ) , kingsway amigo insurance company ( `` amigo '' ) and kingsway reinsurance corporation . throughout this 2014 annual report , the term `` insurance underwriting '' is used to refer to this segment . insurance underwriting provides non-standard automobile insurance to individuals who do not meet the criteria for coverage by standard automobile insurers and actively conducts business in 15 states . in 2014 , production in the following states represented 81.4 % of insurance underwriting 's gross premiums written : florida ( 18.9 % ) , texas ( 17.7 % ) , illinois ( 15.5 % ) , california ( 10.0 % ) , colorado ( 9.7 % ) and nevada ( 9.6 % ) . for the year ended december 31 , 2014 , non-standard automobile insurance accounted for 100.0 % of insurance underwriting 's gross premiums written . the company previously placed amigo and ucc into voluntary run-off in 2012 and 2011 , respectively . each of amigo and ucc has entered into a comprehensive run-off plan which has been approved by its respective state of domicile . kingsway continues to manage amigo and ucc in a manner consistent with the run-off plans . insurance services includes the following subsidiaries of the company : assigned risk solutions ltd. ( `` ars '' ) , iws acquisition corporation ( `` iws '' ) and trinity warranty solutions llc ( `` trinity '' ) . throughout this 2014 annual report , the term `` insurance services '' is used to refer to this segment . ars is a licensed property and casualty agent , full service managing general agent and third-party administrator focused primarily on the assigned risk market . ars is licensed to administer business in 22 states but generates its revenues primarily by operating in the states of new york and new jersey . iws is a licensed motor vehicle service agreement company and is a provider of after-market vehicle protection services distributed by credit unions in 26 states to their members . trinity is a provider of warranty products and maintenance support to consumers and businesses in the heating , ventilation , air conditioning ( `` hvac '' ) and refrigeration industry . trinity distributes its warranty products through original equipment manufacturers , hvac distributors and commercial and residential contractors . trinity distributes its maintenance support direct through corporate owners of retail spaces throughout the united states . non u.s.-gaap financial measures throughout this 2014 annual report , we present our operations in the way we believe will be most meaningful , useful and transparent to anyone using this financial information to evaluate our performance . in addition to the u.s. gaap presentation of net loss , we show certain statutory reporting information and other non-u.s. gaap financial measures that we believe are relevant in managing our business and drawing comparisons to our peers . these measures are segment operating income ( loss ) , gross premiums written , net premiums written and underwriting ratios . following is a list of non-u.s. gaap measures found throughout this report with their definitions , relationships to u.s. gaap measures and explanations of their importance to our operations . replace_table_token_36_th kingsway financial services inc. management 's discussion and analysis segment operating income ( loss ) segment operating income ( loss ) represents one measure of the pretax profitability of our segments and is derived by subtracting direct segment expenses from direct segment revenues . revenues and expenses are presented in the consolidated statements of operations , but are not subtotaled by segment . however , this information is available in total and by segment in note 24 , `` segmented information , '' to the consolidated financial statements , regarding reportable segment information . the nearest comparable u.s. gaap measure is loss from continuing operations before income tax benefit which , in addition to operating income ( loss ) , includes net investment income , net realized gains , other-than-temporary impairment loss , other income not allocated to segments , general and administrative expenses , restructuring expense , interest expense , amortization of intangible assets , contingent consideration ( benefit ) expense , impairment of asset held for sale , loss on change in fair value of debt , loss on disposal of subsidiary , loss on disposal of asset held for sale , loss on buy-back of debt and equity in net ( loss ) income of investee . a reconciliation of segment operating income ( loss ) to loss from continuing operations before income tax benefit for the year ended december 31 , 2014 is presented in table 1 of the `` results of continuing operations '' section of md & a . story_separator_special_tag for fixed maturities , we use observable inputs such as quoted prices in inactive markets , quoted prices in active markets for similar instruments , benchmark interest rates , broker quotes and other relevant inputs . we do not have any investments in our portfolio which require us to use unobservable inputs . any change in the estimated fair value of our investments could impact the amount of unrealized gain or loss we have recorded , which could change the amount we have recorded for our investments and other comprehensive loss on our consolidated balance sheets . gains and losses realized on the disposition of investments are determined on the first-in first-out basis and credited or charged to the consolidated statements of operations . premium and discount on investments are amortized and accredited using the interest method and charged or credited to net investment income . the establishment of an other-than-temporary impairment on an investment requires a number of judgments and estimates . we perform a quarterly analysis of the individual investments to determine if declines in market value are other-than-temporary . the analysis includes some or all of the following procedures , as applicable : identifying all unrealized loss positions that have existed for at least six months ; identifying other circumstances which management believes may impact the recoverability of the unrealized loss positions ; obtaining a valuation analysis from third-party investment managers regarding the intrinsic value of these investments based on their knowledge and experience together with market-based valuation techniques ; reviewing the trading range of certain investments over the preceding calendar period ; assessing if declines in market value are other-than-temporary for debt instruments based on the investment grade credit ratings from third-party rating agencies ; assessing if declines in market value are other-than-temporary for any debt instrument with a non-investment grade credit rating based on the continuity of its debt service record ; determining the necessary provision for declines in market value that are considered other-than-temporary based on the analyses performed ; and assessing the company 's ability and intent to hold these investments at least until the investment impairment is recovered . the risks and uncertainties inherent in the assessment methodology used to determine declines in market value that are other-than-temporary include , but may not be limited to , the following : the opinions of professional investment managers could be incorrect ; the past trading patterns of individual investments may not reflect future valuation trends ; replace_table_token_38_th kingsway financial services inc. management 's discussion and analysis the credit ratings assigned by independent credit rating agencies may be incorrect due to unforeseen or unknown facts related to a company 's financial situation ; and the debt service pattern of non-investment grade instruments may not reflect future debt service capabilities and may not reflect a company 's unknown underlying financial problems . the company did not recognize any impairment related to its investments that was considered other-than-temporary for the year ended december 31 , 2014 . as further discussed in the `` results of continuing operations '' section below , the company recorded a write-down for other-than-temporary impairment related to its investment in atlas financial holdings , inc. ( `` atlas '' ) preferred stock of $ 1.8 million for the year ended december 31 , 2013 . there were no write-downs related to fixed maturities or other investments for the year ended december 31 , 2013 . valuation of deferred income taxes the provision for income taxes is calculated based on the expected tax treatment of transactions recorded in our consolidated financial statements . in determining our provision for income taxes , we interpret tax legislation in a variety of jurisdictions and make assumptions about the expected timing of the reversal of deferred income tax assets and liabilities and the valuation of deferred income taxes . the ultimate realization of the deferred income tax asset balance is dependent upon the generation of future taxable income during the periods in which the company 's temporary differences reverse and become deductible . a valuation allowance is established when it is more likely than not that all or a portion of the deferred income tax asset balance will not be realized . in determining whether a valuation allowance is needed , management considers all available positive and negative evidence affecting specific deferred income tax asset balances , including the company 's past and anticipated future performance , the reversal of deferred income tax liabilities , and the availability of tax planning strategies . objective positive evidence is necessary to support a conclusion that a valuation allowance is not needed for all or a portion of a company 's deferred income tax asset balances when significant negative evidence exists . cumulative losses are the most compelling form of negative evidence considered by management in this determination . to the extent a valuation allowance is established in a period , an expense must be recorded within the income tax provision in the consolidated statements of operations . as of december 31 , 2014 , the company maintains a valuation allowance of $ 289.3 million , $ 282.2 million of which relates to its u.s. deferred income taxes . the largest component of the u.s. deferred income tax asset balance relates to tax loss carryforwards that have arisen as a result of the continued losses of the company 's u.s. operations . uncertainty over the company 's ability to utilize these losses over the short-term has led the company to record a valuation allowance . future events may result in the valuation allowance being adjusted , which could materially impact our financial position and results of operations . if sufficient positive evidence were to arise in the future indicating that all or a portion of the deferred income tax assets would meet the more likely than not standard , the valuation allowance would be reversed in the period that such a conclusion was reached . valuation of intangible assets intangible assets were initially recoded at their estimated fair values at the date of acquisition .
| results of continuing operations a reconciliation of total segment operating income ( loss ) to net loss for the years ended december 31 , 2014 and 2013 is presented in table 1 below : table 1 segment operating income ( loss ) for the years ended december 31 ( in millions of dollars ) replace_table_token_41_th loss from continuing operations , net loss and diluted loss per share for the year ended december 31 , 2014 , we incurred a loss from continuing operations of $ 11.2 million ( $ 0.75 per diluted share ) compared to $ 43.3 million ( $ 3.12 per diluted share ) for the year ended december 31 , 2013 . the loss from continuing operations for the year ended december 31 , 2014 is primarily attributable to corporate general expenses , interest expense , impairment of asset held for sale , loss on change in fair value of debt and loss on disposal of subsidiary , partially offset by net realized gains and operating income in insurance services and insurance underwriting . the loss from continuing operations for the year ended december 31 , 2013 is attributable to operating losses in insurance underwriting , corporate general expenses , interest expense , other-than-temporary impairment loss , impairment of asset held for sale and loss on change in fair value of debt . for the year ended december 31 , 2014 , we incurred a net loss of $ 11.2 million ( $ 0.75 per diluted share ) compared to $ 36.1 million ( $ 2.56 per diluted share ) for the year ended december 31 , 2013 . insurance underwriting for the year ended december 31 , 2014 , insurance underwriting gross premiums written were $ 114.0 million compared to $ 128.6 million for the year ended december 31 , 2013 , representing a 11.4 % decrease .
| 4,045 |
we have clearance from the fda to sell our laser systems in the united states and also have the necessary approvals to sell our laser systems in canada , the european union , and various other international markets . our licensed dental imaging equipment and other related products are designed to improve diagnoses , applications , and procedures in dentistry and medicine . we offer two categories of laser system products : waterlase systems and diode systems . our flagship product category , the waterlase system , uses a patented combination of water and laser energy to perform most procedures currently performed using dental drills , scalpels , and other traditional dental instruments for cutting soft and hard tissue . we also offer our diode laser systems to perform soft tissue , pain therapy , and cosmetic procedures , including teeth whitening . we currently have approximately 180 issued and 120 pending u.s. and international patents , the majority of which are related to our core waterlase technology and dental and medical lasers . from 1998 through december 31 , 2013 , we have sold over 10,200 waterlase systems , including more than 6,200 waterlase md and iplus systems , and more than 24,800 laser systems in over 70 countries around the world . we have suffered recurring losses from operations and have not generated cash from operations for the three years ended december 31 , 2013. our inability to generate cash from operations , the potential need for additional capital , and the uncertainties surrounding our ability to raise additional capital , raises substantial doubt about our ability to continue as a going concern . accordingly , the accompanying financial statements have been prepared assuming tha t we will continue as a going concern , which contemplates that we will continue in operation for the next twelve months and will be able to realize our assets and discharge our liabilities and commitments in the normal course of business . the financial statements do not include any adjustments to reflect the possible future effects of recoverability and classifications of assets or the amounts and classifications of liabilities that may result from our inability to continue as a going concern . the available borrowing capacity on our lines of credit with comerica bank and the net proceeds from the below mentioned equity transactions have been principal sources of liquidity during the year ended december 31 , 2013. on september 6 , 2013 and november 8 , 2013 , we amended our lines of credit with comerica bank . these amendments waived noncompliance with certain financial covenants and established future covenants , restrictions , and potential penalties for noncompliance . the amendment on november 8 , 2013 , included liquidity ratio and liquid asset covenants , and an equity raise requirement . we met the equity raise requirement on february 10 , 2014. we received waivers for noncompliance with financial covenants as of january 31 , 2014 , december 31 , 2013 , and november 30 , 2013. in connection with the waiver for january 2014 and december 2013 comerica bank reduced the total aggregate available borrowings on the lines of credit to $ 5 million . the waiver for november 2013 reset covenants for the remaining term of the agreements . these credit facilities expire may 1 , 2014 , and we are considering alternative solutions , including potentially issuing alternative debt securities , to mitigate any future liquidity constraints these covenants , restrictions , and maturities may impose on us . further discussion of the amendments is included in note 5 to the consolidated financial statements in part iv , item 15 of this annual report on form 10-k , which is incorporated herein by reference . on february 10 , 2014 , we entered into a subscription agreement ( the “ february 2014 subscription agreement ” ) with oracle partners l.p. , oracle institutional partners , l.p. , and oracle ten fund master l.p. under which we offered an aggregate of 1,945,525 unregistered shares of common stock in a private placement at a price of $ 2.57 per share . gross proceeds from the sale totaled $ 5 million , and net proceeds , after offering expenses of approximately $ 208,000 , totaled approximately $ 4.8 million . on january 17 , 2014 , we filed a registration statement on form s-3 , file no . 333-193426 ( “ january 2014 registration statement ” ) with the securities and exchange commission ( “ sec ” ) to register an indeterminate number of shares of common stock , preferred stock , and warrants with a total offering price not to exceed $ 12.5 million . the january 2014 registration statement was declared effective by the sec on january 29 , 2014 . 41 on december 19 , 2013 , we entered into a subscription agreement ( the “ december 2013 subscription agreement ” ) with oracle ten fund mas ter , l.p. under which we offered an aggregate of 340,000 unregistered shares of common stock in a private placement at a price of $ 1.80 per share . gross proceeds from the sale totaled $ 612,000 , and net proceeds , after offering expenses of approximately $ 34,000 , totaled approximately $ 578,000. we used the proceeds for working capital and general corporate purposes . on july 26 , 2013 , we filed a registration statement on form s-3 , file no . 333- 190158 ( the “ 2013 registration statement ” ) with the sec to register an indeterminate number of shares of common stock , preferred stock , and warrants with a total offering price not to exceed $ 5 million . story_separator_special_tag our recently launched occulase website is also a marketing platform for our ophthalmology technologies for which we continue to seek strategic partnerships to assist in our entry into the ophthalmology laser market . we continue to reshape and expand our direct sales force and certain distributor relatio nships . during this period we also restructured our sales and marketing department and its priorities , which we expect will lead to improved resource allocation within the largest share of our operating expenses . critical accounting policies the preparation of consolidated financial statements and related disclosures in conformity with accounting principles generally accepted in the united states requires us to make judgments , assumptions , and estimates that affect the amounts reported . the following is a summary of those accounting policies that we believe are necessary to understand and evaluate our reported financial results . revenue recognition . we sell our products in north america directly to customers through our direct sales force and through non-exclusive distributors . we sell our products internationally through exclusive and non-exclusive distributors as well as direct to customers in certain countries . sales are recorded upon shipment from our facility and payment of our invoices is generally due within 90 days or less . internationally , we primarily sell products through independent distributors . we record revenue based on four basic criteria that must be met before revenue can be recognized : ( i ) persuasive evidence of an arrangement exists ; ( ii ) delivery has occurred and title and the risks and rewards of ownership have been transferred to our customer , or services have been rendered ; ( iii ) the price is fixed or determinable ; and ( iv ) collectability is reasonably assured . sales of our laser systems include separate deliverables consisting of the product , disposables used with the laser systems , installation , and training . we apply the relative selling price method , which requires that arrangement consideration be allocated at the inception o f the arrangement to all deliverables using the relative selling price method . this requires us to use estimated selling prices of each of the deliverables in the total arrangement . the sum of those prices is then compared to the arrangement , and any difference is applied to the separate deliverable ratably . this method also establishes a selling price hierarchy for determining the selling price of a deliverable , which includes : ( i ) vendor-specific objective evidence ( “ vsoe ” ) , if available , ( ii ) third-party evidence if vendor-specific objective evidence is not available , and ( iii ) estimated selling price if neither vendor-specific nor third-party evidence is available . vsoe is determined based on the value we sell the undelivered element to a customer as a stand-alone product . revenue attributable to the undelivered elements is included in deferred revenue when the product is shipped and is recognized when the related service is performed . disposables not shipped at time of sale and installation services are typically shipped or installed within 30 days . training is included in deferred revenue when the product is shipped and is recognized when the related service is performed or upon expiration of time offered under the agreement , typically within six months from date of sale . the adoption of the relative selling price method does not significantly change the value of revenue recognized . the key judgments related to our revenue recognition include the collectability of payment from the customer , the satisfaction of all elements of the arrangement having been delivered , and that no additional customer credits and discounts are needed . we evaluate a customer 's credit worthiness prior to the shipment of the product . based on our assessment of the available credit information , we may determine the credit risk is higher than normally acceptable , and we will either decline the purchase or defer the revenue until payment is reasonably assured . future obligations required at the time of sale may also cause us to defer the revenue until the obligation is satisfied . although all sales are final , we accept returns of products in certain , limited circumstances and record a provision for sales returns based on historical experience concurrent with the recognition of revenue . the sales returns allowance is recorded as a reduction of accounts receivable and revenue . extended warranty contracts , which are sold to our laser and certain imaging customers , are recorded as revenue on a straight-line basis over the period of the contract , which is typically one year . 43 for sales transactions involving used laser trade-ins , we record the purchased trade-ins as inventory at the fair value of the asset surrendered with the offset to accounts receivable . in determining the estimated fair value of used laser trade-ins , we make an assessment of usable parts , key components , and consider the ultimate resale value of the certified pre-owned ( or “ cpo ” ) laser with applicable margins . we sell these cpo laser trade-ins as refurbished lasers follo wing our laser system revenue recognition policy . trade-in rights are not established nor negotiated with customers during the initial sales transaction of the original lasers . trade-in rights are promotional events used at our discretion to encourage existing laser customers to purchase new lasers by offering perceived discounts in exchange for customers trading in original lasers . a customer is not required to trade-in a laser nor are we required to accept a trade-in , however , the promotional value offered in exchange for the trade-in laser is not offered without a laser trade-in . the transaction is treated as a monetary transaction as each sale transaction involving a customer trade-in includes significant boot of greater than 25 % of the fair value of the exchange . as a monetary transaction , the sale is recognized following our laser system revenue recognition policy .
| results of operations the following table sets forth certain data from our operating results for each of the years ended december 31 , 2013 , 2012 , and 2011 , expressed as percentages of revenue : replace_table_token_7_th the following table summarizes our net revenues by category for the years ended december 31 , 2013 , 2012 , and 2011 ( dollars in thousands ) : replace_table_token_8_th non-gaap disclosure in addition to the financial information prepared in conformity with accounting principles generally accepted in the united states of america ( “ gaap ” ) , we provide certain historical non-gaap financial information . management believes that adjustments for these items assist investors in making comparisons of period-to-period operating results and that these items are not indicative of the company 's on-going core operating performance . management believes that the presentation of this non-gaap financial information provides investors with greater transparency and facilitates comparison of operating results across a broad spectrum of companies with varying capital structures , compensation strategies , derivative instruments , and amortization methods , which provide a more complete understanding of our financial performance , competitive position , and prospects for the future . ho wever , the non-gaap financial measures presented herein have certain limitations in that they do not reflect all of the costs associated with the operations of our business as determined in accordance with gaap . therefore , investors should consider non-gaap financial measures in addition to , and not as a substitute for , or as superior to , measures of financial performance prepared in accordance with gaap . further , the non-gaap financial measures presented by the company may be different from the non-gaap financial measures used by other companies . non-gaap net loss .
| 4,046 |
eoquin® ( previously referred to as apaziquone for intravesical instillation ) , is being developed for immediate intravesical instillation post-transurethral resection of bladder tumors in patients with non-muscle invasive bladder cancer . 44 our passion to identify , develop and deliver important options for patients suffering from cancer is behind every action we take . we are committed to excellence and strive to make a difference in the lives of patients every day . see item 1 , “ business , ” for our discussion of : company overview cancer background and market size product portfolio manufacturing sales and marketing customers competition research and development recent highlights of our business , product development initiatives , and regulatory approvals during the year ended december 31 , 2015 and through the filing date of this annual report on form 10-k , we accomplished various critical business objectives , which included : poziotinib : in november 2015 , we submitted an investigational new drug ( `` ind '' ) application with the fda . in march 2016 we initiated our phase 2 breast cancer trial . the phase 2 study is an open-label study that will enroll approximately 70 patients with her-2 positive metastatic breast cancer , who have failed at least two her-2 directed therapies . the dose and schedule of oral poziotinib will be based on clinical experience from the studies in korea , and in addition include the use of prophylactic therapies to help minimize known side-effects of her-2 directed therapies . in february 2015 , we executed a global in-license agreement ( excluding korea and china ) with hanmi pharmaceutical co. , ltd for poziotinib , a pan-her inhibitor in phase 2 clinical trials in return for our upfront payment and future regulatory and sales-dependent milestone payments . poziotinib has shown single agent activity in the treatment of various cancer types , including breast , gastric , colorectal and lung cancers . in the phase 1 study for this drug , 6 of 10 breast cancer patients demonstrated partial responses ; we also believe the safety profile was consistent with similar drug classes , with four patients having a grade 3 diarrhea response . eoquin ( formerly referred to as apaziquone ) : in august 2015 , we reached agreement with the fda on the spa of the planned phase 3 clinical trial of eoquin . this trial commenced with its first patient dosing in october 2015 and is designed to evaluate the intravesical use of this drug for the treatment of patients with non-muscle invasive bladder cancer ( nmibc ) as one or two instillations , immediately following transurethral resection of bladder tumor ( turbt ) . due to the high rate of recurrence for nmibc , there is a significant unmet medical need and the overall cost of bladder cancer treatment in the u.s. is $ 3.4 billion annually , most of which is related to the direct treatment of this disease . accordingly , this drug represents much-needed therapy for patients and provides a meaningful opportunity to reduce overall medical costs . in december 2015 , we submitted our nda for eoquin with the fda , and in february 2016 , the fda communicated its acceptance of this nda with a target decision date of december 11 , 2016. evomela ( formerly referred to as captisol-enabled melphalan ) : on october 23 , 2015 , we received a complete response letter ( `` crl '' ) from the fda for our evomela nda . a crl is a standard communication from the fda that informs companies that an application can not be approved in its present form . nonclinical deficiencies were identified , however , the fda did not identify any clinical deficiencies for this drug in the crl , and we subsequently resubmitted our nda . on march 10 , 2016 , the fda communicated its nda approval for evomela as a high-dose conditioning treatment prior to hematopoietic progenitor ( stem ) cell transplantation in patients with mm , and for the palliative treatment of patients with mm for whom oral therapy is not appropriate .. we plan to commercially launch evomela as soon as possible . spi 2012 : in march 2015 positive phase 2 data for this drug was presented at our analyst day , demonstrating non-inferiority and superiority to pegfilgrastim . in december 2015 , we reached agreement with the fda regarding our phase 3 spa for spi-2012 and initiated the phase 3 clinical study . we have designated more than 100 sites ( with additional sites to be named ) where patients are presently being dosed with spi-2012 as part of this study . 45 sales force contracting arrangement : on november 4 , 2015 , we executed a contract with eagle pharmaceuticals , inc. ( `` eagle '' ) whereby designated members of our sales force will concurrently market ( beginning january 2016 ) up to six of eagle 's pharmaceutical products , along with our products , in return for aggregate fixed proceeds of $ 12.8 million that will be paid over the 18-month service period . we are also eligible to receive variable , performance-based payments for sales of eagle 's products that exceed certain thresholds . zevalin ex-u.s. out-licenses : ◦ in november 2015 , we entered into an out-license agreement with mundipharma international corporation limited for their commercialization of zevalin in asia ( excluding india and greater china ) , australia , new zealand , africa , the middle east , and latin america ( including the caribbean ) . in return , we received ( i ) $ 18 million ( comprised of $ 15 million received in december 2015 and $ 3 million in january 2016 ) , and ( ii ) unsecured notes aggregating $ 3.1 million . ◦ on january 8 , 2016 , we entered into a strategic partnership with servier canada , inc. for the out-licenses of zevalin , folotyn , beleodaq , and marqibo . story_separator_special_tag medicaid rebates : our products are subject to state government-managed medicaid programs , whereby rebates for purchases are issued to participating state governments . these rebates arise when the patient treated with our products is covered under medicaid . our calculations related to these medicaid rebate accruals require us to estimate end-user and patient mix to determine which of our sales will likely be subject to these rebates . there is a significant time lag in us receiving these rebate notices ( generally several months after our sale is made ) . our estimates are based on our historical claims , as supplemented by management 's judgment . distribution , data , and gpo administrative fees : distribution , data , and group purchasing organization ( gpo ) administrative fees are paid to authorized wholesalers of our products ( except for u.s. sales of zevalin ) for various services , including : contract administration , inventory management , end-user sales data , and product returns processing . these fees are based on a contractually determined percentage of applicable sales . license fees : we recognize revenue for our licensing of intellectual property to third parties ( i.e. , out-licenses ) , based on the contractual terms of each agreement . this revenue may be associated with upfront license fees , milestone payments from our licensees ' sales or regulatory achievements , and royalties from our licensees ' sales in applicable territories . service revenue : we receive fees under certain arrangements for research and development activities , sales and marketing activities , clinical trial management , and supply chain services . payment may be triggered by the successful completion of a phase of development , results from a clinical trial , regulatory approval events , or completion of product or service delivery in our capacity as an agent or principal in such arrangement . we recognize revenue when the corresponding milestone is achieved , or the revenue is otherwise earned through our on-going activities . inventories – lower of cost or market we adjust our inventory value for estimated amounts of excess , obsolete , or unmarketable items . such assumptions involve projections of future customer demand , as driven by economic and market conditions , and the product 's shelf life . if actual demand , or economic or market conditions are less favorable than those projected by us , incremental inventory write-downs may be required and could be significant . fair value of acquired assets and assumed liabilities the accounting for business combinations and asset acquisitions requires extensive use of estimates and judgments to measure the fair value of the identifiable tangible and intangible assets acquired , including in-process research and development , and liabilities assumed . additionally , we must determine whether the acquisition meets the criteria for business combination accounting ( rather than asset acquisition accounting ) , because in a business combination , the excess of the purchase price over the fair value of net assets acquired can only be recognized as “ goodwill. ” the fair value of acquired tangible and identifiable intangible assets and liabilities assumed , are based on their estimated fair values at the acquisition date and requires extensive use of accounting estimates , judgments , and assumptions , including but not limited to : likelihood , timing , and costs to complete the in-process projects , probability of achieving regulatory approvals , cash flows to be derived from the acquired assets , and the application of appropriate discount rates . for each acquisition , we engage an independent third-party valuation specialist to assist management in determining the fair value of in-process research and development , identifiable intangible assets , and any contingent consideration . in connection with certain of our acquisitions , we must record a contingent consideration liability for cash or stock payments upon the completion of certain future performance milestones . in these cases , a liability is recorded on the acquisition date for an estimate of the acquisition date fair value of the contingent consideration by applying the income approach utilizing variable inputs such as probability of achievement and risk-free adjusted discount rates . any change in the fair value of the contingent consideration subsequent to the acquisition date is recognized in earnings . goodwill and intangible assets – impairment evaluations 48 goodwill and other intangible assets with indefinite lives are not subject to amortization , but are evaluated for impairment annually as of october 1 , or whenever events or changes in circumstance indicate that the asset might be impaired . we evaluate the possible impairment ( i ) if/when events or changes in circumstances occur that indicate that the carrying value of assets may not be recoverable ; or ( ii ) in the case of goodwill and indefinite lived intangible assets , our annual impairment assessment date of october 1. these evaluations require significant judgment by our management in forecasting net cash flows to be derived by these intangible assets through our on-going operations . the discounted value of such cash flows ( or our market capitalization in the case of goodwill ) are compared to each asset 's carrying value to assess whether there is an indication of impairment and resulting charges to record . income taxes our consolidated balance sheets reflect net deferred tax assets ( net of a valuation allowance ) that primarily represent the tax benefit of net operating loss and tax credit carryforwards , and credits and timing differences between book and tax . when it is more likely than not that all or some portion of deferred tax assets may not be realized , we establish a valuation allowance for the amount that may not be realized . each quarter , we evaluate the need to retain all or a portion of the valuation allowance on our net deferred tax assets . our evaluation considers historical earnings , estimated future taxable income and ongoing prudent and feasible tax planning strategies . adjustments to the valuation allowance increase or decrease net income or loss in the period such adjustments are made .
| results of operations operations overview – 2015 , 2014 , and 2013 49 replace_table_token_7_th year ended december 31 , 2015 versus december 31 , 2014 total revenues replace_table_token_8_th product sales , net : to derive net product sales , gross product revenues in each period are reduced by management 's latest estimated provisions for ( i ) product returns , ( ii ) government chargebacks , ( iii ) prompt pay discounts , ( iv ) commercial rebates , ( v ) medicaid rebates , and ( vi ) distribution , data , and gpo administrative fees . management considers various factors in the determination of these provisions , which are described in more detail within “ critical accounting policies and estimates ” above . fusilev revenue decrease is primarily due to a significant decline in our unit sales to customers , as well as a decrease in our net average sales price per unit . this unit sales and price decline is due to the competitive launch in april 2015 of generic levo-leucovorin product ( see note 3 ( g ) ) . folotyn revenue decrease is primarily due to moderate decline in units sold during the period , partially offset by a slight increase in our net average sales price per unit . zevalin revenue decrease is primarily due to moderate decline in units sold during the period in the u.s. and ex-u.s. territories , as well as a moderate decrease in our net average sales price per unit , specifically in ex-u.s. territories . 50 marqibo revenue increase is due to a moderate increase in units sold during the period , and a moderate increase in our net average sales price per unit . beleodaq revenue increased as a result of units sold in the current period , in comparison to its commercial launch in the third quarter of 2014. the average net sales price per unit remained unchanged between the periods .
| 4,047 |
entity in 1972. as of december 31 , 2011 , we : owned or jointly controlled 748 industrial , office , medical office and other properties , of which 742 properties with approximately 135.6 million square feet are in service and six properties with approximately 913,000 square feet are under development . the 742 in-service properties are comprised of 616 consolidated properties with approximately 110.3 million square feet and 126 jointly controlled properties with approximately 25.3 million square feet . the six properties under development consist of five consolidated properties with more than 639,000 square feet and one jointly controlled property with approximately 274,000 square feet . owned , including through ownership interests in unconsolidated joint ventures , more than 4,800 acres of land and controlled an additional 1,630 acres through purchase options . we have three reportable operating segments , the first two of which consist of the ownership and rental of ( i ) office and ( ii ) industrial real estate investments . the operations of our office and industrial properties , along with our medical office and retail properties , are collectively referred to as “ rental operations. ” our medical office and retail properties do not by themselves meet the quantitative thresholds for separate presentation as reportable segments . the third reportable segment consists of providing various real estate services such as property management , asset management , maintenance , leasing , development and construction management to third-party property owners and joint ventures , and is collectively referred to as “ service operations. ” our reportable segments offer different products or services and are managed separately because each segment requires different operating strategies and management expertise . our service operations segment also includes our taxable reit subsidiary , a legal entity through which certain of the segment 's operations are conducted . operations strategy our operational focus is to drive profitability by maximizing cash from operations as well as funds from operations ( “ ffo ” ) through ( i ) maintaining and increasing property occupancy and rental rates by effectively managing our portfolio of existing properties ; ( ii ) selectively developing new pre-leased medical office and build-to-suit projects at accretive returns ; ( iii ) leveraging our construction expertise to act as a general contractor or construction manager on a fee basis ; and ( iv ) providing a full line of real estate services to our tenants and to third parties . asset strategy our asset strategy is to reposition our investment concentration among product types and further diversify our geographic presence . our strategic objectives include ( i ) increasing our investment in quality industrial properties in both existing markets and select new markets ; ( ii ) expanding our medical office portfolio nationally to take advantage of demographic trends ; ( iii ) increasing our asset investment in markets we believe provide the best potential for future growth ; and ( iv ) reducing our investment in suburban office properties located primarily in the midwest as well as reducing our investment in other non-strategic assets . we are executing our asset strategy through a disciplined approach in identifying accretive acquisition opportunities and our focused development initiatives , which are financed primarily from our active asset disposition program . - 20 - capital strategy our capital strategy is to maintain a strong balance sheet by actively managing the components of our capital structure , in coordination with the execution of our overall operating and asset strategy . we are focused on maintaining investment grade ratings from our credit rating agencies with the ultimate goal of improving the key metrics that formulate our credit ratings . in support of our capital strategy , we employ an asset disposition program to sell non-strategic real estate assets , which generates proceeds that can be recycled into new property investments that better fit our growth objectives or can be used to reduce leverage and otherwise manage our capital structure . we continue to focus on improving our balance sheet by maintaining a balanced and flexible capital structure which includes : ( i ) extending and sequencing the maturity dates of our outstanding debt obligations ; ( ii ) borrowing primarily at fixed rates by targeting a variable rate component of total debt less than 20 % ; and ( iii ) issuing common equity from time-to-time to maintain appropriate leverage parameters or support significant strategic acquisitions . with our successes to date and continued focus on strengthening our balance sheet , we believe we are well-positioned for future growth . year in review the slow pace of recovery in the general economy has continued to present challenges for the commercial real estate industry during 2011. there has been some improvement in a few key metrics such as unemployment ; however , the downgrade of the united states credit rating by standard & poor 's , unresolved united states national debt ceiling discussions and sovereign debt issues in europe continue to weigh heavily on the willingness and ability of businesses to make long term capital commitments . notwithstanding the condition of the economy , as noted hereafter , we were able to execute on our operations , asset and capital strategies , including the execution of a significant portfolio sale ( the `` blackstone office disposition '' ) that allowed us to reduce our overall investment concentration in suburban office properties . net income attributable to common shareholders for the year ended december 31 , 2011 , was $ 31.4 million , or $ 0.11 per share ( diluted ) , compared to a net loss of $ 14.1 million , or $ 0.07 per share ( diluted ) for the year ended december 31 , 2010 . the improvement in 2011 from the 2010 net loss position was mainly the result of a $ 96.7 million increase in gains on sales of properties . story_separator_special_tag also included in the wholly-owned building dispositions in 2011 is the sale of 13 suburban office buildings , totaling over 2.0 million square feet , to a 20 % -owned joint venture . these buildings were sold to the joint venture for a value of $ 342.8 million , of which our 80 % share of proceeds totaled $ 273.7 million . we have limited our new development starts to selected projects in markets or product types expected to have strong future rent growth and demand or projects that have significant pre-leasing . the total estimated cost of our consolidated properties under construction was $ 124.2 million at december 31 , 2011 , with $ 35.2 million of such costs incurred through that date . the total estimated cost for jointly controlled properties under construction was $ 89.3 million at december 31 , 2011 , with $ 7.3 million of costs incurred through that date . the occupancy level for our in-service portfolio of consolidated properties increased from 89.1 % at december 31 , 2010 to 90.8 % at december 31 , 2011. the increase in occupancy was primarily driven by our acquisition and disposition activities as well as leasing up vacant space . despite the continued slow pace of the overall economic recovery , we continued to have strong total leasing activity for our consolidated properties , with total leasing activity of 19.7 million square feet in 2011 compared to 20.4 million square feet in 2010. total leasing activity for our consolidated properties in 2011 included 9.8 million square feet of renewals , which represented a 67.4 % success rate and resulted in a 2.7 % reduction in net effective rents . we executed a number of significant transactions in support of our capital strategy during 2011 in order to optimally sequence our unsecured debt maturities , manage our overall leverage profile , and support our acquisition strategy . highlights of our key financing activities in 2011 are as follows : in december 2011 , we repaid the remaining $ 167.6 million of our 3.75 % exchangeable senior notes ( `` exchangeable notes '' ) at their scheduled maturity date . due to accounting requirements , under which we recorded interest expense on this debt at a similar rate as could have been obtained for non-convertible debt , this debt had an effective interest rate of 5.62 % . in november 2011 , we renewed and extended the term of our unsecured line of credit . the renewed facility matures in december 2015 , has a one-year extension option , and bears interest at libor plus 125 basis points . the previous $ 850 million facility did not have an extension option and bore interest at libor plus 275 basis points . - 23 - in july 2011 , we redeemed all of the outstanding shares of our 7.25 % series n cumulative redeemable preferred shares ( `` series n shares '' ) at a liquidation amount of $ 108.6 million . we assumed 13 secured loans in conjunction with our 2011 acquisitions . these assumed loans had a total face value of $ 162.4 million . key performance indicators our operating results depend primarily upon rental income from our industrial , office , medical office and retail properties ( collectively referred to as “ rental operations ” ) . the following discussion highlights the areas of rental operations that we consider critical drivers of future revenues . occupancy analysis : as previously discussed , our ability to maintain high occupancy rates is a principal driver of maintaining and increasing rental revenue from continuing operations . the following table sets forth occupancy information regarding our in-service portfolio of consolidated rental properties as of december 31 , 2011 and 2010 , respectively ( in thousands , except percentage data ) : replace_table_token_8_th the increase in occupancy at december 31 , 2011 compared to december 31 , 2010 is primarily driven by changes in our portfolio that resulted from our acquisition and disposition activity . specifically , we disposed of properties during 2011 , totaling approximately 16.3 million square feet , that had average occupancy on sale of approximately 83 % , while we acquired properties totaling approximately 9.1 million square feet that had average occupancy on acquisition of approximately 94 % . continued lease-up activity within our portfolio also contributed to the increase in occupancy . lease expiration and renewals : our ability to maintain and improve occupancy rates primarily depends upon our continuing ability to re-lease expiring space . the following table reflects our consolidated in-service portfolio lease expiration schedule by property type as of december 31 , 2011 . the table indicates square footage and annualized net effective rents ( based on december 2011 rental revenue ) under expiring leases ( in thousands , except percentage data ) : - 24 - replace_table_token_9_th within our consolidated properties , we renewed 67.4 % and 77.2 % of our leases up for renewal , totaling approximately 9.8 million and 10.1 million square feet in 2011 and 2010 , respectively . our renewal percentage was lower in 2011 due to the expiration of a few individually large industrial leases where the tenants ' space requirements were reduced and the leases were not renewed . barring any unforeseen deterioration in general economic conditions , we believe our renewal percentage in 2012 should approximate historical levels , which have generally ranged between 70.0 % to 80.0 % . there was a 2.7 % decline in net effective rents on our renewals during 2011 , compared to a 4.9 % decline in 2010 .
| results of operations a summary of our operating results and property statistics for each of the years in the three-year period ended december 31 , 2011 , is as follows ( in thousands , except number of properties and per share data ) : - 26 - replace_table_token_11_th comparison of year ended december 31 , 2011 to year ended december 31 , 2010 rental and related revenue the following table sets forth rental and related revenue from continuing operations by reportable segment for the years ended december 31 , 2011 and 2010 , respectively ( in thousands ) : replace_table_token_12_th the primary reasons for the increase in rental revenue from continuing operations , with specific references to a particular segment when applicable , are summarized below : we acquired 108 properties , of which 87 were industrial , and placed nine developments in service from january 1 , 2010 to december 31 , 2011 , which provided incremental revenues of $ 79.8 million in the year ended december 31 , 2011. we consolidated 106 industrial buildings as a result of acquiring our joint venture partner 's 50 % interest in dugan on july 1 , 2010. the consolidation of these buildings resulted in an increase of $ 37.2 million in rental and related revenue for the year ended december 31 , 2011 , as compared to the same period in 2010. we sold 23 office properties to an unconsolidated joint venture in 2010 and the first quarter of 2011 , resulting in a $ 55.2 million decrease in rental and related revenue from continuing operations in 2011. the remaining increase in rental and related revenues is primarily due to improved results within the properties that have been in service for all of 2010 and 2011. although rental rates declined slightly on our lease renewals , improved occupancy drove the overall improvement within these properties .
| 4,048 |
2018-13 , fair value measurement ( topic 820 ) : disclosure framework—changes to the disclosure requirements for fair value measurement , or asu 2018-13. the amendments in asu 2018-13 eliminate , add , and modify certain disclosure requirements story_separator_special_tag financial condition and results of operations our management 's discussion and analysis of our financial condition and results of operations are based upon our consolidated financial statements included in this annual report on form 10-k , which have been prepared by us in accordance with united states generally accepted accounting principles , or gaap , and with regulation s-x promulgated under the securities exchange act of 1934 , as amended . this discussion and analysis should be read in conjunction with the consolidated financial statements and the notes thereto included elsewhere in this annual report on form 10-k. some of the information contained in this discussion and analysis or set forth elsewhere in this annual report on form 10-k , including information with respect to our plans and strategy for our business , includes forward-looking statements that involve risks and uncertainties . as a result of many factors , including those factors set forth in part i , item 1a . risk factors of this annual report on form 10-k , our actual results could differ materially from the results described in or implied by the forward-looking statements contained in the following discussion and analysis . overview we are a leading clinical-stage gene therapy company with a mission to free people from a lifetime of genetic disease . our company is focused on developing potentially curative ex vivo lentiviral-based gene therapies to treat patients with rare diseases following a single dose treatment regimen . our gene therapies employ hematopoietic stem cells that are harvested from the patient and then modified with a lentiviral vector to insert the equivalent of a functional copy of the gene that is defective in the target disease . we believe that our approach , which is designed to transform stem cells from patients into therapeutic products , has the potential to provide curative benefit for a range of diseases . our initial focus is on a group of rare genetic diseases referred to as lysosomal diseases , some of which today are primarily managed with enzyme replacement therapies , or erts . these lysosomal diseases have well-understood biologies , identified patient populations , established standards of care yet with significant unmet needs , and represent large market opportunities with approximately $ 4.0 billion in worldwide net sales in 2019. our initial pipeline is comprised of four lentiviral-based gene therapy programs , including avr-rd-01 for the treatment of fabry disease , avr-rd-04 for the treatment of cystinosis , avr-rd-02 for the treatment of gaucher disease and avr-rd-03 for the treatment of pompe disease . avr-rd-01 is currently being evaluated in an investigator-sponsored phase 1 clinical trial and a company-sponsored phase 2 clinical trial . five patients have been dosed in the investigator-sponsored phase 1 clinical trial of avr-rd-01 , and enrollment is complete . as of march 6 , 2020 , four patients have been dosed in our company-sponsored phase 2 clinical trial of avr-rd-01 , and we are actively recruiting additional potential patients for our currently active sites in australia , canada and the united states . avr-rd-04 is currently being studied by our collaborators at the university of california , san diego , or ucsd , in a phase 1/2 investigator-sponsored clinical trial , and as of march 6 , 2020 one patient has been dosed . in january 2020 , we announced that we received notice of clearance from the u.s. food and drug administration , or fda , regarding an investigational new drug , or ind , application for avr-rd-02 , our investigational gene therapy for the treatment of gaucher disease . the phase 1/2 clinical trial for avr-rd-02 is actively recruiting in australia and canada , with additional sites planned in the united states . our avr-rd-03 program for pompe disease is currently in preclinical development with the first ind-enabling preclinical study initiated in 2019. since our inception in 2015 , we have devoted substantially all of our resources to organizing and staffing our company , business planning , raising capital , acquiring or discovering product candidates and securing related intellectual property rights , conducting discovery , research and development activities for our programs and planning for potential commercialization . we do not have any products approved for sale and have not generated any revenue from product sales . to date , we have funded our operations with proceeds from the sales of preferred stock and our initial public offering , or ipo , and we have raised additional capital through an underwritten public offering that closed in july 2019 , or the july 2019 follow-on offering , and an underwritten public offering that closed in february 2020 , or the february 2020 follow-on offering . through december 31 , 2019 , we had received gross cash proceeds of $ 87.5 million from sales of our preferred stock , and gross cash proceeds , before deducting underwriting discounts and commissions and expenses , of $ 114.7 million and $ 138.3 million from sales of our common stock through our ipo and july 2019 follow-on offering , respectively . since our inception , we have incurred significant operating losses . our ability to generate product revenue sufficient to achieve profitability will depend heavily on the successful development and eventual commercialization of one or more of our current or future product candidates and programs . our net losses were $ 73.0 million and $ 46.4 million for the years ended december 31 , 2019 and 2018 , respectively . as of december 31 , 2019 , we had an accumulated deficit of $ 144.7 million . we expect to continue to incur significant expenses for at least the next several years as we advance our current and future product candidates from discovery through preclinical development and clinical trials and seek regulatory approval of our product candidates . story_separator_special_tag the table below summarizes our research and development expenses incurred by program ( in thousands ) : 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 clinical trials . as a result , we expect that our research and development expenses will increase substantially over the next several years , particularly as we increase personnel costs , including stock-based compensation , contractor costs and facilities costs , as we continue to advance the development of our product candidates . we also expect to incur additional expenses related to milestone and royalty payments payable to third parties with whom we have entered into license agreements to acquire the rights to our product candidates . the successful development and commercialization of our product candidates is highly uncertain . at this time , we can not reasonably estimate or know the nature , timing and costs of the efforts that will be necessary to complete the preclinical and clinical development of any of our product candidates or when , if ever , material net cash inflows may commence from any of our product candidates . this uncertainty is due to the numerous risks and uncertainties associated with product development and commercialization , including the uncertainty of : the scope , progress , outcome and costs of our preclinical development activities , clinical trials and other research and development activities ; establishing an appropriate safety profile with ind-enabling studies ; successful patient enrollment in , and the design , initiation and completion of , clinical trials ; the timing , receipt and terms of any marketing approvals from applicable regulatory authorities ; establishing commercial manufacturing capabilities or making arrangements with third-party manufacturers ; development and timely delivery of commercial-grade drug formulations that can be used in our clinical trials and for commercial launch ; obtaining , maintaining , defending and enforcing patent claims and other intellectual property rights ; significant and changing government regulation ; launching commercial sales of our product candidates , if and when approved , whether alone or in collaboration with others ; maintaining a continued acceptable safety profile of the product candidates following approval ; and the risks disclosed in the section entitled “ risk factors ” of this annual report on form 10-k. 91 we may never succeed in achieving regulatory approval for any of our product candidates . we may obtain unexpected results from our clinical trials . we may elect to discontinue , delay or modify clinical trials of some product candidates or focus on others . any changes in the outcome of any of these variables with respect to the development of our product candidates in preclinical and clinical development could mean a significant change in the costs and timing associated with the development of these product candidates . for example , if the fda , or another regulatory authority were to delay our planned start of clinical trials or require us to conduct clinical trials or other testing beyond those that we currently expect , or if we experience significant delays in enrollment in any of our planned clinical trials , we could be required to expend significant additional financial resources and time on the completion of clinical development of that product candidate . identifying potential product candidates and conducting preclinical testing and clinical trials is a time-consuming , expensive and uncertain process that takes years to complete , and we may never generate the necessary data or results required to obtain marketing approval and achieve product sales . in addition , our product candidates , if approved , may not achieve commercial success . general and administrative expenses general and administrative expenses consist primarily of salaries , related benefits , travel and stock-based compensation expense for personnel in executive , finance and administrative functions . general and administrative expenses also include professional fees for legal , consulting , accounting and audit services . we anticipate that our general and administrative expenses will increase in the future as we increase our headcount to support our continued research activities and development of our product candidates . we also anticipate that we will continue to incur increased accounting , audit , legal , regulatory , compliance , director and officer insurance costs as well as investor and public relations expenses associated with being a public company . we anticipate the additional costs for these services will substantially increase our general and administrative expenses . additionally , if and when we believe a regulatory approval of a product candidate appears likely , we anticipate an increase in payroll and other commercialization-related expenses as a result of our preparation for commercial operations , especially as it relates to the sales and marketing of our product candidate . other income ( expense ) interest income interest income consists of interest earned on money market funds and other bank deposits . other expense other expense consists of foreign exchange gain or loss . change in fair value of preferred stock warrant liability in connection with entering into a loan agreement , or the loan agreement , with silicon valley bank , or svb , in 2017 , we agreed to issue a warrant to purchase shares of our preferred stock to svb . prior to the completion of our ipo , we classified the warrant as a liability on our consolidated balance sheet and we were required to remeasure to fair value at each reporting date . we recognized changes in the fair value of the warrant liability as a component of other income ( expense ) , net in our consolidated statements of operations and comprehensive loss . on june 21 , 2018 , in connection with our ipo , the warrant to purchase preferred stock was converted to a warrant to purchase common stock .
| consolidated results of operations comparison of the years ended december 31 , 2019 and 2018 the following table summarizes our consolidated results of operations for the years ended december 31 , 2019 and 2018 ( in thousands ) : replace_table_token_2_th research and development expenses the following table summarizes our research and development expenses incurred during the years ended december 31 , 2019 and 2018 ( in thousands ) : replace_table_token_3_th research and development expenses were $ 55.0 million for the year ended december 31 , 2019 , compared to $ 35.1 million for the year ended december 31 , 2018. the increase of $ 19.9 million was primarily due to increases of $ 4.7 million in direct costs related to our pompe program , $ 3.7 million in direct costs related to our other programs , $ 2.9 million in direct costs related to our cystinosis program , and $ 10.3 million in unallocated research and development expenses , all partially offset by a decrease of $ 0.9 million in direct costs related to our gaucher program and a decrease of $ 0.8 million in direct costs related to our fabry program . the increase in direct costs related to our pompe program was primarily due to increases in preclinical and manufacturing costs of $ 4.7 million . the increase in direct costs related to our cystinosis program was primarily due to an increase in preclinical and clinical expenses of $ 1.6 million and a license fee payment of $ 2.0 million , partially off-set by decreases in consulting fees of $ 0.4 million , and manufacturing costs of $ 0.2 million . 93 the increase in direct costs related to our o ther programs was primarily due to increases in preclinical and manufacturing costs of $ 3 . 7 million .
| 4,049 |
glpi is permitted to pay dividends story_separator_special_tag our operations on november 15 , 2012 , penn announced that it intended to pursue a plan to separate the majority of its operating assets and real property assets into two publicly traded companies including an operating entity , and , through a tax-free spin-off of its real estate assets to holders of its common and preferred stock , a newly formed publicly traded reit . the company was incorporated in pennsylvania on february 13 , 2013 , as a wholly-owned subsidiary of penn . in connection with the spin-off , which was completed on november 1 , 2013 , penn contributed to glpi through a series of internal corporate restructurings substantially all of the assets and liabilities associated with penn 's real property interests and real estate development business , as well as the assets and liabilities of hollywood casino baton rouge and hollywood casino perryville , which are referred to as the `` trs properties , '' in a tax-free distribution . we intend to elect on our u.s. federal income tax return for our taxable year beginning on january 1 , 2014 to be treated as a reit and we , together with an indirectly wholly-owned subsidiary of the company , glp holdings , inc. , intend to jointly elect to treat each of glp holdings , inc. , louisiana casino cruises , inc. and penn cecil maryland , inc. as a `` taxable reit subsidiary '' effective on the first day of the first taxable year of glpi as a reit . as a result of the spin-off , glpi owns substantially all of penn 's former real property assets and leases back most of those assets to penn for use by its subsidiaries , under the master lease , and glpi also owns and operates the trs properties through its trs . the assets and liabilities of glpi were recorded at their respective historical carrying values at the time of the spin-off . prior to the spin-off , glpi and penn entered into a separation and distribution agreement setting forth the mechanics of the spin-off , certain organizational matters and other ongoing obligations of penn and glpi . penn and glpi or their respective subsidiaries , as applicable , also entered into a number of other agreements prior to the spin-off to provide a framework for the restructuring and for the relationships between glpi and penn . glpi 's primary business consists of acquiring , financing and owning real estate property to be leased to gaming operators in `` triple net '' lease arrangements . as of december 31 , 2013 , glpi 's portfolio consisted of 21 gaming and related facilities , including the trs properties and the real property associated with 19 gaming and related facilities ( including two properties under development in dayton , ohio and mahoning valley , ohio ) that are geographically diversified across 13 states . we expect to grow our portfolio by aggressively pursuing opportunities to acquire additional gaming facilities to lease to gaming operators under prudent terms , which may or may not include penn . we believe that a number of gaming operators would like to de-lever or are seeking liquidity while continuing to generate the benefits of continued operations , which may present significant expansion opportunities for us to pursue . of particular significance , we believe that a number of gaming operators would be willing to enter into transactions designed to monetize their real estate assets ( i.e. , gaming facilities ) through sale-leaseback transactions with an unrelated party not perceived to be a competitor . these gaming operators could use the proceeds from the sale of those assets to repay debt and rebalance their capital structures , while maintaining the use of the sold gaming facilities through long term leases . additionally , we believe we have the ability to leverage the expertise our management team has developed over the years to secure additional avenues for growth beyond the gaming industry . accordingly , we anticipate we will be able to effect strategic acquisitions unrelated to the gaming industry as well as other acquisitions that may prove complementary to glpi 's gaming facilities . 39 in connection with the spin-off , penn allocated its accumulated earnings and profits ( as determined for u.s. federal income tax purposes ) for periods prior to the consummation of the spin-off between penn and glpi . in connection with its election to be taxed as a reit for u.s. federal income tax purposes , glpi declared a dividend to its shareholders to distribute any accumulated earnings and profits relating to the real property assets and attributable to any pre-reit years , including any earnings and profits allocated to glpi in connection with the spin-off , to comply with certain reit qualification requirements . the purging distribution , which was paid on february 18 , 2014 , totaled $ 1.05 billion and was comprised of cash and glpi common stock . see note 15 for further details . as of december 31 , 2013 , our earnings are the result of the rental revenue from the lease of our properties to a subsidiary of penn pursuant to the master lease . the master lease is a `` triple-net '' operating lease with an initial term of 15 years , with no purchase option , followed by four 5 year renewal options ( exercisable by penn ) on the same terms and conditions . story_separator_special_tag ability to identify attractive real estate investments as a result of our management team 's operating experience , network of relationships and industry insight , we expect to be able to identify attractive real estate investments within the gaming industry . we will seek operators for these real estate investments who possess local market knowledge , demonstrate hands-on management and have proven track records . we believe our management team 's experience gives us a key competitive advantage in objectively evaluating an operator 's financial position and operating efficiency in order for us to make prudent real estate investments . segment information consistent with how our chief operating decision maker reviews and assesses our financial performance , we have two reportable segments , glp capital and the trs properties . the glp capital reportable segment consists of the leased real property and represents the majority of our 41 business . the trs properties reportable segment consists of hollywood casino perryville and hollywood casino baton rouge . story_separator_special_tag entire year , and permits casinos to directly purchase slot machines in exchange for gaming tax reductions . for our hollywood casino perryville facility , table games were opened on march 5 , 2013 and the tax rate will decrease upon the opening of the prince george casino from 67 percent to 61 percent with 43 an option for an additional 5 percent reduction if an independent commission agrees . in december 2013 , the license for the sixth casino in prince george 's county was granted . the proposed $ 925 million casino , which can not open until the earlier of july 2016 or 30 months after the casino being built in baltimore opens , will adversely impact hollywood casino perryville 's financial results . a new riverboat casino and hotel in baton rouge , louisiana opened on september 1 , 2012. the opening of this riverboat casino has and will continue to have an adverse effect on the financial results of hollywood casino baton rouge . critical accounting estimates we make certain judgments and use certain estimates and assumptions when applying accounting principles in the preparation of our consolidated financial statements . the nature of the estimates and assumptions are material due to the levels of subjectivity and judgment necessary to account for highly uncertain factors or the susceptibility of such factors to change . we have identified the accounting for income taxes , real estate investments , and goodwill and other intangible assets as critical accounting estimates , as they are the most important to our financial statement presentation and require difficult , subjective and complex judgments . we believe the current assumptions and other considerations used to estimate amounts reflected in our consolidated financial statements are appropriate . however , if actual experience differs from the assumptions and other considerations used in estimating amounts reflected in our consolidated financial statements , the resulting changes could have a material adverse effect on our consolidated results of operations and , in certain situations , could have a material adverse effect on our consolidated financial condition . the development and selection of the critical accounting estimates , and the related disclosures , have been reviewed with the audit committee of our board of directors . income taxes we intend to elect on our u.s. federal income tax return for our taxable year beginning on january 1 , 2014 to be treated as a reit and we , together with an indirectly wholly-owned subsidiary of the company , glp holdings , inc. , intend to jointly elect to treat each of glp holdings , inc. , louisiana casino cruises , inc. and penn cecil maryland , inc. as a `` taxable reit subsidiary '' effective on the first day of the first taxable year of glpi as a reit . we intend to continue to be organized and to operate in a manner that will permit us to qualify as a reit . to qualify as a reit , we must meet certain organizational and operational requirements , including a requirement to distribute at least 90 % of our annual reit taxable income to shareholders determined without regard to the dividends paid deduction and excluding any net capital gain , meet the various other requirements imposed by the code relating to matters such as operating results , asset holdings , distribution levels , and diversity of stock ownership . as a reit , we generally will not be subject to federal income tax on income that we distribute as dividends to our shareholders . if we fail to qualify as a reit in any taxable year , we will be subject to u.s. federal income tax , including any applicable alternative minimum tax , on our taxable income at regular corporate income tax rates , and dividends paid to our shareholders would not be deductible by us in computing taxable income . any resulting corporate liability could be substantial and could materially and adversely affect our net income and net cash available for distribution to shareholders . unless we were entitled to relief under certain code provisions , we also would be disqualified from re-electing to be taxed as a reit for the four taxable years following the year in which we failed to qualify to be taxed as a reit . it is not possible to state whether in all circumstances we would be entitled to this statutory relief . 44 our trs properties are able to engage in activities resulting in income that would be not qualifying income for a reit . as a result , certain activities of the company which occur within our trs properties are subject to federal and state income taxes . real estate investments our real estate investments that we received in connection with the spin-off were contributed to us at penn 's historical carrying amount . we record the acquisition of real estate at cost , including acquisition and closing costs .
| executive summary financial highlights we reported net revenues and income from operations of $ 242.1 million and $ 60.6 million , respectively , for the year ended december 31 , 2013 , compared to $ 210.6 million and $ 43.7 million , respectively , for the corresponding period in the prior year . the major factors affecting our results for the year ended december 31 , 2013 , as compared to the year ended december 31 , 2012 , were : rental revenue associated with the master lease , which became effective on november 1 , 2013 , of $ 76.6 million for the year ended december 31 , 2013. legal , consulting and other fees related to the spin-off transaction of $ 13.5 million for the year ended december 31 , 2013. increased depreciation expense of $ 14.8 million for the year ended december 31 , 2013 , compared to the corresponding period in the prior year , primarily due to the real property assets transferred to glpi as part of the spin-off , as well as associated real estate taxes of $ 7.6 million for the year ended december 31 , 2013. interest expense of $ 19.3 million for the year ended december 31 , 2013 related to our fixed and variable rate borrowings entered into in connection with the spin-off . additional competition which negatively impacted hollywood casino perryville and hollywood casino baton rouge , namely the partial opening of a casino complex at the arundel mills mall in maryland in june 2012 and its second phase opening in mid-september 2012 and the opening of a new riverboat casino and hotel in baton rouge , louisiana on september 1 , 2012 , respectively .
| 4,050 |
balance sheet components-impairment story_separator_special_tag cautionary statement regarding forward-looking statements you should read the following discussion of our financial condition and results of operations in conjunction with our consolidated financial statements and the notes thereto included elsewhere in this annual report on form 10-k. this discussion contains forward-looking statements that involve risks and uncertainties within the meaning of the private securities litigation reform act of 1995. our actual results could differ materially from those discussed below . such risks and uncertainties include a variety of factors , some of which are beyond our control . factors that could cause or contribute to such differences include those discussed in the section titled “ risk factors ” included in this annual report on form 10-k. these forward-looking statements should not be relied upon as representing our views as of any subsequent date , and we are under no obligation to , and expressly disclaim any responsibility to , update or alter our forward-looking statements , whether as a result of new information , future events or otherwise . overview sunpower corporation ( together with its subsidiaries , `` sunpower , '' `` we , '' `` us , '' or `` our '' ) is a leading global energy company that delivers complete solar solutions to customers worldwide through an array of hardware , software , and financing options and through utility-scale solar power system construction and development capabilities , operations and maintenance ( `` o & m '' ) services , and `` smart energy '' solutions . our smart energy initiative is designed to add layers of intelligent control to homes , buildings and grids—all personalized through easy-to-use customer interfaces . of all the solar cells commercially available to the mass market , we believe our solar cells have the highest conversion efficiency , a measurement of the amount of sunlight converted by the solar cell into electricity . for more information about our business , please refer to the section titled `` part i. item 1. business '' in this annual report on form 10-k . effective january 1 , 2018 , we adopted the requirements of accounting standards update ( `` asu '' ) 2014-09 , revenue from contracts with customers ( topic 606 ) using the full retrospective method as discussed in `` part ii—item 8 . financial statements—notes to the consolidated financial statements—note 1. organization and summary of significant accounting policies `` of this annual report on form 10-k. all amounts and disclosures set forth in this form 10-k reflect these changes . segments overview in the fourth quarter of 2018 , in connection with our efforts to improve operational focus and transparency , drive overhead accountability into segment operating results , and increase strategic agility across the value chain from our upstream business ' core strength in manufacturing and technology and our downstream business 's core strength in offering complete solutions in residential and commercial markets , we reorganized our segment reporting to an upstream and downstream structure . previously , we operated under three end-customer segments , comprised of our ( i ) residential segment , ( ii ) commercial segment , and ( iii ) power plant segment . historically , the residential segment referred to sales of solar energy solutions to residential end-customers , the commercial segment referred to sales of energy solutions to commercial and public entity end-customers , and the power plant segment referred to our large-scale solar products and systems and component sales . under the new segmentation , sunpower energy services segment ( `` sunpower energy services '' or `` downstream '' ) refers to sales of solar energy solutions in the north america region previously included in the legacy residential segment and commercial segment ( collectively previously referred to as `` distributed generation '' or `` dg '' ) including direct sales of turn-key engineering , procurement and construction ( `` epc '' ) services , sales to our third-party dealer network , sales of energy under power purchase agreements ( `` ppas '' ) , storage solutions , cash sales and long-term leases directly to end customers , and sales to resellers . the sunpower energy services segment also includes sales of our global operations and maintenance ( `` o & m '' ) services . the sunpower technologies segment ( `` sunpower technologies '' or `` upstream '' ) refers to our technology development , worldwide solar panel manufacturing operations , equipment supply to resellers and commercial and residential end-customers outside of north america ( `` international dg '' ) , and worldwide power plant project development and project sales . upon reorganization , some support functions and responsibilities , which previously resided within the corporate function , have been shifted to each segment , including financial planning and analysis , legal , treasury , tax and accounting support and services , among others . the reorganization provides our management with a comprehensive financial overview of our key businesses . the application of this structure permits us to align our strategic business initiatives and corporate goals in a manner that best focuses our businesses and support operations for success . 55 our chief executive officer , as the chief operating decision maker ( “ codm ” ) , reviews our business , manages resource allocations and measures performance of our activities among the sunpower energy services segment and sunpower technologies segment . reclassifications of prior period segment information have been made to conform to the current period presentation . these changes do not affect our previously reported consolidated financial statements . for more information about our business segments , see the section titled `` part i. item 1. business '' of this annual report on form 10-k. for more segment information , see `` item 8 . financial statements—note 18 . story_separator_special_tag in fiscal 2019 , we continue to focus on investments that we expect will offer the best opportunities for growth including our industry-leading maxeon 5 cell and panel technology , solar-plus-storage solutions and digital platform to improve customer service and satisfaction in our sunpower energy services offerings . we believe that our strategic decision to re-segment our business into an upstream and downstream structure to focus our downstream efforts on our leading u.s. dg business while growing global sales of our upstream solar panel business through our sunpower solutions group will improve transparency and enable us to regain profitability in 2019. in late fiscal 2015 , the u.s. government enacted a budget bill that extended the solar commercial investment tax credit ( the `` commercial itc '' ) under section 48 ( c ) of the internal revenue code of 1986 , as amended ( the `` code '' ) , and the individual solar investment tax credit under section 25d of the code ( together with the commercial itc , the `` itc '' ) for five years , at rates gradually decreasing from 30 % through 2019 to 22 % in 2021. after 2021 , the commercial itc is retained at 10 % . during december 2017 , the current administration and congress passed comprehensive reform of the code which resulted in the reduction or elimination of various industry-specific tax incentives in return for an overall reduction in corporate tax rates . for more information about the itc and other policy mechanisms , please refer to the section titled `` item 1. business—regulations— public policy considerations `` of this annual report on form 10-k. for more information about how we avail ourselves of the benefits of public policies and the risks related to public policies , please see the risk factors set forth under the caption `` part i. item 1a . risk factors—risks related to our sales channels , '' including `` —the reduction , modification or elimination of government incentives could cause our revenue to decline and harm our financial results `` and `` — existing regulations and policies and changes to these regulations and policies may present technical , regulatory , and economic barriers to the purchase and use of solar power products , which may significantly reduce demand for our products and services `` of this annual report on form 10-k. 57 supply we are focused on delivering complete solar power generation solutions to our customers in both of our business segments . as part of our complete solution approach , we launched our sunpower helix product for our commercial business customers during fiscal 2015 and our sunpower equinox product for our residential business customers during fiscal 2016. the equinox and helix systems are pre-engineered modular solutions for residential and commercial applications , respectively , that combine our high-efficiency solar module technology with integrated plug-and-play power stations , cable management systems , and mounting hardware that enable our customers to quickly and easily complete system installations and manage their energy production . our equinox systems utilize our latest maxeon gen 3 cell and acpv technology for residential applications , where we are also expanding our initiatives on storage and smart energy solutions . during fiscal 2016 we also launched our next generation technology for our existing oasis modular solar power blocks for power plant applications . with the addition of these modular solutions in our residential and commercial applications , we are able to provide complete solutions across all end-customers . additionally , we continue to focus on producing our new lower cost , high efficiency p-series product line , which will enhance our ability to rapidly expand our global footprint with minimal capital cost . we continue to see significant and increasing opportunities in technologies and capabilities adjacent to our core product offerings that can significantly reduce our customers ' ccoe , including the integration of energy storage and energy management functionality into our systems , and have made investments to realize those opportunities , enabling our customers to make intelligent energy choices by addressing how they buy energy , how they use energy , and when they use it . we have added advanced module-level control electronics to our portfolio of technology designed to enable longer series strings and significant balance of system components cost reductions in large arrays . we currently offer solar panels that use microinverters designed to eliminate the need to mount or assemble additional components on the roof or the side of a building and enable optimization and monitoring at the solar panel level to ensure maximum energy production by the solar system . we continue to improve our unique , differentiated solar cell and panel technology . we emphasize improvement of our solar cell efficiency and lcoe and ccoe performance through enhancement of our existing products , development of new products and reduction of manufacturing cost and complexity in conjunction with our overall cost-control strategies . we are now producing our solar cells with over 25 % efficiency in the lab and have reached production panel efficiencies over 24 % . we have reduced our overall solar cell manufacturing output in an ongoing effort to match profitable demand levels , with increasing bias toward our highest efficiency maxeon 3 product platform , which utilizes our latest solar cell technology , and our p-series product , which utilizes conventional cell technology that we purchase from third parties in low-cost supply chain ecosystems such as china . we previously closed our fab 2 cell manufacturing facility and our panel assembly facility in the philippines and are focusing on our latest generation , lower cost panel assembly facilities in mexico . as part of this realignment , we are reducing our back-contact panel assembly capacity while increasing production of our new p-series technology , including our newly-acquired u.s. manufacturing capabilities .
| results of operations revenue replace_table_token_4_th 1 see `` item 8 . financial statements—note 18 . segments `` in the notes to the consolidated financial statements in this annual report on form 10-k for further information regarding our other segments reporting adjustments , net . total revenue : our total revenue decreased by 4 % during fiscal 2018 as compared to fiscal 2017 , primarily due to reduced sales in our sunpower technologies segment in the u.s. and in asia as result of our decision to cease the development of large-scale solar power projects . we sold our remaining u.s. power plant development portfolio in the third quarter of fiscal 2018. this was partially offset by an increase in our sunpower energy services segment in the proportion of capital leases placed in service relative to total leases placed in service under our residential leasing program within the u.s. , as well as stronger sales of solar power systems and components to residential customers in all regions , and stronger sales of commercial solar power projects in all regions . our total revenue decreased by 30 % during fiscal 2017 as compared to fiscal 2016 , primarily due to a decline in the revenue recognized in our sunpower technologies segment as we shift away from global power plant development resulting in a decreased number of large-scale solar power projects in our project pipeline .
| 4,051 |
the company continues to work to position itself as a service solutions provider to the commercial vehicle industry by implementing our growth strategy to expand our portfolio of aftermarket services , broadening the diversity of our commercial vehicle product offerings and extending our network of service points across the united states . the company 's commitment to provide innovative solutions to service its customers ' business needs continues to drive its strong parts , service and body shop revenues . the service needs of an aged fleet also contributed to the growth in our aftermarket revenues in 2012. the company 's aftermarket capabilities include a wide range of services and products such as a fleet of mobile service units , mobile technicians who staff customers ' facilities , a proprietary line of commercial vehicle parts and accessories , new diagnostic and analysis capabilities , factory certified service for alternative fuel vehicles and assembly service for specialized bodies and equipment . as a result of the company 's efforts to expand aftermarket capabilities , aftermarket operations now account for more than 60 % of the company 's total gross profits . the company continues to offer a commercial vehicle product line to include medium-duty and light-duty trucks , buses and vocational specialty vehicles such as refuse trucks , tow trucks and truck-mounted cranes . the company has developed relationships with a more diverse customer base across a wide range of market segments , resulting in our ability to offer a complete range of solutions from sales of new vehicles to aftermarket support for vehicles in operation . the company continues to invest in its infrastructure to better serve its customers operating natural gas vehicles in anticipation of continued adoption of this technology . substantial investments have been made at six rush truck center locations to enable technicians to perform certified cng and lng service , with plans in place to bring additional facilities online as needed in key markets . approximately 85 technicians have been factory-certified to service natural gas fuel systems . the company believes that natural gas-powered vehicles will grow in popularity and could represent up to 10 % of the class 8 new truck sales market by 2017. the company has a track record of growth through acquisitions and additions of dealerships within its current areas of responsibility . it now operates a contiguous network of 78 rush truck centers across the united states . the company believes that this geographic diversity will more effectively allow the company to withstand regional economic downturns and expand service capabilities that better match the footprint of its customer base . 24 on december 31 , 2012 , the company acquired certain assets of mvi group , which operated commercial truck and bus dealerships in ohio under the names of miami valley international , center city international , cci north coast and buckeye truck centers . the acquisition included international , ic bus , and isuzu franchise locations in akron , cincinnati , cleveland , columbus , dayton , findlay and lima , ohio . these dealerships now operate as rush truck centers . rush truck leasing now operates idealease truck rental and leasing franchises in cincinnati , cleveland , columbus , dayton and lima , ohio . the transaction , including real estate , was valued at approximately $ 104.5 million . the purchase price for the assets of the business was financed under the company 's floor plan and lease and rental truck financing arrangements with the remainder paid in cash . the company now operates 24 full service navistar locations and one collision center in 6 states . on february 1 , 2013 , the company 's board of directors approved a stock repurchase program authorizing the company to repurchase , from time to time , up to an aggregate of $ 40.0 million of its shares of class a common stock and or class b common stock . repurchases will be made at times and in amounts as the company deems appropriate and will be made through open market transactions , privately negotiated transactions and other lawful means . the manner , timing and amount of any repurchases will be determined by the company based on an evaluation of market conditions , stock price and other factors . the stock repurchase program expires on february 12 , 2014 and may be suspended or discontinued at any time . while the stock repurchase program does not obligate the company to acquire any particular amount or class of common stock , the company anticipates that it will be repurchasing primarily shares of its class b common stock . key performance indicator absorption ratio . management uses several performance metrics to evaluate the performance of its commercial vehicle dealerships , and considers rush truck centers ' “ absorption ratio ” to be of critical importance . absorption ratio is calculated by dividing the gross profit from the parts , service and body shop departments by the overhead expenses of all of a dealership 's departments , except for the selling expenses of the new and used commercial vehicle departments and carrying costs of new and used commercial vehicle inventory . when 100 % absorption is achieved , all of the gross profit from the sale of a commercial vehicle , after sales commissions and inventory carrying costs , directly impacts operating profit . in 1999 , the company 's commercial vehicle dealerships ' absorption ratio was approximately 80 % . the company has made a concerted effort to increase its absorption ratio since 1999. the company 's commercial vehicle dealerships achieved a 115.9 % absorption ratio for the year in 2012 and 113.9 % absorption ratio for the year in 2011. critical accounting policies and estimates the company 's discussion and analysis of its financial condition and results of operations are based on the company 's consolidated financial statements , which have been prepared in accordance with u.s. generally accepted accounting principles . story_separator_special_tag 26 accounting for income taxes management judgment is required to determine the provisions for income taxes and to determine whether deferred tax assets will be realized in full or in part . deferred income 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 . when it is more likely than not that all or some portion of specific deferred income tax assets will not be realized , a valuation allowance must be established for the amount of deferred income tax assets that are determined not to be realizable . accordingly , the facts and financial circumstances impacting state deferred income tax assets are reviewed quarterly and management 's judgment is applied to determine the amount of valuation allowance required , if any , in any given period . the company 's income tax returns are periodically audited by tax authorities . these audits include questions regarding our tax filing positions , including the timing and amount of deductions . in evaluating the exposures associated with the company 's various tax filing positions , the company adjusts its liability for unrecognized tax benefits and income tax provision in the period in which an uncertain tax position is effectively settled , the statute of limitations expires for the relevant taxing authority to examine the tax position , or when more information becomes available . the company 's liability for unrecognized tax benefits contains uncertainties because management is required to make assumptions and to apply judgment to estimate the exposures associated with its various filing positions . the company 's effective income tax rate is also affected by changes in tax law , the level of earnings and the results of tax audits . although the company believes that the judgments and estimates are reasonable , actual results could differ , and the company may be exposed to losses or gains that could be material . an unfavorable tax settlement generally would require use of the company 's cash and result in an increase in its effective income tax rate in the period of resolution . a favorable tax settlement would be recognized as a reduction in the company 's effective income tax rate in the period of resolution . the company 's income tax expense includes the impact of reserve provisions and changes to reserves that it considers appropriate , as well as related interest . derivative instruments and hedging activities the company utilizes derivative financial instruments to manage its interest rate risk . the types of risks hedged are those relating to the variability of cash flows and changes in the fair value of the company 's financial instruments caused by movements in interest rates . the company assesses hedge effectiveness at the inception and during the term of each hedge . derivatives are reported at fair value on the accompanying consolidated balance sheets . the effective portion of the gain or loss on the company 's cash flow hedges are reported as a component of accumulated other comprehensive loss . hedge effectiveness will be assessed quarterly by comparing the changes in cumulative gain or loss from the interest rate swap with the cumulative changes in the present value of the expected future cash flows of the interest rate swap that are attributable to changes in the libor rate . if the interest rate swaps become ineffective , portions of these interest rate swaps would be reported as a component of interest expense in the accompanying consolidated statements of income . new accounting standards in june 2011 , the financial accounting standards board ( “ fasb ” ) issued an amendment to the existing guidance on the presentation of comprehensive income . under the amended guidance , entities have the option to present the components of net income and other comprehensive income in either a single continuous statement of comprehensive income or in two separate but consecutive statements . entities no longer have the option of presenting the components of other comprehensive income within the statement of changes in stockholders ' equity . this amendment was effective on a retrospective basis for fiscal years , and interim periods within those years , beginning after december 15 , 2011 , which was the first quarter of 2012 for the company . the adoption of this amendment resulted in a change to the company 's current presentation of comprehensive income , but did not have any impact on the company 's consolidated financial statements and related disclosures . the fasb amended existing guidance by requiring that additional information be disclosed about items reclassified ( `` reclassification adjustments '' ) out of accumulated other comprehensive income . the additional information includes separately stating the total change for each component of other comprehensive and separately disclosing both current-period other comprehensive income and reclassification adjustments . entities are also required to present , either on the face of the income statement or in the notes to the financial statements , significant amounts reclassified out of accumulated other comprehensive income as separate line items of net income but only if the entire amount reclassified must be reclassified to net income in the same reporting period . for amounts that are not required to be reclassified in their entirety to net income , an entity must cross-reference to other disclosures that provide additional detail about those amounts . this accounting standard will be effective for interim and annual periods beginning after december 15 , 2012. the company does not believe the adoption of this update will have a material impact on its financial statements . 27 story_separator_special_tag do not leave their service areas overnight . the company also sells light-duty vehicles ( class 3 and under ) at three of its ford dealerships . 29 a.c.t . research currently forecasts sales of new class 4 through 7 commercial vehicles in the u.s. to be approximately 186,000 in 2013 , compared to 164,000 in 2012. a.c.t .
| results of operations the following discussion and analysis includes the company 's historical results of operations for 2012 , 2011 and 2010. the following table sets forth for the years indicated certain financial data as a percentage of total revenues : replace_table_token_5_th the following table sets forth the unit sales and revenue for new heavy-duty , new medium-duty , new light-duty and used commercial vehicles and the absorption ratio for the years indicated ( revenue in millions ) : replace_table_token_6_th ( 1 ) includes sales of glider kits , truck bodies , trailers and other new equipment . 28 the following table sets forth for the periods indicated the percent of gross profit by revenue source : replace_table_token_7_th industry we currently operate in the commercial vehicle market . there has historically been a high correlation between new product sales in the commercial vehicle market and the rate of change in u.s. industrial production and the u.s. gross domestic product . heavy-duty truck market the u.s. retail heavy-duty truck market is affected by a number of factors relating to general economic conditions , including fuel prices , government regulation , interest rate fluctuations , economic recessions , other methods of transportation and customer business cycles . in addition , unit sales of new commercial vehicles have historically been subject to substantial cyclical variation based on general economic conditions . according to data published by a.c.t . research , in recent years total u.s. retail sales of new class 8 trucks have ranged from a low of approximately 97,000 in 2009 to a high of approximately 291,000 in 2006. class 8 trucks are defined by the american automobile association as trucks with a minimum gross vehicle weight rating above 33,000 pounds . typically , class 8 trucks are assembled by manufacturers utilizing certain components that may be manufactured by other companies , including engines , transmissions , axles , wheels and other components .
| 4,052 |
in november 2017 , a current employee filed a paga representative action in california state court alleging the company failed to make wage statements readily available to california store employees who do not receive paper checks . the lawsuit has been dismissed with prejudice . in february 2018 , a current store manager filed a statewide class action in missouri state court alleging the company 's story_separator_special_tag in management 's discussion and analysis , we explain the general financial condition and the results of operations for our company , including : what factors affect our business ; what our net sales , earnings or losses , gross margins and costs were in 2018 , 2017 and 2016 ; why those net sales , earnings or losses , gross margins and costs were different from the year before ; how all of this affects our overall financial condition ; what our expenditures for capital projects were in 2018 and 2017 and what we expect them to be in 2019 ; and where funds will come from to pay for future expenditures . as you read management 's discussion and analysis , please refer to our consolidated financial statements , included in “ item 8. financial statements and supplementary data ” of this form 10-k , which present the results of operations for the fiscal years ended february 2 , 2019 , february 3 , 2018 and january 28 , 2017 . in management 's discussion and analysis , we analyze and explain the annual changes in some specific line items in the consolidated financial statements for fiscal year 2018 compared to fiscal year 2017 and for fiscal year 2017 compared to fiscal year 2016 . we also provide information regarding the performance of each of our operating segments . unless otherwise indicated , references to “ we , ” “ our ” or “ us ” refer to dollar tree , inc. and its direct and indirect subsidiaries on a consolidated basis . key events and recent developments several key events have had or are expected to have a significant effect on our operations . they are listed below : integration of family dollar ◦ in the third quarter of 2018 , we announced that we plan to consolidate our store support centers in matthews , north carolina and chesapeake , virginia to our newly-completed office tower in the summit pointe development in chesapeake , virginia . ◦ based on our strategic and operational reassessment of the family dollar segment , following challenges that the business has experienced that have impacted our ability to grow the business at the originally estimated rate when we acquired family dollar in 2015 , management determined there were indicators that the goodwill of the business may be impaired . accordingly , a goodwill impairment test was performed in the fourth quarter of fiscal 2018. the results of the impairment test showed that the fair value of the family dollar business was lower than the carrying value resulting in a $ 2.73 billion non-cash pre-tax and after-tax goodwill impairment charge . ◦ on march 6 , 2019 , we announced plans for a store optimization program for family dollar . for fiscal 2019 , this program includes rolling out a new model for both new and renovated family dollar stores , internally known as h2 , to at least 1,000 stores , closing as many as 390 under-performing stores , re-bannering 200 family dollar stores to the dollar tree brand , installing adult beverages in approximately 1,000 stores and expanding freezers and coolers in approximately 400 stores . supply chain ◦ in the second quarter of 2016 , we completed construction of a new 1.5 million square foot distribution center in cherokee county , south carolina . ◦ in the third quarter of 2016 , we completed a 0.3 million square foot expansion of our distribution center in stockton , california . ◦ in the second quarter of 2018 , we completed construction of a new 1.2 million square foot distribution center in warrensburg , missouri . ◦ during fiscal 2018 , we began construction of a new 1.2 million square foot distribution center in morrow county , ohio which is expected to be operational in the third quarter of 2019 . ◦ in fiscal 2019 , we announced tentative plans to construct a new 1.2 million square foot distribution center in rosenberg , texas which is expected to be operational in the summer of 2020. long-term debt ◦ during the first quarter of 2018 , we redeemed the $ 750.0 million 5.25 % acquisition notes due 2020 and accelerated the amortization of debt-issuance costs associated with the notes of $ 6.1 million . 27 ◦ during the first quarter of 2018 , we refinanced our long-term debt obligations as follows : ▪ we completed the registered offering of $ 750.0 million of senior floating rate notes due 2020 , $ 1.0 billion of 3.70 % senior notes due 2023 , $ 1.0 billion of 4.00 % senior notes due 2025 and $ 1.25 billion of 4.20 % senior notes due 2028 ; ▪ we entered into a credit agreement for a $ 782.0 million term loan facility and a $ 1.25 billion revolving credit facility ; ▪ we used the proceeds of the above offerings to repay the $ 2,182.7 million outstanding under our senior secured credit facilities and redeem the remaining $ 2,500.0 million outstanding under our acquisition debt , resulting in the acceleration of the expensing of $ 41.2 million of deferred financing costs and the incurrence of $ 114.3 million in prepayment penalties . ◦ during the fourth quarter of 2018 , we prepaid the $ 782.0 million outstanding under the term loan facility and accelerated the expensing of $ 1.5 million of deferred financing costs . story_separator_special_tag as of february 2 , 2019 , we have this layout in approximately 930 dollar tree stores and we plan to implement snack zone in 1,000 new and existing stores in fiscal 2019. we believe these initiatives have and will continue to enable us to increase sales and earnings by increasing the number of shopping trips made by our customers . we are executing several initiatives in our family dollar stores to increase sales . during fiscal 2018 , we completed more than 500 family dollar renovations , and have completed more than 875 renovations since launching this initiative in the second quarter of fiscal 2017. in march 2019 , we announced plans for a store optimization program for family dollar . this program consists of the following : a roll-out of a new model for both new and renovated family dollar stores internally known as h2 . we tested the h2 model in 2018 on a limited basis with positive results . this h2 model has significantly improved merchandise offerings , including dollar tree $ 1.00 merchandise sections and establishing a minimum number of freezer and cooler doors , throughout the store . h2 has increased traffic and provided an average comparable store net sales lift in excess of 10 % over control stores . h2 performs well in a variety of locations , and especially in locations where family dollar has been most challenged in the past . we started 2019 with approximately 200 h2 stores and plan to renovate at least 1,000 stores to this model in 2019 and expect an accelerated renovation schedule in future years . we plan to close under-performing stores . in the fourth quarter of 2018 , we closed 84 under-performing stores which brought our total closed stores for the year to 37 more than originally planned . in 2019 we will accelerate the pace of closings to as many as 390 stores . the normal cadence of family dollar closings on an annual basis is approximately 75 stores . we expect to incur approximately $ 28.0 million in store closure costs , which does not include the cost of rent and other lease obligation and fixture costs . we plan to re-banner approximately 200 family dollar stores to the dollar tree brand in 2019. we re-bannered 52 stores to the dollar tree brand in 2018 and have re-bannered approximately 350 stores since the acquisition of family dollar in 2015. additionally , we plan to install adult beverage product in approximately 1,000 stores and expand freezers and coolers in approximately 400 stores in 2019 . 29 in fiscal 2019 , in addition to the approximately $ 28.0 million in store closure costs , we estimate that we will incur approximately $ 30.0 million of incremental initiative costs based on project count and velocity . on september 18 , 2018 , we announced that as part of our continuing integration of family dollar 's organization and support functions , we plan to consolidate our store support centers in matthews , north carolina and chesapeake , virginia to our newly-completed office tower in the summit pointe development in chesapeake , virginia . approximately 30 percent of the matthews associates , including more than 50 percent of the officers and directors , invited to move to chesapeake have agreed to do so . we are currently hiring to replace the associates who are not moving . we expect the consolidation to be completed by the fall of 2019. we expect to incur total pre-tax expense of approximately $ 37.0 million in connection with these plans in fiscal 2019 and we incurred approximately $ 7.3 million in 2018. additionally , the following items have already impacted or could impact our business or results of operations during 2019 or in the future : we have experienced disruptions and higher than anticipated freight costs primarily due to the truck driver shortage in the united states . we expect that this will result in higher costs in future periods as merchandise is sold and could result in lower sales if product is not received in our stores on a timely basis . the united states trade representative ( ustr ) has implemented section 301 tariffs against $ 250 billion in chinese goods . although the tariff rate on $ 200 billion of those goods was originally expected to rise from 10 percent to 25 percent on march 2 , 2019 , president trump announced on february 24 , 2019 that he would be postponing the increase . the duration of the postponement is unknown , and the final tariffs are subject to the outcome of trade discussions between the united states and china . however , we do not expect that the tariffs will be material to our business or results of operations in 2019. when the tariffs were implemented , approximately nine percent of our products , measured by sales volume , would have been affected . to mitigate the potential adverse effect of the tariffs , we negotiated price concessions from vendors on certain products , canceled orders , changed product sizes and specifications , changed our product mix and changed vendors . as a result of our mitigation efforts , we believe that we have reduced most of the potential adverse effects of the tariffs on the dollar tree and family dollar segments in 2019. however , we can give no assurances as to the final scope , duration , or impact of any existing or future tariffs and such tariffs could have a material adverse effect on our business and results of operations if we do not continue to mitigate their impact . we must continue to control our merchandise costs , inventory levels and our general and administrative expenses as increases in these items could negatively impact our operating results . story_separator_special_tag for the remainder of the year subsequent to the refinancing .
| results of operations replace_table_token_5_th 30 fiscal year ended february 2 , 2019 compared to fiscal year ended february 3 , 2018 net sales . net sales increased 2.6 % , or $ 577.8 million , in 2018 compared to 2017. excluding the 53rd week in 2017 , which accounted for approximately $ 406.6 million of sales , net sales increased 4.5 % , or $ 984.4 million , resulting from sales of $ 618.5 million in new dollar tree and family dollar stores and increased comparable store net sales . comparable store net sales increased 1.7 % on a constant currency basis as a result of an increase in average ticket . this increase is based on a 52-week comparison for both periods . comparable store net sales increased the same 1.7 % when including the impact of canadian currency fluctuations . on a constant currency basis , comparable store net sales increased 3.3 % in the dollar tree segment and increased 0.1 % in the family dollar segment . comparable store net sales are positively affected by our expanded and relocated stores , which we include in the calculation , and are negatively affected when we open new stores , re-banner stores or expand stores near existing stores . gross profit . gross profit decreased by $ 74.4 million or 1.1 % , to $ 6,947.5 million in 2018 compared to $ 7,021.9 million in 2017. gross profit margin decreased to 30.4 % in 2018 from 31.6 % in 2017. our gross profit margin decrease was due to the following : markdown expense increased approximately 30 basis points resulting primarily from expense related to sku rationalization and planned liquidations and higher promotional markdowns in the family dollar segment . merchandise cost , including freight , increased approximately 25 basis points resulting from higher domestic freight costs , partially offset by improvements in initial mark-on . shrink costs increased approximately 20 basis points due to unfavorable inventory results in the current year .
| 4,053 |
our last three fiscal years consisted of the 53 weeks ended february 29 , 2020 ( `` fiscal 2019 `` ) , the 52 weeks ended february 23 , 2019 ( `` fiscal 2018 `` ) and the 52 weeks ended february 24 , 2018 ( `` fiscal 2017 `` ) . in this management 's discussion and analysis of financial condition and results of operations of albertsons companies , inc. , the words `` albertsons , '' the `` company , '' `` we , '' `` us , '' `` our '' and `` ours '' refer to albertsons companies , inc. , together with its subsidiaries . overview fiscal 2019 we are one of the largest food retailers in the united states , with 2,252 stores across 34 states and the district of columbia . we operate 20 iconic banners with on average 85 years of operating history , including albertsons , safeway , vons , pavilions , randalls , tom thumb , carrs , jewel-osco , acme , shaw 's , star market , united supermarkets , market street and haggen , with approximately 270,000 talented and dedicated employees , as of february 29 , 2020 , who serve on average more than 33 million customers each week . additionally , as of february 29 , 2020 , we operated 1,290 in-store branded coffee shops , 402 adjacent fuel centers , 23 dedicated distribution centers , 20 manufacturing facilities and various online platforms . our stores operate in first-and-main retail locations and have leading market share within attractive and growing geographies . we hold a # 1 or # 2 position by market share in 68 % of the 121 metropolitan statistical areas in which we operate . our portfolio of well-located , full-service stores provides the foundation of our omni-channel platform , including our rapidly growing drive up & go curbside pickup , home delivery and rush delivery offerings . we seek to tailor our offerings to local demographics and preferences of the markets that we operate in . our locally great , nationally strong operating structure empowers decision making at the local level , which we believe better serves our customers and communities , while also providing the systems , analytics and buying power afforded by an organization with national scale and $ 62.5 billion in annual sales . throughout the coronavirus ( covid-19 ) pandemic , our highest priorities have been the safety of our associates and customers and maintaining the supply of product . during the first eight weeks of fiscal 2020 , we have delivered strong sales growth and increases in market share . our company has grown through a series of transformational acquisitions over the last six years , including our merger with safeway in 2015 which gave us the benefits of national scale . while our banners have rich histories , we are in many ways a young company . we have integrated systems and converted stores and distribution centers to create a common platform . we believe our common platform gives us greater transparency and compatibility across our network , allowing us to better serve our customers and employees while enhancing our supply chain . we continue to sharpen our in-store execution , increase our own brands penetration and expand our omni-channel and digital capabilities . we have invested substantially in our business , deploying approximately $ 6.8 billion of capital expenditures beginning with fiscal 2015 , and we used that capital to remodel existing stores , opportunistically build new stores and enhance our digital capabilities . we are focused on creating deep and lasting relationships with our customers by offering them an experience that is easy , exciting and friendly – wherever , whenever and however they choose to shop . we make life easy for our customers through a convenient and consistent shopping experience across our omni-channel network . merchandising is at our core and we offer an exciting and differentiated product assortment . we believe we are an industry leader in fresh , emphasizing organic , locally sourced and seasonal items as well as value-added services like daily fresh-cut fruit 30 and vegetables , customized meat cuts and seafood varieties , made-from-scratch bakery items , prepared foods , deli and floral . we also continue to grow our innovative and distinctive own brands portfolio , which achieved over $ 13.1 billion in sales during fiscal 2019 and reached 25.4 % sales penetration . our friendly service is embedded in our culture and enables us to build deep ties with our local communities . our easy , exciting and friendly shopping experience , coupled with our nationwide just for u , grocery and fuel rewards programs and pharmacy services , offers a differentiated value proposition to our customers . the just for u program has 20.7 million registered loyalty households which , we believe , provides us with a comprehensive understanding of our core shoppers . these loyalty programs and our omni-channel offerings combine to form an extended loyalty ecosystem that drives increased customer lifetime value through greater purchase frequency , larger basket size and higher customer retention . we operate in the $ 1.1 trillion u.s. food retail industry , a highly fragmented sector with a large number of companies competing locally and a growing array of companies with a national footprint , including traditional supermarkets , pharmacies and drug stores , convenience stores , warehouse clubs and supercenters . the industry has also seen the widespread introduction of `` limited assortment '' retail stores , as well as local chains and stand-alone stores that cater to the individual cultural preferences of specific neighborhoods . despite this , large , national grocers have increased market share over time as scale remains an important advantage in offering customers a modern and attractive shopping experience . between 2013 and 2018 , the share of the top 10 food retail companies increased from 44 % to 55 % on the basis of industry retail sales . story_separator_special_tag since the beginning of fiscal 2020 , we have experienced significant increases in customer traffic , product demand and basket size in stores as people adjust to these new circumstances . consumer staples , paper goods , meat , alcoholic beverages and cleaning supplies are among the products being purchased in significant quantities . there has also been a substantial increase in customer demand and engagement with our ecommerce offerings as a result of the pandemic , including both home delivery and our drive up & go curbside pickup . we have responded to this increased demand for our ecommerce offerings by hiring additional pickers and drivers , retaining additional third-party service providers and expanding our drive up & go offerings . we have also simplified our offerings on our ecommerce websites to focus on the products that are most in demand . responding to the pandemic has also significantly increased our expenses . we have stepped up how often we clean and disinfect all departments , restrooms , and other high-touch points of our stores , including check stands and service counters , and hourly disinfecting of high-touch areas . this is in addition to our rigorous food safety and sanitations programs already in place . cart wipes and hand sanitizer stations have been installed in key locations within stores . to meet our requirements for increased labor in order to meet customer demand in store and across ecommerce channels , we have partnered with major companies to provide temporary jobs to their employees who have been furloughed or had their hours cut . we have hired over 55,000 new associates since the beginning of fiscal 2020 , partnering with more than 35 companies to help keep americans working . to the extent that our need for increased labor continues , we will need to hire and train additional employees to fill the roles performed by these temporary employees . beginning march 15 , 2020 , in recognition of their significant efforts , we instituted a temporary increase in pay for all front-line associates of $ 2 per hour for every hour that they work . we also , through our albertsons 32 companies foundation , have pledged $ 50 million to hunger relief and previously launched a major fundraiser to help feed families in need during the coronavirus ( covid-19 ) pandemic and ensure that they get the food they need . beyond our doors , we rely on various suppliers and vendors to provide and deliver our product inventory on a continuous basis . we could suffer significant product inventory losses and significant lost revenue in the event of the loss or a shutdown of a major supplier or vendor , disruption of our distribution network , extended power outages , natural disasters or other catastrophic occurrences . due to the coronavirus ( covid-19 ) pandemic and the resulting dislocation of workplaces and the economy , the ability of vendors to supply required products may be impaired because of the illness or absenteeism in their workforces , government mandated shutdown orders or impaired financial conditions . we expect the ultimate significance of the impact of the pandemic on our financial condition , results of operations , or cash flows will be dictated by the length of time that such circumstances continue , which will depend on the currently unknowable extent and duration of the coronavirus ( covid-19 ) pandemic and the nature and effectiveness of governmental and public actions taken in response . coronavirus ( covid-19 ) also makes it more challenging for management to estimate future performance of our businesses , particularly over the near term . stores the following table shows stores operating , acquired , opened and closed during the periods presented : replace_table_token_3_th the following table summarizes our stores by size : replace_table_token_4_th ( 1 ) in millions , reflects total square footage of retail stores operating at the end of the period . 33 story_separator_special_tag roman ; font-size:11pt ; '' > . excluding the impact of fuel , gross profit margin increased 70 basis points . the increase in fiscal 2018 as compared to fiscal 2017 was primarily attributable to lower shrink expense as a percentage of sales , partially due to the completion of our store conversions related to the safeway acquisition and the implementation of inventory management initiatives , lower advertising costs and improved product mix , including improved sales penetration in own brands . fiscal 2018 vs. fiscal 2017 basis point increase ( decrease ) lower shrink expense 31 product mix , including increased own brands penetration 16 advertising 14 acquisition synergies 6 other 3 total 70 selling and administrative expenses selling and administrative expenses consist primarily of store level costs , including wages , employee benefits , rent , depreciation and utilities , in addition to certain back-office expenses related to our corporate and division offices . selling and administrative expenses decreased 30 basis points to 26.6 % of net sales and other revenue in fiscal 2019 from 26.9 % in fiscal 2018 . excluding the impact of fuel , selling and administrative expenses as a percentage of net sales and other revenue decreased 30 basis points during fiscal 2019 compared to fiscal 2018 . the decrease during fiscal 2019 compared to fiscal 2018 was primarily attributable to lower integration and acquisition-related costs and lower depreciation and amortization expense , partially offset by an increase in rent expense and occupancy costs related to store properties and investments in strategic initiatives . lower acquisition and integration-related costs were driven by the substantial completion of the safeway integration in fiscal 2018 , resulting in no store conversions in fiscal 2019 compared to 506 store conversions in fiscal 2018. the integration costs in fiscal 2019 were largely driven by the conversion of back-office related areas and a distribution center .
| results of operations the following table and related discussion sets forth certain information and comparisons regarding the components of our consolidated statements of operations for fiscal 2019 , fiscal 2018 and fiscal 2017 , respectively ( in millions ) : replace_table_token_5_th identical sales , excluding fuel identical sales include stores operating during the same period in both the current year and the prior year , comparing sales on a daily basis . direct to consumer internet sales are included in identical sales , and fuel sales are excluded from identical sales . acquired stores become identical on the one-year anniversary date of the acquisition . identical sales results , on an actual basis , for the past three fiscal years were as follows : replace_table_token_6_th net sales and other revenue net sales and other revenue increased $ 1,920.6 million , or 3.2 % , from $ 60,534.5 million in fiscal 2018 to $ 62,455.1 million in fiscal 2019 . the components of the change in net sales and other revenue for fiscal 2019 were as follows ( in millions ) : replace_table_token_7_th ( 1 ) includes changes in non-identical sales and other miscellaneous revenue . the primary increase in net sales and other revenue in fiscal 2019 as compared to fiscal 2018 was driven by our 2.1 % increase in identical sales and sales due to the additional 53rd week , partially offset by a reduction in sales related to 34 the closure of 31 stores in fiscal 2019 and a decrease in fuel sales of $ 25.5 million . fiscal 2019 identical sales benefited from the growth in online home delivery and drive up & go curbside pickup sales and own brands sales . net sales and other revenue increased $ 609.9 million , or 1.0 % , from $ 59,924.6 million in fiscal 2017 to $ 60,534.5 million in fiscal 2018 .
| 4,054 |
due to the significance of resi 's accounts to the company 's historical consolidated financial statements , the comparability of the company 's consolidated financial statements as of and for the year ended december 31 , 2016 have limited comparability with periods ending on or before december 31 , 2015. additionally , we provide management services to newsource . on december 2 , 2013 , newsource became registered as a licensed reinsurer with the bma . we consolidate newsource in our consolidated financial statements . management overview the 2016 fiscal year was a transformative period for resi under our management . during 2016 , we focused on resi 's goal of directly acquiring sfr properties as it transitions to a 100 % sfr equity reit . under our guidance , resi 's portfolio of rental properties increased by 215 % from 2,732 properties at december 31 , 2015 to 8,603 properties at december 31 , 2016 , primarily due to the home sfr transaction and other sfr acquisitions completed throughout the year . in addition , we have assisted resi in the resolution and or sale of a majority of its remaining mortgage loans , resulting in a decrease in its loan portfolio by approximately 54 % from 7,036 loans with an aggregate upb of $ 1.8 billion at december 31 , 2015 to 3,474 loans with an aggregate upb of $ 823.3 million at december 31 , 2016. resi 's disposition of re-performing and non-performing loans has continued in the ordinary course in the first quarter of 2017. on september 30 , 2016 , we facilitated resi 's completion of its acquisition of 4,262 high-yielding sfr properties for an aggregate purchase price of $ 652.3 million in two separate seller financed transactions . the properties were acquired from investment funds sponsored by amherst holdings , llc ( “ amherst ” ) . the home sfr transaction enhances resi 's presence in new and existing strategic target markets , including florida , texas , georgia and tennessee . following completion of the home sfr transaction , resi has now exceeded 4,500 rented properties , which , commencing in the fourth quarter of 2016 , drives an increase in the base management fee to 2 % of resi 's average invested capital and an increase in the incentive management fee percentage to 25 % of the amount by which resi exceeds its required return on invested capital threshold . in connection with the home sfr transaction , we facilitated resi 's seller financing , through its subsidiary that acquired the properties ( “ home borrower ” ) , of approximately $ 489.3 million , representing 75 % of the aggregate purchase price for the home sfr transaction . this loan ( the “ msr loan ” ) was made pursuant to a loan agreement between msr lender , llc with an ultimate maturity date of up to november 9 , 2021 and a floating interest rate of one-month libor plus a fixed spread . we believe that the terms of the msr loan were attractive to resi in comparison to the financing terms otherwise available to it and will satisfy resi 's financing requirements for the 4,262 sfr properties acquired for the foreseeable future . in connection with the msr loan , we facilitated resi 's retention of msr , the current property manager for the acquired portfolio ( the “ home sfr portfolio ” ) prior to the home sfr transaction , to provide property management services , including leasing and lease management , operations , maintenance , repair and property management services to resi with respect to the home sfr portfolio . this new property management relationship has diversified resi 's property management infrastructure already in place with asps . we believe that the property management agreements with msr and asps are , and will be , key drivers of efficiency and cost management in our business model for resi and will provide it with scalable , established , geographically dispersed property management infrastructures to support resi 's portfolios of sfr properties . importantly , resi 's external property management structure allows it to achieve scale in its sfr portfolio without incurring the substantial costs of developing its own nationwide property management infrastructure , which we believe will allow resi to meet its return objectives and give us the potential to earn incentive management fees . we are continuing efforts to acquire additional portfolios for resi from amherst . on february 28 , 2017 , we negotiated a non-binding letter of intent for resi to purchase up to an additional 3,500 rental homes with seller financing from two entities sponsored by amherst , with the first closing expected to occur in the first quarter of 2017. this transaction is subject to negotiation of definitive purchase agreements and resi 's completion of due diligence . there can be no assurance that we will be able to complete these acquisitions on a timely basis or at all . in addition to the home sfr transaction , during 2016 , we continued our efforts to manage resi 's sale of certain mortgage loans to take advantage of attractive market pricing and use the proceeds to acquire sfr assets that meet its targeted returns . under our guidance , resi has successfully completed the sale of 1,975 npls during the year ended december 31 , 2016. in addition , resi completed the sale of 556 re-performing mortgage loans with an aggregate upb of $ 120.3 million on january 2 43 ( ) 3 , 2017 , and , on february 15 , 2017 , resi agreed to the sale of an additional 2,384 mortgage loans with an aggregate upb of $ 574.4 million , which is targeted to close in the second quarter of 2017. further , we have continued to make significant progress on resi 's sale of non-rental reo properties with 2,668 of such properties sold during 2016. we expect that mortgage loan and non-rental reo property sales will continue to enable resi to recycle capital to purchase stabilized rental homes at attractive yields , to repurchase its story_separator_special_tag we are entitled to a quarterly base management fee equal to 1.5 % of the product of ( i ) resi 's average invested capital ( as defined in the current ama ) for the quarter multiplied by ( ii ) 0.25 , while it has fewer than 2,500 single-family rental properties actually rented ( “ rental properties ” ) . the base management fee percentage increases to 1.75 % of average invested capital while resi has between 2,500 and 4,499 rental properties and increases to 2.0 % of average invested capital while it has 4,500 or more rental properties ; incentive management fee . we are entitled to a quarterly incentive management fee equal to 20 % of the amount by which resi 's return on invested capital ( based on affo , defined as net income attributable to holders of common stock calculated in accordance with gaap plus real estate depreciation expense minus recurring capital expenditures on all real estate assets owned by resi ) exceeds an annual hurdle return rate of between 7.0 % and 8.25 % ( depending on the 10-year treasury rate ) . the incentive management fee increases to 22.5 % while resi has between 2,500 and 4,499 rental properties and increases to 25 % while it has 4,500 or more rental properties ; and conversion fee . we are entitled to a quarterly conversion fee equal to 1.5 % of the market value of assets converted into leased single-family homes by resi for the first time during the quarter . resi has the flexibility to pay up to 25 % of the incentive management fee to us in shares of its common stock . under the current ama , resi will not be required to reimburse us for the allocable compensation and routine overhead expenses of our employees and staff , all of which will now be covered by the base management fee described above . only the compensation and benefits of the general counsel dedicated to resi and certain other out-of-pocket expenses incurred on resi 's behalf are reimbursed by resi . under the current ama , we continue to be the exclusive asset manager for resi for an initial term of 15 years from april 1 , 2015 , with two potential five-year extensions , subject to resi achieving an average annual return on invested capital during the initial term of at least 7.0 % during the then-current term . the original ama also had a 15 year term but provided resi with significant termination rights , including the ability to terminate the agreement if resi 's board of directors determined , in its sole discretion , that our performance was unsatisfactory or our compensation was unreasonable . however , under the current ama , resi 's termination rights are significantly limited . under the current ama , neither party is entitled to terminate the current ama prior to the end of the initial term , or each renewal term , other than termination by ( a ) us and or resi “ for cause ” for certain events such as a material breach of the current ama and failure to cure such breach , ( b ) resi for certain other reasons such as its failure to achieve a return on invested capital of at least 7.0 % for two consecutive fiscal years after the third anniversary of the current ama or ( c ) resi in connection with certain change of control events . if the current ama were terminated by resi , our financial position and future prospects for revenues and growth would be materially adversely affected . 45 ( ) metrics affecting our consolidated results subsequent to january 1 , 2016 subsequent to our deconsolidation of resi effective january 1 , 2016 , our operating results are affected by various factors and market conditions , including the following : revenues our revenues primarily consist of quarterly fees due to us under the current ama , including a base management fee , an incentive management fee and a conversion fee as described above and reimbursements of out-of-pocket expenses in our management of resi 's business . the base management fee is derived as a percentage of resi 's average invested capital , and the conversion fee is based on the number and value of mortgage loans and or reo properties that resi converts to rental properties for the first time in each period . the incentive management fee is directly dependent upon resi 's financial performance being in excess of a 7.0 % -8.25 % minimum return on invested capital and will vary with resi 's financial performance . expense reimbursements we receive from resi relate primarily to travel and other out-of-pocket expenses solely related to our management of resi 's business and the base salary , bonus , benefits and stock compensation , if any , solely of the general counsel dedicated to resi . all other salary , bonus , benefits and stock compensation of aamc 's employees ( other than resi share-based compensation issued to them by resi ) are the responsibility of aamc and are not reimbursed by resi . in addition , we receive dividends on the shares of resi common stock that we own , which we record as other income . the amount of dividends we receive will vary with resi 's financial performance , taxable income , liquidity needs and other factors deemed relevant by resi 's board of directors . lastly , we recognize changes in the fair value of our holdings of resi common stock as other comprehensive income or loss , which will be directly dependent upon fluctuations in the market price of resi 's common stock . expenses our expenses consist primarily of salaries and employee benefits , legal and professional fees and general and administrative expenses . salaries and employee benefits includes the base salaries , incentive bonuses , medical coverage , retirement benefits , relocation and other benefits provided to our employees for their services .
| summary management reporting information prior to our deconsolidation of resi , we evaluated the operations of aamc on a stand-alone basis in addition to evaluating our consolidated financial performance , which included the results of resi and newsource under u.s. gaap . in evaluating our operating performance and managing our business under the original ama , we considered the incentive management fees and reimbursement of expenses paid to us by resi as well as our stand-alone operating expenses . we maintained our internal management reporting on this basis . the following table presents our consolidating balance sheet and statement of operations , which are reconciled to u.s. gaap . accordingly , the entries necessary to consolidate aamc 's subsidiaries , including , but not limited to , elimination of investment in subsidiaries , elimination of intercompany receivables and payables , elimination of fees paid under the asset management agreement and reimbursed expenses , are reflected in the consolidating entries column . upon our adoption of asu 2015-02 , we are no longer required to consolidate the results of resi . therefore , we do not present the table for the current period . the following tables include non-gaap performance measures that we believe are useful to assist investors in gaining an understanding of the trends and operating results for our business on a stand-alone basis . this information should be considered in addition to , and not as a substitute for , our financial results determined in accordance with u.s. gaap .
| 4,055 |
you should also bear in mind the risk factors set forth in item 1a , any of which could materially and adversely affect the company 's business , operating results , financial condition and the actual results of the matters addressed by the forward-looking statements contained in the following discussion . 2016 highlights as part of our long-term strategy to expand into higher-value markets , we acquired secure technology in november 2015 for a purchase price of $ 219.8 million , as adjusted in accordance with the acquisition agreement . secure is a leading provider of customized high-performance electronics , sub-systems , and component solutions for mission critical applications . the secure acquisition deepened our engineering capabilities and enhanced our ability to serve customers in highly regulated industrial markets , including aerospace and defense . the allocation of the net purchase price resulted in $ 145.6 million of goodwill . this transaction was financed with borrowings under our term loan facility . sales for 2016 were $ 2.3 billion , a 9 % decrease from sales of $ 2.5 billion in 2015. during 2016 , sales to customers in our various industry sectors fluctuated from 2015 as follows : · industrials increased by 7 % , · medical decreased by 1 % , · test & instrumentation increased by 9 % , · computing decreased by 19 % , and · telecommunications decreased by 33 % . a significant portion of the overall decrease in sales resulted from a decrease in telecommunications revenue primarily related to a maturing and non-recurring program at one of our top customers and some of our telecommunications customers experiencing order declines . in addition , computing revenue declined due to lower demand from some of our computing customers . our sales depend on the success of our customers , some of which operate in businesses associated with rapid technological change and consequent product obsolescence . developments adverse to our major customers or their products , or the failure of a major customer to pay for components or services , can adversely affect us . a substantial percentage of our sales are made to a small number of customers , and the loss of a major customer , if not replaced , would adversely affect us . sales to our ten largest customers represented 43 % and 47 % of our sales in 2016 and 2015 , respectively . no single customer represented 10 % or more of our sales during 2016 ; in 2015 , sales to international business machines corporation represented 11 % of our sales . we experience fluctuations in gross profit from period to period . different programs contribute different gross profits depending on factors such as the types of services involved , location of production , size of the program , complexity of the product and level of material costs associated with the various products . moreover , new programs can contribute relatively less to our gross profit in their early stages when manufacturing volumes are usually lower , resulting in inefficiencies and unabsorbed manufacturing overhead costs . in addition , a number of our new and higher-volume programs remain subject to competitive constraints that can exert downward pressure on our margins . during periods of low production volume , we generally have idle capacity and reduced gross profit . we have undertaken initiatives to restructure our business operations with the intention of improving utilization and reducing costs . during 2016 , we recognized $ 4.7 million of restructuring charges in connection with reductions in workforce of certain facilities primarily in the americas , and $ 0.1 million of integration costs . in addition , we recognized $ 4.3 million of costs in connection with a proxy contest relating to our 2016 annual shareholders 29 meeting , $ 3.0 million in connection with the separation of our former chief executive officer in september 2016 and $ 0.4 million in other charges . story_separator_special_tag style= '' font-size:11.0pt ; line-height : .7pt ; '' > income tax expense income tax expense of $ 4.1 million represented a 6.1 % effective tax rate for 2016 , compared with a $ 5.4 million benefit that represented an effective tax rate of negative 6.0 % for 2015. in 2016 , we recorded the reversal of uncertain tax benefits of $ 8.3 million relating to the expiration of the statute of limitations for a liquidated foreign subsidiary . in 2015 , we recorded discrete tax benefits of $ 21.2 million related to a reduced valuation allowance on u.s. net operating losses and the release of tax reserves associated with a foreign subsidiary for which the statutory period for tax audits expired . excluding these tax items , the effective tax rate would have been 18.2 % in 2016 compared to 17.6 % in 2015. the increase in the effective tax rate results primarily from the geographic mix of profitability . we have been granted certain tax incentives , including tax holidays , for our subsidiaries in china , malaysia and thailand that will expire at various dates , unless extended or otherwise renegotiated , through 2018 in china , 2021 in malaysia , and 2028 in thailand . see note 9 to the consolidated financial statements in item 8 of this report . net income we reported net income of $ 64.0 million , or $ 1.29 per diluted share for 2016 , compared with net income of $ 95.4 million , or $ 1.83 per diluted share for 2015. the net decrease of $ 31.4 million in 2016 derived from the factors discussed above . 2015 compared with 2014 sales sales for 2015 were $ 2.5 billion , a 9 % decrease from sales of $ 2.8 billion in 2014. the percentages of our sales by sector were as follows : replace_table_token_10_th industrials . 2015 sales decreased 3 % to $ 820.3 million from $ 845.9 million in 2014 primarily as a result of lower infrastructure spending and the impact of the strengthening u.s. dollar . telecommunications . story_separator_special_tag under current tax laws and regulations , if cash and cash equivalents held outside the u.s. were to be distributed to the u.s. in the form of dividends or otherwise , we would be subject to additional u.s. income taxes and foreign withholding taxes . cash provided by operating activities was $ 272.5 million in 2016. the cash provided by operations during 2016 consisted primarily of $ 64.0 million of net income , adjusted for $ 55.1 million of depreciation and amortization , a $ 37.6 million decrease in accounts receivable , a $ 27.7 million decrease in inventories and a $ 76.0 million increase in accounts payable . the decrease in accounts receivable and inventories was primarily driven by the decrease in sales . the increase in accounts payable was a result of the timing of payments . working capital was $ 1.1 billion at december 31 , 2016 and $ 1.1 billion at december 31 , 2015. we purchase components only after customer orders or forecasts are received , which mitigates , but does not eliminate , the risk of loss on inventories . supplies of electronic components and other materials used in operations are subject to industry-wide shortages . in certain instances , suppliers may allocate available quantities to us . if shortages of these components and other material supplies used in operations occur , vendors may not ship the quantities we need for production , and we may be forced to delay shipments , which would increase backorders and impact cash flows . 34 cash used in investing activities was $ 21.2 million in 2016 primarily due to purchases of additional property , plant and equipment totaling $ 30.5 million , offset by a $ 10.8 million purchase price adjustment received during the quarter ended september 2016 relating to the secure acquisition . the purchases of property , plant and equipment were primarily for machinery and equipment in the americas and asia . cash used in financing activities was $ 34.7 million in 2016. share repurchases totaled $ 41.9 million , net principal payments on long-term debt totaled $ 12.3 million , and we received $ 18.8 million from the exercise of stock options . under the terms of our $ 430.0 million credit agreement ( the credit agreement ) , in addition to the term loan facility , we have a $ 200.0 million five-year revolving credit facility to be used for general corporate purposes with a maturity date of november 12 , 2020. the credit agreement includes an accordion feature pursuant to which total commitments under the facility may be increased by an additional $ 150.0 million , subject to satisfaction of certain conditions . as of december 31 , 2016 , we had $ 218.5 million in borrowings outstanding under the term loan facility and $ 2.1 million in letters of credit outstanding under our revolving credit facility . during 2016 , the company borrowed and repaid $ 25.0 million of under the revolving credit facility . $ 197.9 million remains available for future borrowings under the revolving credit facility . see note 6 to the consolidated financial statements in item 8 of this report for more information regarding the terms of the credit agreement . our operations , and the operations of businesses we acquire , are subject to certain foreign , federal , state and local regulatory requirements relating to environmental , waste management , health and safety matters . we believe we operate in substantial compliance with all applicable requirements and we seek to ensure that newly acquired businesses comply or will comply substantially with applicable requirements . to date , the costs of compliance and workplace and environmental remediation have not been material to us . however , material costs and liabilities may arise from these requirements or from new , modified or more stringent requirements in the future . in addition , our past , current and future operations , and the operations of businesses we have or may acquire , may give rise to claims of exposure by employees or the public , or to other claims or liabilities relating to environmental , waste management or health and safety concerns . as of december 31 , 2016 , we had cash and cash equivalents totaling $ 681.4 million and $ 197.9 million available for borrowings under the credit agreement . during the next 12 months , we believe our capital expenditures will approximate $ 45- $ 55 million , principally for machinery and equipment to support our ongoing business around the globe . in december 2015 , our board of directors approved the repurchase of up to $ 100.0 million of our outstanding common shares . as of december 31 , 2016 , we had $ 92.8 million remaining under the repurchase program to purchase additional shares . we are under no commitment or obligation to repurchase any particular amount of common shares . management believes that our existing cash balances and funds generated from operations will be sufficient to permit us to meet our liquidity requirements over the next 12 months . management further believes that our ongoing cash flows from operations and any borrowings we may incur under our revolving credit facility will enable us to meet operating cash requirements in future years . if we consummated significant acquisition opportunities in the future , our capital needs would increase and could possibly result in our need to increase available borrowings under our credit agreement or access public or private debt and equity markets . there can be no assurance , however , that we would be successful in raising additional debt or equity on acceptable terms . 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 u.s. gaap . our significant accounting policies are summarized in note 1 to the consolidated financial statements in item 8 of this report .
| results of operations the following table presents the percentage relationship that certain items in our consolidated statements of income bear to sales for the periods indicated . the financial information and the discussion below should be read in conjunction with the consolidated financial statements and notes thereto in item 8 of this report . replace_table_token_8_th 2016 compared with 2015 sales as noted above , sales decreased 9 % in 2016. the percentages of our sales by sector were as follows : replace_table_token_9_th industrials . 2016 sales increased 7 % to $ 874.5 million from $ 820.3 million in 2015 primarily as a result of the secure acquisition . telecommunications . 2016 sales decreased 33 % to $ 401.3 million from $ 595.1 million in 2015. the decrease related primarily to a maturing and non-recurring program at one of our top customers and some customers experiencing order declines . computing . 2016 sales decreased 19 % to $ 444.6 million from $ 551.2 million in 2015. the decrease was primarily due to lower demand from most of our computing customers . medical . 2016 sales decreased 1 % to $ 346.2 million from $ 350.4 million in 2015 . 30 testing & instrumentation . 2016 sales increased 9 % to $ 243.8 million from $ 223.8 million in 2015. the increase stemmed primarily from strong demand from our semi-cap equipment customers . our international operations are subject to the risks of doing business abroad . see item 1a for factors pertaining to international sales , fluctuations in foreign currency exchange rates and a discussion of potential adverse effects in operating results associated with the risks of doing business abroad . during 2016 and 2015 , 47 % and 50 % , respectively , of our sales were from international operations .
| 4,056 |
overview we are a financial holding company headquartered in dallas , texas and registered under the bank holding company act . through our wholly owned bank subsidiary , tbk bank , we offer traditional banking services as well as commercial finance product lines focused on businesses that require specialized financial solutions . our banking operations include a full suite of lending and deposit products and services focused on our local market areas . these activities generate a stable source of core deposits and a diverse asset base to support our overall operations . our commercial finance product lines include factoring , asset-based lending , equipment lending and premium finance products offered on a nationwide basis . as of december 31 , 2017 , we had consolidated total assets of $ 3.499 billion , gross loans held for investment of $ 2.811 billion , total deposits of $ 2.621 billion and total stockholders ' equity of $ 391.7 million . most of our products and services share basic processes and have similar economic characteristics . however , our factoring subsidiary operates in a highly specialized niche and earns substantially higher yields on its factored accounts receivable portfolio than our other lending products . this business also has a legacy and structure as a standalone company . in addition , through our triumph capital advisors asset management subsidiary , we previously provided fee-based asset management services distinct from our traditional banking offerings and operations . as a result , we have determined our reportable segments are banking , factoring , asset management , and corporate . for the year ended december 31 , 2017 , our banking segment generated 66 % of our total revenue ( comprised of interest and noninterest income ) , our factoring segment generated 22 % of our total revenue , our asset management segment generated 1 % of our total revenue , and our corporate segment generated 11 % of our total revenue . as discussed below , on march 31 , 2017 , we sold our 100 % membership interest in triumph capital advisors , llc ( “ tca ” ) and no longer provide fee based asset management services . asset management segment results reflect activity through the date of the tca sale . the $ 20.9 million pre-tax gain on the sale of tca is included in the corporate segment 's revenue for the year ended december 31 , 2017. story_separator_special_tag style= '' margin-top:12pt ; margin-bottom:0pt ; text-indent:0 % ; font-style : italic ; font-family : times new roman ; font-size:10pt ; font-weight : normal ; text-transform : none ; font-variant : normal ; '' > triumph healthcare finance on january 19 , 2018 , we entered into an agreement to sell the assets ( the “ disposal group ” ) of triumph healthcare finance ( “ thf ” ) and exit the healthcare asset-based lending line of business . the decision to sell thf was made prior to the end of the fourth quarter , and at december 31 , 2017 , the fair value of the disposal group exceeded its carrying amount . as a result of this decision , the carrying amount of the disposal group , including loans with a recorded balance of $ 68.7 million , net of an allowance for loan and lease losses of $ 2.1 million , was transferred to assets held for sale . for further information , see note 2 – business combinations and divestitures in the accompanying notes to the consolidated financial statements included in item 8 of this report . commercial finance product lines a key element of our strategy is to supplement the asset generation capacity in our community banking markets with commercial finance product lines which are offered on a nationwide basis and which serve to enhance the overall yield of our portfolio . these products include our factoring services , provided principally in the transportation sector ( though increasingly in other industries as well ) , our asset-based lending and equipment finance products . our aggregate outstanding balances for these products increased from $ 693.7 million as of december 31 , 2016 to $ 897.5 million as of december 31 , 2017. this increase was driven by organic growth and partially offset by the transfer of $ 70.8 million of healthcare asset-based lending loans to assets held for sale during the fourth quarter . the following table sets forth our commercial finance loan portfolios held for investment as of december 31 , 2017 and 2016 : replace_table_token_7_th in general , we view the long term market fundamentals for our commercial finance product offerings as sound , with continued opportunity to increase our market share within very large markets . in particular , we note continued positive performance in the transportation factored receivables industry , with consistent growth in the number of clients and number of invoices processed , coupled with freight invoice prices near historical highs , which has contributed to the strong year-over-year growth in our factored receivables . these positive trends have caused increased competition from existing as well as new lenders that have entered these markets , which resulted in increased pricing pressure . despite competitive conditions , we remain disciplined in our structuring and underwriting parameters . we incurred expense increases during 2017 associated with the growth in our commercial finance lending lines as we continued to invest in additional personnel and resources necessary to grow these products and manage the risk of larger portfolios . in general , we believe these expenses , consisting primarily of increased headcount and the occupancy and technology expenses necessary to support such additional headcount , represent costs that may be leveraged or scaled to support increased loan production in these areas . story_separator_special_tag ” the following table presents the distribution of average assets , liabilities and equity , as well as interest income and fees earned on average interest earning assets and interest expense paid on average interest bearing liabilities for the years ended december 31 , 2017 , 2016 , and 2015 : replace_table_token_8_th 1. balance totals include respective nonaccrual assets . 2. net interest spread is the yield on average interest earning assets less the rate on interest bearing liabilities . 3. net interest margin is the ratio of net interest income to average interest earning assets . 47 year ended december 31 , 2017 compared with year ended december 31 , 2016. we earned net interest income of $ 155.7 million for the year ended december 31 , 2016 compared to $ 112.4 million for the year ended december 31 , 2016. this increase in net interest income was driven by increases in average interest earning assets , which increased to $ 2.631 billion for the year ended december 31 , 2017 from $ 1.902 billion for the year ended december 31 , 2016 , an increase of $ 729 million , or 38.3 % . the increase in interest earning assets was impacted by the $ 95.8 million of loans acquired in the acquired branches acquisition on october 6 , 2017 , which were outstanding for almost three full months during the year ended december 31 , 2017. to a lesser extent , the increase in interest earning assets was impacted by the $ 171.2 million of loans and the $ 97.7 million of investment securities acquired in the valley acquisition on december 9 , 2017 , which were outstanding for approximately 3 weeks during the year ended december 31 , 2017. the remaining increase primarily resulted from organic growth in our loan portfolio . with the exception of healthcare asset-based lending loans , our commercial finance product lines , including our factored receivables , asset-based loans , equipment finance loans , and premium finance loans increased on a period over period basis as a result of the continued execution of our growth strategy for such products . in total , our outstanding commercial finance balances increased $ 203.8 million , or 29.4 % , from $ 693.7 million at december 31 , 2016 to $ 897.5 million at december 31 , 2017 and of this growth , $ 136.2 million , or 66.8 % , was the result of growth in our higher yielding factored receivables . we also experienced organic growth in our mortgage warehouse facilities and community banking lending products period over period , including commercial real estate and general commercial and industrial loans . the increases in our net interest income resulting from changes in the interest income generated by the acquired assets and the organic growth in our loan portfolio discussed above were offset in part by an increase in our interest expense associated with the growth in customer deposits and other borrowings . average total interest bearing deposits increased to $ 1.687 billion for the year ended december 31 , 2017 from $ 1.315 billion for the year ended december 31 , 2016 , an increase of $ 372 million , or 28.3 % . the $ 160.7 million of customer deposits assumed in the acquired branches acquisition on october 6 , 2017 , which were outstanding for almost three full months during the year ended december 31 , 2017 , contributed to the increase in average interest bearing deposits during the period . to a lesser extent , the $ 293.4 million of customer deposits assumed in the valley acquisition on december 9 , 2017 , which were outstanding for approximately three weeks during the year ended december 31 , 2017 , also contributed to the increase in average interest bearing deposits during the period . the remaining increase was partially due to growth in our certificates of deposit as these higher cost deposit products were used to fund our loan growth period over period . in addition , our use of other interest bearing borrowings , consisting primarily of fhlb advances , was also increased to fund growth in our mortgage warehouse lending . finally , we issued $ 50.0 million of subordinated notes on september 30 , 2016 at an initial fixed rate of 6.5 % and a full year impact of this issuance is reflected in the average balance for the year ended december 31 , 2017. net interest margin increased to 5.92 % for the year ended december 31 , 2017 from 5.91 % for the year ended december 31 , 2016. the increase in our net interest margin primarily resulted from an increase in yields on our interest earning assets . our average yield on earning assets increased to 6.74 % for the year ended december 31 , 2017 from 6.55 % for the year ended december 31 , 2016 , an increase of 19 basis points . the increase is primarily attributable to increased average yields on cash and cash equivalents , tax-exempt securities , and fhlb & frb stock due to increases in the underlying interest rates of these instruments throughout the year ended december 31 , 2017. additionally , we experienced an increase in average yield on our taxable securities due to increases in the underlying interest rates over the same period as well as accelerated interest recognition due to early calls of certain taxable securities acquired at a discount to par during the year ended december 31 , 2017. these increases in average yields on our interest earning assets were offset by a decrease in average yield on our loan portfolio of 16 basis points or 2.1 % due to a change in the mix within our loan portfolio period over period .
| 2017 highlights net income available to common stockholders for the year ended december 31 , 2017 was $ 35.4 million , or $ 1.81 per diluted share , compared to net income available to common stockholders for the year ended december 31 , 2016 of $ 19.8 million , or $ 1.10 per diluted share . excluding material gains and expenses related to merger and acquisition related activities , including divestitures , adjusted net income to common stockholders was $ 26.6 million , or $ 1.37 per diluted share , for the year ended december 31 , 2017 compared to $ 21.2 million , or $ 1.17 per diluted share for the year ended december 31 , 2016. for the year ended december 31 , 2017 , our return on average common equity was 10.73 % and our return on average assets was 1.27 % . at december 31 , 2017 , we had total assets of $ 3.499 billion , including gross loans of $ 2.811 billion , compared to $ 2.641 billion of total assets and $ 2.028 billion of gross loans at december 31 , 2016. the year-over-year increases in total assets and gross loans were due in part to the acquisition of nine branches from independent bank in colorado and our acquisition of valley bancorp , inc. discussed below . excluding the acquired balances , organic loan growth totaled $ 587 million during the year ended december 31 , 2017. our commercial finance loans increased from $ 693.7 million in aggregate as of december 31 , 2016 to $ 897.5 million as of december 31 , 2017 , an increase of 29 % , and constitute 32 % of our total loan portfolio at december 31 , 2017 .
| 4,057 |
11. contingencies and commitments environmental carpenter is subject to various federal , state , local and international environmental laws and regulations relating to pollution , protection of public health and the environment , natural resource damages and occupational story_separator_special_tag background and general our discussions below in this item 7 should be read in conjunction with our consolidated financial statements , including the notes thereto , included in this annual report on form 10-k. we are engaged in the manufacturing , fabrication , and distribution of specialty metals . we primarily process basic raw materials such as nickel , cobalt , titanium , manganese , chromium , molybdenum , iron scrap and other metal alloying elements through various melting , hot forming and cold working facilities to produce finished products in the form of billet , bar , rod , wire and narrow strip in many sizes and finishes . we also produce certain metal powders . our sales are distributed directly from our production plants and distribution network as well as through independent distributors . unlike many other specialty steel producers , we operate our own worldwide network of service and distribution centers . these service and distribution centers , located in the united states , canada , mexico , europe and asia allow us to work more closely with customers and to offer various just-in-time stocking programs . we also manufacture and rent down-hole drilling tools and components used in the oil and gas industry . in fiscal year 2014 we completed the construction of a new 400,000 square foot state-of-the-art manufacturing facility in limestone county , alabama in response to anticipated strong customer demand for premium products primarily in the fast-growing aerospace and defense and energy industries . we produced 1,000 tons of saleable products in the fourth quarter of fiscal year 2014 and are making progress on internal and customer qualifications . we ultimately expect the facility will be capable of producing approximately 27,000 tons per year of premium products in the future . the new facility includes forge , remelting and associated finishing and testing capabilities and will play a key role in further developing our capabilities in the production of our premium products . as part of our overall business strategy , we have sought out and considered opportunities related to strategic acquisitions and joint collaborations as well as possible business unit dispositions aimed at broadening our offering to the marketplace . we have participated with other companies to explore potential terms and structure of such opportunities and we expect that we will continue to evaluate these opportunities . business trends selected financial results for the past three fiscal years are summarized below : replace_table_token_6_th 19 ( 1 ) see the section non-gaap financial measures below for further discussion of these financial measures . ( 2 ) includes specialty and titanium alloys , stainless steel and powder materials . our sales are across a diversified list of end-use markets . the table below summarizes our estimated sales by market over the past three fiscal years : replace_table_token_7_th the table below shows our net sales by major product class for the past three fiscal years : replace_table_token_8_th impact of raw material prices and product mix we value most of our inventory utilizing the last-in , first-out ( lifo ) inventory costing methodology . under the lifo inventory costing method , changes in the cost of raw materials and production activities are recognized in cost of sales in the current period even though these materials may have been acquired at potentially significantly different values due to the length of time from the acquisition of the raw materials to the sale of the processed finished goods to the customers . in a period of rising raw material costs , the lifo inventory valuation normally results in higher costs of sales . conversely , in a period of decreasing raw material costs , the lifo inventory valuation normally results in lower costs of sales . 20 the volatility of the costs of raw materials has impacted our operations over the past several years . we , and others in our industry , generally have been able to pass cost increases on major raw materials through to our customers using surcharges that are structured to recover increases in raw material costs . generally , the formula used to calculate a surcharge is based on published prices of the respective raw materials for the previous month which correlates to the prices we pay for our raw material purchases . however , a portion of our surcharges to customers may be calculated using a different surcharge formula , which creates a lag between surcharge revenue and corresponding raw material costs recognized in costs of sales . the surcharge mechanism protects our net income on such sales except for the lag effect discussed above . however , surcharges have had a dilutive effect on our gross margin and operating margin percentages as described later in this report . approximately 25 percent of our net sales are sales to customers under firm price sales arrangements . firm price sales arrangements involve a risk of profit margin fluctuations , particularly when raw material prices are volatile . in order to reduce the risk of fluctuating profit margins on these sales , we enter into commodity forward contracts to purchase certain critical raw materials necessary to produce the related products sold . firm price sales arrangements generally include certain annual purchasing commitments and consumption schedules agreed to by the customers at selling prices based on raw material prices at the time the arrangements are established . if a customer fails to meet the volume commitments ( or the consumption schedule deviates from the agreed-upon terms of the firm price sales arrangements ) , the company may need to absorb the gains or losses associated with the commodity forward contracts on a temporary basis . gains or losses associated with commodity forward contracts are reclassified to earnings/loss when earnings are impacted by the hedged transaction . story_separator_special_tag · we completed a superalloy powders multi-level agreement with pratt & whitney which includes a technical assistance agreement and long-term powder supply agreement . as a result of the agreement we began construction of a superalloy powder facility in limestone county , alabama . · due to the steady increases in customer demand for titanium fastener material , we added titanium wire line capacity . · we started construction and are near completion of a new production facility in china . we negotiated multiple customer long-term agreements which are key to our future growth . in summary , in fiscal year 2014 we showed agility in a difficult context and now start , what we believe will be strengthening demand cycle , with over $ 380 million of adjusted ebitda and the capacity to support growth . results of operations fiscal year 2014 compared to fiscal year 2013 for fiscal year 2014 , we recorded net income of $ 132.8 million , or $ 2.47 per diluted share , compared with net income of $ 146.1 million , or $ 2.73 per diluted share , a year earlier . our fiscal year 2014 results reflect the impact of the decrease in demand for our materials used in aerospace and energy which was partially offset by increased volumes from lower value materials . the impact of the unfavorable mix was partially offset by reductions in variable cost per ton in our specialty alloys operations and reduction in overall selling , general and administrative costs . net sales net sales for fiscal year 2014 were $ 2,173.0 million , which was a 4 percent decrease from fiscal year 2013. excluding surcharge revenues , sales were 3 percent lower than fiscal year 2013 on 6 percent higher volume . the decrease in sales combined with higher shipment volume reflects an unfavorable shift in product mix . geographically , sales outside the united states decreased 9 percent from fiscal year 2013 to $ 635.1 million . international sales as a percentage of our total net sales represented 29 percent and 31 percent for fiscal year 2014 and fiscal year 2013 , respectively . sales by end-use markets we sell to customers across diversified end-use markets . the following table includes comparative information for our net sales , which includes surcharge revenues , by principal end-use markets which we believe is helpful supplemental information in analyzing the performance of the business from period to period : replace_table_token_11_th 23 the following table includes comparative information for our net sales by the same principal end-use markets , but excluding surcharge revenues : replace_table_token_12_th sales to the aerospace and defense market decreased 8 percent from fiscal year 2013 to $ 980.7 million . excluding surcharge revenue , sales decreased 7 percent on 1 percent lower shipment volume . the results reflect weakness in demand for our premium materials used in engine applications offset by improving demand for materials used in structural components and increased demand for materials used in titanium fasteners . the fiscal year 2014 results were impacted significantly by supply chain destocking in the first half of our fiscal year . industrial and consumer market sales increased 2 percent from fiscal year 2013 to $ 481.6 million . excluding surcharge revenue , sales increased approximately 4 percent on 16 percent higher shipment . the results reflect strong demand for lower value materials used in plant and equipment applications as wells as materials used in bridge infrastructure projects . the shift in unfavorable mix was a result of soften demand for materials used in the more premium products used in high end valves and fittings and electronics applications . sales to the energy market of $ 310.4 million reflected an 8 percent decrease from fiscal year 2013. excluding surcharge revenue , sales decreased 7 percent on 12 percent lower shipment volume . the results reflect demand softness in materials used in oil and gas completions as well as the power generation sector . these declines were partially offset by a moderate increase in sales , particularly rentals through our amega west oil and gas business . transportation market sales increased 8 percent from the fiscal year 2013 to $ 150.1 million . excluding surcharge revenue , sales increased 11 percent on 18 higher shipment volumes . the results reflect the impacts of growth in demand for our materials as a result of increasing north american vehicle sales and strong demand for materials used in next generation of fuel delivery systems . sales to the medical market decreased 1 percent to $ 112.6 million from fiscal year 2013. adjusted for surcharge revenue , sales were flat on 10 percent higher shipment volume . the results reflect the impacts of lower titanium scrap prices during most of the fiscal year , which negatively impacted order patterns for our materials . during the second half of the fiscal year we began to see improving demand for materials used in orthopedics and surgical devices and more normalized buying patterns by distributors as supply chain inventory levels appeared to stabilize . distribution sales decreased 2 percent from the same period a year ago to $ 137.6 million . excluding surcharge revenue , sales decreased 2 percent from the same period a year ago . 24 sales by product class the following table includes comparative information for our net sales by major product class : replace_table_token_13_th the following table includes comparative information for our net sales by the same major product class , but excluding surcharge revenues : replace_table_token_14_th sales of special alloys products decreased 7 percent in fiscal year 2014 as compared with a year ago to $ 917.0 million . excluding surcharge revenue , sales decreased 6 percent on a flat shipment volume . the results reflect an unfavorable shift in product mix due to lower demand for aerospace engine and fastener material as compared to the year ago period . sales of stainless steels increased 1 percent in fiscal year 2014 as compared with a year ago to $ 643.6 million .
| business segment results summary information about our operating results on a segment basis is set forth below . for more detailed segment information , see note 19 to the consolidated financial statements included in item 8 , financial statements and supplementary data . the following tables include selected information by business segment : replace_table_token_24_th replace_table_token_25_th 34 replace_table_token_26_th specialty alloys operations segment net sales in fiscal year 2013 for the specialty alloys operations ( sao ) segment were $ 1,823.5 million , as compared with $ 1,672.0 million in fiscal year 2012. excluding surcharge revenues , sales increased 15 percent from a year ago . the fiscal year 2013 net sales reflected 16 percent higher shipment volume as compared to fiscal year 2012. the results reflect the inclusion of the latrobe acquisition in february 2012. excluding the latrobe manufacturing operations net sales in fiscal year 2013 for the sao segment were $ 1,547.4 million , as compared with $ 1,566.6 million in fiscal year 2012. excluding surcharge revenues , sales increased 4 percent from a year ago . the fiscal year 2013 net sales reflected 1 percent lower shipment volume as compared to fiscal year 2012. the results reflect growth attributable to our premium and ultra-premium products offset by the impact of lower order intake activity .
| 4,058 |
the company also has california state research and development ( “ r & d ” ) credit carryforwards of $ 0.4 million , which do not expire and federal r & d credit carryforwards of $ 0.7 million which will begin to expire in 2037. the company has not performed a formal study validating these credits claimed in the tax returns . once a study story_separator_special_tag you should read the following discussion and analysis of our financial condition and results of operations together with the section titled “ selected financial data ” and our financial statements and the related notes included elsewhere in this report . this discussion and analysis and other parts of this report contain forward-looking statements based upon current beliefs , plans and expectations related to future events and our future financial performance that involve risks , uncertainties and assumptions , such as statements regarding our intentions , plans , objectives , expectations , forecasts and projections . our actual results and the timing of selected events could differ materially from those anticipated in these forward-looking statements as a result of several factors , including those set forth under the section titled “ risk factors ” and elsewhere in this report . overview we are a clinical-stage biopharmaceutical company developing a novel therapeutic product for the acute treatment of migraine . our product candidate , sts101 , is a drug-device combination of a proprietary dry-powder formulation of dihydroergotamine mesylate , or dhe , which is designed to be quickly and easily self-administered with a proprietary pre-filled , single-use , nasal delivery device . dhe products have long been recommended as a first-line therapeutic option for the acute treatment of migraine and have significant advantages over other therapeutics for many patients . however , broad use has been limited by invasive and burdensome administration and or sub-optimal clinical performance of available injectable and liquid nasal spray products . sts101 is specifically designed to deliver the clinical advantages of dhe while overcoming these shortcomings . if approved , we believe sts101 has the potential to be an important and differentiated option for the acute treatment of migraine that can address the unmet needs of many people living with migraines . we completed enrollment in our emerge phase 3 efficacy trial in may 2020 , randomizing more than the planned 1,140 migraine patients to one of two sts101 dose strengths or placebo . in september 2020 , we announced topline data from the emerge trial . although sts101 3.9 mg and 5.2 mg showed favorable numerical differences versus placebo on the pre-specified co-primary endpoints of freedom from pain and freedom from most bothersome symptom ( from among photophobia , phonophobia and nausea ) at two hours post-administration , these differences did not achieve statistical significance for either dose strength . both dose strengths of sts101 did , however , demonstrate significant effects on both freedom from pain and most bothersome symptom by three hours post-dose and later time points . both sts101 dose strengths were well-tolerated in the emerge trial , with low adverse event rates and no serious adverse events reported . based on our analyses and review of emerge trial results and other data , including preliminary results from our ongoing open-label , phase 3 long-term safety trial of sts101 5.2 mg , or ascend , we believe we have identified and are taking steps to address the key reasons that sts101 did not achieve statistical significance for either dose strength . in march 2021 , we announced an update to our development plan for sts101 that takes into account the findings from our analyses of results from our sts101 phase 3 emerge efficacy trial in which sts101 demonstrated favorable numerical trends but did not achieve statistical significance versus placebo on the study 's co-primary endpoints . our updated development plan for sts101 includes a phase 1 trial , which we expect to complete the second quarter of 2021 , to evaluate the pharmacokinetics , safety and tolerability of sts101 5.2 mg and two higher dose strengths , as well as a new sts101 pivotal phase 3 efficacy trial that we anticipate initiating in mid-2021 , with topline results expected in the second half of 2022. if successful , we could file a new drug application , or nda , for sts101 by the end of 2022. as we continue the development of sts101 , our expenses may increase substantially , as we seek to advance sts101 through clinical development , manufacturing scale-up and regulatory approval , and prepare for commercialization of sts101 , if approved . since our inception in june 2016 , we have invested substantially all of our efforts and financial resources in the development of sts101 for the acute treatment of migraine . we have incurred significant operating losses to date and expect that our operating expenses will increase significantly as we advance sts101 through clinical development , manufacturing and regulatory approval , and as we prepare for commercialization of sts101 , if approved ; obtain , maintain , protect and enforce our intellectual property portfolio ; and hire additional personnel . in addition , we expect to incur increasing costs associated with operating as a public company . 84 our net losses were $ 47.6 million , $ 28.2 million for the years ended december 31 , 20 20 and 20 19 , respectively . as of december 31 , 20 20 , we had an accumulated deficit of $ 90.6 million . we do not have any products approved for sale and have not generated any product revenue since our inception . prior to the completion of our ipo in september 2019 , we have funded our operations primarily with an aggregate of $ 78.8 million in gross cash proceeds from the sale and issuance of convertible preferred stock , a convertible promissory note , and long-term debt . in september 2019 , we sold and issued 5,500,000 shares of common stock at $ 15.00 per share for gross proceeds of $ 82.5 million . story_separator_special_tag moreover , our emerge trial sites were all in the united states and mostly at standalone clinics not co-located with hospitals . in addition , in march 2020 we implemented an irb approved contingency study visit plan for our emerge trial , which provided increased visit scheduling flexibility , options for home or drive through visits and telemedicine options ( consistent with recent fda guidance on conducting clinical trials during the covid-19 pandemic ) . we also implemented remote site monitoring activities . in august 2020 , we initiated patient enrollment in our ascend open-label , phase 3 safety trial of sts101 . while we expect our ascend safety trial to benefit from some of the similar design features that enabled our emerge clinical trial to be completed on schedule , there can be no assurance that clinical site initiation and enrollment will not be delayed or otherwise negatively affected . we are working closely with our supply chain partners globally to maintain the levels of drug product and proprietary nasal delivery devices to conduct existing and planned clinical trials , as suppliers support the health and safety of their employees . financial resources we believe that our cash , cash equivalents and marketable securities , as well as the proceeds from the recent private placement , will be adequate to fund our currently projected operations for at least 12 months from the issuance of our financial statements as of and for the year ended december 31 , 2020 and into the second half of 2023 . 86 components of operating results operating expenses research and development expenses all of our research and development expenses consist of expenses incurred in connection with the development of sts101 for the acute treatment of migraine . these expenses include : payroll and personnel-related expenses , including salaries , annual cash bonuses , employee benefit costs and stock-based compensation expenses for our research and product development employees ; fees paid to third parties to conduct preclinical and clinical studies and other research and development activities , including contract research organizations , or cros , contract manufacturing organizations , or cmos , and other service providers ; and costs for licenses and allocated overhead , including rent , equipment , depreciation , information technology costs and utilities . we expense both internal and external research and development expenses as they are incurred . we have entered into various agreements with cros and cmos . our research and development accruals are estimated based on the level of services performed , progress of the studies , including the phase or completion of events or tasks , and contracted costs . the estimated costs of research and development provided , but not yet invoiced , are included in accrued and other current liabilities on the balance sheet . if the actual timing of the performance of services or the level of effort varies from the original estimates , we adjust the accrual accordingly . payments made to cros and cmos under these arrangements in advance of the performance of the related services are recorded as prepaid expenses and other current assets until the services are rendered . nonrefundable payments made prior to the receipt of goods or services that will be used or rendered for future research and development activities are deferred and capitalized as prepaid expenses and other current assets on our balance sheet . the capitalized amounts are recognized as expense as the goods are delivered or the related services are performed . as we continue the development of sts101 , our research and development expenses may increase substantially , as we seek to advance sts101 through clinical development , manufacturing and regulatory approval , and prepare for commercialization of sts101 , if approved . predicting the timing or the cost to complete our clinical trials or validation of our commercial manufacturing and supply processes is difficult and delays may occur because of many factors , including factors outside of our control . for example , if the fda or other regulatory authorities were to require us to conduct clinical trials beyond those that we currently anticipate , if we experience significant delays in enrollment in any of our clinical trials or if we experience delays in manufacturing with any of our cmos , we could be required to expend significant additional financial resources and time on the completion of clinical development . furthermore , we are unable to predict with any certainty when or if sts101 will receive regulatory approval . general and administrative expenses general and administrative expenses consist principally of payroll and personnel expenses , including salaries , benefits and stock-based compensation expenses , professional fees for legal , consulting , accounting and tax services , directors and officers insurance , allocated overhead , including rent , debt service , equipment , depreciation , information technology costs , and utilities , and other general operating expenses not otherwise classified as research and development expenses including marketing expenses due to pre-commercialization activities . we anticipate that our general and administrative expenses will increase as a result of increased personnel costs , including salaries , benefits and stock-based compensation expenses , expanded infrastructure and higher consulting , legal and accounting services associated with maintaining compliance with stock exchange listing and securities and exchange commission , or sec , requirements , marketing expenses due to pre-commercialization activities , investor relations costs and director and officer insurance premiums associated with being a public company . 87 interest income interest income consists primarily of interest earned on our cash , cash equivalents and marketable securities . interest expense interest expense consists primarily of interest related to our long-term debt and accretion of debt discount and debt issuance costs . other income ( expense ) , net other income ( expense ) , net primarily consists of changes in the fair value of convertible preferred stock tranche liability and the obligation to issue additional shares of common stock . story_separator_special_tag inception .
| results of operations comparison of the years ended december 31 , 2020 and 2019 replace_table_token_4_th research and development expenses research and development expenses increased by $ 12.1 million , or 50 % , from the year ended december 31 , 2019 to the year ended december 31 , 2020. the increase in research and development expenses was primarily due to a net increase of $ 9.8 million in fees paid to cros and cmos as a result of increased clinical trial activities , an increase of $ 2.5 million in payroll and personnel expenses , including salaries , benefits and stock-based compensation expenses , due to increases in headcount and stock options granted to existing employees , partially offset by a decrease of travel expenses of $ 0.3 million as a result of reduced travel due to the covid-19 pandemic . general and administrative expenses general and administrative expenses increased by $ 7.4 million , or 157 % , from the year ended december 31 , 2019 to the year ended december 31 , 2020. the increase in general and administrative expenses was primarily due to an increase of $ 4.1 million of director and officer liability insurance , professional fees for legal , consulting , accounting , tax and other services , an increase of $ 2.2 million of payroll and personnel expenses , including salaries , benefits and stock-based compensation expenses , due to increases in headcount and stock options granted to existing employees and an increase of $ 0.8 million in marketing expenses due to pre-commercialization activities . the covid-19 pandemic did not have any measurable impact on general and administrative expenses other than a reduction in travel expenses .
| 4,059 |
statements in the following discussion may include forward-looking statements . these forward-looking statements involve risks and uncertainties . see “ item 1a . risk factors , ” for additional discussion of these factors and risks . this section of this form 10-k generally discusses 2019 and 2018 items and year-to-year comparisons between 2019 and 2018. discussions of 2017 items and year-to-year comparisons between 2018 and 2017 that are not included in this form 10-k can be found in “ management 's discussion and analysis of financial condition and results of operations ” in part ii , item 7 of our annual report on form 10-k for the fiscal year ended december 31 , 2018. business overview we are a geographically diversified oil and gas services company , focused on completion fluids and associated products and services , comprehensive water management , frac flowback , production well testing and offshore rig cooling services , and compression services and equipment . we operate through three reporting segments organized into three divisions - completion fluids & products , water & flowback services , and compression . our completion fluids & products division manufactures and markets clear brine fluids , additives , and associated products and services to the oil and gas industry for use in well drilling , completion , and workover operations in the united states and in certain countries in latin america , europe , asia , the middle east , and africa . the division also markets liquid and dry calcium chloride products manufactured at its production facilities or purchased from third-party suppliers to a variety of markets outside the energy industry . demand for products and services of our completion fluids & products division has remained fairly consistent despite continued volatility in pricing for oil and natural gas and uncertainty in many of the markets where we operate ; however , we expect the significant decline in oil prices since the beginning of 2020 may adversely effect the demand for our products and services for the near future . during 2019 , we experienced increased cbf product sales revenues in the u.s. gulf of mexico , including product sales associated with a tetra cs neptune completion fluid sale and increased international cbf product sales and domestic manufactured products sales . future profitability levels of our completion fluids & products division will continue to be affected by the timing of future tetra cs neptune projects and other cbf sales . gross profit during 2019 was significantly impacted by an i mpairment of $ 91.8 million related to our el dorado , arkansas calcium chloride production plant facility assets . our water & flowback services division provides onshore oil and gas operators with comprehensive water management services . the division also provides frac flowback , production well testing , offshore rig cooling , and other associated services in many of the major oil and gas producing regions in the united states and mexico , as well as in oil and gas basins in certain countries in latin america , africa , europe , the middle east , and australia . recent oil and natural gas price volatility has particularly affected domestic onshore demand for our water & flowback services division services , resulting in increased customer contract pricing pressure . during the fourth quarter of 2019 , due to further decline in the energy industry outlook resulting in decreased expected 25 future cash flows for our water management reporting unit , we recorded a full goodwill impairment of $ 25.8 million . as a result , there is no remaining goodwill balance as of december 31 , 2019 . our compression division is a provider of compression services and equipment for natural gas and oil production , gathering , artificial lift , transmission , processing , and storage . our compression and related services business includes a fleet of more than 5,200 compressor packages providing approximately 1.2 million capacity in aggregate horsepower , utilizing a full spectrum of low- , medium- , and high-horsepower engines . customers of our compression division operate throughout many of the onshore producing regions of the united states , as well as in a number of international locations , including the countries of mexico , canada and argentina . our compression division operates primarily through our csi compressco lp subsidiary ( `` cclp '' ) , of which we own 34 % of the common equity and control through our ownership of its general partner . the operations of the compression division are significantly dependent upon the demand for , and production of , oil and the associated gas from unconventional oil production in the domestic and international markets in which we operate . beginning in 2017 and continuing throughout all of 2019 , production of oil and the associated gas produced from these wells in shale basins including the permian basin in texas and new mexico provided improved compression demand opportunities for our products and services . this growth in demand resulted in increases in our compression services revenues , through increased activity and customer contract pricing . this has resulted in increased utilization of our compression equipment fleet , with over 1.06 million horsepower of our compression equipment in service as of december 31 , 2019 . during 2019 , the overall compression fleet utilization of the compression division reached 90.1 % , the highest overall compression fleet utilization since cclp 's acquisition of compressor systems , inc. in 2014. as of december 31 , 2019 our compression division is close to maximum utilization for our high-horsepower class of compression equipment at 97.9 % . during 2019 , the shift to centralized gas lift as a preferred lifting method improved demand , particularly for our high-horsepower service offerings . while we have experienced increased demand and utilization for certain of our compressor packages , the recent decline in oil prices as well as the volatility and declines in the stock market may impact demand for compression services and equipment . story_separator_special_tag our assumptions , estimates , and judgments may change as new events occur , as new information is acquired , and as changes in our operating environments are encountered . actual results are likely to differ from our current estimates , and those differences may be material . the following critical accounting policies reflect the most significant judgments and estimates used in the preparation of our financial statements . impairment of long-lived assets the determination of impairment of long-lived assets , including identified intangible assets , is conducted periodically whenever indicators of impairment are present . if such indicators are present , the determination of the amount of impairment is based on our judgments as to the future operating cash flows to be generated from these assets throughout their estimated useful lives . if an impairment of a long-lived asset is warranted , we estimate the fair value of the asset based on a present value of these cash flows or the value that could be realized from disposing of the asset in a transaction between market participants . the oil and gas industry is cyclical , and our estimates of the amount of future cash flows , the period over which these estimated future cash flows will be generated , as well as the fair value of an impaired asset , are imprecise . our failure to accurately estimate these future operating cash flows or fair values could result in certain long-lived assets being overstated , which could result in impairment charges in periods subsequent to the time in which the impairment indicators were first present . alternatively , if our estimates of future operating cash flows or fair values are understated , impairments might be recognized unnecessarily or in excess of the appropriate amounts . during 2019 , primarily as the result of the impairment of our el dorado , arkansas calcium chloride production plant due to a reduction in the cost of raw materials for certain of our other chemical production plants , we recorded consolidated impairments and other charges of $ 95.2 million . during periods of economic uncertainty , the likelihood of additional material impairments of long-lived assets is higher due to the possibility of decreased demand for our products and services . impairment of goodwill the impairment of goodwill is also assessed whenever impairment indicators are present , but not less than once annually at a reporting unit level . during the third quarter of 2019 , we determined that the current decreased energy industry outlook was an indicator requiring further analysis for impairment of goodwill . we determined at that time that the fair value of the water management reporting unit , the only reporting unit with goodwill , exceeded its carrying value and there was no impairment to goodwill . we perform the annual test of goodwill impairment as of the last day of the fourth quarter of each year . the first step of the impairment test is to compare the estimated fair value with the recorded net book value ( including goodwill ) of our reporting unit . our estimates of fair value are based on a combination of an income and market approach . these estimates are imprecise and are subject to our estimates of the future cash flows of the reporting unit . these estimates and judgments are affected by numerous factors , including the general economic environment at the time of our assessment . if we overestimate the fair value , the balance of our goodwill asset may be overstated . alternatively , if our estimated reporting unit fair value is understated , impairments might be recognized unnecessarily or in excess of the appropriate amounts . specific uncertainties affecting the estimated fair value of our water management reporting unit includes the impact of competition , prices of oil and natural gas , future overall activity levels in the regions in which it operates , the activity levels of our significant customers , and other factors affecting the rate of future growth of this reporting unit . if our analysis results in the fair value of our reporting unit being less than the carrying value , impairment is calculated based on the difference between the fair value and carrying value in accordance with our early adoption of asu 2017-04 `` intangibles-goodwill and other ( topic 350 ) : simplifying the test for goodwill impairment . '' during the fourth quarter of 2019 , due to further decline in the energy industry outlook resulting in decreased expected future cash flows for our water management reporting unit , a component of our water & flowback services division , we recorded a full goodwill impairment of $ 25.8 million . as a result , there was no goodwill balance as of december 31 , 2019 . 28 story_separator_special_tag associated with increases ( or decreases ) in the trading price of our common stock , resulting in adjustments to earnings for the associated valuation losses ( gains ) , and resulting in future volatility of our earnings during the period the warrants are outstanding . the cclp preferred units were eligible to be settled using a variable number of cclp common units , and therefore the fair value of the cclp preferred units was classified as a long-term liability on our consolidated balance sheets in accordance with asc 480. because the cclp preferred units were convertible into cclp common units at the option of the holder , the fair value of the cclp preferred units generally increased or decreased with the trading price of the cclp common units , and this increase ( decrease ) in cclp preferred unit fair value was charged ( credited ) to earnings , as appropriate . the last remaining outstanding cclp preferred units were redeemed for cash on august 8 , 2019. consolidated other ( income ) expense , net , was $ 0.2 million of income during 2019 compared to $ 7.9 million of expense during the prior year .
| results of operations the following data should be read in conjunction with the consolidated financial statements and the associated notes contained elsewhere in this report . 2019 compared to 2018 consolidated comparisons replace_table_token_4_th consolidated revenues for 2019 increased compared to the prior year due to increased revenues in our compression and completion fluids & products divisions . compression division revenues increased by $ 38.0 million driven by service revenues from compression and aftermarket services operations and new compressor equipment sales activity . our completion fluids & products division revenues increased by $ 21.8 million due to increased cbf product sales revenues in the u.s. gulf of mexico , including product sales associated with a tetra cs neptune completion fluid sale , and increased international cbf product sales and domestic manufactured products sales . these increases were partly offset by a decrease in water & flowback services division revenues primarily due to decreased water management services activity . see divisional comparisons section below for additional discussion . consolidated gross profit decreased during 2019 compared to the prior year due to our completion fluids & products and water & flowback services divisions . the completion fluids & products division gross profit decrease resulted from an impairment of $ 91.8 million related to our el dorado , arkansas calcium chloride production plant facility assets . the impairment charge is primarily the result of a reduction in the cost of raw materials for certain of our other chemical production plants , following the execution of a long-term raw material supply agreement during the fourth quarter of 2019. the water & flowback services division decrease in gross profit is attributable to the costs to demobilize from one customer to mobilize for another . in addition , water & flowback services division gross profit reflected the decrease in high-margin projects performed during the prior year .
| 4,060 |
homebuilders with attractive , lower price-point product in desirable locations captured this demand that has been bolstered in part by millennials entering the market in a meaningful way , as well as the baby boomer generation downsizing . we believe the longer-term economic data supports a continuation of a solid homebuilding cycle , although individual market results will vary , responding to each respective market 's economic factors . at meritage , we continue to focus on enhancing our entry-level and first move-up product through our commitment to simplification and remaining focused on our key financial initiatives of home closing gross margin improvement , selling , general and administrative cost control and long-term community count growth . as of december 31 , 2020 , 94 % of our current communities are targeted to first-time or first move-up buyers and those buyer segments represented approximately 95 % of our orders in 2020. we believe our strategy will allow us to achieve higher gross margins and better opportunities to leverage our overhead costs in the years to come . story_separator_special_tag roman ' , sans-serif ; font-size:10pt ; font-weight:400 ; line-height:120 % ; padding-left:12.53pt '' > managing construction efficiencies and costs through national and regional vendor relationships with a focus on quality construction and warranty management ; carefully managing our liquidity and a strong balance sheet ; we ended the year with a 30.3 % debt-to-capital ratio and a 10.5 % net debt-to-capital ratio ; maximizing returns to our shareholders , most recently through our improved financial performance and share repurchase program ; and promoting a positive environment for our employees through our commitment to drive diversity , equity , and inclusion and providing market-competitive benefits in order to develop and motivate our employees and to minimize turnover and to maximize recruitment efforts . critical accounting policies we have established various accounting policies that govern the application of united states generally accepted accounting principles ( “ gaap ” ) in the preparation and presentation of our consolidated financial statements . our significant accounting policies are described in note 1 of the accompanying consolidated financial statements included in this form 10-k. certain of these policies involve significant judgments , assumptions and estimates by management that may have a material impact on the carrying value of certain assets and liabilities , and revenue and costs . we are subject to uncertainties such as the impact of future events , economic , environmental , political and regulatory factors and changes in our business environment ; therefore , actual results could differ from these estimates . accordingly , the accounting estimates used in the preparation of our financial statements may change as new events occur , as more experience is acquired , as additional information is obtained and as our operating environment changes . changes in estimates are revised when circumstances warrant . such changes in estimates and refinements in methodologies are reflected in our reported results of operations and , if material , the effects of changes in estimates are disclosed in the notes to our consolidated financial statements . the judgments , assumptions and estimates we use and believe to be critical to our business are based on historical experience , knowledge of the accounts , industry practices , and other factors , which we believe to be reasonable under the circumstances . because of the nature of the judgments and assumptions we have made , actual results may differ from these judgments and estimates and could have a material impact on the carrying values of assets and liabilities and the results of our operations . the accounting policies that we deem most critical to us and involve the most difficult , subjective or complex judgments are as follows : 28 revenue recognition we recognize revenue in accordance with accounting standards codification ( `` asc '' ) 606 , revenue from contracts with customers , by applying the following steps in determining the timing and amount of revenue to recognize : ( 1 ) identify the contract with our customer ; ( 2 ) identify the performance obligation ( s ) in the contract ; ( 3 ) determine the transaction price ; ( 4 ) allocate the transaction price to the performance obligations in the contract , if applicable ; and ( 5 ) recognize revenue when ( or as ) we satisfy the performance obligation . the performance obligation and subsequent revenue recognition for our three sources of revenue are outlined below : revenue from closings of residential real estate is recognized when closings have occurred , the risks and rewards of ownership are transferred to the buyer , and we have no continuing involvement with the property , which is generally upon the close of escrow . revenue is reported net of any discounts and incentives . revenue from land sales is recognized when a significant down payment is received , title passes and collectability of the receivable is reasonably assured , and we have no continuing involvement with the property , which is generally upon the close of escrow . revenue from financial services is recognized when closings have occurred and all financial services have been rendered , which is generally upon the close of escrow . real estate real estate is stated at cost unless the community or land is determined to be impaired , at which point the inventory is written down to fair value as required by asc 360-10 , property , plant and equipment . 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 that benefit the entire community , less impairments , if any . land and development costs are typically allocated and transferred to homes under construction when home construction begins . home construction costs are accumulated on a per-home basis , while selling costs are expensed as incurred . story_separator_special_tag the effect on deferred tax assets and liabilities of a change in tax rates is recognized in earnings in the period when the changes are enacted . on december 22 , 2017 , the president signed into law the tax act . in accordance with asc 740-10-25-47 , we recognized the effects of the new legislation in the period that included the date of enactment . the tax act 's impact on 2017 was to reduce the value of our net deferred tax balances by $ 19.7 million at december 31 , 2017 , which was estimated due to the change in the federal tax rate and has been reflected in our financial statements . we have completed our accounting for the income tax effects of the tax act on our deferred tax assets . in accordance with sec staff accounting bulletin no . 118 and asc 740 , we revised the valuation of our 2017 deferred tax assets for the impact of the tax act based on completion of our 2017 income tax returns in 2018. accordingly , at december 31 , 2018 we recorded a favorable adjustment of $ 2.7 million which has been reflected in our financial statements . in accordance with asc 740-10 , income taxes , we evaluate our deferred tax assets by tax jurisdiction , including the benefit from net operating losses ( `` nols '' ) by tax jurisdiction , to determine if a valuation allowance is required . companies must assess , using significant judgments , whether a valuation allowance should be established based on the consideration of all available evidence using a “ more likely than not ” standard with significant weight being given to evidence that can be objectively verified . this assessment considers , among other matters , the nature , frequency and severity of current and cumulative losses , forecasts of future profitability , the length of statutory carryforward periods , experience with operating losses and experience of utilizing tax credit carryforwards and tax planning alternatives . we have no valuation allowance on our deferred tax assets and nol carryovers at december 31 , 2020. home closing revenue , home orders and order backlog - segment analysis the composition of our closings , home orders and backlog is constantly changing and is based on a dissimilar mix of communities between periods as new projects and product lines open and existing projects wind down . further , individual homes within a community can range significantly in price due to differing square footage , option selections , lot sizes and quality and location of lots ( e.g . cul-de-sac , view lots , greenbelt lots ) . these variations result in a lack of meaningful comparability between our home orders , closings and backlog due to the changing mix between periods . for discussion of our fiscal 2019 results compared to our fiscal 2018 results , refer to item 7 , “ management 's discussion and analysis of financial condition and results of operations ” under part ii of our annual report on form 10-k for the year ended december 31 , 2019 . the tables on the following pages present operating and financial data that we consider most critical to managing our operations ( dollars in thousands ) : 30 replace_table_token_2_th 31 replace_table_token_3_th ( 1 ) home orders for any period represent the aggregate sales price of all homes ordered , net of cancellations . we do not include orders contingent upon the sale of a customer 's existing home or a mortgage pre-approval as a sales contract until the contingency is removed . 32 replace_table_token_4_th replace_table_token_5_th ( 1 ) cancellation rates are computed as the number of canceled units for the period divided by the gross sales units for the same period . 33 replace_table_token_6_th ( 1 ) our backlog represents net sales that have not closed . 34 fiscal 2020 compared to fiscal 2019 companywide . in 2020 , home closings improved 27.7 % to 11,834 units valued at $ 4.5 billion compared to 9,267 units valued at $ 3.6 billion in 2019. the increase in closings year-over-year reflects a 42.7 % increase in order volume to 13,724 units valued at $ 5.2 billion in 2020 as compared to 9,616 units valued at $ 3.7 billion in 2019 , as well as increased backlog conversion due to selling and closing more speculative inventory homes in 2020 compared to the prior year . the higher volume of spec sales and a notably higher orders pace year-over-year are due to the heightened demand in today 's market for available , new and healthier single-family homes at affordable price points due to the macroeconomic events discussed in `` industry conditions '' . this customer demand is aligned with our focus on the first-time and first move-up buyers , as our entry-level communities offer only spec homes for sale , and in both our entry-level and first move-up communities we have achieved shorter construction cycle times , allowing quicker move-ins for our customers . the increase in home closing revenue was due entirely to 2,567 additional units closed as average sales prices ( `` asp '' ) decreased 3.0 % , reflective of a higher percentage of lower-priced entry-level homes in our closing mix that was partially offset by sequential price increases throughout 2020 in all of our geographies . at december 31 , 2020 we had 195 actively selling communities , 20.1 % lower than prior year , as a 67.7 % improvement in orders pace to 5.2 per month in 2020 compared to 3.1 in 2019 resulted in communities selling and closing out faster than we were able to open replacement communities . we ended the year with 4,672 homes in backlog valued at $ 1.8 billion , reflecting 67.9 % and 65.1 % increases in backlog units and value , respectively , compared to 2019. asp of homes in backlog declined by 1.7 % to $ 388,000 from $ 394,700 in 2019 primarily a result of our shift to entry-level homes offset by price increases , as noted previously .
| summary company results total home closing revenue increased 23.9 % due to higher closing volume , to $ 4.5 billion for the year ended december 31 , 2020 from $ 3.6 billion in 2019. home closing gross margin for the year ended december 31 , 2020 improved by 310 basis points to 22.0 % while gross margin for the year ended december 31 , 2019 was 18.9 % . the improved margin in 2020 reflects increased pricing power , increased volume and efficiencies in our construction process and effective cost controls , despite increasing lumber prices . we recorded impairment charges of approximately $ 24.9 million during the year ended december 31 , 2020 , primarily resulting from the decision to sell land assets that no longer fit our strategy , compared to $ 7.3 million of similar charges in 2019. interest expense decreased to $ 2.2 million for the year ended december 31 , 2020 from $ 8.4 million in 2019 , due to the the early redemption of senior notes in the fourth quarter of 2019 , partially offset by interest charges from our credit facility which had $ 500.0 million outstanding for several months during the first half of 2020. pre-tax net earnings of $ 533.6 million in 2020 increased 76.1 % from $ 302.9 million in 2019. our effective tax rate in 2020 was 20.6 % as compared to a 17.6 % effective tax rate in 2019. net income for the year ended december 31 , 2020 was $ 423.5 million compared to $ 249.7 million in 2019. our results for 2020 reflect strong growth in both closings and orders as buyers took advantage of the historically low interest-rate environment and capitalized on their desire to purchase their first home or move out of their existing home and transition to a larger , healthier home with indoor space to accommodate work and school from home needs and outdoor space to enjoy
| 4,061 |
58 / schnitzer steel industries , inc. form 10-k 2013 schnitzer steel industries , inc. notes to the consolidated financial statements share-based compensation the company recognizes compensation cost relating to share-based payment transactions over the vesting period , with the cost measured based on the grant-date fair value of the equity instruments issued , net of an estimated forfeiture rate . see note 17 – share-based compensation for further detail . income taxes income taxes are accounted for using the asset and liability method . this requires the recognition of taxes currently payable or refundable and the recognition of deferred tax assets and liabilities for the future tax consequences of events that are recognized in one reporting period on the consolidated financial statements but in a different reporting period on the tax returns . tax credits are recognized as a reduction of income story_separator_special_tag this section includes a discussion of our operations for the three years ended august 31 , 2013 , 2012 and 2011 . the following discussion and analysis provides information which management believes is relevant to an assessment and understanding of our results of operations and financial condition . the discussion should be read in conjunction with the consolidated financial statements and the related notes thereto in part ii , item 8 of this report and the selected financial data contained in part ii , item 6 of this report . business we are one of the nation 's largest recyclers of ferrous and nonferrous scrap metal , a leading recycler of used and salvaged vehicles and a manufacturer of finished steel products . we operate in three reporting segments : the metals recycling business ( “ mrb ” ) , the auto parts business ( “ apb ” ) and the steel manufacturing business ( “ smb ” ) , which collectively provide an end-of-life cycle solution for a variety of products through our integrated businesses . we use operating income ( loss ) to measure our segment performance . restructuring charges are not allocated to the segment operating income ( loss ) because we do not include this information in our measurement of the segments ' performance . corporate expense consists primarily of unallocated expense for management and administrative services that benefit all three reporting segments . as a result of this unallocated expense , the operating income ( loss ) of each reporting segment does not reflect the operating income ( loss ) the reporting segment would report as a stand-alone business . for further information regarding our reporting segments , including financial information about geographic areas , see note 21 – segment information in the notes to the consolidated financial statements in part ii , item 8 of this report . mrb buys , collects , processes , recycles , sells and brokers ferrous scrap metal ( containing iron ) to foreign and domestic steel producers , including smb , and nonferrous scrap metal ( not containing iron ) to both foreign and domestic markets . mrb processes mixed and large pieces of scrap metal into smaller pieces by crushing , sorting , shearing , shredding and torching , resulting in scrap metal pieces of a size , density and metal content required by customers to meet their production needs . apb procures used and salvaged vehicles and sells serviceable used auto parts from these vehicles through its self-service auto parts stores . the remaining portions of the vehicles , primarily autobodies and major parts containing ferrous and nonferrous materials , are sold to metal recyclers , including mrb where geographically feasible . smb operates a steel mini-mill that produces a wide range of finished steel products . mrb is the sole supplier for smb 's scrap metal requirements , which smb purchases at rates that approximate export market prices for shipments from the west coast of the u.s. smb uses its mini-mill near portland , oregon to melt recycled metal and other raw materials to produce finished steel products . smb also maintains a mill depot in southern california . our results of operations depend in large part on the demand and prices for recycled metal in foreign and domestic markets and on the supply of raw materials , including end-of-life vehicles , available to be processed at our facilities . our deep water port facilities on both the east and west coasts of the u.s. ( in everett , massachusetts ; providence , rhode island ; oakland , california ; portland , oregon ; and tacoma , washington ) and access to public deep water port facilities ( in kapolei , hawaii ; and salinas , puerto rico ) allow us to efficiently meet the global demand for recycled ferrous metal by shipping bulk cargoes to steel manufacturers located in europe , asia , central america and africa . our exports of nonferrous processed recycled metal are shipped in containers through various public docks to specialty steelmakers , foundries , aluminum sheet and ingot manufacturers , copper refineries and smelters , brass and bronze ingot manufacturers and wire and cable producers globally . we also transport both ferrous and nonferrous metals by truck , rail and barge in order to transfer scrap metal between our facilities for further processing , to load shipments at our export facilities and to meet regional domestic demand . key economic factors and trends affecting the industries in which we operate we sell recycled metals to the global steel industry for the production of finished steel . our financial results largely depend on supply of raw materials in the u.s. and western canada and demand for recycled metal in foreign and domestic markets and for finished steel products in the western u.s. fluctuating or volatile supply and demand conditions affect market prices for and volumes of recycled ferrous and nonferrous metal in global markets and for steel products in the western u.s. and can have a significant impact on the results of operations for all three reporting segments . story_separator_special_tag 25 / schnitzer steel industries , inc. form 10-k 2013 schnitzer steel industries , inc. in the fourth quarter of fiscal 2013 , we identified the combination of the continued challenging market conditions , the constrained supply of raw materials , the company 's recent financial performance and the lack of recovery of our market capitalization as a triggering event requiring an interim impairment test of goodwill allocated to our reporting units . the impairment test resulted in a non-cash goodwill impairment charge of $ 321 million at the mrb reporting unit . in addition , during the fourth quarter of fiscal 2013 , we recorded impairment charges of $ 13 million on various other assets . in fiscal 2013 , we made further progress on our growth strategy through the integration of nine stores acquired in fiscal 2013 and the opening of two greenfield store locations in apb . in mrb , our new shredder and processing equipment in surrey , british columbia became operational and our nonferrous processing facility in puerto rico neared completion and became operational in september 2013. in addition , in march 2013 we acquired the redeemable noncontrolling interest in one of mrb 's canadian subsidiaries for consideration of $ 25 million . net loss attributable to ssi in fiscal 2013 was $ 281 million , or $ ( 10.56 ) per diluted share , compared to net income attributable to ssi of $ 27 million , or $ 0.99 per diluted share , in the prior year . adjusted net loss attributable to ssi , excluding goodwill and other asset impairments , restructuring charges and the valuation allowance recorded on deferred tax assets was $ 2 million , or $ ( 0.07 ) per diluted share , for fiscal 2013 , compared to adjusted net income attributable to ssi of $ 31 million , or $ 1.12 per diluted share , in the prior year ( see the reconciliation of adjusted net income ( loss ) attributable to ssi in non-gaap financial measures at the end of item 7 ) . the following items summarize our consolidated financial performance for fiscal 2013 : revenues of $ 2.6 billion , compared to $ 3.3 billion in the prior year ; operating loss of $ 328 million , compared to operating income of $ 54 million in the prior year ; adjusted operating income of $ 14 million , a reduction of $ 45 million , or 76 % , compared to the prior year ( see the reconciliation of adjusted consolidated operating income in non-gaap financial measures at the end of item 7 ) ; net loss attributable to ssi of $ 281 million , or $ ( 10.56 ) per diluted share , compared to net income of $ 27 million , or $ 0.99 per diluted share , in the prior year ; and adjusted net loss attributable to ssi of $ 2 million , or $ ( 0.07 ) per diluted share , compared to adjusted net income attributable to ssi of $ 31 million , or $ 1.12 per diluted share , in the prior year ( see the reconciliation of adjusted net income ( loss ) attributable to ssi in non-gaap financial measures at the end of item 7 ) . the following items summarize our consolidated cash flow and balance sheet information for fiscal 2013 : net cash provided by operating activities of $ 39 million , compared to $ 245 million in the prior year ; debt , net of cash , of $ 368 million , compared to $ 245 million as of the prior year-end ( see the reconciliation of debt , net of cash , in non-gaap financial measures at the end of item 7 ) ; and dividends paid of $ 20 million compared to $ 11 million in the prior year . the following items highlight the financial results for our operating segments for the year ended august 31 , 2013 : mrb revenues of $ 2.2 billion and operating loss of $ 312 million , compared to revenues of $ 2.9 billion and operating income of $ 64 million for the year ended august 31 , 2012 , respectively . adjusted operating income at mrb was $ 23 million in fiscal 2013 ( see the reconciliation of adjusted mrb operating income ( loss ) in non-gaap financial measures at the end of item 7 ) ; apb revenues and operating income of $ 313 million and $ 25 million , respectively , compared to $ 317 million and $ 33 million for the year ended august 31 , 2012 , respectively ; and smb revenues and operating income of $ 352 million and $ 7 million , respectively , compared to $ 333 million and operating loss of $ 2 million for the year ended august 31 , 2012 , respectively . 26 / schnitzer steel industries , inc. form 10-k 2013 schnitzer steel industries , inc. results of operations replace_table_token_10_th _ nm = not meaningful ( 1 ) mrb sells recycled ferrous metal to smb at rates per ton that approximate west coast u.s. export market prices . in addition , apb sells ferrous and nonferrous material to mrb . these intercompany revenues and costs of goods sold are eliminated in consolidation . 27 / schnitzer steel industries , inc. form 10-k 2013 schnitzer steel industries , inc. ( 2 ) corporate expense consists primarily of unallocated expenses for services that benefit all three business segments . as a consequence of this unallocated expense , the operating income ( loss ) of each segment does not reflect the operating income ( loss ) the segment would report as a stand-alone business . ( 3 ) the joint ventures sell recycled ferrous metal to mrb and then subsequently to smb at rates per ton that approximate west coast u.s. export market prices .
| resulting from lower financial performance in fiscal 2012 and a decrease in expense related to environmental liabilities of $ 3 million compared to the prior year . 32 / schnitzer steel industries , inc. form 10-k 2013 schnitzer steel industries , inc. auto parts business replace_table_token_13_th fiscal 2013 compared with fiscal 2012 revenues the decrease in revenues by $ 4 million or 1 % was driven primarily by lower average commodity prices , partially offset by higher sales volumes primarily generated by the eleven new store locations acquired or opened during fiscal 2013. segment operating income operating income for fiscal 2013 decreased by $ 9 million , or 26 % , compared to the prior year . the compression in operating margins was primarily related to car purchase costs decreasing at a slower rate than ferrous and nonferrous selling prices due to supply constraints of end-of-life vehicles . operating income for fiscal 2013 included $ 5 million of operating losses , including transaction , integration and startup costs , related to the eleven store locations acquired or opened during the year . sg & a expense remained consistent with the prior year , as the positive impact of the restructuring initiatives and other operational efficiencies implemented in fiscal 2013 and decreased legal expenses were offset by incremental expenses related to the eleven store locations acquired or opened in fiscal 2013. fiscal 2012 compared with fiscal 2011 revenues the decrease in revenues by $ 3 million , or 1 % , was driven by lower average commodity prices and decreased car volumes , both of which adversely impacted sales of ferrous and nonferrous material compared to the prior year .
| 4,062 |
( b ) represents prepaid insurance 64 13. selected quarterly financial data ( unaudited ) the following tables set forth the company 's unaudited quarterly results of operations for each of the quarters in fiscal 2013 and fiscal 2012. the company uses a 13 week ( 14 week in fourth quarter fiscal 2012 ) fiscal quarter ending on the last saturday of the quarter . replace_table_token_27_th the sum of the quarterly net income per common share may not equal the annual total due to quarterly changes in the weighted average shares and share equivalents outstanding . 14. stock repurchase program on march 18 , 2013 , the company announced that our board of directors had authorized a stock repurchase program pursuant to which the company may repurchase up to $ 150 million of the company 's common stock . the repurchases may be made from time to time in the open market , in privately negotiated transactions , or otherwise , at prices that the company deems appropriate and subject to market conditions , applicable law and other factors deemed relevant in the company 's sole discretion . the stock repurchase program does not have an expiration date and may be suspended or discontinued at any time . during fiscal 2013 , we purchased 500,500 shares of common stock for $ 37.3 million at an average price of $ 74.58 . 65 exhibits replace_table_token_28_th story_separator_special_tag the following discussion and analysis of our financial condition and results of operations should be read in conjunction with our financial statements and related notes included elsewhere in this annual report on form 10-k. this discussion contains forward-looking statements within the meaning of section 21e of the securities exchange act of 1934 , as amended , and the safe harbor provisions of the private securities litigation reform act of 1995 , which reflect our current views with respect to , among other things , future events and financial performance . you can identify these forward-looking statements by the use of forward-looking words such as outlook , believes , expects , plans , estimates , or other comparable words . any forward-looking statements contained in this form 10-k are based upon our historical performance and on current plans , estimates and expectations . the inclusion of this forward-looking information should not be regarded as a representation by us or any other person that the future plans , estimates or expectations contemplated by us will be achieved . such forward-looking statements are subject to various risks and uncertainties , which include , without limitation : the impact of weakness in the economy ; changes in the overall level of consumer spending ; changes in the wholesale cost of our products ; the possibility that we may be unable to compete effectively in our highly competitive markets ; the possibility that our continued opening of new stores could strain our resources and have a material adverse effect on our business and financial performance ; the possibility that new store openings and existing locations may be impacted by developer or co-tenant issues ; the possibility that the capacity of our distribution and order fulfillment infrastructure may not be adequate to support our recent growth and expected future growth plans ; the possibility of material disruptions to our information systems ; weather conditions that could negatively impact sales ; our ability to attract and retain key executive personnel ; our ability to successfully execute and implement our common stock repurchase program ; our ability to sustain our growth plans and successfully develop and implement our long-range strategic and financial plan ; and other risk factors detailed in our public filings with the securities and exchange commission ( the sec ) , including risk factors contained in item 1a , risk factors of this annual report on form 10-k for the year ended february 1 , 2014. we assume no obligation to update any forward-looking statements as a result of new information , future events or developments . references in the following discussion to we , us , our , the company , ulta and similar references mean ulta salon , cosmetics & fragrance , inc. and its consolidated subsidiary , ulta inc. unless otherwise expressly stated or the context otherwise requires . overview we were founded in 1990 as a beauty retailer at a time when prestige , mass and salon products were sold through distinct channels department stores for prestige products , drug stores and mass merchandisers for mass products , and salons and authorized retail outlets for professional hair care products . we developed a unique specialty retail concept by combining one-stop shopping , a compelling value proposition , convenient locations 32 and a welcoming shopping environment . we believe our strategy provides us with the competitive advantages that have contributed to our strong financial performance . we are currently the largest beauty retailer that provides one-stop shopping for prestige , mass and salon products and salon services in the united states . we focus on providing affordable indulgence to our customers by combining unmatched product breadth , value and convenience with the distinctive environment and experience of a specialty retailer . key aspects of our business include our ability to offer our customers a broad selection of more than 20,000 beauty products across the categories of cosmetics , fragrance , haircare , skincare , bath and body products and salon styling tools , as well as salon haircare products . we focus on delivering a compelling value proposition to our customers across all of our product categories . our stores are predominantly located in convenient , high-traffic locations such as power centers . the continued growth of our business and any future increases in net sales , net income and cash flows is dependent on our ability to execute our five point growth strategy , including growing stores to approximately 1,200 locations , expanding our offering by adding new products , brands and services , enhancing our loyalty program , broadening our marketing reach and expanding our digital business . story_separator_special_tag selling , general and administrative expenses include : payroll , bonus and benefit costs for retail and corporate employees ; advertising and marketing costs ; occupancy costs related to our corporate office facilities ; stock-based compensation expense ; depreciation and amortization for all assets except those related to our retail and warehouse operations , which is included in cost of sales ; and legal , finance , information systems and other corporate overhead costs . 34 this presentation of items in selling , general and administrative expenses may not be comparable to the way in which our competitors or other retailers compute their selling , general and administrative expenses . pre-opening expense includes non-capital expenditures during the period prior to store opening for new , remodeled and relocated stores including rent during the construction period for new and relocated stores , store set-up labor , management and employee training , and grand opening advertising . interest expense includes interest costs and unused facility fees associated with our credit facility , which is structured as an asset based lending instrument . our credit facility interest is based on a variable interest rate structure which can result in increased cost in periods of rising interest rates . income tax expense reflects the federal statutory tax rate and the weighted average state statutory tax rate for the states in which we operate stores . story_separator_special_tag $ 22.9 million , or 23.2 % to $ 121.4 million compared to $ 98.5 million in fiscal 2011. the sales increases are due to the opening of 101 net new stores in 2012 and a 8.8 % increase in comparable store sales which was primarily due to a 6.5 % increase in store traffic . non-comparable stores , which include stores opened in fiscal 2012 as well as stores opened in fiscal 2011 which have not yet turned comparable , contributed $ 291.0 million of the net sales increase while comparable stores contributed $ 153.1 million of the total net sales increase . we attribute the increase in comparable store sales to our successful marketing and merchandise strategies . the sales for the 53rd week of fiscal 2012 were approximately $ 55 million . gross profit gross profit increased $ 166.9 million , or 27.0 % , to $ 783.7 million in fiscal 2012 , compared to $ 616.8 million , in fiscal 2011. gross profit as a percentage of net sales increased 60 basis points to 35.3 % in fiscal 2012 compared to 34.7 % in fiscal 2011. the increase in gross profit margin in fiscal 2012 was primarily driven by : 50 basis points of leverage in fixed store costs attributed to the impact of higher sales levels in fiscal 2012 ; and 30 basis points improvement in merchandise margins driven by our marketing and merchandising strategies . selling , general and administrative expenses selling , general and administrative ( sg & a ) expenses increased $ 78.2 million , or 19.0 % , to $ 488.9 million in fiscal 2012 compared to $ 410.7 million in fiscal 2011. as a percentage of net sales , sg & a expenses decreased 110 basis points to 22.0 % in fiscal 2012 compared to 23.1 % in fiscal 2011. the leverage in sg & a expense was primarily driven by : 70 basis points in corporate overhead leverage attributed to higher sales volume ; and 37 40 basis points improvement in variable store and marketing expense leverage attributed to cost efficiencies and higher sales volume . pre-opening expenses pre-opening expenses increased $ 4.8 million , or 48.4 % , to $ 14.8 million in fiscal 2012 compared to $ 10.0 million in fiscal 2011. during fiscal 2012 , we opened 102 new stores , remodeled 21 stores and relocated 3 stores . during fiscal 2011 , we opened 61 new stores and remodeled 17 stores and relocated 2 stores . interest expense interest expense was $ 0.2 million in fiscal 2012 and $ 0.6 million in fiscal 2011. interest expense for both periods represents various fees related to the credit facility . we did not utilize our credit facility during fiscal 2012 or 2011. income tax expense income tax expense of $ 107.2 million in fiscal 2012 represents an effective tax rate of 38.3 % , compared to fiscal 2011 tax expense of $ 75.3 million and an effective tax rate of 38.5 % . the lower tax rate in fiscal 2012 is primarily due to a decrease in state taxes and less non-deductible executive compensation compared to fiscal 2011. net income net income increased $ 52.2 million , or 43.5 % , to $ 172.5 million in fiscal 2012 compared to $ 120.3 million in fiscal 2011. the increase in net income was primarily due to an increase in gross profit of $ 166.9 million , which was offset by a $ 78.2 million increase in sg & a expenses and a $ 31.9 million increase in income tax expense . liquidity and capital resources our primary cash needs are for capital expenditures for new , relocated and remodeled stores , increased merchandise inventories related to store expansion , supply chain improvements and for continued improvement in our information technology systems . our primary sources of liquidity are cash on hand and cash flows from operations , including changes in working capital , and borrowings under our credit facility . the most significant component of our working capital is merchandise inventories reduced by related accounts payable and accrued expenses . our working capital position benefits from the fact that we generally collect cash from sales to customers the same day , or within several days of the related sale , while we typically have up to 30 days to pay our vendors . our working capital needs are greatest from august through november each year as a result of our inventory build-up during this period for the approaching holiday season .
| results of operations our fiscal years are the 52 or 53 week periods ending on the saturday closest to january 31. the company 's fiscal years ended february 1 , 2014 , february 2 , 2013 and january 28 , 2012 were 52 , 53 and 52 week years , respectively , and are hereafter referred to as fiscal 2013 , fiscal 2012 and fiscal 2011. as of february 1 , 2014 , we operated 675 stores across 46 states . the following tables present the components of our consolidated results of operations for the periods indicated : replace_table_token_6_th 35 replace_table_token_7_th fiscal year 2013 versus fiscal year 2012 net sales net sales increased $ 450.3 million , or 20.3 % , to $ 2,670.6 million in fiscal 2013 compared to $ 2,220.3 million in fiscal 2012. salon service sales increased $ 24.4 million , or 20.1 % to $ 145.8 million compared to $ 121.4 million in fiscal 2012. e-commerce sales increased $ 40.7 million , or 73.9 % , to $ 95.8 million compared to $ 55.1 million in fiscal 2012. the net sales increases are due to the opening of 125 net new stores in 2013 and a 7.9 % increase in comparable store sales . non-comparable stores , which include stores opened in fiscal 2013 as well as stores opened in fiscal 2012 which have not yet turned comparable , contributed $ 283.0 million of the net sales increase while comparable stores contributed $ 167.3 million of the total net sales increase . the sales for the 53rd week of fiscal 2012 were approximately $ 55 million . the 7.9 % comparable store sales increase consisted of a 6.1 % increase at the company 's retail and salon stores and a 76.6 % increase in the company 's e-commerce business .
| 4,063 |
the interest rate swap contract was put in place on march 30 , 2011 and expired on december 31 , 2014. the table below shows the amount of outstanding debt and the related notional amount on the interest rate swap contract at each of the balance sheet dates : replace_table_token_30_th 47 under the new credit agreement , the company has three key covenants ( with which it was in compliance throughout the year and as of december 31 , 2014 ) . the covenants are as follows : ( 1 ) the company must maintain its borrowings below a certain consolidated funded debt ratio , ( 2 ) the company has a limitation on its annual spending on the acquisition of fixed asset capital additions , and ( 3 ) the company must maintain a certain consolidated fixed charge coverage ratio . at december 31 , 2014 , total indebtedness is $ 99,526 as compared to $ 51,745 at december 31 , 2013. at december 31 , 2014 , based on its performance against the most restrictive covenants listed above , the company has the capacity story_separator_special_tag forward-looking statements/risk factors : the company , from time-to-time , may discuss forward-looking statements including assumptions concerning the company 's operations , future results and prospects . generally , may , could , will , would , expect , believe , estimate , anticipate , intend , continue and similar words identify forward-looking statements . forward-looking statements appearing in this report are made pursuant to the safe harbor provisions of the private securities litigation reform act of 1995. forward-looking statements are based on our current expectations and are subject to risks and uncertainties that can cause actual results and events to differ materially from those set forth in or implied by the forward-looking statements and related assumptions contained in the entire report . such factors include , but are not limited to : product demand and market acceptance risks ; the effect of economic conditions ; weather conditions ; changes in regulatory policy ; the impact of competitive products and pricing ; changes in foreign exchange rates ; product development and commercialization difficulties ; capacity and supply constraints or difficulties ; availability of capital resources ; general business regulations , including taxes and other risks as detailed from time-to-time in the company 's reports and filings filed with the u.s. securities and exchange commission ( the sec ) . it is not possible to foresee or identify all such factors . we urge you to consider these factors carefully in evaluating the forward-looking statements contained in this report . 16 american vanguard corporation and subsidiaries ( dollars in thousands , except per share data ) story_separator_special_tag width= '' 5 % '' > general and administrative expenses decreased by $ 6,479 to $ 27,057 for the year ended december 31 , 2014 , as compared to $ 33,536 in 2013. the main drivers for the reduced expenses are lower incentive compensation , and lower legal costs . these cost reductions were partly offset by the expenses associated with a reduction in personnel during the final quarter of the year and the write-off of an impaired intangible asset . research , product development costs and regulatory expenses decreased by $ 438 to $ 21,206 for the year ended december 31 , 2014 , as compared to $ 21,644 in 2013. this change is primarily driven by a decrease in the use of outside legal services for registration review and other registration expenses . freight , delivery and warehousing costs for the year ended december 31 , 2014 increased by $ 427 to $ 27,930 , as compared to $ 27,503 in 2013. as a percentage of sales , freight costs increased to 9.3 % of net sales during 2014 , as compared to 7.2 % of net sales during 2013. this is primarily due to high volume of our heavier products such as fumigants sold domestically , continued growth of our international business and storage costs for higher-than-normal levels of inventory . net interest expense was $ 3,066 in 2014 , as compared to $ 1,901 in 2013. interest costs are summarized in the following table : replace_table_token_9_th the company 's average overall debt for the year ended december 31 , 2014 was $ 95,060 as compared to $ 52,872 for the comparable period of the previous year . as can be seen from the above table , on a gross basis , our effective interest rate decreased to 2.5 % , as compared to 3.4 % in 2013 , due to lower interest rates on our new senior credit facility agreement . after deductions of capitalized interest and including expenses related to the amortization of deferred liabilities , our effective rate was 3.2 % for 2014 as compared to 3.6 % in 2013. lower amortization of discounting on deferred liabilities related to product line acquisitions contributed to the reduction in our effective interest rate in 2014. the table below shows the amount of outstanding debt and the related notional amount on the interest rate swap contract at each of the balance sheet dates : 19 american vanguard corporation and subsidiaries ( dollars in thousands , except per share data ) replace_table_token_10_th income tax benefit for 2014 was $ 451 , as compared to an expense of $ 18,916 for 2013. the effective tax rate for 2013 was 35 % , whereas for 2014 the benefit was 12.4 % . the lower effective tax rate was driven by the increase in income in foreign tax jurisdictions where tax rates are lower than the u.s. statutory rates and lower income generated in the u.s. further , there was a benefit of $ 328 related to the release of the reserve for a discrete item . the release of the income tax reserve resulted from the lapse of a statute for a tax year in which the company is no longer subject to examination . story_separator_special_tag the company 's total net sales for the period were up 4 % to $ 381,021 compared to $ 366,190 for the year ended december 31 , 2012. net sales of our crop business in 2013 were $ 346,514 , which constitutes an increase of 5 % over the net sales of $ 329,540 for that business in 2012. net sales of our non-crop products in 2013 were $ 34,507 , which is a reduction of approximately 6 % as compared to 2012. a more detailed discussion of product groups and products having a material effect on net sales for each of the crop and non-crop businesses appears below . in our crop business , net sales of insecticides in 2013 ended at $ 193,623 , which was flat as compared to 2012. within the crop business , annual net sales of our granular soil insecticides were up 2 % over 2012 , driven by continued strong performance from our primary corn soil insecticides aztec ® , smartchoice ® and force , offset by year-over-year declines in thimet due to reduced peanut acres and counter which had somewhat lighter use in 2013 on corn and sugar beets . our mocap and nemacur granular insecticides/nematicides benefited from increased demand in international markets . among our non-granular insecticide products , net sales for crop applications declined by 3 % , as less of our foliar cotton insecticide bidrin was required on the reduced cotton acres planted in 2013. sales of bifenthrin , permethrin and acephate remained relatively flat with the prior year . within the product group of herbicides/soil fumigants/fungicides , our crop net sales in 2013 were up 35 % to $ 121,042 vs. $ 89,899 in 2012. within this group , we had mixed results . the positive driver was our herbicide product category , up 146 % , resulting from strong demand and ample supply availability for our post-emergent corn herbicide , impact . our co-marketing agreement with monsanto continues to expand our market presence . our fumigants sales volume , however , declined 2 % as our vapam and k-pam ® products were affected by some water shortages in certain markets . within our other products group ( which includes plant growth regulators , molluscicides and third party manufacturing activity ) , we experienced a decrease of 30 % in net sales during 2013 , $ 31,849 vs. $ 45,581 in 2012. the major driver of this sales performance was folex , a defoliant used in cotton harvest management . this product was impacted by the drop in cotton acres mentioned above . most of the other products and functional activities captured in this group were relatively flat with the prior year . within our non-crop business , 2013 net sales were down by 6 % to $ 34,507 vs. $ 36,650 recorded in 2012. naled ® sales ( our dibrom brand mosquito adulticide ) were down slightly , and pest strips business was flat . additionally , net sales of our pcnb fungicide for turf uses were stable . we experienced a decline in pharmaceutical sales of approximately 9 % , primarily due to generic competition from china . our cost of sales for 2013 was $ 209,674 or 55 % of net sales . this compared to $ 205,065 or 56 % of net sales for 2012. the decline in cost of sales as a percentage of net sales in 2013 arose primarily from these factors . in 2013 the company continued to focus on continuing to limit volumes on products that have lower than average margins . furthermore , in 2013 our sales team has focused on selling brands and tends to have stronger margins throughout the supply chain over the long term . as detailed in the table , the change in volume , mix , price and manufacturing activity resulted overall in a 1 % improvement in gross margin to 45 % in 2013 as compared to 44 % for the same period of the prior year . this included the benefit of selling prices that increased on average by 4.7 % offset by approximately 3.7 % increase in raw material costs and manufacturing costs adjusted for the different mix of products manufactured and sold in 2013 . 22 american vanguard corporation and subsidiaries ( dollars in thousands , except per share data ) operating expenses in 2013 increased by $ 13,810 to $ 115,612 or 30 % of sales as compared to $ 101,802 or 28 % in 2012. the differences in operating expenses by department are as follows : replace_table_token_13_th selling expenses increased by $ 7,060 to end at $ 32,929 for the year ended december 31 , 2013 , as compared to $ 25,869 in 2012. the main drivers for increased overall expenses were costs associated with expanding our international and domestic sales teams to better support the expanding business , field stewardship activities and increased advertising and promotion expenses in support of our leading brands . our costs in 2013 also included expenses as a result of starting up the envance majority owned subsidiary . general and administrative expenses increased by $ 3,821 to $ 33,536 for the year ended december 31 , 2013 , as compared to $ 29,715 in 2012. the main drivers for the increase are primarily related to higher legal costs associated with a data compensation matter , which concluded in july 2013 , other outside consulting services associated with domestic and international business development and additional personnel costs in support of our expanding business . research , product development costs and regulatory expenses increased by $ 894 to $ 21,644 for the year ended december 31 , 2013 , as compared to $ 20,750 in 2012. this change is primarily driven by increased activities on both product development and additional formulation and process chemistry projects offset by some lower regulatory expenses .
| results of operations 2014 compared with 2013 : replace_table_token_7_th net sales in 2014 dropped by 22 % over the prior year , primarily due to the impact of carryover corn products inventory in the midwest distribution channel . this condition arose from vigorous procurement of these products in 2012 and early 2013 , followed by adverse weather conditions that reduced usage during the 2013 planting season . throughout 2014 , many distributors , retailers and corn growers were still drawing down their inventories of the company 's corn products and reduced their orders materially . with that reduced purchasing from the company , we have seen the level of excess inventory of these products decline significantly . the combined sales of our corn herbicide and our granular soil insecticides declined by more than 55 % in 2014 , from the prior year , and in fact this decline in our corn product sales constituted virtually all of the overall revenue drop in 2014. market conditions in our non-corn products were balanced in 2014 , resulting in nearly neutral results for those crop sectors . while cotton planting increased approximately one million acres above the prior year , lighter foliar pest pressure and inclement late season weather ( hail in arkansas and frost in texas ) resulted in a relatively flat performance for our cotton products . modest gains by our products for the potato market were offset by slightly weaker sales in some of our specialty applications for vegetable/fruit markets and pharmaceuticals . overall financial performance for the year ended december 31 , 2014 was significantly reduced as compared to the same period in 2013 , with both net sales and net income lower .
| 4,064 |
you should read the “ risk factors ” section of this annual report for a discussion of important factors that could cause actual results to differ materially from the results described in or implied by the forward‑looking statements contained in the following discussion and analysis . basis of presentation this discussion of our results of operations omits our results of operations for the year ended december 31 , 2018 and the comparison of our results of operations for the years ended december 31 , 2019 and 2018 , which may be found in our annual report on form 10-k for the year ended december 31 , 2019 , filed with the sec on june 22 , 2020. unless otherwise indicated , references in this “ management 's discussion and analysis of financial condition and results of operations ” to “ propetro holding corp. , ” “ the company , ” “ we , ” “ our , ” “ us ” or like terms refer to propetro holding corp. and its subsidiary . overview our business we are a midland , texas‑based oilfield services company providing hydraulic fracturing and other complementary services to leading upstream oil and gas companies engaged in the exploration and production , or e & p , of north american unconventional oil and natural gas resources . our operations are primarily focused in the permian basin , where we have cultivated longstanding customer relationships with some of the region 's most active and well‑capitalized e & p companies . the permian basin is widely regarded as one of the most prolific oil‑producing areas in the united states , and we believe we are one of the leading providers of hydraulic fracturing services in the region by hydraulic horsepower . changes to our customers ' well design , shale formations , operating conditions and new technology have resulted in continuous changes to the number of pumps that constitute a fleet . as a result of the asymmetric nature of the number of pumps that constitute a fleet across our customer base and competitors , which we believe will continue to evolve , we view hhp to be an appropriate metric to measure our available hydraulic fracturing capacity . on average , one conventional tier ii hydraulic fracturing fleet consists of approximately 50,000 hhp , depending on job design and customer demand . our total available hhp at december 31 , 2020 was 1,373,000 hhp ( excluding approximately 150,000 hhp we are in the process of permanently retiring ) , which was comprised of 1,265,000 hhp of conventional tier ii equipment and 108,000 hhp of our new durastim® hydraulic fracturing equipment . in addition , we have committed to purchase 50,000 hhp of tier iv dynamic gas blending ( “ dgb ” ) equipment and it is expected to be delivered during the first half of 2021. with the industry transition to lower emission equipment and changes to the number of pumps or hhp that constitute a fleet , we believe that our available fleet capacity could decline if we decide to reconfigure our fleets to increase active hhp and back up hhp at the wellsites based on our customers ' and operational needs or as we retire and replace conventional tier ii equipment . in light of the energy industry transition to lower emissions equipment , the company made a strategic decision to permanently retire approximately 150,000 hhp of its existing conventional tier ii pressure pumping equipment . as a result of the company 's plan to retire 150,000 hhp during the year ended december 31 , 2020 , we recorded an impairment expense of approximately $ 21.3 million . our durastim® hydraulic fracturing equipment is still being tested and to date has only been deployed to our customers ' wellsites on a limited scale . the company has set a goal to commercialize its first durastim® hydraulic 33 fracturing equipment to our customer wellsites in the second half of 2021. we also have an option to purchase up to an additional 108,000 hhp of durastim® hydraulic fracturing equipment in the future through july 31 , 2022. the durastim® equipment is powered by electricity . we currently have gas turbines to provide electrical power to our durastim® fleet . the electrical power sources for future durastim® fleets are still being evaluated and could be supplied by the company , customers or a third-party supplier . pioneer pressure pumping acquisition on december 31 , 2018 , we consummated the purchase of pressure pumping and related assets of pioneer and pioneer pumping services , llc in the pioneer pressure pumping acquisition . the pressure pumping assets acquired included hydraulic fracturing pumps of 510,000 hhp , four coiled tubing units and the associated equipment maintenance facility . in connection with the acquisition , we became a long-term service provider to pioneer under the pioneer services agreement , providing pressure pumping and related services for a term of up to 10 years ; provided , that pioneer has the right to terminate the pioneer services agreement , in whole or part , effective as of december 31 of each of the calendar years of 2022 , 2024 and 2026. pioneer can increase the number of committed fleets prior to december 31 , 2022. pursuant to the pioneer services agreement , the company is entitled to receive compensation if pioneer were to idle committed fleets ( “ idle fees ” ) ; however , we are first required to use all economically reasonable effort to deploy the idled fleets to another customer . at the present , we have eight fleets committed to pioneer . during times when there is a significant reduction in overall demand for our services , the idle fees could represent a material portion of our revenues . story_separator_special_tag 2020 financial highlights financial highlights for the year ended december 31 , 2020 : revenue decreased $ 1,263.1 million , or 61.5 % , to $ 789.2 million , as compared to $ 2,052.3 million for the year ended december 31 , 2019 , primarily a result of the decrease in demand for pressure pumping services following the depressed oil prices and economic slowdown caused by the covid-19 pandemic that negatively impacted e & p completions activity ; cost of services ( exclusive of depreciation and amortization ) decreased $ 886.1 million or 60.3 % to $ 584.3 million , as compared to $ 1,470.4 million for the year ended december 31 , 2019 , primarily a result of our 35 lower utilization and activity levels , following the depressed oil prices and economic slowdown caused by the covid-19 pandemic that negatively impacted e & p completions activity ; cost of services as a percentage of revenue increased to 74.0 % in 2020 compared to 71.6 % for the year ended december 31 , 2019 ; general and administrative expenses , inclusive of stock-based compensation , decreased $ 18.3 million , or 17.4 % to $ 86.8 million , as compared to $ 105.1 million for the year ended december 31 , 2019 ; the total impairment expense recorded during the year december 31 , 2020 was approximately $ 38.0 million compared to $ 3.4 million during the year ended december 31 , 2019 ; net loss was $ 107.0 million , compared to a net income of $ 163.0 million for the year ended december 31 , 2019. diluted net loss per common share was $ 1.06 , compared to diluted net income per common share of $ 1.57 for the year ended december 31 , 2019. adjusted ebitda was approximately $ 141.5 million , compared to $ 519.1 million for the year ended december 31 , 2019 ( see reconciliation of adjusted ebitda to net income in the subsequent section “ how we evaluate our operations ” ) ; and maintained a conservative balance sheet , with cash of $ 69 million and no debt as of december 31 , 2020 . actions to address the economic impact of covid-19 and decline in commodity prices since march 2020 , we initiated several actions to mitigate the anticipated adverse economic conditions for the immediate future and to support our financial position , liquidity and the efficient continuity of our operations as follows : ◦ growth capital : we cancelled substantially all our planned growth capital expenditures for the second half of 2020. our 2021 capital expenditures will be driven by customer activity levels and demand for our pressure pumping services ; ◦ other expenditures : we significantly reduced our maintenance expenditures and field level consumable costs due to our reduced activity levels in 2020. in 2021 , we will continue to seek lower pricing and cost saving measures for our expendable items , materials used in day-to-day operations and large component replacement parts ; ◦ labor force reductions : we reduced our workforce by over 60 % between april and may 2020 due to the changing activity levels for our services ; in 2021 , we will continue to make appropriate adjustments to our workforce to reflect outlook related to our customers ' activity levels ; ◦ working capital : we have negotiated more favorable payment terms with certain of our larger vendors and are continuing to increase our diligence in collecting and managing our portfolio of accounts receivables . we are continuing to evaluate and consider additional cost saving measures . we will continue to prioritize the safety and welfare of our employees and customers through these turbulent times caused in part by covid-19 and the depressed energy market . our assets and operations through our pressure pumping segment , which includes cementing operations , we primarily provide hydraulic fracturing services to e & p companies in the permian basin . our modern hydraulic fracturing fleets have been designed to handle permian basin specific operating conditions and the region 's increasingly high‑intensity well completions , which are characterized by longer horizontal wellbores , more frac stages per lateral and increasing amounts of proppant per well . we plan to continually reinvest in our equipment to ensure optimal performance and reliability . in addition to our core pressure pumping segment operations , we also offer a suite of complementary well completion and production services , including coiled tubing and other services . we believe these complementary 36 services create operational efficiencies for our customers and could allow us to capture a greater portion of their capital spending across the lifecycle of a well in the future . how we generate revenue we generate revenue primarily through our pressure pumping segment , and more specifically , by providing hydraulic fracturing services to our customers . we own and operate a fleet of mobile hydraulic fracturing units and other auxiliary equipment to perform fracturing services . we also provide personnel and services that are tailored to meet each of our customers ' needs . we charge our customers on a per‑job basis , in which we set pricing terms after receiving full specifications for the requested job , including the lateral length of the customer 's wellbore , the number of frac stages per well , the amount of proppant and chemicals to be used and other parameters of the job . we also could generate revenue from idle fees from pioneer in certain circumstances when committed fleets are idled . in addition to hydraulic fracturing services , we generate revenue through the complementary services that we provide to our customers , including cementing , coiled tubing and other related services . these complementary services are provided through various contractual arrangements , including on a turnkey contract basis , in which we set a price to perform a particular job , or a daywork contract basis , in which we are paid a set price per day for our services . we are also sometimes paid by the hour for these complementary services .
| results of operations we conduct our business through three operating segments : hydraulic fracturing , cementing and coiled tubing . in march 2020 , the company shut down its flowback operating segment and subsequently disposed of the assets for approximately $ 1.6 million . in september 2020 , the company disposed of all of its drilling rigs and ancillary assets for approximately $ 0.5 million and shut down its drilling operations . for reporting purposes , the hydraulic fracturing and cementing operating segments are aggregated into our one reportable segment—pressure pumping . the comparability of the results of operations for the years ended december 31 , 2020 and 2019 have been impacted by the decrease in demand for pressure pumping services following the depressed oil prices and economic slowdown caused by the covid-19 pandemic that negatively impacted e & p completions activity during the year ended december 31 , 2020. year ended december 31 , 2020 compared to year ended december 31 , 2019 replace_table_token_5_th ( 1 ) exclusive of depreciation and amortization . ( 2 ) inclusive of stock‑based compensation of $ 9.1 million and $ 7.8 million for 2020 and 2019 , respectively . ( 3 ) for definitions of the non‑gaap financial measures of adjusted ebitda and adjusted ebitda margin and reconciliation of adjusted ebitda and adjusted ebitda margin to our most directly comparable financial measures calculated in accordance with gaap , please read “ how we evaluate our operations. ” included in our adjusted ebitda is idle fees of $ 47.2 million and $ 13.3 million for the years ended december 31 , 2020 and 2019 , respectively . ( 4 ) the non‑gaap financial measure of adjusted ebitda margin for the pressure pumping segment is calculated by taking adjusted ebitda for the pressure pumping segment as a percentage of our revenues for the pressure pumping segment . 41 revenue .
| 4,065 |
you should read the “ cautionary statement about forward-looking statements ” and “ risk factors ” sections of this annual report on form 10-k for a discussion of important factors that could cause actual results to differ materially from the results described in or implied by the forward-looking statements contained in the following discussion and analysis . this discussion and analysis should be read in conjunction with the accompanying audited and unaudited consolidated financial statements and related notes appearing elsewhere in this annual report on form 10-k. overview rev is a leading designer , manufacturer and distributor of specialty vehicles and related aftermarket parts and services . we provide customized vehicle solutions for applications including : essential needs ( ambulances , fire apparatus , school buses , mobility vans and municipal transit buses ) , industrial and commercial ( terminal trucks , cut-away buses and street sweepers ) and consumer leisure ( recreational vehicles “ rvs ” and luxury buses ) . our brand portfolio consists of 30 well-established principal vehicle brands including many of the most recognizable names within our served markets . several of our brands pioneered their specialty vehicle product categories and date back more than 50 years . we believe that in most of our markets , we hold the first or second market share position and approximately 61 % of our net sales during fiscal year 2018 came from products where we believe we hold such share positions . segments we serve a diversified customer base primarily in the united states through the following segments : fire & emergency – the fire & emergency segment sells fire apparatus equipment under the emergency one , kovatch mobile equipment and ferrara brands and ambulances under the american emergency vehicles , horton emergency vehicles , leader emergency vehicles , marque , mccoy miller , road rescue , wheeled coach and frontline brands . we believe we are the largest manufacturer by unit volume of fire and emergency vehicles in the united states and have one of the industry 's broadest portfolios of products including type i ambulances ( aluminum body mounted on a heavy truck-style chassis ) , type ii ambulances ( van conversion ambulance typically favored for non-emergency patient transportation ) , type iii ambulances ( aluminum body mounted on a van-style chassis ) , pumpers ( fire apparatus on a custom or commercial chassis with a water pump and small tank to extinguish fires ) , ladder trucks ( fire apparatus with stainless steel or aluminum ladders ) , tanker trucks and rescue and other vehicles . each of our individual brands is distinctly positioned and targets certain price and feature points in the market such that dealers often carry and customers often buy more than one rev fire & emergency product line . commercial – our commercial segment serves the bus market through the following principal brands : collins bus , goshen coach , enc , eldorado national , krystal coach , federal coach , champion and world trans . in addition , we have a joint venture partnership with daimler to distribute and service setra branded motor coaches to customers in the united states . we serve the terminal truck market through the capacity brand , the sweeper market through the lay-mor brand and the mobility van market through our revability brand . we are a leading producer of small- and medium-sized buses , type a school buses , transit buses , terminal trucks and street sweepers in the united states . our products in the commercial segment include cut-away buses ( customized body built on various types and sizes of commercial chassis ) , transit buses ( large municipal buses where we build our own chassis and body ) , luxury buses ( bus-style limo or high-end luxury conversions ) , street sweepers ( three- and four-wheel versions used in road construction activities ) , terminal trucks ( specialized vehicle which moves freight in warehouses or intermodal yards and ports ) , type a school buses ( small school bus built on commercial chassis ) , and mobility vans ( mini-van converted to be utilized by wheelchair passengers ) . within each market segment , we produce a large number of customized configurations to address the diverse needs of our customers . 42 recreation – our recreation segment serves the rv market through seven principal brands : american coach , fleetwood rv , monaco coach , holiday rambler , renegad e , midwest and lance . we believe our brand portfolio contains some of the longest standing , most recognized brands in the rv industry . under these seven brands , rev provides a variety of highly recognized motorized and towable rv models such as : american e agle , signature , marquis , bounder , pace arrow , verona , weekender and lance , among others . our products in the recreation segment include class a motorized rvs ( motorhomes built on a heavy duty chassis with either diesel or gas engine configurations ) , class c and “ super c ” motorized rvs ( motorhomes built on a commercial truck or van chassis ) , a line of heavy-duty special application trailers , and , as a result of the acquisition of midwest , class b rvs ( motorhomes built out on a van chassis ) , and towable trav el trailers and truck campers . the recreation segment also includes goldshield fiberglass , which produces a wide range of custom molded fiberglass products for the rv and broader industrial markets . in january 2018 , we acquired lance , a producer of truck c ampers , towable campers and toy haulers . factors affecting our performance the primary factors affecting our results of operations include : general economic conditions our business is impacted by the u.s. economic environment , employment levels , consumer confidence , municipal spending , changes in interest rates and instability in securities markets around the world , among other factors . in particular , changes in the u.s. economic climate can impact demand in key end markets . story_separator_special_tag commercial segment net sales were $ 638.5 million , $ 620.1 million and $ 679.0 million for fiscal years 2018 , 2017 and 2016 , respectively , an increase of $ 18.4 million , or 3.0 % from fiscal year 2017 , and a decrease of $ 58.9 million , or 8.7 % , from fiscal year 2016. the increase in net sales compared to fiscal year 2017 was primarily due to increases in sales of shuttle bus units , parts sales and mobility vans , partially offset by lower school and transit bus unit volume compared to the prior year . the decrease in net sales for fiscal year 2017 compared to fiscal year 2016 was due primarily to a decrease in the number of shuttle and school bus units sold compared to the prior year , partially offset by higher sales of transit buses and terminal trucks compared to the prior year . this was also partially offset by higher average realized pricing compared to the prior year due to sales mix and strategic pricing initiatives . excluding the impact of net sales from acquired companies , commercial segment net sales for fiscal year 2017 decreased 8.8 % compared to fiscal year 2016. adjusted ebitda . commercial segment adjusted ebitda was $ 38.1 million , $ 50.5 million and $ 53.4 million for fiscal years 2018 , 2017 and 2016 , respectively , a decrease of $ 12.4 million , or 24.6 % from fiscal year 2017 , and a decrease of $ 2.9 million , or 5.4 % , from fiscal year 2016. the decrease in adjusted ebitda compared to fiscal year 2017 was primarily due to product mix shift from higher content and higher margin transit and school buses to lower margin shuttle buses and mobility vans and , higher material costs partially offset by pricing actions . the decrease in adjusted ebitda for fiscal year 2017 compared to fiscal year 2016 was primarily due to reduced shuttle bus unit volume compared to the prior year , which was offset by lower material costs , increased average realized pricing , and a shift in sales mix toward transit buses and terminal trucks as a percentage of total segment sales . excluding the impact of acquisitions , commercial segment adjusted ebitda for fiscal year 2017 decreased 4.8 % compared to fiscal year 2016. recreation segment replace_table_token_6_th net sales . recreation segment net sales were $ 811.9 million , $ 659.8 million and $ 478.1 million for fiscal years 2018 , 2017 and 2016 , respectively , an increase of $ 152.1 million , or 23.1 % from fiscal year 2017 , and an increase $ 181.7 million , or 38.0 % , from fiscal year 2016. the increase in net sales compared to fiscal year 2017 was due to the acquisition of lance as well as higher volumes in all classes of rvs except class a. excluding the impact of net sales from acquired companies , recreation segment net sales increased 0.3 % compared to the prior year . 46 the increase in net sales for fiscal year 2017 compared to fiscal year 2016 was due to an increase in organic unit volume and average selling prices as well as the impact of acquired companies . the increase in organic unit volume was due to an increase in both class a and class c units sold for fiscal year 2017 compared to the prior year . the increase in average selling prices was due to an improved mix of sales , compared to the prior year , as well as strategic pricing initiatives . excluding the impact of net sales from acquired companies , recreation segment net sales for fiscal year 2017 increased 14.5 % compared to fiscal year 2016. adjusted ebitda . recreation segment adjusted ebitda was $ 60.4 million , $ 36.2 million and $ 11.0 million for fiscal years 2018 , 2017 and 2016 , respectively , an increase of $ 24.2 million , or 66.9 % compared to fiscal year 2017 , and an increase of $ 25.2 million , or 229.1 % , from fiscal year 2016. the increase in adjusted ebitda was primarily due to impact of the acquisition of lance and higher profitability in all classes of rvs except class a. this increase was partially offset by higher purchased material costs and lower class a sales volumes . excluding the impact of net sales from acquired companies , recreation segment adjusted ebitda increased 9.1 % compared to the prior year . the increase in adjusted ebitda for fiscal year 2017 compared to fiscal year 2016 was primarily due to an increase in gross profit offset partially by an increase in selling , general and administrative expenses . the increase in gross profit was due to higher unit sales volumes , lower cost of materials , lower cost of quality as a percentage of sales , higher average selling prices resulting from product mix , and the impact of acquired companies . the increase in selling , general and administrative expenses was due primarily to expenses from acquired companies . excluding the impact of acquisitions , recreation segment adjusted ebitda for fiscal year 2017 increased 136.7 % compared to fiscal year 2016. backlog backlog represents orders received from dealers or directly from end customers . the following table presents a summary of our backlog by segment : replace_table_token_7_th each of our three segments has a backlog of new vehicle orders that generally extends out from two to twelve months in duration . our businesses take orders from our dealers and end customers that are evidenced by a firm purchase order for delivery of one or more specialty vehicles and parts with a given specification and period of time . these firm orders are placed in our backlog and reported at the aggregate selling prices , net of discounts or allowances , at the time the purchase order is received . we do not include verbal commitments or promised orders in our reported backlog .
| results of operations the following table compares results for fiscal years 2018 , 2017 and 2016 replace_table_token_3_th net sales . consolidated net sales were $ 2,381.3 million , $ 2,267.8 million and $ 1,926.0 million for fiscal years 2018 , 2017 and 2016 , respectively , an increase of $ 113.5 million , or 5.0 % from fiscal year 2017 , and $ 341.8 million , or 17.7 % , from fiscal year 2016. the increase in consolidated net sales for fiscal year 2018 compared to fiscal year 2017 was primarily due to an increase in net sales of $ 152.1 million and $ 18.4 million in the recreation and commercial segments , respectively , offset by a decrease in net sales of $ 27.4 million in the fire & emergency segment . the increase in net sales in the recreation segment was primarily due to net sales from the acquisition of lance as well as higher unit sales volumes in all classes of rvs except class a. the increase in commercial segment net sales was primarily due to increases in sales of shuttle bus units , parts sales and mobility vans partially offset by lower school and transit bus unit volume compared to the prior year period . the decrease in fire & emergency segment net sales was due to decreases in sales of certain fire apparatus caused by labor inefficiencies and decreases in sales of ambulance units caused by chassis supply disruption which impacted the timing of shipments . excluding net sales from acquired companies , net sales for fiscal year 2018 decreased 3.7 % compared to the prior year .
| 4,066 |
factors that might cause future results to differ materially from those projected in the forward-looking statements include , but are not limited to , those discussed in item 1a , “ risk factors ” and elsewhere in this annual report on form 10-k. certain percentage changes may not recalculate due to rounding . overview we are a full service , early-stage contract research organization ( cro ) . for over 70 years , we have been in the business of providing the research models required in research and development of new drugs , devices , and therapies . over this time , we have built upon our original core competency of laboratory animal medicine and science ( research model technologies ) to develop a diverse portfolio of discovery and safety assessment services , both good laboratory practice ( glp ) and non-glp , that enable us to support our clients from target identification through non-clinical development . we also provide a suite of products and services to support our clients ' manufacturing activities . utilizing our broad portfolio of products and services enables our clients to create a more flexible drug development model , which reduces their costs , enhances their productivity and effectiveness , and increases speed to market . our client base includes all major global biopharmaceutical companies , many biotechnology companies , cros , agricultural and industrial chemical companies , life science companies , veterinary medicine companies , contract manufacturing companies , medical device companies , and diagnostic and other commercial entities , as well as leading hospitals , academic institutions , and government agencies around the world . we currently operate approximately 80 facilities in 23 countries worldwide , which numbers exclude our insourcing solutions ( is ) sites . segment reporting our three reportable segments are research models and services ( rms ) , discovery and safety assessment ( dsa ) , and manufacturing support ( manufacturing ) . our rms reportable segment includes the research models and research model services businesses . research models includes the commercial production and sale of small research models , as well as the supply of large research models . research model services includes : genetically engineered models and services ( gems ) , which performs contract breeding and other services associated with genetically engineered research models ; research animal diagnostic services ( rads ) , which provides health monitoring and diagnostics services related to research models ; and insourcing solutions ( is ) , which provides colony management of our clients ' research operations ( including recruitment , training , staffing , and management services ) . our dsa reportable segment includes services required to take a drug through the early development process including discovery services , which are non-regulated services to assist clients with the identification , screening , and selection of a lead compound for drug development , and regulated and non-regulated ( glp and non-glp ) safety assessment services . our manufacturing reportable segment includes microbial solutions , which provides in vitro ( non-animal ) lot-release testing products , microbial detection products , and species identification services ; biologics testing services ( biologics ) , which performs specialized testing of biologics ; avian vaccine services ( avian ) , which supplies specific-pathogen-free chicken eggs and chickens ; and contract development and manufacturing ( cdmo ) services , which , until we divested this business on february 10 , 2017 , allowed us to provide formulation design and development , manufacturing , and analytical and stability testing for small molecules . recent acquisitions and divestiture we continued to make strategic acquisitions designed to expand our portfolio of services to support the drug discovery and early-stage development continuum and position us as a market leader in the outsourced discovery services market . our recent acquisitions and divestiture are described below . on february 12 , 2018 , we entered into a definitive agreement to acquire mpi research , a non-clinical cro , providing comprehensive testing services to biopharmaceutical and medical device companies worldwide . acquiring mpi research will enhance our position as a leading global early-stage cro by strengthening our ability to partner with clients across the drug discovery and development continuum . the transaction is expected to close early in the second quarter of 2018 , subject to regulatory approvals and customary closing conditions . the preliminary purchase price will be approximately $ 800 million in cash , subject to customary closing adjustments . the acquisition and associated fees are expected to be financed through an expansion of our credit facility and cash . we entered into a commitment letter , pursuant to which we will be provided up to $ 830 million under a bridge loan facility . this business is expected to be reported as part of our dsa reportable segment . in the 30 event the agreement is terminated under specified circumstances , we may be required to pay a termination fee of $ 48 million , increasing to $ 56 million based on other specific circumstances . on january 11 , 2018 , we acquired kws biotest limited ( kws biotest ) , a cro specializing in in vitro and in vivo discovery testing services for immuno-oncology , inflammatory and infectious diseases . the acquisition enhances our discovery expertise , with complementary offerings that provide our customers with additional tools in the active therapeutic research areas of oncology and immunology . the purchase price for kws biotest was $ 20.3 million in cash , subject to certain post-closing adjustments that may change the purchase price , and was funded by our various borrowings . in addition to the initial purchase price , the transaction includes aggregate , undiscounted contingent payments of up to £ 3.0 million ( approximately $ 4.1 million based on recent exchange rates ) , based on future performance . this business will be reported as part of our dsa reportable segment . story_separator_special_tag demand for our research models and services was stable in fiscal year 2017. demand for research models in mature markets outside of china declined modestly , partially offset by improved pricing . the continued effect of the consolidation of internal infrastructure within our large biopharmaceutical clients and a longer-term trend towards more efficient use of research models has led to reduced demand for research models . demand for research models in china continued to be robust in fiscal year 2017 , as clients in this growing market continue to value our high-quality research models . to accommodate increased demand , we opened a new research models facility in china in late 2017. demand for research models services also improved in fiscal year 2017 , particularly for our gems and is businesses . we are confident that research models and services will remain essential tools for our clients ' drug discovery and early-stage development efforts , and the rms business will continue to be an important source of cash flow generation for us . overview of results of operations and liquidity revenue for fiscal year 2017 was $ 1,857.6 million compared to $ 1,681.4 million in fiscal year 2016 . the 2017 increase as compared to the corresponding period in 2016 was $ 176.2 million , or 10.5 % , and was primarily due to growth in our dsa and manufacturing segments , as discussed in the above “ business trends ” section . in fiscal year 2017 , our operating income and operating income margin were $ 287.5 million and 15.5 % , respectively , compared with $ 237.4 million and 14.1 % , respectively , in fiscal year 2016 . the increase in operating income and operating income margin was primarily due to increased demand in our dsa and manufacturing segments , the effects of our recent acquisitions , and various productivity initiatives . net income attributable to common shareholders decreased to $ 123.4 million in fiscal year 2017 , from $ 154.8 million in the corresponding period of 2016 . the decrease in net income attributable to common shareholders of $ 31.4 million was primarily due to an increase in the provision for income taxes of $ 104.6 million as a result of u.s. tax reform , partially offset by an increase in operating income as discussed above , as well as a gain of $ 10.6 million on the cdmo divestiture and an increase of $ 12.6 million in gains on our venture capital investments . during fiscal year 2017 , our cash flows from operations was $ 318.1 million compared with $ 316.9 million for fiscal year 2016 . the increase was primarily driven by positive changes in operating assets and liabilities due to the recognition of a tax payable in connection with the recent u.s. tax reform , and the timing of our accounts payable and accrued compensation payments . these increases were partially offset by a decrease in income from continuing operations . in the fourth quarter of fiscal 2017 , as part of our efficiency initiatives , we committed to a plan to close our rms production facility in maryland before the end of 2018 , consolidate production in other facilities , and to reduce our workforce at certain other global rms facilities . total costs recognized in the fourth quarter of fiscal 2017 were $ 18.1 million , of which $ 17.7 million related to asset impairments and accelerated depreciation . additional costs are expected to be incurred during 2018 resulting from accelerated lease obligations , severance and transition costs , and site consolidation costs in the range of $ 6.5 million to $ 7.5 million . critical accounting policies and estimates our discussion and analysis of our financial condition and results of operations is based upon our consolidated financial statements prepared in accordance with generally accepted accounting principles in the united states ( u.s. ) . the preparation of these financial statements requires us to make certain estimates and assumptions that may affect the reported amounts of assets and liabilities , the reported amounts of revenues and expenses during the reported periods and related disclosures . these 32 estimates and assumptions are monitored and analyzed by us for changes in facts and circumstances , and material changes in these estimates could occur in the future . we base our estimates on our historical experience , trends in the industry , and various other factors that are believed to be reasonable under the circumstances . actual results may differ from our estimates under different assumptions or conditions . we believe that the application of our accounting policies , each of which require significant judgments and estimates on the part of management , are the most critical to aid in fully understanding and evaluating our reported financial results . our significant accounting policies are more fully described in note 1 , “ description of business and summary of significant accounting policies ” , to our consolidated financial statements contained in item 8 , “ financial statements and supplementary data ” in this annual report on form 10-k. we believe the following represent our critical accounting policies and estimates used in the preparation of our financial statements : revenue recognition we recognize revenue when all of the following conditions are satisfied : persuasive evidence of an arrangement exists , delivery has occurred or services have been provided , our price to the customer is fixed or determinable , and collectibility is reasonably assured . service revenue is generally evidenced by client contracts , which range in duration from a few weeks to a few years and typically take the form of an agreed upon rate per unit or fixed fee arrangements . such contracts typically do not contain acceptance provisions based upon the achievement of certain study or laboratory testing results . revenue of agreed upon rate per unit contracts is recognized as services are performed , based upon rates specified in the contract .
| results of operations fiscal year 2017 compared to fiscal year 2016 revenue the following tables present consolidated revenue by reportable segment and by type : replace_table_token_4_th replace_table_token_5_th rms revenue decreased $ 0.4 million due to lower research model revenue outside of china , lower service revenue in the rads business , and the negative effect of changes in foreign currency exchange rates ; partially offset by higher research model product revenue in china , and higher research model services revenue attributable to the is and gems businesses . dsa revenue increased $ 143.4 million due primarily to increased demand from mid-tier biotechnology clients and global biopharmaceuticals clients . the safety assessment business had higher service revenue as a result of the wil research acquisition , which contributed $ 62.5 million to service revenue growth , as well as growth of the legacy business , including favorable volume , mix of services , and pricing ; and the discovery services business had higher service revenue , primarily as a result of the acquisitions of agilux and brains on-line that contributed $ 28.6 million and $ 4.9 million to service revenue growth , respectively ; partially offset by the negative effect of changes in foreign currency exchange rates . manufacturing revenue increased $ 33.2 million due primarily to higher demand for endotoxin products in the microbial solutions business ; increased demand in the biologics business , which included the acquisition of blue stream that contributed $ 3.5 million to service revenue growth ; and positive effect of changes in foreign current exchange rates ; partially offset by the absence of $ 10.9 million of service revenue related to the cdmo business ; and lower product revenue in the avian business .
| 4,067 |
in february 2012 , the transaction with halres resulted in an `` ownership change `` as defined under section 382 of the internal revenue code of 1986 , as amended . as a consequence , the company has additional limitations on its ability to use the net operating losses it accrued before the ownership change as a deduction against any taxable income the company realizes after the ownership change . 3. restructuring in the fourth quarter of 2013 , in conjunction with the company 's divestitures of certain non-core assets , see note 4 , `` acquisitions and divestitures , `` the company incurred and settled approximately $ 4.0 million in severance costs related to the termination of certain employees in these non-core areas . the severances were complete with the closing of the final non-core asset story_separator_special_tag the following discussion is intended to assist in understanding our results of operations and our current financial condition . our consolidated financial statements and the accompanying notes included elsewhere in this annual report on form 10-k contain additional information that should be referred to when reviewing this material . statements in this discussion may be forward-looking . these forward-looking statements involve risks and uncertainties , including those discussed below , which could cause actual results to differ from those expressed . overview we are an independent energy company focused on the acquisition , production , exploration and development of onshore liquids-rich oil and natural gas assets in the united states . we were incorporated in delaware on february 5 , 2004 and were recapitalized on february 8 , 2012. during 2012 , we focused our efforts on the acquisition of unevaluated leasehold and producing properties in selected prospect areas , providing us with an extensive drilling inventory in multiple basins that we believe allow for multiple years of production growth and broad flexibility to direct our capital resources to projects with the greatest potential returns . during 2013 and 2014 , we focused on the development of acquired properties and also divested non-core assets in order to fund activities in our core resource plays . at december 31 , 2014 , our estimated total proved oil and natural gas reserves , as prepared by our independent reserve engineering firm , netherland , sewell & associates , inc. ( netherland , sewell ) , were approximately 189.1 mmboe , consisting of 155.6 mmbbls of oil , 16.3 mmbbls of natural gas liquids , and 103.7 bcf of natural gas . approximately 41 % and 40 % of our proved reserves were classified as proved developed as of december 31 , 2014 and 2013 , respectively . we maintain operational control of approximately 93 % of our proved reserves . production for the fourth quarter of 2014 averaged 46,076 boe/d . full year 2014 production averaged 42,107 boe/d compared to 33,329 boe/d in 2013. our total operating revenues for 2014 were approximately $ 1.1 billion compared to $ 999.5 million in 2013. our oil and natural gas assets consist of undeveloped acreage positions in unconventional liquids-rich basins/fields . we have acquired acreage and may acquire additional acreage in the bakken / three forks formations in north dakota and the eagle ford formation in east texas , as well as several other areas . 46 our average daily production increased 26 % year over year . the increase in production compared to the prior year period was driven by our operated drilling results and increased production volumes associated with the development of properties we have acquired in the bakken / three forks and the eagle ford formation in east texas ( which we refer to as `` el halcón '' ) . these areas collectively accounted for approximately 37,500 boe/d in 2014 , or 89 % of our production . in 2014 , we participated in the drilling of 320 gross ( 98.3 net ) wells all of which were completed and capable of production . our financial results depend upon many factors , but are largely driven by the volume of our oil and natural gas production and the price that we receive for that production . our production volumes will decline as reserves are depleted unless we expend capital in successful development and exploration activities or acquire properties with existing production . the amount we realize for our production depends predominantly upon commodity prices and our related commodity price hedging activities , which are affected by changes in market demand and supply , as impacted by overall economic activity , weather , pipeline capacity constraints , inventory storage levels , basis differentials and other factors . accordingly , finding and developing oil and natural gas reserves at economical costs is critical to our long-term success . for the twelve months ended december 31 , 2014 we incurred capital expenditures for drilling and completions of approximately $ 1.2 billion . we expect to spend approximately $ 350 million to $ 400 million on drilling and completion capital expenditures during 2015. in addition , we expect to spend approximately $ 20 million on leasehold , infrastructure , seismic and other in 2015. the significant decrease in planned capital spending for 2015 , as compared to actual 2014 drilling and completion capital expenditures , is in response to the significant decrease in crude oil prices over the latter half of 2014 and our expectations that prices may not recover in the near term . approximately 60 - 65 % of our 2015 drilling and completions budget is expected to be spent in the bakken / three forks formations in north dakota , approximately 30 - 35 % is budgeted for the el halcón area in east texas , and the remaining amount is planned for various other project areas . our 2015 drilling and completion budget contemplates two operated rigs running in the bakken / three forks and one operated rig running in the el halcón area . our drilling and completion budget for 2015 is based on our current view of market conditions and current business plans , and is subject to change . story_separator_special_tag our senior credit agreement contains customary financial and other covenants , including minimum working capital levels ( the ratio of current assets plus the unused commitment under the senior credit agreement to current liabilities ) of not less than 1.0 to 1.0 and minimum coverage of interest expenses ( as defined in the senior credit agreement ) of i ) not less than 2.0 to 1.0 through march 31 , 2016 ( pursuant to the ninth amendment ) , and ii ) not less than 2.5 to 1.0 for subsequent periods . we are subject to additional 48 covenants limiting dividends and other restricted payments , transactions with affiliates , incurrence of debt , changes of control , asset sales , and liens on properties . additionally , the indentures governing our senior unsecured debt contain covenants limiting our ability to incur additional indebtedness , including borrowings under our senior credit agreement , unless we meet one of two alternative tests . the first test , the fixed charge coverage ratio test , applies to all indebtedness and requires that after giving effect to the incurrence of additional debt the ratio of our adjusted consolidated ebitda ( as defined in our indentures ) to our adjusted consolidated interest expense over the trailing four fiscal quarters will be at least 2.0 to 1.0. the second test allows us to incur additional indebtedness , beyond the limitations of the fixed charge coverage ratio test , as long as this additional debt is incurred under credit facilities ( as defined in our indentures ) and the amount of such additional indebtedness is not more than the greater of a fixed sum of $ 750 million or 30 % of our adjusted consolidated net tangible assets ( as defined in all of our indentures ) , which is determined primarily by the value of discounted future net revenues from proved oil and natural gas reserves as of the date of such determination . at december 31 , 2014 , we had $ 557.0 million of indebtedness outstanding , $ 1.1 million of letters of credit outstanding and $ 491.9 million of borrowing capacity available under our senior credit agreement . our ability to meet our debt covenants and our capacity to incur additional indebtedness will depend on our future performance , which will be affected by financial , business , economic , regulatory and other factors . for example , lower oil and natural gas prices could result in a redetermination of the borrowing base under our senior credit agreement at a lower level and reduce our adjusted consolidated ebitda , as well as our adjusted consolidated net tangible assets as determined under our indentures , and thus could reduce our ability to incur indebtedness . our strategic divestitures of non-core producing properties in favor of investing in undeveloped acreage , coupled with our aggressive drilling plans have also impacted our near-term ability to comply with our debt covenants , particularly the interest coverage test under our senior credit agreement and the fixed charge coverage ratio under our indentures by reducing our production and reserves on a current and , for purposes of covenant calculations , a pro forma historical basis , while drilling takes time to replace these losses . of course , over the longer term , we expect that our strategy and our investments will result in increased production and reserves , lower lease operating costs and more abundant drilling opportunities . as a consequence , we constantly monitor our liquidity and capital resources , endeavor to anticipate potential covenant compliance issues and work with the lenders under our senior credit agreement to address any such issues ahead of time . we have in the past obtained amendments to the covenants under our senior credit agreement under circumstances where we anticipated that it might be challenging for us to comply with our financial covenants for a particular period of time . during 2013 , we obtained amendments to the calculation of the interest coverage ratio covenant under our senior credit agreement allowing us to annualize our quarterly ebitda because , among other things , we anticipated that our strategic decision to divest various non-core producing properties and invest in the acquisition and drilling of undeveloped acreage would have caused us to fall below the interest coverage ratio . we requested reductions in the minimum required interest coverage ratio of 2.0 to 1.0 for 2014 and 2015 and those requests were granted on march 21 , 2014 and again on february 25 , 2015 , respectively . the basis for the amendment request is similar to previously requested waivers described above , i.e. , the potential for us to fall out of compliance primarily as a result of our strategic decision to divest producing properties , invest extensively in undeveloped acreage and the long lead times associated with replacing lost production through our drilling program . as part of our plan to manage liquidity risks and in recognition of lower oil prices , we have scaled back our capital expenditures budget , focused our drilling program on our highest return projects , entered into a transaction with funds and accounts managed by the affiliates of apollo global management , llc , to finance the development of our tms assets , and we continue to explore opportunities to divest non-core properties . 49 if , in the future , the lenders under our senior credit agreement are unwilling to provide us with the covenant flexibility we seek , and we are unable to comply with those covenants , we may be forced to repay or refinance amounts then outstanding under the senior credit agreement and seek alternative sources of capital to fund our business and anticipated capital expenditures .
| results of operations below for a review of the impact of prices and volumes on sales . replace_table_token_13_th operating activities . net cash flows provided by operating activities were $ 667.9 million , $ 493.9 million and $ 84.4 million for the years ended december 31 , 2014 , 2013 and 2012 , respectively . key drivers of net operating cash flows are commodity prices , production volumes , operating costs and realized settlements on our derivative contracts . for the year ended december 31 , 2014 , net cash provided by operating activities increased $ 174.0 million over the prior year . the improvement in operating cash flows primarily reflects the impact of the 26 % increase in our average daily production compared to the 2013 period , which drove the increase in operating revenues . production for 2014 averaged 42,107 boe/d compared to 33,329 boe/d in 2013. net loss for the year ended december 31 , 2013 was $ 1.2 billion . non-cash items , including a $ 1.1 billion full cost ceiling impairment , $ 228.9 million goodwill impairment , $ 67.5 million other operating property and equipment impairment and $ 463.7 million depreciation , depletion and accretion served to more than offset this net loss . the improvement in operating cash flows primarily reflects the impact of the 254 % increase in our average daily production compared to the 2012 period , which drove the significant increase in operating revenues . net loss for the year ended december 31 , 2012 was $ 53.9 million . non-cash items , including $ 90.3 million of depreciation , depletion and accretion , $ 9.4 million of non-cash interest and amortization and $ 6.2 million of amortization and write-off of deferred loan costs served to offset this net loss .
| 4,068 |
on may 28 , 2009 , the company and halpern denny agreed that the company would redeem shares in accordance with a designated schedule with the final payment occurring june 30 , 2010. the first redemption payment was made on june 30 , 2009. all subsequent redemption payments included additional redemption price per share based on a rate that was 250 bps higher than the highest rate paid on the company 's funded indebtedness , as provided in the certificate of designation for the series z. as of december 29 , 2009 , the company had redeemed $ 24.8 million of series z and incurred $ 0.2 million of additional redemption expense and $ 1.3 million of additional redemption amount was included in accrued expenses and other liabilities on the balance sheet and included within interest expense on the statements of operations . on march 17 , 2010 , the company and halpern denny amended their previous agreement dated may 28 , 2009 to extend the redemption date to june 30 , 2011 , and allowed the company to redeem any amount of series z at any time through that date . in addition , beginning july 1 story_separator_special_tag general we have a 52/53-week fiscal year ending on the tuesday closest to december 31. fiscal years 2009 and 2010 ended on december 29 , 2009 and december 28 , 2010 , respectively , and each contained 52 weeks . fiscal year 2011 contained 53 weeks and ended on january 3 , 2012. comparable store percentages presented in this item 7 are calculated excluding the 53 rd week . overview we are the largest owner/operator , franchisor and licensor of bagel specialty restaurants in the united states . as a leading fast-casual restaurant chain , our restaurants specialize in high-quality foods for breakfast , lunch and afternoon snacks in a bakery-café atmosphere with a neighborhood emphasis . our product offerings include fresh bagels and other bakery items baked on-site , made-to-order breakfast and lunch sandwiches on a variety of bagels , breads or wraps , gourmet soups and salads , assorted pastries , premium coffees and an assortment of snacks . our manufacturing and commissary operations prepare and assemble consistent , high-quality ingredients that are delivered fresh to our restaurants through our network of independent distributors . 2011 highlights and trends our results for 2011 reflect the soundness of our business model , the underlying strength of our brands and the talent and dedication of our employees . despite significant headwinds from commodity costs and another year of a challenging economic environment for our consumers , our results progressively improved as we went through 2011. we continued to focus on our key strategies which are : drive comparable store sales growth ; enhance corporate margins ; and accelerate unit growth . our 2011 system-wide comparable store sales were positive in each of the last three quarters of 2011 , with sequential improvement for all quarters in 2011. comparable store sales in our third and fourth quarters were progressively stronger than the first-half of 2011 on a system-wide and company-owned restaurants basis . replace_table_token_9_th the primary reasons for this sequential improvement was strong growth in average check , a favorable mix shift and strength in catering sales . this was partially offset by lower comparable transactions due largely to the rollover of free bagel promotions in 2010. we grew our breakfast sandwich business , on a comparable store basis , by 12.8 % which benefited from the continued success of our bagel thin sandwich platform and our focus on healthy , low calorie food options . our catering business , on a comparable store basis , grew by approximately 16.5 % with our focus on our online ordering system and on search engine/online marketing . we targeted our marketing investments at coupons , directional billboards and digital online media . in 2011 , we launched our enhanced coffee program which helped bolster comparable coffee sales by approximately 9 % in the fourth quarter . coffee sales now represent over 10 % of our menu mix and continue to grow . the impact of higher commodity costs negatively impacted our operating margin at our company-owned restaurants and was the primary underlying cause for the 1.1 % increase in cost of goods sold as a percentage of company-owned restaurant sales . most of the commodity pressure was related to wheat , coffee and dairy . as a 25 percentage of company-owned restaurant sales , cost of goods sold increased to 29.6 % from 28.5 % in 2010. on a combined basis , labor , other operating expenses , occupancy and marketing expenses were flat to 2010 as a percentage of company-owned restaurant sales . to partially offset the impact of inflation , we increased our menu prices and delivered on planned initiatives to reduce our costs . replace_table_token_10_th our cost initiatives drove $ 2.7 million in savings primarily driven by : changes to bagel thin manufacturing and pricing ; changes to bulk bagel packaging ; and freight savings . although revenues increased by 13.6 % for our manufacturing plant and commissaries , our margins declined by approximately $ 0.7 million , or 15.3 % , as a result of inflationary commodity costs and a shift in sales volume to lower margin export customers . to streamline our supply chain and to reduce our cost base , in september 2011 , we initiated a plan to close our five food commissary facilities . related to this plan , we incurred approximately $ 0.7 million of restructuring expenses in 2011 including employee termination benefits and lease termination expenses . we completed the closure of the grove city ( columbus ) , ohio commissary in the fourth quarter and the remaining four commissaries will be closed in the first quarter of 2012. we expect to incur an additional $ 0.5 million to $ 0.8 million of restructuring expenses in 2012. we expect to realize annual cost savings of approximately $ 1.5 million from the closure of these facilities . story_separator_special_tag 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 , adjusted net income or adjusted eps 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 29 , 34 , 39 and 43. we include in this report information on system-wide comparable store sales percentages . in fiscal 2011 , we modified the method by which we determine restaurants included in our comparable store sales percentages to include those restaurants in operation for a full six fiscal quarters . previously , comparable store sales percentages were based on restaurants that had been in operation for thirteen months . this methodology modification did not have a material impact on previously reported amounts , and therefore previously reported amount have not been restated . 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 . 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 . system-wide sales include sales at all our restaurants including those operated by franchisees and licensees . management reviews the increase or decrease in comparable store sales to assess business trends . comparable store sales exclude closed locations . 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 . results of operations for fiscal 2011 as compared to fiscal 2010 financial highlights consolidated revenues increased $ 11.9 million , which was driven by strong increases in our franchise and license revenue , a strong increase in manufacturing revenue and $ 7.3 million contributed by the extra 53 rd week in fiscal 2011. manufacturing and commissary revenues increased $ 4.1 million , which was driven by higher frozen dough sales to third party resellers and $ 0.5 million contributed by the extra 53 rd week in fiscal 2011 . 28 franchise and license revenue related revenues grew $ 1.2 million , which was driven by an increase in comparable store sales of +1.8 % and $ 0.1 million contributed by the extra 53 rd week in fiscal 2011. net income increased 24.3 % primarily due to interest savings , a lower effective tax rate and the extra 53 rd week . adjusted ebitda decreased 1.8 % primarily due to inflationary pressures in our product costs . eps increased to $ 0.78 per share on a dilutive basis in fiscal 2011 compared to $ 0.67 per share on a dilutive basis in fiscal 2010. this increase was primarily due to $ 0.03 in additional eps contributed by the extra 53 rd week , interest rate savings and a lower effective tax rate on our earnings . restructuring charges incurred in fiscal 2011 reduced our eps by approximately $ 0.04 per diluted share . consolidated results fiscal 2011 vs fiscal 2010 replace_table_token_11_th * as a result of the march 17 , 2010 agreement modifying our series z , we recognized a non-cash loss of $ 0.9 million on the extinguishment of debt , recorded additional redemption within stockholders ' equity and recorded a discount within interest expense . our income from operations declined by $ 3.1 million in 2011 to $ 24.5 million primarily as a result of inflationary pressures on our product costs , partially offset by $ 0.8 million in income from operations resulting from the 53 rd week in fiscal 2011. total revenues increased by $ 11.9 million to $ 423.6 million , primarily the result of increased revenue from our manufacturing and commissary segment and $ 7.3 million in revenue from the extra 53 rd week . system-wide comparable stores were +0.4 % for fiscal 2011 due to an increase in average check of +3.7 % that was partially offset by a decline in system-wide transactions of -3.3 % . our comparable transactions decreased from 2010 29 primarily due to the transaction impact of our 2011 promotion not generating as many transactions as our 2010 free bagel friday promotion .
| financial highlights operating income increased 10.7 % to $ 27.6 million in fiscal 2010 from $ 24.9 million in fiscal 2009. net income decreased $ 79.8 million . eps decreased to $ 0.67 per share on a dilutive basis in fiscal 2010 compared to $ 5.47 per share on a dilutive basis in fiscal 2009. this decrease was primarily due to the 33 benefit from income taxes that we recognized related to the reversal in fiscal 2009 of substantially all of our valuation allowance of $ 79.3 million on our deferred tax assets , which had an impact of $ 4.80 per share on a dilutive basis in fiscal 2009. adjusted ebitda increased $ 3.0 million , or 7.1 % , to $ 45.3 million in fiscal 2010 from $ 42.3 million in fiscal 2009. adjusted eps was $ 0.75 on a dilutive basis in fiscal 2010 compared to $ 0.67 on a dilutive basis in fiscal 2009. our net cash from operating activities increased by 29.8 % to $ 43.8 million from $ 33.7 million . consolidated results fiscal 2010 vs fiscal 2009 replace_table_token_19_th * as a result of the march 17 , 2010 agreement modifying our series z , we recognized a non-cash loss of $ 0.9 million on the extinguishment of debt , recorded additional redemption within stockholders ' equity and recorded a discount within interest expense . * * not meaningful our income from operations improved by $ 2.6 million in 2010 to $ 27.6 million as a result of higher revenues and lower cost of sales offset by an increase in operating expenses . total revenues increased by $ 3.1 million to $ 411.7 million as a result of increases in company-owned restaurant sales and franchise and license related revenues .
| 4,069 |
on september 6 , 2013 , we completed the acquisition of evaluated and unevaluated oil and natural gas properties located in glasscock county , texas in the permian basin , from private parties for $ 36.7 million consisting of cash and 123,803 shares of our restricted common stock , subject to customary closing adjustments . on february 25 , 2014 , we completed the acquisition of the mineral interests underlying 278 net acres in glasscock county , texas in the midland basin for $ 7.3 million . these mineral interests entitle us to receive royalties on all production from this acreage with no additional future capital or operating expenses required . on june 11 , 2014 , we completed the acquisition of evaluated and unevaluated oil and natural gas properties , totaling 460 net acres , located in reagan county , texas in the midland basin for $ 4.7 million , net of closing adjustments . on june 23 , 2014 , we completed the acquisition of evaluated and unevaluated oil and natural gas properties , totaling 24 net acres , located in glasscock county , texas for $ 1.8 million . on august 26 , 2014 , we completed a material acquisition of leasehold interests totaling 8,156 net acres in the midland basin , primarily within our core development area , for $ 192.5 million . divestitures on august 1 , 2013 , we completed the anadarko basin sale , consisting of oil and natural gas properties located in the anadarko granite wash , eastern anadarko and central texas panhandle ( the `` anadarko basin '' ) in the state of oklahoma and the state of texas , associated pipeline assets and various other related property and equipment for a purchase price of $ 438.0 million . the purchase price ( including the buyers ' deposits ) consisted of $ 400.0 million from certain affiliates of enervest , ltd. and $ 38.0 million from other third parties in connection with the exercise of such third parties ' preferential rights associated with certain of the oil and gas properties . approximately $ 388.0 million of the purchase price , excluding closing adjustments , was allocated to oil and natural gas properties pursuant to the rules governing full cost accounting . after transaction costs and adjustments at closing reflecting an economic effective date of april 1 , 2013 , the net proceeds were $ 428.3 million , net of working capital adjustments . the net proceeds were used to pay off our senior secured credit facility and for working capital purposes . effective august 1 , 2013 , the operations and cash flows of these properties were eliminated from our ongoing operations , and we do not have continued involvement in the operation of these properties . the oil and natural gas properties , which are a component of the assets sold , are not presented as discontinued operations pursuant to the rules governing full cost accounting for oil and gas properties . the results of operations of the associated pipeline assets and various other related property and equipment have been presented as results of discontinued operations , net of tax . accordingly , we have reclassified certain prior period amounts in the consolidated financial statements included elsewhere in this annual report as discontinued operations . see note 4.d to our consolidated financial statements included elsewhere in this annual report for additional discussion of these reclassifications and the anadarko basin sale . on december 20 , 2013 , we completed the sale of 37,000 net acres in the dalhart basin , including one producing well , for $ 20.4 million , subject to customary closing adjustments . the net proceeds were used for working capital purposes . on september 15 , 2015 , we completed the sale of non-strategic and primarily non-operated properties and associated production totaling 6,060 net acres and 123 producing properties in the midland basin to a third-party buyer for a purchase price of $ 65.5 million . after transaction costs reflecting an economic effective date of july 1 , 2015 , the net proceeds were $ 64.8 59 million , net of working capital and post-closing adjustments . the net proceeds were used for working capital purposes . this divestiture did not represent a strategic shift and will not have a major effect on our operations or financial results . core area of operations the oil and liquids-rich permian basin is characterized by multiple target horizons , extensive production histories , long-lived reserves , high drilling success rates and high initial production rates . as of december 31 , 2015 , we had assembled 135,408 net acres in the permian basin . sources of our revenue our revenues are primarily derived from the sale of oil , ngl and natural gas and the sale of purchased oil within the continental united states and do not include the effects of derivatives . for the year ended december 31 , 2015 , our revenues were comprised of sales of 54 % oil , 8 % ngl , 9 % natural gas , 28 % purchased oil and 1 % midstream service revenues . our oil , ngl and natural gas revenues may vary significantly from period to period as a result of changes in volumes of production and or changes in commodity prices . our midstream service revenues may vary due to the level of services provided to third parties for ( i ) gathered natural gas , ( ii ) gas lift fees , ( iii ) oil throughput fees and ( iv ) water services . our sales of purchased oil revenue may vary due to changes in oil prices . principal components of our cost structure lease operating expenses . story_separator_special_tag these are daily costs incurred to bring oil and natural gas out of the ground and to market , together with the daily costs incurred to maintain our producing properties . such costs also include maintenance , repairs and non-routine workover expenses related to our oil and natural gas properties . production and ad valorem taxes . production taxes are paid on oil , ngl and natural gas sold based on a percentage of revenues from products sold at market prices or at fixed rates established by federal , state or local taxing authorities . we take full advantage of all credits and exemptions in our various taxing jurisdictions . in general , the production taxes we pay correlate to the changes in oil , ngl and natural gas revenues . ad valorem taxes are property taxes based on the value of our reserves attributed to our properties . midstream service expenses . these are costs incurred to operate and maintain our ( i ) oil and natural gas gathering and transportation systems and related facilities , ( ii ) centralized oil storage tanks , ( iii ) natural gas lift , rig fuel and centralized compression infrastructure and ( iv ) water storage , recycling and transportation facilities . costs of purchased oil . these are costs associated with purchasing oil from other producers and the transportation costs to bring it to market . drilling rig fees . these are costs incurred for the early termination of drilling rig contracts . general and administrative ( `` g & a '' ) . these are costs incurred for overhead , including payroll and benefits for our corporate staff , costs of maintaining our headquarters , costs of managing our production and development operations , franchise taxes , audit and other fees for professional services , legal compliance and compensation expense related to employee and director stock awards , performance awards and option awards granted which have been recognized on a straight-line basis over the vesting period associated with the award . accretion of asset retirement obligations . accretion is a non-cash charge that represents changes in our asset retirement liability due to the passage of time . depletion , depreciation and amortization . under the full cost accounting method , we capitalize all acquisition , exploration and development costs , including certain related employee costs , incurred for the purpose of finding oil and natural gas within a cost center and then systematically expense those costs on a units of production basis based on evaluated oil , ngl and natural gas reserve quantities . we calculate depletion on the following types of costs : ( i ) all capitalized costs , other than the cost of investments in unevaluated properties and major development projects for which evaluated reserves can not yet be assigned , less accumulated amortization ; ( ii ) the estimated future expenditures to be incurred in developing evaluated reserves ; and ( iii ) the estimated dismantlement and abandonment costs , net of estimated salvage values . we calculate depreciation on the cost of fixed assets related to our pipelines and other fixed assets utilizing the straight-line method over the useful life of the asset , or in the case of leasehold improvements over the shorter of the estimated useful lives of the assets or the terms of the related leases . impairment expense . long-lived assets are considered impaired when their net carrying value is greater than the future undiscounted cash flows . once an asset is recognized as impaired , costs are incurred to write the asset down . with the continuing volatility in commodity prices , we may incur additional write-downs on our oil and natural gas properties . materials 60 and supplies and line-fill are recorded at the lower of cost or market ( `` lcm '' ) , with costs determined using the weighted-average cost method . other income ( expense ) gain ( loss ) on commodity derivatives . we utilize commodity derivatives to reduce our exposure to fluctuations in the price of crude oil and natural gas . this amount represents ( i ) the recognition of gains and losses associated with our open derivatives as commodity prices change and commodity derivatives expire or new ones are entered into , and ( ii ) our gains and losses on the settlement of these commodity derivatives . we classify these gains and losses as operating activities in our consolidated statements of cash flows . gain ( loss ) on interest rate derivatives . in prior periods , we utilized interest rate swaps and caps to reduce our exposure to fluctuations in interest rates on our outstanding debt . this amount represents ( i ) the recognition of gains and losses associated with interest rate derivatives as interest rates change and interest rate derivatives expire or new ones are entered into , and ( ii ) our gains and losses on the settlement of these interest rate contracts . we classify these gains and losses as operating activities in our consolidated statements of cash flows . during each of the years ended december 31 , 2013 and 2012 , we had one interest rate swap and one interest rate cap outstanding for a total notional amount of $ 100.0 million with fixed pay rates ranging from 1.11 % to 3.00 % until their expiration in september 2013. we had no interest rate derivatives in place in 2015 or 2014. income ( loss ) from equity method investee . we have invested in a company where we own 49 % of the ownership units . as such , we account for this investment under the equity method of accounting with our proportionate share of net income ( loss ) reflected in the consolidated statements of operations as `` loss from equity method investee '' and the carrying amount reflected in the consolidated balance sheet as `` investment in equity method investee . ''
| results of operations consolidated for the year ended december 31 , 2015 as compared to the year ended december 31 , 2014 , and for the year ended december 31 , 2014 as compared to the year ended december 31 , 2013 sales volume , revenue and pricing the following table sets forth information regarding oil , ngl and natural gas sales volumes , revenues and average sales prices from continuing operations per boe sold , for the periods presented : replace_table_token_16_th _ ( 1 ) for periods prior to january 1 , 2015 , we presented our sales volumes , revenues and average sales prices for oil and natural gas , which combined ngl with the natural gas stream , and did not separately report ngl . this change impacts the comparability of the three periods presented . ( 2 ) boe equivalents are calculated using a conversion rate of six mcf per one bbl . ( 3 ) the volumes presented are based on actual results and are not calculated using the rounded numbers presented in the table above . ( 4 ) realized oil , ngl and natural gas prices are the actual prices realized at the wellhead adjusted for quality , transportation fees , geographical differentials , marketing bonuses or deductions and other factors affecting the price received at the wellhead . the prices presented are based on actual results and are not calculated using the rounded numbers presented in the table above . ( 5 ) hedged prices reflect the after-effect of our commodity hedging transactions on our average sales prices . our calculation of such after-effects include current period settlements of matured commodity derivatives in accordance with gaap and an adjustment to reflect premiums incurred previously or upon settlement that are attributable to instruments that settled in the period . the prices presented are based on actual results and are not calculated using the rounded numbers presented in the table above .
| 4,070 |
such capitalized costs include external direct story_separator_special_tag the following discussion and analysis of our financial condition and results of operations should be read together with our consolidated financial statements and related notes included elsewhere in this annual report on form 10-k. a discussion regarding our financial condition and results of operations for fiscal 2020 compared to fiscal 2019 is presented under results of operations of this form 10-k. discussions regarding our financial condition and results of operations for fiscal 2019 compared to 2018 have been omitted from this annual report on form 10-k , but can be found in `` item 7. management 's discussion and analysis of financial condition and results of operations '' in our annual report on form 10-k for the fiscal year ended december 31 , 2019 , filed with the sec on february 28 , 2020 , which is available without charge on the sec 's website at www.sec.gov and on our investor relations website at investor.aligntech.com . overview our purpose is to transform smiles and change lives , and we are accomplishing this goal by establishing clear aligners as the principal solution for the treatment of malocclusions and our invisalign clear aligners as the treatment solution of choice by orthodontists , general dental practitioners and patients globally . to date , over 9.6 million people worldwide have been treated with our invisalign system . to encourage consumers to treat malocclusions with clear aligners under the direction and supervision of licensed dental professionals , we have developed a business strategy designed to bring to market solutions that we believe strengthen our digital dental platform for doctors , labs and partners , including establishing the itero intraoral scanner and related services as the preferred 3d digital scanning solution and integrating computer-aided design and computer-aided manufacturing ( “ cad/cam ” ) solutions and workflows into the markets for clear aligner orthodontics and dental restorative treatments . our business strategic priorities are currently based on four principal pillars of growth : ( i ) international expansion ; ( ii ) gp adoption ; ( iii ) patient demand & conversion ; and ( iv ) orthodontic utilization . for a further description of our strategic growth drivers , please see the business - business strategy section of this annual report on form 10-k. we strive to deliver on each of our strategic growth drivers through a variety of interrelated enterprise-wide efforts including : new technology , products , and feature enhancements . we believe technological innovations allowing dental professionals to more quickly and accurately diagnose , plan and treat a wide range of cases from simple to complex combined with new and improved products drives greater treatment predictability , clinical applicability , ease of use and confidence for the dental professionals we serve ; thereby supporting adoption of invisalign treatment in their practices . furthermore , we believe the digital revolution in dentistry is an important aspect of the experience for our customers and their patients , encouraging the utilization of our invisalign solution and therefore comprising an important component of our digital approach . ▪ invisalign clear aligners : our product portfolio includes invisalign treatment with mandibular advancement , invisalign go , invisalign first and invisalign moderate . we also continue to increase the clinical efficacy and applicability of our products as exemplified most recently in the announcement of invisalign g8 with smartforce aligner activation , and our clincheck pro 6.0 3d treatment planning software . each of these advancements broadens and strengthens our reach into key markets and demographics central to our strategic plans . 34 ▪ itero scanner : we continue to expand our intraoral digital scanning solutions ; periodically launching or announcing new offerings including most recently the itero element ® plus series of scanner solutions and previously the itero element 2 , itero element flex and the itero element 5d imaging system , for which we announced in march 2020 that we had obtained u.s. fda 501 ( k ) clearance and which we continue to release in additional countries . the clearance of the itero element 5d imaging system in the u.s. markets and its release in other countries allows us to sell this first integrated dental imaging system that simultaneously records 3d , intra-oral color and near-infrared ( “ niri ” ) images into a single , integrated scan that enables comparison over time using the itero timelapse technology ; thereby improving doctor experiences and improving engagement opportunities and communications with their patients . the itero element 5d aids in the detection and monitoring of interproximal caries lesions above the gingiva without using harmful radiation . exocad : on april 1 , 2020 , we completed the acquisition of privately-held exocad global holdings gmbh ( “ exocad ” ) , a german dental cad/cam software company that offers fully integrated workflows to dental labs and practices . we believe the acquisition strengthens our digital platform by adding exocad 's expertise in restorative dentistry , implantology , guided surgery , and smile design to extend our digital dental solutions and broadens the align digital platform towards fully interdisciplinary end-to-end workflows dentistry in lab and at chairside . exocad also broadens our reach in digital dentistry with over 200 partners and more than 40,000 licenses installed worldwide . to further the transformation of dental and orthodontic practices from outdated manual and analog practices to end-to-end digital workflows , in 2020 we introduced virtual solutions such as invisalign® virtual appointment and invisalign® virtual care ; solutions that facilitate the safe , effective and successful continuity of treatment of patients by conveniently connecting doctors and their patients throughout their treatment plans . invisalign adoption . our goal is to establish invisalign clear aligners as the treatment of choice for treating malocclusion , ultimately driving increased product adoption and frequency of use by dental professionals , which we refer to as “ utilization rates. story_separator_special_tag additionally , we believe that well-designed , targeted sales and marketing promotions help us build on our strong brand awareness and differentiate us from traditional and emerging competitors . accordingly , we continue to increase investments intended to grow consumer demand . during 2020 , our marketing and consumer engagement included 36 social media campaigns targeting teens and mothers through social media influencers , becoming the official clear aligner sponsor of the national football league and introducing invisalign stickables which patients can apply to their aligners as a fun and simple way to distinguish themselves and our products from the competition . we expect to make further investments to create additional demand for invisalign system treatment ; driving more consumers to dental professionals for those treatments . we also believe that investing in our sales teams is important to our success . the addition of sales representatives in apac in 2020 follows increases in the u.s. in 2019. we believe the realignment of our sales teams to focus on the channels they serve , allows us to partner with doctors in more meaningful ways ; assessing their specific needs and helping to tailor their practices for success while encouraging increased adoption and engagement of a variety of our products and services . covid-19 update the covid-19 pandemic disrupted our business and the businesses and lives of our customers , their patients and our suppliers in unprecedented ways ; requiring us to reevaluate priorities , adapt to new ways of doing business and developing new strategies and plans quickly and revising them frequently as conditions evolved . by the end of the fourth quarter of 2020 , many dental practices had resumed operations although often at capacities less than pre-pandemic levels . additionally , in virtually all practices the effects of covid-19 persist , typically in the form of additional preventative safety measures such as added sterilization requirements , increased costs for personal protective equipment and staggered patient visits intended to reduce the risks of cross contamination , each of which contribute to fewer patient visits per day . to help doctors through the pandemic and to stimulate demand for our products and services during the recovery , we modified existing programs and implemented new promotions in 2020 , some of which remain in effect . for instance , we did not implement annual price increases on our various clear aligner products in 2020 , offered promotions to encourage doctors with patients in wires and brackets to switch to our invisalign clear aligners , allowed doctors to maintain their promotional status levels notwithstanding declining sales , increased advertising and launched new media campaigns , implemented new promotions and modified others , all in an effort to help our customers and accelerate our mutual return to normal operations . as a result of these efforts , during the year ended december 31 , 2020 , we recorded net revenues of $ 2.5 billion , an increase of 2.7 % compared to the same period in 2019. during the year ended december 31 , 2020 , clear aligner case volume was 1.6 million , an increase of 7.0 % compared to the same period in 2019 and systems and services net revenues decreased by 2.8 % compared to the same period in 2019. in the short term , our business remains susceptible to the covid-19 pandemic . concerns about additional outbreaks of the virus , the spread of new variants of the virus and the efficacy of vaccines against those variants , and efforts to slow or prevent a recurrence of its spread are likely to continue causing disruption and uncertainties in the markets , adversely impacting our customers and their patients for an indeterminate period of time . this in turn could impact our operations as purchasing decisions are delayed or lost , create logistics complexities related to uneven or rapid changes in demand , and sales and marketing efforts are postponed or prove ineffective . conversely , we believe the pandemic emphasizes the benefits of digital dentistry and virtual appointments over traditional practice methods that require frequent in office patient visits to manually adjust wires and brackets . we further believe that this will in turn motivate doctors to use more digital solutions , including our itero scanner , exocad cad/cam software and the invisalign system . as we assess the possible future short- and long-term impacts to our revenues , operations and financial condition from the covid-19 pandemic , we are continually evaluating macroeconomic as well as industry-specific factors . for instance , among the many factors we continue to monitor are governmental and societal reactions to the virus , global and regional economic activity , unemployment and its potential impact on discretionary spending and health insurance coverage , patient reluctance or fear of exposure as a result of orthodontic or dental office visits , travel restrictions on employees , suppliers , customers and their patients and other external factors beyond our control . furthermore , if the threat of further spread of covid-19 occurs or the pace of recovery by dental practices is haphazard or inconsistent , there may be a substantial impact on our employees or suppliers , our operations , including our ability to timely obtain the materials needed to manufacture our products and manufacture and deliver those products to customers ; any of which may harm our results of operations , financial condition and overall financial performance . moreover , many of the measures we implemented to protect our employees from the spread of the virus remain in effect . for instance , many of our offices across the globe remain underutilized as employees continue to work from home . we are also screening our employees , providing them with personal protective equipment , and altering work environments to facilitate social distancing , which has in the past and may in the future harm productivity . furthermore , if our employees or their families are sickened by covid-19 , our ability to respond or mitigate the impact of covid-19 may be adversely impacted .
| results of operations net revenues by reportable segment we group our operations into two reportable segments : clear aligner segment and imaging systems and cad/cam services ( “ systems and services ” ) segment . our clear aligner segment consists of comprehensive products , non-comprehensive products and non-case revenues as defined below : comprehensive products include , but are not limited to , invisalign comprehensive and invisalign first . non-comprehensive products include , but are not limited to , invisalign moderate , lite and express packages and invisalign go . non-case includes , but is not limited to , vivera retainers along with our training and ancillary products for treating malocclusion . our systems and services segment consists of our itero intraoral scanning systems , which includes a single hardware platform and restorative or orthodontic software options , orthocad services and ancillary products , as well as exocad 's cad/cam software solution that integrates workflows to dental labs and dental practices . 38 net revenues for our clear aligner and systems and services segments by region for the year ended december 31 , 2020 , 2019 and 2018 are as follows ( in millions ) : replace_table_token_0_th changes and percentages are based on actual values . certain tables may not sum or recalculate due to rounding . clear aligner case volume by region case volume data which represents clear aligner case shipments by region for the year ended december 31 , 2020 , 2019 and 2018 is as follows ( in thousands ) : replace_table_token_1_th changes and percentages are based on actual values . certain tables may not sum or recalculate due to rounding .
| 4,071 |
the preparation of our consolidated financial statements in conformity with gaap requires us to make estimates and assumptions that affect the reported amounts in our consolidated financial statements and the accompanying notes including various claims and contingencies related to lawsuits , taxes , environmental and other matters arising during the normal course of business . we apply our best judgment , our knowledge of existing facts and circumstances and actions that we may undertake in the future in determining the estimates that affect our consolidated financial statements . we evaluate our estimates on an ongoing basis using our historical experience , as well as other factors we believe appropriate under the circumstances , such as current economic conditions , and adjust or revise our estimates as circumstances change . as future events and their effects can not be determined with precision , actual results may differ from these estimates . overview business overview we are a diversified global provider of leading engineered technologies to the environmental , energy , and fluid handling and filtration industrial segments , targeting specific niche-focused end markets through an attractive asset-light business model . we provide a wide spectrum of products and services including dampers & diverters , cyclonic technology , thermal oxidizers , separation and filtration systems , selective catalytic reduction ( “ scr ” ) and selective non-catalytic reduction ( “ sncr ” ) systems , scrubbers , dampers and silencers , exhaust systems , fluid handling equipment and plant engineered services and engineered design build fabrication . these products play a vital role in helping companies achieve exacting production standards , meeting increasing plant needs and stringent emissions control regulations around the globe . we believe that globally we serve the broadest range of markets and industries including power , municipalities , chemical , industrial manufacturing , mid-stream pipeline natural gas transmission , refining , petrochemical , metals , minerals & mining companies , as well as hospitals and universities . therefore , our business is not concentrated in a single industry or customer . industry trends and corporate strategy we are a global corporation with worldwide operations . as a global business , our operations are affected by worldwide , regional and industry-specific economic factors , wherever we operate or do business . our geographic and industry diversity , and the breadth of our product and services portfolios , have helped mitigate the impact of any one industry or the economy of any single country on our consolidated operating results . we believe growth for our products and services is driven by the increasing demand for energy consumption and a shift towards cleaner sources such as natural gas , nuclear , and renewable sources . these trends should stimulate investment in new power generation facilities , pipeline expansion and related infrastructure , and in upgrades of existing facilities . with a shift to cleaner , more environmentally responsible power generation , power providers and industrial power consumers are building new facilities that use cleaner fuels . in developed markets , natural gas is increasingly becoming one of the energy sources of choice . we supply product offerings throughout the entire natural gas infrastructure value chain and believe expansion will drive growth within our energy segment for our pressure products and scr systems for natural-gas-fired power plants . increased global natural gas production as a percent of total energy consumption , miles of new pipeline being added globally , and an increase in liquification capacity all stand to drive the need for our products . we also believe there is a trend in both developed and emerging markets to control and reduce emissions of harsher fuel sources for which our air pollution control equipment is required . in emerging markets including china , india , and south east asia our business is positioned to benefit from tightening of air pollution standards . in developed markets , growth of industrialization will drive greater output of emissions requiring our equipment as well . in both markets , we expect capital expenditures for our equipment to increase and the need for our aftermarket services to grow as companies seek to meet new standards . we continue to focus on increasing revenues and profitability globally while continuing to strengthen and expand our presence domestically . our operating strategy has historically involved horizontally expanding our scope of technology , products , and services through selective acquisitions and the formation of new business units that are then vertically integrated into our growing group of turnkey system providers . our continuing focus will be on global growth , market coverage , and expansion of our asia operations . operational excellence , margin expansion , after-market recurring revenue growth , and safety leadership are also critical to our growth strategy . 26 operations overview we operate under a “ hub and spoke ” business model in which executive management , finance , administrative and marketing staff serves as the hub while the sales channels serve as spokes . we use this model throughout our operations . this has provided us with certain efficiencies over a more decentralized model . the company 's segment presidents manage our division managers who are responsible for successfully running their operations , that is , sales , gross margins , manufacturing , pricing , purchasing , safety , employee development and customer service excellence . the segment presidents work closely with our ceo on global growth strategies , operational excellence , and employee development . the headquarters ( hub ) focuses on enabling the core back-office key functions for scale and efficiency , that is , accounting , payroll , human resources/benefits , information technology , safety support , internal control over financial reporting , and administration . we have excellent organizational focus from headquarters throughout our divisional businesses with clarity and minimal duplicative work streams . we are structured for growth and will do future bolt-on acquisitions . story_separator_special_tag the increase in sales was primarily due to the acquisitions of hee in mid-august 2014 , sat at the end of september 2014 , emtrol at the beginning of november 2014 , zhongli at the end of december 2014 , and pmfg at the beginning of september 2015. these acquisitions contributed an incremental $ 103.0 million of sales in 2015. gross profit increased by $ 24.4 million , or 28.8 % , to $ 109.2 million in 2015 compared with $ 84.8 million in 2014. gross profit as a percentage of sales was 29.7 % in 2015 compared with 32.2 % in 2014. the increase in gross profit on a dollar basis was the result of the aforementioned acquisitions , which contributed $ 27.1 million . this increase was partially offset by a decline in overall gross profit percentage due to product mix . on an as adjusted basis , non-gaap gross profit was $ 110.3 million or 30.0 % as a percentage of sales for 2015 , an increase of $ 24.9 million on a dollar basis compared with non-gaap gross margin of $ 85.4 million or 32.4 % as a percentage of sales in 2014 . 30 selling and administrative expenses were $ 67.5 million in 2015 compared with $ 51.4 million in 2014. the increase in selling and administrative expenses was the result of the aforementioned acquisitions . selling and administrative expenses as a percen tage of sales were 18.4 % in 2015 compared with 19.5 % in 2014. acquisition and integration expenses of $ 7.9 million in 2015 and $ 1.3 million in 2014 relate to acquisition activities , which include legal , accounting , and banking expenses . amortization and earn-out expense was $ 25.6 million in 2015 and $ 10.1 million in 2014. this increase was the result of the aforementioned acquisitions . of the increase in 2015 , $ 11.2 million is an adjustment to the fair value of the earn-out from the zhongli acquisition . the fair value adjustment to the earn-out was the result of zhongli performing above initial acquisition date operational expectations . legal reserves of $ 0.3 million in 2014 relate to the settlement of the valero lawsuit . there were no such reserves in 2015. see note 13 to our consolidated financial statements for more information . operating income for 2015 was $ 4.9 million , a decrease of $ 16.8 million from $ 21.7 million in 2014. operating income as a percentage of sales for 2015 was 1.3 % compared with 8.2 % for 2014. the decrease in operating income was attributable to the aforementioned acquisitions , and associated acquisition and integration expenses , as well as the amortization and earn-out expenses . on an as adjusted basis , non-gaap operating income was $ 42.8 million for 2015 , an increase of $ 8.8 million from 2014. non-gaap operating income as a percentage of sales for 2015 was 11.6 % compared with 12.9 % for 2014 , down slightly year over year . other expense for 2015 was $ 2.1 million compared with $ 2.3 million in 2014 , and was comprised primarily of foreign currency transaction losses in 2015 and 2014. the expense in 2015 and 2014 is primarily attributable to a translation remeasurement on u.s. dollar denominated intercompany debt at our subsidiary in the netherlands . interest expense increased to $ 6.0 million in 2015 from $ 3.1 million in 2014 , due to higher debt levels in 2015 , which debt was incurred in connection with the pmfg and emtrol acquisitions . income tax expense was $ 2.6 million and $ 3.1 million in 2015 and 2014 , respectively . the effective tax rate for 2015 was ( 85.2 ) % compared with 19.3 % in 2014. the effective tax rate in 2015 was adversely impacted $ 3.9 million by nondeductible earnout expenses , $ 1.4 million by nondeductible deal costs related to the pmfg acquisition , as well as $ 1.2 million of certain permanent differences , which more than offset the benefits of $ 1.5 million from foreign rate differences and $ 1.3 million of changes in uncertain tax position reserves . business segments the company 's operations in 2016 , 2015 and 2014 are organized and reviewed by management along its product lines or end market that the segment serves and are presented in three reportable segments . the results of the segments are reviewed through to the “ income from operations ” line on the consolidated statements of operations . the amounts presented in the net sales table below and in the following comments regarding our net sales at the reportable business segment level exclude both intra-segment and inter-segment net sales . the income ( loss ) from operations table and corresponding comments regarding operating income at the reportable segment level include both intra-segment and inter-segment operating income . replace_table_token_8_th 31 ( 1 ) includes adjustment for revenue on intercompany jobs . replace_table_token_9_th ( 2 ) includes corporate compensation , professional services , information technology , acquisition and integration expenses , and other general and administrative corporate expenses . comparison of the years ended december 31 , 2016 and 2015 energy segment our energy segment net sales increased $ 61.2 million to $ 203.4 million in the year ended december 31 , 2016 compared with $ 142.2 million in the year ended december 31 , 2015 , an increase of 43.1 % . the increase is primarily due to the pmfg acquisition , which contributed an incremental $ 60.9 million in net sales , for the year ended december 31 , 2016. operating income from the energy segment increased $ 20.1 million to $ 23.6 million for the year ended december 31 , 2016 compared with $ 3.5 million in the year ended december 31 , 2015 , an increase of 575.9 % .
| consolidated results our consolidated statements of operations for the years ended december 31 , 2016 , 2015 and 2014 are as follows : replace_table_token_4_th to compare operating performance between the years ended december 31 , 2016 , 2015 and 2014 , the company has adjusted gaap operating ( loss ) income and gaap net ( loss ) income to exclude ( 1 ) acquisition and integration related expenses , including legal , accounting , and banking expenses , ( 2 ) amortization and contingent acquisition expenses , including amortization of acquisition-related intangibles , retention , severance , and earn-out expenses , ( 3 ) legal reserves , ( 4 ) inventory valuation and plant , property and equipment valuation adjustments related to the met-pro and pmfg acquisitions , ( 5 ) intangible asset and goodwill impairment , ( 6 ) foreign currency remeasurement with respect to intercompany loans , ( 7 ) write-off of deferred financing fees associated with debt extinguishment , ( 8 ) gains on life insurance settlements , and ( 9 ) with respect to net income , associated tax benefits of these charges . the company has adjusted gaap gross profit to exclude inventory valuation and plant , property and equipment valuation adjustments related to the met-pro and pmfg acquisitions . see “ note regarding use of non-gaap financial measures ” above . the following tables present the reconciliation of gaap gross profit and gaap gross profit margin to non-gaap gross profit and non-gaap gross profit margin , gaap operating ( loss ) income and gaap operating margin to non-gaap operating income and non-gaap operating margin , and gaap net ( loss ) income attributable to ceco environmental corp. to non-gaap net income attributable to ceco environmental corp. : replace_table_token_5_th 28 replace_table_token_6_th replace_table_token_7_th comparison of the years ended december 31 , 2016 and 2015 consolidated sales in 2016 were $ 417.0 million compared with $ 367.4 million in 2015 , an increase of $ 49.6 million .
| 4,072 |
the year-to-year consolidated net sales increase reflects sales increases of $ 3,076 ( 2.7 % ) for our nobelclad segment and $ 6,247 ( 8.1 % ) for our dynaenergetics segment . these sales increases were partially offset by a sales decrease of $ 1,317 ( 14.9 % ) for our amk technical services segment . largely as a result of an increase of $ 5,512 in operating expenses , our consolidated income from operations decreased to $ 11,697 in 2013 from $ 17,403 in 2012. this $ 5,706 decrease in operating income reflects decreases of $ 349 , $ 2,198 and $ 549 in the operating income reported by our nobelclad , dynaenergetics and amk technical services business segments , respectively , and a net increase of $ 2,610 in aggregate unallocated corporate expenses and stock-based compensation expense which includes $ 2,965 of non-recurring expenses associated with executive management retirements . reported consolidated operating income for 2013 and for 2012 includes amortization expense of $ 6,348 and $ 6,210 , respectively , relating to purchased intangible assets associated with several acquisitions executed between november 2007 and january 2012. we reported net income of $ 7,495 in 2013 compared to $ 11,696 in 2012. the explosion-welded clad plate market is dependent upon sales of products for use by customers in a number of heavy industries , including oil and gas , chemicals and petrochemicals , aluminum production , power generation , shipbuilding , industrial refrigeration , alternative energy and hydrometallurgy . these industries tend to be cyclical in nature and the uneven worldwide economic recovery has affected many of these markets . while certain sectors continue to be slow , including alternative energy , hydrometallurgy and power generation , quoting activity in other end markets remains healthy , and we continue to track an extensive list of projects . while timing of new order inflow remains difficult to predict , we believe that our nobelclad segment is well-positioned to benefit as global economic conditions improve . as a result of acquisitions made during 2009 , 2010 and 2012 and strong organic sales growth in 2010 and 2011 , our dynaenergetics segment has grown into a second core business for us , generating 40 % , 39 % and 35 % of our consolidated net sales in 2013 , 2012 and 2011 , respectively , as compared to only 13 % of our consolidated net sales in 2009. our nobelclad backlog decreased to $ 36,930 at december 31 , 2013 from $ 46,398 at december 31 , 2012. based upon the negative impact this backlog decrease is expected to have on nobelclad 's 2014 sales and an expected year over year sales increase for our dynaenergetics business segment , we believe that our 2014 consolidated net sales will be flat to up 4 % versus the $ 209,573 in consolidated net sales that we reported in 2013. net sales nobelclad 's revenues are generated principally from sales of clad metal plates and sales of transition joints , which are made from clad plates , to customers that fabricate industrial equipment for various industries , including oil and gas , petrochemicals , alternative energy , hydrometallurgy , aluminum production , shipbuilding , power generation , industrial refrigeration , and similar industries . while a large portion of the demand for our clad metal products is driven by new plant construction and large plant expansion projects , maintenance and retrofit projects at existing chemical processing , petrochemical processing , oil refining , and aluminum smelting facilities also account for a significant portion of total demand . dynaenergetics ' revenues are generated principally from sales of shaped charges , detonators and detonating cord , and bidirectional boosters and perforating guns to customers who perform the perforation of oil and gas wells and from sales of seismic products to customers involved in oil and gas exploration activities . 28 amk technical services ' revenues are generated from welding , heat treatment , and inspection services that are provided with respect to customer-supplied parts for customers primarily involved in the power generation industry and aircraft engine markets . a significant portion of our revenue is derived from a relatively small number of customers ; therefore , the failure to complete existing contracts on a timely basis , to receive payment for such services in a timely manner , or to enter into future contracts at projected volumes and profitability levels could adversely affect our ability to meet cash requirements exclusively through operating activities . we attempt to minimize the risk of losing customers or specific contracts by continually improving product quality , delivering product on time and competing aggressively on the basis of price . gross profit and cost of products sold cost of of products sold for nobelclad includes the cost of metals and alloys used to manufacture clad metal plates , the cost of explosives , employee compensation and benefits , freight , outside processing costs , depreciation of manufacturing facilities and equipment , manufacturing supplies and other manufacturing overhead expenses . cost of products sold for dynaenergetics includes the cost of metals , explosives and other raw materials used to manufacture shaped charges , detonating products and perforating guns as well as employee compensation and benefits , depreciation of manufacturing facilities and equipment , manufacturing supplies and other manufacturing overhead expenses . amk technical services ' cost of products sold consists principally of employee compensation and benefits , welding supplies ( wire and gas ) , depreciation of manufacturing facilities and equipment , outside services and other manufacturing overhead expenses . backlog we use backlog as a primary means of measuring the immediate outlook for our nobelclad business . we define “ backlog ” at any given point in time as consisting of all firm , unfulfilled purchase orders and commitments at that time . generally speaking , we expect to fill most backlog orders within the following 12 months . from experience , most firm purchase orders and commitments are realized . story_separator_special_tag the gross profit margin for amk technical services decreased to 16.9 % in 2013 from 22.1 % in 2012 , with this decrease relating principally to the $ 1,317 decrease in amk 's 2013 sales and the fact that the majority of amk 's manufacturing costs are fixed in nature . based upon the expected contribution to 2014 consolidated net sales by each of our three business segments , we expect our consolidated full year 2014 gross margin to be in a range of 29 % to 31 % as compared to the 28.4 % gross margin that we reported for 2013. story_separator_special_tag style= '' padding-left:0px ; text-indent:0px ; line-height : normal ; padding-top:10px ; '' > replace_table_token_11_th we reported net other expense of $ 528 in 2013 compared to net other expense of $ 32 in 2012. our 2013 net other income includes net realized and unrealized foreign exchange losses of $ 836 and net other income items aggregating $ 308. our 2012 net other expense includes net realized and unrealized foreign exchange losses of $ 45 and net other income items aggregating $ 13. interest income ( expense ) , net replace_table_token_12_th we recorded net interest expense of $ 641 in 2013 compared to net interest expense of $ 819 in 2012. the decreases in 2013 net interest expense reflects relatively stable interest rates , decreases in average outstanding borrowings during the year and an increase in capitalized interest on our greenfield capital investment projects in russia and north america . income tax provision replace_table_token_13_th we recorded an income tax provision of $ 2,941 in 2013 compared to $ 4,858 in 2012. our 2013 effective tax rate decreased to 27.9 % from 29.3 % in 2012. our consolidated income tax provision for 2013 and 2012 included $ 1,203 and $ 3,587 , respectively , related to u.s. taxes , with the remainder relating to net foreign tax provisions of $ 1,738 in 2013 and $ 1,271 in 2012 , respectively , associated with our foreign operations and holding companies . our statutory income tax rates range from 20 % to 35 % for our various u.s. and foreign operating entities and holding companies . in january 2013 , the united states congress authorized , and the president signed into law , changes to the u. s. income tax laws which were retroactive to january 1 , 2012. however , since these changes were enacted in 2013 , the financial statement benefit of such legislation could not be reflected until the first quarter of 2013. the $ 914 tax benefit that we recognized in 2013 had a significant favorable impact on full year effective tax rate . during 2013 , we also recorded a one-time tax expense of $ 812 associated with a german tax audit settlement as further discussed below . this non-recurring adjustment had a significant unfavorable impact on full year effective tax rate . excluding the effects of the $ 914 tax benefit and the $ 812 of additional german tax expense , our 2013 effective tax rate would have been 29 % . year-to-year fluctuations in our consolidated effective tax rate also reflect the different tax rates in our u.s. and foreign tax jurisdictions and the variation in contribution to consolidated pre-tax income from each jurisdiction for the respective year . tax returns of our german subsidiaries have been under routine examination by the german tax authorities for most of 2013. during 2013 , german tax authorities proposed and we agreed to a settlement . the key provisions of the settlement resulted in a net reduction of the subsidiaries ' loss carryforwards , which reduced the non-current deferred tax assets associated with these carryforwards that were recorded on our books . thus , we recorded an additional $ 812 in income tax expense to reflect these reductions . the settlement also resulted in an increase in the tax basis of our amortizable , intangible assets ; however , under u.s. gaap , this increase is not reflected in the financial statements . the tax savings from the increase in these assets will be realized by the company over the next nine years as a reduction in the taxes payable . we expect our blended effective tax rate for the full year 2014 to range from 29 % to 30 % based on projected pre-tax income . 33 adjusted ebitda 2013 2012 change percentage change adjusted ebitda $ 27,901 $ 33,595 $ ( 5,694 ) ( 16.9 ) % adjusted ebitda is a non-gaap measure that we believe provides an important indicator of our ongoing operating performance . our aggregate non-cash depreciation , amortization of purchased intangible assets and stock-based compensation expense for 2013 and 2012 was $ 16,296 and $ 16,190 , respectively . these aggregate non-cash charges represent a significant percentage of the consolidated operating income that we reported for these periods . we use non-gaap ebitda and adjusted ebitda in our operational and financial decision-making and believe that these non-gaap measures facilitate a more meaningful and accurate comparison of the operating performance of our three business segments than do certain gaap measures . research analysts , investment bankers and lenders also use ebitda and adjusted ebitda to assess operating performance . in addition , during 2013 and 2014 , our management incentive awards will be based , in part , upon the amount of ebitda achieved during the year . a portion of the equity incentive awards granted in 2014 to our named executive officers will be earned based on the amount of adjusted ebitda achieved in 2014 and 2015. the following is a reconciliation of the most directly comparable gaap measure to adjusted ebidta . replace_table_token_14_th adjusted ebitda decreased 16.9 % to $ 27,901 in 2013 from $ 33,595 in 2012 primarily due to the decrease in operating income of $ 5,706 as discussed above . year ended december 31 , 2012 compared to year ended december 31 , 2011 net sales 2012 2011 change percentage change net sales $ 201,567 $ 208,891 $ ( 7,324 ) ( 3.5 ) % net sales for 2012 decreased 3.5
| general and administrative expenses replace_table_token_8_th general and administrative expenses increased by $ 6,132 , or 32.0 % , to $ 25,273 in 2013 from $ 19,141 in 2012. excluding the impacts of $ 2,965 in non-recurring expenses associated with management retirements and a $ 756 asset impairment charge related to an information system project in russia , our general and administrative increased $ 2,411 or 12.6 % . this increase includes an aggregate increase of $ 733 in salaries , benefits and payroll taxes , an increase of $ 1,215 in consulting/professional service expenses , including $ 439 for our re-branding project , an increase of $ 466 in business travel expenses , an increase of $ 342 in other personnel costs ( principally recruiting and relocation ) , and a net decrease of $ 345 in all other expense categories . excluding the impact of non-recurring management retirement and asset impairment expenses , general and administrative expenses , as a percentage of net sales , increased to 10.3 % in 2013 from 9.5 % in 2012. selling and distribution expenses replace_table_token_9_th selling and distribution expenses decreased by 4.5 % to $ 16,196 in 2013 from $ 16,954 in 2012. this decrease in our selling and distribution expenses includes decreases in stock-based compensation and commissions of $ 917 and $ 175 , respectively , which were offset by increases in salaries , benefits and payroll taxes of $ 222 and a net increase of $ 112 in all other expense categories . the large decrease in 2013 stock-based compensation expense relates principally to the december 31 , 2012 retirement of a senior sales executive for whom $ 860 of stock-based compensation expense was recognized in 2012. as a percentage of net sales , selling and distribution expenses decreased to 7.7 % in 2013 compared to 8.4 % in 2012. our 2013 consolidated selling and distribution expenses include $ 5,574 and $ 10,377 for our nobelclad and dynaenergetics business segments , respectively .
| 4,073 |
those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects . our audit included obtaining an understanding of internal control over financial reporting , assessing the risk that a material weakness exists , testing and evaluating the design and operating effectiveness of internal control story_separator_special_tag overview we are a leading , less-than-truckload ( “ ltl ” ) , union-free motor carrier providing regional , inter-regional and national ltl service and other value-added services from a single integrated organization . in addition to our core ltl services , we offer our customers a broad range of value-added services including ground and air expedited transportation , container delivery , truckload brokerage , supply chain consulting , warehousing and consumer household pickup and delivery services . we also offer worldwide freight forwarding services . more than 90 % of our revenue has historically been derived from transporting ltl shipments for our customers , whose demand for our services is generally tied to industrial production and the overall health of the u.s. domestic economy . in analyzing the components of our revenue , we monitor changes and trends in the following key metrics : revenue per hundredweight – this measurement reflects the application of our pricing policies to the services we provide , which are influenced by competitive market conditions and our growth objectives . generally , freight is rated by a class system , which is established by the national motor freight traffic association , inc. light , bulky freight typically has a higher class and is priced at higher revenue per hundredweight than dense , heavy freight . fuel surcharges , accessorial charges , revenue adjustments and revenue for undelivered freight are included in this measurement . revenue for undelivered freight is deferred for financial statement purposes in accordance with our revenue recognition policy ; however , we believe including it in our revenue per hundredweight metrics results in a better indicator of changes in our yields by matching total billed revenue with the corresponding weight of those shipments . revenue per hundredweight is a commonly-used indicator of pricing trends , but this metric can be influenced by many other factors , such as changes in fuel surcharges , weight per shipment , length of haul and the mix of our freight . as a result , changes in revenue per hundredweight do not necessarily indicate actual changes in underlying base rates . weight per shipment – fluctuations in weight per shipment can indicate changes in the class , or mix , of freight we receive from our customers , as well as changes in the number of units included in a shipment . generally , increases in weight per shipment indicate higher demand for our customers ' products and overall increased economic activity . changes in weight per shipment generally have an inverse effect on our revenue per hundredweight , as an increase in weight per shipment will typically cause a decrease in revenue per hundredweight . average length of haul – we consider lengths of haul less than 500 miles to be regional traffic , lengths of haul between 500 miles and 1,000 miles to be inter-regional traffic , and lengths of haul in excess of 1,000 miles to be national traffic . by analyzing this metric , we can determine the success and growth potential of our service products in these markets . changes in length of haul generally have a direct effect on our revenue per hundredweight , as an increase in length of haul will typically cause an increase in revenue per hundredweight . our primary revenue focus is to increase our “ density , ” our shipment and tonnage growth within our existing infrastructure , which allows us to maximize our asset utilization and labor productivity . we measure density over many different functional areas of our operations including revenue per service center , linehaul load factor , pickup and delivery ( “ p & d ” ) stops per hour , p & d shipments per hour , platform pounds handled per hour and platform shipments per hour . in addition to our focus on density , it is critical for us to obtain an appropriate yield on the shipments we handle . we manage our yields by focusing on individual account profitability . we believe yield management and improvements in density are key components in our ability to produce profitable growth . our primary cost elements are direct wages and benefits associated with the movement of freight ; fuel and equipment repair expenses ; and depreciation of our equipment fleet and service center facilities . we gauge our overall success in managing these costs by monitoring our operating ratio , a measure of profitability calculated by dividing total operating expenses by revenue , which also allows industry-wide comparisons with our competition . we continually upgrade our technological capabilities to improve our customer service and lower our operating costs . our technology provides our customers with visibility of their shipments throughout our network , increases the productivity of our workforce and provides key metrics from which we can monitor our processes . 21 story_separator_special_tag style= '' font-family : inherit ; font-size:10pt ; '' > employee benefit costs increased $ 37.7 million primarily due to an increase in the number of full-time employees eligible for benefits , an increase in paid time off for employees and an increase in the cost per employee for our group health and dental plans . as a percentage of salaries and wages , employee benefit costs increased slightly to 33.7 % in 2012 from 31.9 % in 2011. operating supplies and expenses increased $ 23.3 million in 2012 primarily due to the increases in the costs of diesel fuel , excluding fuel taxes , which represents the largest component of operating supplies and expenses . story_separator_special_tag we regularly monitor the components of our pricing , including base freight rates and fuel surcharges . we also address any individual account profitability issues with our customers as part of our effort to minimize the negative impact on our profitability that would likely result from a rapid and significant change in any of our operating expenses . operating costs and other expenses salaries , wages and benefits increased $ 147.3 million or 18.2 % in 2011 , which compares favorably with our revenue growth of 27.1 % . as a result , our salaries , wages and benefits improved to 50.8 % of revenue from 54.6 % in 2010. salaries and wages , excluding benefits , increased $ 109.9 million due to a 7.6 % increase in the total number of full-time employees and the impact from salary and wage increases provided to our employees in september 2011 and 2010. in addition , there was an increase in performance-based compensation due to the improvement in our financial and operational results . these increases were partially offset by the improved productivity of our linehaul , p & d and platform operations that resulted from increased density and a continued focus on efficiency . our linehaul laden load average , p & d shipments per hour and platform pounds handled per hour improved 0.3 % , 1.1 % and 0.1 % , respectively . employee benefit costs increased $ 37.3 million primarily due to an increase in the number of full-time employees , increased costs related to our group health plan and higher payroll-related taxes . as a percentage of salaries and wages , employee benefit costs increased slightly to 31.9 % in 2011 from 31.5 % in 2010. our group health plan requires a 90-day waiting period before newly hired employees are eligible to enroll . a significant number of employees were hired in the second half of 2010 , and as a result , our group health costs increased as these new employees began to enroll in our plan in 2011. in addition , our group health costs increased due to changes required by the 2010 patient protection and affordable care act , which required us to provide dependant coverage until the age of 26 . 25 operating supplies and expenses increased to 18.9 % of revenue in 2011 from 16.5 % in 2010. this increase is primarily due to the increase in diesel fuel costs , excluding fuel taxes , which is the largest component of operating supplies and expenses . these costs increased 52.8 % during the year as a result of the combined effect of a 29.7 % increase in our average price per gallon and a 12.7 % increase in gallons consumed . the increase in fuel consumption is primarily due to a 14.7 % year-over-year increase in overall miles driven that was partially offset by an improvement in our average miles per gallon . our increased fuel consumption also resulted in an increase in our fuel tax expenses and was the principal driver of the $ 7.9 million increase in “ operating taxes and licenses. ” we do not use diesel fuel hedging instruments and are therefore subject to market price fluctuations . depreciation and amortization expense decreased to 4.8 % of revenue in 2011 as compared to 5.4 % in 2010. although our capital expenditure requirements increased in 2011 , we were able to offset the cost of these additions by utilizing the available capacity of our fleet and service center network to create operating leverage on the 13.1 % increase in tonnage . our capital expenditure plan for 2012 is projected to be higher than 2011 and , as a result , our depreciation costs will likely increase in future periods . we purchase linehaul transportation and p & d services from other motor carriers and railroads . we also utilize independent contractors for our container operations . we utilize these services when it is economically beneficial or when there are imbalances of freight flow within our service center network . purchased transportation expense remained consistent at 3.4 % of revenue in 2011 and 2010. as it is typically more efficient and profitable for us to utilize our own personnel and equipment , we expect to continue to focus on balancing our internal resources with freight demand in an effort to reduce our use of purchased transportation in future periods . our effective tax rate for 2011 was 36.6 % as compared to 39.2 % in 2010. our effective tax rates in 2011 and 2010 were favorably impacted by alternative fuel tax credits for the use of propane in our operations . these fuel tax credits were originally scheduled to expire on december 31 , 2009 ; however , they were extended to december 31 , 2011 with the passage of the tax relief , unemployment insurance reauthorization , and job creation act of 2010. our 2011 rate also included the favorable impact of tax credits related to our investment in alternative energy-producing assets . liquidity and capital resources a summary of our cash flows is presented below : replace_table_token_12_th the changes in our cash flows provided by operating activities for the periods presented above are due primarily to the significant improvement in our net income , which increased $ 30.0 million in 2012 and $ 63.8 million in 2011 over the comparable periods in 2011 and 2010 , respectively . this increase is more fully described above in item 7 , “ management 's discussion and analysis of financial condition and results of operations – results of operations . ” depreciation and amortization expenses also increased $ 19.9 million in 2012 and $ 10.5 million in 2011 over the comparable periods of 2011 and 2010 , respectively , which is primarily due to the ongoing execution of our capital expenditure program and more fully described in item 7 , “ management 's discussion and analysis of financial condition and results of operations – capital expenditures.
| results of operations the following table sets forth , for the years indicated , expenses and other items as a percentage of revenue from operations : replace_table_token_9_th ( 1 ) for the purpose of this table , interest expense is presented net of interest income . 22 2012 compared to 2011 key financial and operating metrics for 2012 and 2011 are presented below : replace_table_token_10_th our 2012 financial results were driven by strong growth in our revenue , which exceeded $ 2.0 billion for the first time in our company 's history . in addition to our company record for annual revenue , we also achieved company records for our annual operating ratio and earnings per diluted share . we experienced strong growth in both tonnage and revenue per hundredweight , while also improving the efficiency of our operations , all of which led to margin improvement over the previous year . as a result , our operating ratio improved to 86.5 % and net income increased 21.5 % to $ 169.5 million for 2012. we believe our success in 2012 was primarily the result of our ability to win market share by providing shippers with a value proposition that consists of providing `` best-in-class '' on-time and claims-free service at a fair and equitable price . our commitment to this value proposition should allow us to continue to increase our tonnage and market share . revenue our revenue growth during 2012 of 12.1 % was driven by increases in tonnage and pricing . tonnage increased 7.5 % primarily due to a 7.0 % increase in shipments and a 0.5 % increase in weight per shipment for the periods compared . we believe the increase in shipments during the year was primarily due to increased market share , as our growth exceeded reported industry levels .
| 4,074 |
name title james d. devries chief executive officer and director ( principal executive officer ) james d. devries jeffrey likosar chief financial officer ( principal financial and accounting officer ) jeffrey likosar marc e. becker director ( chairman ) marc e. becker reed b. rayman director reed b. rayman matthew h. nord director matthew h. nord andrew d. africk director andrew d. africk story_separator_special_tag introduction the following discussion and analysis should be read in conjunction with our consolidated financial statements and the related notes thereto included elsewhere in this annual report to enhance the understanding of our financial condition , changes 39 in financial condition , and results of operations . the following discussion and analysis contains forward-looking statements about our business , operations , and financial performance based on current plans and estimates that involve risks , uncertainties , and assumptions . actual results could differ materially from those discussed in the forward-looking statements . factors that could cause such differences are discussed in the sections of this annual report titled “ item 1a . risk factors ” and “ cautionary statements regarding forward-looking statements. ” overview we are a leading provider of monitored security and interactive home and business automation solutions in the u.s. and canada . our monitored security and automation offerings involve the installation and monitoring of security and premises automation systems designed to detect intrusion ; control access ; sense movement , smoke , fire , carbon monoxide , flooding , temperature , and other environmental conditions and hazards ; and address personal emergencies such as injuries , medical emergencies , or incapacitation . our products and services include interactive technologies to allow our customers to remotely monitor and manage their residential and commercial environments by adding automation capabilities to our monitored security systems . through our interactive offerings , customers are able to remotely access information regarding the security of their residential or commercial environment , arm and disarm their security system , adjust lighting or thermostat levels , or view real-time video from cameras covering different areas of their premises via web-enabled devices ( such as smart phones , laptops , and tablet computers ) and a customized web portal . additionally , our interactive automation solutions enable customers to create customized schedules or automation for managing lights , thermostats , appliances , and garage doors . the system can also be programmed to perform additional functions such as recording and viewing live video and sending text messages based on triggering events . our goal is to extend the concept of security from the physical home or business to cybersecurity and personal on-the-go security and safety . customers ' increasingly mobile and active lifestyles have created new opportunities for us in the fast-growing market for self-monitored and diy products and services . our technology also allows us to service our customers via various connected and wearable devices whether they are at home or on-the-go . in addition , we offer professional monitoring of third-party devices by enabling other companies to integrate solutions into our monitoring and billing platform . this allows us to provide monitoring solutions to customers who do not currently have an installed adt security system or interactive automation platform . as of december 31 , 2018 , we serve approximately 7.2 million recurring customers , excluding contracts monitored but not owned . we are one of the largest full-service companies with a national footprint providing both residential and commercial monitored security . we deliver an integrated customer experience by maintaining the industry 's largest sales , installation , and service field force , as well as a 24/7 professional monitoring network . basis of presentation all financial information presented in this section has been prepared in u.s. dollars in accordance with generally accepted accounting principles in the united states of america ( “ gaap ” ) and include the accounts of adt inc. and its subsidiaries . all intercompany transactions have been eliminated . we report financial and operating information in one segment . our operating segment is also our reportable segment . we have presented results of operations , including the related discussion and analysis , for the following periods : ( i ) year ended december 31 , 2018 compared to year ended december 31 , 2017 , and ( ii ) year ended december 31 , 2017 compared to year ended december 31 , 2016 . factors affecting operating results our subscriber-based business requires significant upfront investment to generate new customers , which in turn provides predictable recurring revenue generated from our monitoring and other services . in order to optimize returns on customer acquisitions and cash flow generation , we focus on the following key drivers of our business : best-in-class customer service ; increased customer retention ; disciplined , high-quality customer additions ; efficient customer acquisition ; and reduced costs incurred to provide ongoing services to customers . our ability to add new subscribers depends on the overall demand for our products and solutions , which is driven by a number of external factors . the overall economic condition in the geographies in which we operate can impact our ability to attract new customers and grow our business in all customer channels . growth in our residential customer base can be influenced by the overall state of the housing market . growth in our commercial customer base can be influenced by the rate at which new businesses begin operations or existing businesses grow . the demand for our products and solutions is also impacted by the perceived threat of crime , as well as the quality of the service of our competitors . 40 the monthly fees that we generate from any individual customer vary based on the level of service we provide to the customer and customer tenure . we offer a wide range of services at various price points from basic burglar alarm monitoring to our full suite of interactive services . story_separator_special_tag the modification of the distributed shares performance tranche resulted in a significant increase in fair value , whereas the impact of the modification on the distributed shares service tranche was not material . additionally , upon consummation of the ipo , we approved our 2018 omnibus incentive plan ( “ 2018 plan ” ) . under the 2018 plan , and in connection with the class b unit redemption , we also granted options to holders of class b units ( “ top-up options ” ) . the class b unit redemption and top-up options resulted in the increase in share-based compensation expense during 2018 . red hawk acquisition on december 3 , 2018 , we acquired all of the issued and outstanding capital stock of red hawk fire & security , a leader in commercial fire , life safety , and security services , for total consideration of $ 318 million and cash paid of $ 301 million , net of cash acquired ( “ red hawk acquisition ” ) . we funded the red hawk acquisition from a combination of additional debt financing and cash on hand . this acquisition is intended to accelerate our growth in the commercial security market and expand our product portfolio with the introduction of commercial fire safety related solutions . key performance indicators in evaluating our results , we utilize key performance indicators which include non-gaap measures as well as the operating metrics of gross revenue attrition , unit and customer count , rmr , rmr additions and revenue payback . our computations of key performance indicators may not be comparable to other similarly titled measures reported by other companies . additionally , our operating metric key performance indicators are approximated as there may be variations to reported results in each period due to certain adjustments we might make in connection with the integration over several periods of acquired companies that calculated these metrics differently , or otherwise , including periodic reassessments and refinements in the ordinary course of business . these refinements , for example , may include changes due to systems conversion or historical methodology differences in legacy systems . recurring monthly revenue ( “ rmr ” ) rmr is generated by contractual monthly recurring fees for monitoring and other recurring services provided to our customers , including contracts monitored but not owned . we believe the presentation of rmr is useful because it measures the volume of revenue under contract at a given point in time . gross customer revenue attrition gross customer revenue attrition is defined as the rmr lost as a result of customer attrition , net of dealer charge-backs and reinstated customers , excluding contracts monitored but not owned . customer sites are considered canceled when all services are terminated . dealer charge-backs represent customer cancellations charged back to the dealers because the customer canceled service during the charge-back period , generally twelve to fifteen months . 42 gross customer revenue attrition is calculated on a trailing twelve-month basis , the numerator of which is the annualized rmr lost during the period due to attrition , net of dealer charge-backs and reinstated customers , excluding contracts monitored but not owned , and the denominator of which is total annualized rmr based on an average of rmr under contract at the beginning of each month during the period . adjusted ebitda adjusted ebitda is a non-gaap measure that we believe is useful to investors to measure the operational strength and performance of our business . our definition of adjusted ebitda , a reconciliation of adjusted ebitda to net income ( loss ) ( the most comparable gaap measure ) , and additional information , including a description of the limitations relating to the use of adjusted ebitda , are provided under “ —non-gaap measures. ” in addition , adjusted ebitda may be presented on a supplemental pro forma basis . refer to the “ —supplemental management 's discussion and analysis of financial condition and results of operations ” section for further discussion regarding the presentation of supplemental pro forma financial information . free cash flow free cash flow is a non-gaap measure that our management employs to measure cash that is available to repay debt , make other investments , and pay dividends . our definition of free cash flow , a reconciliation of free cash flow to net cash provided by operating activities ( the most comparable gaap measure ) , and additional information , including a description of the limitations relating to the use of free cash flow , are provided under “ —non-gaap measures. ” story_separator_special_tag primarily includes $ 22 million of licensing fees , as well as a gain of $ 7.5 million from the sale of equity in a third party that we received as part of a settlement . during 2017 , other income primarily includes $ 24 million of foreign currency gains related to the conversion of intercompany loans that are denominated in canadian dollars . during the first quarter of 2018 , we designated certain of these intercompany loans to be of a long-term-investment nature and began recognizing the related foreign currency gains and losses in accumulated other comprehensive loss . income tax benefit income tax benefit was $ 23 million during 2018 , resulting in an effective tax rate for the period of 3.7 % . the effective tax rate reflects the reduced federal income tax rate of 21 % as a result of tax reform , a 10.3 % unfavorable impact from permanent non-deductible expenses , primarily associated with the koch preferred securities , a 5.8 % unfavorable impact from future non-deductible share-based compensation , a 3.7 % unfavorable impact from non-deductible goodwill impairment loss , and a 3.2 % unfavorable impact from state legislative changes , offset by a 3.8 % favorable impact of tax adjustments related to prior year state returns filed in the first quarter of 2018 . income tax benefit was $ 764 million in 2017 , resulting in an effective tax rate for the period of 181.3 % .
| results of operations the following table sets forth our consolidated results of operations , summary cash flow data , and key performance indicators for the periods presented . replace_table_token_2_th _ ( 1 ) refer to the “ —key performance indicators ” section for the definitions of these key performance indicators . 43 ( 2 ) gross customer revenue attrition for 2016 is presented on a pro forma basis for the adt corporation business . ( 3 ) adjusted ebitda and free cash flow are non-gaap measures . refer to the “ —non-gaap measures ” section for the definitions of these terms and reconciliations to the most comparable gaap measures . 2018 compared to 2017 total revenue monitoring and related services revenue increase d by $ 81 million during 2018 , which includes incremental revenue associated with acquisitions . the increase was primarily attributable to an increase in contractual monthly recurring fees for monitoring and other recurring services , which resulted from the addition of new customers and improvements in average pricing , partially offset by customer attrition . the improvement in average pricing was driven by the addition of new customers at higher rates , largely due to new subscribers generally selecting higher priced services as compared to our existing customers , as well as price escalations on our existing customer base . these factors also were a primary driver for the increase in rmr to $ 347 million as of december 31 , 2018 from $ 335 million as of december 31 , 2017 . in addition , approximately 2 % of the 4 % increase in rmr was due to the red hawk acquisition . gross customer revenue attrition improved to 13.3 % as of december 31 , 2018 from 13.7 % as of december 31 , 2017 as a result of lower voluntary disconnects and lower disconnects due to non-paying customers . installation and other revenue increase d by $ 186 million during 2018 .
| 4,075 |
item 8. financial statements and supplementary data '' of this form 10-k. the information contained in this section should be read in conjunction with these consolidated financial statements and footnotes and the business and financial information provided in this form 10-k. overview our principal business consists of attracting retail and commercial deposits from the general public and investing those funds , along with borrowed funds , in loans secured by first and second mortgages on one-to-four family residences ( including home equity loans and lines of credit ) , commercial and multifamily real estate , construction and land , and consumer and commercial business loans . our commercial business loans include unsecured lines of credit and secured term loans and lines of credit secured by inventory , equipment and accounts receivable . we also offer a variety of secured and unsecured consumer loan products , including manufactured home loans , floating home loans , automobile loans , boat loans and recreational vehicle loans . as part of our business , we focus on residential mortgage loan originations , a portion of which we sell to fannie mae and other investors and the remainder of which we retain for our loan portfolio consistent with our asset/liability objectives . we sell loans which conform to the underwriting standards of fannie mae ( “ conforming ” ) in which we retain the servicing of the loan in order to maintain the direct customer relationship and to generate noninterest income . residential loans which do not conform to the underwriting standards of fannie mae ( “ non-conforming ” ) , are either held in our loan portfolio or sold with servicing released . we originate and retain a significant amount of commercial real estate loans , including those secured by owner-occupied and nonowner-occupied commercial real estate , multifamily property , mobile home parks and construction and land development loans . we originated $ 321.3 million , $ 129.0 million and $ 112.5 million of one-to-four family residential mortgage loans during the years ended december 31 , 2020 , 2019 and 2018 , respectively . during these same periods , we sold $ 258.2 million , $ 78.9 million and $ 50.0 million , respectively , of one-to-four family residential mortgage loans . our operating revenues are derived principally from earnings on interest-earning assets , service charges and fees , and gains on the sale of loans . our primary sources of funds are deposits ( both retail and brokered ) , fhlb advances , borrowings through the federal reserve , and payments received on loans and securities . we offer a variety of deposit accounts that provide a wide range of interest rates and terms , including savings , money market , now , interest-bearing and noninterest-bearing demand accounts , and certificates of deposit . our noninterest expenses consist primarily of salaries , employee benefits , incentive pay , expenses for occupancy , online and mobile services , marketing , professional fees , data processing , charitable contributions , fdic deposit insurance premiums and regulatory expenses . salaries and benefits consist primarily of the salaries paid to our employees , payroll taxes , directors ' fees , retirement expenses , share-based compensation and other employee benefits . occupancy expenses , which are the fixed and variable costs of buildings and equipment , consist primarily of lease payments , property taxes , depreciation charges , maintenance and the cost of utilities . our strategic plan targets consumers , small- and medium-size businesses , and professionals in our market area for loans and deposits . in pursuit of these goals and by managing the size of our loan portfolio , we focus on including a significant amount of commercial business and commercial and multifamily real estate loans in our portfolio . a significant portion of these loans have adjustable rates , higher yields or shorter terms and higher credit risk than traditional fixed-rate mortgages . our commercial loan portfolio ( commercial and multifamily real estate and commercial business loans ) increased to $ 330.0 million or 53.6 % of our loan portfolio at december 31 , 2020 , from $ 300.2 million or 48.3 % of our loan portfolio at december 31 , 2019 , and $ 291.4 million or 46.9 % of our loan portfolio at december 31 , 2018. in addition to higher balances in commercial lending , we also benefit from lending opportunities in our consumer loan portfolio . our consumer loan portfolio , which includes manufactured and floating homes and other consumer loans , increased to $ 75.8 million or 12.4 % of our loan portfolio at december 31 , 2020 , from $ 72.7 million or 11.7 % of our loan portfolio at december 31 , 2019 , and $ 67.6 million or 10.9 % of our loan portfolio at december 31 , 2018. additional commercial and multifamily real estate and consumer loans have improved our net interest income and helped diversify our loan portfolio mix . our provision for loan losses was $ 925,000 for the year ended december 31 , 2020 , compared to a recapture of loan loss expense of $ 125,000 for the year ended december 31 , 2019 and a provision for loan losses of $ 525,000 for the year ended december 31 , 2018 . 50 table of conten t s recent accounting standards for a discussion of recent accounting standards , see `` note 2—accounting pronouncements recently issued or adopted '' in the notes to consolidated financial statements contained in `` part ii . item 8. financial statements and supplementary data '' of this report on form 10-k. critical accounting policies certain of our accounting policies are important to an understanding of our financial condition , since they require management to make difficult , complex or subjective judgments , which may relate to matters that are inherently uncertain . estimates associated with these policies are susceptible to material changes as a result of changes in facts and circumstances . story_separator_special_tag , the difference between the present value of the cash flows expected to be collected and fair value , is recognized as a charge to other comprehensive income ( loss ) . impairment losses related to all other factors are presented as separate components within accumulated other comprehensive income ( loss ) . mortgage servicing rights . we record msrs on loans sold to fannie mae with servicing retained as well as for acquired servicing rights . we stratify our capitalized msrs based on the type , term and interest rates of the underlying loans . msrs are carried at fair value . the value is determined through a discounted cash flow analysis , which uses interest rates , prepayment speeds and delinquency rate assumptions as inputs . all of these assumptions require a significant degree of management judgment . if our assumptions prove to be incorrect , the value of our msrs could be negatively impacted . we use a third party to assist us in the preparation of the analysis of the market value each quarter . other real estate owned . oreo represents real estate that we have taken control of in partial or full satisfaction of significantly delinquent loans . at the time of foreclosure , oreo is recorded at the fair value less costs to sell , which becomes the property 's new basis . any write-downs based on the asset 's fair value at the date of acquisition are charged to the allowance for loan losses . after foreclosure , management periodically performs valuations such that the real estate is carried at the lower of its new cost basis or fair value , net of estimated costs to sell . subsequent valuation adjustments are recognized within net ( loss ) gain on oreo . revenue and expenses from operations and subsequent adjustments to the carrying amount of the property are included in other noninterest expense in the consolidated statements of income . in some instances , we may make loans to facilitate the sales of oreo . management reviews all sales for which it is the lending institution for compliance with sales treatment under provisions established by accounting standards codification ( `` asc '' ) topic 360 , `` accounting for sales of real estate '' . any gains related to sales of oreo are deferred until the buyer has a sufficient initial and continuing investment in the property . income taxes . income taxes are reflected in our financial statements to show the tax effects of the operations and transactions reported in the financial statements and consist of taxes currently payable plus deferred taxes . asc topic 740 , `` accounting for income taxes , '' requires the asset and liability approach for financial accounting and reporting for deferred income taxes . deferred tax assets and liabilities result from differences between the financial statement carrying amounts and the tax bases of assets and liabilities . they are reflected at currently enacted income tax rates applicable to the period in which the deferred tax assets or liabilities are expected to be realized or settled and are determined using the assets and liability method of accounting . the deferred income provision represents the difference between net deferred tax asset/liability at the beginning and end of the reported period . in formulating our deferred tax asset , we are required to estimate our income and taxes in the jurisdiction in which we operate . this process involves estimating our actual current tax exposure for the reported period together with assessing temporary differences resulting from differing treatment of items , such as depreciation and the provision for loan losses , for tax and financial reporting purposes . valuation allowances are established to reduce the net carrying amount of deferred tax assets if it is determined to be more likely than not all or some portion of the potential deferred tax asset will not be realized . business and operating strategies and goals our goal is to deliver returns to stockholders by increasing higher-yielding assets ( including consumer , commercial and multifamily real estate and commercial business loans ) , increasing lower-cost core deposit balances , managing expenses , managing problem assets and exploring expansion opportunities . we seek to achieve these results by focusing on the following objectives : focusing on asset quality . we believe that strong asset quality is a key to our long-term financial success . we are focused on monitoring existing performing loans , resolving nonperforming assets and selling foreclosed assets . nonperforming assets were $ 3.5 million , or 0.40 % of total assets , at december 31 , 2020 compared to $ 5.2 million or 0.73 % of total assets , at december 31 , 2019. we continue to seek to reduce the level of nonperforming assets through collections , modifications and sales of oreo . 52 table of conten t s we also take proactive steps to resolve our non-performing loans , including negotiating payment plans , forbearances , loan modifications and loan extensions on delinquent loans when such actions have been deemed appropriate . our goal is to maintain or improve upon our level of nonperforming assets by managing all segments of our loan portfolio in order to proactively identify and mitigate risk . improving earnings by expanding product offerings . we intend to prudently maintain the percentage of our assets consisting of higher-yielding commercial and multifamily real estate and commercial business loans , which offer higher risk-adjusted returns , shorter maturities and more sensitivity to interest-rate fluctuations than one-to-four family mortgage loans , while maintaining our focus on residential lending . in addition , we continue to focus on consumer products , such as floating and manufactured home loans . with our long experience and expertise in residential lending we believe we can be effective in capturing mortgage banking opportunities and grow consumer deposits . we continue to develop correspondent relationships to sell nonconforming mortgage loans servicing released .
| general . total assets increased by $ 141.5 million , or 19.7 % , to $ 861.4 million at december 31 , 2020 , from $ 719.9 million at december 31 , 2019. the increase was primarily a result of a higher balances in cash and cash equivalents and loans held-for-sale . cash and securities . cash , cash equivalents and our available-for-sale securities increased by $ 139.0 million , or 213.6 % , to $ 204.0 million at december 31 , 2020. cash and cash equivalents increased $ 138.1 million , or 247.6 % , to $ 193.8 million at december 31 , 2020. the increase in total cash and cash equivalents was due to deposit growth and the proceeds from the issuance of $ 12 million in subordinated notes during the third quarter of 2020. available-for-sale securities , which consist of agency mortgage-backed securities and municipal bonds , increased $ 912,000 , or 9.8 % , to $ 10.2 million at december 31 , 2020 , from $ 9.3 million at december 31 , 2019 , primarily due to the purchase of investment securities during the year . at december 31 , 2020 , our securities portfolio consisted of 16 agency mortgage-backed securities and 10 municipal bonds with a fair value of $ 10.2 million . at december 31 , 2019 , our securities portfolio consisted of 13 agency mortgage-backed securities and eight municipal bonds with a fair value of $ 9.3 million . during the year ended december 31 , 2020 we did not recognize any non-cash otti losses on our investment securities . at december 31 , 2020 , six agency mortgage-backed securities had unrealized losses of $ 6,000 , but management determined the decline in value was not related to specific credit deterioration . the unrealized losses were caused by changes in interest rates and the widening of market spreads subsequent to purchase of these securities .
| 4,076 |
the factors that could create such adverse impact include : the severity and duration of the covid-19 pandemic ; continued demand for covid-19 testing ; competition from existing and new covid-19 testing technologies and products ; the covid-19 pandemic 's impact on the u.s. and international healthcare system , the u.s. economy and worldwide economy ; and the timing , scope and effectiveness of u.s. and international governmental responses to the covid-19 pandemic and associated economic disruptions . in addition to adversely affecting demand for the company 's products , story_separator_special_tag the following discussion and analysis should be read in conjunction with the consolidated financial statements , the information described under the caption “ risk factors ” in part i , item 1a of this report and our special note regarding forward-looking statements at the outset of this report . overview we are a developer , manufacturer and supplier of premium diagnostics products , medical imaging systems and surgical products with an emphasis on women 's health and well-being through early detection and treatment . we sell and service our products through a combination of direct sales and service personnel and a network of independent distributors and sales representatives . we operate in four segments : diagnostics , breast health , gyn surgical and skeletal health . until december 30 , 2019 , our product portfolio included aesthetic and medical treatments systems sold by our former medical aesthetic business . we completed the sale of our medical aesthetics segment on december 30 , 2019 ( the first day of the second quarter of fiscal 2020 ) . through our diagnostics segment , we offer a wide range of diagnostic products , which are used primarily to aid in the screening and diagnosis of human diseases . our primary diagnostics products include our molecular diagnostic assays , which run on our advanced instrumentation systems ( panther , panther fusion and tigris ) , our thinprep cytology system , and the rapid fetal fibronectin test . our aptima family of molecular diagnostic assays is used to detect , among other things , the infectious microorganisms that cause common sexually transmitted diseases , or stds , such as chlamydia and gonorrhea , certain high-risk strains of human papillomavirus , or hpv , and trichomonas vaginalis , the parasite that causes trichomoniasis . in addition , in 2017 and 2018 we introduced the aptima quantitative viral load tests for hiv , hepatitis c and hepatitis b. our assay portfolio also includes diagnostic tests for a range of acute respiratory infections , including sars-cov-2 , as well as a test for the detection of group b streptococcus , or gbs , that are run on the panther fusion system , a field upgradeable instrument addition to the base panther system . in 2020 , in response to the covid-19 global pandemic , we developed and launched the aptima sars-cov-2 assay ( which runs on our standard panther system ) and the panther fusion sars-cov-2 assay ( which runs on our panther fusion system ) . the thinprep system is primarily used in cytology applications , such as cervical cancer screening , and the rapid fetal fibronectin test assists physicians in assessing the risk of pre-term birth . in january 2017 , we sold our blood screening business to grifols . we have continued to provide grifols with instrumentation and certain raw materials , manufacture assays , and perform research and development services to support the blood screening business grifols acquired from us . our breast health segment offers a broad portfolio of solutions for breast cancer care for radiology , pathology and surgery . these solutions include breast imaging and analytics , such as our 2d and 3d digital mammography systems and reading workstations , minimally invasive breast biopsy guidance systems and devices , breast biopsy site markers and localization , specimen radiology , ultrasound and connectivity solutions and breast conserving surgery products . our most advanced breast imaging platforms , selenia dimensions and 3dimensions , utilize a technology called tomosynthesis to produce 3d images that show multiple contiguous slice images of the breast , which we refer to as the genius 3d mammography exam , as well as conventional 2d full field digital mammography images . our clinical results for fda approval demonstrated that conventional 2d digital mammography with the addition of 3d tomosynthesis is superior to 2d digital mammography alone for both screening and diagnostics for women of all ages and breast densities . with the acquisition of supersonic imagine in the first quarter of fiscal 2020 , we now offer premium ultrasound imaging , further connecting hologic capabilities across the continuum of breast care from screening to diagnosis and treatment . our gyn surgical products include our novasure endometrial ablation system , or novasure , and our myosure hysteroscopic tissue removal system , or myosure , as well as our fluent fluid management system , or fluent . the novasure portfolio is comprised of the novasure classic and novasure advanced devices and involves a trans-cervical procedure for the treatment of abnormal uterine bleeding . the myosure suite of devices offers four options to provide incision-less removal of fibroids , polyps , and other pathology within the uterus . the fluent system is a fluid management system that provides liquid distention during diagnostic and operative hysteroscopic procedures . our skeletal health segment 's products includes the horizon dxa , a dual energy x-ray system , which evaluates bone density and performs body composition assessments , and the fluoroscan insight fd mini c-arm , which assists in performing minimally invasive orthopedic surgical procedures on a patient 's extremities , such as the hand , wrist , knee , foot , and ankle . our medical aesthetics segment consisted of a portfolio of aesthetic treatment systems . we completed the sale of our medical aesthetics business on december 30 , 2019. unless the context otherwise requires , references to we , us , hologic or our company refer to hologic , inc. and its consolidated subsidiaries . story_separator_special_tag 34 acquisitions and disposition the following sets forth a description of certain of our acquisitions and dispositions in our last three fiscal years : acquisitions acessa health on august 23 , 2020 , we completed the acquisition of acessa health , inc. , or acessa for a purchase price of $ 161.3 million , which included a hold-back of $ 3.0 million payable up to 5 months from the date of acquisition , and contingent consideration , which we estimated at $ 81.8 million as of the measurement date . acessa , located in austin , texas , manufactures and markets its acessa provu system , a laparoscopic radio frequency ablation system for use in treatment of uterine fibroids . the contingent consideration is based on annual incremental revenue growth over a three-year period ending annually in december . the contingent consideration is payable after each annual measurement period . based on our preliminary purchase price allocation , we have allocated $ 128.2 million of the purchase price to the preliminary value of intangible assets and $ 48.4 million to goodwill . the allocation of the purchase price is preliminary as we continue to gather information supporting the acquired assets and liabilities . acessa 's results of operations are reported in our surgical segment from the date of acquisition . health beacons on february 3 , 2020 , we completed the acquisition of health beacons , inc. , or health beacons , for a purchase price of $ 19.7 million , which included hold-backs of $ 2.3 million that are payable up to 18 months from the date of acquisition . health beacons manufactures the localizer product . based on our preliminary valuation , we have allocated $ 10.7 million of the purchase price to the preliminary value of developed technology and $ 6.2 million to goodwill . the remaining $ 2.8 million of the purchase price has been allocated to acquired tangible assets and liabilities . the allocation of the purchase price is preliminary as we continue to gather information supporting the acquired assets and liabilities . health beacon 's results of operations are reported in our breast health reportable segment from the date of acquisition . alpha imaging on december 30 , 2019 , we completed the acquisition of assets from alpha imaging , llc , or alpha imaging , for a purchase price of $ 18.0 million , which included a hold-back of $ 1.0 million and contingent consideration estimated at $ 0.9 million . the contingent consideration was payable upon shipment of certain backlog orders entered into by alpha imaging prior to the acquisition . alpha imaging was a long-standing distributor of our breast and skeletal products in the u.s. based on our preliminary valuation , the majority of the purchase price was allocated to a customer relationships intangible asset . the allocation of the purchase price is preliminary as we continue to gather information supporting the acquired assets and liabilities . supersonic imagine on august 1 , 2019 , we acquired approximately 46 % of the outstanding shares of supersonic imagine s. a. , or ssi . ssi , headquartered in france , specializes in ultrasound imaging and designs , develops and markets an ultrasound platform used in the non-invasive care path for the characterization of breast , liver or prostate diseases . we initially accounted for this investment as an equity method investment . on november 21 , 2019 , we acquired an additional 7.6 million common shares of ssi for $ 12.6 million . as a result , we owned approximately 78 % of the outstanding common shares of ssi at november 21 , 2019 and controlled ssi 's voting interest and operations . we performed purchase accounting as of november 21 , 2019 and beginning on that date the financial results of ssi are included within our consolidated financial statements , specifically within our breast health segment . we remeasured the initial investment of 46 % of the outstanding shares of ssi to its fair value at the acquisition date , resulting in a gain of $ 3.2 million in the first quarter of fiscal 2020. the total purchase price was $ 69.3 million , which consisted of $ 17.9 million for the equity method investment in ssi , $ 12.6 million for shares acquired on november 21 , 2019 , $ 30.2 million for loans we provided to ssi prior to the acquisition that are considered forgiven , and $ 8.6 million representing the fair value of the noncontrolling interests as of november 21 , 2019. based on our preliminary purchase price allocation , we have allocated $ 45.3 million of the purchase price to the preliminary value of intangible assets and $ 34.3 million to goodwill . the allocation of the purchase price is preliminary as we continue to gather information supporting the acquired assets and liabilities , primarily income taxes and recognition of uncertain tax positions , to finalize the purchase price allocation . as of september 26 , 2020 , we owned approximately 81 % of ssi , and accordingly we have recorded an adjustment to our net income for the non-controlling interest we do not own of $ 4.7 million in the current year . 35 focal therapeutics on october 1 , 2018 , we completed the acquisition of focal therapeutics , inc. , or focal , for a purchase price of $ 120.1 million , which included hold-backs of $ 14.0 million payable up to one year from the date of acquisition . in the second quarter of fiscal 2019 , $ 1.5 million of the hold-back was paid , and the remaining $ 12.5 million was paid on october 1 , 2019. focal , headquartered in california , manufactures and markets its biozorb marker , which is an implantable three-dimensional marker that helps clinicians overcome certain challenges in breast conserving surgery . based on our valuation , we allocated $ 97.2 million of the purchase price to the value of intangible assets and $ 31.1 million to goodwill .
| results of operations the following table sets forth , for the periods indicated , the percentage of total revenues represented by items as shown in our consolidated statements of operations . all dollar amounts in tables are presented in millions . replace_table_token_3_th 37 fiscal year ended september 26 , 2020 compared to fiscal year ended september 28 , 2019 product revenues replace_table_token_4_th we generated a 16.4 % increase in product revenues in fiscal 2020 compared to fiscal 2019 primarily due to the increase in the diagnostics business from sales of our newly introduced covid-19 assays that were partially offset by reduced sales of our legacy products . we had decreases in our breast health , gyn surgical and skeletal health segments which we attribute primarily to the impact of the covid-19 pandemic across our businesses . we disposed of the medical aesthetics business segment on december 30 , 2019 , the beginning of our second quarter of fiscal 2020 , and generated no medical aesthetics revenue after that sale . diagnostics product revenues increased 75.8 % in fiscal 2020 compared to fiscal 2019 primarily due to increases in molecular diagnostics ( excluding blood screening ) of $ 965.6 million , partially offset by decreases in cytology & perinatal of $ 62.7 million and a decrease of $ 9.0 million in blood screening . while we divested our blood screening business in the second quarter of fiscal 2017 , we continue to provide long-term access to panther instrumentation and certain supplies to the purchaser of that business .
| 4,077 |
the company is a leading innovator , manufacturer and marketer of flow measurement and control products , serving water and gas utilities , municipalities and industrial customers worldwide . the company 's products are used in a wide variety of applications , including water , oil and lubricants , and are known for their high degree of accuracy , long-lasting durability and ability to provide valuable and timely measurement information to customers . the company 's product lines fall into two categories : water applications and specialty applications . water applications , the largest category by sales volume , include water meters and related technologies and services used by water utilities as the basis for generating water and wastewater revenues . the key market for the company 's water meter products is north america , primarily the united states , because the meters are designed and manufactured to conform to standards promulgated by the american water works association . the company 's products are also sold for other water-based purposes , including irrigation , water reclamation and industrial process applications . specialty applications include the sale of meters and related technologies and services for measuring a wide variety of fluids in industries such as food and beverage , pharmaceutical production , petroleum , heating , ventilating and air conditioning ( hvac ) , and measuring and dispensing automotive fluids . it also includes the sale of radio technology to natural gas utilities for installation on their gas meters . additional information about the company 's business is described in part 1 , item 1 business under the heading market overview , products , systems and solutions in this 2011 annual report on form 10-k. business trends increasingly , the electric utility industry relies on ami technology for two-way communication to monitor and control electrical devices at the customer 's site . although the company does not sell products for electric 14 market applications , the trend toward ami affects the markets in which the company does participate , particularly for those customers in the water utility market that are interested in more frequent and diverse data . specifically , ami enables water utilities to capture readings from each meter at specific intervals . in 2011 , the company introduced what it believes will be the next generation of metering technology , advanced metering analytics ( ama ) , that incorporates both mobile and fixed network reading capabilities , along with a host of automated utility management tools to facilitate the ability of water utilities to increase their productivity and revenue . ama is comprised of readcenter analytics software coupled with the new orion se two-way fixed network technology , which is complemented by a family of highly accurate and reliable water meters . the orion se system can operate as a mobile amr system , a fixed network ami system , or both . for example , a utility can begin deployment in mobile mode and migrate to a fixed network system . also , if the system is operating in fixed network mode and the collector network goes down , the system will automatically revert to mobile mode , allowing the utility to continue collecting readings . once the collector network is back up , it will automatically revert back to its fixed network mode . by using ama , utilities will be able to proactively manage their day-to-day operations through powerful analytics-based software and two-way fixed network meter reading . the company sells its technology solutions to meet customer requirements . since the technology products have comparable margins , any change in the mix between amr , ami or ama is not expected to have a significant impact on the company 's net sales related to meter reading technology . there are approximately 53,000 water utilities in the united states and the company estimates that less than 30 percent of them have converted to an amr or ami technology . although there is growing interest in ami and ama communication by water utilities , the vast majority of utilities installing technology continue to select amr technologies for their applications . the company 's orion technology has experienced rapid acceptance in the united states as an increasing number of water utilities have selected orion as their amr solution . the company anticipates that even with growing interest in ami and ama , amr will continue to be the primary product of choice for a number of years . for many water utilities , amr technology is simply the most cost-effective solution available today . however , with the introduction of ama , the company believes it is well-positioned to meet customers ' future needs . acquisitions on february 1 , 2012 , the company acquired 100 % of the outstanding common stock of racine federated , inc. ( racine federated ) of racine , wisconsin and its subsidiary premier control technologies , ltd. , located in thetford , england for approximately $ 57.0 million in cash . racine federated manufactures and markets flow meters for the water industry as well as various industrial metering and specialty products . these products complement and expand the company 's existing line of water application and specialty application products for the global flow measurement business . this acquisition is further described in note 1 summary of significant accounting policies under the heading subsequent events in the notes to consolidated financial statements in part ii , item 8 of this 2011 annual report on form 10-k. on january 26 , 2011 , the company purchased remag , ag ( remag ) of bern , switzerland for $ 4.9 million . remag distributes a line of precision flow measurement products , some of which they manufacture , for the global industrial market . their small turbine meters complement and expand the company 's existing line of specialty application products . story_separator_special_tag interest expense ( income ) , net interest expense ( income ) , net was $ 0.2 million in 2011 compared to $ 0.4 million in 2010. the decrease was due primarily to lower borrowings in 2011. interest expense ( income ) , net was $ 0.4 million in 2010 compared to $ ( 0.1 ) million in 2009. the increase was due to the reversal in 2009 of $ 1.2 million that was previously accrued during 2007 and 2008 related to the french tax issue discussed below under discontinued operations and lower overall debt balances . income taxes income taxes as a percentage of earnings from continuing operations before income taxes were 29.9 % , 35.5 % , and 36.7 % for 2011 , 2010 and 2009 , respectively . the 2011 results include recognition of previously 18 unrecognized tax benefits for certain deductions that were taken on prior tax returns . these benefits total approximately $ 1.3 million and were recognized in earnings in 2011 due to the realization that such benefits became more likely than not upon the conclusion of an irs audit of the company 's 2009 federal income tax return . without these benefits , the provision for income taxes as a percentage of earnings before income taxes for 2011 would have been 34.8 % , which is lower than the 2010 rate of 35.5 % due to higher foreign income taxed at lower rates . the decrease between 2010 and 2009 was due to higher federal benefits for domestic production activities and increased foreign income tax benefits . earnings and diluted earnings per share from continuing operations as a result of the lower operating earnings , mitigated somewhat by a lower effective tax rate , earnings from continuing operations were $ 19.2 million in 2011 compared to $ 28.7 million in 2010. on a diluted basis , earnings per share from continuing operations were $ 1.27 compared to $ 1.91 for the same periods . primarily as a result of the increased operating earnings and a lower effective income tax rate , earnings from continuing operations were $ 28.7 million in 2010 compared to $ 26.8 million in 2009. on a diluted basis , earnings per share from continuing operations were $ 1.91 compared to $ 1.79 for the same periods . discontinued operations the 2009 results include recognition of previously unrecognized tax benefits for certain deductions that were taken on prior tax returns related to the 2006 shutdown of the company 's french subsidiaries , which were reflected as a discontinued operation . these tax benefits ( $ 7.4 million ) were recognized as earnings from discontinued operations in 2009 due to the realization that such tax benefits became more likely than not upon the conclusion of an irs audit of the company 's 2006 federal income tax return . on a diluted basis , earnings per share from discontinued operations for 2009 were $ 0.49. the company recorded interest income in continuing operations during 2009 , because it recognized an interest expense reversal of $ 1.2 million that was previously accrued during 2007 and 2008 relating to this uncertain tax position . liquidity and capital resources the main sources of liquidity for the company are cash from operations and borrowing capacity . cash provided by operations in 2011 was $ 31.3 million compared to $ 18.4 million in 2010. the primary reason for the change between years was due to the significant increase in inventory in 2010 that did not recur in 2011. additionally , there was no contribution to the company 's pension plan in 2011. cash provided by operations in 2010 was $ 18.4 million compared to $ 36.6 million in 2009. the decrease in cash provided by operations in 2010 from 2009 was due to higher inventory and receivable balances , offset somewhat by higher earnings from continuing operations and lower pension plan contributions . receivables at december 31 , 2011 were $ 41.2 million compared to $ 40.4 million in 2010. the increase was due in part to the addition of remag in 2011. the company believes its net receivables balance is fully collectible . inventories at december 31 , 2011 were $ 49.4 million compared to $ 48.3 million at december 31 , 2010. the increase was due primarily to less than expected sales in the fourth quarter and the addition of remag in 2011. capital expenditures totaled $ 5.3 million in 2011 , $ 9.2 million in 2010 and $ 7.8 million in 2009. these amounts vary due to the timing of capital expenditures . the company believes it has adequate capacity to increase production levels with minimal additional capital expenditures . intangible assets decreased to $ 33.7 million at december 31 , 2011 from $ 34.2 million at december 31 , 2010 , primarily due to normal amortization , partially offset by intangibles acquired with the remag acquisition in 2011 . 19 other assets decreased to $ 6.3 million at december 31 , 2011 compared to $ 7.4 million at december 31 , 2010 due to the redemption of life insurance policies on several individuals that were associated with the company . long-term deferred income tax assets increased to $ 2.3 million at december 31 , 2011 compared to $ 1.7 million in 2010 due to the timing of certain tax deductions , primarily for pension plan remeasurement . goodwill increased to $ 9.4 million at december 31 , 2011 compared to $ 9.2 million at december 31 , 2010. the increase was due to the acquisition of remag in 2011. short-term debt decreased from december 31 , 2010 to december 31 , 2011 as cash generated from operations was used to pay down debt . these accounts totaled $ 1.8 million at december 31 , 2011 , a decrease from $ 12.9 million at december 31 , 2010. at the end of 2011 , debt represented less than 1.0 % of the company 's total capitalization . none of the company 's debt carries financial covenants nor is it secured .
| results of operations net sales net sales in 2011 decreased $ 13.7 million , or 5.0 % , to $ 262.9 million from $ 276.6 million in 2010. the overall decrease was the net result of lower volumes sold for the company 's water application products , offset somewhat by higher sales of specialty application products . higher prices in certain product lines also helped offset the lower water application sales . water application products represented 78.3 % of total net sales in 2011 compared to 84.3 % in 2010. these sales decreased in 2011 by $ 27.4 million , or 11.7 % , to $ 205.9 million from $ 233.3 million . the decline was due primarily to lower volumes of the company 's amr/ami related products , as well as lower sales of commercial and manual read residential meters , offset by somewhat higher prices in certain product lines . sales of the company 's orion amr technology products decreased nearly 17.0 % while sales of itron related products declined nearly 33.0 % . ( itron sales were substantially higher in 2010 due to increased sales to certain customers . ) in 2011 , orion related products outsold itron related products by a ratio of 2.7 to 1. these declines were offset somewhat by higher sales of the company 's galaxy/ami related products , which increased nearly 77.0 % as more utilities purchased network systems . the company believes the net decrease in water application sales was due to a continuation of certain factors , including concerns over municipal spending that continue to delay order decisions , slower housing starts and the company 's introduction in early 2011 of the next generation of the orion product that caused water utilities to take time to evaluate this new technology . in addition , poor weather in the midwest and northeast had a negative impact on sales in early 2011 due to its effects on budget demands and installation rates .
| 4,078 |
cost of sales / operating expense tax effects ( 130 ) income tax expense foreign currency translation adjustments write off of currency translation amounts 135 other income and expense total reclassifications for the period $ 346 the story_separator_special_tag unless otherwise stated , all monetary amounts in this management 's discussion and analysis of financial condition and results of operations , other than per share amounts , are stated in thousands . executive overview the company designs , manufactures and markets high quality recreational products for the outdoor enthusiast . through a combination of innovative products , strong marketing , a talented and passionate workforce and efficient distribution , the company seeks to set itself apart from the competition . its subsidiaries operate as a network that promotes innovation and leverages best practices and synergies , following the strategic vision set by executive management and approved by the company 's board of directors . highlights the company 's fiscal 2016 revenues increased by 1 % over the prior year . strong performance in the marine electronics and watercraft segments more than offset revenue declines in the diving and outdoor equipment segments . operating profit grew $ 5,041 , or 28 % , in the current year due primarily to an improvement in gross profit related to the higher sales volume as well as margin improvements . the impact of one time items in operating expenses in both years nearly offset each other . an improvement of approximately $ 9,900 in net legal expense year over year was partially offset by $ 6,197 of impairment charges related to goodwill in the diving segment recognized by the company in the third quarter of 2016. results of operations summary consolidated financial results from continuing operations for the fiscal years presented were as follows : replace_table_token_5_th the company 's internal and external sales and operating profit ( loss ) by business segment for each of the three most recent completed fiscal years were as follows : replace_table_token_6_th 23 replace_table_token_7_th see note 12 to the consolidated financial statements included elsewhere in this report for the definition of segment net sales and operating profit . fiscal 2016 vs. fiscal 2015 net sales net sales in 2016 increased by 1 % to $ 433,727 compared to $ 430,489 in 2015. foreign currency exchange had a $ 2,691 unfavorable impact , less than 1 % , on the current year 's sales versus the prior year . net sales for the marine electronics business increased by $ 12,354 , or 5 % during 2016. the increase from fiscal 2015 was driven primarily by exceptional new product performance in both the minn kota and humminbird product lines . outdoor equipment net sales decreased $ 7,555 , or 16 % , in 2016 from 2015. strong sales of jetboil products during 2016 was not able to offset declines in sales of tents year over year . net sales in the watercraft business increased $ 1,427 , or 3 % , due primarily to solid product offerings in a strong paddling marketplace . diving net sales declined $ 2,988 , or 4 % , year over year . several factors contributed to this decline , including instability in the middle east market , competitive pricing pressure in europe and a product recall in the computer segment . additionally , foreign currency exchange had a 1 % unfavorable impact on sales . cost of sales cost of sales was $ 257,265 , or 59.3 % of net sales , on a consolidated basis for the year ended september 30 , 2016 compared to $ 258,756 or 60.1 % of net sales , in the prior year . modest increases in labor rates were more than offset by process improvements in each of the business segments and lower costs of resin used in the watercraft business . gross profit gross profit of $ 176,462 was 40.7 % of net sales on a consolidated basis for the year ended september 30 , 2016 compared to $ 171,733 or 39.9 % of net sales in the prior year . gross profit in the marine electronics business increased by $ 5,899 from the prior year due primarily to the 5 % increase in net sales . outdoor equipment gross profit decreased by $ 2,089 from 2015 due primarily to the decline in net sales volume . a better mix of products sold improved the gross margin rate year over year . gross profit in the watercraft segment was $ 2,270 higher than 2015 levels due primarily to higher sales volume occurring during 2016 as well as lower resin costs . 24 the 4 % decrease in net sales in the diving segment noted above was the primary driver of a $ 1,402 decrease in gross profit of that segment year over year . operating expenses operating expenses decreased from the prior year by $ 312. the decrease was driven primarily by approximately $ 9,900 of lower net legal expense , offset in part by $ 6,197 of impairment charges on diving goodwill , recognized in the third quarter of the current fiscal year . operating expenses for the marine electronics segment decreased by $ 11,139 from fiscal 2015 levels . the decrease was due mainly to approximately $ 9,900 of lower net legal expense . lower warranty expense in the current year also was a factor in the improvement year over year . outdoor equipment operating expenses decreased by $ 319 from the prior year due primarily to lower sales volume related costs . in the watercraft segment , operating expenses increased $ 541 from their levels in fiscal 2015 due primarily to higher sales volume related expense . operating expenses for the diving business increased by $ 8,916 year over year due primarily to a goodwill impairment charge of $ 6,197 recognized in the current year . additionally , the acquisition of seabear contributed approximately $ 1,200 of incremental expense in the current year . story_separator_special_tag the increase was due mainly to approximately $ 7,300 of patent litigation costs incurred in 2015 as well as higher sales volume related costs . outdoor equipment operating expenses decreased by $ 7,195 in 2015 from 2014 due primarily to $ 8,475 of impairment charges recognized in fiscal 2014 on jetboil intangible assets , which was partially offset by a $ 1,600 cash recovery from the jetboil indemnity claim in that same year . 26 in the watercraft segment , operating expenses decreased $ 673 in 2015 from their levels in fiscal 2014 due primarily to lower operating costs as a result of our decision to exit certain unprofitable international markets . operating expenses for the diving business decreased by $ 2,425 year over year due primarily to cost containment efforts in light of lower sales volumes in this segment . story_separator_special_tag the company 's domestic subsidiaries and a second lien on working capital and certain patents and trademarks of the company and its subsidiaries . any proceeds from the sale of secured property are first applied against the related term loans and then against the revolvers ( as defined below ) . the aggregate term loan borrowings are subject to a pre-payment penalty . the penalty is currently 3 % of the pre-payment amount , and the penalty will decrease by 1 % annually on the anniversary date of the effective date of the loan agreement . see discussion of the payoff of the term loans at note 14 to the consolidated financial statements included elsewhere in this report . on september 16 , 2013 , the company and certain of its subsidiaries entered into a new credit facility with pnc bank national association and certain other lenders named therein . this credit facility consists of a revolving credit agreement dated september 16 , 2013 among the company , certain of the company 's subsidiaries , pnc bank , national association , as lender and as administrative agent and the other lenders named therein ( the “ revolving credit agreement ” or “ revolver ” ) . the revolver has a 60 month term and provides for borrowing of up to an aggregate principal amount not to exceed $ 90,000 with an accordion feature that gives the company the option to increase the maximum seasonal financing availability subject to the conditions of the revolving credit agreement and subject to the approval of the lenders . the revolver imposes a seasonal borrowing limit such that borrowings under the facility may not exceed $ 60,000 from the period june 30 th through october 31 st of each year under the agreement . the interest rate on the revolver is based on libor plus an applicable margin . the applicable margin resets each quarter and ranges from 1.25 % to 2.00 % and is dependent on the company 's leverage ratio for the trailing twelve month period . the interest rate on the revolver was approximately 1.7 % at september 30 , 2016 and 1.4 % at october 2 , 2015. the revolver is secured with a first priority lien on working capital assets and certain patents and trademarks of the company and its subsidiaries and a second priority lien on land , buildings , machinery and equipment of the company 's domestic subsidiaries . the revolving credit agreement limits asset or stock acquisitions to no more than $ 20,000 in the event that the company 's consolidated leverage ratio is greater than 2.5 times . no limits are imposed if the company 's consolidated leverage ratio is less than 2.5 times and the remaining borrowing availability under the revolver is greater than $ 10,000 at the time of the acquisition . the revolving credit agreement limits the amount of restricted payments ( primarily dividends and repurchases of common stock ) made during each fiscal year . the company may declare , and pay , dividends in accordance with historical practices , but in no event may the aggregate amount of all dividends or repurchases of common stock exceed $ 10,000 in any fiscal year . the revolving credit agreement includes maximum leverage ratio and minimum interest coverage ratio limitations . as of september 30 , 2016 , the company held approximately $ 53,698 of cash and cash equivalents in bank accounts in foreign jurisdictions . contractual obligations and off balance sheet arrangements the company has contractual obligations and commitments to make future payments under its existing credit facilities , including interest , operating leases and open purchase orders . the following schedule details these significant contractual obligations at september 30 , 2016. replace_table_token_11_th 29 the company utilizes letters of credit primarily as security for the payment of future claims under its workers ' compensation insurance . letters of credit outstanding at september 30 , 2016 were $ 392 compared to $ 684 on october 2 , 2015 and were included in the company 's total loan availability . the company had no unsecured revolving credit facilities at its foreign subsidiaries as of september 30 , 2016 or october 2 , 2015. the company has no other off-balance sheet arrangements . the company anticipates making contributions to its defined benefit pension plans of $ 685 through september 29 , 2017. market risk management foreign exchange risk the company has significant foreign operations , for which the functional currencies are denominated primarily in euros , swiss francs , hong kong dollars , japanese yen and canadian dollars . as the values of the currencies of the foreign countries in which the company has operations increase or decrease relative to the u.s. dollar , the sales , expenses , profits , losses , assets and liabilities of the company 's foreign operations , as reported in the company 's consolidated financial statements , increase or decrease , accordingly . approximately 17 % of the company 's revenues for the fiscal year ended september 30 , 2016 were denominated in currencies other than the u.s. dollar .
| operating results the company 's operating profit was $ 17,853 in fiscal 2015 compared to an operating profit of $ 16,691 in fiscal 2014. marine electronics operating profit decreased by $ 4,667 to $ 26,055 in 2015 from $ 30,722 in the prior year due primarily to $ 7,300 of patent litigation costs incurred in 2015. excluding the effect of these charges , operating profit for this segment would have been $ 2,666 higher in 2015 than in the prior year . the operating profit for outdoor equipment was $ 3,847 in 2015 compared to an operating loss of $ 3,726 in the prior year due primarily to the jetboil impairment charges noted above . excluding the effect of these charges , operating profit for this segment would have been $ 698 higher in 2015 than in 2014. operating profit for the watercraft business increased by $ 1,410 in fiscal 2015. operating profit for the diving business declined $ 2,662 from fiscal 2014 to $ 934 in fiscal 2015. other income and expenses interest expense of $ 865 in 2015 increased from the prior year by $ 77. interest income was less than $ 100 in both years . net other expense of $ 1,299 in fiscal 2015 compared to other income of $ 1,434 in fiscal 2014. the current year other expense included currency losses of $ 1,196 and market losses , net of dividend income , of $ 106 on deferred compensation plan assets . in 2014 , other income included $ 427 of currency gains as well as $ 965 of market gains and dividends on the deferred compensation plan assets . the dividends and market gains and losses on deferred compensation plan assets recognized in the consolidated statement of operations in “ other expense ( income ) , net ” are offset as deferred compensation expense in “ operating expenses.
| 4,079 |
as a result , the company will no longer receive royalty fees and now has no third party licensing agreements . in general , the company 's earnings improve , and cash flows from operations increase , as sales increase . although the company 's cost of goods sold is largely variable with sales , a portion of the company 's selling , general and administrative expenses rise relatively slowly in relation to sales increases . therefore , the company prioritizes initiatives that it expects will have the greatest impact on increasing sales . looking forward to the next several quarters , the following items are likely to have an impact on business and the results of operations : general economic factors as the u.s. economy provides mixed signals about whether a modest recovery is taking hold or whether another slow-down may occur ( the so-called “ double dip ” ) , the company continues to watch for signs as to what effect this may have in its markets . the recession experienced in the u.s. in calendar year 2009 appeared to have had less effect on the company 's markets , particularly central america , than past u.s. recessions . while there has been no specific indication of a change in the moderate economic growth of the past two years within most of the company 's markets , the company will continue to monitor the situation as a slow-down in the u.s. economy could have a negative impact on future sales growth . further , world economic events , such as the concerns over european debt , can have an impact on financial markets , which in turn can affect exchange rates of currencies compared to the u.s. dollar in the company 's markets and also the interest rates paid by the company on some of its long-term debt . the company continues to be concerned about the increasing price of oil and certain commodities that could have a negative effect on the company 's operating costs and sales . higher oil prices can negatively impact the economic growth of the countries in which the company operates , thereby reducing the buying power of our members . higher oil prices can also increase the company 's operating costs , particularly utilities and distribution expenses . inflationary pressures on various commodities may also impact consumer spending . the company takes steps to buy competitively from its suppliers , but will pass through higher costs for items through increased pricing when necessary although , depending on the magnitude of the change , at a reduced gross margin percentage of sales . due to many factors , including the broad array of merchandise offered in our warehouse clubs , the changing mix of items between imported versus locally sourced , and the company 's ongoing efforts to reduce prices through operational efficiencies , the company believes that the current impact of inflation , if any , on the company 's reported sales growth is small , but has determined that this is not quantifiable with any certainty . in the countries in which the company operates , the company does not currently face direct competition from u.s. membership warehouse club operators . however , it does face competition from various retail formats such as hypermarkets , supermarkets , cash and carry , and specialty stores , including those within latin america that are owned and operated by a large u.s. based retailer . the company has competed effectively in these markets in the past and expects to continue to do so in the future due to the unique nature of the membership warehouse club format . the company has noted that certain retailers are making investments in upgrading their locations which may result in increased competition . further , it is possible that current u.s. warehouse club operators may decide to enter the company 's markets and compete more directly with pricesmart in a similar warehouse club format . many pricesmart markets are susceptible to foreign currency exchange rate volatility . currency exchange rate changes either increase or decrease the cost of imported products which the company purchases in u.s. dollars and prices in local currency . price changes can impact the demand for those products in the market . currency exchange rates also affect the reported sales of the consolidated company when local currency-denominated sales are translated to u.s. dollars . in addition , the company revalues all u.s. dollar denominated assets and liabilities within those markets that do not use the u.s. dollar as its functional currency . these assets and liabilities include , but are not limited to , excess cash permanently reinvested offshore and the value of items shipped from the u.s. to the company 's foreign markets . the gain or loss associated with this revaluation , net of reserves , is recorded in net warehouse sales cost of goods sold . approximately 49 % of the company 's net warehouse sales are comprised of products imported into the markets where pricesmart warehouse clubs are located . products imported for sale in pricesmart markets are purchased in u.s. dollars , but approximately 79 % of the company 's net warehouse sales are in foreign currencies . during fiscal year 2011 , local currencies in pricesmart markets have generally declined relative to the dollar , but the barbados dollar , colombian peso and guatemalan quetzale have all appreciated relative to the u.s. dollar on a year-over-year basis recently which has had a positive impact on sales . story_separator_special_tag the company opened a new warehouse club in santo domingo , dominican republic ( “ arroyo hondo ” ) on november 5 , 2010 , and a new membership warehouse club in barranquilla , colombia on august 19 , 2011. during may 2011 , the company entered into an agreement to acquire land in north cali , colombia , which is currently subject to the fulfillment of certain conditions prior to march , 2012. in the event the conditions are timely fulfilled , the company plans to acquire the site to construct and operate upon it a new warehouse club . during july 2011 , the company also entered into an agreement to acquire land in south cali , colombia , which is currently subject to the fulfillment of certain conditions prior to january , 2012. in the event the conditions are timely fulfilled , the company plans to also acquire this site to construct and operate upon it an additional new warehouse club . while it is currently unknown whether the north cali conditions will be met in a timely manner , the company currently anticipates that the south cali site will be acquired by the company in december 2011 and that a new warehouse club will open on that site in late calendar 2012. the company continues to explore other potential sites for future warehouse clubs in other major cities in colombia . the initial warehouse sales and membership results experienced with the opening of the barranquilla warehouse club has reinforced the company 's belief that colombia could be a market for multiple pricesmart warehouse clubs . the company seeks to enhance its long-term business performance by buying rather than leasing real estate which occasionally includes developing adjacent land either directly or through joint ventures . real estate ownership provides a number of advantages as compared to leasing , including lower operating expenses , flexibility to expand or otherwise enhance pricesmart buildings , long-term control over the use of the property and the residual value that the real estate may have in future years . in the course of acquiring sites , the company sometimes has to purchase more land than is actually needed for the warehouse club operation . as an example , when the company acquired the alajuela site in costa rica , it purchased land for the pricesmart warehouse club and entered into a joint venture with the seller on the balance of the property . pricesmart entered into a similar real estate transaction with respect to its recently opened brisas site in panama city . to the extent that the company acquires property in excess of what is needed for a particular warehouse club , the company generally plans to either sell or develop the excess property . the excess land at alajuela and brisas is being held for development by the joint ventures , which commenced in fiscal year 2011. a similar development strategy is being employed for the company 's excess land at the new san fernando , trinidad and arroyo hondo , dominican republic locations where the properties are fully owned by pricesmart . in this respect , the company recently began developing and has executed lease agreements on part of the excess land in san fernando , trinidad . the profitable sale or development of real estate is highly dependent on real estate market conditions . the company believes that it will find suitable tenants or acquirers in the future for its other property development projects . 5 key items for fiscal year 2011 fourth quarter include : · net warehouse club sales increased 22.1 % over the same quarter in the prior year , resulting from a 19.3 % increase in comparable warehouse club sales ( for the 13 weeks ending september 4 , 2011 ) and the addition of two new warehouse clubs : santo domingo , dominican republic ( november 5 , 2010 ) and barranquilla , colombia ( august 19 , 2011 ) . · the company opened its 29 th warehouse club and first in colombia on august 19 , 2011. warehouse sales for the 13 days in the quarter and fiscal year contributed 77 basis points of growth in the quarter . · gross profits ( net warehouse club sales less associated cost of goods sold ) were $ 64.6 million ( 14.8 % of sales ) compared to $ 55.5 million ( 15.6 % of sales ) . the increase in gross profits and decrease in gross margin percentage are consistent with the company 's strategy of lowering prices to enhance value to members and increase sales . · selling , general and administrative expenses , including preopening expenses , grew 26.6 % to $ 53.8 million ( 12.3 % of net warehouse sales ) from $ 42.5 million ( 11.9 % of net warehouse sales ) from the same period last year . the cost associated with colombia , including the infrastructure established within the country , the pre-opening expenses for the warehouse club , and the initial costs to operate the warehouse club , added $ 2.1 million in operating expenses ( 0.5 % of net warehouse sales ) in the quarter . additionally , the company recorded a charge in the current quarter to increase depreciation expense by $ 2.5 million in connection with the correction of an error from prior periods associated with the translation of depreciation expense from foreign currencies into u.s. dollars . ( see notes to consolidated financial statements - note 1 - company overview and basis of presentation ) . · provision for income taxes was $ 5.4 million for a tax rate of 29.9 % of pre-tax income . the rate in the current quarter was positively impacted by a decrease of $ 3.1 million in the quarter resulting from a correction of an error identified in the company 's reconciliation of net deferred tax assets associated with operating and capital loss carry-forwards to its tax returns ( see notes to consolidated financial statements - note 1 - company overview and basis of presentation ) .
| financial condition and results of operations this annual report contains forward-looking statements concerning the company 's anticipated future revenues and earnings , adequacy of future cash flow and related matters . these forward-looking statements include , but are not limited to , statements containing the words “ expect , ” “ believe , ” “ will , ” “ may , ” “ should , ” “ project , ” “ estimate , ” “ anticipated , ” “ scheduled , ” and like expressions , and the negative thereof . these statements are subject to risks and uncertainties that could cause actual results to differ materially , including the following risks : the company 's financial performance is dependent on international operations which exposes the company to various risks ; any failure by the company to manage its widely dispersed operations could adversely affect its business ; the company faces significant competition ; the company faces difficulties in the shipment of , and risks inherent in the acquisition and importation of , merchandise to its warehouse clubs ; the company is exposed to weather and other natural disaster risks ; general economic conditions could adversely impact the company 's business in various respects ; a few of the company 's stockholders own nearly 31.9 % of the company 's voting stock , which may make it difficult to complete some corporate transactions without their support and may impede a change in control ; the loss of key personnel could harm the company 's business ; the company is subject to volatility in foreign currency exchange rates ; the company faces the risk of exposure to product liability claims , a product recall and adverse publicity ; a determination that the company 's long-lived or intangible assets have been impaired could adversely affect the company 's future results of operations and financial position ; although the company takes steps to continuously review , enhance , and implement improvements to its internal controls , there may be material weaknesses or significant deficiencies that the company has not yet identified ; as well as
| 4,080 |
forward-looking statements can be identified by their use of forward-looking words , such as “ may , ” “ will , ” “ anticipate , ” “ expect , ” “ believe , ” “ intend , ” “ plan , ” “ should , ” “ seek ” or comparable terms , or the negative use of those words , but the absence of these words does not necessarily mean that a statement is not forward-looking . the forward-looking statements are based on the company 's beliefs , assumptions and expectations of its future performance , taking into account all information currently available to the company . forward-looking statements are not predictions of future events . these beliefs , assumptions and expectations can change as a result of many possible events or factors , not all of which are known to the company . some of these factors are described below and under the headings “ business ” , “ risk factors ” and “ management 's discussion and analysis of financial condition and results of operations ” . these and other risks , uncertainties and factors could cause the company 's actual results to differ materially from those included in any forward-looking statements the company makes . any forward-looking statement speaks only as of the date on which it is made . new risks and uncertainties arise over time , and it is not possible for the company to predict those events or how they may affect the company . except as required by law , the company is not obligated to , and does not intend to , update or revise any forward-looking statements , whether as a result of new information , future events or otherwise . important factors that could cause actual results to differ materially from the company 's expectations include , among others : the ability of the company 's tenants to make payments under their respective leases , our reliance on certain major tenants and the company 's ability to re-lease properties that are currently vacant or that become vacant ; the company 's ability to obtain suitable tenants for its properties ; changes in real estate market conditions , economic conditions in the industrial sector and the market in which the company 's properties are located and general economic conditions ; the inherent risks associated with owning real estate , including local real estate market conditions , governing laws and regulations and illiquidity of real estate investments ; the company 's ability to sell properties at an attractive price ; the company 's ability to repay debt financing obligations ; the company 's ability to refinance amounts outstanding under its credit facilities at maturity on terms favorable to us ; the loss of any member of the company 's management team ; the company 's ability to comply with debt covenants ; the company 's ability to integrate acquired properties and operations into existing operations ; continued availability of proceeds from issuances of the company 's debt or equity securities ; the availability of other debt and equity financing alternatives ; market conditions affecting the company 's debt and equity securities ; changes in interest rates under the company 's current credit facility and under any additional variable rate debt arrangements that the company may enter into in the future ; the company 's ability to successfully implement the company 's selective acquisition strategy ; the company 's ability to maintain internal controls and procedures to ensure all transactions are accounted for properly , all relevant disclosures and filings are timely made in accordance with all rules and regulations , and any potential fraud or embezzlement is thwarted or detected ; changes in federal or state tax rules or regulations that could have adverse tax consequences ; 31 declines in the market value of the company 's investment securities ; and the company 's ability to qualify as a reit for federal income tax purposes . you should not place undue reliance on these forward-looking statements , as events described or implied in such statements may not occur . the company undertakes no obligation to update or revise any forward-looking statements as a result of new information , future events or otherwise . the following discussion should be read in conjunction with the financial statements and notes thereto included elsewhere herein . overview the company is a self-administered and self-managed reit . the company seeks to invest in well-located , modern industrial buildings , leased primarily to investment-grade tenants on long-term net leases . at september 30 , 2014 , the company held investments in eighty-two properties totaling approximately 11,207,000 square feet . total net real estate investments were $ 636,923,228 at september 30 , 2014. these properties are located in twenty-eight states : alabama , arizona , colorado , connecticut , florida , georgia , illinois , indiana , iowa , kansas , kentucky , maryland , michigan , minnesota , mississippi , missouri , nebraska , new jersey , new york , north carolina , ohio , oklahoma , pennsylvania , south carolina , tennessee , texas , virginia , and wisconsin . all of these properties are wholly owned , with the exception of an industrial property in new jersey , in which the company owns a 51 % controlling equity interest , and the shopping center in new jersey , in which the company holds a two-thirds controlling equity interest . the company 's weighted-average lease expiration was 6.7 and 6.1 years as of september 30 , 2014 and 2013 , respectively and its average rent per occupied square foot as of september 30 , 2014 and 2013 was $ 5.51 and $ 5.53 , respectively . at september 30 , 2014 and 2013 , the company 's occupancy was 95.9 % and 96.0 % , respectively . during fiscal 2014 , the company acquired six industrial properties totaling approximately 1,450,000 square feet for approximately $ 97,605,000. the company has a concentration of properties leased to fedex corporation ( fdx ) . story_separator_special_tag % . interest and dividend income for fiscal 2014 was $ 3,882,597 which is in line with interest and dividend income of $ 3,885,920 for fiscal 2013. during fiscal 2014 , the company recognized $ 2,166,766 in gains on sales of securities transactions . the company 33 has unrealized gains of $ 121,356 in its reit securities portfolio as of september 30 , 2014. the dividends received from our securities investments continue to meet our expectations . the company intends to hold these securities for investment on a long-term basis . the company had $ 20,474,661 in cash and cash equivalents and $ 59,311,403 in reit securities as of september 30 , 2014. the company believes that funds generated from operations , the dividend reinvestment and stock purchase plan ( the drip ) , the unsecured line of credit , together with the ability to finance and refinance its properties , will provide sufficient funds to adequately meet its obligations over the next several years . on may 28 , 2014 , the company completed a public offering of 8,050,000 shares of the company 's common stock ( including the underwriters ' option to purchase 1,050,000 additional shares ) at a price of $ 8.50 per share , before underwriting discounts . the company received net proceeds from the offering , after deducting underwriting discounts and all other transaction costs , of approximately $ 65,113,000. the company has used and will continue to use such net proceeds to purchase additional properties in the ordinary course of business and for general corporate purposes , including repayment of indebtedness . on june 7 , 2012 and june 21 , 2012 , the company issued 2,000,000 and 300,000 shares , respectively , of 7.875 % series b cumulative redeemable preferred stock ( series b preferred stock ) at an offering price of $ 25.00 per share in an underwritten public offering . the company received net proceeds from the offering , after deducting the underwriting discount and other estimated offering expenses , of approximately $ 55,033,000 and used the net proceeds from the offering to purchase properties in the ordinary course of business and for general corporate purposes . on december 5 , 2011 , the company issued 2,000,000 shares of common stock in a registered direct placement at a price of $ 8.39 per share . the company received net proceeds from the common stock offering of approximately $ 16,190,000. the company used such net proceeds to purchase additional properties in the ordinary course of business and for general corporate purposes , including the repayment of indebtedness . the company has a dividend reinvestment plan ( drip ) , in which participants can purchase stock from the company at a price of approximately 95 % of market value . amounts received in connection with the drip , ( including dividend reinvestments of $ 7,624,528 , $ 6,781,345 and $ 2,425,032 for fiscal years ended 2014 , 2013 and 2012 , respectively ) , were $ 38,090,334 , $ 31,119,351 and $ 13,094,616 for fiscal years ended 2014 , 2013 and 2012 , respectively . on march 13 , 2012 , the company temporarily suspended its drip and , as of august 2 , 2012 , the drip was reinstated . see part i , item 1 – business and item 1a – risk factors for a more complete discussion of the economic and industry-wide factors relevant to the company and the opportunities and challenges , and risks on which the company is focused . significant accounting policies and estimates the discussion and analysis of the company 's financial condition and results of operation are based upon the company 's consolidated financial statements , which have been prepared in accordance with u.s. gaap . the preparation of these consolidated financial statements requires management to make estimates and judgments that affect the reported amounts of assets and liabilities , revenues and expenses , and related disclosure of contingent assets and liabilities at the date of the company 's consolidated financial statements . actual results may differ from these estimates under different assumptions or conditions . significant accounting policies are defined as those that involve significant judgment and potentially could result in materially different results under different assumptions and conditions . management believes the following significant accounting policies are affected by our more significant judgments and estimates used in the preparation of the company 's consolidated financial statements . for a detailed description of these and other accounting policies , see note 1 in the notes to the company 's consolidated financial statements included in this form 10-k. 34 real estate investments the company applies financial accounting standards board accounting standards codification ( asc ) 360-10 , property , plant & equipment ( asc 360-10 ) to measure impairment in real estate investments . rental properties are individually evaluated for impairment when conditions exist which may indicate that it is probable that the sum of expected future cash flows ( on an undiscounted basis without interest ) from a rental property is less than its historical net cost basis . these expected future cash flows consider factors such as future operating income , trends and prospects as well as the effects of leasing demand , competition and other factors . upon determination that a permanent impairment has occurred , rental properties are reduced to their fair value . for properties to be disposed of , an impairment loss is recognized when the fair value of the property , less the estimated cost to sell , is less than the carrying amount of the property measured at the time there is a commitment to sell the property and or it is actively being marketed for sale . a property to be disposed of is reported at the lower of its carrying amount or its estimated fair value , less its cost to sell . subsequent to the date that a property is held for disposition , depreciation expense is not recorded .
| results of operations occupancy and rent per occupied square foot the company 's weighted-average lease expiration was 6.7 and 6.1 years as of september 30 , 2014 and 2013 , respectively and its average rent per occupied square foot as of september 30 , 2014 and 2013 was $ 5.51 and $ 5.53 , respectively . at september 30 , 2014 and 2013 , the company 's occupancy was 95.9 % and 96.0 % , respectively . all improved properties were 100 % occupied at september 30 , 2014 except for the following : replace_table_token_13_th 37 lease renewals and extensions approximately 4 % of the company 's gross leasable area , consisting of six leases totaling 437,727 square feet , were set to expire during fiscal 2014. the company has renewed four of the six leases with its existing tenants which were scheduled to expire in fiscal 2014. the company has incurred or expects to incur tenant improvement costs of approximately $ 470,000 and leasing costs of approximately $ 160,000 in connection with these four lease renewals . the table below summarizes the lease terms of the four leases which were renewed and includes both the tenant improvement costs and the leasing costs which are presented on a per square foot ( psf ) basis averaged over the renewal term .
| 4,081 |
in 2017 , we incurred $ 72 million in restructuring and related costs including asset write-downs of $ 3 million , primarily related to the planned closing a clean air belgian jit plant in response to the end of production on a customer platform , closing an oe clean air manufacturing plant and downsizing ride performance operations in australia , the required 90 tenneco inc. notes to consolidated financial statements - ( continued ) relocation of our beijing ride performance plant outside of the beijing area and other cost improvement initiatives , of which $ 41 million was recorded in cost of sales , $ 28 million in sg & a and $ 3 million in depreciation and amortization expense . amounts related to activities that are part of our restructuring plans are as follows : replace_table_token_47_th on january 31 , 2013 , we story_separator_special_tag as you read the following review of our financial condition and results of operations , you should also read our consolidated financial statements and related notes in item 8. story_separator_special_tag style= '' line-height:120 % ; padding-top:6px ; text-indent:32px ; font-size:10pt ; '' > goodwill impairment : as a result of our goodwill impairment evaluation in the fourth quarter of 2017 , we determined that the estimated fair value of the europe and south america ride performance reporting unit was lower than its carrying value . accordingly , we recorded a goodwill impairment charge of $ 11 million in the fourth quarter . we reached this determination based on updated long-term projections for the europe and south america ride performance reporting unit provided by the company 's annual budgeting and strategic planning process , which is completed in the fourth quarter . the 2017 annual budgeting and strategic planning process indicated that the reporting unit 's recovery period will be longer than previously expected . earnings before interest expense , taxes and noncontrolling interests ( “ ebit ” ) was $ 417 million for 2017 , a decrease of $ 99 million , when compared to $ 516 million in the prior year . higher oe light vehicle and commercial truck , off-highway and other vehicle revenues in all regions , higher aftermarket ride performance revenues in europe , south america and asia pacific , as well as new platforms , mainly in north america and europe , were more than offset by lower aftermarket revenues in clean air and north america ride performance , higher manufacturing costs , higher restructuring and related costs , the antitrust settlement accrual of $ 132 million , a goodwill impairment charge of $ 11 million in europe and south america , a warranty settlement with a customer , the timing of steel economics recoveries and continued investments in growth for new programs . ebit for 2016 also included $ 72 million in pension buyout charges . results from operations net sales and operating revenues for years 2017 and 2016 the tables below reflect our revenues for 2017 and 2016. we show the component of our oe revenue represented by substrate sales . while we generally have primary design , engineering and manufacturing responsibility for oe emission control systems , we do not manufacture substrates . substrates are porous ceramic filters coated with a catalyst - typically , precious metals such as platinum , palladium and rhodium . these are supplied to us by tier 2 suppliers generally as directed by our oe customers . we generally earn a small margin on these components of the system . as the need for more sophisticated emission control solutions increases to meet more stringent environmental regulations , and as we capture more diesel aftertreatment business , these substrate components have been increasing as a percentage of our revenue . while these substrates dilute our gross margin percentage , they are a necessary component of an emission control system . our value-add content in an emission control system includes designing the system to meet environmental regulations through integration of the substrates into the system , maximizing use of thermal energy to heat up the catalyst quickly , efficiently managing airflow to reduce back pressure as the exhaust stream moves past the catalyst , managing the expansion and contraction of the emission control system components due to temperature extremes experienced by an emission control system , using advanced acoustic engineering tools to design the desired exhaust sound , minimizing the opportunity for the fragile components of the substrate to be damaged when we integrate it into the emission control system and reducing unwanted noise , vibration and harshness transmitted through the emission control system . we present these substrate sales separately in the following table because we believe investors utilize this information to understand the impact of this portion of our revenues on our overall business and because it removes the impact of potentially volatile precious metals pricing from our revenues . while our original equipment customers generally assume the risk of precious metals pricing volatility , it impacts our reported revenues . presenting revenues that exclude “ substrates ” used in catalytic converters and diesel particulate filters removes this impact . additionally , we present these reconciliations of revenues in order to reflect value-add revenues without the effect of changes in foreign currency rates . we have not reflected any currency impact in the 2016 table since this is the base period for measuring the effects of currency during 2017 on our operations . we believe investors find this information useful in understanding period-to-period comparisons in our revenues . 47 replace_table_token_15_th replace_table_token_16_th 48 replace_table_token_17_th light vehicle industry production by region for years ended december 31 , 2017 and 2016 ( according to ihs automotive , january 2018 ) replace_table_token_18_th clean air revenue was up $ 448 million in 2017 compared to 2016 with higher volumes in all segments . in north america , higher volumes drove a $ 104 million revenue increase due to increased oe light vehicle and commercial truck , off-highway and other sales , as well as new platforms . story_separator_special_tag europe and south america 's ebit was $ 112 million in 2017 and $ 98 million in 2016. the benefit from increased oe light vehicle volumes and higher commercial truck , off-highway and other vehicles sales in the region , new platforms in europe , operational efficiencies and positive currency was partially offset by lower aftermarket sales in europe , higher restructuring and related expenses and higher costs associated with launching light vehicle , commercial truck and off-highway programs . ebit for asia pacific decreased $ 17 million to $ 133 million in 2017 from $ 150 million in 2016. ebit benefited from higher oe light vehicle and commercial truck revenues in china and india as well as higher oe off-highway and other revenues in japan , which was more than offset by lower oe light vehicle revenues in australia , the timing of steel recoveries , higher restructuring and related expenses and negative currency . for the clean air division , restructuring and related expenses of $ 30 million were included in ebit for 2017 and $ 7 million were included in ebit for the same period in 2016. currency had a $ 3 million favorable impact on ebit of the clean air division for 2017 when compared to 2016. ebit for the ride performance division was $ 199 million in 2017 compared to $ 236 million in 2016. ebit for north america decreased $ 37 million in 2017 to $ 120 million from $ 157 million in 2016 , driven by lower volumes in aftermarket , a warranty settlement with a customer , the timing of steel recoveries , and higher restructuring and related expenses , which more than offset higher oe light vehicle and commercial truck sales and new platforms . europe and south america 's ebit was $ 21 million in 2017 and $ 16 million in 2016. the benefit from higher light vehicle , aftermarket and commercial truck , off-highway and other vehicle revenues in the region , new platforms in europe and lower restructuring and related expenses was partially offset by the timing of steel recoveries , higher manufacturing costs , a goodwill impairment charge due to a longer recovery period for this reporting unit 's financial performance than previously expected and unfavorable currency . ebit for asia pacific decreased to $ 58 million in 2017 from $ 63 million in 2016 , driven by lower volumes in australia , higher restructuring and related expenses and negative currency partially offset by higher oe light vehicle volumes in china and india and higher aftermarket sales in the region . for the ride performance division , restructuring and related expenses of $ 38 million were included in ebit for 2017 and $ 27 million for the same period in 2016. additionally , a warranty settlement charge of $ 7 million and a goodwill impairment charge of $ 11 million were recorded in 2017. currency had a $ 3 million unfavorable impact on ebit of the ride performance division for 2017 when compared to 2016. currency had no impact on overall company ebit for 2017 as compared to 2016. ebit for years 2016 and 2015 replace_table_token_25_th 53 the ebit results shown in the preceding table include the following items , certain of which are discussed below under “ restructuring and other charges , ” which have an effect on the comparability of ebit results between periods : replace_table_token_26_th ( 1 ) charges related to pension derisking . ebit for the clean air division was $ 468 million in 2016 compared to $ 407 million in 2015. ebit for north america decreased $ 24 million , to $ 220 million , in 2016 versus 2015. the benefit from higher oe light vehicle sales , new platforms and favorable currency was more than offset by lower aftermarket revenue , lower commercial truck and off-highway vehicle revenue , higher manufacturing costs and higher sg & a expense . europe and south america 's ebit was $ 98 million in 2016 and $ 49 million in 2015. the benefit from higher light vehicle volumes , higher commercial truck , off-highway and other vehicle revenue , favorable mix and new platforms in europe as well as lower restructuring and related expenses and year-over-year restructuring savings was partially offset by negative currency . ebit for asia pacific increased $ 36 million to $ 150 million in 2016 from $ 114 million in 2015. ebit benefited from increased oe light vehicle sales and new platforms in china , higher commercial truck , off-highway and other vehicle revenue in china and japan as well as strong operational cost management , partially offset by higher sg & a expense and negative currency . for the clean air division , $ 7 million restructuring and related expenses were included in ebit for 2016 , whereas $ 10 million were included for 2015. ebit for clean air division also benefited from the timing of a customer recovery in china of $ 5 million in 2015. currency had a $ 23 million unfavorable impact on ebit of the clean air division for 2016 when compared to 2015. ebit for the ride performance division was $ 236 million in 2016 compared to $ 188 million in 2015. ebit for north america increased $ 2 million in 2016 to $ 157 million from $ 155 million in 2015. the benefit of improved operational cost management was partially offset by lower volumes in light vehicle , commercial truck and aftermarket revenues net of favorable mix , higher restructuring and related expenses and negative currency . europe and south america 's ebit was $ 16 million in 2016 and negative $ 11 million in 2015. the benefit from higher light vehicle sales in the region , higher aftermarket sales in europe and south america , lower restructuring and related expenses and savings from prior restructuring activities was partially offset by unfavorable mix in europe , lower commercial truck , off-highway and other vehicle revenue in europe reflecting the sale of the marzocchi specialty business and negative currency .
| executive summary we are one of the world 's leading manufacturers of clean air and ride performance products and systems for light vehicle , commercial truck and off-highway applications . we serve both original equipment ( oe ) vehicle designers and manufacturers and the repair and replacement markets , or aftermarket , globally through leading brands , including monroe ® , rancho ® , clevite ® elastomers , axios , kinetic ® and fric-rot ride performance products and walker ® , xnox ® , fonos , dynomax ® and thrush ® clean air products . we serve more than 80 different original equipment manufacturers and commercial truck and off-highway engine manufacturers , and our products are included on six of the top 10 car models produced for sale in europe and nine of the top 10 light truck models produced for sale in north america for 2017. our aftermarket customers are comprised of full-line and specialty warehouse distributors , retailers , jobbers , installer chains and car dealers . as of december 31 , 2017 , we operated 92 manufacturing facilities worldwide and employed approximately 32,000 people to service our customers ' demands . factors that continue to be critical to our success include winning new business awards , managing our overall global manufacturing footprint to ensure proper placement and workforce levels in line with business needs , maintaining competitive wages and benefits , maximizing efficiencies in manufacturing processes and reducing overall costs . in addition , our ability to adapt to key industry trends , such as a shift in consumer preferences to other vehicles in response to higher fuel costs and other economic and social factors , increasing technologically sophisticated content , changing aftermarket distribution channels , increasing environmental standards and extended product life of automotive parts , also play a critical role in our success .
| 4,082 |
the company story_separator_special_tag the following discussion should be read in conjunction with our financial statements , which present our results of operations for the years ended december 31 , 2020 , 2019 and 2018 , as well as our financial positions at december 31 , 2020 and 2019 , contained elsewhere in this form 10-k. some of the information contained in this discussion and analysis or set forth elsewhere in this form 10-k , including information with respect to our plans and strategy for our business , includes forward-looking statements that involve risks and uncertainties . you should review the “ special note regarding forward looking statements ” and “ risk factors ” sections of this form 10-k for a discussion of important factors that could cause actual results to differ materially from the results described in or implied by the forward-looking statements contained in the following discussion and analysis . the discussion that follows includes a comparison of the company 's results of operations and liquidity and capital resources for the years ended december 31 , 2020 and 2019. for the discussion of changes from the year ended december 31 , 2018 to the year ended december 31 , 2019 and other financial information related to the year ended december 31 , 2018 , refer to item 7. management 's discussion and analysis of financial condition and results of operations , of the company 's form 10-k for the year ended december 31 , 2019. that document was filed with the united states securities and exchange commission on february 20 , 2020. business outlook superior is comprised of three reportable business segments : ( 1 ) uniforms and related products , ( 2 ) remote staffing solutions , and ( 3 ) promotional products . covid-19 impact the covid-19 pandemic continues to affect our operations and financial performance , and likely will continue to do so for an undetermined period of time . international , federal , state and local efforts to contain the spread of covid-19 have continued as government actions to address the situation remain in effect and new actions continue to be enacted , including safety requirements such as recommended or mandatory use of face masks and other personal protective equipment and related products , social distancing rules and guidelines , travel restrictions , temporary closures of non-essential businesses and other restrictive measures that prohibit many employees from going to work . with regard to personal protective equipment , the covid-19 pandemic has created significant market demand from new and existing customers . in responding to the needs of our customers , we have sourced significant amounts of personal protective equipment , including face masks , isolation gowns , sanitizers and gloves , which contributed $ 82.7 million and $ 48.5 million to net sales during the year ended december 31 , 2020 for our promotional products segment and uniforms and related products segment , respectively . however , the pandemic also had and could continue to have a number of adverse impacts on our business , including , but not limited to , additional disruption to the economy and our customers ' willingness and or ability to spend , temporary or permanent closures of businesses that consume our products and services , additional work restrictions , and supply chains being interrupted , slowed , or rendered inoperable . our employees and the employees and contractors of our suppliers and customers also could become ill , quarantined , or otherwise unable to work or travel due to health reasons or governmental restrictions . we have and will continue to monitor and control our expense levels to protect our profitability . for example , on march 30 , 2020 , we entered into debt deferment agreements with truist bank ( formerly known as branch banking and trust company ) to : ( i ) defer contractual principal and interest payments due between april 1 , 2020 and june 1 , 2020 under the 2017 term loan and 2018 term loan until their respective maturity dates ; and ( ii ) defer contractual interest payments due between april 1 , 2020 and june 1 , 2020 under the revolving credit facility until its maturity date . additionally , we have proactively taken steps to increase available cash on hand by targeted reductions in discretionary operating expenses . finally , we have and will continue to delay certain capital expenditures relating to non-essential projects until economic conditions begin to stabilize . 19 prolonged instability in the united states and global economies , and how the world reacts to them , could have long-term impacts on our business . these business impacts could negatively affect us in a number of ways , including , but not limited to , reduced demand for our core products and services , reductions to our revenue and profitability , costs associated with complying with new or amended laws and regulations affecting our business , declines in our stock price , reduced availability and less favorable terms of future borrowings , valuation of our pension assets and obligations , reduced credit-worthiness of our customers , and potential impairment of the carrying value of goodwill or other indefinite-lived intangible assets . the extent to which the covid-19 pandemic ultimately impacts our business , financial condition , results of operations or cash flows will depend on numerous evolving factors that we are unable to accurately predict at this time . the length and scope of the restrictions imposed by various governments and success of efforts to deliver a vaccine on a timely basis , among other factors , will determine the ultimate severity of the covid-19 impact on our business . however , prolonged periods of difficult market conditions could have material adverse impacts on our business , financial condition , results of operations and cash flows . uniforms and related products in our uniforms and related products segment , we manufacture and sell a wide range of uniforms , career apparel and accessories . story_separator_special_tag uniforms and related products net sales increased 21.0 % , or $ 49.8 million , for the year ended december 31 , 2020 compared to the year ended december 31 , 2019. the increase was primarily due to increased demand for personal protective equipment , including face masks , isolation gowns , sanitizers and gloves , which contributed $ 44.6 million to the increase in net sales . additionally , market demand in 2020 for healthcare service apparel contributed to the increase in net sales . these increases were partially offset by decrease in demand for uniform apparel experienced during 2020 primarily as a result of covid-19 . remote staffing solutions net sales increased 16.1 % before intersegment eliminations and 17.6 % after intersegment eliminations for the year ended december 31 , 2020 compared to the year ended december 31 , 2019. these increases were primarily attributed to providing continued services in 2020 to our customer base that was expanded during 2019 and the onboarding of new customers in 2020 . 21 promotional products net sales increased 88.0 % , or $ 94.6 million , for the year ended december 31 , 2020 compared to the year ended december 31 , 2019. the increase was primarily due to the sale of personal protective equipment , including face masks , sanitizers and gloves , which contributed $ 82.7 million to the increase in net sales during the year ended december 31 , 2020. as a result of the covid-19 pandemic , we have seen significant short-term opportunities within the personal protective equipment market . additionally , continued product sales to our expanded customer base during 2020 also contributed to the net sales increase . in our core promotional products business we have not experienced the same downturn that many of our competitors have experienced as the increase in activities from customers in certain industries , such as the delivery service industry , has more than offset reduced activities from customers in other industries , such as the restaurant and entertainment industries . cost of goods sold cost of goods sold consists primarily of direct costs of acquiring inventory , including cost of merchandise , inbound freight charges , purchasing costs , and inspection costs for our uniforms and related products and promotional products segments . cost of goods sold for our remote staffing solutions segment includes salaries and payroll related benefits for agents . the company includes shipping and handling fees billed to customers in net sales . shipping and handling costs associated with out-bound freight are recorded in cost of goods sold . other shipping and handling costs are included in selling and administrative expenses . as a percentage of net sales , cost of goods sold for our uniforms and related products segment was 65.2 % for the year ended december 31 , 2020 and 65.4 % for the year ended december 31 , 2019. as a percentage of net sales , cost of goods sold remained relatively flat . the increase in cost of goods sold during the year ended december 31 , 2020 compared to the year ended december 31 , 2019 was primarily due to the net sales increase explained above . as a percentage of net sales , cost of goods sold for our remote staffing solutions segment was 42.6 % for the year ended december 31 , 2020 and 41.3 % for the year ended december 31 , 2019. the percentage increase was primarily driven by disruptions resulting from covid-19 and costs associated with the onboarding of new customers in 2020. as a percentage of net sales , cost of goods sold for our promotional products segment was 66.5 % for the year ended december 31 , 2020 and 73.6 % for the year ended december 31 , 2019. the percentage decrease was primarily the result of personal protective equipment sales during the year ended december 31 , 2020 and differences in the mix of products and customers . selling and administrative expenses selling and administrative expenses increased 27.2 % , or $ 29.2 million , for the year ended december 31 , 2020 compared to the year ended december 31 , 2019. the increase was primarily due to an increase in sales commissions and other employee compensation as a result of record sales levels during the year ended december 31 , 2020 , an increase in bad debt expense of $ 5.4 million on outstanding accounts receivable and an increase in expense of $ 4.2 million on acquisition related contingent liabilities primarily driven by fair market value adjustments . as a percentage of net sales , selling and administrative expenses for our uniforms and related products segment was 28.9 % for the year ended december 31 , 2020 and 30.7 % for the year ended december 31 , 2019. the percentage decrease was primarily due to the increase in net sales explained above . as a percentage of net sales , selling and administrative expenses for our remote staffing solutions segment was 36.1 % for the year ended december 31 , 2020 and 37.4 % for the year ended december 31 , 2019. the percentage decrease was primarily related to the net sales increase explained above . as a percentage of net sales , selling and administrative expenses for our promotional products segment was 20.5 % for the year ended december 31 , 2020 and 22.1 % for the year ended december 31 , 2019. the percentage decrease was primarily related to the net sales increase explained above . 22 other periodic pension costs during the years ended december 31 , 2020 and 2019 , the company recorded $ 0.4 million and $ 1.1 million , respectively , in pension settlement losses that resulted from lump sum pension payments made to various employees upon their retirement or termination during the periods specified . the pension settlement losses did not require a cash outlay by the company and did not increase the company 's total pension expense over time , as the charge was an acceleration of costs that otherwise would be recognized as pension expense in future periods .
| overview management uses a number of standards in measuring the company 's liquidity , such as : working capital , profitability ratios , cash flows from operating activities , and activity ratios . the company 's balance sheet generally provides the ability to pursue acquisitions , invest in new product lines and technologies and invest in additional working capital as necessary . as of december 31 , 2020 , approximately $ 4.4 million of our cash was held in our foreign subsidiaries , of which $ 2.4 million of cash was held at foreign subsidiaries from which the company plans to repatriate the funds as needed for liquidity . the company 's primary source of liquidity has been its net income and the use of credit facilities and term loans as described further below . in the future , the company may continue to use credit facilities and other secured and unsecured borrowings as a source of liquidity . management currently believes that cash flows provided by operating activities and availability under the revolving credit facility will be sufficient to satisfy the company 's anticipated working capital requirements for the next twelve months . the company has proactively taken steps to increase available cash on hand by targeted reductions in discretionary cash outflows . the company may also begin relying on the issuance of equity or debt securities , and for that purpose has filed with the securities and exchange commission a universal shelf registration statement ( file no . 333-249760 ) . there can be no assurance that any such financings would be available to us on reasonable terms . any future issuances of equity securities or securities convertible into or exercisable for equity securities may be dilutive to our shareholders . additionally , the cost of the company 's future sources of liquidity may differ from the costs of the company 's sources of liquidity to date .
| 4,083 |
although management believes it has established and maintained the allowance for loan losses at adequate levels , if management 's assumptions and judgments prove to be incorrect due to continued deterioration in economic , real estate and other conditions , and the allowance for loan losses is not adequate to absorb inherent losses , our earnings and capital could be significantly and adversely affected . our general policy regarding recognition of interest on loans is to discontinue the accrual of interest when principal or interest payments are delinquent 90 days or more , or earlier if collection of principal or interest is doubtful . any unpaid amounts previously accrued on these loans are reversed from income . subsequent cash receipts are applied to the outstanding principal balance or to interest income if , in the judgment of management , collection of the principal balance is not in question . loans are returned to accrual status when they become current as to both principal and interest and when subsequent performance reduces the concern as to the collectability of principal and interest . loan fees and certain direct loan origination costs are deferred , and the net fee or cost is recognized as an adjustment to interest income over the estimated average lives of the related loans . we must make certain estimates in determining income tax expense for financial statement purposes . these estimates occur in the calculation of the deferred tax assets and liabilities , which arise from the temporary differences between the tax basis and financial statement basis of our assets and liabilities . the carrying value of our net deferred tax asset is based on our historic taxable income for the two prior years as well as our belief that it is more likely than not that we will generate sufficient future taxable income to realize these deferred tax assets . judgments regarding future taxable income may change due to changes in market conditions , changes in tax laws or other factors which could result in a change in the assessment of the realization of the net deferred tax asset . 44 on a quarterly basis , we review securities with a decline in fair value below the amortized cost of the investment to determine whether the decline in fair value is temporary or other than temporary . declines in the fair value of marketable equity securities below their cost that are deemed to be other than temporary based on the severity and duration of the impairment are reflected in earnings as realized losses . in estimating other than temporary impairment losses for securities , impairment is required to be recognized if ( 1 ) we intend to sell the security ; ( 2 ) it is “ more likely than not ” that we will be required to sell the security before recovery of its amortized cost basis ; or ( 3 ) for debt securities , the present value of expected cash flows is not sufficient to recover the entire amortized cost basis . for all impaired available for sale securities that we intend to sell , or more likely than not will be required to sell , the full amount of the other than temporary impairment is recognized through earnings . for other impaired debt securities , credit-related other than temporary impairment is recognized through earnings , while non-credit related other than temporary impairment is recognized in other comprehensive income , net of applicable taxes . average balance sheet and analysis of net interest and dividend income the following table sets forth information relating to our financial condition and net interest and dividend income for the years ended december 31 , 2017 , 2016 and 2015 and reflects the average yield on assets and average cost of liabilities for the years indicated . the yields and costs were derived by dividing income or expense by the average balance of interest-earning assets or interest-bearing liabilities , respectively , for the years shown . average balances were derived from actual daily balances over the years indicated . interest income includes fees earned from making changes in loan rates or terms , and fees earned when commercial real estate loans were prepaid or refinanced . the interest earned on tax-exempt assets is adjusted to a tax-equivalent basis to recognize the income tax savings which facilitates comparison between taxable and tax-exempt assets . 45 replace_table_token_24_th ( 1 ) loans , including non-accrual loans , are net of deferred loan origination costs , and unadvanced funds and allowance for loan losses . ( 2 ) securities income , loan income and net interest income are presented on a tax-equivalent basis using a tax rate of 35 % for the 2017 period and 34 % for the 2016 and 2015 periods . the tax-equivalent adjustment is deducted from tax-equivalent net interest and dividend income to agree to the amount reported in the consolidated statements of net income . ( 3 ) short-term investments include federal funds sold . ( 4 ) net interest rate spread represents the difference between the weighted average yield on interest-earning assets and the weighted average cost of interest-bearing liabilities . ( 5 ) net interest margin represents tax-equivalent net interest and dividend income as a percentage of average interest-earning assets . 46 rate/volume analysis . the following table shows how changes in interest rates and changes in the volume of interest-earning assets and interest-bearing liabilities have affected our interest and dividend income and interest expense during the periods indicated . story_separator_special_tag december 31 , 2017. non-interest-bearing deposits increased $ 7.9 million , or 2.6 % , to $ 311.9 million , money market accounts increased $ 1.0 million , or 0.2 % , to $ 410.2 million , and interest-bearing checking accounts increased $ 5.0 million , or 6.1 % , to $ 87.4 million , while savings accounts decreased $ 9.4 million , or 6.3 % , to $ 140.1 million . time deposits decreased $ 16.4 million , or 2.9 % , from $ 572.9 million at december 31 , 2016 to $ 556.5 million at december 31 , 2017. the decrease in time deposits is due to customers and brokered deposits seeking higher yields . we are focused on allowing high cost deposits to mature and be replaced with low-cost core deposits . 48 short-term borrowings decreased $ 27.7 million , or 16.1 % , to $ 144.7 million at december 31 , 2017 from $ 172.4 million at december 31 , 2016. short-term borrowings are made up of fhlbb advances with an original maturity of less than one year as well as customer repurchase agreements , which have an original maturity of one day . short-term borrowings from the fhlbb were $ 133.0 million and $ 155.0 million at december 31 , 2017 and 2016 , respectively . customer repurchase agreements decreased $ 5.7 million to $ 11.7 million at december 31 , 2017 from $ 17.4 million at december 31 , 2016. a customer repurchase agreement is an agreement by us to sell to and repurchase from the customer an interest in specific securities issued by or guaranteed by the united states government or government-sponsored enterprises . this transaction settles immediately on a same day basis in immediately available funds . interest paid is commensurate with other products of equal interest and credit risk . long-term debt consists of fhlbb advances . at december 31 , 2017 , long-term debt with the fhlbb increased $ 40.0 million , or 32.1 % , to $ 164.8 million . this compares to $ 124.8 million in fhlbb advances at december 31 , 2016. during 2016 , we prepaid $ 42.5 million in fhlbb borrowings with a weighted average rate of 2.29 % and incurred a prepayment expense of $ 915,000. offsetting these prepayments were $ 63.3 million in fhlbb advances acquired from chicopee . at december 31 , 2017 and 2016 , we had interest rate swap contracts with a combined notional value of $ 55.0 million and $ 75.0 million , respectively . the swap contracts have durations ranging from five to six years . this hedge strategy converts the variable rate of interest on certain fhlb advances to fixed interest rates , thereby protecting us from floating interest rate variability . the interest rate swaps introduce potential future volatility in tangible book value and accumulated other comprehensive income ( “ aoci ” ) . during the first quarter of 2016 , we terminated a forward-starting interest rate swap with a notional amount of $ 32.5 million and incurred a termination fee of $ 3.4 million . the termination fee is being amortized as a reclassification of other comprehensive income into interest expense over the terms of the previously hedged borrowing , which was six years for the swap terminated in 2016. shareholders ' equity was $ 247.3 million and $ 238.4 million , which represented 11.9 % and 11.5 % of total assets at december 31 , 2017 and december 31 , 2016 , respectively . the increase in shareholders ' equity during the twelve months ended december 31 , 2017 reflects net income of $ 12.3 million , the exercise of stock options totaling $ 5.5 million and $ 2.2 million in other comprehensive income . these increases were offset by a decrease of $ 9.2 million for the repurchase of shares of the company 's common stock during the year and the payment of regular cash dividends of $ 3.6 million . 49 comparison of operating results for years ended december 31 , 2017 and 2016 story_separator_special_tag million at december 31 , 2017 and $ 10.1 million at december 31 , 2016 , respectively . the allowance for loan losses as a percentage of total loans was 0.66 % and 0.64 % at december 31 , 2017 and 2016 , respectively . the allowance does not include the $ 640.9 million in loans acquired from chicopee that were recorded at fair value on october 21 , 2016 and required no further allowance subsequent to the acquisition . residential real estate and home equity loans increased $ 36.2 million , or 5.9 % , to $ 650.4 million at december 31 , 2017 , from $ 614.2 million at december 31 , 2016. commercial and industrial loans increased $ 16.2 million , or 7.3 % , to $ 238.5 million , from $ 222.3 million at december 31 , 2016. commercial real estate loans increased $ 11.9 million , or 1.7 % , to $ 732.6 million , from $ 720.7 million at december 31 , 2016. we consider residential real estate loans to contain less credit risk and market risk than commercial and industrial loans and commercial real estate . net charge-offs were $ 597,000 for the year ended december 31 , 2017. this comprised charge-offs of $ 1.0 million for the year ended december 31 , 2017 , offset by recoveries of $ 451,000. net recoveries were $ 653,000 for the year ended december 31 , 2016. this comprised recoveries of $ 1.1 million primarily on one commercial real estate loan previously charged-off in 2010 , offset by charge-offs of $ 486,000. although management believes it has established and maintained the allowance for loan losses at appropriate levels , future adjustments may be necessary if economic , real estate and other conditions differ substantially from the current operating environment . non-interest income . non-interest income increased $ 2.5 million , or 42.4 %
| general . net income for the year ended december 31 , 2017 was $ 12.3 million , or $ 0.41 per diluted share , compared to $ 4.8 million , or $ 0.24 per diluted share , for the same period in 2016. interest and dividend income . total interest and dividend income increased $ 25.4 million , or 52.3 % , to $ 74.0 million for the year ended december 31 , 2017 compared to $ 48.6 million for the same period in 2016. the increase in interest and dividend income was primarily the result of an increase in the average interest-earning balance of our loan portfolio resulting from the acquisition of loans from chicopee on october 21 , 2016 as well as focusing on increasing organic loan growth . at december 31 , 2017 , the average balance of loans increased $ 584.0 million , or 57.6 % , to $ 1.6 billion , while the average balance of securities decreased $ 23.8 million , or 7.3 % , to $ 302.2 million . the balance of interest-earning assets increased $ 541.4 million to $ 1.9 billion for the year ended december 31 , 2017 , compared to $ 1.4 billion for the same period in 2016. the average yield on interest-earning assets , on a tax-equivalent basis , increased 38 basis points to 3.88 % for the year ended december 31 , 2017 from 3.50 % for the same period in 2016. interest income on loans increased $ 25.5 million , or 63.4 % , to $ 65.7 million for the year ended december 31 , 2017 from $ 40.2 million for the year ended december 31 , 2016. the tax-equivalent yield on loans increased 18 basis point from 3.99 % for the year 2016 to 4.17 % for the same period in 2017. the increase in interest income on loans for the year ended december 31 , 2017 was due to the average balance of loans increasing $ 584.0 million , or 57.6 % , primarily
| 4,084 |
pursuant to the terms of executive story_separator_special_tag the following discussion and analysis of our financial condition and results of operations for the years ended december 31 , 2020 and 2019 should be read in conjunction with our consolidated financial statements and related notes to those consolidated financial statements that are included elsewhere in this report . certain information contained in the discussion and analysis set forth below includes forward-looking statements that involve risks and uncertainties . special note regarding forward-looking statements all statements other than statements of historical fact included in this form 10-k including , without limitation , statements under “ management 's discussion and analysis of financial condition and results of operations ” regarding our financial position , business strategy and the plans and objectives of management for future operations , are forward-looking statements . when used in this form 10-k , words such as “ anticipate , ” “ believe , ” “ estimate , ” “ expect , ” “ intend ” and similar expressions , as they relate to us or our management , identify forward-looking statements . such forward-looking statements are based on the beliefs of management , as well as assumptions made by , and information currently available to , our management . actual results could differ materially from those contemplated by the forward-looking statements as a result of a number of factors , including those set forth under the risk factors and business sections in this form 10-k. impact of covid-19 on our operations , financial condition , liquidity and results of operations the ultimate impact of the covid-19 pandemic on our operations is unknown and will depend on future developments , which are highly uncertain and can not be predicted with confidence , including the duration of the covid-19 outbreak , new information which may emerge concerning the severity of the covid-19 pandemic , and any additional preventative and protective actions that governments , or us , may determine are needed . the occurrence of covid-19 pandemic had negativeimpact on our operations . some tenants have delayed on rent payment and some of the universities and laboratories with which we collaborate were temporarily closed . our general development operations have continued during the covid-19 pandemic and we have not had significant disruption . however , we are uncertain if the covid-19 pandemic will impact future operations at our laboratory , or our ability to collaborate with other laboratories and universities . in addition , we are unsure if the covid-19 pandemic will impact future clinical trials . given the dynamic nature of these circumstances , the duration of business disruption and reduced traffic , the related financial effect can not be reasonably estimated at this time but is expected to adversely impact the company 's business for the year of 2021. we have limited cash available to fund planned operations and although we have other sources of capital described below under “ liquidity and capital resources , ” management continues to pursue various financing alternatives to fund our operations so we can continue as a going concern . however , the covid-19 pandemic has created significant economic uncertainty and volatility in the credit and capital markets . management plans to secure the necessary financing through the issue of new equity and or the entering into of strategic partnership arrangements but the ultimate impact of the covid-19 pandemic on our ability to raise additional capital is unknown and will depend on future developments , which are highly uncertain and can not be predicted with confidence , including the duration of the covid-19 outbreak and new information which may emerge concerning the severity of the covid-19 pandemic . we may not be able to raise sufficient additional capital and may tailor our operations based on the amount of funding we are able to raise in the future . nevertheless , there is no assurance that these initiatives will be successful . further , there is no assurance that capital available to us in any future financing will be on acceptable terms . overview the company is a clinical-stage , vertically integrated , leading celltech bio-developer dedicated to advancing and empowering innovative , transformative immune effector cell therapy , exosome technology , as well as covid-19 related diagnostics and therapeutics . the company also provides strategic advisory and outsourcing services to facilitate and enhance its clients ' growth and development , as well as competitiveness in healthcare and celltech industry markets . through its subsidiary structure with u nique integration of verticals from innovative r & d to automated bioproduction and accelerated clinical development , the company is establishing a leading role in the fields of cellular immunotherapy ( including car-t/nk ) , exosome technology ( actex ) , and covid-19 related vaccine and therapeutics . avalon achieves and fosters seamless integration of unique verticals to bridge and accelerate innovative research , bio-process development , clinical programs and product commercialization . avalon 's upstream innovative research includes : ● development of avalon clinical-grade tissue-specific exosome ( “ actex ” ) ● novel therapeutic and diagnostic targets development utilizing qty-code protein design technology with massachusetts institute of technology ( mit ) including using the qty code protein design technology for development of a hemofiltration device to treat cytokine storm . ● co-development of next generation , transposon-based , multi-target car-t , car-nk and other immune effector cell therapeutic modalities with arbele limited . 37 ● strategic partnership with the university of natural resources and life sciences ( boku ) in vienna , austria to develop an s-layer vaccine that can be administered by an intranasal or oral route against sars-cov-2 , the novel coronavirus that causes covid-19 disease . avalon 's midstream bio-processing and bio-production facility is located in nanjing , china with state-of-the-art , automated gmp and qc/qa infrastructure for standardized bio-manufacturing of clinical-grade cellular products involved in our clinical programs in immune effector cell therapy , regenerative therapeutics , as well as bio-banking . story_separator_special_tag in addition , the current cash balance can not be projected to cover the operating expenses for the next twelve months from the release date of this report . these matters raise substantial doubt about the company 's ability to continue as a going concern . the ability of the company to continue as a going concern is dependent on the company 's ability to raise additional capital , implement its business plan , and generate significant revenues . there are no assurances that the company will be successful in its efforts to generate significant revenues , maintain sufficient cash balance or report profitable operations or to continue as a going concern . the company plans on raising capital through the sale of equity to implement its business plan . however , there is no assurance these plans will be realized and that any additional financings will be available to the company on satisfactory terms and conditions , if any . the occurrence of an uncontrollable event such as the covid-19 pandemic had negatively impact on the company 's operations . some tenants have delayed on rent payment and our occupancy of our rental property has decreased . our general development operations have continued during the covid-19 pandemic and we have not had significant disruption . however , we are uncertain if the covid-19 pandemic will impact future operations at our laboratory , or our ability to collaborate with other laboratories and universities . in addition , we are unsure if the covid-19 pandemic will impact future clinical trials . given the dynamic nature of these circumstances , the duration of business disruption and reduced traffic , the related financial effect can not be reasonably estimated at this time but is expected to adversely impact the company 's business for the year of 2021. the accompanying consolidated financial statements do not include any adjustments related to the recoverability or classification of asset-carrying amounts or the amounts and classification of liabilities that may result should the company be unable to continue as a going concern . critical accounting policies use of 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 . 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 . we continually evaluate our estimates , including those related to the useful life of property and equipment and investment in real estate , assumptions used in assessing impairment of long-term assets , valuation of deferred tax assets and the associated valuation allowances , and valuation of stock-based compensation . we base our estimates on historical experience and on various other assumptions that we 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 . any future changes to these estimates and assumptions could cause a material change to our reported amounts of revenues , expenses , assets and liabilities . actual results may differ from these estimates under different assumptions or conditions . revenue recognition we recognize revenue under accounting standards codification ( “ asc ” ) topic 606 , revenue from contracts with customers ( “ asc 606 ” ) . the core principle of the revenue standard is that a company should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the company expects to be entitled in exchange for those goods or services . the following five steps are applied to achieve that core principle : ● step 1 : identify the contract with the customer ● step 2 : identify the performance obligations in the contract ● step 3 : determine the transaction price ● step 4 : allocate the transaction price to the performance obligations in the contract ● step 5 : recognize revenue when the company satisfies a performance obligation 39 in order to identify the performance obligations in a contract with a customer , a company must assess the promised goods or services in the contract and identify each promised goods or service that is distinct . a performance obligation meets asc 606 's definition of a “ distinct ” goods or service ( or bundle of goods or services ) if both of the following criteria are met : ● the customer can benefit from the goods or service either on its own or together with other resources that are readily available to the customer ( i.e. , the goods or service is capable of being distinct ) . ● the entity 's promise to transfer the goods or service to the customer is separately identifiable from other promises in the contract ( i.e. , the promise to transfer the goods or service is distinct within the context of the contract ) . if a goods or service is not distinct , the goods or service is combined with other promised goods or services until a bundle of goods or services is identified that is distinct . the transaction price is the amount of consideration to which an entity expects to be entitled in exchange for transferring promised goods or services to a customer , excluding amounts collected on behalf of third parties ( for example , some sales taxes ) . the consideration promised in a contract with a customer may include fixed amounts , variable amounts , or both . variable consideration is included in the transaction price only to the extent that it is probable that a significant reversal in the amount of cumulative revenue recognized will not occur when the uncertainty associated with the variable consideration is subsequently resolved . the transaction price is allocated to each performance obligation on a relative standalone selling price basis .
| results of operations comparison of results of operations for the years ended december 31 , 2020 and 2019 revenues for the year ended december 31 , 2020 , we had real property rental revenue of $ 1,206,854 , as compared to $ 1,155,677 for the year ended december 31 , 2019 , an increase of $ 51,177 , or 4.4 % . the increase was primarily attributable to the increase of tenants in 2020. we expect that our revenue from real property rent will increase in the near future since our occupancy of our rental property increased in subsequent period . for the year ended december 31 , 2020 , we had medical related consulting services revenue from related parties of $ 170,908 , as compared to $ 355,544 for the year ended december 31 , 2019 , a decrease of $ 184,636 , or 51.9 % . the decrease was mainly attributable to the decreased demand for our consulting service from our related parties . we expect that our revenue from medical related consulting services will increase in the near future . for the year ended december 31 , 2020 , we did not have any revenue from contract services through performing development services for hospitals and other customers and sales of developed products to hospitals and other customers . for the year ended december 31 , 2019 , we had revenue from contract services through performing development services for hospitals and other customers and sales of developed products to hospitals and other customers of $ 35,084. we have discontinued sales of our exosome isolation system product . however , we are actively developing other unrelated proprietary exosome related products for sale or licensure . costs and expenses real property operating expenses consist of property management fees , property insurance , real estate taxes , depreciation , repairs and maintenance fees , utilities and other expenses related to our rental properties .
| 4,085 |
the extra week , which occurred in the first quarter of fiscal 2016 , impacts the year-over-year analysis of fiscal 2016 in this md & a . there are references to the impact of foreign currency translation in the discussion of the company 's results of operations . when the u.s. dollar strengthens and the stronger exchange rates of the current year are used to translate the results of operations of avnet 's subsidiaries denominated in foreign currencies , the resulting impact is a decrease in u.s. dollars of reported results . conversely , when the u.s. dollar weakens and the weaker exchange rates of the current year are used to translate the results of operations of avnet 's subsidiaries denominated in foreign currencies , the resulting impact is an increase in u.s. dollars of reported results . in the discussion that follows , results excluding this impact , primarily for subsidiaries in emea , and asia/pacific , are referred to as “ excluding the translation impact of changes in foreign currency exchange rates ” or “ constant currency. ” in addition to disclosing financial results that are determined in accordance with generally accepted accounting principles in the u.s. ( “ gaap ” ) , the company also discloses certain non-gaap financial information , including : · sales , income or expense items excluding the translation impact of changes in foreign currency exchange rates for subsidiaries reporting in currencies other than the u.s. dollar by adjusting the average exchange rates used in current period to be consistent with the average exchange rates in effect during the comparative period , as discussed above . · sales adjusted for certain items that impact the year-over-year analysis , which includes the impact of certain acquisitions or divestitures by adjusting avnet 's prior periods to include the sales of acquired businesses or exclude the sales of divested businesses as if the acquisitions or divestitures had occurred at the beginning of the earliest period presented . in addition , fiscal 2016 sales are adjusted for the estimated impact of the extra week of sales in the first quarter of fiscal 2016 due to it being a 14-week quarter , as discussed above . sales taking into account these adjustments are referred to as “ organic sales. ” · operating income excluding ( i ) restructuring , integration and other expenses ( see restructuring , integration and other expenses in this md & a ) and ( ii ) amortization of acquired intangible assets and other . operating income excluding such amounts is referred to as “ adjusted operating income. ” the reconciliation of operating income to adjusted operating income is presented in the following table : replace_table_token_7_th 22 management believes that providing this additional information is useful to the reader to better assess and understand operating performance , especially when comparing results with prior periods or forecasting performance for future periods , primarily because management typically monitors the business both including and excluding these adjustments to gaap results . management also uses these non-gaap measures to establish operational goals and , in many cases , for measuring performance for compensation purposes . however , any analysis of results on a non-gaap basis should be used as a complement to , and in conjunction with , results presented in accordance with gaap . story_separator_special_tag a result of changes in foreign currency exchange rates between years , and the impact of prior restructuring actions partially offset by an increase in sg & a expenses for acquisitions and other costs , including employee merit compensation increases that took place in january 2016. in fiscal 2016 , sg & a expenses as a percentage of sales were 8.3 % and as a percentage of gross profit were 71.5 % as compared with 8.1 % and 71.2 % , respectively , in fiscal 2015. sg & a expenses as a percentage of gross profit at em increased 147 basis points year over year due primarily to lower sales , partially offset by lower sg & a expenses due primarily to the benefits of recent restructuring and cost savings actions . sg & a expenses as a percentage of gross profit at ts decreased 64 basis points from fiscal 2015 due primarily to the benefits of recent restructuring and cost savings actions and improvements in gross profit margin in all three regions . sg & a expenses were $ 2.27 billion in fiscal 2015 , a decrease of $ 66.5 million , or 2.8 % , from fiscal 2014. this decrease consisted primarily of decreases due to the impact of differences in foreign currency exchange rates between the fiscal years and decreases due to prior restructuring actions . these decreases were partially offset by increases due to fiscal 2014 acquisitions and increases to fund organic growth and other costs . in fiscal 2015 , sg & a expenses as a percentage of sales were 8.1 % and as a percentage of gross profit were 71.2 % as compared with 8.5 % and 72.6 % , respectively , in fiscal 2014. sg & a expenses as a percentage of gross profit at em decreased 197 basis points year over year due primarily to the benefits of recent restructuring and cost savings actions and from an increase in gross profit due to increased sales , partially offset by increases associated with fiscal 2014 acquisitions and increases to fund organic growth and other costs . sg & a expenses as a percentage of gross profit at ts decreased 224 basis points from fiscal 2014 due primarily to the benefits of recent restructuring and costs savings actions , partially offset by the decrease in gross profit and increases to fund organic growth and other costs . 26 restructuring , integration and other expenses during fiscal 2016 , the company incurred restructuring expenses related to certain actions intended to reduce future operating expenses . these actions include activities related to the avnet advantage initiative , which is focused on creating long-term operational efficiencies . story_separator_special_tag the increase in em operating income margin was primarily due to an increase in emea in constant currency , partially offset by the weaker euro adversely impacting the contribution to operating income margin in emea , the geographic mix shift towards asia discussed above , as well as an increase in select high volume supply chain engagements between fiscal years . ts operating income of $ 325.7 million increased 2.5 % year over year and operating income margin increased 18 basis points to 3.1 % primarily due to improvements in the emea region . interest expense interest expense for fiscal 2016 was $ 99.1 million , an increase of $ 3.4 million , or 3.5 % , compared with fiscal 2015. the increase in interest expense was primarily due to the issuance of $ 550.0 million of 4.625 % notes in march 2016 and a corresponding increase in average borrowings during the fourth quarter , partially offset by repayment at maturity of $ 250.0 million of 6.00 % notes in september 2015. interest expense for fiscal 2015 was $ 95.7 million , a decrease of $ 9.2 million , or 8.7 % , compared with fiscal 2014. the decrease in interest expense was primarily due to the repayment at maturity of $ 300.0 million of 5.875 % notes at the end of the third quarter of fiscal 2014 and a corresponding lower average borrowing rate . other expense , net during fiscal 2016 , the company recognized $ 18.1 million of other expense as compared with $ 19.0 million in fiscal 2015. other expense in both years is primarily attributable to the greater strengthening of the u.s. dollar relative to foreign currencies and the corresponding higher costs incurred to purchase forward foreign currency exchange contracts in order to economically hedge such foreign currency exposures . during fiscal 2015 , the company recognized $ 19.0 million of other expense as compared with $ 6.1 million in fiscal 2014. the increase in other expense in fiscal 2015 is primarily attributable to the strengthening of the u.s. dollar relative to foreign currencies , including the euro , during fiscal 2015 and the corresponding higher costs incurred to purchase forward foreign currency exchange contracts in order to economically hedge such foreign currency exposures . 28 gain on legal settlement during fiscal 2014 , the company received award payments and recognized a gain on legal settlement of $ 22.1 million before tax , $ 13.5 million after tax and $ 0.09 per share on a diluted basis . income tax expense avnet 's effective tax rate on income before income taxes was 24.5 % in fiscal 2016 as compared with an effective tax rate of 19.8 % in fiscal 2015. included in the fiscal 2016 effective tax rate is a net tax benefit of $ 15.1 million , which is comprised primarily of ( i ) a tax benefit of $ 9.2 million for the release of a valuation allowance against deferred tax assets that were determined to be realizable , and ( ii ) a net tax benefit of $ 9.5 million primarily related to favorable audit settlements , and the expiration of statutes of limitation . the fiscal 2016 effective tax rate is higher than the fiscal 2015 effective tax rate primarily due to a lesser tax benefit from the valuation allowance released in fiscal 2016 as compared with the amount released in fiscal 2015. avnet 's effective tax rate on income before income taxes was 19.8 % in fiscal 2015 as compared with an effective tax rate of 22.2 % in fiscal 2014. included in the fiscal 2015 effective tax rate is a net tax benefit of $ 55.1 million , which is comprised primarily of ( i ) a net tax benefit of $ 51.6 million for the release of valuation allowances against deferred tax assets that were determined to be realizable , related to a legal entity in emea , and ( ii ) a net tax benefit of $ 16.2 million primarily related to favorable audit settlements , partially offset by $ 7.6 million of tax expense primarily related to the establishment of valuation allowances . the fiscal 2015 effective tax rate is lower than the fiscal 2014 effective tax rate primarily due to a greater tax benefit from the valuation allowance released in fiscal 2015 as compared with the amount released in fiscal 2014 , partially offset by lower amount of tax benefits from audit settlements in fiscal 2015 as compared to fiscal 2014. avnet 's effective tax rate is primarily a function of the tax rates in the numerous jurisdictions in which it does business applied to the mix of income before taxes . the effective tax rate may vary year over year as a result of changes in tax requirements in these jurisdictions , management 's evaluation of its ability to recognize its net deferred tax assets and the establishment of liabilities for unfavorable outcomes of tax positions taken on certain matters that are common to multinational enterprises and the actual outcome of those matters , including the elimination of existing liabilities for favorable outcomes of tax positions or the expiration of statutes of limitations related to such liabilities . see note 9 , “ income taxes ” to the company 's consolidated financial statements included in item 15 of this annual report on form 10-k for additional information related to income taxes and valuation allowances .
| results of operations executive summary sales for fiscal 2016 were $ 26.22 billion , a decrease of 6.1 % from fiscal 2015 sales of $ 27.92 billion . organic sales in constant currency decreased 5.3 % year over year . em sales of $ 16.57 billion decreased 4.5 % and organic sales in constant currency decreased 3.7 % year over year . ts sales of $ 9.65 billion decreased 8.8 % and organic sales in constant currency decreased 7.9 % year over year . gross profit margin of 11.6 % increased 16 basis points from fiscal 2015 primarily as a result of gross profit margin improvements at ts across all regions , partially offset by declines at em . operating income margin was 3.0 % in fiscal 2016 and in fiscal 2015. excluding restructuring , integration and other expenses and amortization expense associated with acquired intangible assets from both periods , adjusted operating income margin was 3.4 % in fiscal 2016 as compared to 3.5 % in fiscal 2015. em operating income margin of 4.4 % decreased 22 basis points year over year primarily due to declines in the americas region . ts operating income margin of 3.3 % increased 21 basis points year over year primarily due to improvements in emea . three-year analysis of sales : by region in each operating group and geography replace_table_token_8_th 23 sales items impacting year-over-year sales comparisons during fiscal 2016 and 2014 , the company acquired businesses impacting both operating groups , as presented in the following table . there were no acquisitions in fiscal 2015. to facilitate more meaningful year-over-year comparisons , the discussions that follow include organic sales as well as sales on a reported basis . replace_table_token_9_th ( 1 ) represents the approximate annual sales for the acquired businesses ' most recent fiscal year prior to acquisition by avnet and based upon average foreign currency exchange rates for such fiscal year .
| 4,086 |
no awards may be granted or awarded during any period of suspension or after termination of the plan , and in no event may any award be granted under the plan after the tenth ( 10 th ) anniversary of the date of its adoption . any awards that are outstanding on the expiration date , or the date of termination of the plan ( if earlier ) , shall remain in force according to the terms story_separator_special_tag you should read the following discussion and analysis of our financial condition and results of operations together with our consolidated financial statements and the related notes and other financial information included elsewhere in this annual report on form 10-k. some of the information contained in this discussion and analysis or set forth elsewhere in this annual report on form 10-k , including information with respect to our plans and strategy for our business and related financing , includes forward-looking statements that involve risks and uncertainties . you should review the “ risk factors ” section of this annual report , and elsewhere in this report , for a discussion of important factors that could cause actual results to differ materially from the results described in or implied by the forward-looking statements contained in the following discussion and analysis . our fiscal year ends on april 30. references to fiscal 2018 are to the fiscal year ended april 30 , 2018. overview we are commercializing proprietary systems that generate electricity by harnessing the renewable energy of ocean waves . our powerbuoy systems use proprietary technologies to convert the mechanical energy created by the rising and falling of ocean waves into electricity . we currently have developed our pb3 powerbuoy product . since fiscal 2002 , government agencies have accounted for a significant portion of our revenues , which were largely for the support of our product development efforts . our goal is that an increased portion of our revenues will be from the sale of products and services , as compared to revenue from grants to support our product development efforts . as we continue to advance our proprietary technologies , we expect to have a net use of cash in operating activities unless or until we achieve positive cash flow from the commercialization of our products and services . 35 we are marketing our powerbuoy , which is designed to generate power for use independent of the power grid , to customers that require electricity in remote locations . we believe there are a variety of potential applications for our powerbuoy , within markets such as oil and gas , ocean observing , security and defense and as well as other markets , which we refer to collectively as autonomous application markets . we were incorporated in new jersey in 1984 , began business operations in 1994 , and were re-incorporated in delaware in 2007. we currently have five wholly-owned subsidiaries : ocean power technologies ltd. , organized under the laws of the united kingdom , reedsport opt wave park llc , organized under the laws of oregon , and oregon wave energy partners i , llc , organized under the laws of delaware , ocean power technologies ( australasia ) pty ltd ( “ opta ” ) , organized under the laws of australia . opta owns 100 % of victorian wave partners pty . ltd. ( “ vwp ” ) , which is also organized under the laws of australia . product development the development of our technology has been funded by revenue generating projects , capital we raised and by development engineering contracts we received starting in fiscal 1995 , including projects with the doe , the u.s. navy , the department of homeland security and mes . please see item 1 of this annual report– “ business – customers ” and “ historic projects ” for more information . through these historic projects , we also continued development of our powerbuoy technologies . we are continuing to focus on marketing and developing our powerbuoy products and services for use in autonomous power applications . during fiscal 2018 , we continued to focus on the commercialization of our powerbuoy technology , while expanding the application of our pb3 product in autonomous application markets . during fiscal 2018 , we gained additional field experience with our pb3 by completing the demonstration of the powerbuoy in an ocean observing application with mes . in january 2018 , we were awarded a contract from premier oil to study the feasibility of using the pb3 powerbuoy for decommissioning operations in the north sea . the work under this contract was completed in may 2018. in march 2018 , we entered into an agreement with eni s.p.a. ( “ eni ” ) that provides for a minimum 24-month contract that includes an 18-month pb3 powerbuoy lease and associated project management . the pb3 powerbuoy will be deployed in the adriatic sea to advance eni 's clean sea technology for marine environmental monitoring and offshore asset inspection using auvs . additionally , we completed the phase i work under the contract with the u.s. department of defense office of naval research ( “ onr ” ) , which focused on the initial concept design and development of a mass-on-spring pto-based powerbuoy . we are waiting for onr funding of phase ii to be approved . working closely with potential customers , we also continued to analyze and further develop new applications for the powerbuoy including subsea well monitoring for oil and gas , auv charging , and independent telecommunications platforms . in fiscal 2017 , we completed our work under our doe contract that focused on further optimization of our modular pto technology and delivered the project final report to the doe in the prior year . in the prior year , we successfully completed the final stage and associated review with the doe of the contract deliverables during which the doe reviewed advancements related to pto design aspects such as reliability , cost take out , manufacturability and scalability . story_separator_special_tag in april 2017 , our commercial pb3 was deployed off the coast of kozushima island in japan as part of this lease , operated meeting all project requirements . the mes lease concluded in september 2017 and the pb3 was shipped back to new jersey . 37 capital raises on june 2 , 2016 , we entered into a securities purchase agreement , which was amended on june 7 , 2016 ( as amended , the “ purchase agreement ” ) with certain institutional purchasers ( the “ purchasers ” ) . pursuant to the terms of the purchase agreement , we sold an aggregate of 417,000 shares of common stock together with warrants to purchase up to an aggregate of 145,952 shares of common stock . each share of common stock was sold together with a warrant to purchase 0.35 of a share of common stock at a combined purchase price of $ 4.60. the net proceeds from the offering to us were approximately $ 1.7 million , after deducting placement agent fees and estimated offering expenses payable by us , but excluding the proceeds , if any , from the exercise of the warrants issued in the offering . the warrants have an exercise price of $ 6.08 per share , will be exercisable on december 8 , 2016 , and will expire five years following the date of issuance . on july 22 , 2016 , the company entered into the second amendment to the purchase agreement ( the “ second amended purchase agreement ” ) with certain purchasers ( the “ july purchasers ” ) . pursuant to the terms of the second amended purchase agreement , the company sold an aggregate of 595,000 shares of common stock together with warrants to purchase up to an aggregate of 178,500 shares of common stock . each share of common stock was sold together with a warrant to purchase 0.30 of a share of common stock at a combined purchase price of $ 6.75. the net proceeds to the company from the offering were approximately $ 3.6 million , after deducting placement agent fees and estimated offering expenses payable by the company , but excluding the proceeds , if any , from the exercise of the warrants issued in the offering . the warrants were exercisable immediately at an exercise price of $ 9.36 per share . the warrants will expire on the fifth ( 5th ) anniversary of the initial date of issuance . on october 19 , 2016 , the company sold 2,760,000 shares of common stock at a price of $ 2.75 per share , which includes the sale of 360,000 shares of the company 's common stock sold by the company pursuant to the exercise , in full , of the over-allotment option by the underwriters in a public offering . the net proceeds to the company from the offering were approximately $ 6.9 million , after deducting placement agent fees and offering expenses payable by the company . on may 2 , 2017 , the company sold 6,192,750 shares of common stock at a price of $ 1.30 per share , which includes the sale of 807,750 shares of the company 's common stock sold by the company pursuant to the exercise , in full , of the over-allotment option by the underwriters in a public offering . the net proceeds to the company from the offering were approximately $ 7.2 million , after deducting placement agent fees and offering expenses payable by the company . on october 23 , 2017 , the company sold 5,739,437 shares of common stock at a price of $ 1.42 per share in a best efforts public offering . the net proceeds to the company from the offering were approximately $ 7.4 million , after deducting placement fees and offering expenses payable by the company . the sale of additional equity or convertible securities could result in dilution to our stockholders . if additional funds are raised through the issuance of debt securities or preferred stock , these securities could have rights senior to those associated with our common stock and could contain covenants that would restrict our operations . we do not have any committed sources of debt or equity financing and we can not assure you that financing will be available in amounts or on terms acceptable to us when needed , or at all . if we are unable to obtain required financing when needed , we may be required to reduce the scope of our operations , including our planned product development and marketing efforts , which could materially and adversely affect our financial condition and operating results . if we are unable to secure additional financing , we may be forced to cease our operations . backlog as of april 30 , 2018 , our negotiated backlog was $ 0.7 million . as of april 30 , 2017 , our negotiated backlog was $ 0.3 million . our backlog can include both funded amounts , which are unfilled firm orders for our products and services for which funding has been both authorized and appropriated by the customer ( u.s. congress , in the case of u.s. government agencies ) , and unfunded amounts , which are unfilled firm orders for which funding has not been appropriated . if any of our contracts were to be terminated , our backlog would be reduced by the expected value of the remaining terms of such contract . 38 the amount of contract backlog is not necessarily indicative of future revenue because modifications to , or terminations of present contracts and production delays can provide additional revenue or reduce anticipated revenue . a substantial portion of our revenue has been for the support of our product development efforts . these revenues are recognized using the percentage-of-completion method , and changes in estimates from time to time may have a significant effect on revenue and backlog . our backlog is also typically subject to large variations from time to time due to the timing of new awards .
| results of operations this section should be read in conjunction with the discussion below under “ liquidity and capital resources. ” fiscal years ended april 30 , 2018 and 2017 the following table contains selected statement of operations information , which serves as the basis of the discussion of our results of operations for the years ended april 30 , 2018 and 2017 : replace_table_token_5_th 42 revenues revenues for the fiscal years ended april 30 , 2018 and 2017 were approximately $ 0.5 million and $ 0.8 million , respectively . the decrease of approximately $ 0.3 million or 39 % over 2017 was attributable to the mes and onr contracts being completed in the second quarter of fiscal 2018 partly offset by the new eni and premier contracts . cost of revenues cost of revenues consists primarily of incurred material , labor and manufacturing overhead expenses , such as engineering expense , equipment depreciation and maintenance and facility related expenses , and includes the cost of powerbuoy parts and services supplied by third-party suppliers . cost of revenues also includes powerbuoy system delivery and deployment expenses and may include anticipated losses at completion on certain contracts . cost of revenues for the fiscal years ended april 30 , 2018 and 2017 were approximately $ 0.8 million and $ 0.9 million , respectively . the decrease of approximately $ 0.1 million , or 19 % , over 2017 was due to lower revenue in the current year as compared to the prior year , partially offset by a higher reserve for future contract losses . product development costs our product development costs consist of salaries and other personnel-related costs and the costs of products , materials and outside services used in our product development and unfunded research activities .
| 4,087 |
this discussion contains forward-looking statements that involve risks and uncertainties . our actual results could differ materially from those anticipated in these forward-looking statements as a result of various factors , including those discussed below and elsewhere in this report , particularly those under “ risk factors. ” dollars in tabular format are presented in thousands , except per share data , or otherwise indicated . overview growgeneration corp. ( “ growgeneration , together with all of its wholly- subsidiaries or the “ company ” ) was incorporated in colorado in 2014 to build a national chain of hydroponic equipment and supply garden centers in the u.s. growgeneration is the largest and fastest growing chain of hydroponic garden centers in north america . today , growgeneration is a service provider of a wide selection of supplies and equipment for commercial and home growers and a leading marketer and distributor of nutrients , growing media , advanced indoor garden , lighting and ventilation systems and accessories for hydroponic gardening . as of march 27 , 2020 , the company owns and operates a chain of twenty seven ( 27 ) retail hydroponic/gardening centers , with five ( 5 ) located in the state of colorado , four ( 4 ) in the state of california , four ( 4 ) in the state of michigan , two ( 2 ) in the state of nevada , one ( 1 ) in the state of washington , one ( 1 ) in the state of oregon , four ( 4 ) in the state of oklahoma , one ( 1 ) in the state of rhode island , three ( 3 ) in maine , ( 1 ) in florida , one ( 1 ) distribution facility in california and an online e-commerce store , growgen.pro . our plan is to acquire , open and operate hydroponic/gardening stores and related businesses throughout the united states and canada . the florida location was acquired in february 2020 and the fourth oklahoma store was open in march 2020. in 2019 , we added tony sullivan , an experienced and proven multi-store operator , as our chief operating officer . his initiatives include , but not be limited to , providing unwavering support to the 27 growgeneration stores , adding new locations , integrating our e-commerce and store supply channels and leveraging synergies amongst interconnected departments , working to drive more cost efficiencies across all areas of our company . we saw triple-digit growth in revenue in colorado , michigan and nevada and double-digit growth in all other markets . our online business has risen over 100 % for the same period year over year . growgeneration management corp , our commercial division , is now approaching sales of $ 5.0 million per quarter , and we added hundreds of new commercial accounts in 2019. with our success in oklahoma , we opened our fourth location in the state , located in tulsa , ok , a 40,000 sq . ft. super garden center , the largest hydroponic garden center in the us . our private label program , under the sunleaves brand , began to be stocked on our shelves and online in the fourth quarter of 2019. our initial private label lineup includes a one- part micro and macro nutrient+ cal mag powder line , for both cannabis and hemp farmers , a silica+ micronutrient booster and a root stimulant , all additives that can be used with any nutrient regimen . additional private level products that will be on shelf in second quarter of 2020 include , rope rachets for hoisting lighting , breathable fabric pots and t5 florescent lights for indoor gardens . we improved the financial performance of the company in all areas in 2019. revenue was up 175 % year over year , at $ 79.7 million . adjusted ebitda , for 2019 was slightly over $ 6,600,000 , a positive $ .20 per share . our same store sales were up approximately 36 % year over year . gross profit margins increased to 28.3 % , an increase of 610 basis points year over year . we believe our strategies to increase margins are working , by purchasing in larger volumes and buying more efficiently . we saw significant revenue increases in all key markets . colorado was up 114 % , california 70 % , nevada 126 % , michigan 200 % , and rhode island 79 % our new stores in oklahoma contributed $ 11.8 million in revenue and our stores in maine added $ 6.2 million . our e-commerce store , growgen.pro added approximately $ 4.8 million in revenue . our commercial division generated approximately $ 17 million in revenue all of which is reflected in store revenues . with our significant top and bottom-line growth , we reduced our store operating expenses to 12.7 % of revenues in 2019 compared to 18 % in 2018 and our corporate overhead to 8.5 % as a percentage of our revenue , not including non-cash expenditures . the company has successfully completed the implementation of our enterprise resource planning ( “ erp ” ) platform , designed to lower costs , integrate our online and store sales and supply channels , improve departmental productivity , and provides forecasting and reporting tools . management focuses on a variety of key indicators and operating metrics to monitor the financial condition and performance of the continuing operations of our business . these metrics include consumer purchases ( point-of-sale data ) , market share , category growth , net sales , gross profit margins , income from operations , net income and earnings per share . we also focus on measures to optimize cash flow and return on invested capital , including the management of working capital and capital expenditures . 12 in 2019 , the company continued focusing its efforts on increasing its distributions through acquisitions and opening of new locations . we increased our store footprint from 21 to 26 locations in 2019 , which included three store closing/consolidations . sales increased 175 % between 2018 and 2019. story_separator_special_tag the lease is effective from january 1 , 2019 to december 31 , 2024. the company opened this store for business on february 1 , 2019. in october 2018 , the company consolidated its store located in boulder , co with our denver , co store . on august 30 , 2018 , the company entered into an asset purchase agreement , amended on september 14 , 2018 , with virgus , inc. d/b/a/ heavy gardens , an online store of hydroponic and garden supplies ( “ heavy gardens ” ) to purchase the assets of heavy gardens through its wholly-owned subsidiary , growgeneration hg corp. the closing of the asset purchase took place on september 14 , 2018. on august 23 , 2018 , the company signed a commercial lease to open a 10,000 sq . ft. warehouse and product showroom in oklahoma city to service the emerging legal cannabis cultivators in the state of oklahoma . the lease is effective from october 1 , 2018 to september 30 , 2023. the company opened this store for business on october 1 , 2018. on june 28 , 2018 , the company entered into a restated and amended asset purchase agreement to purchase the assets of a retail hydroponic store , santa rosa hydroponics & grower supply inc. , located in santa rosa , california . on july 13 , 2018 , the parties entered into an amendment to the purchase agreement and conducted the closing of the asset purchase . in connection with the purchase of the assets , the company also entered into a commercial lease agreement , effective from july 14 , 2018 to july 13 , 2023 , to rent the premises where the assets were located . in may 2018 , the company consolidated its store located in colorado springs , co with our denver , co store and in april 2018 , consolidated its store located in pueblo west with its pueblo downtown store . on may 9 , 2018 , growgeneration corp. ( the “ company ” ) completed a private placement ( the “ offering ” ) of a total of 33.33 units ( the “ units ” ) of the company 's securities at the price of $ 300,000 per unit pursuant to section 4 ( a ) ( 2 ) of the securities act of 1933 , as amended ( the “ securities act ” ) and rule 506 of regulation d promulgated under the securities act . each unit consists of ( i ) 100,000 shares of the company 's $ .001 par value common stock ( the “ shares ” ) and ( ii ) 50,000 3-year warrants ( the “ warrants ” ) , each entitling the holder to purchase one share of the company 's common stock , at a price of $ .35 per share or through cashless exercise . the company raised a total of $ 10,000,000 from three accredited investors . on april 12 , 2018 , the company entered into an asset purchase agreement through its wholly-owned subsidiary , growgeneration michigan corp. , to purchase substantially all of the assets of superior growers supply , inc. 's business located in michigan . in connection with the purchase of the assets , the company also entered into a commercial lease , effective from april 12 , 2018 to april 11 , 2023 , to rent the premises where a part of the assets are located . the company entered into two additional leases . following this acquisition , the company opened three stores in the state of michigan . 14 story_separator_special_tag nter '' > 6 same stores year ended year ended december 31 , 2019 december 31 , 2018 variance net revenue $ 12,995,795 $ 9,528,453 $ 3,467,342 cost of goods sold cost of goods sold for the year ended december 31 , 2019 increased approximately $ 34.6 million or 153.5 % , to $ 57.2 million , compared to $ 22.6 million for the year ended december 31 , 2018. the increase in cost of goods sold was due to the 174.9 % increase in revenues , comparing the year ended december 31 , 2018 to 2019 primarily due to the increase in the number of stores between 2018 and 2019 as noted in more detail above . gross profit was $ 22.6 million for the year ended december 31 , 2019 , as compared to $ 6.4 million for the year ended december 31 , 2018 , an increase of approximately $ 16.1 million or 250.1 % . gross profit as a percentage of sales was 28.3 % for the year ended december 31 , 2019 , compared to 22.2 % for the year ended december 31 , 2018. the increase in the gross profit margin percentage in 2019 was due to ( 1 ) reduced pricing from vendors as a result of our increasing purchases from those vendors , and ( 2 ) the sale of product acquired in a large bulk purchase in the first quarter of 2019 at a substantial discount . the increase in the gross profit percentage was also due to the slight decrease in non-cash inventory valuation adjustments of approximately $ 870,000 in 2018 , compared to $ 809,000 in 2019. the inventory valuation adjustments consist of a reserve for obsolete inventory as well as the write down of inventory resulting from physical inventory counts and to its current fair market value where that is lower than cost . 16 operating expenses operating expenses are comprised of store operations , primarily payroll , rent and utilities , and corporate overhead . store operating costs were approximately $ 10.1 million for the year ended december 31 , 2019 , compared to approximately $ 5.2 million for the year ended december 31 , 2018 , an increase of approximately $ 4.9 million or 94 % . the increase in store operating costs was due to the addition of 10 new stores in 2019 and 9 new stores 2018. revenues increased 174.9 % , but store operating costs increased only 94 % .
| results of operations replace_table_token_2_th revenue net revenue for the year ended december 31 , 2019 were approximately $ 79.7 million , compared to approximately $ 29 million for the year ended december 31 , 2018 , an increase of $ 50.7 million , or 175 % . the increase in revenues is due to the addition of 10 new retail stores opened or acquired during 2019 for which there were no sales for these retail stores for the year ended december 31 , 2018 , and 8 stores and the e-commerce site opened or acquired at various times during 2018 that were open for all of 2019. sales in the 10 new stores opened or acquired in 2019 were $ 26 million . sales from the e-commerce site and the 8 stores opened in 2018 were approximately $ 38.3 million for the year ended december 31 , 2019 , compared to approximately $ 14.5 million for the year ended december 31 , 2018. the company also had store closures and consolidations in 2019 and 2018. sales of the closed and consolidated stores was approximately $ 909,000 for the year ended december 31 , 2019 and approximately $ 4.5 million for the year ended december 31 , 2018. while the company continues to focus on the 9 markets noted below and the growth opportunities that exist in each market , we also are focusing on new store acquisitions , proprietary products , and developing our online sales with growgen.pro and amazon sales .
| 4,088 |
this asu will be effective for the company in the first quarter of 2019 and must be adopted using a modified retrospective transition approach . the company has not yet determined whether it will elect early a doption and is currently evaluating story_separator_special_tag story_separator_special_tag development and may never be successful in developing or commercializing our product candidates . while we may in the future generate revenue from a variety of sources , including license fees , milestone and research and development payments in connection with strategic partnerships , and potentially revenue from product sales if any of our product candidates are approved , to date we have not generated any revenue from product sales . we entered into our collaboration and license arrangements with regeneron in may 2014 and editas in august 2016. both arrangements are revenue-generating arrangements , refer to note 7 , significant agreements , of the notes to consolidated financial statements included in this form 10-k for details . we have no clinical or commercial manufacturing facilities , and all of our clinical manufacturing activities are contracted out to third parties . additionally , we use third-party clinical research organizations ( “ cros ” ) to carry out our clinical development and we do not have a sales organization . we expect to incur substantial and increasing expenditures in the foreseeable future for the development and potential commercialization of our product candidates . we will need substantial additional funding in the future to support our operating activities as we advance our product candidates through preclinical and clinical development , seek regulatory approval and prepare for and , if approved , proceed to commercialization . adequate funding may not be available to us on acceptable terms , or at all . if we are unable to raise capital , or to do so on acceptable terms , when needed , or to form additional collaboration partnerships to support our efforts , we could be forced to delay , reduce or eliminate our research and development programs or potential commercialization efforts . as of december 31 , 2017 , we had $ 190.5 million in cash , cash equivalents and short-term investments . we believe that we have sufficient funds , together with the net proceeds from our february 2018 underwritten public offering of our common stock , to continue our operations through the end of 2019. in august 2017 , we entered into an at-the-market sales agreement with an agent for the sales of our common stock at market price ( the “ 2017 stock offering agreement ” ) . under the terms and conditions of the 2017 stock offering agreement , we may offer to sell our common stock for an aggregate offering price of up to $ 50.0 million through the agent from time to time . in january 2018 , we sold a total of 1,419,893 shares of our common stock at market prices under the 2017 stock offering agreement and raised total net proceeds of $ 5.7 million , net of issuance costs . we have sold a total of 6,550,232 shares of our common stock at market prices pursuant to the 2017 stock offering agreement and raised total net proceeds of approximately $ 22.5 million , net of issuance costs . in february 2018 , we completed an underwritten public offering for the sale of 10,222,235 shares of our common stock and raised total net proceeds of approximately $ 64.3 million , after discounts and other issuance costs . revenue to date we have not generated any revenue from the sale of our products . we generate revenue through research , collaboration and license arrangements with our strategic partners . as of december 31 , 2017 , our total deferred revenue related to collaboration arrangements with our strategic partners was $ 7.1 million . we recognized $ 1.8 million , $ 1.5 million and $ 2.3 million of revenue associated with these collaboration arrangements during the years ended december 31 , 2017 , 2016 and 2015 , respectively . 65 agreement with editas in august 2016 , we entered into a collaboration , option and license agreement with editas . under the terms of the agreement , we received $ 1.0 million non-refundable upfront payment , with $ 0.5 million of such payment to be credited against editas ' obligation to fund research and development costs . as the agreement provides for multiple deliverables , we accounted for this agreement as a multiple elements revenue arrangement . at the inception of the agreement , identified deliverables include research services , manufacturing of viral vectors for research , participation in the joint research committee and exclusivity during the option period . these deliverables did not appear to have a standalone value and were combined into one unit of accounting . options for each indication to license our aav vector are considered substantive options and do not include significant incremental discounts . therefore , they are not considered as deliverables under the agreement . we allocated the $ 1.0 million received to a single unit of accounting identified in the arrangement . we recognize $ 1.0 million ratably over the associated period of performance , which is the maximum research period of three years . as there is no discernible pattern of performance and or objectively measurable performance measures do not exist , we recognize revenue on a straight-line basis . in january 2018 , we and editas extended the collaboration , option and license agreement . in consideration for extending the agreement , editas made a one-time payment to adverum of $ 0.5 million in february 2018. refer to note 17 of the notes to consolidated financial statements included in this form 10-k for details . agreement with regeneron in may 2014 , we entered into a research , collaboration and license agreement with regeneron . story_separator_special_tag general and administrative expenses general and administrative expenses include primarily personnel-related costs , stock-based compensation , professional fees for legal , consulting , audit and tax services , overhead expenses , such as rent , equipment depreciation , insurance and utilities , and other general operating expenses not otherwise included in research and development expenses . our general and administrative expenses may increase in future periods if and to the extent we elect to increase our investment in infrastructure to support continued research and development activities and potential commercialization of our product candidates . we will continue to evaluate the need for such investment in conjunction with our ongoing consideration of our pipeline of product candidates . we anticipate increased expenses related to audit , legal and regulatory functions , as well as director and officer insurance premiums and investor relations costs associated with being a public reporting company . impairment of goodwill and intangible assets during the year ended december 31 , 2016 , due to a continuing decrease in our stock price that resulted in our market capitalization being less than the carrying value of our net assets and expected continuation of operating losses in subsequent years due to preclinical and expected clinical trials , we concluded that it was more likely than not that the fair value of our reporting unit was less than its carrying value . we performed a two-step goodwill impairment analysis and determined that our goodwill was fully impaired . as a result , we recorded a $ 49.5 million goodwill impairment charge in our consolidated statements of operations and comprehensive loss during the year ended december 31 , 2016. additionally , in the fourth quarter of 2016 , we performed our annual assessment for impairment of our intangible assets , advm-043 and advm-053 . as a result of our decision to change our manufacturing process for advm-043 and advm-053 by implementing our proprietary baculovirus-based production system , we updated the related product development and manufacturing costs . we also reviewed and updated our expected timing of clinical trials , receipts of regulatory approvals and costs to complete for our advm-043 and advm-053 programs . based upon our impairment analysis , we determined that the total carrying value of $ 16.2 million of our intangible assets was higher than their total fair value of $ 5.0 million . accordingly , we recorded an $ 11.2 million impairment charge related to our intangible assets for the year ended december 31 , 2016. in the fourth quarter of 2017 , we performed our annual impairment assessment of our intangible asset , advm-043 , and concluded that our advm-043 intangible asset was not impaired . as of december 31 , 2017 and 2016 , our intangible asset of $ 5.0 million was associated with advm-043 . we are required to test our indefinite-lived intangible asset for impairment on an annual basis or more frequently if indicators of impairment exist . we operate as one reporting unit . 67 other income ( expense ) , net other income ( expense ) , net primarily comprises of interest income on our cash equivalents and investments in marketable securities . critical accounting policies , significant judgments and use of estimates this discussion and analysis of our financial condition and results of operations is based on our consolidated financial statements , which have been prepared in accordance with u.s. gaap . the preparation of these consolidated 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 consolidated financial statements , as well as the reported expenses incurred during the reporting periods . our estimates are based on our 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 . actual results may differ from these estimates . we believe that the accounting policies discussed below are critical to understanding our historical and future performance , as these policies relate to the more significant areas involving management 's judgments and estimates . revenue recognition we have primarily generated revenue through the license and research and collaboration arrangements with our strategic partners for the development and commercialization of product candidates . the terms of these types of agreements may include ( i ) licenses to our technology , ( ii ) research and development services , and ( iii ) services or obligations in connection with participation in research or steering committees . payments to us under these arrangements typically include one or more of the following : nonrefundable upfront and license fees , research funding , milestone and other contingent payments for the achievement of defined collaboration objectives and certain preclinical , clinical , and regulatory events , as well as royalties on sales of any commercialized products . in arrangements involving the delivery of more than one element , each required deliverable is evaluated to determine whether it qualifies as a separate unit of accounting . the determination is based on whether the deliverable has “ standalone value ” to the customer . if a deliverable does not qualify as a separate unit of accounting , it is combined with the other applicable undelivered item ( s ) within the arrangement and these combined deliverables are treated as a single unit of accounting . the arrangement 's consideration that is fixed or determinable is allocated to each separate unit of accounting based on the relative selling price methodology in accordance with the selling price hierarchy , which includes vendor-specific objective evidence ( “ vsoe ” ) of selling price , if available , or third-party evidence of selling price if vsoe is not available , or the best estimate of selling price , if neither vsoe nor third-party evidence is available .
| financial condition and results of operations you should read the following discussion of our financial condition and results of operations in conjunction with the financial statements and the related notes included elsewhere in this annual report on form 10-k. the following discussion contains forward-looking statements that reflect our plans , estimates and beliefs . our actual results could differ materially from those discussed in the forward-looking statements . factors that could cause or contribute to these differences include those discussed below and elsewhere in this annual report on form 10-k , particularly in “ cautionary note regarding forward-looking statements ” and “ risk factors. ” overview adverum is a clinical-stage gene therapy company targeting unmet medical needs in serious rare and ocular diseases . we are leveraging our next-generation adeno-associated virus ( “ aav ” ) -based directed evolution platform to generate gene therapy product candidates designed to provide durable efficacy by inducing sustained expression of a therapeutic protein . in may 2016 , we closed our acquisition of annapurna therapeutics sas ( “ annapurna ” ) , a privately-held french gene therapy company , ( the “ annapurna acquisition ” ) . our core capabilities include clinical development , novel vector development , and in-house manufacturing expertise , specifically in process development , assay development and good manufacturing practices quality control . our leadership team has significant drug development and gene therapy expertise . we are advancing our robust pipeline of gene therapy candidates designed to treat rare diseases alpha-1 antitrypsin ( “ a1at ” ) deficiency and hereditary angioedema ( “ hae ” ) as well as in wet age-related macular degeneration ( “ wamd ” ) . for the treatment of a1at deficiency , we are advancing our gene therapy product candidate advm-043 , aavrh.10-a1at , in an ongoing phase 1/2 clinical trial ( the “ advance trial ” ) . the advance trial is a multi-center , open-label , dose-escalation study . the primary endpoint is safety and tolerability and secondary endpoints include changes in plasma concentrations of both total and m-specific a1at levels .
| 4,089 |
certain prestige fragrance products are produced and marketed by our european operations through our 73 % owned subsidiary in paris , interparfums sa , which is also a publicly traded company as 27 % of interparfums sa shares trade on the nyse euronext . we produce and distribute our european based fragrance products primarily under license agreements with brand owners , and european based fragrance product sales represented approximately 80 % , 81 % and 78 % of net sales for 2018 , 2017 and 2016 , respectively . we have built a portfolio of prestige brands , which include boucheron , coach , jimmy choo , karl lagerfeld , lanvin , montblanc , paul smith , repetto , rochas , s.t . dupont and van cleef & arpels , whose products are distributed in over 100 countries around the world . through our united states operations , we also market fragrance and fragrance related products . united states operations represented 20 % , 19 % and 22 % of net sales in 2018 , 2017 and 2016 , respectively . these fragrance products are sold or to be sold primarily pursuant to license or other agreements with the owners of the abercrombie & fitch , agent provocateur , anna sui , bebe , dunhill , french connection , graff , guess , hollister , lily aldridge and oscar de la renta brands . 35 with respect to the company 's largest brands , we own the lanvin brand name for our class of trade , and license the montblanc , jimmy choo and coach brand names . as a percentage of net sales , product sales for the company 's largest brands were as follows : replace_table_token_6_th quarterly sales fluctuations are influenced by the timing of new product launches as well as the third and fourth quarter holiday season . in certain markets where we sell directly to retailers , seasonality is more evident . we sell directly to retailers in france as well as through our own distribution subsidiaries in italy , spain and the united states . we grow our business in two distinct ways . first , we grow by adding new brands to our portfolio , either through new licenses or other arrangements or out-right acquisitions of brands . second , we grow through the introduction of new products and by supporting new and established products through advertising , merchandising and sampling as well as by phasing out underperforming products so we can devote greater resources to those products with greater potential . the economics of developing , producing , launching and supporting products influence our sales and operating performance each year . our introduction of new products may have some cannibalizing effect on sales of existing products , which we take into account in our business planning . our business is not capital intensive , and it is important to note that we do not own manufacturing facilities . we act as a general contractor and source our needed components from our suppliers . these components are received at one of our distribution centers and then , based upon production needs , the components are sent to one of several third party fillers , which manufacture the finished product for us and then deliver them to one of our distribution centers . as with any global business , many aspects of our operations are subject to influences outside our control . we believe we have a strong brand portfolio with global reach and potential . as part of our strategy , we plan to continue to make investments behind fast-growing markets and channels to grow market share . in years prior to 2017 , the economic and political uncertainty and financial market volatility in eastern europe , the middle east and china had a minor negative impact on our business , but our sales in these regions have been improving and we do not anticipate dramatic changes in business conditions for the foreseeable future . however , if the degree of uncertainty or volatility worsens or is prolonged , then there will likely be a negative effect on ongoing consumer confidence , demand and spending and accordingly , our business . we believe general economic and other uncertainties still exist in select markets in which we do business , and we monitor these uncertainties and other risks that may affect our business . 36 our reported net sales are impacted by changes in foreign currency exchange rates . a strong u.s. dollar has a negative impact on our net sales . however , earnings are positively affected by a strong dollar , because over 45 % of net sales of our european operations are denominated in u.s. dollars , while almost all costs of our european operations are incurred in euro . conversely , a weak u.s. dollar has a favorable impact on our net sales while gross margins are negatively affected . our company addresses certain financial exposures through a controlled program of risk management that includes the use of derivative financial instruments . we primarily enter into foreign currency forward exchange contracts to reduce the effects of fluctuating foreign currency exchange rates . we are also carefully monitoring currency trends in the united kingdom as a result of the volatility created from the united kingdom 's decision to exit the european union . we have evaluated our pricing models and we do not expect any significant pricing changes . however , if the devaluation of the british pound worsens , it may affect future gross profit margins from sales in the territory . recent important events lily aldridge license in september 2018 , interstellar brands llc , a wholly-owned subsidiary of the company , announced the development of a new fragrance line in collaboration with supermodel lily aldridge . the license agreement with lily aldridge runs through december 31 , 2023 , and is subject to royalty payments as are customary in our industry . story_separator_special_tag we generally grant credit based upon our analysis of the customer 's financial position as well as previously established buying patterns . sales returns generally , we do not permit customers to return their unsold products . however , for u.s. distribution of our prestige products , we allow returns if properly requested , authorized and approved as is customary in the industry . we regularly review and revise , as deemed necessary , our estimate of reserves for future sales returns based primarily upon historic trends and relevant current data , including information provided by retailers regarding their inventory levels . in addition , as necessary , specific accruals may be established for significant future known or anticipated events . the types of known or anticipated events that we have considered , and will continue to consider , include , but are not limited to , the financial condition of our customers , store closings by retailers , changes in the retail environment and our decision to continue to support new and existing products . we record estimated reserves for sales returns as a reduction of sales , cost of sales and accounts receivable . returned products are recorded as inventories and are valued based upon estimated realizable value . the physical condition and marketability of returned products are the major factors we consider in estimating realizable value . actual returns , as well as estimated realizable values of returned products , may differ significantly , either favorably or unfavorably , from our estimates , if factors such as economic conditions , inventory levels or competitive conditions differ from our expectations . 39 inventories inventories are stated at the lower of cost and net realizable value . cost is principally determined by the first-in , first-out method . we record adjustments to the cost of inventories based upon our sales forecast and the physical condition of the inventories . these adjustments are estimates , which could vary significantly , either favorably or unfavorably , from actual results if future economic conditions or competitive conditions differ from our expectations . equipment and other long-lived assets equipment , which includes tools and molds , is recorded at cost and is depreciated on a straight-line basis over the estimated useful lives of such assets . changes in circumstances such as technological advances , changes to our business model or changes in our capital spending strategy can result in the actual useful lives differing from our estimates . in those cases where we determine that the useful life of equipment should be shortened , we would depreciate the net book value in excess of the salvage value , over its revised remaining useful life , thereby increasing depreciation expense . factors such as changes in the planned use of equipment , or market acceptance of products , could result in shortened useful lives . we evaluate indefinite-lived intangible assets for impairment at least annually during the fourth quarter , or more frequently when events occur or circumstances change , such as an unexpected decline in sales , that would more likely than not indicate that the carrying value of an indefinite-lived intangible asset may not be recoverable . when testing indefinite-lived intangible assets for impairment , the evaluation requires a comparison of the estimated fair value of the asset to the carrying value of the asset . the fair values used in our evaluations are estimated based upon discounted future cash flow projections using a weighted average cost of capital of 6.21 % . the cash flow projections are based upon a number of assumptions , including , future sales levels and future cost of goods and operating expense levels , as well as economic conditions , changes to our business model or changes in consumer acceptance of our products which are more subjective in nature . if the carrying value of an indefinite-lived intangible asset exceeds its fair value , an impairment charge is recorded . we believe that the assumptions we have made in projecting future cash flows for the evaluations described above are reasonable . however , if future actual results do not meet our expectations , we may be required to record an impairment charge , the amount of which could be material to our results of operations . at december 31 , 2018 indefinite-lived intangible assets aggregated $ 123.3 million . the following table presents the impact a change in the following significant assumptions would have had on the calculated fair value in 2018 assuming all other assumptions remained constant : replace_table_token_7_th 40 intangible assets subject to amortization are evaluated for impairment testing whenever events or changes in circumstances indicate that the carrying amount of an amortizable intangible asset may not be recoverable . if impairment indicators exist for an amortizable intangible asset , the undiscounted future cash flows associated with the expected service potential of the asset are compared to the carrying value of the asset . if our projection of undiscounted future cash flows is in excess of the carrying value of the intangible asset , no impairment charge is recorded . if our projection of undiscounted future cash flows is less than the carrying value of the intangible asset , an impairment charge would be recorded to reduce the intangible asset to its fair value . the cash flow projections are based upon a number of assumptions , including future sales levels and future cost of goods and operating expense levels , as well as economic conditions , changes to our business model or changes in consumer acceptance of our products which are more subjective in nature . in those cases where we determine that the useful life of long-lived assets should be shortened , we would amortize the net book value in excess of the salvage value ( after testing for impairment as described above ) , over the revised remaining useful life of such asset thereby increasing amortization expense . we believe that the assumptions we have made in projecting future cash flows for the evaluations described above are reasonable .
| results of operations replace_table_token_8_th 42 net sales increased 14 % in 2018 to $ 675.6 million , as compared to $ 591.3 million in 2017. at comparable foreign currency exchange rates , net sales increased 13 % . net sales increased 13 % in 2017 to $ 591.3 million , as compared to $ 521.1 million in 2016. at comparable foreign currency exchange rates , net sales increased 12 % . the average u.s. dollar/euro exchange rates were 1.18 in 2018 and 1.13 in 2017 and 1.11 in 2016. european based product sales increased 13 % in 2018 to $ 537.6 million , as compared to $ 476.5 million in 2017. at comparable foreign currency exchange rates , european based product sales increased 11 % in 2018. european based product sales increased 18 % in 2017 to $ 476.5 million , as compared to $ 404.0 million in 2016. at comparable foreign currency exchange rates , european based prestige product sales increased 16 % in 2017. european based product sales in 2018 were stronger than our original expectations even though no new fragrance families were launched in 2018. top line growth was primarily attributed to established scents and brand extensions for our largest brands . coach brand sales accounted for much of the 2018 upside surprise with brand sales increasing 73 % in 2018 to $ 99.7 million , as compared to $ 57.5 million in 2017 , making it our portfolio 's third largest brand . the other largest brands in our european operations portfolio performed as expected with montblanc , jimmy choo and lanvin , achieving year-over-year sales growth of 1 % , 8 % , and 7 % , respectively . net sales in 2017 , for european based operations were also stronger than original expectations , with coach brand sales contributing much of that gain .
| 4,090 |
the company measures stock-based compensation cost at the grant date , based on the estimated fair value of the award and recognizes the cost on a straight-line basis ( net of estimated forfeitures ) over the requisite service period . see note 8 , `` employee stock compensation plans `` for further information on ncr 's stock-based compensation plans . related party transactions in 2011 , concurrent with the sale of a noncontrolling interest in ncr manaus to scopus , we entered into a master purchase agreement ( mpa ) with banco bradesco sa ( bradesco ) , the parent of scopus . through the mpa , bradesco agreed to purchase up to 30,000 atms from us over the 5 year term of the agreement . pricing of the atms will adjust over the term of the mpa using certain formulas which are based on prevailing market pricing . we recognized $ 124 million , $ 145 million and $ 35 million in revenue related to bradesco for the years ended december 31 , 2013 , 2012 and 2011 , respectively , and we had $ 9 million in receivables outstanding from bradesco as of december 31 , 2013 and 2012 . recent accounting pronouncements adopted in february 2013 , the financial accounting standards board ( fasb ) issued an accounting standards update requiring new disclosures about reclassifications from accumulated other comprehensive loss to net income . these disclosures may be presented on the face of the statements story_separator_special_tag business overview ncr corporation is a leading global technology company that provides innovative products and services that enable businesses to connect , interact and transact with their customers and enhance their customer relationships by addressing consumer demand for convenience , value and individual service . our portfolio of self-service and assisted-service solutions serve customers in the financial services , retail , hospitality , travel , and telecommunications and technology industries and include automated teller machines ( atms ) and atm and financial services software , point of sale ( pos ) devices and pos software , self-service kiosks and software applications that can be used by consumers to enable them to interact with businesses from their computer or mobile device . we also complement these product solutions by offering a complete portfolio of services that support both ncr and third party solutions . we also resell third-party networking products and provide related service offerings in the telecommunications and technology sectors . we have four operating segments : financial services , retail solutions , hospitality and emerging industries . each of our lines of business derives its revenues by selling products and services in each of the sales theaters in which ncr operates . our solutions are based on a foundation of long-established industry knowledge and consulting expertise , value-added software , hardware technology , global customer support services , and a complete line of business consumables and specialty media products . ncr 's reputation is founded upon over 129 years of providing quality products , services and solutions to our customers . at the heart of our customer and other business relationships is a commitment to acting responsibly , ethically and with the highest level of integrity . this commitment is reflected in ncr 's code of conduct , which is available on the corporate governance page of our website . 2013 overview as more fully discussed in later sections of this md & a , the following were significant themes and events for 2013 : revenue growth of approximately 7 % compared to full year 2012 continued growth of higher margin software and services offerings and improvements in revenue mix pension underfunded status improved by $ 372 million compared to 2012 completed the acquisition of retalix ltd. entered into a definitive agreement and plan of merger to acquire digital insight corporation for a cash purchase price of approximately $ 1.65 billion issued $ 400 million aggregate principal amount of 5.875 % senior unsecured notes due in 2021 , and $ 700 million aggregate principal amount of 6.375 % senior notes due in 2023 , to help finance the digital insight acquisition 26 overview of strategic initiatives we have established a focused and consistent business strategy targeted at revenue growth , gross margin expansion , improved customer loyalty and employee engagement . this strategy guided our efforts in 2013 , and will continue to guide us in 2014. to execute this strategy , we incorporate three key imperatives that align with our financial objectives : deliver disruptive innovation ; focus on migrating our revenue to higher margin software and recurring services revenue ; and more fully enable our sales force with a consultative selling model that better leverages the innovation we are bringing to the market . our strategy is summarized in more detail below : gain profitable share - we have been working to shift our business model to focus on growth of higher margin software and services revenue , including by focusing our research and development efforts , changing and educating our sales force and executing transformative acquisitions in each of our core lines of business . at the same time , we are continuing our effort to optimize our investments in demand creation to increase ncr 's market share in areas with the greatest potential for profitable growth , which include opportunities in self-service technologies with our core financial services , retail , and hospitality customers . we focus on expanding our presence in our core industries , while seeking additional growth by : ◦ penetrating market adjacencies in single and multi-channel self-service segments ; ◦ expanding and strengthening our geographic presence and sales coverage across customer tiers through use of the indirect channel ; and ◦ leveraging ncr services and consumables solutions to grow our share of customer revenue , improve customer retention , and deliver increased value to our customers . story_separator_special_tag after considering these items , the product gross margin increased due to favorable sales mix with an increase in software revenue . services gross margin decreased to 30.5 % in 2013 compared to 32.5 % in 2012 . services gross margin in 2013 was negatively impacted by $ 68 million in lower pension benefit , or 2.1 % as a percentage of services revenue , year over year . after considering this item , the increase in services gross margin was due to a favorable mix of revenues , including an increase in saas revenues . 2012 compared to 2011 story_separator_special_tag style= '' font-family : inherit ; font-size:10pt ; '' > $ 19 million of amortization of acquisition related intangible assets and $ 4 million of legal costs related to the previously disclosed ofac and fcpa internal investigations . in 2011 , selling , general , and administrative expenses included $ 162 million of pension costs , $ 37 million of acquisition related costs , and $ 6 million of amortization of acquisition related intangible assets . after considering these items , selling , general and administrative expenses increased as a percentage of revenue to 13.3 % in 2012 from 12.9 % in 2011 primarily due to additional investments in sales resources . 30 research and development expenses research and development expenses increased $ 48 million to $ 203 million in 2013 from $ 155 million in 2012 . as a percentage of revenue , these costs were 3.3 % in 2013 and 2.7 % in 2012 . research and development expenses included pension benefit of $ 10 million in 2013 as compared to pension benefit of $ 30 million in 2012 . after considering this item , research and development expenses slightly increased to 3.5 % in 2013 from 3.2 % in 2012 as a percentage of revenue and are in line with management expectations as we continue to invest in broadening our self-service solutions . research and development expenses decreased $ 54 million to $ 155 million in 2012 from $ 209 million in 2011 . as a percentage of revenue , these costs were 2.7 % in 2012 and 4.0 % in 2011 . research and development expenses included a $ 30 million pension benefit in 2012 as compared to pension expense of $ 57 million in 2011 . after considering this item , research and development expenses slightly increased to 3.2 % in 2012 from 2.9 % in 2011 as a percentage of revenue and are in line with management expectations as we continue to invest in broadening our self-service solutions . interest and other expense items interest expense was $ 103 million in 2013 compared to $ 42 million in 2012 and $ 13 million in 2011 . interest expense in 2013 was primarily related to the company 's senior unsecured notes and borrowings under the company 's senior secured credit facility . the increase in 2013 compared to 2012 is primarily related to a full year of interest expense related to the company 's senior unsecured notes in 2013 compared to a partial year of interest expense in 2012 . the increase in 2012 compared to 2011 is primarily related to a full year of interest expense related to the company 's senior secured credit facility that was entered into in august 2011. other ( expense ) income , net was $ 9 million in 2013 compared to $ 8 million in 2012 and $ 3 million in 2011 . interest income was $ 6 million in 2013 , $ 6 million in 2012 , and $ 5 million in 2011 . in 2013 , other ( expense ) income , net included $ 13 million related to losses from foreign currency contracts not designated as hedging instruments as well as from foreign currency fluctuations and $ 7 million in bank related fees partially offset by income from the sale of certain patents and a $ 3 million gain on the sale of an investment . in 2012 , other ( expense ) income , net included $ 7 million related to the impairment of an investment , $ 5 million in bank related fees and $ 2 million related to losses from foreign currency fluctuations . in 2011 , other ( expense ) income , net included $ 7 million related to losses from foreign currency fluctuations partially offset by income from the sale of certain patents and a benefit of $ 3 million from final settlement of a litigation matter . income taxes the effective tax rate was 18 % in 2013 , 32 % in 2012 , and 40 % in 2011 . during 2013 , we recorded a one-time benefit of approximately $ 16 million in connection with the american taxpayer relief act of 2012 that was signed into law in january 2013 and the related retroactive tax relief for certain law provisions that expired in 2012. the 2013 tax rate was also favorably impacted by the release of a $ 10 million valuation allowance due to the implementation of a tax planning strategy to access certain deferred tax assets , a $ 15 million reduction in a valuation allowance related to a subsidiary in japan , and a favorable mix of earnings by country , primarily related to lower pension benefit . during 2012 , we favorably settled examinations with canada for the 2003 tax year and japan for tax years 2001 through 2006 that resulted in tax benefits of $ 14 million and $ 13 million , respectively . in addition , the 2012 tax rate was favorably impacted by the mix of earnings by country . these benefits were partially offset by an increase of $ 17 million to the u.s. valuation allowance for deferred tax assets , primarily related to tax attributes expiring by 2015. during 2011 , we favorably settled examinations with canada for 1997 through 2001 that resulted in a $ 12 million tax benefit .
| results discussion revenue revenue increased 8 % in 2012 from 2011 due to improvement in our financial services and hospitality lines of business offset by declines in our retail solutions and emerging industries lines of business . the effects of foreign currency fluctuations had a 3 % unfavorable impact on revenue . for the year ended december 31 , 2012 , our product revenue increased 10 % and services revenue increased 7 % compared to the year ended december 31 , 2011 . the increase in our product revenue was due to growth in the financial services line of business in the americas , europe and amea theaters , and growth in the hospitality line of business in the americas theater offset by declines in the retail solutions line of business in the americas and europe theaters . the increase in our services revenue was primarily attributable to increases in professional and installation services and maintenance services in the financial services and hospitality lines of business in the americas theater offset by declines in such services in the retail solutions line of business in the americas and europe theaters . gross margin gross margin as a percentage of revenue was 28.7 % in 2012 compared to 18.0 % in 2011 . product gross margin in 2012 increased slightly to 24.9 % compared to 22.0 % in 2011 . during 2012 and 2011 , product gross margin was adversely affected by approximately $ 19 million and $ 6 million , respectively , of acquisition related amortization of intangibles . product gross margin was positively impacted by $ 37 million in lower pension expense , or 1.3 % as a percentage of product revenue , year over year . after considering these items , the product gross margin increased due to favorable sales mix with an increase in software revenue .
| 4,091 |
the engraving group benefitted from a second consecutive record year of automotive platform work , while the electronics products and hydraulics products groups continue to demonstrate the impact of prior cost reductions combined with end-user market recovery and entry into new markets and applications . additionally , the engineering technologies group was bolstered by the acquisition of metal spinners impacting the full year of 2012 as compared to only three months of 2011. discussion of the performance of all of our groups is more fully explained in the segment analysis that follows . income taxes the company 's income tax provision from continuing operations for the fiscal year ended june 30 , 2013 was $ 15.9 million , or an effective rate of 26.0 % , compared to $ 15.9 million , or an effective rate of 25.3 % for the year ended june 30 , 2012 , and $ 14.9 million , or an effective rate of 28.2 % for the year ended june 30 , 2011. changes in the effective tax rates from period to period may be significant as they depend on many factors including , but not limited to , the amount of the company 's income or loss , the mix of income earned in the us versus outside the us , the effective tax rate in each of the countries in which we earn income , and any one time tax issues which occur during the period . in 2014 , we expect to return to a more normal tax rate in the range of 28.0 % to 30.0 % based on an anticipated increase in us-based taxable income within our overall business mix . the company 's income tax provision from continuing operations for the fiscal year ended june 30 , 2013 was impacted by the following items : ( i ) a benefit of $ 0.4 million related to the retroactive extension of the r & d credit recorded during the third quarter , ( ii ) a benefit of $ 0.3 million related to a decrease in the statutory tax rate in the united kingdom on prior period deferred tax liabilities recorded during the first and fourth quarters , ( iii ) a benefit of $ 1.0 million from the reversal of a deferred tax liability that was determined to be no longer required during the third quarter and ( iv ) a benefit of $ 2.8 million due to the mix of income earned in jurisdictions with beneficial tax rates . the company 's income tax provision from continuing operations for the fiscal year ended june 30 , 2012 was impacted by the following items : ( i ) a benefit of $ 1.3 million from the reversal of income tax contingency reserves that were determined to be no longer needed due to the lapsing of the statute of limitations and re-measurement of existing tax contingency reserves based on recently completed tax examinations , ( ii ) a benefit of $ 0.4 million related to a decrease in the statutory tax rate in the united kingdom on prior period deferred tax liabilities recorded during the first quarter , and ( iii ) a benefit of $ 4.5 million due to the mix of income earned in jurisdictions with beneficial tax rates . the company 's income tax provision from continuing operations for the fiscal year ended june 30 , 2011 was impacted by the following items : ( i ) a benefit of $ 0.3 million from the reversal of income tax contingency reserves that were determined to be no longer needed due to the expiration of applicable limitation statutes , ( ii ) a benefit of $ 0.2 million related primarily to the retroactive extension of the r & d credit recorded during the second quarter , and ( iii ) a benefit totaling $ 0.3 million as part of the deferred tax provision related to a change in the estimated state rate used to calculate the deferred balances . capital expenditures in general , our capital expenditures over the longer term are expected to be approximately equivalent to our annual depreciation costs . in 2013 , capital expenditures of $ 14.4 million began shifting back to our historical trend as we made strategic investments which supported productivity improvements , geographic expansion , and development of new product offerings . backlog total backlog includes amounts realizable beyond one year . at june 30 , 2013 total backlog increased $ 13.2 million or 11.0 % 17 from $ 119.7 million to $ 132.9 million when compared to fiscal 2012. the increase was driven by electronics where the backlog increased 71.4 % primarily due to backlog associated with the acquired meder business and engineering technologies where the backlog increased 7.0 % offset by decrease in food service equipment , hydraulics products group , and engraving groups . segment analysis ( in thousands ) food service equipment replace_table_token_9_th net sales for fiscal 2013 increased $ 6.1 million , or 1.6 % , when compared to the prior year . the top line growth includes the negative effect of foreign exchange rates of $ 0.6 million in sales . the refrigerated solutions ( walk-in coolers and freezers and refrigerated cabinets ) and specialty solutions groups grew approximately 4.0 % and 5.1 % year over year , respectively , while the cooking solutions group net sales declined by 5.7 % year over year . the refrigeration business continues to see strong sales to our quick-service restaurant chain customers , and we are seeing continued traction in the dollar store segment . this strength is offset by weakness in the drug retail segment as new store construction is at reduced levels . the specialty solutions group growth was driven by double digit growth in the specialty merchandising and custom fabrication businesses through market share gains . this growth was partially offset by a 7 % decline in the global beverage pump business due to soft demand , particularly in the european markets . story_separator_special_tag sale growth in the aerospace and energy markets was offset by declines in the oil and gas segment . the aerospace segment increased from prior year levels due to strong demand for unmanned space launch vehicles . the land based gas turbine business improved significantly year-over-year due to strong demand from several of our oem customers . sales to the oil and gas segment were down as the prior year benefited from several very large offshore platform projects which did not repeat in the current year . the aviation market was down from prior year due to order phasing and the defense market was up slightly over the prior year . income from operations in the fiscal year 2013 decreased $ 1.1 million , or 7.4 % , when compared to the prior year . this decrease is primarily due to the impact of reduced sales in the higher margin oil and gas markets . net sales in the fiscal year 2012 increased $ 13.0 million or 21.3 % , when compared to the prior year . the increase is a result of the full year impact of the acquisition of metal spinners group . negative organic growth of 11.3 % occurred in our legacy businesses as increases in the aerospace segment at spincraft were more than offset by declines in the energy , aviation and the defense markets . as expected , the energy business was down significantly year-over-year as one of our major customers implemented an inventory correction program . 19 for the fiscal year ending june 30 , 2012 , income from operations increased $ 1.7 million , or 13.5 % , when compared to the prior year . this increase was driven by full year impact of the acquisition of metal spinners . the improvement from metal spinners was offset by the impact of reduced sales volume at spincraft . electronics products replace_table_token_12_th net sales in the fiscal year 2013 increased $ 59.9 million , or 124.2 % , when compared to the prior year . this increase includes the impact of $ 55.1 million from the acquisition of meder and $ 4.8 million of organic growth driven by increased sales from the new sensor programs launched over the past 18 months partially offset by lower sales in magnetic products . income from operations in the fiscal year 2013 increased $ 7.4 million , or 85.3 % , when compared to the prior year . this increase was primarily driven by the meder acquisition . the integration of the meder acquisition continued successfully throughout the year with a focus on identifying and implementing both sales and cost synergies . thus far , we identified and had substantially implemented by the end of the fiscal year approximately $ 4.0 million of cost synergies . these cost synergies were primarily the result of procurement savings and the consolidation of our sales and production facilities in china into a single facility . income from the meder acquisition was accretive to earnings inclusive of $ 1.5 million in purchase accounting expenses primarily related to a one time step up of inventory to fair value . electronics net sales increased $ 1.6 million , or 3.4 % in 2012 when compared to the prior year . sales growth was negatively impacted during the first three quarters of 2012 as we experienced soft demand for reed switches , particularly in the asia pacific region , and soft demand from a number of larger oem accounts for sensors and magnetic products . however , sales strengthened significantly in the fourth quarter as we benefited from a number of new products and customer project launches within the automotive , appliance , medical , and hvac sensor and magnetic markets and strengthening demand for reed switches . income from operations in 2012 increased $ 1.2 million , or 15.4 % , compared to 2011. the year over year improvement was the result of the sales increase as well as the impact of various material and labor cost savings particularly within the north american businesses . the higher sales level and the various cost reduction initiatives drove operating income margin from 16.2 % in 2011 to 18.1 % for 2012. hydraulics products replace_table_token_13_th net sales in the fiscal year 2013 increased $ 0.2 million , or 0.5 % , when compared to the prior year . continued market share gains in the north american refuse market coupled with growth in the aftermarket segment was offset by softness in the traditional north american dump truck and trailer and export markets . in many cases end users continue to hold off in making capital investments until absolutely necessary . we have successfully penetrated several large roll off container refuse vehicle oem 's by leveraging our engineering expertise and low cost manufacturing position provided by our factory in tianjin , china . we also have recently launched a new telescopic cylinder product line for the garbage truck refuse markets that two large oem customers are now utilizing . we are currently expanding the capacity of our chinese facility as we expect to continue to drive sales growth by utilizing our low cost position to further penetrate both rod and telescopic cylinder product applications for our global customer base . this expansion geographically includes australia , south america , germany , and central america . 20 income from operations in the fiscal year 2013 increased $ 0.6 million or 12.8 % when compared to the prior year . this increase in annual income from operations can be attributed to cost containment and improvements in both process and productivity during the year in both north america and china . net sales in 2012 for the hydraulics products group increased $ 7.0 million , or 30.5 % when compared to 2011. diversification into other markets in 2012 was a major contributor to the growth , as demonstrated by market share gains at several north american refuse market oems .
| overview we are a leading manufacturer of a variety of products and services for diverse commercial and industrial market segments . we have five reportable segments : food service equipment group , engraving group , engineering technologies group , electronics products group , and the hydraulics products group . our business objective is to provide value-added , technology-driven solutions to our customers . our strategic objective , which we refer to as focused diversity , are to 1 ) identify those businesses which are best able to meet our objectives , and invest in them by taking advantage of both organic growth and acquisition opportunities and 2 ) pursue operational excellence in order to improve operating margins and working capital management . over the past 18 months , we have taken two major steps in the implementation of our strategy . the first was the divestiture at the end of the third quarter of fiscal 2012 of our air distribution products ( adp ) business segment . we determined that the low-margin , commodity orientation of that segment 's products no longer suited our ongoing business objectives . the second major step was the acquisition in the first quarter of fiscal 2013 of meder electronic ag . the acquisition , which more than doubled the size of our electronics products group allowed us to complement our existing electronics business with significantly broadened product line offerings , end-user markets , and manufacturing support that will enhance our global footprint for sales coverage and profitable growth . in addition to the continued implementation of our business strategy , we have successfully taken substantial measures over a period of more than four years to reduce our cost structure . we have achieved this through company-wide and targeted headcount reductions , low cost manufacturing and value-added engineering initiatives , plant consolidations , procurement savings , and improved productivity in all aspects of our operations .
| 4,092 |
101.lab xbrl taxonomy extension labels linkbase document 101.pre xbrl taxonomy story_separator_special_tag the following discussion of our financial condition and results of operations should be read in conjunction with the consolidated financial statements and notes to consolidated financial statements included elsewhere in this annual report on form 10-k. this discussion contains forward-looking statements that involve risks and uncertainties . when reviewing the discussion below , you should keep in mind the substantial risks and uncertainties that impact our business . in particular , we encourage you to review the risks and uncertainties described in part i , item 1a “ risk factors ” in this annual report on form 10-k. these risks and uncertainties could cause actual results to differ materially from those projected in forward-looking statements contained in this report or implied by past results and trends . overview jazz pharmaceuticals plc is an international biopharmaceutical company focused on improving patients ' lives by identifying , developing and commercializing meaningful products that address unmet medical needs . we have a diverse portfolio of products and product candidates , with a focus in the areas of sleep and hematology/oncology . our strategy is to create shareholder value by : growing sales of the existing products in our portfolio , including by identifying new growth opportunities ; acquiring additional differentiated products that are on the market or product candidates that are in late-stage development ; and pursuing focused development of a pipeline of post-discovery differentiated product candidates . throughout 2014 and so far in 2015 , we have made substantial progress in the execution of our strategy . some of the significant developments affecting our business in 2014 are summarized below . strong revenue growth in 2014 , our total net product sales increased by 34 % compared to 2013 , primarily from the growth in sales of xyrem ® ( sodium oxybate ) oral solution and erwinaze ® ( asparaginase erwinia chrysanthemi ) , and from the addition to our product portfolio of defibrotide , marketed under the name defitelio ® ( defibrotide ) in certain countries in europe . xyrem is the only product approved by the united states food and drug administration , or fda , for the treatment of both cataplexy and excessive daytime sleepiness , or eds , in patients with narcolepsy . sales of xyrem increased 37 % in 2014 compared to 2013. erwinaze is a treatment approved in the united states and in certain markets in europe ( where it is marketed as erwinase ® ) for patients with acute lymphoblastic leukemia , or all , who have developed hypersensitivity to e. coli -derived asparaginase . first approved by the fda for administration via intramuscular injection in conjunction with chemotherapy , erwinaze received approval for administration via intravenous infusion in conjunction with chemotherapy in december 2014. sales of erwinaze/erwinase increased 15 % in 2014 compared to 2013. total product sales are expected to increase in 2015 over 2014 , primarily due to anticipated growth in sales of our lead marketed products . expansion of marketed product portfolio we strengthened our commercial portfolio with the addition of defitelio/defibrotide in january 2014 through our acquisition of a controlling interest in gentium . our aggregate acquisition cost for the gentium acquisition to date is $ 994.1 million , comprising cash payments of $ 1,011.2 million , offset by proceeds from the exercise of gentium share options of $ 17.1 million . defitelio was granted marketing authorization under exceptional circumstances by the european commission , or ec , in october 2013 for the treatment of severe hepatic veno-occlusive disease , or vod , in adults and children undergoing hematopoietic stem cell transplantation , or hsct , therapy . during 2014 , defitelio was launched in a number of european countries . we expect to continue to launch the product in additional european countries on a rolling basis in 2015 and are in the process of making pricing and reimbursement submissions with respect to defitelio , and discussing them with regulatory authorities , in those european countries where defitelio is not yet launched , including in countries where pricing and reimbursement approvals are required for launch . defibrotide has been , and continues to be , provided to patients where it is not commercially available through an expanded access treatment protocol that is open under an investigational new drug application , or ind , in the united states and on a named patient basis elsewhere . 79 acquisition of product candidates we have made significant investment in building our product development pipeline . in 2014 , we acquired products and or product candidates in the sleep and hematology/oncology therapeutic areas , where we believe we will be able to leverage our existing specialty commercial expertise and infrastructure , as well as our strong clinical , medical and commercial teams . jzp-110 . in january 2014 , we entered into an asset purchase agreement with aerial biopharma llc , or aerial , to acquire the worldwide development , manufacturing and commercial rights to jzp-110 , other than in certain jurisdictions in asia where sk biopharmaceuticals co. , ltd , or sk , retains rights . jzp-110 is a late-stage investigational compound being developed for potential treatment of eds in patients with narcolepsy and eds in patients with obstructive sleep apnea , or osa . under the agreement , we made an upfront payment of $ 125.0 million to aerial . we also paid a $ 2.0 million milestone to sk on assignment of the jzp-110 rights from aerial to us . we are obligated to make milestone payments , in an aggregate amount of up to $ 270.0 million , based on development , regulatory and sales milestones and to pay tiered royalties from high single digits to mid-teens based on potential future sales of jzp-110 . defibrotide . in august 2014 , we acquired from sigma-tau pharmaceuticals , inc. , or sigma-tau , the rights to defibrotide for the treatment and prevention of vod in north america , central america and south america . story_separator_special_tag we completed enrollment for this study in march 2014 and expect to receive preliminary data in mid-2015 . for 2015 and beyond , we expect that our research and development expenses will increase substantially from historical levels , particularly as we initiate our planned clinical trials and related development work and potentially acquire rights to additional product candidates . in june 2012 , we entered into a credit agreement that provided for $ 475.0 million principal amount of term loans and a $ 100.0 million revolving credit facility . the proceeds from the term loans were used to partially finance the eusa acquisition in june 2012. in june 2013 , we amended the credit agreement to provide for $ 557.2 million principal amount of term loans and a revolving credit facility of $ 200.0 million that replaced the $ 100.0 million revolving credit facility . we used a portion of the proceeds from the new term loans to refinance in full the $ 457.2 million principal amount of term loans outstanding under the credit agreement prior to the amendment . in january 2014 , in connection with the gentium acquisition , we further amended the credit agreement to provide for a tranche of incremental term loans in the aggregate principal amount of $ 350.0 million , a tranche of term loans that refinanced the approximately $ 554.4 million principal amount of term loans outstanding prior to this amendment , and a $ 425.0 million revolving credit facility that replaced the $ 200.0 million revolving credit facility . we used the proceeds from the incremental term loans and $ 300.0 million of loans under the revolving credit facility , together with cash on hand , to purchase gentium ordinary shares and american depository shares , or adss . in august 2014 , we completed a private placement of $ 575.0 million aggregate principal amount of 1.875 % exchangeable senior notes due 2021 , or the 2021 notes , to several investment banks acting as initial purchasers who subsequently resold the 2021 notes to qualified institutional buyers . the net proceeds from this offering were approximately $ 558.9 million , after deducting initial purchasers ' discounts and related offering expenses . we used a portion of the net proceeds from this offering to repay all then outstanding borrowings under the revolving credit facility provided for under our current credit agreement and intend to use the remainder of the net proceeds for general corporate purposes , including potential business development activities . for a more detailed discussion regarding our 2021 notes , see “ liquidity and capital resources ” below . in 2013 , we initiated purchases under a share repurchase program for up to $ 200 million of our ordinary shares . as of december 31 , 2014 , we had spent a total of $ 178.7 million , including brokerage commissions , to repurchase our ordinary shares under this program . over the past two years , we have made targeted investments to strengthen our operational capabilities to support our lead marketed products and product candidates in our primary therapeutic areas . during 2014 , we reorganized our operations in europe to focus on our hematology/oncology therapeutic area following the gentium acquisition and streamlined our u.s. 81 commercial operations to devote more resources to our lead marketed products . in the fourth quarter of 2014 , we entered into an agreement to sell certain products acquired as part of the eusa acquisition and the related business . the sale , subject to certain closing conditions , is expected to close in the first half of 2015. we acquired a manufacturing facility located in italy in the gentium acquisition that produces active pharmaceutical ingredients , including defibrotide , and commenced construction of a manufacturing and development facility in ireland . we anticipate that we will continue to face a number of challenges and risks to our business and our ability to execute our strategy in 2015. for example , while we now have a more diversified product portfolio than in the past , our financial results remain significantly influenced by sales of xyrem , which accounted for 67.0 % of our net product sales in 2014 and 65.8 % of our net product sales in 2013. as a result , we continue to place a high priority on seeking to maintain and increase sales of xyrem in its approved indications , while remaining focused on ensuring the safe and effective use of the product . we are also focusing on the lifecycle management of xyrem , including seeking to enhance and enforce our intellectual property rights and to develop product , service and safety improvements for patients . our ability to maintain or increase xyrem product sales is subject to a number of risks and uncertainties , including those discussed in part i , item 1a “ risk factors ” of this annual report on form 10-k. in particular , five abbreviated new drug applications , or andas , have been filed with the fda by third parties seeking to market generic versions of xyrem , including the most recent in the fourth quarter of 2014. we have initiated lawsuits against all five third parties , and the litigation proceedings are ongoing . we can not predict the timing or outcome of these proceedings . although no trial date has been set in any of the anda suits , we anticipate that trial on some of the patents in the case against the first anda filer , roxane laboratories , inc. , or roxane , could occur as early as the third quarter of 2015. in addition , certain of the anda filers have sought to challenge the validity of our patents covering the distribution system for xyrem by filing petitions for covered business method , or cbm , post-grant patent review and or inter partes review , or ipr , by the patent trial and appeal board , or ptab , of the u.s. patent and trademark office , or uspto .
| results of operations the following table presents revenues and expenses for the years ended december 31 , 2014 , 2013 and 2012 ( amounts in thousands ) : replace_table_token_4_th _ ( 1 ) our financial results include the financial results of the historic gentium business since the closing of the gentium acquisition on january 23 , 2014 . ( 2 ) our financial results include the financial results of the historic azur pharma and eusa pharma businesses since the completion of the azur merger on january 18 , 2012 and the eusa acquisition on june 12 , 2012. the following discussions of our results of operations exclude the results related to the women 's health business sold in 2012 ( see “ income from discontinued operations , net of taxes ” below for more information ) . this business was segregated from continuing operations and reflected as a discontinued operation for the 2012 period . ( 3 ) comparison to prior period is not meaningful . revenues the following table presents product sales , royalties and contract revenues , and total revenues for the years ended december 31 , 2014 , 2013 and 2012 ( amounts in thousands ) : replace_table_token_5_th _ ( 1 ) comparison to prior period is not meaningful . product sales , net xyrem product sales increased in 2014 and 2013 compared to the immediately preceding years , primarily due to higher average net selling prices in the 2014 and 2013 periods and , to a lesser extent , increases in sales volume . price increases in 85 2014 and 2013 were based on market analysis . xyrem product sales volumes increased by 10 % and 12 % in 2014 and 2013 , respectively , compared to the immediately preceding years .
| 4,093 |
we calculate the equity component of exchangeable debt based on the difference between the initial proceeds received from the issuance of the exchangeable debt and the fair value of the liability story_separator_special_tag overview sl green realty corp. , which is referred to as sl green or the company , a maryland corporation , and sl green operating partnership , l.p. , which is referred to as slgop or the operating partnership , a delaware limited partnership , were formed in june 1997 for the purpose of combining the commercial real estate business of s.l . green properties , inc. and its affiliated partnerships and entities . the company is a self-managed real estate investment trust , or reit , with in-house capabilities in property management , acquisitions , financing , development , construction and leasing . unless the context requires otherwise , all references to `` we , '' `` our '' and `` us '' means the company and all entities owned or controlled by the company , including the operating partnership . reckson associates realty corp. , or reckson , and reckson operating partnership , l.p. or rop , are wholly-owned subsidiaries of the operating partnership . the following discussion related to our consolidated financial statements should be read in conjunction with the financial statements appearing in item 8 of this annual report on form 10-k. the new york city commercial real estate market continued to strengthen in 2013 , and we took advantage of this strengthening market in improving occupancies and deploying capital in the borough of manhattan to strategically position the company for future growth . leasing and operating we have historically outperformed the manhattan office market , and did so again in 2013. our manhattan office property occupancy on same-store properties based on leases signed increased to 96.6 % from 95.1 % in the prior year . during 2013 , we signed office leases in manhattan encompassing 5.2 million square feet , of which 4.3 million square feet represented office leases that replaced previously occupied space . our mark-to-market on these 4.3 million square feet of signed manhattan office leases that replaced previously occupied space was 9.5 % for 2013. the highlight of our leasing activity during 2013 was the signing of an agreement extending citigroup 's triple-net lease covering 2,634,670 square feet at 388-390 greenwich street through december 31 , 2035. the agreement includes an option for citigroup to acquire the properties during the period from december 1 , 2017 through december 31 , 2020 for $ 2.0 billion . the mark-to-market based on citigroup 's cash rent in the extension period is 12.8 percent . new leasing activity in manhattan in 2013 totaled 25.7 million square feet , slightly below the ten-year average but higher than 2012. of the total 2013 leasing activity in manhattan , the midtown submarket accounted for approximately 16.0 million square feet , or 62.3 % . midtown 's overall office vacancy increased from 10.3 % at december 31 , 2012 to 11.2 % at december 31 , 2013. however , 1.2 million square feet of new office space was added to the midtown office inventory , with approximately 2.2 million square feet ( 0.6 % of the total 395.3 million square foot manhattan office inventory ) currently under construction and scheduled to be placed in service by 2015 or early 2016. demand for space in certain sub-markets such as midtown south and a lack of new supply created conditions in which asking rents for direct space in midtown south increased during 2013 by 27.3 % to $ 63.67 per square foot . asking rents for direct space in midtown increased during 2013 by 2.6 % to $ 70.54 per square foot and have increased by 10.5 % since the recessionary trough in in the first quarter of 2010. over the same period , net effective rents ( which take into consideration leasing concessions ) have increased by 21.5 % . acquisition and disposition activity sales volume in manhattan in 2013 increased 5.3 % to $ 30.0 billion compared to $ 28.5 billion in 2012 , partly as a result of a flurry of activity in the fourth quarter . nevertheless , consistent with our multi-faceted approach to property acquisitions , we were able to source transactions that provide value enhancement opportunities , including the acquisition of equity interests in six office , retail and multi-family properties during 2013 , representing total investments of $ 0.7 billion . we also took advantage of the improving market conditions and interest by institutions and individuals seeking ownership interests in properties to sell assets , disposing of properties with more limited growth opportunities , and raising efficiently priced capital for reinvestment . during the year , we sold our fee interest in 333 west 34th street , new york , new york , 300 main street , stamford , connecticut , and 44 west 55th street , new york , new york , . debt and preferred equity beginning in 2010 , we saw an increase in opportunities to acquire existing debt and preferred equity positions in high quality manhattan office properties at discounts that enabled us to generate high risk adjusted yields , and offer off-market access to property acquisitions . as 2013 progressed , and the availability of acquiring discounted debt and preferred equity in high quality properties waned , we began to focus on the origination of financings , typically in the form of preferred equity and mezzanine 39 debt , for owners or acquirers seeking higher leverage than was available from traditional lending sources lending at modest leverage levels . traditional sources of junior financings have not yet materialized . this provided us with an opportunity to fill a need for additional debt by providing more modest amounts of leverage . the typical investments made by us during 2013 were to reputable owners or acquirers , and at leverage levels which are senior to sizable equity investments by the sponsors . story_separator_special_tag the difference between the book value of our equity investment on the purchase date and our share of the fair value of the investment 's purchase price is recorded as a purchase price fair value adjustment in our consolidated statements of income . in april 2013 , we recognized a purchase price fair value adjustment of $ ( 2.3 ) million in connection with the consolidation of 16 court street , which was previously accounted for as an investment in unconsolidated joint venture . we allocate the purchase price of real estate to land and building ( inclusive of tenant improvements ) and , if determined to be material , intangibles , such as the value of above- and below-market leases and origination costs associated with the in-place leases . we depreciate the amount allocated to building ( inclusive of tenant improvements ) and other intangible assets over their estimated useful lives , which generally range from three to 40 years and from one to 14 years , respectively . the values of the above- and below-market leases are amortized and recorded as either an increase ( in the case of below-market leases ) or a decrease ( in the case of above-market leases ) to rental income over the remaining term of the associated lease , which generally range from one to 14 years . the value associated with in-place leases is amortized over the expected term of the associated lease , which generally ranges from one to 14 years . if a tenant vacates its space prior to the contractual termination of the lease and no rental payments are being made on the lease , any unamortized balance of the related intangible will be written off . the tenant improvements and origination costs are amortized as an expense over the remaining life of the lease ( or charged against earnings if the lease is terminated prior to its contractual expiration date ) . we assess fair value of the leases based on estimated cash flow projections that utilize appropriate discount and capitalization rates and available market information . estimates of future cash flows are based on a number of factors including the historical operating results , known trends , and market/economic conditions that may affect the property . to the extent acquired leases contain fixed rate renewal options that are below market and determined to be material , we amortize such below market lease value into rental income over the renewal period . investment in unconsolidated joint ventures we account for our investments in unconsolidated joint ventures under the equity method of accounting in cases where we exercise significant influence over , but do not control , these entities and are not considered to be the primary beneficiary . we consolidate those joint ventures that we control or which are vies and where we are considered to be the primary beneficiary . in all these joint ventures , the rights of the joint venture partner are both protective as well as participating . unless we are determined to be the primary beneficiary in a vie , these participating rights preclude us from consolidating these non-vie entities . these investments are recorded initially at cost , as investments in unconsolidated joint ventures , and subsequently adjusted for equity in net income ( loss ) and cash contributions and distributions . equity income ( loss ) from unconsolidated joint ventures is allocated based on our ownership or economic interest in each joint venture . when a capital event ( as defined in each joint venture agreement ) such as a refinancing occurs , if return thresholds are met , future equity income will be allocated at our increased economic interest . we recognize incentive income from unconsolidated real estate joint ventures as income to the extent it is earned and not subject 41 to a clawback feature . distributions we receive from unconsolidated real estate joint ventures in excess of our basis in the investment are recorded as offsets to our investment balance if we remain liable for future obligations of the joint venture or may otherwise be committed to provide future additional financial support . none of the joint venture debt is recourse to us , except for $ 218.4 million which we guarantee at two joint ventures and performance guarantees under master leases at two other joint ventures . see note 6 , `` investments in unconsolidated joint ventures , '' in the accompanying consolidated financial statements . we assess our investments in unconsolidated joint ventures for recoverability , and if it is determined that a loss in value of the investment is other than temporary , we write down the investment to its fair value . we evaluate our equity investments for impairment based on the joint venture 's projected discounted cash flows . during the year ended december 31 , 2011 , we recorded a $ 5.8 million impairment charge on one of our equity investments , which we sold in july 2012. these charges are included in depreciable real estate reserves in the accompanying consolidated statements of income . see note 6 , `` investments in unconsolidated joint ventures , '' in the accompanying consolidated financial statements . we do not believe that the values of any of our equity investments were impaired at december 31 , 2013 . revenue recognition rental revenue is recognized on a straight-line basis over the term of the lease . the excess of rents recognized over amounts contractually due pursuant to the underlying leases are included in deferred rents receivable on the accompanying balance sheets . we establish , on a current basis , an allowance for future potential tenant credit losses , which may occur against this account . the balance reflected on the balance sheet is net of such allowance . interest income on debt and preferred equity investments is recognized over the life of the investment using the effective interest method and recognized on the accrual basis .
| results of operations comparison of the year ended december 31 , 2013 to the year ended december 31 , 2012 the following comparison for the year ended december 31 , 2013 , or 2013 , to the year ended december 31 , 2012 , or 2012 , makes reference to the following : ( i ) the effect of the “ same-store properties , ” which represents all operating properties owned by us in the same manner at january 1 , 2012 and at december 31 , 2013 and totaled 46 of our 49 consolidated operating properties , representing approximately 83.9 % of our share of annualized cash rent , ( ii ) the effect of the “ acquisitions , ” which represents all properties or interests in properties acquired in 2013 and 2012 and all non-same-store properties , including properties deconsolidated during the period , and ( iii ) “ other , ” which represents corporate level items not allocable to specific properties , as well as the service corporation and eemerge inc. any assets sold or held for sale are excluded from the income from continuing operations and from the following discussion . 43 replace_table_token_25_th rental , escalation and reimbursement revenues occupancy in the same-store consolidated properties increased to 91.7 % at december 31 , 2013 as compared to 91.3 % at december 31 , 2012. occupancy for our same-store manhattan consolidated portfolio increased to 94.5 % at december 31 , 2013 as compared to 94.1 % at december 31 , 2012. occupancy for our suburban consolidated portfolio increased to 79.8 % at december 31 , 2013 as compared to 79.6 % at december 31 , 2012. rental revenues depend on our ability to maintain the occupancy rates of currently leased space and to lease currently available space and space available from unscheduled lease terminations .
| 4,094 |
for a further discussion , please see forward looking statements at the beginning of this annual report on form 10-k. our actual results may differ materially from those anticipated in these forward-looking statements as a result of many factors , including those risks inherent with our business as discussed in item 1a risk factors . the following discussion starts with an overview of our business and a discussion of trends , including seasonality , that affect our industry . that is followed by an overview of the critical accounting policies and estimates that we use to prepare our financial statements . next we discuss our results of operations and liquidity and capital resources , including our off-balance sheet transactions and contractual obligations . we conclude with a discussion of our outlook and backlog . introduction primoris is a holding company of various subsidiaries , which form one of the larger publicly traded specialty contractors and infrastructure companies in the united states . serving diverse end-markets , we provide a wide range of construction , fabrication , maintenance , replacement , water and wastewater , and engineering services to major public utilities , petrochemical companies , energy companies , municipalities , state departments of transportation and other customers . we install , replace , repair and rehabilitate natural gas , refined product , water and wastewater pipeline systems ; large diameter gas and liquid pipeline facilities ; and heavy civil projects , earthwork and site development . we also construct mechanical facilities and other structures , including power plants , petrochemical facilities , refineries , water and wastewater treatment facilities and parking structures . finally , we provide specialized process and product engineering services . historically , we have longstanding relationships with major utility , refining , petrochemical , power and engineering companies . we have completed major underground and industrial projects for a number of large natural gas transmission and petrochemical companies in the western united states , as well as significant projects for our engineering customers . we enter into a large number of contracts each year and the projects can vary in length from several weeks , to as long as 48 months for completion on larger projects . although we have not been dependent upon any one customer in any year , a small number of customers tend to constitute a substantial portion of our total revenues . we recognize revenues and profitability on our contracts depending on the type of contract . for our fixed price , or lump sum , contracts , we record revenue as the work progresses on a percentage-of-completion basis which means that we recognize revenue based on the percentage of costs incurred to date in proportion to the total estimated costs expected to complete the contract . fixed price contracts may include retainage provisions under which customers withhold a percentage of the contract price until the project is complete . for our unit price and cost-plus contracts , we recognize revenue as units are completed or services are performed . we report our results in three reporting segments : east construction services ( east ) , west construction services ( west ) and engineering . this reporting structure is focused on the location of the entities performing the work for some end markets we perform the same services in both the east and west segments , while for other end markets , such as poured-in-place parking structures or turn-around services , only one of our segments currently serves the market . the following table shows the approximate percentage of revenues derived from our major end-markets for the years listed : replace_table_token_9_th the east segment provides highway and bridge construction services to public agencies in texas , louisiana and mississippi , and provides services for the construction of energy and petrochemical processing facilities and mine and maintenance services for potash mines . the segment also provides underground pipeline services to utilities and energy companies in texas and louisiana and water and wastewater facility and pipeline construction services primarily in florida and texas . the segment includes construction capabilities for gas plants and the ability to provide turn-around services to refineries . 29 the west segment provides underground construction and maintenance services to utilities and construction services for underground pipeline capital projects . the segment also constructs gas fired power plants and alternative energy facilities as well as other industrial construction , including poured-in-place parking structures . the engineering segment specializes in designing , supplying , and installing high-performance furnaces , heaters , burner management systems , and related combustion and process technologies for clients in the oil refining , petrochemical , and power generation industries . it furnishes turnkey project management with technical expertise and the ability to deliver custom engineering solutions worldwide . the following table shows our major operating subsidiaries and their reporting segment : subsidiary operating segment arb , inc. ( arb ) west construction services arb structures , inc. west construction services q3 contracting , inc. ( q3c ) ; acquired 2012 west construction services rockford corporation ( rockford ) west construction services stellaris , llc . west construction services onquest , inc. engineering onquest , canada , ulc ( born heaters canada , ulc prior to 2013 ) engineering cardinal contractors , inc. east construction services force specialty services , inc. ( fssi ) ; acquired 2013 east construction services james construction group , llc ( jcg ) east construction services sprint pipeline services , l.p. ( sprint ) ; acquired 2012 east construction services silva group ( silva ) ; acquired 2012 east construction services the saxon group ( saxon ) ; acquired 2012 east construction services material trends and uncertainties we generate our revenue from both large and small construction and engineering projects . the award of these contracts is dependent on a number of factors , many of which are not within our control . business in the construction industry is cyclical . story_separator_special_tag in the percentage-of-completion method , estimated revenues and resulting contract income is calculated based on the total costs incurred to date as a percentage of total estimated costs . total estimated costs , and thus contract revenues and income , can be impacted by changes in any of the following : productivity , scheduling , the unit cost of labor , subcontracts , materials and equipment . additionally , external factors such as weather , client needs , client delays in providing permits and approvals , labor availability , governmental regulation and politics may affect the progress of a project 's completion and thus the timing of revenue recognition . if an estimate of total contract cost indicates a loss on a contract , the projected loss is recognized in full at the time of the estimate . in addition , t he company also uses unit-price , time and material , and cost reimbursable plus fee contracts . for these jobs , revenue is recognized based on contractual terms . for example , time and material contract revenues are recognized based on purchasing and employee time records . similarly , unit price contracts recognize revenue based on accomplishment of specific units at a specified unit price . for all of its contracts , the company includes the provision for estimated losses on uncompleted contracts in accrued expenses . the provision for estimated losses on uncompleted contracts was $ 1,392,000 and $ 764,000 for the years ended december 31 , 2013 and 2012 , respectively . changes in job performance , job conditions and estimated profitability , including those arising from final contract settlements , may result in revisions to costs and income . these revisions are recognized in the period in which the revisions are identified . claims are included in revenues when realization is probable and amounts can be reliably determined . revenues in excess of contract costs incurred on claims are recognized only when the amounts have been paid . 31 the caption costs and estimated earnings in excess of billings on our balance sheets represents unbilled receivables which arise when revenues have been recorded but the amount can not be billed under the terms of the contract until a later date . balances may represent : ( a ) unbilled amounts arising from the use of the percentage-of-completion method of accounting , ( b ) incurred costs to be billed under cost reimbursement type contracts , ( c ) amounts arising from routine lags in billing , or ( d ) the revenue associated with unapproved change orders or claims when realization is probable and amounts can be reliably determined . for those contracts in which billings exceed contract revenues recognized to date , excesses are included in the caption billings in excess of costs and estimated earnings . the company considers unapproved change orders to be contract variations for which primoris has customer approval for a change of scope but a price change associated with the scope change has not yet been agreed upon . costs associated with unapproved change orders are included in the estimated cost to complete the contracts and are treated as project costs as incurred . the company recognizes revenue equal to costs incurred on unapproved change orders when realization of price approval is probable . unapproved change orders involve the use of estimates , and it is reasonably possible that revisions to the estimated costs and recoverable amounts may be required in future reporting periods to reflect changes in estimates or final agreements with customers . the company considers claims to be amounts primoris seeks , or will seek , to collect from customers or others for customer-caused changes in contract specifications or design , or other customer-related causes of unanticipated additional contract costs on which there is no agreement with customers on both scope and price changes . revenue from claims is recognized when agreement is reached with customers as to the value of the claims , which in some instances may not occur until after completion of work under the contract . costs associated with claims are included in the estimated costs to complete the contracts and are treated as project costs when incurred . in accordance with applicable terms of construction contracts , certain retainage amounts may be withheld by customers until completion and acceptance of the project . final payments of the majority of retainage may not be made until the following operating cycle . valuation of acquired businesses we use the fair value of the consideration paid and the fair value of the assets acquired and liabilities assumed to account for the purchase price of businesses . the determination of fair value requires estimates and judgments of future cash flow expectations for the assignment of the fair values to the identifiable tangible and intangible assets . identifiable tangible assets . significant identifiable tangible assets acquired would include accounts receivable , costs and earnings in excess of billings for projects , inventory and fixed assets , generally consisting of construction equipment , for each acquisition . we determine the fair value of these assets on the acquisition date . for current assets and current liabilities of an acquisition , the company will evaluate whether the book value is equivalent to fair value due to their short term nature . we estimate the fair value of fixed assets using a market approach , based on comparable market values for similar equipment of similar condition and age . identifiable intangible assets . when necessary , we use the assistance of an independent third party valuation specialist to determine the fair value of the intangible assets acquired for the acquisitions . a liability for contingent consideration based on future earnings is estimated at its fair value at the date of acquisition , with subsequent changes in fair value recorded in earnings as a gain or loss . fair value is estimated as of the acquisition date using estimated earnout payments based on management 's best estimate .
| results of operations revenue , gross profit , operating income and net income for the years ended december 31 , 2013 , 2012 and 2011 were as follows : replace_table_token_11_th consolidated results in 2012 , we acquired sprint , silva , saxon and q3c , and in 2013 , we acquired fssi . combined , these companies are referred to as acquired companies in the following discussion . revenues 2013 and 2012 revenue increased by $ 402.5 million , or 26.1 % , in 2013 compared to 2012 as a result of both acquisitive and organic growth . revenues from the acquired companies were $ 344.8 million in 2013 , an increase of $ 152.4 , or 79.2 % , from the $ 192.4 million in 2012. the increase reflects the full year results for q3c , sprint , silva and saxon which were acquired at different times in 2012 and a partial year for fssi acquired in 2013. organically , revenues at the west segment increased by $ 163.2 million , or 19.6 % , revenues at the east segment increased by $ 45.0 million , or 6.8 % , and revenues decreased at the engineering segment by $ 1.6 million , or 3.5 % , all compared to 2012. in 2013 , the east segment represented 38.5 % of total revenues , the west segment represented 59.2 % of total revenues and the engineering segment represented 2.3 % of total revenues . in 2012 , the east segment represented 43.0 % of total revenues , the west segment represented 54.0 % of total revenues and the engineering segment represented 3.0 % of total revenues . 2012 and 2011 revenue in 2012 grew to $ 1.5 billion , an increase of $ 81 million , or 5.6 % from the prior year . the acquired companies contributed $ 113 million , or 7.3 % of the total 2012 revenues . the decline in organic revenues of $ 32 million reflects the impact of the el paso ruby contract ( ruby ) on 2011 revenues .
| 4,095 |
after the purchase of a property , lease commissions incurred to extend in-place leases or generate new leases are added to deferred lease costs . deferred lease costs are included as a component of other assets and are amortized on a straight-line basis over the terms of their respective agreements . deferred financing costs are shown as a direct reduction from the related debt liability . the trust amortizes deferred financing costs as a component of interest expense over the terms of the related borrowings on a straight-line basis . derivative instruments when the company has derivative instruments embedded in other contracts , it records them either as an asset or a liability measured at their fair value unless they qualify for a normal purchase or normal sales exception . when specific hedge story_separator_special_tag the following discussion should be read in conjunction with our financial statements , including the notes to those statements , included in this report , and the section entitled “ cautionary statement regarding forward-looking statements ” in this report . as discussed in more detail in the section entitled “ cautionary statement regarding forward-looking statements , ” this discussion contains forward-looking statements which involve risks and uncertainties . our actual results may differ materially from the results discussed in the forward-looking statements . factors that might cause those differences include those discussed in “ part i , item 1. business ” and “ part i , item 1a . risk factors ” and elsewhere in this report . overview we are a self-managed healthcare real estate company organized in april 2013 to acquire , selectively develop , own , and manage healthcare properties that are leased to physicians , hospitals , and healthcare delivery systems . we invest in real estate that is integral to providing high quality healthcare services . our properties are typically located on a campus with a hospital or other healthcare facilities or strategically located and affiliated with a hospital or other healthcare facilities . we believe the impact of government programs and continuing trends in the healthcare industry create attractive opportunities for us to invest in healthcare related real estate . in particular , we believe the demand for healthcare will continue to increase as a result of the aging population as older persons generally utilize healthcare services at a rate well in excess of younger people . our management team has significant public healthcare reit experience and has long-established relationships with physicians , hospitals , and healthcare delivery system decision makers that we believe will provide quality investment and growth opportunities . our principal investments include medical office buildings , outpatient treatment facilities , acute and post-acute care hospitals , as well as other real estate integral to healthcare providers . during 2017 , we saw an increased level of competition for healthcare properties and , as a result , an increase in prices paid for them . in turn , this has had a negative impact on the initial cash yields on potential asset acquisitions . we seek to invest in stabilized medical facility assets with initial cash yields of 5.0 % to 9.0 % , although we invested in certain medical facility assets in 2017 with anticipated initial cash yields below 5.0 % and we may invest in other medical facility assets with initial cash yields outside of this range . we seek to generate attractive risk-adjusted returns for our shareholders through a combination of stable and increasing dividends and potential long-term appreciation in the value of our properties and our common shares . we have grown our portfolio of gross real estate investments from approximately $ 124 million at the time of our ipo in july 2013 to approximately $ 4.3 billion as of december 31 , 2017 . since the date of our ipo through to december 31 , 2017 , our compounded annual growth rate was 120.0 % . while we expect to continue to grow through property acquisitions and investments as our asset base continues to increase , our growth rate decelerated in 2017 and we expect our annual growth rate to decelerate in the future . as of december 31 , 2017 , our portfolio consisted of 280 healthcare properties located in 30 states with approximately 13,996,802 net leasable square feet , which were approximately 96.6 % leased with a weighted average remaining lease term of approximately 8.3 years . as of december 31 , 2017 , approximately 85.1 % of the net leasable square footage of our portfolio was either on campus with a hospital or other healthcare facility or strategically located and affiliated with a hospital or other healthcare facility . 43 as of december 31 , 2017 , leases representing a percentage of our portfolio on the basis of leasable square feet will expire as follows : replace_table_token_9_th ( 1 ) “ mtm ” means month-to-month . ( 2 ) includes 4 leases which expired on december 31 , 2017 , representing 0.1 % of portfolio leasable square feet . we receive a cash rental stream from these healthcare providers under our leases . approximately 90.8 % of the annualized base rent payments from our properties as of december 31 , 2017 are from absolute and triple-net leases , pursuant to which the tenants are responsible for all operating expenses relating to the property , including but not limited to real estate taxes , utilities , property insurance , routine maintenance and repairs , and property management . this structure helps insulate us from increases in certain operating expenses and provides more predictable cash flow . approximately 7.0 % of the annualized base rent payments from our properties as of december 31 , 2017 are from modified gross base stop leases which allow us to pass through certain increases in future operating expenses ( e.g. , property tax and insurance ) to tenants for reimbursement , thus protecting us from increases in such operating expenses . we seek to structure our triple-net leases to generate attractive returns on a long-term basis . story_separator_special_tag no assurance can be made , however , that any or all of the properties will be sold , that the company will receive the anticipated consideration for the sale of any or all of the properties , or as to the timing of any such sale or sales . 45 components of our revenues , expenses , and cash flow revenues revenues consist primarily of the rental revenues and property operating expense recoveries we collect from tenants pursuant to our leases . additionally , we recognize certain cash and non-cash revenues . these cash and non-cash revenues are highlighted below . rental revenues . rental revenues represent rent under existing leases that is paid by our tenants , straight-lining of contractual rents , and below-market lease amortization reduced by lease inducements and above-market lease amortization . expense recoveries . certain of our leases require our tenants to make estimated payments to us to cover their proportional share of operating expenses , including but not limited to real estate taxes , property insurance , routine maintenance and repairs , utilities , and property management expenses . we collect these estimated expenses and are reimbursed by our tenants for any actual expenses in excess of our estimates or reimburse tenants if our collected estimates exceed our actual operating expenses . the net reimbursed operating expenses are included in revenues as expense recoveries . we have certain tenants with absolute net leases . under these lease agreements , the tenant is responsible for operating and building expenses . for absolute net leases , we do not recognize operating expense or expense recoveries . interest income on real estate loans and other . represents interest income on mezzanine loans , term loans , notes receivable , income generated on tenant improvements , changes in the fair value of derivative liabilities , and other . interest income on the loans are recorded as earned based on the terms of the loans subject to evaluation of collectability risks . expenses expenses consist primarily of interest expense , general and administrative costs associated with operating our properties , operating expenses of our properties , depreciation and amortization , and costs we incur to acquire properties . interest expense . we recognize the interest expense we incur on our borrowings as interest expense . additionally , we incur amortization expense for charges such as legal fees , commitment fees , and arrangement fees that reflect costs incurred with arranging certain debt financings . we generally recognize these costs over the term of the respective debt instrument for which the costs were incurred as a component of interest expense . general and administrative . general and administrative expenses include certain expenses such as compensation , accounting , legal , and other professional fees as well as certain other administrative and travel costs , and expenses related to bank charges , franchise taxes , corporate filing fees , exchange listing fees , officer and trustee insurance costs , and other costs associated with being a public company . operating expenses . operating expenses include property operating expenses such as real estate taxes , property insurance , routine maintenance and repairs , utilities , and third party property management expenses , some of which are reimbursed to us by tenants under the terms of triple net leases . depreciation and amortization . we incur depreciation and amortization expense on all of our long-lived assets . this non-cash expense is designed under generally accepted accounting principles , or gaap , to reflect the economic useful lives of our assets . acquisition expenses . acquisition costs are costs we incur in pursuing and closing property acquisitions accounted for as business combinations . these costs include legal , accounting , valuation , other professional or consulting fees , and the compensation of certain employees who dedicate substantially all of their time to acquisition related job functions . we account for acquisition-related costs as expenses in the period in which the costs are incurred and the services are received . equity in income of unconsolidated entities . we recognize our 40 % share of earnings and losses from the entity that owns the land under crescent city surgical centre . during 2017 we had a 43 % voting interest in the entity desert cove mob , of which we bought the remaining interest on december 18 , 2017. the company reports investments in unconsolidated entities over whose operating and financial policies it has the ability to exercise significant influence under the equity method of accounting . 46 gain or loss on sale of investment properties . upon the sale of investment properties , gains or losses are recorded based upon the difference between the disposal sale price and the net book value of the asset . cash flow cash flows from operating activities . cash flows from operating activities are derived largely from net income by adjusting our revenues for those amounts not collected in cash during the period in which the revenue is recognized and for cash collected that was billed in prior periods or will be billed in future periods . net income is further adjusted by adding back expenses charged in the period that is not paid for in cash during the same period . we expect to make our distributions based largely from cash provided by operations . cash flows from investing activities . cash flows from investing activities consist of cash that is used during a period for making new investments and capital expenditures , offset by cash provided from sales of real estate investments . cash flows from financing activities . cash flows from financing activities consist of cash we receive from debt and equity financings . this cash provides the primary basis for investments in new properties and capital expenditures . while we may invest a portion of our cash from operations into new investments , as a result of the distribution requirements to maintain our reit status , it is likely that additional debt or equity financings will finance the majority of our investment activity .
| results of operations year ended december 31 , 2017 compared to the year ended december 31 , 2016 . the following table summarizes our results of operations for the years ended december 31 , 2017 and 2016 ( in thousands ) : replace_table_token_11_th nm = not meaningful revenues total revenues increase d $ 102.6 million , or 42.5 % , for the year ended december 31 , 2017 as compared to the year ended december 31 , 2016 . an analysis of selected revenues follows . rental revenues . rental revenues increase d $ 73.4 million , or 39.4 % , from $ 186.3 million for the year ended december 31 , 2016 to $ 259.7 million for the year ended december 31 , 2017 . the increase in rental revenues primarily resulted 47 from our 2017 and 2016 acquisitions which resulted in additional rental revenue of $ 35.4 million and $ 48.9 million , respectively . revenues for the year ended december 31 , 2017 were partially offset by declines in rental income recognized at the kennewick medical office building located in kennewick , washington ( the “ kennewick mob ” ) of $ 7.4 million and at certain of our buildings formerly occupied by foundation healthcare of $ 2.7 million . expense recoveries . expense recoveries increase d $ 29.6 million , or 64.4 % , for the year ended december 31 , 2017 as compared to the year ended december 31 , 2016 . the increase in expense recoveries primarily resulted from our 2017 and 2016 acquisitions which resulted in additional expense recoveries of $ 12.1 million and $ 16.7 million , respectively . interest income on real estate loans and other . interest income on real estate loans and other decrease d $ 0.4 million for the year ended december 31 , 2017 as compared to the year ended december 31 , 2016 .
| 4,096 |
overview we are a fabless semiconductor company that designs , develops and markets very fast static random access memories , or srams , and low latency dynamic random access memories , or lldrams , primarily for the networking and telecommunications markets . we are subject to the highly cyclical nature of the semiconductor industry , which has experienced significant fluctuations , often in connection with fluctuations in demand for the products in which semiconductor devices are used . beginning in fiscal 2001 , the networking and telecommunications markets experienced an extended period of severe contraction , during which our operating results sharply declined . between fiscal 2004 and fiscal 2006 , demand for networking and telecommunications equipment recovered . during the first three quarters of fiscal 2007 , demand for such equipment accelerated and , as a result , our operating results improved . in the fourth quarter of fiscal 2007 and the first quarter of fiscal 2008 , revenues again declined due , in part , to the implementation of a “ lean manufacturing ” program by our largest customer , 30 cisco systems . our revenues have been substantially impacted by the fluctuations in sales to cisco systems , and we expect that future direct and indirect sales to cisco systems will continue to fluctuate significantly on a quarterly basis . the worldwide financial crisis and the resulting economic impact on the end markets we serve adversely impacted our financial results since the second half of fiscal 2009 , and we expect that the unsettled global economic environment will continue to affect our operating results in future periods . however , with no debt , substantial liquidity and a history of positive cash flows from operations , we believe we are in a better financial position than many other companies of our size . revenues . our revenues are derived primarily from sales of our very fast sram products . sales to networking and telecommunications oems accounted for 75 % to 80 % of our net revenues during our last three fiscal years . we also sell our products to oems that manufacture products for defense applications such as radar and guidance systems , for professional audio applications such as sound mixing systems , for test and measurement applications such as high-speed testers , for automotive applications such as smart cruise control and voice recognition systems , and for medical applications such as ultrasound and cat scan equipment . as is typical in the semiconductor industry , the selling prices of our products generally decline over the life of the product . our ability to increase net revenues , therefore , is dependent upon our ability to increase unit sales volumes of existing products and to introduce and sell new products with higher average selling prices in quantities sufficient to compensate for the anticipated declines in selling prices of our more mature products . although we expect the average selling prices of individual products to decline over time , we believe that , over the next several quarters , our overall average selling prices will increase due to a continuing shift in product mix to a higher percentage of higher price , higher density products . our ability to increase unit sales volumes is dependent primarily upon increases in customer demand but , particularly in periods of increasing demand , can also be affected by our ability to increase production through the availability of increased wafer fabrication capacity from tsmc and powerchip , our wafer suppliers , and our ability to increase the number of good integrated circuit die produced from each wafer through die size reductions and yield enhancement activities . we may experience fluctuations in quarterly net revenues for a number of reasons . historically , orders on hand at the beginning of each quarter are insufficient to meet our revenue objectives for that quarter and are generally cancelable up to 30 days prior to scheduled delivery . accordingly , we depend on obtaining and shipping orders in the same quarter to achieve our revenue objectives . in addition , the timing of product releases , purchase orders and product availability could result in significant product shipments at the end of a quarter . failure to ship these products by the end of the quarter may adversely affect our operating results . furthermore , our customers may delay scheduled delivery dates and or cancel orders within specified timeframes without significant penalty . we sell our products through our direct sales force , international and domestic sales representatives and distributors . revenues from product sales , except for sales to distributors , are generally recognized upon shipment , net of sales returns and allowances . sales to consignment warehouses , who purchase products from us for use by contract manufacturers , are recorded upon delivery to the contract manufacturer . sales to distributors are recorded as deferred revenues for financial reporting purposes and recognized as revenues when the products are resold by the distributors to the oem . sales to distributors are made under agreements allowing for returns or credits under certain circumstances . we therefore defer recognition of revenue on sales to distributors until products are resold by the distributor . historically , a small number of oem customers have accounted for a substantial portion of our net revenues , and we expect that significant customer concentration will continue for the foreseeable future . many of our oems use contract manufacturers to manufacture their equipment . accordingly , a significant percentage of our net revenues is derived from sales to these contract manufacturers and to consignment warehouses . in addition , a significant portion of our sales are made to foreign and domestic distributors who resell our products to oems , as well as their contract manufacturers . direct sales to contract manufacturers and consignment warehouses accounted for 45.1 % , 39.5 % and 39.2 % of our net revenues for fiscal 2012 , 2011 and 2010 , respectively . story_separator_special_tag the acquisition resulted in a bargain purchase as sony had been incurring significant losses on an annual basis , had a minimal product offering , had only one customer and declining annual revenues at the time of the acquisition and was therefore motivated to sell the assets of its sram product line . we adopted authoritative guidance for business combinations as a result of this acquisition . the acquisition has been accounted for as a purchase under authoritative guidance for business combinations . acquisition related costs of approximately $ 533,000 incurred in connection with this acquisition have been expensed in accordance with the authoritative guidance and are included in selling , general and administrative expenses in the consolidated statement of operations for the year ended march 31 , 2010. contingent consideration was recognized at the date of the acquisition and recorded at its fair value . changes to the fair value of the contingent consideration subsequent to september 30 , 2009 have been recorded in general and administrative expense and amounted to $ 105,000 , $ 64,000 and $ 47,000 in fiscal 2010 , 2011 and 2012 , respectively . the purchase price of the acquisition has been preliminarily allocated to the net tangible and intangible assets acquired , with the excess of the fair value of assets acquired over the purchase price recorded as a bargain purchase gain . the results of operations and estimated fair value of assets acquired and liabilities assumed were included in our consolidated financial statements beginning august 29 , 2009. the total purchase consideration was approximately $ 7.1 million in cash , of which approximately $ 5.2 million was paid at the closing , $ 1.2 million was paid in october 2009 following a post-closing adjustment to reflect actual product inventory on hand at the closing and $ 727,000 consisted of contingent consideration that was payable on the basis of sales of certain acquired sram products over an eight quarter period commencing with the quarter ended september 30 , 2009 , the quarter in which we first derived revenue from shipments of such products . the allocation of the purchase price to acquired tangible and identifiable intangible assets was based on their estimated fair values at the date of acquisition . prior to the closing of the acquisition , there were no material relationships between us and sony or any related parties or affiliates of sony . 33 story_separator_special_tag at approximately $ 604,000 that were acquired in the sony acquisition and are being amortized over four quarters . cost of revenues included stock-based compensation expense of $ 300,000 and $ 291,000 , respectively , in fiscal 2011 and fiscal 2010. gross profit . gross profit increased by 53.2 % from $ 29.2 million in fiscal 2010 to $ 44.8 in fiscal 2011. gross margin increased from 43.2 % in fiscal 2010 to 45.8 % in fiscal 2011. the increase in gross profit was primarily related to the increased net revenues.the increase in gross margin was primarily related to a shift in product mix to a higher percentage of higher density , higher margin products , partially offset by a reduction in the percentage of sales of products for military applications and increased depreciation and amortization expense related to assets acquired from sony . research and development expenses . research and development expenses increased 17.2 % from $ 9.1 million in fiscal 2010 to $ 10.6 million in fiscal 2011. this increase was primarily due to increases in payroll related expenses of $ 695,000 , facility related expenses of $ 241,000 and lesser increases in software maintenance expense , stock-based compensation expense and depreciation expense . the increase in payroll expenses was related to increases in headcount to support our low latency dram project and various high speed sram projects . research and development expenses included stock-based compensation expense of $ 834,000 and $ 686,000 , respectively , in fiscal 2011 and fiscal 2010. selling , general and administrative expenses . selling , general and administrative expenses increased 12.5 % from $ 9.5 million in fiscal 2010 to $ 10.7 million in fiscal 2011. this increase was primarily related to increases of $ 710,000 in independent sales representative commissions , $ 521,000 in payroll related expenses and a smaller increase in facility related expenses , partially offset by a decrease in outside consulting expenses . selling , general and administrative expenses in fiscal 2010 included $ 533,000 in legal and accounting fees and changes to the fair value of the contingent consideration related to the sony acquisition , compared to $ 64,000 in such acquisition related expenses in fiscal 2011. stock-based compensation expense of $ 578,000 and $ 502,000 were included in selling , general and administrative expenses in fiscal 2011 and fiscal 2010 , respectively . interest and other income ( expense ) , net . interest and other income ( expense ) , net decreased 76.5 % from $ 2.0 million in fiscal 2010 to $ 461,000 in fiscal 2011. this decrease was primarily the result of a $ 1.1 million bargain purchase gain resulting from our acquisition of the sony sram memory device product line in the quarter ended september 30 , 2009 , and decreases in interest income due to lower interest rates received on our cash , short-term and long-term investments . in addition , we recorded an exchange loss of $ 212,000 in fiscal 2011 compared to an exchange loss of $ 29,000 in fiscal 2010 , related to our taiwan branch operations . provision for income taxes . the provision for income taxes increased from $ 2.2 million in fiscal 2010 to $ 5.0 million in fiscal 2011. this increase was due to the increased pre-tax income and changes in the relative mix of income within operating jurisdictions in fiscal 2011 . 35 net income . net income increased 81.8 % from $ 10.4 million in fiscal 2010 to $ 18.9 million in fiscal 2011. this increase was primarily due to the increased net revenues and changes in operating expenses and gross profit discussed above .
| results of operations the following table sets forth statement of operations data as a percentage of net revenues for the periods indicated : replace_table_token_8_th fiscal year ended march 31 , 2012 compared to fiscal year ended march 31 , 2011 net revenues . net revenues decreased by 15.6 % from $ 97.8 million in fiscal 2011 to $ 82.5 million in fiscal 2012 largely as a result of excess inventories accumulated by our customers in fiscal 2011 and drawn down in fiscal 2012. direct and indirect sales to cisco systems , our largest customer , decreased by $ 2.8 million from $ 36.2 million in fiscal 2011 to $ 33.4 million in fiscal 2012. net revenues in fiscal 2012 included $ 20.7 million from the sale to cisco of products acquired in our august 28 , 2009 acquisition of the sony sram memory device product line , compared to $ 14.6 million in fiscal 2011. shipments of our sigmaquad product line accounted for 34.5 % of total shipments in fiscal 2012 compared to 31.7 % of total shipments in fiscal 2011. we believe net revenues in the third and fourth quarters of fiscal 2012 were negatively impacted by uncertainty regarding the outcome of our pending patent litigation with cypress semiconductor and that this uncertainty will continue to affect our revenues over the next several quarters . cost of revenues . cost of revenues decreased by 13.4 % from $ 53.0 million in fiscal 2011 to $ 45.9 million in fiscal 2012. this decrease was primarily due to the decrease in net revenues , partially offset by increases in manufacturing overhead expenses as we prepared to support expected increases in the production levels of new and existing products , including our low latency drams .
| 4,097 |
in some cases , forward-looking statements can be identified by the use of words such as `` may , `` `` will , `` `` expects , `` `` believes , `` `` intends , `` `` plans , `` `` anticipates , `` `` estimates , `` `` projects , `` `` potential , `` or `` continue `` or the negative thereof or other comparable terminology . in addition , any statements that refer to projections of our future financial performance , our anticipated growth and trends in our businesses , and other characterizations of future events or circumstances are forward-looking statements . readers are cautioned that these forward-looking statements are only predictions and are subject to risks , uncertainties , and assumptions that are difficult to predict , including those identified in the risk factors discussed in item 1a , in the discussion below , as well as in other sections of this annual report on form 10-k. therefore , actual results may differ materially and adversely from those expressed in any forward-looking statements . all forward-looking statements and reasons why results may differ included in this report are made as of the date hereof , and we assume no obligation to update these forward-looking statements or reasons why actual results might differ . overview we are a leading global provider of broadband communications access platforms , systems and software for fiber- and copper-based network architectures and a pioneer in software defined access that enable csps to transform their networks and enhance how they connect to their residential and business subscribers . we enable csps to provide a wide range of revenue-generating services , from basic voice and data to advanced broadband services , over legacy and next-generation access networks . we focus solely on csp access networks , the portion of the network that governs available bandwidth and determines the range and quality of services that can be offered to subscribers . we develop and sell carrier-class hardware and cloud products that are designed to enhance and transform csp access networks to meet the changing demands of subscribers rapidly and cost-effectively . our most advanced systems operate on axos , a network operating system and software platform built for the specific needs of the access network that allows for all software functions in the access network to be developed and run without dependence on underlying hardware and associated silicon chipsets . we market our access systems and related software to csps globally through our direct sales force as well as a limited number of resellers . as of december 31 , 2016 , over 23 million ports of the calix portfolio have been deployed at a growing number of csps worldwide . our customers include many of the world 's largest csps . in addition , we have enabled over 1,300 customers to deploy gigabit passive optical network , active ethernet and point-to-point ethernet fiber access networks . our revenue increased to $ 458.8 million for 2016 from $ 407.5 million for 2015 and $ 401.2 million for 2014 , respectively . our revenue levels and continued revenue growth will depend on our ability to continue to sell our access systems and software to existing customers and to attract new customers , particularly larger csps , globally . since 2015 , we have seen increased market demand for turnkey solutions that include professional services together with the supply of equipment and materials , including a project we commenced in 2015 with one of our existing customers . we believe that these services enable us to offer broader solutions to meet customer and market demand and support our growth initiatives . during 2016 , we continued to ramp up our services operations for this project along with other professional services projects . revenue for such projects is generally recognized only when project requirements are completed , typically over longer periods depending on the nature and scope of the project . similarly , some of the costs incurred by us for such projects , including labor and related costs , are deferred and recognized to cost of revenue when the associated revenue is recognized . revenue fluctuations result from many factors , including : increases or decreases in customer orders for our products and services , large customer purchase agreements with delayed revenue recognition , varying budget cycles and seasonal buying patterns of our customers . more specifically , our customers tend to spend less in the first fiscal quarter as they are finalizing their annual budgets , and in certain regions , customers are also challenged by winter weather conditions that inhibit fiber deployment in outside plants . our revenue levels are also dependent upon our customers ' timing of purchases and capital expenditure plans , including expenditure plans for turnkey solutions projects , which are generally non-recurring in nature . as of december 31 , 2016 , our deferred revenue of $ 48.1 million primarily included extended warranty services contracts that are recognized ratably over the period during which the services are to be performed , as well as those relating to turnkey projects that are recognized only upon acceptance by customers . the timing of recognition of deferred revenue may cause significant fluctuations in our revenue and operating results from period to period . cost of revenue is strongly correlated to revenue and tends to fluctuate from all of the above factors that could impact revenue . story_separator_special_tag we believe the following critical accounting policies affect our more significant judgments and estimates used in the preparation of our financial statements . revenue recognition we derive revenue primarily from the sale of hardware products and related software . revenue is recognized when all of the following criteria have been met : persuasive evidence of an arrangement exists . we generally rely upon sales agreements and customer purchase orders as evidence of an arrangement . delivery has occurred . we use the shipping terms of the arrangement or evidence of customer acceptance to verify delivery or performance . sales price is fixed or determinable . we assess whether the sales price is fixed or determinable based on the payment terms and whether the sales price is subject to refund or adjustment . payment terms to customers can range from net 30 to net 120 days . collectability is reasonably assured . we assess collectability based primarily on creditworthiness of customers and their payment histories . revenue from installation and training services is recognized as the services are completed . post-sales software support revenue and extended warranty services revenue are deferred and recognized ratably over the period during which the services are to be performed . in instances where substantive acceptance provisions are specified in the customer agreement , revenue is deferred until all acceptance criteria have been met . from time to time , we offer customers sales incentives , which include volume rebates and discounts . these amounts are estimated on a quarterly basis and recorded net of revenue . we enter into arrangements with certain of our customers who receive government supported loans and grants from the rus to finance capital spending . under the terms of an rus equipment contract that includes installation services , the customer does not take possession and control and title does not pass until formal acceptance is obtained from the customer . under this type of arrangement , we do not recognize revenue until we have received formal acceptance from the customer . for rus arrangements that do not involve installation services , we recognize revenue when all of the revenue recognition criteria as described above have been met . 38 our products contain both software and non-software components that function together to deliver the products ' essential functionality . when we enter into sales arrangements that consist of multiple deliverables of our product and service offerings , we allocate the total consideration of the arrangement to each separable deliverable based on their relative selling price . we limit the amount allocable to delivered elements to the amount that is not contingent upon the delivery of additional items or meeting specified performance conditions , and we recognize revenue on each deliverable in accordance with our revenue policy . the determination of selling price for each deliverable is based on a selling price hierarchy , which is vendor-specific objective evidence ( `` vsoe '' ) if available , third-party evidence ( `` tpe '' ) if vsoe is not available , or estimated selling price ( `` esp '' ) if neither vsoe nor tpe is available . vsoe of selling price is based on the price charged when the element is sold separately . in determining vsoe , we require that a substantial majority of the selling prices of an element fall within a narrow range when each element is sold separately . we have established vsoe for our training and post-sales software support services based on the normal pricing practices of these services when sold separately . tpe of selling price is established by evaluating whether there are similar competitor products or services that are sold in stand-alone sales transaction to similarly situated customers . generally , our marketing strategy differs from that of our peers and our offerings contain a significant level of customization and differentiation such that the comparable pricing of products with similar functionality can not be obtained . additionally , as we are unable to reliably determine what similar competitor products ' selling prices are on a stand-alone basis , we are not typically able to determine tpe . esp is established considering multiple factors including , but not limited to geographies market conditions , competitive landscape , internal costs , gross margin objectives , characteristics of targeted customers and pricing practices . the determination of esp is made through consultation with and formal approval by management , taking into consideration the go-to-market strategy . stock-based compensation stock-based awards are recorded at fair value as of the grant date and recognized to expense over the employee 's requisite service period ( generally the vesting period ) , which we have elected to amortize on a straight-line basis . we value restricted stock units ( `` rsus '' ) and restricted stock awards ( `` rsas '' ) at the closing market price of our common stock on the date of grant . stock-based compensation expense associated with performance restricted stock units ( `` prsus '' ) with graded vesting features and which contain both a performance and a service condition is measured based on the closing market price of our common stock on the date of grant , and is recognized , net of forfeitures , as expense over the requisite service period using the graded vesting attribution method . compensation expense is only recognized if we have determined that it is probable that the performance condition will be met . we reassess the probability of vesting at each reporting period and adjusts compensation expense based on this probability assessment . the fair value of prsus with a market condition is estimated on the date of grant , using a monte carlo simulation model to estimate the total return ranking of our common stock in relation to the peer group over each performance period . compensation cost on prsus with a market condition is not adjusted for subsequent changes in the company 's stock performance or the level of ultimate vesting .
| results of operations for years ended december 31 , 2016 , 2015 and 2014 revenue the following table sets forth our revenue ( in thousands , except for percentages ) : replace_table_token_4_th our revenue is principally derived in the united states . during 2016 , 2015 and 2014 , revenue generated in the united states represented approximately 91 % , 88 % and 88 % of our total revenue , respectively . 2016 compared to 2015 : the increase in revenue during 2016 compared with 2015 resulted from stronger bookings and shipments as customer demand increased . this was led by higher demand from our larger domestic customers for both products and services with the increase in services associated with our turnkey network improvement projects . the increase in revenue was partially offset by lower demand from our international markets and lower revenue derived from contracts funded by the broadband stimulus programs under the arra as we completed and closed our existing contracts . the extended date for completion of projects funded under the broadband initiatives program , which is administered by the rus , ended on july 31 , 2015. during the year ended 2016 , revenue generated in the united states represented approximately $ 415.6 million or 91 % of our total revenue . international revenue represented approximately $ 43.2 million or 9 % of total revenue . we expect overall revenue to grow as we increase our focus on key customer accounts , new customer opportunities and seek to expand our international markets . we had two customers that each accounted for more than 10 % of our total revenue in 2016 and one of these customers accounted for more than 10 % of our total revenue in 2015 and 2014 .
| 4,098 |
the shares of vca common stock were valued at $ 22.18 per share , which was based on the daily volume weighted average closing sales price of the vca common stock for the 10 consecutive trading days ending on the trading day immediately preceding the acquisition . b. related party vendors frank reddick joined our company as a story_separator_special_tag the following discussion should be read in conjunction with our consolidated financial statements provided under part ii , item 8 of this annual report on form 10-k. we have included herein statements that constitute forward-looking statements within the meaning of the private securities litigation reform act of 1995. we generally identify forward-looking statements in this report using words like believe , intend , seek , expect , estimate , may , plan , should plan , project , contemplate , anticipate , predict , potential , continue , or similar expressions . you may find some of these statements below and elsewhere in this report . these forward-looking statements are not historical facts and are inherently uncertain and outside of our control . any or all of our forward-looking statements in this report may turn out to be wrong . they can be affected by inaccurate assumptions we might make or by known or unknown risks and uncertainties . many factors mentioned in our discussion in this report will be important in determining future results . consequently , no forward-looking statement can be guaranteed . actual future results may vary materially . factors that may result in these forward-looking statements in being different than reflected in this report are described throughout this annual report and particularly in risk factors part i , item 1a of this annual report on form 10-k. the forward-looking information set forth in this annual report on form 10-k is as of february 29 , 2012 , and we undertake no duty to update this information . shareholders and prospective investors can find information filed with the sec after february 29 , 2012 , at our website at http : //investor.vcaantech.com or at the sec 's website at www.sec.gov . overview we are a leading national animal healthcare company . we provide veterinary services and diagnostic testing services to support veterinary care and we sell diagnostic imaging equipment and other medical technology products and related services to veterinarians . we also provide both online and printed communications , education and information , and analytical based marketing solutions to the veterinary community . our reportable segments are as follows : our animal hospital segment operates the largest network of freestanding , full-service animal hospitals in the nation . our animal hospitals offer a full range of general medical and surgical services for companion animals . we treat diseases and injuries , offer pharmaceutical and retail products and perform a variety of pet wellness programs , including health examinations , diagnostic testing , routine vaccinations , spaying , neutering and dental care . at december 31 , 2011 , our animal hospital network consisted of 541 animal hospitals in 41 states and 1 canadian province . our laboratory segment operates the largest network of veterinary diagnostic laboratories in the nation . our laboratories provide sophisticated testing and consulting services used by veterinarians in the detection , diagnosis , evaluation , monitoring , treatment and prevention of diseases and other conditions affecting animals . at december 31 , 2011 , our laboratory network consisted of 53 laboratories serving all 50 states and certain areas in canada . our all other category includes the results of our medical technologies and vetstreet operating segments . each of these segments did not meet the materiality thresholds to be reported individually . the practice of veterinary medicine is subject to seasonal fluctuation . in particular , demand for veterinary services is significantly higher during the warmer months because pets spend a greater amount of time outdoors where they are more likely to be injured and are more susceptible to disease and parasites . in addition , use of veterinary services may be affected by levels of flea infestation , heartworms and ticks , and the number of daylight hours . our revenue has been adversely impacted by the current economic recession . we are unable to forecast the timing or degree of any economic recovery . further , trends in the general economy may not be reflected in our 21 business at the same time or in the same degree as in the general economy . the timing and degree of any economic recovery , and its impact on our business , are among the important factors that could cause our actual results to differ from our forward-looking information . executive overview the slow economic recovery continues to have an adverse impact on our organic revenue and our profitability . consumer spending habits , including spending for pet healthcare , are affected by , among other things , prevailing economic conditions , levels of employment , salaries and wage rates , consumer confidence and consumer perception of economic conditions . these factors continue to impact consumer spending and may continue to cause levels of spending to remain depressed for the foreseeable future . additionally , these factors may cause pet owners to elect to defer expensive treatment options or to forgo treatment for their pet 's altogether . during 2009 , continuing through 2011 , we experienced a decline in the number of visits to our animal hospitals and the number of orders placed , as well as , a decline in the number of our laboratory requisitions . these factors resulted in a decline in our animal hospital same-store revenue and related profit margin . improvement in our laboratory internal revenue growth , in spite of the decline in requisitions , was offset by increased transportation costs resulting in a decline in our profit margin . our consolidated profit margin was further eroded by lower profit margins initially experienced with our acquired businesses . story_separator_special_tag we frequently sell equipment and license our software in multiple element arrangements in which the customer may choose a combination of our products and services . the accounting for the sale of equipment and the sale of software licenses and related items is substantially governed by the requirements of the fasb 's general revenue recognition rules . the determination of the amount of software license , maintenance and professional service revenue to be recognized in each accounting period requires us to exercise judgment and use estimates . in determining whether or not to recognize revenue , we evaluate each of these criteria : evidence of an arrangement : we consider a non-cancelable agreement signed by the customer and us to be evidence of an arrangement . delivery : we consider delivery to have occurred when the ultrasound imaging equipment is delivered . we consider delivery to have occurred when the digital radiography imaging equipment , including software , is delivered or accepted by the customer if installation is required . we consider delivery to have occurred with respect to professional services when those services are provided or on a straight-line basis over the service contract term , based on the nature of the service or the terms of the contract . fixed or determinable fee : we assess whether fees are fixed or determinable at the time of sale and recognize revenue if all other revenue recognition requirements are met . we generally consider payments that are due within six months to be fixed or determinable based upon our successful collection history . we only consider fees to be fixed or determinable if they are not subject to refund or adjustment . collection is deemed probable : we conduct a credit review for all significant transactions at the time of the arrangement to determine the credit worthiness of the customer . collection is deemed probable if we expect that the customer will be able to pay amounts under the arrangement as payments become due . if we determine that collection is not probable , we defer the revenue and recognize the revenue upon cash collection . digital radiography imaging equipment we sell our digital radiography imaging equipment with multiple elements , including hardware , software licenses and or services . tangible products containing software components and nonsoftware components that function together to deliver the tangible product 's essential functionality are accounted for under the fasb 's accounting guidance pertaining to multiple-deliverable revenue arrangements . under the guidance sales arrangement consideration is allocated at the inception of the arrangement to all deliverables using the relative selling price method , whereby any discount in the arrangement is allocated 24 proportionally to each deliverable on the basis of each deliverable 's selling price . the selling price for each deliverable is based on vendor-specific objective evidence ( vsoe ) if available , third-party evidence ( tpe ) if vsoe is not available , or estimated selling price ( esp ) if neither vsoe nor tpe is available . for elements where vsoe is available , vsoe of fair value is based on the price for those products and services when sold separately by us or the price established by management with the relevant authority . tpe of selling price is the price of our , or any of our competitor 's , largely interchangeable products or services in stand-alone sales to similarly situated customers . we do not currently have vsoe for our dr imaging equipment as units are not sold on a stand-alone basis without the related support packages . as this is also true for our competitors , tpe of selling price is also unavailable . we therefore use the esp to allocate the arrangement consideration related to our dr imaging equipment . we recognize revenue when the services are provided or at the time of delivery or installation and customer acceptance . generally , at the time of delivery and installation of equipment the only undelivered item is the post-contract customer support ( pcs ) . this obligation is contractually defined in both terms of scope and period . for the pcs , we recognize the revenue for these services on a straight-line basis over the period of support and we expense the costs of these services as they are incurred . ultrasound imaging equipment we sell our ultrasound imaging equipment on a stand-alone basis and with multiple elements , including hardware , software , licenses and or services . we account for the sale of ultrasound imaging equipment on a stand-alone basis under the requirements of the fasb 's general revenue recognition rules and recognize revenue upon delivery . we account for the sale of ultrasound imaging equipment with related computer hardware and software pursuant to the the requirements of the fasb 's revenue recognition multiple-element arrangements guidance . digital radiography and ultrasound imaging equipment sold together in certain transactions we sell our ultrasound imaging equipment and related services together with our digital radiography imaging equipment and related services . in these transactions , each element is accounted for pursuant to the fasb 's revenue recognition multiple-element arrangements guidance . other services we recognize revenue on mobile imaging , consulting and education services at the time the services have been rendered . we also generate revenue from extended service agreements related to our digital radiography imaging and ultrasound imaging equipment . these extended service agreements include technical support , product updates for software on a when and if available basis and extended warranty coverage . the revenue for these extended service agreements is recognized on a straight-line basis over the term of the agreement . valuation of goodwill and other intangible assets goodwill we allocate a significant portion of the purchase price for our acquired businesses to goodwill . our goodwill represents the excess of the cost of an acquired entity over the net of the amounts assigned to identifiable assets acquired and liabilities assumed .
| segment results animal hospital segment the following table summarizes revenue and gross profit for the animal hospital segment ( in thousands , except percentages ) : replace_table_token_10_th 30 animal hospital revenue increased $ 97.7 million in 2011 as compared to 2010 , and $ 58.2 million in 2010 as compared to 2009. the components of the increases are summarized in the following table ( in thousands , except percentages and average price per order ) : replace_table_token_11_th ( 1 ) same-store revenue and orders were calculated using animal hospital operating results , adjusted to exclude the operating results for newly acquired animal hospitals that we did not own as of the beginning of the comparable period in the prior year and adjusted for the impact resulting from any differences in the number of business days in the comparable periods . same-store revenue also includes revenue generated by customers referred from our relocated or combined animal hospitals , including those merged upon acquisition . ( 2 ) the change in orders may not calculate exactly due to rounding . ( 3 ) computed by dividing same-store revenue by same-store orders . the average revenue per order may not calculate exactly due to rounding . ( 4 ) the 2010 business day adjustment reflects the impact of one additional business day in 2010 as compared to 2009 . ( 5 ) net acquired revenue represents the revenue from those animal hospitals acquired , net of revenue from those animal hospitals sold or closed , on or after the beginning of the comparable period , which was january 1 , 2010 for the 2011 comparative analysis and january 1 , 2009 for the 2010 comparative analysis . fluctuations in net acquired revenue occur due to the volume , size and timing of acquisitions and dispositions during the periods from this date through the end of the applicable period .
| 4,099 |
Subsets and Splits
No community queries yet
The top public SQL queries from the community will appear here once available.