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due to the complexities associated with the hypothetical calculation to determine residual taxes on the undistributed earnings , including the availability of foreign tax credits , applicability of any additional local withholding tax and other indirect tax consequence that may arise due to the distribution of these earnings , the company has concluded it is not practicable to determine the unrecognized deferred tax liability related to the undistributed earnings . in november 2015 , the fasb issued asu 2015-17 , balance sheet classification of deferred taxes , which amends the existing guidance to require presentation of deferred tax story_separator_special_tag overview genuine parts company is a service organization engaged in the distribution of automotive parts , industrial parts , office products and electrical/electronic materials . we have a long tradition of growth dating back to 1928 , the year we were founded in atlanta , georgia . the company conducted business in 2015 throughout the united states , canada , australia , new zealand , mexico and puerto rico from approximately 2,650 locations . we recorded consolidated net sales of $ 15.3 billion for the year ended december 31 , 2015 , down 0.4 % compared to sales in 2014. consolidated net income for the year ended december 31 , 2015 was $ 706 million , down 1 % from $ 711 million in 2014. our revenue and earnings in 2015 reflect a 3 % negative impact of currency translation and after adjusting for this factor , the company produced an increase in both sales and net income . the company 's internal growth initiatives , including the positive impact of acquisitions , as well as effective cost management , which we discuss further below , served to support our underlying progress for the year . the relatively unchanged sales results for 2015 compare to a 9 % sales increase in 2014 and an 8 % sales increase in 2013. net income in 2014 increased by 4 % and was up 6 % in 2013. in 2014 , improved market conditions relative to the prior year drove sales and earnings growth in each of our four business segments . in 2013 , we experienced difficult market conditions in the industrial , electrical/electronic and office industries , while the automotive business performed reasonably well . over the three year period of 2013 through 2015 , our financial performance was positively impacted by a variety of initiatives the company implemented to grow sales and earnings across our businesses . examples of such initiatives include strategic acquisitions , the introduction of 18 new and expanded product lines , geographic expansion , sales to new markets , enhanced customer marketing programs and a variety of gross margin and cost savings initiatives . we discuss these initiatives further below . with regard to the december 31 , 2015 consolidated balance sheet , the company 's cash balance of $ 212 million compares to cash of $ 138 million at december 31 , 2014. the company continues to maintain a strong cash position , supported by relatively steady net income and effective asset management in 2015. accounts receivable decreased by approximately 3 % , which compares to an approximate 4 % sales decrease in the fourth quarter of the year , and inventory was down by approximately 1 % . accounts payable increased $ 267 million or 10 % from the prior year , due primarily to improved payment terms with certain suppliers . total debt outstanding at december 31 , 2015 was $ 625 million , down from total debt of $ 765 at december 31 , 2014. story_separator_special_tag x '' > 20 the prior year periods . as this business is dependent on the manufacturing segment of the economy , we expect to face challenging end market conditions for at least the first half of 2016. to offset the challenges , we have initiatives in place to generate growth for this business . net sales for electrical/electronic were $ 739 million in 2014 , an increase of 30 % from 2013. the increase in sales consists of an increase in sales volume of approximately 1 % and a 29 % sales contribution from acquisitions . the benefit of higher transaction values associated with slight price inflation for the year was offset by the negative sales impact of copper pricing . sales for electrical/electronic increased by 30 % in the first quarter , 32 % in the second quarter , 35 % in the third quarter and 23 % in the fourth quarter . cost of goods sold the company includes in cost of goods sold the actual cost of merchandise , which represents the vast majority of this line item . other items in cost of goods sold include warranty costs and in-bound freight from the supplier , net of any vendor allowances and incentives . cost of goods sold was $ 10.72 billion in 2015 , $ 10.75 billion in 2014 and $ 9.86 billion in 2013. cost of goods sold in 2015 and 2014 changed from the prior year periods in accordance with the related percentage change in sales for the same periods . for these periods , product inflation was relatively insignificant and actual costs were relatively unchanged from the prior year . cost of goods sold represented 70.2 % of net sales in 2015 , 70.1 % of net sales in 2014 and 70.0 % of net sales in 2013 and , as a percent of net sales , increased slightly in 2015 from 2014 and also in 2014 from 2013. in 2015 , 2014 and 2013 , the industrial and office business segments experienced slight vendor price increases . in 2014 and 2013 , the electrical/electronic business also experienced slight vendor price increases . in any year where we experience price increases , we are able to work with our customers to pass most of these along to them . story_separator_special_tag this was partially offset by greater expense leverage driven by this group 's overall sales increase in 2014. electrical/electronic group electrical/electronic 's operating margin increased to 9.3 % in 2015 from 8.8 % in 2014 , as higher margin acquisitions , declining copper prices and effective cost management positively impacted the operating margins for this group . electrical/electronic will continue to focus on its sales initiatives and cost controls to further improve its operating margin in 2016. electrical/electronic 's operating margin increased to 8.8 % in 2014 from 8.4 % in 2013 , primarily due to greater expense leverage associated with this group 's sales increase in 2014 . 22 income taxes the effective income tax rate of 37.2 % in 2015 increased from 36.4 % in 2014. the increase in rate primarily reflects the company 's higher mix of u.s. earnings in 2015 , which is taxed at a higher rate relative to our foreign operations . to a lesser extent , the less favorable retirement asset valuation adjustment in 2015 relative to 2014 impacted the increase in rate . the income tax rate of 36.4 % in 2014 increased from 34.4 % in 2013. the increase in rate is primarily due to the favorable tax rate applied to the one-time gain associated with the gpc asia pacific acquisition recorded in 2013. additionally , the company 's retirement asset valuation adjustment was less favorable in 2014 relative to 2013. the higher mix of u.s. earnings , taxed at a higher rate relative to our foreign operations , also contributed to the increase in the 2014 tax rate . net income net income was $ 706 million in 2015 , a decrease of 1 % from $ 711 million in 2014. on a per share diluted basis , net income was $ 4.63 in 2015 , up slightly compared to $ 4.61 in 2014. net income was 4.6 % of net sales in 2015 and 2014. net income was $ 711 million in 2014 , an increase of 4 % from $ 685 million in 2013. on a per share diluted basis , net income was $ 4.61 in 2014 compared to $ 4.40 in 2013 , up 5 % . net income in 2014 was 4.6 % of net sales compared to 4.9 % of net sales in 2013. in connection with the acquisition of gpc asia pacific , the company recorded one-time positive purchase accounting adjustments of $ 33 million or $ 0.21 per diluted share in 2013. before the impact of these adjustments , net income in 2014 was up 9 % from 2013 , and on a per share diluted basis , net income was up 10 % from 2013. financial condition our cash balance of $ 212 million at december 31 , 2015 compares to our cash balance of $ 138 million at december 31 , 2014 , as discussed further below . the company 's accounts receivable balance at december 31 , 2015 decreased by approximately 3 % from the prior year . this compares to the company 's 4 % sales decrease for the fourth quarter of 2015 , and we are satisfied with the quality and collectability of our accounts receivable . inventory at december 31 , 2015 decreased by approximately 1 % from december 31 , 2014 and accounts payable increased $ 267 million or approximately 10 % from december 31 , 2014 due primarily to improved payment terms with certain suppliers . liquidity and capital resources the company 's sources of capital consist primarily of cash flows from operations , supplemented as necessary by private issuances of debt and bank borrowings . we have $ 625 million of total debt outstanding at december 31 , 2015 , of which $ 250 million matures in november 2016 and $ 250 million matures in december 2023. in addition , the company has an unsecured revolving line of credit with a consortium of financial institutions for $ 1.2 billion , of which approximately $ 125 million and $ 265 million were outstanding under the line of credit at december 31 , 2015 and 2014 , respectively . currently , we believe that our cash on hand and available short-term and long-term sources of capital are sufficient to fund the company 's operations , including working capital requirements , scheduled debt payments , interest payments , capital expenditures , benefit plan contributions , income tax obligations , dividends , share repurchases and contemplated acquisitions . the ratio of current assets to current liabilities was 1.4 to 1 at december 31 , 2015 and 1.6 to 1 at december 31 , 2014. our liquidity position remains solid . the company 's total debt outstanding at december 31 , 2015 is down $ 140 million or 18 % from december 31 , 2014 . 23 sources and uses of net cash a summary of the company 's consolidated statements of cash flows is as follows : replace_table_token_7_th net cash provided by operating activities : the company continues to generate cash and in 2015 net cash provided by operating activities totaled $ 1.2 billion . this reflects a 47 % increase from 2014 , as the collective change in trade accounts receivable , merchandise inventories and trade accounts payable represented a $ 312 million source of cash in 2015 compared to a $ 34 million use of cash in 2014. net cash provided by operating activities was $ 790 million in 2014 , a 25 % decrease from 2013 due primarily to the change in trade accounts receivable , merchandise inventories and trade accounts payable , which , collectively , net to a $ 34 million use of cash in 2014 compared to a $ 278 million source of cash in 2013. this decline was partially offset by the increase in net income and depreciation and amortization of $ 26 million and $ 14 million , respectively , in 2014. net cash used in investing activities : net cash flow used in investing activities was $ 264 million in 2015 compared to $ 387 million in 2014 , a decrease
| results of operations our results of operations are summarized below for the three years ended december 31 , 2015 , 2014 and 2013. replace_table_token_6_th net sales consolidated net sales for the year ended december 31 , 2015 totaled $ 15.3 billion , down slightly from 2014 . 2015 net sales included a 1.5 % increase in sales volume and a 1 % contribution from acquisitions , offset by an approximate 3 % negative impact of currency . the impact of product inflation varied by business in 2015 and , cumulatively , prices were down 0.2 % in the automotive segment , up approximately 0.9 % in the industrial segment , up approximately 0.6 % in the office segment and down approximately 1.7 % in the electrical/electronic segment . the company is well positioned with strategic plans in place to grow sales in 2016. consolidated net sales for the year ended december 31 , 2014 totaled $ 15.3 billion , a 9 % increase from 2013 and driven by revenue growth in each of our four business segments . the increase in sales volume and acquisitions across our four businesses each contributed 5 % to our total sales growth , while currency negatively impacted total sales by 1 % . the impact of product inflation varied by business in 2014 and , cumulatively , prices were flat in the automotive segment , up approximately 1.5 % in the industrial segment , up approximately 1.4 % in the office segment and up approximately 0.3 % in the electrical/electronic segment . automotive group net sales for the automotive group ( automotive ) were $ 8.0 billion in 2015 , a 1 % decrease from 2014. the decrease in sales for the year consists of a positive core sales increase of approximately 3.5 % and a slight benefit from acquisitions . combined , the approximate 4 % growth was offset by a 5 % negative impact of currency associated with our automotive businesses in canada , australasia and mexico .
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our goal is to deliver value to our shareholders by building a profitable global portfolio of branded footwear , apparel , equipment and accessories businesses . our strategy is to achieve long-term revenue growth by creating innovative , “ must have ” products , building deep personal consumer connections with our brands and delivering compelling consumer experiences at retail and online . in addition to achieving long-term , sustainable revenue growth , we continue to strive to deliver shareholder value by driving operational excellence in several key areas : expanding gross margin by : - delivering innovative , premium products that command higher prices while maintaining a balanced price-to-value proposition for consumers ; - reducing product costs through a continued focus on manufacturing efficiency , product design and innovation ; - making our supply chain a competitive advantage by investing in new technologies that increase automation , help reduce waste and have long-term potential to increase both customization of our products and speed to market ; and - driving growth in our higher gross margin dtc business as part of an integrated marketplace growth strategy across our dtc and wholesale operations . optimizing selling and administrative expense by focusing on : - investments in consumer engagement that drive economic returns in the form of incremental revenue and gross profit ; - infrastructure investments that improve the efficiency and effectiveness of our operations ; and - increasing the productivity of our legacy infrastructure . improving working capital efficiency ; and deploying capital effectively . through execution of this strategy , our long-term financial goals continue to be : high single-digit revenue growth , mid-teens earnings per share growth , strong return on invested capital and accelerated cash flows and sustainable , profitable , long-term growth through effective management of our diversified portfolio of businesses . over the past ten years , we have achieved many of these financial goals . during this time , revenues and diluted earnings per common share for nike , inc. , inclusive of both continuing and discontinued operations , have grown 8 % and 13 % , respectively , on an annual compounded basis . our return on invested capital has increased from 23.2 % to 28.1 % and we expanded gross margins by approximately 150 basis points . on november 15 , 2012 , we announced a two-for-one stock split of both class a and class b common shares . the stock split was in the form of a 100 % stock dividend payable on december 24 , 2012 to shareholders of record at the close of business on december 10 , 2012. common stock began trading at the split-adjusted price on december 26 , 2012. all share numbers and per share amounts presented reflect the stock split . our fiscal 2015 results from continuing operations demonstrated nike 's ongoing commitment to deliver consistent growth in revenues , earnings and cash returns to shareholders , while investing for long-term growth . despite significant foreign currency headwinds , we delivered record revenues and earnings per share in fiscal 2015. nike , inc. revenues grew 10 % to $ 30.6 billion , gross margin expanded 120 basis points , net income from continuing operations increased 22 % to $ 3.3 billion and diluted earnings per common share increased 25 % to $ 3.70. earnings before interest and income taxes ( `` ebit '' ) from continuing operations increased 18 % for fiscal 2015 , driven by revenue growth and gross margin expansion , which more than offset higher selling and administrative expense . the increase in revenues was attributable to growth across nearly all nike brand geographies , key categories and product types . this broad-based growth was primarily fueled by : innovative performance and sportswear products , incorporating proprietary technology platforms such as nike air , free , zoom , lunar , flywire , dri-fit and flyknit ; deep brand connections to consumers through a category lens , reinforced by investments in endorsements by high-profile athletes , sports teams and leagues , high-impact marketing around global sporting events ( such as the world cup and nfl super bowl ) and digital marketing ; and strong category retail presentation online and at nike-owned and retail partner stores . our converse business also grew , with revenue and ebit growth of 18 % and 4 % , respectively . gross margin increased primarily due to higher average selling prices and the favorable impact of our higher-margin dtc businesses , partially offset by higher product input costs , primarily a result of labor input cost inflation and shifts in mix to higher-cost products . for fiscal 2015 , the growth of our net income from continuing operations was positively affected by a year-over-year decrease in our effective tax rate of 180 basis points primarily due to the favorable resolution of audits in several jurisdictions . in addition , diluted earnings per common share grew at a higher rate than net income due to a 2 % decrease in the weighted average diluted common shares outstanding , driven by our share repurchase program . 20 while foreign currency markets remain volatile , we continue to see opportunities to drive future growth and remain committed to effectively managing our business to achieve our financial goals over the long-term by executing against the operational strategies outlined above . results of operations unless otherwise indicated , the following disclosures reflect the company 's continuing operations . replace_table_token_4_th ( 1 ) during fiscal 2013 , we divested of umbro and cole haan , allowing us to focus our resources on driving growth in the nike , jordan , converse and hurley brands . as of may 31 , 2013 , we had substantially completed all transition services related to the sale of both businesses . the results of the divestitures are presented as discontinued operations . please refer to note 15 — discontinued operations in the accompanying notes to the consolidated financial statements for more detail . story_separator_special_tag we estimate the combination of the translation of foreign currency-denominated profits from our international business and the year-over-year change in foreign currency-related gains and losses included in other ( income ) expense , net had an unfavorable impact on our income before income taxes of $ 73 million for fiscal 2015. fiscal 2014 compared to fiscal 2013 other ( income ) expense , net shifted from $ 15 million of other ( income ) , net for fiscal 2013 to $ 103 million of other expense , net for fiscal 2014 , primarily driven by a $ 90 million adverse change in foreign currency conversion gains and losses as well as an adverse legal judgment in the second quarter of fiscal 2014 related to a long outstanding bankruptcy case for a former customer in western europe . we estimate the combination of the translation of foreign currency-denominated profits from our international businesses and the year-over-year change in foreign currency-related gains and losses included in other ( income ) expense , net had an unfavorable impact on our income before income taxes of $ 139 million for fiscal 2014. income taxes replace_table_token_10_th fiscal 2015 compared to fiscal 2014 the 180 basis point decrease in our effective tax rate for the fiscal year was primarily due to the favorable resolution of audits in several jurisdictions . 25 fiscal 2014 compared to fiscal 2013 the 70 basis point decrease in our effective tax rate for the fiscal year was primarily driven by an increase in earnings in lower tax jurisdictions . during the fourth quarter of the fiscal year ended may 31 , 2014 , we reached a resolution with the irs on an advanced pricing agreement . this agreement did not have a material impact on our effective tax rate for fiscal 2014. refer to note 9 — income taxes in the accompanying notes to the consolidated financial statements for additional disclosure . operating segments our reportable operating segments are evidence of the structure of the company 's internal organization . the nike brand segments are defined by geographic regions for operations participating in nike brand sales activity . each nike brand geographic segment operates predominantly in one industry : the design , development , marketing and selling of athletic footwear , apparel and equipment . the company 's reportable operating segments for the nike brand are : north america , western europe , central & eastern europe , greater china , japan and emerging markets , and include results for the nike , jordan and hurley brands . the company 's nike brand dtc operations are managed within each geographic operating segment . converse is also a reportable segment for nike , inc. , and operates in one industry : the design , marketing , licensing and selling of casual sneakers , apparel and accessories . as part of our centrally managed foreign exchange risk management program , standard foreign currency rates are assigned twice per year to each nike brand entity in our geographic operating segments and converse . these rates are set approximately nine months in advance of the future selling season based on average market spot rates in the calendar month preceding the date they are established . inventories and cost of sales for geographic operating segments and converse reflect the use of these standard rates to record non-functional currency product purchases into the entity 's functional currency . differences between assigned standard foreign currency rates and actual market rates are included in corporate together with foreign currency hedge gains and losses generated from our centrally managed foreign exchange risk management program and other conversion gains and losses . the breakdown of revenues is as follows : replace_table_token_11_th ( 1 ) results have been restated using actual exchange rates in use during the comparative period to enhance the visibility of the underlying business trends excluding the impact of translation arising from foreign currency exchange rate fluctuations . ( 2 ) global brand divisions revenues primarily represent nike brand licensing businesses that are not part of a geographic operating segment . ( 3 ) corporate revenues primarily consist of foreign currency revenue-related hedge gains and losses generated by entities within the nike brand geographic operating segments and converse through our centrally managed foreign exchange risk management program . the primary financial measure used by the company to evaluate performance of individual operating segments is earnings before interest and taxes ( commonly referred to as “ ebit ” ) , which represents net income before interest expense ( income ) , net and income tax expense in the consolidated statements of income . as discussed in note 18 — operating segments and related information in the accompanying notes to the consolidated financial statements , certain corporate costs are not included in ebit of our operating segments . 26 the breakdown of earnings before interest and taxes is as follows : replace_table_token_12_th ( 1 ) certain prior year amounts have been reclassified to conform to fiscal 2015 presentation . these changes had no impact on previously reported results of operations or shareholders ' equity . north america replace_table_token_13_th fiscal 2015 compared to fiscal 2014 north america revenues increased 12 % , despite congestion at ports on the west coast of the united states in the second half of the fiscal year , which affected the company 's supply chain and flow of product to customers . revenue growth was driven by nearly all key categories for fiscal 2015 , led by our basketball , sportswear and men 's and women 's training categories . on a constant currency basis , dtc revenue grew 17 % for fiscal 2015 , fueled by comparable store sales growth of 8 % , strong online sales growth and the addition of new stores . footwear revenue growth was driven by increases in most key categories , notably basketball and sportswear . unit sales of footwear for fiscal 2015 increased 6 % and higher average selling price per pair contributed approximately 8 percentage points of footwear revenue growth .
| consolidated operating results revenues replace_table_token_5_th 22 ( 1 ) certain prior year amounts have been reclassified to conform to fiscal 2015 presentation . these changes had no impact on previously reported results of operations or shareholders ' equity . ( 2 ) results have been restated using actual exchange rates in use during the comparative period to enhance the visibility of the underlying business trends by excluding the impact of translation arising from foreign currency exchange rate fluctuations . ( 3 ) global brand divisions revenues primarily represent nike brand licensing businesses that are not part of a geographic operating segment . ( 4 ) corporate revenues primarily consist of foreign currency revenue-related hedge gains and losses generated by entities within the nike brand geographic operating segments and converse through our centrally managed foreign exchange risk management program . ( 5 ) references to nike brand wholesale equivalent revenues are intended to provide context as to the total size of our nike brand market footprint if we had no direct to consumer operations . nike brand wholesale equivalent revenues consist of ( 1 ) sales to external wholesale customers and ( 2 ) internal sales from our wholesale operations to our direct to consumer operations which are charged at prices that are comparable to prices charged to external wholesale customers . ( 6 ) others include all unisex products , equipment and other products not allocated to men ' s , women ' s and young athletes ' , as well as certain adjustments that are not allocated to products designated by gender or age . ( 7 ) others include all other categories and certain adjustments that are not allocated at the category level . fiscal 2015 compared to fiscal 2014 on a currency-neutral basis , revenues from nike , inc. continuing operations grew 14 % for fiscal 2015 , driven by increases in revenues for both the nike brand and converse .
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all of the company 's operations are in the motor carrier segment . for both operations , substantially all of our revenue is generated by transporting freight for customers and is predominantly affected by the rates per mile received from our customers , equipment utilization , and our percentage of non-compensated miles . these aspects of our business are carefully managed and efforts are continuously underway to achieve favorable results . truckload services revenues , excluding fuel surcharges , represented 93.5 % , 85.9 % , and 85.3 % of total revenues , excluding fuel surcharges for the twelve months ended december 31 , 2011 , 2010 , and 2009 , respectively . the main factors that impact our profitability on the expense side are costs incurred in transporting freight for our customers . currently , our most challenging costs include fuel , driver recruitment , training , wage and benefit costs , independent broker costs ( which we record as purchased transportation ) , insurance , and maintenance and capital equipment costs . 19 in discussing our results of operations we use revenue , before fuel surcharge , ( and fuel expense , net of surcharge ) , because management believes that eliminating the impact of this sometimes volatile source of revenue allows a more consistent basis for comparing our results of operations from period to period . during 2011 , 2010 and 2009 , approximately $ 75.1 million , $ 49.5 million and $ 31.1 million , respectively , of the company 's total revenue was generated from fuel surcharges . we also discuss certain changes in our expenses as a percentage of revenue , before fuel surcharge , rather than absolute dollar changes . we do this because we believe the high variable cost nature of certain expenses makes a comparison of changes in expenses as a percentage of revenue more meaningful than absolute dollar changes . results of operations - truckload services the following table sets forth , for truckload services , the percentage relationship of expense items to operating revenues , before fuel surcharges , for the periods indicated . fuel costs are shown net of fuel surcharges . replace_table_token_6_th 2011 compared to 2010 for the year ended december 31 , 2011 , truckload services revenue , before fuel surcharges , increased 9.5 % to $ 265.8 million as compared to $ 242.8 million for the year ended december 31 , 2010. the increase relates primarily to an increase in the average rate charged to customers per total mile during 2011 as compared to 2010. during 2011 , the average rate charged to customers per total mile increased by $ 0.10 as compared to the average rate charged during 2010. salaries , wages and benefits remained at 44.4 % of revenues , before fuel surcharges , for both 2010 and 2011. using a dollar-based comparison , salaries , wages and benefits increased from $ 107.9 million during 2010 to $ 118.0 million during 2011. the dollar-based increase relates primarily to the rescission of a pay rate reduction plan , an increase in driver wages , and an increase in driver lease expense . rescission of the 5 % pay rate reduction plan , which had been in effect during the first seven months of 2010 but not at anytime during 2011 , had the effect of increasing comparative salaries and wages by 5 % following the rescission date in august 2010. driver wages increased as the number of company driver compensated miles increased from 192.1 million miles during 2010 to 195.1 million miles during 2011. driver lease expense , which is a component of salaries , wages and benefits , increased as the average number of owner-operators under contract increased from 29 during 2010 to 48 during 2011. the company also experienced an increase in expenses associated with employee workers compensation benefits . 20 fuel expense , net of fuel surcharge , decreased from 19.8 % of revenues , before fuel surcharges , during 2010 to 18.8 % of revenues , before fuel surcharges , during 2011. the decrease , as a percentage of revenue , relates to interaction of higher revenues without a proportional increase in fuel costs as the increase in the average rate charged to customers on a per-mile basis outpaced the per-mile increase in fuel costs . using a dollar-based comparison , fuel expense increased from $ 48.1 million during 2010 to $ 49.9 million during 2011. the dollar-based increase relates primarily to an increase in the average surcharge-adjusted price paid per gallon of fuel from $ 1.35 during 2010 to $ 1.43 paid per gallon during 2011. the fuel surcharge collections vary from period to period as they are generally based on changes in fuel prices from period to period so that during periods of rising fuel prices fuel surcharge collections increase while fuel surcharge collections decrease during periods of declining fuel prices . rent and purchased transportation decreased from 2.3 % of revenues , before fuel surcharges , in 2010 to 1.6 % of revenues , before fuel surcharges , in 2011. the decrease relates primarily to a decrease in amounts paid to third party transportation service providers . depreciation and amortization increased from 11.1 % of revenues , before fuel surcharges , in 2010 to 12.8 % of revenues , before fuel surcharges , in 2011. the increase relates primarily to 2011 revenue equipment acquisitions placed in service during 2011 and to revisions made during 2011 to the estimated useful lives and residual values of our trucks to facilitate the acceleration of our planned truck replacement cycle from five years to three years . using a dollar-based comparison , depreciation and amortization increased from $ 26.9 million during 2010 to $ 34.1 million during 2011 as the revisions generally resulted in higher monthly depreciation expense over a shorter period of time . story_separator_special_tag the company has made corresponding reclassifications to comparative periods . rent and purchased transportation decreased from 2.7 % of revenues , before fuel surcharges , in 2009 to 2.3 % of revenues , before fuel surcharges , in 2010. the decrease relates primarily to a decrease in amounts paid to third party transportation service providers for intermodal services . depreciation and amortization decreased from 17.0 % of revenues , before fuel surcharges , in 2009 to 11.1 % of revenues , before fuel surcharges , in 2010. the percentage related to depreciation expense for 2009 was elevated due to a change in estimated residual values for a certain group of tractors . during the fourth quarter of 2009 , management determined that a certain group of trucks , with guaranteed manufacturer trade-in residual values , would not be used as trade-ins for a newer model of the same make . accordingly , the manufacturer guaranteed residual values associated with these trucks were no longer available . management expected that these trucks would be sold on the open market and that the ultimate selling price would be significantly lower than the manufacturer guaranteed residual values . therefore , the residual values of these trucks were reduced during the fourth quarter of 2009 to reflect this expectation . this reduction in residual values resulted in additional depreciation expense of $ 4.2 million during 2009. also , during the fourth quarter of 2009 , management performed an evaluation of the appropriateness of the estimated useful lives and residual values assigned to its remaining truck and trailer fleet . during this evaluation , and based on a decrease in anticipated future capital expenditures , management determined that the useful life of its tractor fleet should be extended to 5 years from 3 or 4 years and that the useful life of its trailer fleet should be extended to 12 years from 10 years . residual values of trucks and trailers were also reduced accordingly to reflect the estimated value at the end of the extended period . excluding the impact of the additional $ 4.2 million depreciation , depreciation and amortization , decreased from 15.1 % of revenues , before fuel surcharges , in 2009 to 11.1 % of revenues , before fuel surcharges , in 2010. other than the decreases resulting from the changes mentioned above , also contributing to the percentage decrease was the percentage effect of higher revenues during 2010 as compared to 2009 with the fixed cost nature of depreciation expense . on a dollar basis , and excluding the additional $ 4.2 million depreciation discussed above , depreciation and amortization expense decreased from $ 33.5 million during 2009 to $ 26.9 million during 2010 as extending the expected useful life of trucks and trailers resulted in lower monthly depreciation expense albeit over a longer period of time . 22 operating supplies and expenses increased from 11.9 % of revenues , before fuel surcharges , during 2009 to 12.4 % of revenues , before fuel surcharges , during 2010. the increase relates primarily to an increase in equipment maintenance and repair costs as the tractor and trailer fleet has aged as a result of delayed equipment replacements due to the current economic environment . to a lesser extent , an increase in driver recruiting costs , which consist primarily of payments to third-party driver training schools , also contributed to the increase for the periods compared . on a dollar basis , operating supplies and expenses increased from $ 26.5 million during 2009 to $ 30.1 million during 2010. the primary components of the increase were an increase in maintenance and repair costs of $ 3.5 million and an increase in driver recruiting costs of $ 1.2 million and were partially offset by a decrease in tolls and other miscellaneous operating costs . operating taxes and licenses decreased from 2.3 % of revenues , before fuel surcharges , during 2009 to 2.0 % of revenues , before fuel surcharges , during 2010. the decrease , as a percentage of revenue , resulted from the interaction of expenses with fixed-cost characteristics , such as registration fees , with an increase in revenues for the periods compared . on a dollar basis , operating taxes and licenses , which consists primarily of equipment registration fees , decreased from $ 5.0 million during 2009 to $ 4.9 million during 2010. insurance and claims expense decreased from 5.6 % of revenues , before fuel surcharges , during 2009 to 5.3 % of revenues , before fuel surcharges , during 2010. the decrease , as a percentage of revenues , resulted primarily from the interaction of fixed-rate insurance premiums , such as physical damage premiums , with higher revenues . on a dollar basis , insurance and claims expense increased from $ 12.6 million during 2009 to $ 12.8 million during 2010. this dollar-based increase relates primarily to an increase in auto liability insurance premiums which are determined based on a negotiated rate-per-mile ( “ nrpm ” ) with the company 's insurance carrier . during 2010 , the number of miles used to calculate the premiums increased to 192.1 million miles as compared to 2009 miles of 177.9 million and , on a dollar basis , translated into an increase in auto liability insurance expense . other expenses decreased from 2.1 % of revenues , before fuel surcharges , during 2009 to 2.0 % of revenues , before fuel surcharges , during 2010. the decrease relates primarily to a decrease in uncollectible revenue expense . loss on sale or disposal of property decreased from 0.4 % of revenues , before fuel surcharges , during 2009 to 0.1 % of revenues , before fuel surcharges , during 2010. the decrease relates primarily to a gain associated with the sale of the assets of east coast transport and logistics , llc during the third quarter of 2010 which partially offset losses realized on the sale or disposal of revenue equipment .
| quarterly results of operations the following table presents selected consolidated financial information for each of our last eight fiscal quarters through december 31 , 2011. the information has been derived from unaudited consolidated financial statements that , in the opinion of management , reflect all adjustments , consisting of normal recurring adjustments , necessary for a fair presentation of the quarterly information . replace_table_token_8_th 26 liquidity and capital resources our business has required , and will continue to require , a significant investment in new revenue equipment . our primary sources of liquidity have been funds provided by operations , proceeds from the sales of revenue equipment , issuances of equity securities , and borrowings under our lines of credit and installment notes . during 2011 , we generated $ 34.9 million in cash from operating activities compared to $ 15.0 million and $ 32.1 million in 2010 and 2009 , respectively . investing activities used $ 61.4 million in cash during 2011 compared to $ 14.2 million and $ 2.4 million in 2010 and 2009 , respectively . the cash used for investing activities in all three years related primarily to the purchase of revenue equipment such as trucks and trailers or related equipment such as auxiliary power units . financing activities provided $ 12.9 million and $ 3.1 million in cash during 2011 and 2010 , respectively , as compared to financing activities in 2009 which used $ 20.7 million . see the consolidated statements of cash flows in item 8 of this report . our primary use of funds is for the purchase of revenue equipment . we typically use installment notes , our existing lines of credit on an interim basis , proceeds from the sale or trade of equipment , and cash flows from operations , to finance capital expenditures and repay long-term debt .
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the matters discussed in these forward-looking statements are subject to risk , uncertainties , and other factors that could cause actual results to differ materially from those projected or implied in the forward-looking statements . please see above “ risk factors ” and “ forward-looking statements ” for a discussion of the uncertainties , risks and assumptions associated with these statements . all amounts discussed are in millions of u.s. dollars , unless otherwise indicated . forward-looking statements this document contains both historical and forward-looking statements . forward-looking statements are not based on historical facts but instead reflect our expectations , estimates or projections concerning future results or events , including , without limitation , the future sales , gross margins , costs , earnings , cash flows , tax rates and performance of the company . these statements generally can be identified by the use of forward-looking words or phrases such as `` believe , '' `` expect , '' `` expectation , '' `` anticipate , '' `` may , '' `` could , '' `` intend , '' `` belief , '' `` estimate , '' `` plan , '' `` target , '' `` predict , '' `` likely , '' `` should , '' `` forecast , '' `` outlook , '' or other similar words or phrases . these statements are not guarantees of performance and are inherently subject to known and unknown risks , uncertainties and assumptions that are difficult to predict and could cause our actual results to differ materially from those indicated by those statements . we can not assure you that any of our expectations , estimates or projections will be achieved . the forward-looking statements included in this document are only made as of the date of this document and we disclaim any obligation to publicly update any forward-looking statement to reflect subsequent events or circumstances . all forward-looking statements should be evaluated with the understanding of their inherent uncertainty . numerous factors could cause our actual results and events to differ materially from those expressed or implied by forward-looking statements . see part i , item 1a , “ risk factors , '' as updated from time to time in the company 's sec filings . non-gaap financial measures the company reports its financial results in accordance with accounting principles generally accepted in the u.s. ( gaap ) . however , management believes that certain non-gaap financial measures provide users with additional meaningful comparisons to the corresponding historical or future period . these non-gaap financial measures exclude items that are not reflective of the company 's on-going operating performance , such as acquisition and integration costs and related items , loss on extinguishment of debt , settlement loss on pension plan termination , gains on sale of real estate , and the one-time impact of coronavirus aid , relief and economic security ( cares ) act and the december 2017 tax cuts and jobs act ( 2017 tax reform ) . in addition , these measures help investors to analyze year over year comparability when excluding currency fluctuations , acquisition activity as well as other company initiatives that are not on-going . we believe these non-gaap financial measures are an enhancement to assist investors in understanding our business and in performing analysis consistent with financial models developed by research analysts . investors should consider non-gaap measures in addition to , not as a substitute for , or superior to , the comparable gaap measures . in addition , these non-gaap measures may not be the same as similar measures used by other companies due to possible differences in method and in the items being adjusted . we provide the following non-gaap measures and calculations , as well as the corresponding reconciliation to the closest gaap measure : segment profit . this amount represents the operations of our two reportable segments including allocations for shared support functions . general corporate and other expenses , global marketing expenses , r & d expenses , amortization expense , interest expense , loss on extinguishment of debt , other items , net , charges related to acquisition and integration , settlement loss on pension plan termination and gains on sale of real estate have all been excluded from segment profit . adjusted net earnings from continuing operations and adjusted diluted net earnings per common share - continuing operations ( eps ) . these measures exclude the impact of the costs related to acquisition and integration , loss on extinguishment of debt , settlement loss on pension plan terminations and the gain on sale of real estate and the one-time impact of the cares act and 2017 tax reform . 36 organic . this is the non-gaap financial measurement of the change in revenue or segment profit that excludes or otherwise adjusts for the impact of acquisitions , change in argentina operations and the impact of currency from the changes in foreign currency exchange rates as defined below : impact of acquisitions . energizer completed the auto care acquisition on january 28 , 2019 , the battery acquisition on january 2 , 2019 , and the nu finish acquisition on july 2 , 2018. these adjustments include the impact each acquisition 's on-going operations contributed to each respective income statement caption for the first year 's operations directly after the acquisition date . this does not include the impact of acquisition and integration costs or the one time inventory fair value step up costs associated with the acquisitions . change in argentina operations . the company is presenting separately all changes in sales and segment profit from our argentina affiliate due to the designation of the economy as highly inflationary as of july 1 , 2018. impact of currency . the company evaluates the operating performance of our company on a currency neutral basis . the impact of currency is the difference between the value of current year foreign operations at the current period ending usd exchange rate , compared to the value of the current year foreign operations at the prior period ending usd exchange rate . story_separator_special_tag on january 2 , 2020 , the company sold the varta® consumer battery business in the europe , middle east and africa regions , including manufacturing and distribution facilities in germany ( divestment business ) to varta aktiengesellschaft ( varta ag ) for a contractual purchase price of 180.0 , subject to purchase price adjustments ( varta divestiture ) . in addition , pursuant to the terms of the battery acquisition agreement , spectrum also contributed cash proceeds toward this sale . total cash proceeds received , net of the working capital settlement , were approximately $ 323.1. auto care acquisition on january 28 , 2019 , the company acquired spectrum 's global auto care business , including armor all® , stp® , and a/c pro® brands ( auto care acquisition ) . for the twelve months ended september 30 , 2020 , the revenue and segment profit associated with the auto care acquisition was $ 85.1 and $ 17.1 , respectively , relating to the four months of activity for which they were not owned in the comparable periods in fiscal 2019. for the twelve months ended september 30 , 2019 , the revenue and segment profit associated with the auto care acquisition was $ 315.8 and $ 76.8 , respectively . nu finish acquisition on july 2 , 2018 , the company acquired all of the assets of reed-union corporation 's automotive appearance business , including nu finish car polish® and scratch doctor® brands ( nu finish acquisition ) . the acquisition purchase price of $ 38.1 was funded through a combination of cash on hand and committed debt facilities . the revenue in the first nine months of fiscal 2019 and the last quarter of fiscal 2018 associated with the nu finish acquisition was $ 5.9 and 2.3 , respectively , and segment profit was $ 2.0 and 0.9 , respectively . acquisition and integration costs the company incurred pre-tax acquisition and integration costs related to the battery acquisition , the auto care acquisition , and the nu finish acquisition of $ 68.0 , $ 188.4 and $ 84.6 in the twelve months ended september 30 , 2020 , 2019 , and 2018 , respectively . pre-tax costs recorded in costs of products sold were $ 32.0 for the twelve months ended september 30 , 2020 and primarily related to the integration restructuring costs of $ 29.3 as discussed in note 6 , restructuring . pre-tax costs recorded in costs of products sold were $ 58.7 for the twelve months ended september 30 , 2019 , which primarily related to the inventory fair value adjustment of $ 36.2 and integration restructuring costs of $ 12.1. pre-tax costs recorded in costs of products sold were $ 0.2 for the twelve months ended september 30 , 2018 . 38 pre-tax acquisition and integration costs recorded in sg & a were $ 38.8 , $ 82.3 and $ 62.9 for the twelve months ended september 30 , 2020 , 2019 and 2018 , respectively . in fiscal 2020 these expenses primarily related to consulting fees , success incentives , and costs of integrating the information technology systems of the business . in fiscal 2019 and 2018 these expenses primarily related to acquisition success fees and legal , consulting and advisory fees to assist with obtaining regulatory approval around the globe and to plan for the closing and integration of the battery acquisition and auto care acquisition . for the twelve months ended september 30 , 2020 and 2019 the company recorded $ 1.3 and $ 1.1 in research and development , respectively . also included in the pre-tax acquisition costs for the twelve months ended september 30 , 2019 was $ 65.6 of interest expense , including ticking fees , related to the escrowed debt for the battery acquisition and the financing fees incurred related to amending and issuing the debt for the battery and auto care acquisitions . the pre-tax acquisition costs for the twelve months ended september 30 , 2018 was $ 41.9 of interest expense , including ticking fees , related to the escrowed debt for the battery acquisition and the financing fees incurred related to amending and issuing the debt for the battery and auto care acquisitions . included in other items , net was pre-tax income of $ 4.1 , $ 19.3 and $ 20.4 in the twelve months ended september 30 , 2020 , 2019 and 2018 , respectively . the pre-tax income recorded in fiscal 2020 was primarily driven by pre-acquisition insurance proceeds of $ 4.9 , a $ 1.0 gain on the sale of assets and $ 0.9 of transition services income , offset by a $ 2.2 loss related to the hedge contract on the proceeds from the varta divestiture and $ 0.5 of other items . the pre-tax income of $ 19.3 recorded in fiscal 2019 was primarily driven by the escrowed debt funds held in restricted cash prior to the closing of the battery acquisition . the company recorded a pre-tax gain of $ 9.0 related to the favorable movement in the escrowed usd restricted cash held in our european euro functional entity . the company also recorded interest income of $ 5.8 earned on the restricted cash funds held in escrow associated with the battery acquisition . the company recorded a gain of $ 4.6 related to the hedge contract on the expected proceeds from the anticipated varta divestiture and recorded income on transition services agreements of $ 1.4 for the twelve months ended september 30 , 2019. these income items were offset by $ 1.5 of expense to settle hedge contracts of the acquired business . the company recorded pre-tax income in other items , net of $ 15.2 on foreign currency gains related to the battery acquisition during the twelve months ended september 30 , 2018. of the gain , $ 9.4 was related to contracts which were entered into in june 2018 and locked in the u.s. dollar ( usd ) value of the euro notes related to the battery acquisition .
| operating results net sales replace_table_token_6_th net sales for the year ended september 30 , 2020 increased 10.0 % . the increase was driven by the impact of the acquisitions which added $ 210.6 , or 8.4 % , the increase in organic sales of $ 61.4 , or 2.5 % , and favorable change in argentina 's operations of $ 1.6 , or 0.1 % . these increases were partially offset by the unfavorable impact of currency of $ 23.3 , or 1.0 % . organic net sales increased 2.5 % primarily due to : distribution gains contributed 2.7 % of the increase ; favorable carryover impact of the fiscal 2019 price increases , together with the net covid-19 pandemic impact driven by north america battery , contributed 1.0 % of the increase ; and lower replenishment volume early in the year , and the year-over-year impact of lower storm activity partially offset the increases . 44 net sales for the year ended september 30 , 2019 increased 38.8 % . the increase was driven by the impact of the acquisitions which added $ 660.6 , or 36.8 % , and the increase in organic sales of $ 73.4 , or 4.1 % . these increases were partially offset by the unfavorable impact of currency of $ 32.7 , or 1.8 % and the unfavorable change in argentina 's operations of $ 4.5 , or 0.3 % . organic net sales increased 4.1 % primarily due to : category growth and distribution gains which contributed 2.7 % to the organic increase ; favorable pricing across several markets increased net sales by 0.9 % ; and the impact of the reclassification of licensing revenues contributed 0.5 % . for further discussion regarding net sales in each of our geographic segments , including a summary of reported versus organic changes , please see the section titled “ segment results ” provided below .
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note 12 business segments information we operate our business in two distinct operating and reportable segments : specialty foods and glassware and candles. our management evaluates segment performance based on sales and operating income . story_separator_special_tag our fiscal year begins on july 1 and ends on june 30. unless otherwise noted , references to year pertain to our fiscal year ; for example , 2013 refers to fiscal 2013 , which is the period from july 1 , 2012 to june 30 , 2013. the following discussion should be read in conjunction with the selected financial data and our consolidated financial statements and the notes thereto , all included elsewhere in this annual report on form 10-k. the forward-looking statements in this section and other parts of this report involve risks and uncertainties including statements regarding our plans , objectives , goals , strategies , and financial performance . our actual results could differ materially from the results anticipated in these forward-looking statements as a result of factors set forth under the caption forward-looking statements. overview business overview lancaster colony corporation is a diversified manufacturer and marketer of consumer products focusing primarily on specialty foods for the retail and foodservice markets . we also manufacture and market candles for the food , drug and mass markets . while much less significant , we have also sold candles , glassware and various other products to customers in certain commercial markets . these commercial product lines were sold in may 2013. our operations are organized in two reportable segments : specialty foods and glassware and candles. the sales of each segment are predominately domestic . in recent years , our strategy has shifted away from operating businesses in a variety of industries towards emphasizing the growth and success we have achieved in our specialty foods segment . for perspective , in 2013 , approximately 87 % of our consolidated net sales was derived from the specialty foods segment , as compared to approximately 55 % of our consolidated net sales being derived from the specialty foods segment in 2003. we intend to periodically reassess the strategic fit and contribution of our remaining nonfood operations in light of market conditions , capital needs and other factors . our current strategy focuses our efforts on the most profitable part of our business and minimizes the amount of financial and management resources devoted to our nonfood operations . we view our food operations as having the potential to achieve future growth in sales and profitability due to attributes such as : leading retail market positions in several branded products with a high-quality perception ; a broad customer base in both retail and foodservice accounts ; well-regarded culinary expertise among foodservice accounts ; recognized leadership in foodservice product development ; experience in integrating complementary business acquisitions ; and historically strong cash flow generation that supports growth opportunities . within the specialty foods segment , our goal is to grow both retail and foodservice sales over time by : leveraging the strength of our retail brands to increase current product sales , introduce new products and expand to new channels ; growing our foodservice sales through the strength of our reputation in product development and quality ; and pursuing acquisitions that meet our strategic criteria . within retail markets , our specialty foods segment utilizes numerous branded products to support growth and maintain market competitiveness . we place great emphasis on our product innovation and development efforts so as to enhance growth by providing distinctive new products meeting the evolving needs and preferences of consumers . 18 our foodservice sales primarily consist of products sold to restaurant chains . over the long-term , we have experienced broad-based growth in our foodservice sales , as we build on our strong reputation for product development and quality . we expect that part of our future growth in the specialty foods segment will result from acquisitions . we continue to review potential acquisitions that we believe will provide good complements to our existing product lines , enhance our gross margins or offer good expansion opportunities in a manner that fits our overall goals . as has occasionally been required to support future growth opportunities , we have historically made substantial capital investments to support our existing food operations , such as the construction of a new frozen yeast roll facility in horse cave , kentucky that began operations in 2008 and was significantly expanded through a project that was completed in june 2011. this facility has helped provide capacity for potential future sales growth and also provided greater manufacturing efficiencies . in 2013 , we expanded our crouton manufacturing capacity to provide capacity for potential future sales growth as well as improve operating efficiencies . based on our current plans and expectations , we believe that our total capital expenditures for 2014 could total $ 25 million , and perhaps more depending on the timing and approval of certain food-related projects currently being evaluated . summary of 2013 results consolidated net sales reached approximately $ 1,166 million during 2013 , increasing by approximately 3 % as compared to prior-year net sales of $ 1,131 million , driven by growth coming from both operating segments . the specialty foods segment 's increase reflected higher retail and foodservice sales , including some benefit from higher pricing . the increase in sales of the glassware and candles segment was influenced by the growth of seasonal candle programs . gross margin increased 11 % to approximately $ 267.1 million from the prior-year comparable total of $ 240.1 million . the higher level of net sales , lower material costs and a more favorable sales mix contributed to the improved gross margin . overall results were also affected by the funds received under cdsoa . story_separator_special_tag the 2013 increase reflected factors such as improved sales volumes , beneficial pricing actions and modestly favorable ingredient costs ( especially for soybean oil , flour and sweeteners ) . we estimate that lower material costs beneficially affected the segment 's results by less than one percent of segment net sales . the 2012 decrease reflected a somewhat less favorable sales mix , as well as comparatively higher costs for a wide variety of raw materials ( especially for soybean oil and flour ) and freight , as partially offset by higher pricing . we estimate that higher material costs in 2012 adversely affected comparative results by approximately 5 % of segment net sales . segment review glassware and candles glassware and candles segment net sales totaled approximately $ 152.1 million during 2013 , as compared to $ 142.4 million in 2012 and $ 167.1 million in 2011. the 2013 increase was influenced by the growth of seasonal candle programs . the 2012 decrease primarily reflected lower candle volumes as we exited certain lower-margin business , including some seasonal candle programs . higher pricing helped to offset some of the 2012 volume declines . the segment recorded operating income of approximately $ 8.0 million in 2013 , $ 2.1 million in 2012 and $ 3.8 million in 2011. the 2013 increase was influenced by a more beneficial customer and product mix , higher sales and production levels and lower wax costs . we estimate that the lower wax costs benefited segment operating margins by over 1 % of segment net sales . the 2012 decrease reflected higher wax costs , lower sales and reduced production levels . these factors were somewhat mitigated by modestly higher pricing and an improved sales mix . we estimate that higher wax costs in the glassware and candles segment adversely affected the segment 's comparative results in 2012 by over 1 % of net sales . corporate expenses the 2013 corporate expenses totaled approximately $ 11.8 million as compared to $ 10.3 million in 2012 and $ 12.0 million in 2011. the 2013 increase was influenced by greater personnel costs . the 2012 decrease reflected lower expenses related to previously idled held-for-sale real estate . financial condition liquidity and capital resources in order to ensure that our capitalization is adequate to support our future internal growth prospects , acquire food businesses consistent with our strategic goals , and maintain cash returns to our shareholders through cash dividends and share repurchases , we will need to maintain sufficient flexibility in our future capital structure . our balance sheet retained fundamental financial strength during 2013 , and we ended the year with approximately $ 123 million in cash and equivalents , along with shareholders ' equity of approximately $ 501 million and no debt . under our unsecured revolving credit facility , we may borrow up to a maximum of $ 120 million at any one time . loans may be used for general corporate purposes . we had no borrowings outstanding under this facility at june 30 , 2013. at june 30 , 2013 , we had approximately $ 3.4 million of standby letters of credit outstanding , which reduced the amount available for borrowing on the unsecured revolving credit facility . the facility expires in april 2017 , and all outstanding amounts are then due and payable . interest is variable based upon formulas tied to libor or an alternative base rate defined in the credit agreement , at our option . we must also pay facility fees that are tied to our then-applicable consolidated leverage ratio . based on the long-term nature of this facility , when we have outstanding borrowings under this facility , we will classify the outstanding balance as long-term debt . the facility contains certain restrictive covenants , including limitations on indebtedness , asset sales and acquisitions , and financial covenants relating to interest coverage and leverage . at june 30 , 2013 , we were in compliance with all applicable provisions and covenants of the facility , and we exceeded the requirements of the financial covenants by substantial margins . 23 we currently expect to remain in compliance with the facility 's covenants for the foreseeable future . a default under the facility could accelerate the repayment of any outstanding indebtedness and limit our access to additional credit available under the facility . such an event could require curtailment of cash dividends or share repurchases , reduce or delay beneficial expansion or investment plans , or otherwise impact our ability to meet our obligations when due . at june 30 , 2013 , we were not aware of any event that would constitute a default under the facility . we believe that internally generated funds and our existing balances in cash and equivalents , in addition to our currently available bank credit arrangements , should be adequate to meet our cash requirements through 2014. if we were to borrow outside of our credit facility under current market terms , our average interest rate may increase significantly and have an adverse effect on our results of operations . for additional information regarding our credit facility , see note 4 to the consolidated financial statements . cash flows replace_table_token_9_th our cash flows for the years 2011 through 2013 are presented in the consolidated statements of cash flows . cash flow generated from operations remains the primary source of financing for our internal growth . cash provided by operating activities in 2013 totaled approximately $ 131.7 million , an increase of 8 % as compared with the prior-year total of $ 122.4 million , which decreased from the 2011 total of $ 147.5 million . the 2013 increase in cash provided by operating activities resulted from higher net income . the 2012 decrease reflected relative changes in working capital , particularly accounts receivable , as well as lower net income .
| review of consolidated operations segment sales mix the relative proportion of sales contributed by each of our business segments can impact a year-to-year comparison of the consolidated statements of income . the following table summarizes the sales mix over each of the last three years : replace_table_token_5_th net sales and gross margin replace_table_token_6_th consolidated net sales for the year ended june 30 , 2013 increased by approximately 3 % to approximately $ 1,166 million from the prior-year total of approximately $ 1,131 million . there were increased sales within both of our segments . the specialty foods segment 's increase reflected higher retail and foodservice sales . retail sales reflected the incremental benefit from some recently introduced food products . the segment 's foodservice sales increased on expanded volumes associated with certain existing customer programs . higher pricing contributed less than one-third of the segment 's net sales growth for 2013. the increased sales of the glassware and candles segment primarily reflected growth in seasonal candle volumes . consolidated net sales for the year ended june 30 , 2012 increased by approximately 4 % over the 2011 total of approximately $ 1,090 million . in 2012 , increased sales within the specialty foods segment were partially offset by lower sales within the glassware and candles segment . the specialty foods segment 's increase reflected higher retail and foodservice sales . higher pricing totaled approximately 4 % of segment net sales for 2012. retail sales also reflected the incremental benefit from some recently introduced food products . the segment 's foodservice sales also increased on expanded volumes associated with programs among existing customers . the decrease in sales of the glassware and candles segment primarily reflected lower candle volumes . in 2012 , we exited certain lower-margin business , including some seasonal 20 candle programs . higher pricing helped to offset some of these declines .
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if the sum of the estimated undiscounted cash flows is less than the carrying amount , an impairment loss is recorded for the difference between the estimated fair value and the carrying amount . if our anticipated holding period for properties , the estimated fair value of properties or other factors change based on market conditions or otherwise , our evaluation of impairment charges may be different and such differences could be material to our consolidated financial statements . the evaluation of anticipated cash flows is subjective and is based , in part , on assumptions regarding future physical occupancy , rental rates , and capital requirements that could differ materially from actual results . plans to hold properties story_separator_special_tag the following discussion and analysis should be read in conjunction with the consolidated financial statements and notes appearing elsewhere in this report . historical results and trends which might appear in the consolidated financial statements should not be interpreted as being indicative of future operations . we are presenting our result of operations for the years ended december 31 , 2020 and 2019. for additional comparison of results of operations for the years ended december 31 , 2019 and december 31 , 2018 , please refer to our annual report on form 10-k filed with the sec on february 19 , 2020. for additional comparison of results of operations for the eight months ended december 31 , 2018 and 2017 , and the fiscal years ended april 30 , 2018 and 2017 , please refer to our transition report on from 10-kt filed with the sec on february 27 , 2019. this and other sections of this report contain forward-looking statements within the meaning of section 27a of the securities act of 1933 , as amended , and section 21e of the exchange act , with respect to our expectations for future periods . forward-looking statements do not discuss historical fact , but instead include statements related to expectations , projections , intentions or other items related to the future . executive summary we own , manage , acquire , redevelop , and develop apartment communities . we primarily focus on investing in markets characterized by stable and growing economic conditions , strong employment , and an attractive quality of life that we believe , in combination , lead to higher demand for our apartment homes and retention of our residents . as of december 31 , 2020 , we owned interests in 67 apartment communities consisting of 11,910 homes as detailed in item 2 - properties . property owned , as presented in the consolidated balance sheet , was $ 1.8 billion at december 31 , 2020 , compared to $ 1.6 billion at december 31 , 2019. renting apartment homes is our primary source of revenue , and our business objective is to provide great homes . we strive to maximize resident satisfaction and retention by investing in high-quality assets in desirable locations and developing and training team members to create vibrant apartment communities through resident-centered operations . we believe that delivering superior resident experiences will drive consistent profitability for our shareholders . we have paid quarterly distributions every quarter since our first distribution in 1971. covid-19 developments the covid-19 pandemic has had an impact on our business since march 2020 , when it spread to many of the markets in which we own properties . our first priority continues to be the health and well-being of our residents , team members , and the communities we serve . we enhanced cleaning protocols at our communities and offices , implemented physical distancing in community common spaces , and instituted remote work guidelines for our team members , all in accordance with state and local guidelines . we are utilizing technology to allow our property teams to interact remotely with prospective residents through virtual leasing . we have provided rent deferrals to residents and rent abatement to commercial tenants who were financially impacted by the covid-19 pandemic . to support our team members working on-site , we have provided additional covid-19 paid time off and enhanced flextime arrangements . certain states and cities , including some of those in which our apartment communities are located , have reacted to the covid-19 pandemic by instituting quarantines , restrictions on travel , shelter-in-place or stay-at-home directives , restrictions on types of businesses that may continue to operate , and restrictions on the types of construction projects that may continue . we can not predict when restrictions currently in place will expire or whether additional restrictions will be imposed in the future . we implemented a plan to safely re-open common spaces in several of our communities while adhering to state and local guidelines , but we recognize that an increase in covid-19 cases in these markets could cause us to close common spaces or take other preventive measures . financial impact of the covid-19 pandemic many companies , especially in urban areas , have extended directives for employees to work from home during the covid-19 pandemic . these extended directives have resulted in decreased traffic to businesses and , in some cases , closures of businesses in urban areas , which has resulted in lower demand and lower rent increases for our five urban based apartment communities . the covid-19 pandemic and these directives have affected our operations and the conduct of business at our apartment communities and offices , but did not have a material impact on our financial condition , operating results , or cash flows for the twelve months ended december 31 , 2020 . story_separator_special_tag we recorded a loss of $ 1.6 million in interest and other income ( loss ) in the year ended december 31 , 2020 , compared to income of $ 2.1 million in the prior year . the decrease was primarily due to a $ 3.4 million loss from certain marketable securities . gain ( loss ) on sale of real estate and other investments . in the years ended december 31 , 2020 and 2019 , we recorded gains on sale of real estate and other investments in continuing operations of $ 25.5 million and $ 97.6 million , respectively , primarily related to increased dispositions in 2019. gain ( loss ) on litigation settlement . in the year ended december 31 , 2019 , we recorded a gain on litigation settlement of $ 6.6 million from the settlement of a construction defect claim . 31 funds from operations we believe that funds from operations ( “ ffo ” ) , which is a standard supplemental measure for equity real estate investment trusts , is helpful to investors in understanding our operating performance , primarily because its calculation does not assume the value of real estate assets diminishes predictably over time , as implied by the historical cost convention of gaap and the recording of depreciation . we use the definition of ffo adopted by the national association of real estate investment trusts , inc. ( “ nareit ” ) . nareit defines ffo as net income or loss calculated in accordance with gaap , excluding : depreciation and amortization related to real estate ; gains and losses from the sale of certain real estate assets ; and impairment write-downs of certain real estate assets and investments in entities when the impairment is directly attributable to decreases in the value of depreciable real estate held by the entity . the exclusion in nareit 's definition of ffo of impairment write-downs and gains and losses from the sale of real estate assets helps to identify the operating results of the long-term assets that form the base of our investments , and assists management and investors in comparing those operating results between periods . due to limitations of the nareit ffo definition , we have made certain interpretations in applying the definition . we believe all such interpretations not specifically provided for in the nareit definition are consistent with the definition . nareit 's ffo white paper 2018 restatement clarified that impairment write-downs of land related to a reit 's main business are excluded from ffo and a reit has the option to exclude impairment write-downs of assets that are incidental to the main business . while ffo is widely used by us as a primary performance metric , not all real estate companies use the same definition of ffo or calculate ffo the same way . accordingly , ffo presented here is not necessarily comparable to ffo presented by other real estate companies . ffo should not be considered as an alternative to net income or any other gaap measurement of performance , but rather should be considered as an additional , supplemental measure . ffo also does not represent cash generated from operating activities in accordance with gaap , nor is it indicative of funds available to fund all cash needs , including the ability to service indebtedness or make distributions to shareholders . net loss available to common shareholders for the year ended december 31 , 2020 decreased to $ 1.8 million compared to net income of $ 71.8 million for the year ended december 31 , 2019. ffo applicable to common shares and units for the year ended december 31 , 2020 , decreased to $ 47.4 million compared to $ 52.9 million for the year ended december 31 , 2019 , a change of 10.4 % , primarily due to a $ 6.6 million gain on litigation settlement in the prior year which did not recur in the current year , as well as decreased noi from sold properties and increased loss on marketable securities in the current year . the decrease in ffo was partially offset by increases in noi from same-store and non-same-store communities and reductions in interest expense and prepayment penalties . for a comparison of ffo applicable to common shares and units for the years ended december 31 , 2019 and 2018 , refer to our annual report on form 10-k filed with the sec on february 19 , 2020. for a comparison of ffo applicable to common shares and units for the eight months ended december 31 , 2018 and 2017 and the fiscal years ended april 30 , 2018 and 2017 , please refer to our transition report on from 10-kt filed with the sec on february 27 , 2019 . 32 reconciliation of net income available to common shareholders to funds from operations replace_table_token_13_th liquidity and capital resources overview our primary sources of liquidity are cash and cash equivalents on hand and cash flows generated from operations . other sources include availability under our unsecured lines of credit , proceeds from property dispositions , including restricted cash related to net tax deferred proceeds , offerings of preferred and common shares under our shelf registration statement , including offerings of common shares under our 2019 atm program , and long-term unsecured debt and secured mortgages . our primary liquidity demands are normally-recurring operating and overhead expenses , debt service and repayments , capital improvements to our communities , distributions to the holders of our preferred shares , common shares , series d preferred units , and units , value-add redevelopment , common and preferred share buybacks and unit redemptions , and acquisition of additional communities . we intend to maintain a strong balance sheet and preserve our financial flexibility , which we believe should enhance our ability to capitalize on appropriate investment opportunities as they may arise .
| highlights . for the year ended december 31 , 2020 , our highlights included the following : net loss was $ 0.15 per diluted share for the year ended december 31 , 2020 , compared to net income of $ 6.00 per diluted share for the year ended december 31 , 2019 ; same-store year-over-year revenue growth of 2.1 % , driven by 1.7 % growth in rental revenue and 0.4 % growth in occupancy ; same-store net operating income growth of 1.8 % ; funded $ 18.5 million of multifamily construction loans ; announced nashville as one of our target markets ; and rebranded the company as centerspace to reflect both the transformation of the company and its vision for the future . acquisitions and dispositions . during the year ended december 31 , 2020 , we completed the following transactions in furtherance of our strategic plan : continued our focus on key growth markets , expanding in minneapolis , minnesota and denver , colorado , acquiring a total of two apartment communities in these markets , consisting of 647 homes , for an aggregate purchase price of $ 191.0 million ; acquired the remaining noncontrolling interest in 71 france for $ 12.2 million ; 27 disposed of four apartment communities in grand forks , north dakota , a commercial property , and a parcel of unimproved land for an aggregate sale price of $ 44.3 million . financing transactions . during the year ended december 31 , 2020 , we completed the following financing transactions : we issued 829,078 common shares under the 2019 atm program for total consideration , net of commissions and issuance costs , of approximately $ 59.2 million . outlook we intend to continue our focus on maximizing the financial performance of the communities in our existing portfolio . to accomplish this , we have introduced initiatives to expand our operating margin by enhancing the resident experience , making value-add investments , and implementing technology solutions and expense controls .
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impairment on the intangibles is measured by comparing the partnership 's total investment balance after impairment of investments in local limited partnerships to the sum of the total of the remaining low income housing tax credits allocated to the partnership and the estimated residual value of the investments . if an impairment loss related to the acquisition expenses is recorded , the accumulated amortization is reduced to zero at that time . as of all periods presented , the fees have been fully amortized or impaired . non-accountable acquisition costs of 2 % of the gross proceeds from the sale of partnership units as an expense reimbursement in connection with the acquisition of local limited partnerships . as of march 31 , 2020 and 2019 , the partnership incurred cumulative acquisition costs of $ 419,620 which were included in investments in local limited partnerships . impairment on the intangibles is measured by comparing the partnership 's total investment balance after impairment of investments in local limited partnerships to the sum of the total of the remaining low income housing tax credits allocated to the partnership and the estimated residual value of the investments . if an impairment loss related to the acquisition expenses is recorded , the accumulated amortization is reduced to zero at that time . as of all periods presented , the costs have been fully amortized or impaired . an annual asset management fee accrues in an amount equal to 0.5 % of the invested assets of the partnership , as defined . “ invested assets ” is defined as the sum of the partnership 's investment in local limited partnerships , plus the reserves of the partnership of up to 5 % of gross partnership unit sales proceeds , and the partnership 's allocable share of the amount of the mortgage loans and other debts related to the housing complexes owned by such local limited partnerships . management fees of $ 41,576 , $ 55,686 , and $ 65,975 were incurred during the years ended march 31 , 2020 , 2019 and 2018 , respectively . payments of $ 0 , $ 60,000 , and $ 96,706 were made during the years ended march 31 , 2020 , 2019 and 2018 , respectively . the partnership will reimburse the general partner or its affiliates for operating expenses incurred on behalf of the partnership and paid for by the general partner or its affiliates on behalf of the partnership . operating expense reimbursements were $ 0 , $ 101,270 , and $ 29,315 during the years ended march 31 , 2020 , 2019 and 2018 , respectively . a subordinated disposition fee will be paid in an amount equal to 1 % of the sales price of real estate sold . payment of this fee is subordinated to the limited partners receiving a return on investment ( as defined in the partnership agreement ) and is payable only if the general partner or its affiliates render services in the sales effort . no disposition fees have been incurred for the three years presented . 42 wnc housing tax credit fund vi , l.p. , series 13 ( a california limited partnership ) notes to financial statements - continued for the years ended march 31 , 2020 , 2019 and 2018 note 3 - related party transactions , continued wnc holding , llc ( “ holding ” ) , a wholly owned subsidiary of associates , acquires investments in local limited partnerships using funds from a secured warehouse line of credit . such investments are warehoused by holding until transferred to syndicated partnerships as investors are identified . the transfer of the warehoused investments is typically achieved through the admittance of the syndicated partnership as the limited partner of the local limited partnership and the removal of holding as the limited partner . consideration paid to holding for the transfer of its interest in the local limited partnership generally consists of cash reimbursement of capital contribution installment ( s ) paid to the local limited partnerships by holding , assumption of the remaining capital contributions payable due to the local limited partnership and financing costs and interest charged by holding . as of all periods presented , the partnership incurred financing costs of $ 772 and interest of $ 267 which are included in investments in local limited partnerships . impairment on the intangibles is measured by comparing the partnership 's total investment balance after impairment of investments in local limited partnerships to the sum of the total of the remaining low income housing tax credits allocated to the partnership . if an impairment loss related to the capitalized warehouse interest and costs are recorded , the accumulated amortization is reduced to zero at that time . as of all periods presented , the financing costs and interest were fully amortized or impaired . the accrued fees and expenses due to general partner and affiliates consist of the following at : replace_table_token_14_th the partnership currently has insufficient working capital to fund its operations . associates has agreed to continue providing advances sufficient enough to fund the operations and working capital requirements of the partnership through june 30 , 2021 . 43 wnc housing tax credit fund story_separator_special_tag forward looking statements with the exception of the discussion regarding historical information , this “ management 's discussion and analysis of financial condition and results of operations ” and other discussions elsewhere in this form 10-k contain forward looking statements . such statements are based on current expectations subject to uncertainties and other factors which may involve known and unknown risks that could cause actual results of operations to differ materially from those projected or implied . story_separator_special_tag the partnership currently records the amount of its investment in these local limited partnerships as an asset on its balance sheets , recognizes its share of partnership income or losses in the statements of operations , and discloses how it accounts for material types of these investments in its financial statements . the partnership 's balance in investment in local limited partnerships , plus the risk of recapture of tax credits previously recognized on these investments , represents its maximum exposure to loss . the partnership 's exposure to loss on these local limited partnerships is mitigated by the condition and financial performance of the underlying housing complexes as well as the strength of the local general partners and their guarantee against credit recapture to the investors in the partnership . 20 income taxes the partnership has elected to be treated as a pass-through entity for income tax purposes and , as such , is not subject to income taxes . rather , all items of taxable income , deductions and tax credits are passed through to and are reported by its owners on their respective income tax returns . the partnership 's federal tax status as a pass-through entity is based on its legal status as a partnership . accordingly , the partnership is not required to take any tax positions in order to qualify as a pass-through entity . the partnership is required to file and does file tax returns with the internal revenue service and other taxing authorities . accordingly , these financial statements do not reflect a provision for income taxes and the partnership has no other tax positions which must be considered for disclosure . income tax returns filed by the partnership are subject to examination by the internal revenue service for a period of three years . while no income tax returns are currently being examined by the internal revenue service , tax years since 2016 remain open . impact of recent accounting pronouncements i n may 2014 , the fasb issued accounting standards update 2014-09 , revenue from contracts with customers ( topic 606 ) ( “ asu 2014-09 ” ) , as amended by subsequent accounting standard updates ( collectively , “ asc 606 ” ) . the partnership adopted asc 606 during 2019 and applied the guidance on a retrospective basis . there was no impact as a result of the adoption of asc 606 to recognize revenue on the financial statements of the partnership as of and for the periods ended december 31 , 2019 and 2018 as the reporting fee income is immaterial . in august 2016 , the financial accounting standards board ( the “ fasb ” ) issued accounting standards update 2016-15 statement of cash flows ( topic 230 ) , classification of certain cash receipts and cash payments . the partnership adopted the update on a retrospective basis . the effect of the adoption was the application of an accounting policy election to classify distributions received from investees using the nature of the distribution approach . the partnership classifies distributions from tax credit investments as returns on investment because the design of the local limited partnership is to generate tax credits and losses rather than income from operations . application of the accounting policy election had no impact on the presentation in the statements of cash flows in the current or prior reporting periods . certain risks and uncertainties see item 1a for a discussion of risks regarding the partnership . to date , certain local limited partnerships have incurred significant operating losses and have working capital deficiencies . in the event these local limited partnerships continue to incur significant operating losses , additional capital contributions by the partnership and or the local general partners may be required to sustain the operations of such local limited partnerships . if additional capital contributions are not made when they are required , the partnership 's investment in certain of such local limited partnerships could be lost , and the loss and recapture of the related low income housing tax credits could occur . anticipated future and existing cash resources of the partnership are not sufficient to pay existing liabilities of the partnership . however , substantially all of the existing liabilities of the partnership are payable to the general partner and or its affiliates . though the amounts payable to the general partner and or its affiliates are contractually currently payable , the partnership anticipates that the general partner and or its affiliates will not require the payment of these contractual obligations until capital reserves are in excess of the aggregate of then existing contractual obligations and then anticipated future foreseeable obligations of the partnership . the partnership would be adversely affected should the general partner and or its affiliates demand current payment of the existing contractual obligations and or suspend services for this or any other reason . the spread of a novel strain of coronavirus ( covid-19 ) has caused significant business disruptions in the united states beginning in the first quarter of 2020. the economic impact of the business disruptions caused by covid-19 is uncertain . the extent of any effects these disruptions may have on the operations and financial performance of the partnership will depend on future developments , including possible impacts on the operations of the underlying real estate of its investments , which can not be determined . 21 financial condition the partnership 's assets at march 31 , 2020 consisted of $ 229,000 in cash and cash equivalents and investments in local limited partnerships of $ 52,000 ( see “ method of accounting for investments in local limited partnerships ) .
| results of operations year ended march 31 , 2020 compared to year ended march 31 , 2019 the partnership 's net loss for the year ended march 31 , 2020 was $ 703,000 , reflecting a decrease of $ 63,000 from the net loss for the year ended march 31 , 2019 of $ 766,000. the decrease in net loss is partially due to a $ 65,000 decrease in gain on sale of local limited partnerships for the year ended march 31 , 2020. the gain and loss on sale of local limited partnerships will vary from period to period depending on the values and sale prices of the housing complexes that have been identified for disposition and the closing dates of such transactions . additionally , impairment loss decreased by $ 72,000 for the year ended march 31 , 2020. impairment loss varies from year to year depending on the operations of the local limited partnerships and the amount of low income housing tax credits that are allocated each year to the partnership . there was an increase in accounting and legal fees of $ 6,000 for the year ended march 31 , 2020 compared to the year ended march 31 , 2019 due to timing of work performed . asset management fees decreased by $ 14,000 during the year ended march 31 , 2020. the fees are calculated based on the value of invested assets , which decreased due to the sales of local limited partnerships .
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the company elected to present a single statement of operations and comprehensive income for quarterly reporting and separate statements for annual reports beginning in the first quarter of fiscal 2012. in february 2013 , the fasb issued an update to existing guidance related to the reporting of amounts reclassified out of accumulated other comprehensive income that requires presentation of the effects on the line items of net income of significant amounts reclassified out of accumulated other comprehensive income , but only if the item reclassified is required under story_separator_special_tag this management 's discussion and analysis of financial condition and results of operations contains forward-looking statements that involve risks and uncertainties . please see “ cautionary statement ” on page 1 for a discussion of the uncertainties , risks and assumptions associated with these statements . you should read the following discussion in conjunction with our historical consolidated financial statements and the notes thereto appearing elsewhere in this annual report on form 10-k. the results of operations for the periods reflected herein are not necessarily indicative of results that may be expected for future periods , and our actual results may differ materially from those discussed in the forward-looking statements as a result of various factors , including but not limited to those listed under “ risk factors ” in item 1a of this annual report on form 10-k and included elsewhere in this annual report on form 10-k. story_separator_special_tag t ; '' > from 10.2 % for fiscal 2011 primarily as a result of increased average store sales and the 53rd week . distribution and fulfillment expenses increased as a percentage of net sales to 2.0 % for fiscal 2012 from 1.9 % for fiscal 2011 primarily due to incremental expenses to support growth initiatives surrounding the reconfiguration of the columbus distribution center and the expansion of the dsw.com fulfillment center . gross profit for the affiliated business group division increased as a percentage of net sales for fiscal 2012 primarily due to a decrease in occupancy expense . we incur occupancy expense of approximately 20 % of net sales for our affiliated business group . operating expenses . operating expenses as a percentage of net sales were 21.3 % and 22.2 % for fiscal 2012 and fiscal 2011 , respectively . in the fourth quarter of fiscal 2012 , dsw increased its estimate of a lease impairment in a lease assumed in the merger with rvi by $ 6.0 million based on our expectation of reduced future sublease income and an expected increase in real estate taxes . this increase was partially offset by dsw 's receipt of a court approved award of damages of $ 5.3 million from our insurance carrier for a denied claim related to the 2005 data theft , partially offset by related expense of $ 1.3 million . 21 excluding the impact of the award of damages and other rvi operating expenses noted above , operating expenses as a percentage of net sales was 21.2 % for fiscal 2012 . excluding the impact of dsw and rvi merger-related transaction costs and other rvi-related expenses of $ 17.3 million in fiscal 2011 , operating expenses as a percentage of net sales were 21.3 % for fiscal 2011 . of the 10 basis point leverage , we leveraged home office overhead expenses by 70 basis points primarily due to reduced incentive compensation , which was partially offset by a deleverage of 60 basis points related to new store and store expenses . change in fair value of derivatives . during fiscal 2012 and 2011 , the company recorded a non-cash charge of $ 6.1 million and $ 12.3 million , respectively , representing the changes in fair value of outstanding warrants , which were settled during fiscal 2012. during fiscal 2011 , the company recorded a non-cash charge of $ 41.7 million representing the change in the fair value of the conversion feature of the pies , which were settled during fiscal 2011. the company utilized the black-scholes pricing model to estimate the fair value of the derivatives . the change in the fair value of the derivatives was primarily due to the increases in share price . interest income ( expense ) , net . as a result of the elimination of pies interest expense due to the settlement of the pies in the third quarter of fiscal 2011 , we now have interest income , net for fiscal 2012 rather than interest expense , net for fiscal 2011 . in the third quarter of fiscal 2012 , we also received interest of $ 1.9 million related to the award of damages from our insurance carrier . income taxes . our effective tax rate for fiscal 2012 was 39.7 % , compared to a benefit of 40.8 % for fiscal 2011 . the effective tax rate of 39.7 % for fiscal 2012 reflects the impact of state and local taxes and the change in fair value of the warrants , which are included for book income but not in tax income . the effective tax rate of a benefit of 40.8 % for fiscal 2011 was favorably impacted by the release of the valuation allowance and other merger-related tax items . income from discontinued operations - value city department stores . there was no income from discontinued operations for fiscal 2012 related to value city department stores . income from discontinued operations of $ 0.2 million in fiscal 2011 was primarily due to revaluation of guarantees due to changes in facts and circumstances related to the guarantees . income ( loss ) from discontinued operations - filene 's basement . income from discontinued operations of $ 1.3 million in fiscal 2012 was primarily due to reduction in expected payments under our lease guarantees for filene 's basement . loss from discontinued operations , net of tax , of $ 5.0 million during fiscal 2011 was primarily due to lease guarantees , net of tax , partially offset by a distribution from the debtors ' estates . noncontrolling interests . story_separator_special_tag the $ 0.2 million and $ 2.7 million reduction in the loss from discontinued operations in fiscal 2011 and fiscal 2010 , respectively , was primarily due to revaluation of guarantees due to changes in facts and circumstances related to the guarantees . ( loss ) income from discontinued operations - filene 's basement . loss from discontinued operations of $ 5.0 million in fiscal 2011 was primarily due to lease guarantees , net of tax , partially offset by a distribution from the debtors ' estates . income from discontinued operations , net of tax , of $ 3.9 million during fiscal 2010 is primarily due to an initial distribution from the debtors ' estates . noncontrolling interests . for fiscal 2011 and fiscal 2010 , net income was impacted by $ 20.7 million and $ 40.7 million , respectively , to reflect that portion of the income attributable to dsw minority shareholders . non-gaap financial measures dsw utilizes merchandise margin , a non-gaap financial measure , to explain its gross profit performance . management believes this non-gaap measure is an indication of the company 's performance as the measure provides a consistent means of comparing performance between periods and competitors as retailers differ on their definition of cost of sales . management uses this non-gaap measure to assist in the evaluation of the performance of our segments and to make operating decisions . within management 's discussion and analysis , dsw discloses merchandise margin , store occupancy expenses and distribution and fulfillment expenses , which reconcile to gross profit . liquidity and capital resources overview our primary ongoing cash flow requirements are for inventory purchases , capital expenditures made in connection with our expansion , improving our information systems , the remodeling of existing stores and infrastructure growth . our working capital and inventory levels typically build seasonally . we believe that we have sufficient financial resources and access to financial resources at this time . we are committed to a cash management strategy that maintains liquidity to adequately support the operation of the business , our growth strategy and to withstand unanticipated business volatility . we believe that cash generated from dsw operations , together with our current levels of cash and investments as well as availability under our revolving credit facility , should be sufficient to maintain our ongoing operations , support seasonal working capital requirements , fund capital expenditures related to projected business growth and continue payments of dividends to our shareholders . net working capital . net working capital is defined as current assets less current liabilities . net working capital remained 24 relatively flat at $ 546.5 million as of february 2 , 2013 compared to $ 560.5 million as of january 28 , 2012 . as of february 2 , 2013 and january 28 , 2012 , the current ratio was 3.0 and 2.8 , respectively . operating activities net cash provided by operations in fiscal 2012 increased to $ 258.6 million from $ 214.2 million for fiscal 2011 . the increase in net cash provided by operations was driven primarily by dsw 's utilization of rvi 's federal net operating losses and tax credits to offset its taxable income , as well as other changes in working capital . the utilization of net operating losses and tax credits generated significant cash tax savings , and we believe should continue to generate cash tax savings in the first half of fiscal 2013. net cash provided by operations in fiscal 2011 increased to $ 214.2 million from $ 127.0 million for fiscal 2010 . the increase in our income from continuing operations was $ 148.5 million , which was higher than our increase in net cash provided by operations , as it was driven by a non-cash deferred income tax benefit . the merger allows dsw the opportunity to utilize rvi 's federal net operating losses and tax credits to offset future taxable income , which generated significant cash tax savings in fiscal 2011. we operate all our stores and our fulfillment center from leased facilities . all lease obligations are accounted for as operating leases . we disclose the minimum payments due under operating leases in the notes to the consolidated financial statements included elsewhere in this annual report on form 10-k. as of the fourth quarter of fiscal 2012 , we own our corporate office headquarters and our distribution center . although our plan for continued expansion could place increased demands on our financial , managerial , operational and administrative resources and result in increased demands on management , we do not believe that our anticipated growth plan will have an unfavorable impact on our operations or liquidity . uncertainty in the united states economy could result in reductions in customer traffic and comparable sales in our existing stores with the resultant increase in inventory levels and markdowns . reduced sales may result in reduced operating cash flows if we are not able to appropriately manage inventory levels or leverage expenses . these potential negative economic conditions may also affect future profitability and may cause us to reduce the number of future store openings , impair goodwill or impair long-lived assets . investing activities for fiscal 2012 , cash used in investing activities amounted to $ 119.4 million compared to $ 139.6 million for fiscal 2011 . during fiscal 2012 , $ 353.8 million of cash was used to purchase available-for-sale and held-to-maturity securities while $ 367.7 million of cash was generated by the sale of available-for-sale and held-to-maturity securities . excluding the purchase of our corporate office headquarters and distribution center during fiscal 2012 , we incurred $ 99.8 million in capital expenditures , of which $ 69.3 million related to stores and $ 30.5 million related to information technology , the reconfiguration of the columbus distribution center , the expansion of the dsw.com fulfillment center and business infrastructure .
| executive summary - fiscal 2012 during fiscal 2012 , we generated a 5.5 % increase in comparable sales and an 11.5 % increase in total sales for the fifty-three week period . the fiscal 2012 comparable sales increase is based on a fifty-two week period and is in addition to a comparable sales increase of 8.3 % for the same period last year . the increase in comparable sales was a result of an increase in traffic , conversion and average unit retail . all merchandise categories reported a positive comparable sales performance , with no single category driving the overall sales increase . in fiscal 2012 , dsw 's merchandise margin rate decreased 60 basis points as a percentage of net sales over fiscal 2011 as a result of increased markdowns . overall gross profit as a percentage of net sales decreased 20 basis points . occupancy leverage partially offset the decrease in merchandise margin rate due to increased average store sales and the 53rd week while distribution and fulfillment expenses were essentially flat . we have continued making investments in our business that are critical to long-term growth . in fiscal 2012 , we purchased our corporate office headquarters , our distribution facility and a trailer parking lot for $ 72 million . excluding the purchase of those properties , we invested $ 99.8 million in capital expenditures compared to $ 76.9 million during fiscal 2011 . our capital expenditures during fiscal 2012 were primarily related to opening 39 new stores , the distribution center reconfiguration , expansion of the fulfillment center , store remodels and business infrastructure . we plan to open 25 to 30 stores in fiscal 2013 and believe we have the potential to operate 450 to 500 stores . as of february 2 , 2013 , we operated 364 dsw stores , dsw.com and shoe departments in 260 stein mart stores , 83 gordmans stores and one frugal fannie 's store .
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45 since april 30 , 2011 , pillar , the sole shareholder of which is realty advisors , llc , a nevada limited liability company , the sole member of which is rai , a nevada corporation , the sole shareholder of which is mrhi , a nevada corporation , the sole shareholder of which is a trust known as the may trust , became the story_separator_special_tag the following discussion should be read in conjunction with the financial statements and notes thereto appearing elsewhere in this report . the annual report on form 10-k contains forward-looking statements within the meaning of the federal securities laws , principally , but not only , under the captions “ business ” , “ risk factors ” and “ management 's discussion and analysis of financial condition and results of operations. ” we caution investors that any forward-looking statements in this report , or which management may make orally or in writing from time to time , are based on management 's beliefs and on assumptions made by , and information currently available to , management . when used , the words “ anticipate ” , “ believe ” , “ expect ” , “ intend ” , “ may ” , “ might ” , “ plan ” , “ estimate ” , “ project ” , “ should ” , “ will ” , “ result ” and similar expressions which do not relate solely to historical matters are intended to identify forward-looking statements . these statements are subject to risks , uncertainties and assumptions and are not guarantees of future performance , which may be affected by known and unknown risks , trends , uncertainties and factors that are beyond our control . should one or more of these risks or uncertainties materialize , or should underlying assumptions prove incorrect , actual results may vary materially from those anticipated , estimated or projected . we caution you that , while forward-looking statements reflect our good faith beliefs when we make them , they are not guarantees of future performance and are impacted by actual events when they occur after we make such statements . we expressly disclaim any responsibility to update our forward-looking statements , whether as a result of new information , future events or otherwise . accordingly , investors should use caution in relying on past forward-looking statements , which are based on results and trends at the time they are made , to anticipate future results or trends . some of the risks and uncertainties that may cause our actual results , performance or achievements to differ materially from those expressed or implied by forward-looking statements include , among others , the following : ● general risks affecting the real estate industry ( including , without limitation , the inability to enter into or renew leases , dependence on tenants ' financial condition , and competition from other developers , owners and operators of real estate ) ; ● risks associated with the availability and terms of financing and the use of debt to fund acquisitions and developments ; ● failure to manage effectively our growth and expansion into new markets or to integrate acquisitions successfully ; ● risks and uncertainties affecting property development and construction ( including , without limitation , construction delays , cost overruns , inability to obtain necessary permits and public opposition to such activities ) ; ● risks associated with downturns in the national and local economies , increases in interest rates , and volatility in the securities markets ; ● costs of compliance with the americans with disabilities act and other similar laws and regulations ; ● potential liability for uninsured losses and environmental contamination ; ● risks associated with our dependence on key personnel whose continued service is not guaranteed ; and ● the other risk factors identified in this form 10-k , including those described under the caption “ risk factors. ” the risks included here are not exhaustive . other sections of this report , including part i item 1a . “ risk factors , ” include additional factors that could adversely affect our business and financial performance . moreover , we operate in a very competitive and rapidly changing environment . new risk factors emerge from time to time and it is not possible for management to predict all such risk factors , nor can we assess the impact of all such risk factors on our business or the extent to which any factor , or combination of factors , may cause actual results to differ materially from those contained in any forward-looking statements . given these risks and uncertainties , investors should not place undue reliance on forward-looking statements as a prediction of actual results . investors should also refer to our quarterly reports on form 10-q for future periods and current reports on form 8-k as we file them with the sec , and to other materials we may furnish to the public from time to time through forms 8-k or otherwise . overview we are an externally advised and managed real estate investment company that owns a diverse portfolio of income-producing properties and land held for development . the company 's portfolio of income-producing properties includes residential apartment communities , office buildings and other commercial properties . our investment strategy includes acquiring existing income-producing properties as well as developing new properties on land already owned or acquired for a specific development project . we acquire land primarily in in-fill locations or high-growth suburban markets . we are an active buyer and seller of real estate and during 2017 we acquired $ 41.7 million and sold $ 11.2 million of land and income-producing properties . as of december 31 , 2017 , we owned 8,427 units in fifty-one residential apartment communities , seven commercial properties comprising approximately 1.7 million rentable square feet , and a golf course . in addition , we own 3,466 acres of land held for development . story_separator_special_tag we record acquired “ above- ” and “ below-market ” leases at their fair values ( using a discount rate which reflects the risks associated with the leases acquired ) equal to the difference between ( 1 ) the contractual amounts to be paid pursuant to each in-place lease and ( 2 ) management 's estimate of fair market lease rates for each corresponding in-place lease , measured over a period equal to the remaining term of the lease for above-market leases and the initial term plus the term of any below-market fixed rate renewal options for below-market leases . other intangible assets acquired include amounts for in-place lease values that are based on our evaluation of the specific characteristics of each tenant 's lease . factors to be considered include estimates of carrying costs during hypothetical expected lease-up periods considering current market conditions , and costs to execute similar leases . in estimating carrying costs , we include real estate taxes , insurance and other operating expenses and estimates of lost rentals at market rates during the expected lease-up periods , depending on local market conditions . in estimating costs to execute similar leases , we consider leasing commissions , legal and other related expenses . transfers to or from our parent , arl , or other related parties reflect a basis equal to the cost basis in the asset at the time of the sale . depreciation and impairment real estate is stated at depreciated cost . the cost of buildings and improvements includes the purchase price of property , legal fees and other acquisition costs . costs directly related to the development of properties are capitalized . capitalized development costs include interest , property taxes , insurance , and other direct project costs incurred during the period of development . a variety of costs are incurred in the acquisition , development and leasing of properties . after determination is made to capitalize a cost , it is allocated to the specific component of a project that is benefited . determination of when a development project is substantially complete and capitalization must cease involves a degree of judgment . our capitalization policy on development properties is guided by asc topic 835-20 “ interest - capitalization of interest ” and asc topic 970 “ real estate—general ” . the costs of land and buildings under development include specifically identifiable costs . the capitalized costs include pre-construction costs essential to the development of the property , development costs , construction costs , interest costs , real estate taxes , salaries and related costs and other costs incurred during the period of development . we consider a construction project as substantially completed and held available for occupancy upon the receipt of certificates of occupancy , but no later than one year from cessation of major construction activity . we cease capitalization on the portion ( 1 ) substantially completed and ( 2 ) occupied or held available for occupancy , and we capitalize only those costs associated with the portion under construction . management reviews its long-lived assets used in operations for impairment when there is an event or change in circumstances that indicates impairment in value . an impairment loss is recognized if the carrying amount of its assets is not recoverable and exceeds its fair value . fair value is determined by a recent appraisal , comparable based upon prices for similar assets , executed sales contract , a present value and or a valuation technique based upon a multiple of earnings or revenue . if such impairment is present , an impairment loss is recognized based on the excess of the carrying amount of the asset over its fair value . the evaluation of anticipated cash flows is highly subjective and is based in part on assumptions regarding future occupancy , rental rates and capital requirements that could differ materially from actual results in future periods . if we determine that impairment has occurred , the affected assets must be reduced to their face value . real estate assets held for sale we classify properties as held for sale when certain criteria are met in accordance with gaap . at that time , we present the assets and obligations of the property held for sale separately in our consolidated balance sheet and we cease recording depreciation and amortization expense related to that property . properties held for sale are reported at the lower of their carrying amount or their estimated fair value , less estimated costs to sell . we did not have any real estate assets classified as held for sale at december 31 , 2017 or 2016 . 21 effective as of january 1 , 2015 , we adopted the revised guidance in accounting standards update no . 2014-08 regarding discontinued operations . for sales of real estate or assets classified as held for sale after january 1 , 2015 , we will evaluate whether a disposal transaction meets the criteria of a strategic shift and will have a major effect on our operations and financial results to determine if the results of operations and gains on sale of real estate will be presented as part of our continuing operations or as discontinued operations in our consolidated statements of operations . if the disposal represents a strategic shift , it will be classified as discontinued operations for all periods presented ; if not , it will be presented in continuing operations . any properties that are treated as “ subject to sales contract ” on the consolidated balance sheets and are listed in detail in schedule iii , “ real estate and accumulated depreciation ” are those in which we have not recognized the legal sale according to the guidance in asc 360-20 due to various factors , disclosed in item 1 “ significant real estate acquisitions/dispositions and financing. ” any sale transaction where the guidance reflects that a sale had not occurred , the asset involved in the transaction , including the debt , if appropriate , and property operations , remained on the books of the company .
| results of operations the discussion of our results of operations is based on management 's review of operations , which is based on our segments . our segments consist of apartments , commercial buildings , land and other . for discussion purposes , we break these segments down into the following sub-categories ; same property portfolio , acquired properties , and developed properties in the lease-up phase . the same property portfolio consists of properties that were held by us for the entire period for both years being compared . the acquired property portfolio consists of properties that we acquired but have not held for the entire period for both periods being compared . developed properties in the lease-up phase consist of completed projects that are being leased-up . as we complete each phase of the project , we lease-up that phase and include those revenues in our continued operations . once a developed property becomes leased-up ( 80 % or more ) and is held the entire period for both years under comparison , it is considered to be included in the same property portfolio . income- producing properties that we have sold during the year are reclassified to discontinued operations for all periods presented . the other segment consists of revenue and operating expenses related to the notes receivable and corporate entities . the following discussion is based on our consolidated statements of operations for the years ended december 31 , 2017 , 2016 , and 2015 as included in item 8 . “ consolidated financial statements and supplementary data ” . the prior year 's property portfolios have been adjusted for subsequent sales . continuing operations relates to income-producing properties that were held during those years as adjusted for sales in the subsequent years . 23 at december 31 , 2017 , 2016 and 2015 , we owned or had interests in a portfolio of fifty-nine , fifty-eight and fifty-seven income-producing properties , respectively .
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we develop semiconductor devices with a focus on complex digital and mixed signal complementary metal oxide semiconductor based devices and analog iii-v based products . we have a history of innovation in the semiconductor industry and offer thousands of products that are used in end products such as enterprise and data center networking , home connectivity , set-top boxes , broadband access , telecommunication equipment , smartphones and base stations , data center servers and storage systems , factory automation , power generation and alternative energy systems , and electronic displays . our infrastructure software solutions enable customers to plan , develop , automate , manage and secure applications across mainframe , distributed , mobile and cloud platforms . we offer a cyber security solutions portfolio , including endpoint , network , information and identity security solutions . we also offer mission critical fibre channel storage area networking ( “ fc san ” ) products and related software in the form of modules , switches and subsystems incorporating multiple semiconductor products . during the first quarter of our fiscal year ended november 1 , 2020 ( “ fiscal year 2020 ” ) , we changed our organizational structure , resulting in two reportable segments : semiconductor solutions and infrastructure software . in addition , during the fourth quarter of our fiscal year 2020 , we refined our allocation methodology for certain selling , general and administrative expenses to more closely align these costs with the segment benefiting from the shared expenses . prior period segment results have been recast to conform to the current presentation . our strategy is to combine best-of-breed technology leadership in semiconductor and infrastructure software solutions , with unmatched scale , on a common sales and administrative platform to deliver a comprehensive suite of infrastructure technology products to the world 's leading business and government customers . we seek to achieve this through responsibly financed acquisitions of category-leading businesses and technologies , as well as investing extensively in research and development , to ensure our products retain their technology leadership . this strategy results in a robust business model designed to drive diversified and sustainable operating and financial results . the demand for our products has been affected in the past , and is likely to continue to be affected in the future , by various factors , including the following : gain or loss of significant customers ; general economic and market conditions in the industries and markets in which we compete ; our distributors ' product inventory and end customer demand ; the rate at which our present and future customers and end-users adopt our products and technologies in our target markets , and the rate at which our customers ' products that include our technology are accepted in their markets ; the shift to cloud-based it solutions and services , such as hyperscale computing , which may adversely affect the timing and volume of sales of our products for use in traditional enterprise data centers ; and the timing , rescheduling or cancellation of expected customer orders . our fiscal year 2020 and our fiscal year ended november 3 , 2019 ( “ fiscal year 2019 ” ) were 52-week fiscal years compared to our fiscal year ended november 4 , 2018 ( “ fiscal year 2018 ” ) , which was a 53-week fiscal year . covid-19 update in response to the ongoing covid-19 pandemic and the various resulting government directives , we have taken extensive measures to protect the health and safety of our employees and contractors at our facilities . we modified our workplace practices globally , which resulted in most of our employees working remotely for an extended periods of time . while we have implemented a phased-in return of employees to many of our facilities , if the spread of covid-19 worsens significantly , we may need to further limit onsite operations or otherwise modify our business practices . we continue to monitor the implications of the covid-19 pandemic on our business , as well as our customers ' and suppliers ' businesses . 36 the demand environment for our semiconductor products was consistent with our expectations for our fourth quarter of fiscal year 2020 , with continued demand for products and infrastructure to support a dramatic increase around the world in remote or tele-work and learning due to covid-19 . while we continue to see robust demand in this area , the macroeconomic environment remains uncertain and it may not be sustainable over the longer term . to date , the impact of covid-19 on the demand environment for our software products has been limited . on the product supply side , we continue to experience various constraints in our supply chain due to the pandemic , including with respect to wafers and substrates . as a result , supply lead times are still extended and we continue to have difficulties in obtaining some necessary components and inputs in a timely manner . however , the disruptions in our outsourced assembly and test capacity that we experienced previously , as a result of covid-19 related shutdowns , have now largely resolved . we have also taken various actions to de-risk our business in light of the ongoing uncertainty . for example , we are largely building semiconductor products to order , instead of based on customer forecasts . in addition , during the fourth fiscal quarter , we continued to strengthen our balance sheet , including closely managing working capital and reducing our total debt outstanding . overall , in light of the changing nature and continuing uncertainty around the covid-19 pandemic , our ability to predict the impact of covid-19 on our business in future periods remains limited . the effects of the pandemic on our business are unlikely to be fully realized , or reflected in our financial results , until future periods . fiscal year highlights highlights during fiscal year 2020 include the following : we acquired the symantec corporation enterprise security business ( the “ symantec business ” ) . we generated $ 12,061 million of cash from operations . story_separator_special_tag total cost of revenue also includes the purchase accounting effect on inventory , amortization of acquisition-related intangible assets and restructuring charges . research and development . research and development expense consists primarily of personnel costs for our engineers engaged in the design and development of our products and technologies , including stock-based compensation expense . these expenses also include project material costs , third-party fees paid to consultants , prototype development expense , allocated facilities costs and other corporate expenses and computer services costs related to supporting computer tools used in the engineering and design process . selling , general and administrative . selling expense consists primarily of compensation and associated costs for sales and marketing personnel , including stock-based compensation expense , sales commissions paid to our independent sales representatives , advertising costs , trade shows , corporate marketing , promotion , travel related to our sales and marketing operations , related occupancy and equipment costs , and other marketing costs . general and administrative expense consists primarily of compensation and associated costs for executive management , finance , human resources and other administrative personnel , including stock-based compensation expense , outside professional fees , allocated facilities costs , acquisition-related costs and other corporate expenses . amortization of acquisition-related intangible assets . in connection with our acquisitions , we recognize intangible assets that are being amortized over their estimated useful lives . we also recognize goodwill , which is not amortized , and in-process research and development ( “ ipr & d ” ) , which is initially capitalized as an indefinite-lived intangible asset , in connection with the acquisitions . upon completion of each underlying project , ipr & d assets are reclassified as amortizable purchased intangible assets and amortized over their estimated useful lives . restructuring , impairment and disposal charges . restructuring , impairment and disposal charges consist primarily of compensation costs associated with employee exit programs , alignment of our global manufacturing operations , rationalizing product development program costs , facility and lease abandonments , fixed asset impairment , ipr & d impairment , and other exit costs , including curtailment of service or supply agreements . 38 interest expense . interest expense includes coupon interest , commitment fees , accretion of original issue discount , amortization of debt premiums and debt issuance costs , and expenses related to debt modifications or extinguishments . other income , net . other income , net includes interest income , gains or losses on investments , foreign currency remeasurement , and other miscellaneous items . provision for ( benefit from ) income taxes . we have structured our operations to maximize the benefit from tax incentives extended to us in various jurisdictions to encourage investment or employment . our tax incentives from the singapore economic development board provide that any qualifying income earned in singapore is subject to tax incentives or reduced rates of singapore income tax . subject to our compliance with the conditions specified in these incentives and legislative developments , these singapore tax incentives are presently expected to expire in november 2025. the corporate income tax rate in singapore that would otherwise apply to us would be 17 % . we also have a tax holiday on our qualifying income in malaysia , which is scheduled to expire in fiscal year 2028. each tax incentive and tax holiday is also subject to our compliance with various operating and other conditions . if we can not , or elect not to , comply with any such operating conditions specified , we could , in some instances , be required to refund previously realized material tax benefits , or if such tax incentive or tax holiday is terminated prior to its expiration absent a new incentive applying , we will lose the related tax benefits earlier than scheduled . we may elect to modify our operational structure and tax strategy , which may not be as beneficial to us as the benefits provided under the present tax concession arrangements . before taking into consideration the effects of the u.s. tax cuts and jobs act ( “ 2017 tax reform act ” ) and other indirect tax impacts , the effect of these tax incentives and tax holiday was to increase the benefit from income taxes by approximately $ 833 million , $ 923 million and $ 590 million for fiscal years 2020 , 2019 and 2018 , respectively . our interpretations and conclusions regarding the tax incentives are not binding on any taxing authority , and if our assumptions about tax and other laws are incorrect or if these tax incentives are substantially modified or rescinded we could suffer material adverse tax and other financial consequences , which would increase our expenses , reduce our profitability and adversely affect our cash flows . in addition , taxable income in any jurisdiction is dependent upon acceptance of our operational practices and intercompany transfer pricing by local tax authorities as being on an arm 's length basis . due to inconsistencies in application of the arm 's length standard among taxing authorities , as well as lack of adequate treaty-based protection , transfer pricing challenges by tax authorities could , if successful , substantially increase our income tax expense . the 2017 tax reform act made significant changes to the u.s. internal revenue code , including ( 1 ) a decrease in the u.s. corporate tax rate from 35 % to 21 % effective for tax years beginning after december 31 , 2017 , ( 2 ) the accrual of u.s. income tax on foreign earnings when earned , allowing certain foreign dividends to then be tax-exempt , rather than deferring such income tax payments until the foreign earnings are repatriated into the u.s. , and ( 3 ) the transition tax on the mandatory deemed repatriation of accumulated non-u.s. earnings of u.s. controlled foreign corporations ( the “ transition tax ” ) .
| results of operations fiscal year 2020 compared to fiscal year 2019 the following table sets forth our results of operations for the periods presented : replace_table_token_2_th net revenue historically , a relatively small number of customers has accounted for a significant portion of our net revenue . sales of products to distributors accounted for 42 % and 46 % of our net revenue for fiscal years 2020 and 2019 , respectively . direct sales to wt microelectronics , a distributor , accounted for 13 % and 17 % of our net revenue for fiscal years 2020 and 2019 , respectively . we believe our aggregate sales to our top five end customers through all channels accounted for more than 30 % of our net revenue for each of our fiscal years 2020 and 2019. we believe aggregate sales to apple inc. , through all channels , accounted for approximately 15 % and 20 % of our net revenue for fiscal years 2020 and 2019 , respectively . we expect to continue to experience significant customer concentration in future periods . the loss of , or significant decrease in demand from , any of our top five end customers could have a material adverse effect on our business , results of operations and financial condition . from time to time , some of our key semiconductor customers place large orders or delay orders , causing our quarterly net revenue to fluctuate significantly . this is particularly true of our wireless products as fluctuations may be magnified by the timing of launches , and seasonal variations in sales , of mobile handsets . in addition , the ongoing covid-19 pandemic and related challenges and uncertainties may also cause our net revenue to fluctuate significantly and adversely affect our results of operations , as discussed above . additionally , if export restrictions on one of our larger customers continue , revenue in future periods may continue to be adversely impacted .
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acquisition of linc on december 1 , 2010 , the company acquired linc pursuant to an agreement and plan of merger ( the merger agreement ) , by and among abm , linc , gi manager lp , as the members representative , and lightning services , llc , a wholly-owned subsidiary of abm ( merger sub ) . pursuant to the merger agreement , merger sub merged with and into linc , and linc continued as the surviving corporation and as a wholly owned subsidiary of abm . the aggregate purchase price for all of the outstanding limited liability company interests of linc was $ 298.7 million in cash . in connection with the acquisition , the company incurred $ 5.2 million in direct acquisition costs which were expensed as incurred and classified as selling , general and administrative expenses . linc provides end-to-end integrated facilities management services , military base operation services , and translation and other services in support of u.s. military operations . linc 's clients include state and federal governments , commercial entities and residential customers , throughout the united states and in select international locations . some of these services are performed through franchisees and other affiliated entities . the operations of linc are included in the engineering segment as of the acquisition date . revenues and operating profit associated with linc and included in the company 's 2011 consolidated statement of income were $ 512.9 million and $ 11.1 million ( excluding transaction costs and the interest expense associated with the borrowings under the company 's line of credit used to finance the acquisition , which were recorded at the corporate segment ) , respectively . a significant portion of linc 's revenues are generated from contracts with the u.s. government . in early 2010 , the current administration submitted its budget for the fiscal year ending september 30 , 2011 ( 2011 budget ) . the 2011 budget was not approved until mid-april 2011 , delaying the award of most new contracts . the company is continually assessing the impact that the delayed 2011 budget , as well as the potential impact of the proposed 2012 budget ( 2012 budget ) , will have on its governmental business . while the volume of bid activity and request for proposals for future awards remains active , linc 's governmental business has experienced and will continue to experience delays in new contract awards and in the start dates of currently awarded contracts , shifting the start of certain projects from 2011 to 2012 . 19 summary of key financial performance indicators total revenues increased $ 751.1 million in 2011 , as compared to 2010 , which was primarily related to revenues associated with the linc , diversco and l & r acquisitions . operating profit increased $ 8.7 million in 2011 , as compared to 2010. the significant components of the operating profit increase were : ( 1 ) operating profit associated with the linc , diversco , and l & r acquisitions , ( 2 ) a decrease in charges for litigation contingencies , ( 3 ) a benefit related to a refund of health insurance premiums paid , and ( 4 ) a settlement received related to a dispute in connection with the l & r acquisition . the positive impact of the above items was partially offset by increases in ( 1 ) corporate general and administrative expenses ( primarily related to acquisition transaction costs , share-based compensation expense , professional fees and information technology costs ) , ( 2 ) labor expenses in the janitorial segment ( resulting from one additional working day in 2011 ) , and ( 3 ) payroll related expenses associated with higher state unemployment insurance rates that went into effect on january 1 , 2011. see the results of operations section below for additional information . during the second half of 2011 , the u.s. economy was weaker than originally anticipated at the beginning of the year , causing the company 's clients to take additional cost containment measures . these cost containment measures have and are anticipated to continue to result in price compression , particularly in the janitorial business . further , the delay in passing federal appropriations had an adverse impact on the timing of awarding contracts to the company 's government business , which is expected to shift the start of certain projects from 2011 to 2012. taken together , along with higher unemployment insurance expense and fuel and related costs , the company 's operating results were negatively impacted in 2011. in addition to revenues and operating profit , the company 's management views operating cash flows as a good indicator of financial performance , as strong operating cash flows provide opportunities for growth both organically and through acquisitions . operating cash flows primarily depend on : revenue levels ; the quality and timing of collections of accounts receivable and payments to suppliers and other vendors ; the timing and amount of income tax payments ; and the timing and amount of payments on self-insured claims . operating cash flows are also impacted by receivables relating to government contracts , as these receivables generally have longer collection periods . the company 's net cash provided by continuing operating activities was $ 156.8 million , $ 140.7 million and $ 121.3 million for 2011 , 2010 and 2009 , respectively . the company 's largest operating segment is the janitorial segment , which generated approximately 56.1 % of the company 's revenues and approximately 68.2 % of the company 's operating profit , excluding the corporate segment , for 2011. strategy and outlook the company believes that achieving desired levels of revenues and profitability in the future will depend upon , among other things , its ability to make successful acquisitions ( while maintaining a target leverage ratio ) , attract and retain clients at desirable profit margins , and keep overall costs low . story_separator_special_tag in 2010 , the company paid $ 62.3 million for the l & r and diversco acquisitions , net of cash acquired , and $ 3.3 million of additional consideration for the achievement of certain financial performance targets in connection with prior years ' acquisitions . 2010 compared to 2009 in 2010 , the company paid $ 62.3 million for the l & r and diversco acquisitions , net of cash acquired , and $ 3.3 million of additional consideration for the achievement of certain financial performance targets in connection with prior years ' acquisitions . in 2009 , the company paid $ 15.1 million for certain assets of control building services , inc. , control engineering services , inc. , and ttf , inc. ( control ) and $ 6.0 million of additional consideration for the achievement of certain financial performance targets in connection with prior years ' acquisitions ( excluding $ 1.2 million related to contingent amounts settled in stock issuances ) . 22 cash flows from financing activities . net cash provided by financing activities was $ 134.4 million in 2011 , compared to net cash used of $ 56.7 million and $ 96.0 million in 2010 and 2009 , respectively . 2011 compared to 2010 the $ 191.2 million increase in cash flows from financing activities in 2011 compared to 2010 was primarily related to $ 306.8 million of cash borrowed to finance the linc acquisition , which was partially offset by repayments made on the company 's line of credit during 2011 . 2010 compared to 2009 the $ 39.3 million decrease in net cash used in financing activities in 2010 compared to 2009 was primarily related to $ 25.5 million of net repayments on borrowings from the line of credit ( which included the financing of the l & r and diversco acquisitions for $ 64.9 million , excluding acquisition costs ) . commitments as of october 31 , 2011 , the company 's future contractual payments , commercial commitments and other long-term liabilities were as follows : replace_table_token_7_th ibm master professional services agreement on october 11 , 2011 , the company entered into a termination agreement ( the termination agreement ) with international business machines corporation ( ibm ) pursuant to which the parties agreed to terminate services currently being provided by ibm to the company pursuant to a master professional services agreement dated october 1 , 2006 , as such agreement has been amended ( the master professional services agreement ) . under the master professional services agreement , the company and ibm have entered into a statement of work relating to the design and build by ibm of the company 's new primary data center in alpharetta , georgia and a statement of work relating to the relocation by ibm of certain company it environments now supported by ibm to the new data center . the termination agreement provides that services under the master professional services agreement shall terminate effective as of the successful completion of the design and build of the company 's new primary data center and the relocation of the data centers currently supported by ibm to that data center , both of which are expected to be completed by february 29 , 2012 . 23 the termination agreement provides that the master professional services agreement is being terminated without penalty . during the fourth quarter of 2011 , the company wrote-off $ 1.5 million of deferred costs associated with the master professional services agreement . operating leases the amounts set forth under operating leases represent the company 's contractual obligations to make future payments under non-cancelable operating lease agreements for various facilities , vehicles and other equipment . information technology service agreements the amounts set forth under information technology service agreements represent the company 's contractual obligations to make future payments for outsourced services and licensing costs pursuant to its information technology agreements . unfunded employee benefit plans the company has defined benefit , post-retirement and deferred compensation plans . all defined benefit and post-retirement plans have been amended to preclude new participants . these plans are described in further detail in note 10 of the notes to the consolidated financial statements contained in item 8 , financial statements and supplementary data. as of october 31 , 2011 , the aggregate employee benefit plan liability , including the company 's deferred compensation plans , was $ 28.2 million . future benefits expected to be paid over the next 20 years are approximately $ 37.4 million . the defined benefit and post-retirement plans liabilities as of october 31 , 2011 assume future annual compensation increases of 3.50 % , a rate of return on plan assets of 8.0 % ( when applicable ) , and discount rates in the range of 4.04 % to 4.56 % . the discount rates were determined using the individual cash flows of each plan . in determining the long-term rate of return for a plan , the company considers the nature of the plan 's investments , historical rates of return , and an expectation for the plan 's investment strategies . the company believes changes in assumptions will not have a material impact on the company 's financial position and operating performance . the company expects to make payments required for unfunded liabilities through cash flows from operating activities when such amounts become due in accordance with the plans . the employee benefit plan obligation of $ 28.2 million as of october 31 , 2011 does not include the union-sponsored multiemployer defined benefit plans . these plans are not administered by the company and contributions are determined in accordance with provisions of negotiated labor contracts . contributions made to these plans were $ 63.2 million , $ 58.2 million and $ 47.9 million in 2011 , 2010 and 2009 , respectively .
| results of operations comparison of 2011 to 2010 replace_table_token_8_th * not meaningful net income . net income in 2011 increased by $ 4.4 million , or 6.8 % , to $ 68.5 million ( $ 1.27 per diluted share ) from $ 64.1 million ( $ 1.21 per diluted share ) in 2010. net income included a loss from discontinued operations of $ 0.2 million and income from discontinued operations of $ 0.3 million in 2011 and 2010 , respectively . income from continuing operations . income from continuing operations in 2011 increased by $ 4.8 million , or 7.6 % , to $ 68.7 million ( $ 1.27 per diluted share ) from $ 63.9 million ( $ 1.21 per diluted share ) in 2010. the increase in income from continuing operations was primarily related to : a $ 13.1 million increase in operating profit , excluding the corporate segment , which includes the operating profit associated with the linc , diversco , and l & r acquisitions and the negative impact of one additional working day and higher state unemployment insurance rates ; a $ 4.1 million decrease in charges related to litigation contingencies , including associated legal fees ; $ 3.9 million in income from unconsolidated affiliates acquired in connection with the linc acquisition ; a $ 3.7 million benefit related to a refund of 2011 and 2010 health insurance premiums paid to one of the company 's health insurance providers ; a $ 3.2 million decrease in income taxes , primarily related to a benefit from the re-measurement of certain unrecognized tax benefits ; and a net $ 2.7 million benefit for a settlement received in 2011 , related to a dispute in connection with the l & r acquisition ; 26 partially offset by : an $ 11.2 million increase in interest expense due to an increase in average borrowings and average interest rates under the $ 650.0 million line of credit as a result of financing the linc acquisition ; a $ 5.1 million increase in share-based compensation
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the table below presents net income ( loss ) attributable to nee and earnings ( loss ) per share , assuming dilution , attributable to nee by reportable segment - fpl and neer , and by corporate and other , which is primarily comprised of the operating results of neet , fpl fibernet and other business activities , as well as other income and expense items , including interest expense , income taxes and eliminating entries ( see note 15 for additional segment information , including reported results from continuing operations ) . the following discussions should be read in conjunction with the notes to consolidated financial statements contained herein and all comparisons are with the corresponding items in the prior year . replace_table_token_11_th ( a ) neer 's results reflect an allocation of interest expense from neech based on a deemed capital structure of 70 % debt and allocated shared service costs . ( b ) neer 's and corporate and other 's results for 2014 and 2013 were retrospectively adjusted to reflect a segment change as further discussed in note 15. during 2014 , nep , through neer , was formed to acquire , manage and own contracted clean energy projects with stable , long-term cash flows through a limited partner interest in nep opco . on july 1 , 2014 , nep completed its ipo as further described in note 1 - nextera energy partners , lp . see item 1. business - ii . neer . in december 2014 , nee and hei announced a proposed merger . see item 1. business - overview . for the five years ended december 31 , 2015 , nee delivered a total shareholder return of approximately 137.0 % , above the s & p 500 's 80.8 % return , the s & p 500 utilities ' 68.8 % return and the dow jones u.s. electricity 's 61.7 % return . the historical stock performance of nee 's common stock shown in the performance graph below is not necessarily indicative of future stock price performance . 44 adjusted earnings nee prepares its financial statements under gaap . however , management uses earnings excluding certain items ( adjusted earnings ) , a non-gaap financial measure , internally for financial planning , for analysis of performance , for reporting of results to the board of directors and as an input in determining performance-based compensation under nee 's employee incentive compensation plans . nee also uses adjusted earnings when communicating its financial results and earnings outlook to analysts and investors . nee 's management believes adjusted earnings provides a more meaningful representation of the company 's fundamental earnings power . although the excluded amounts are properly included in the determination of net income under gaap , management believes that the amount and or nature of such items make period to period comparisons of operations difficult and potentially confusing . adjusted earnings do not represent a substitute for net income , as prepared under gaap . adjusted earnings exclude the unrealized mark-to-market effect of non-qualifying hedges ( as described below ) and otti losses on securities held in neer 's nuclear decommissioning funds , net of the reversal of previously recognized otti losses on securities sold and losses on securities where price recovery was deemed unlikely ( collectively , otti reversals ) . however , other adjustments may be made from time to time with the intent to provide more meaningful and comparable results of ongoing operations . nee and neer segregate into two categories unrealized mark-to-market gains and losses on derivative transactions . the first category , referred to as non-qualifying hedges , represents certain energy derivative transactions and certain interest rate derivative transactions entered into as economic hedges , which do not meet the requirements for hedge accounting , or for which hedge accounting treatment is not elected or has been discontinued . changes in the fair value of those transactions are marked to market and reported in the consolidated statements of income , resulting in earnings volatility because the economic offset to the positions are not marked to market . as a consequence , nee 's net income reflects only the movement in one part of economically-linked transactions . for example , a gain ( loss ) in the non-qualifying hedge category for certain energy derivatives is offset by decreases ( increases ) in the fair value of related physical asset positions in the portfolio or contracts , which are not marked to market under gaap . for this reason , nee 's management views results expressed excluding the unrealized mark-to-market impact of the non-qualifying hedges as a meaningful measure of current period performance . the second category , referred to as trading activities , which is included in adjusted earnings , represents the net unrealized effect of actively traded positions entered into to take advantage of expected market price movements and all other commodity hedging activities . in january 2016 , nee discontinued hedge accounting for all of its remaining interest rate and foreign currency derivative instruments , which could result in increased volatility in the non-qualifying hedge category in the future . at fpl , substantially all changes in the fair value of energy derivative transactions are deferred as a regulatory asset or liability until the contracts are settled , and , upon settlement , any gains or losses are passed through the fuel clause . see note 3. in 2013 , an after-tax gain from discontinued operations of $ 231 million ( $ 216 million recorded at neer and $ 15 million recorded at corporate and other ) was recorded in nee 's consolidated statements of income related to the sale of its ownership interest in a portfolio of hydropower generation plants and related assets located in maine and new hampshire ( see note 6 ) . story_separator_special_tag in addition , retail base revenues increased in 2015 and 2014 through a $ 234 million annualized retail base rate increase associated with the riviera beach power plant and , in 2014 , a $ 164 million annualized retail base rate increase associated with the cape canaveral power plant . the 2012 rate agreement : remains in effect until december 2016 , establishes fpl 's allowed regulatory roe at 10.50 % , with a range of plus or minus 100 basis points , and allows for an additional retail base rate increase as the modernized port everglades project becomes operational ( which is expected by april 2016 ) . in january 2016 , fpl filed a formal notification with the fpsc indicating its intent to initiate a base rate proceeding . see item 1. business - fpl - fpl regulation - fpl rate regulation - base rates for additional information on the 2012 rate agreement and details of fpl 's formal notification . in 2015 and 2014 , retail base revenues increased approximately $ 43 million and $ 192 million , respectively , related to the modernized riviera beach power plant being placed in service in april 2014. additionally , 2014 included approximately $ 53 million of additional retail base revenues related to the cape canaveral power plant being placed in service in april 2013. additional retail base revenues of approximately $ 115 million were recorded in 2014 , primarily related to new nuclear capacity which was placed in service in 2013 as permitted by the fpsc 's nuclear cost recovery rule . see cost recovery clauses below for discussion of the nuclear cost recovery rule . retail customer usage and growth in 2015 and 2014 , fpl experienced a 1.4 % and 1.8 % increase , respectively , in the average number of customer accounts and a 4.2 % increase and 0.4 % decrease , respectively , in the average usage per retail customer , which collectively , together with other factors , increased revenues by approximately $ 263 million and $ 36 million , respectively . the increase in 2015 usage per retail customer is due to favorable weather . an improvement in the florida economy contributed to the increased revenues for both periods . fpl expects year over year weather-normalized usage per customer to be between flat and 0.5 % negative . cost recovery clauses revenues from fuel and other cost recovery clauses and pass-through costs , such as franchise fees , revenue taxes and storm-related surcharges , are largely a pass-through of costs . such revenues also include a return on investment allowed to be recovered through the cost recovery clauses on certain assets , primarily related to solar and environmental projects , natural gas reserves and nuclear capacity . see item 1 . - i. fpl - fpl regulation - fpl rate regulation - cost recovery clauses . fluctuations in fuel cost recovery revenues are primarily driven by changes in fuel and energy charges which are included in fuel , purchased power and interchange expense in the consolidated statements of income , as well as by changes in energy sales . fluctuations in revenues from other cost recovery clauses and pass-through costs are primarily driven by changes in storm-related surcharges , capacity charges , franchise fee costs , the impact of changes in o & m and depreciation expenses on the underlying cost recovery clause , investment in solar and environmental projects , investment in nuclear capacity until such capacity goes into service and is recovered in base rates , pre-construction costs associated with the development of two additional nuclear units at the turkey point site and changes in energy sales . capacity charges are included in fuel , purchased power and interchange expense and franchise fee costs are included in taxes other than income taxes and other in the consolidated statements of income . underrecovery or overrecovery of cost recovery clause and other pass-through costs ( deferred clause and franchise expenses and revenues ) can significantly affect nee 's and fpl 's operating cash flows . the 2015 net overrecovery was approximately $ 176 million and positively affected nee 's and fpl 's cash flows from operating activities in 2015 , while the 2014 net underrecovery was approximately $ 67 million and negatively affected nee 's and fpl 's cash flows from operating activities in 2014 . 48 the slight decrease in fuel cost recovery revenues in 2015 reflects lower revenues from the incentive mechanism and lower revenues from interchange power sales totaling approximately $ 118 million and a lower average fuel factor of approximately $ 96 million , partly offset by increased revenues of $ 213 million related to higher energy sales . the increase in fuel cost recovery revenues in 2014 is primarily due to a higher average fuel factor of approximately $ 329 million and higher energy sales of $ 158 million , as well as higher interchange power sales , partly offset by lower revenues from the incentive mechanism , totaling approximately $ 55 million . the declines in 2015 revenues from other cost recovery clauses and pass-through costs were largely due to reductions in expenses associated with energy conservation and capacity clause programs . the decrease in revenues from other cost recovery clauses and pass-through costs in 2014 primarily reflects higher revenues in 2013 associated with the fpsc 's nuclear cost recovery rule reflective of higher earnings on additional nuclear capacity investments and the shift to the collection of nuclear capacity recovery through retail base revenues ( see retail base above ) . the nuclear cost recovery rule provides for the recovery of prudently incurred pre-construction costs and carrying charges ( equal to the pretax afudc rate ) on construction costs and a return on investment for new nuclear capacity through levelized charges under the capacity clause . the same rule provides for the recovery of construction costs , once property related to the new nuclear capacity goes into service , through a retail base rate increase effective beginning the following january .
| results of operations net income attributable to nee for 2015 was $ 2.75 billion , compared to $ 2.47 billion in 2014 and $ 1.91 billion in 2013 . in 2015 , net income attributable to nee improved due to higher results at fpl , neer and corporate and other . in 2014 , net income attributable to nee improved due to higher results at fpl and neer partly offset by lower results at corporate and other . 46 nee 's effective income tax rate for all periods presented reflects the benefit of ptcs for neer 's wind projects , as well as itcs and deferred income tax benefits associated with convertible itcs for solar and certain wind projects at neer . ptcs , itcs and deferred income tax benefits associated with convertible itcs can significantly affect nee 's effective income tax rate depending on the amount of pretax income . the amount of ptcs recognized can be significantly affected by wind generation and by the roll off of ptcs on certain wind projects after ten years of production ( ptc roll off ) . in addition , nee 's effective income tax rate for 2014 was unfavorably affected by a noncash income tax charge of approximately $ 45 million associated with structuring canadian assets in connection with the creation of nep and for 2013 was unfavorably affected by the establishment of a full valuation allowance on the deferred tax assets associated with the spain solar projects . see note 1 - income taxes and - sale of differential membership interests , note 4 - nonrecurring fair value measurements and note 5. also see item 1. business - neer - generation and other operations - neer fuel/technology mix - policy incentives for renewable energy projects .
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82 allegiance bancshares , inc. notes to consolidated financial statements asu 2017-01 , “ business combinations ( topic 805 ) : clarifying the definition of a business , ” ( “ asu 2017-01 ” ) to improve such definition and , as a result , assist entities with evaluating whether transactions should be accounted for as acquisitions ( or disposals ) of assets or as business combinations . the definition of a b usiness impacts many areas of accounting including acquisitions , disposals , goodwill and co nsolidation . asu 2017-01 became effective for the company on january 1 , 2018 and is to be applied under a prospective approach . the company expects the adoption of t his new guidance to impact the determination of whether future acquisitions are considered business combinations or asset purchases . newly issued but not yet effective accounting standards asu 2016-02 “ leases ( topic 842 ) . `` asu 2016-02 will , among other things , require lessees to recognize a lease liability , which is a lessee 's obligation to make lease payments arising from a lease , measured on a discounted basis ; and a right-of-use asset , which is an asset that represents the lessee 's right to use , or control the use of , a specified asset for the lease term . asu 2016-02 does not significantly change lease accounting requirements applicable to lessors ; however , certain changes were made to align , where necessary , lessor accounting with the lessee accounting model and asc topic 606 , “ revenue from contracts story_separator_special_tag financial condition and results of operati ons the following discussion and analysis of the company 's financial condition and results of operations should be read in conjunction with item 6 . “ selected financial data ” and the company 's consolidated financial statements and the accompanying notes included elsewhere in this annual report on form 10-k. this discussion and analysis contains forward-looking statements that are subject to certain risks and uncertainties and are based on certain assumptions that the company believes are reasonable but may prove to be inaccurate . certain risks , uncertainties and other factors , including those set forth under “ – cautionary notice regarding forward-looking statements , ” in this item 7 , under item 1a . “ risk factors ” and elsewhere in this annual report on form 10-k , may cause actual results to differ materially from those projected results discussed in the forward-looking statements appearing in this discussion and analysis . the company assumes no obligation to update any of these forward-looking statements . cautionary notice regarding forward-looking statements statements and financial discussion and analysis contained in this annual report on form 10-k that are not historical facts are forward-looking statements made pursuant to the safe harbor provisions of the private securities litigation reform act of 1995. we also may make forward-looking statements in our other documents filed or furnished with the sec . in addition , our senior management may make forward-looking statements orally to investors , analysts , representatives of the media and others . statements preceded by , followed by or that otherwise include the words “ believes , ” “ expects , ” “ anticipates , ” “ intends , ” “ projects , ” “ estimates , ” “ plans ” and similar expressions or future or conditional verbs such as “ will , ” “ should , ” “ would , ” “ may ” and “ could ” are generally forward-looking in nature and not historical facts , although not all forward looking statements include the foregoing . forward-looking statements are based on assumptions and involve a number of risks and uncertainties , many of which are beyond our control . many possible events or factors could affect our future financial results and performance and could cause such results or performance to differ materially from those expressed in our forward-looking statements . while there is no assurance that any list of risks and uncertainties or risk factors is complete , below are certain factors which could cause our actual results to differ from those in our forward-looking statements : risks related to the concentration of our business in the houston region , including risks associated with volatility or decreases in oil and gas prices or prolonged periods of lower oil and gas prices ; general market conditions and economic trends nationally , regionally and particularly in the houston region ; our ability to retain executive officers and key employees and their customer and community relationships ; our ability to recruit and retain successful bankers that meet our expectations in terms of customer and community relationships and profitability ; risks related to our strategic focus on lending to small to medium-sized businesses ; our ability to implement our growth strategy , including through the identification of acquisition candidates that will be accretive to our financial condition and results of operations , as well as permitting decision-making authority at the branch level ; risks related to any businesses we acquire in the future , including exposure to potential asset and credit quality risks and unknown or contingent liabilities , the time and costs associated with integrating systems , technology platforms , procedures and personnel , the need for additional capital to finance such transactions and possible failures in realizing the anticipated benefits from such acquisitions ; risks associated with our owner-occupied commercial real estate loan and other commercial real estate loan portfolios , including the risks inherent in the valuation of the collateral securing such loans ; risks associated with our commercial and industrial loan portfolio , including the risk for deterioration in value of the general business assets that generally secure such loans ; the accuracy and sufficiency of the assumptions and estimates we make in establishing reserves for potential loan losses and other estimates ; risk of deteriorating asset quality and higher loan charge-offs , as well as the time and effort necessary to resolve nonperforming assets ; potential changes in the prices , values and sales volumes of commercial and residential story_separator_special_tag because the acquisition closed on october 1 , 2018 , our results of operations included post oak for only a portion of 2018. our historical financial condition and results of operations as of and for periods ended before december 31 , 2018 contained in this annual report on form 10-k do not reflect the financial condition and results of operations of post oak . in connection with the acquisition of post oak , we issued 8.4 million shares of company common stock . in addition to the impact of the acquisition of post oak , the comparability of our consolidated results of operations for the year ended december 31 , 2014 may be affected by our acquisition of f & m bancshares on january 1 , 2015. the results of the acquired operations of f & m bancshares were included in our results of operations for 2015 , as compared to the full year 2014. we completed an initial public offering of 2,990,000 shares of allegiance 's common stock at $ 21.00 per share on october 7 , 2015 , generating net proceeds of $ 57.1 million . allegiance 's common stock began trading on the nasdaq global market on october 8 , 2015 under the ticker symbol “ abtx. ” critical accounting policies certain of our accounting estimates are important to the portrayal of our financial condition , since they require management to make difficult , complex or subjective judgments , some of which may relate to matters that are inherently uncertain . estimates are susceptible to material changes as a result of changes in facts and circumstances . facts and circumstances which could affect these judgments include , but are not limited to , changes in interest rates , changes in the performance of the economy and changes in the financial condition of borrowers . management believes that determining the allowance for loan losses is its most critical accounting estimate . our accounting policies are discussed in detail in note 1 – nature of operations and summary of significant accounting and reporting policies in the accompanying notes to the consolidated financial statements included elsewhere in this annual report on form 10-k. allowance for loan losses the allowance for loan losses is a valuation allowance that is established through charges to earnings in the form of a provision for loan losses . the amount of the allowance for loan losses is affected by the following : ( 1 ) charge-offs of loans that decrease the allowance , ( 2 ) subsequent recoveries on loans previously charged off that increase the allowance and ( 3 ) provisions for loan losses charged to income that increase the allowance . management considers the policies related to the allowance for loan losses as the most critical to the financial statement presentation . the total allowance for loan losses includes activity related to allowances calculated in accordance with accounting standards codification ( “ asc ” ) 310 , receivables , and asc 450 , contingencies . throughout the year , management estimates the probable incurred losses in the loan portfolio to determine if the allowance for loan losses is adequate to absorb such losses . the allowance for loan losses consists of specific and general components . the specific component relates to loans that are individually classified as impaired . we follow a loan review program to evaluate the credit risk in the loan portfolio . loans that have been identified as impaired are reviewed on a quarterly basis in order to determine whether a specific reserve is required . the general component covers non-impaired loans and is based on industry and our specific historical loan loss experience , volume , growth and composition of the loan portfolio , the evaluation of our loan portfolio through our internal loan review process , general current economic conditions both internal and external to us that may affect the borrower 's ability to pay , value of collateral and other qualitative relevant risk factors . based on a review of these estimates , we adjust the allowance for loan losses to a level determined by management to be adequate . estimates of loan losses are inherently subjective as they involve an exercise of judgment . loans acquired in business combinations are initially recorded at fair value , which includes an estimate of loan losses expected to be realized over the remaining lives of the loans . therefore , no corresponding allowance for loan losses is recorded for these loans at acquisition . methods utilized to estimate any subsequently required allowance for loan losses for acquired loans not deemed credit-impaired at acquisition are similar to originated loans . however , the estimate of loss is based on the unpaid principal balance and then 39 compared to any remaining unaccreted purchase discount . to the extent that the calculated loss is greater than the remaining unaccreted purchase discount , an allowance i s recorded for such difference . emerging growth company pursuant to the jobs act , an emerging growth company can elect to opt in to any new or revised accounting standards that may be issued by the fasb or the sec otherwise applicable to non-emerging growth companies . we have elected to opt in to such standards , which election is irrevocable . we will likely continue to take advantage of some of the reduced regulatory and reporting requirements that are available to us so long as we qualify as an emerging growth company , including , but not limited to , not being required to comply with the auditor attestation requirements of section 404 ( b ) of the sarbanes-oxley act , reduced disclosure obligations regarding executive compensation and exemptions from the requirements of holding non-binding advisory votes on executive compensation and golden parachute payments . recently issued accounting pronouncements we have evaluated new accounting pronouncements that have recently been issued and have determined that there are no new accounting pronouncements that should be described in this section that will have a material impact the company 's operations , financial condition or liquidity in future periods .
| results of operations net income was $ 37.3 million , or $ 2.37 per diluted common share , for the year ended december 31 , 2018 compared with $ 17.6 million , or $ 1.31 per diluted common share , for the year ended december 31 , 2017 , an increase of $ 19.7 million , or 111.6 % . the increase in net income was primarily the result of a $ 24.9 million increase in net interest income and an $ 8.9 million decrease in the provision for loan losses partially offset by a $ 16.8 million increase in noninterest expense . net income was $ 17.6 million , or $ 1.31 per diluted common share , for the year ended december 31 , 2017 compared with $ 22.9 million , or $ 1.75 per diluted common share , for the year ended december 31 , 2016. returns on average common equity were 9.02 % , 5.92 % and 8.36 % , returns on average assets were 1.11 % , 0.65 % and 0.98 % and efficiency ratios were 63.68 % , 63.89 % and 62.34 % for the years ended december 31 , 2018 , 2017 and 2016 , respectively . the efficiency ratio is calculated by dividing total noninterest expense by the sum of net interest income plus noninterest income , excluding net gains and losses on the sale of loans , securities and assets ( including the sale of the two acquired central texas branches in 2016 ) . additionally , taxes and provision for loan losses are not part of the efficiency ratio calculation . net interest income net interest income is the difference between interest income on earning assets , such as loans and securities , and interest expense on liabilities , such as deposits and borrowings , which are used to fund those assets . net interest income is our largest source of revenue , representing 94.3 % of total revenue during 2018. tax equivalent net interest margin is the ratio of taxable-equivalent net interest income to average earning assets for the period .
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adcs are an expanding approach to the treatment of cancer , with seven approved products and the number of agents in development growing significantly in recent years . we have established a leadership position in adcs with a portfolio of differentiated product candidates to address both solid tumors and hematological malignancies . our lead program is mirvetuximab soravtansine , a first-in-class investigational adc targeting frα , a cell-surface protein overexpressed in a number of epithelial tumors , including ovarian , endometrial , and non-small-cell lung cancers . in march of 2019 , we announced that forward i , our phase 3 clinical trial evaluating mirvetuximab compared to chemotherapy in women with frα-positive proc , did not meet the primary endpoint in either the entire treatment population or the pre-specified high frα expression population . data from forward i did , however , show promising efficacy signals across a range of parameters in the pre-specified subset of patients with high frα expression . in post hoc exploratory analyses using a ps2+ scoring method , in the frα-high population scored by the ps2+ method , mirvetuximab was associated with longer pfs , by birc , higher overall response rate , or orr , and longer overall survival , or os . following consultation with the fda , we will concurrently enroll two new trials of mirvetuximab : soraya , a single-arm clinical trial that , if successful , could lead to accelerated approval of mirvetuximab ; and mirasol , a randomized phase 3 clinical trial that , if successful , could lead to full approval of mirvetuximab . we anticipate enrolling our first patient in soraya during the first quarter of 2020 , and expect to report top-line data from this trial in mid-2021 . we opened enrollment in mirasol in december 2019 and expect to report top-line data from this trial in the first half of 2022. if soraya is successful , we expect to submit an application for accelerated approval of mirvetuximab in the applicable patient population to the fda during the second half of 2021 and to thereafter seek full approval on the basis of a confirmatory phase 3 trial , mirasol . we undertook a review of our operations during the second quarter of 2019 with the goals of prioritizing our portfolio and reducing our cost base to ensure that our cash resources will be sufficient to advance certain of our programs through the next stages of development . based on the outcome of this operational review and subsequent consultation with fda , we have established three strategic priorities for the business : ( i ) execute soraya and mirasol and pursue the development of additional indications for mirvetuximab in ovarian cancer ; ( ii ) advance a select portfolio of three earlier-stage product candidates ; and ( iii ) further strengthen our balance sheet and expand our capabilities through partnering . consistent with these priorities , we have focused our operations on the following activities : ◾ open soraya and enroll patients in mirasol to support the potential for accelerated approval in 2022 and conversion to full approval in 2023 ; ◾ continue follow up in the ongoing phase 1b forward ii companion trial of mirvetuximab in combination regimens and initiate additional combination trials to support expanded indications ; ◾ continue imgn632 development in patients with aml , bpdcn , and other cd123-positive hematologic malignancies in collaboration with jazz ; ◾ advance two additional assets that demonstrate our continued innovation in adcs : imgc936 , which is an investigational adc directed to the novel solid tumor target , adam9 , which we are co-developing with macrogenics ; and our next generation investigational anti-frα adc , imgn151 , which is expected to enter preclinical development in 2020 ; and ◾ monetize our remaining portfolio and platform technologies through out-licensing transactions or asset sales . 43 corresponding to the prioritization of our portfolio , we have reduced ongoing expenses through the discontinuation of our imgn779 development program , suspension of all other research activities , and a reduction in our workforce . we have also developed a new class of cytotoxic payloads that we refer to as igns . our igns are designed to alkylate dna without cross-linking , which has provided a broad therapeutic index in preclinical models . specifically , ign adcs have retained the anti-tumor potency of crosslinking drugs with less toxicity to normal cells in in vitro and animal models . these properties have allowed for repeat administration of adcs with ign payloads in clinical studies and as supported by preclinical data , suggest that igns may be able to be combined with other agents . imgn632 is an investigational adc comprised of a high affinity antibody designed to target cd123 with site specific conjugation to our most potent ign payload . we are advancing imgn632 in clinical trials for patients with aml and bpdcn . we recently presented data from our phase 1 clinical trial of imgn632 in patients with relapsed or refractory adult aml and bpdcn . we have also determined a phase 2 dose and schedule for imgn632 and have initiated a clinical trial with combinations in aml as well as monotherapy in front-line patients with minimal residual disease following induction therapy . in addition , we continue to enroll bpdcn patients under our initial protocol . we continue to advance select preclinical programs , led by imgc936 . imgc936 is an investigational adc in co-development with macrogenics designed to target adam9 , an enzyme overexpressed in a range of solid tumors and implicated in tumor progression and metastasis . this adc incorporates a number of innovations , including antibody engineering to extend half-life , site-specific conjugation with a fixed drug-antibody ratio to enable higher dosing , and a next-generation linker and payload for improved stability and bystander activity . story_separator_special_tag payments to us under these agreements may include upfront fees , option fees , exercise fees , payments for research activities , payments for the manufacture of preclinical or clinical materials , payments based upon the achievement of certain milestones , and royalties on product sales . we follow the provisions of accounting standards codification topic 606 - revenue from contracts with customers ( asc 606 ) in accounting for these agreements . revenue is recognized when a customer obtains control of promised goods or services , in an amount that reflects the consideration which the entity expects to receive in exchange for those goods or services . in determining the appropriate amount of revenue to be recognized as we fulfill our obligations under the agreements , we perform the following five steps : ( i ) identification of the promised goods or services in the contract ; ( ii ) determination of whether the promised goods or services are performance obligations , including whether they are distinct in the context of the contract ; ( iii ) measurement of the transaction price , including the constraint on variable consideration ; ( iv ) allocation of the transaction price to the performance obligations ; and ( v ) recognition of revenue when or as we satisfy each performance obligation . we only apply the five-step model to contracts when it is probable that we will collect the consideration to which we are entitled in exchange for the goods or services we transfer to the customer . at contract inception , once the contract is determined to be within the scope of asc 606 , we assess the goods or services promised within each contract and determine those that are performance obligations , and assess whether each promised good or service is distinct . we then recognize as revenue the amount of the transaction price that is allocated to the respective performance obligation when or as the performance obligation is satisfied . as part of the accounting for the arrangement , we must develop assumptions that require judgment to determine the selling price for each performance obligation that was identified in the contract , which is discussed in further detail below . at december 31 , 2019 , we had the following material types of agreements with the parties identified below : ● development and commercialization licenses , which provide the party with the right to use our adc technology and or certain other intellectual property to develop and commercialize anticancer compounds to a specified antigen target : bayer ( one exclusive single-target license ) biotest ( one exclusive single-target license ) cytomx ( two exclusive single-target licenses ) debiopharm ( one exclusive single-compound license ) 45 fusion pharmaceuticals ( one exclusive single-compound license ) novartis ( five exclusive single-target licenses ) oxford biotherapeutics/menarini ( one exclusive single target license sublicensed from amgen ) roche , through its genentech unit ( five exclusive single-target licenses ) sanofi ( five fully-paid , exclusive single-target licenses ) takeda , through its wholly owned subsidiary , millennium pharmaceuticals , inc. ( one exclusive single-target license ) ● collaboration and option agreement for a defined period of time to secure a license to develop and commercialize a specified anticancer compound on established terms : jazz pharmaceuticals ● collaboration and license agreement to co-develop and co-commercialize a specified anticancer compound on established terms : macrogenics there are no performance , cancellation , termination , or refund provisions in any of the arrangements that contain material financial consequences to us . development and commercialization licenses the obligations under a development and commercialization license agreement generally include the license to our adc technology with respect to a specified antigen target , and may also include obligations related to rights to future technological improvements , research activities to be performed on behalf of the collaborative partner and , previously , the manufacture of preclinical or clinical materials for the collaborative partner . generally , development and commercialization licenses contain non-refundable terms for payments and , depending on the terms of the agreement , provide that we will earn payments upon the achievement of certain milestones and royalty payments , generally until the later of the last applicable patent expiration or 10 to 12 years after product launch . royalty rates may vary over the royalty term depending on our intellectual property rights and or the presence of comparable competing products . in the case of sanofi , its licenses are fully-paid and no further milestones or royalties will be received . in the case of debiopharm , no royalties will be received . we previously made available research and manufacturing services under the development and commercialization licenses ; following our restructuring in june 2019 , these services have been discontinued . however , we may provide technology transfer services in connection with the out-licensing of product candidates initially developed by us at negotiated prices which are generally consistent with what other third parties would charge . we may also provide technical assistance and share any technology improvements with our collaborators during the term of the collaboration agreements . we do not directly control when or whether any collaborator will request research , achieve milestones , or become liable for royalty payments . in determining the performance obligations , management evaluates whether the license is distinct , and has significant standalone functionality , from the undelivered elements to the collaborative partner based on the consideration of the relevant facts and circumstances for each arrangement . factors considered in this determination include the research capabilities of the partner and the availability of adc technology research expertise in the general marketplace and whether technological improvements are required for the continued functionality of the license . if the license to our intellectual property is determined to be distinct from the other performance obligations identified in the arrangement , we recognize revenues from non-refundable , up-front fees allocated to the license when the license is transferred to the customer and the customer is able to use and benefit from the license .
| results of operations revenues our total revenues increased $ 28.9 million to $ 82.3 million for the year ended december 31 , 2019 compared to the prior year and decreased $ 62.0 million to $ 53.4 million for the year ended december 31 , 2018 compared to the year ended december 31 , 2017. the increase in revenues in 2019 compared to 2018 is attributable to an increase in license and milestone and non-cash royalty revenue , partially offset by decreases in research and development support and clinical materials revenue . the decrease in revenues in 2018 compared to 2017 is attributable to a decrease in license and milestone fees and research and development support revenue , partially offset by an increase in non-cash royalty revenue and clinical materials revenue . license and milestone fees the amount of license and milestone fees we earn is directly related to the number of our collaborators , the collaborators ' advancement of the product candidates , and the overall success in the clinical trials of the product candidates . as such , the amount of license and milestone fees may vary widely from quarter to quarter and year to year . 49 total revenue recognized from license and milestone fees from each of our collaborators in the years ended december 31 , 2019 , 2018 , and 2017 is shown in the following table ( in thousands ) : replace_table_token_3_th revenue from license and milestone fees increased $ 19.5 million to $ 34.8 million for the year ended december 31 , 2019 and decreased $ 64.2 million to $ 15.3 million for the year ended december 31 , 2018. included in license and milestone fees for the year ended december 31 , 2019 is a $ 5 million regulatory milestone achieved under our license agreement with genentech , a member of the roche group , and $ 3.0 million and $ 4.7 million of development
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actual results may differ materially from those discussed in these forward-looking statements due to a number of factors , including those set forth in the section entitled “ risk factors ” and elsewhere in this annual report on form 10-k. for further information regarding forward-looking statements , please refer to the “ special note regarding forward-looking statements and projections ” at the beginning of part i of this annual report on form 10-k. overview alimera sciences , inc. ( we , alimera or the company ) is a biopharmaceutical company that specializes in the research , development and commercialization of prescription ophthalmic pharmaceuticals . we are presently focused on diseases affecting the back of the eye , or retina , because we believe these diseases are not well treated with current therapies and represent a significant market opportunity . our most advanced product candidate is iluvien ® , which has received marketing authorization in austria , the united kingdom , portugal , france , germany and spain , and has been recommended for marketing authorization in italy , for the treatment of vision impairment associated with chronic diabetic macular edema ( dme ) considered insufficiently responsive to available therapies . dme is a disease of the retina that affects individuals with diabetes and can lead to severe vision loss and blindness . iluvien has not been approved by the u.s. food and drug administration ( fda ) . we currently plan to launch iluvien in germany , the united kingdom and france in 2013 , and are pursuing pricing and reimbursement in those countries . in july 2012 , we received a letter from germany 's federal joint committee indicating that the automatic obligation to submit a dossier on iluvien , per the arzneimittelmarkt-neuordnungsgesetz law , would not be necessary , and that a benefit assessment would not be required . receipt of this letter allows us to launch iluvien in germany without price restriction . in january 2013 , the united kingdom 's national institute for health and clinical excellence ( nice ) published final guidance indicating that iluvien is not cost effective for the treatment of vision impairment associated with chronic dme considered insufficiently responsive to available therapies given the cost of £5500 . we subsequently submitted a simple patient access scheme ( pas ) for iluvien to the patient access schemes liaison unit ( paslu ) w hich has been agreed to by the united kingdom 's department of health and is now under consideration by nice for inclusion in its rapid review facility . under this facility , the appraisal committee at nice is expected to assess the impact of the iluvien pas on iluvien 's cost effectiveness and determine whether an update to the recently published final guidance is warranted . 46 we submitted a new drug application ( nda ) in june 2010 for iluvien in the u.s. with the u.s. food and drug administration ( fda ) and in december 2010 , we received a complete response letter ( crl ) from the fda regarding our nda . the primary concerns expressed in the crl centered on the benefits of iluvien in treating dme patients versus the risk of its side effects . upon further analysis of the fame study data through its final readout at month 36 , we determined that a pre-planned subgroup of chronic dme patients demonstrated a greater benefit to risk profile than the full population dataset in our original nda filing . we submitted our response to the crl to the fda in may 2011 , including additional safety and efficacy data through month 36 of the fame study with an emphasis on the chronic dme subgroup . in november 2011 , the fda issued a second crl to communicate that the nda could not be approved in its then current form stating that the nda did not provide sufficient data to support that iluvien is safe and effective in the treatment of patients with dme . the fda stated that the risks of adverse reactions shown for iluvien in the fame study were significant and were not offset by the benefits demonstrated by iluvien in these clinical trials . in its second crl , the fda indicated that we would need to conduct two additional clinical trials to demonstrate that iluvien is safe and effective for the proposed indication . during the second quarter of 2012 , we met with the fda in an effort to gain a better understanding of the regulatory path for iluvien in the u.s. based upon this meeting , we submitted a response to the second crl to the fda in the first quarter of 2013 , which included additional analysis of the benefits and risks of iluvien based upon clinical data available from the fame study . we do not plan to conduct additional trials for dme at this time . we commenced operations in june 2003. since our inception we have incurred significant losses . as of december 31 , 2012 , we have accumulated a deficit of $ 231.1 million . we expect to incur substantial losses through the projected commercialization of iluvien as we : complete the clinical development and registration of iluvien ; prepare for the anticipated commercial launch of iluvien in the eu in 2013 , at the earliest ; continue to seek regulatory approval of iluvien in the u.s. and other jurisdictions ; evaluate the use of iluvien for the treatment of other diseases ; and advance the clinical development of other new product candidates either currently in our pipeline , or that we may license or acquire in the future . as of december 31 , 2012 , we had approximately $ 49.6 million in cash and cash equivalents . we plan to proceed with the direct commercialization of iluvien in germany , the united kingdom and france in 2013. we believe that we has sufficient funds available to fund our operations beyond the projected commercialization of iluvien in these eu countries . story_separator_special_tag if we repay term loan a prior to maturity , we must pay to the lenders a prepayment fee equal to 1.0 % of the total amount of principal then outstanding , provided that such fee will be reduced by 50 % in the event that the prepayment occurs in connection with an acquisition of us . to secure the repayment of any amounts borrowed under the term loan agreement , we granted to the lenders a first priority security interest in all of our assets , including our intellectual property , however , the lien on our intellectual property will be released if we meet certain financial conditions . the occurrence of an event of default could result in the acceleration of our obligations under the term loan agreement and an increase to the applicable interest rate , and would permit the lenders to exercise remedies with respect to the collateral under the term loan agreement . we also agreed not to pledge or otherwise encumber our intellectual property assets . additionally , we must seek the lenders ' approval prior to the payment of any cash dividends to our stockholders . on the effective date , we issued to the lenders warrants to purchase an aggregate of up to 39,773 shares of our common stock . each of the warrants is exercisable immediately , has a per-share exercise price of $ 11.00 and has a term of 10 years . we estimated the fair value of warrants granted using the black-scholes option pricing model . the aggregate fair value of the warrants was estimated to be $ 389,000. we allocated a portion of the proceeds from the term loan agreement to the warrants in accordance with accounting standards codification ( asc ) 470-20-25-2 , debt instruments with detachable warrants . as a result , we recorded a discount of $ 366,000 which is being amortized to interest expense using the effective interest method . the lenders will have certain registration rights with respect to the shares of common stock issuable upon exercise of all of their warrants . we paid to the lenders an upfront fee of $ 62,500 on the effective date and an additional fee of $ 50,000 in connection with the term loan modification . in accordance with asc 470-50-40-17 , debt — modifications and extinguishments , we are amortizing the unamortized discount on term loan a and the $ 50,000 modification fee over the remaining term of term loan a , as modified . the lenders also hold warrants to purchase an aggregate of up to 69,999 shares of our common stock , which would have been exercisable only if term loan b had been advanced . as a result of the issuance of the second crl by the fda in november 2011 , we did not draw down term loan b by december 31 , 2011 and the ability to draw down term loan b expired . consequently , the warrants issued to the lenders in connection with term loan b are not exercisable . we are required to maintain our primary operating and other deposit accounts and securities accounts with silicon valley bank , which accounts must represent at least 50 % of the dollar value of our accounts at all financial institutions . 48 the weighted average interest rate of our notes payable to silicon valley bank and midcap financial llp approximates the rate at which we could obtain alternative financing ; therefore , the carrying amount of the notes approximates their fair value . on february 6 , 2012 , we received a letter from the lenders stating that they reserve the right to assert that recent events , including the issuance by the fda of the second crl and a decrease in the market value of our public equity securities , may represent a material impairment of the value of the collateral under the loan agreements . to date , the lenders have not made such an assertion , and in our opinion a material impairment of the value of the collateral has not occurred . working capital revolver also on the effective date , we entered into a loan and security agreement with silicon valley bank , pursuant to which we obtained a secured revolving line of credit ( working capital revolver ) from silicon valley bank with borrowing availability up to $ 20.0 million ( revolving loan agreement ) . on may 16 , 2011 , silicon valley bank and we amended the revolving loan agreement to extend the maturity date of the working capital revolver from october 31 , 2013 to april 30 , 2014. the working capital revolver is a working capital-based revolving line of credit in an aggregate amount of up to the lesser of ( i ) $ 20.0 million , or ( ii ) 85 % of eligible domestic accounts receivable . as of december 31 , 2012 and 2011 , respectively , no amounts under the working capital revolver were outstanding or available to us . we may only draw on the revolving line of credit against eligible u.s. domestic accounts receivable , which we would not expect to have prior to the launch of iluvien in the u.s. therefore , the revolving line of credit , which expires in april 2014 , is not currently , and may never be , available to us . amounts advanced under the working capital revolver will bear interest at an annual rate equal to silicon valley bank 's prime rate plus 2.50 % ( with a rate floor of 6.50 % ) . interest on the working capital revolver will be due monthly , with the balance due at the maturity date .
| results of operations the following discussion should be read in conjunction with our consolidated financial statements . replace_table_token_3_th year ended december 31 , 2012 compared to the year ended december 31 , 2011 research and development expenses . research and development expenses increased by approximately $ 800,000 , or 11 % , to approximately $ 7.9 million for the year ended december 31 , 2012 compared to approximately $ 7.1 million for the year ended december 31 , 2011. the increase was primarily attributable to increases of $ 2.3 million in costs related to a consultant engaged to assist with the continued pursuit of approval of iluvien in the u.s. , $ 240,000 in costs related to our third party reading center for additional analysis of photographs of the retina of patients of our fame study to be included in the response to the second crl from the fda and $ 240,000 in costs related to the physician utilization study which is being conducted to assess the safety and utility of the commercial version of the applicator for iluvien , offset by decreases of $ 940,000 in costs associated with terminating our medical science liaisons to engage with retinal specialists in the study of iluvien in the u.s. , $ 360,000 in costs associated with establishing manufacturing capabilities with our third party manufacturer for iluvien , $ 220,000 in costs associated with certain types of nadph oxidase inhibitors which was terminated in 2011 as we terminated our license agreements with emory university , $ 210,000 in costs associated with the cros of our fame study as the cros completed their work in 2011 and $ 140,000 in costs associated with our ancillary studies . general and administrative expenses .
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as used in this report , the terms “ company , ” “ we , ” “ our , ” “ us ” and “ hgs ” refer to china hgs real estate , inc. and its subsidiaries . preliminary note regarding forward-looking statements . we make forward-looking statements in management 's discussion and analysis of financial condition and results of operations and elsewhere in this report based on the beliefs and assumptions of our management and on information currently available to us . forward-looking statements include information about our possible or assumed future results of operations which follow under the headings “ business and overview , ” “ liquidity and capital resources , ” and other statements throughout this report preceded by , followed by or that include the words “ believes , ” “ expects , ” “ anticipates , ” “ intends , ” “ plans , ” “ estimates ” or similar expressions . forward-looking statements are subject to a number of risks and uncertainties that could cause actual results to differ materially from those expressed in these forward-looking statements , including the risks and uncertainties described below and other factors we describe from time to time in our periodic filings with the u.s. securities and exchange commission ( the “ sec ” ) . we therefore caution you not to rely unduly on any forward-looking statements . the forward-looking statements in this report speak only as of the date of this report , and we undertake no obligation to update or revise any forward-looking statement , whether as a result of new information , future developments or otherwise . these forward-looking statements include , among other things , statements relating to : · our ability to sustain our project development · our ability to obtain additional land use rights at favorable prices ; · the market for real estate in tier 3 and 4 cities and counties ; · our ability to obtain additional capital in future years to fund our planned expansion ; or · economic , political , regulatory , legal and foreign exchange risks associated with our operations . our business overview we conduct substantially all of our business through shaanxi guangsha investment and development group co. , ltd , in hanzhong , shaanxi province . since the initiation of our business , we have been focused on expanding our business in certain tier 3 and tier 4 cities and counties in china . the real estate market in china plodded forward amid increasingly restrictive policies starting in 2011. on march 1 , 2013 , china 's state council announced five general curbing principles to regulate the real estate market , including new initiatives aimed at streamlining the work responsibility system for property prices , controlling speculative property investments , increasing commodity housing and land supply , stepping up construction of affordable housing , as well as tightening controls of the market . the detailed measures include a 20 percent tax on profits from selling a home , a capital gains tax that is on the books but has not been widely enforced . additionally , down payments and mortgage rates would be increased for second homes in certain cities . cities and local governments were instructed to institute “ property control targets and detailed implementation plans ” by the end of march 2013. the state council pointed out that china is in the progress of rapid urbanization and housing supply in major cities will not be able to meet demands in the short term . the state council will maintain its control on speculative property investment and make efforts to meet the demands of home buyers . 30 the introduction of the cooling measures such as the “ national five ” regulations has by far caused a temporary halt in land and property price appreciation . with uncertainties in the prc government 's credit tightening policies , the market for real estate sales in 2013 remained challenging . while the government 's broad policy direction is likely to remain unchanged and the restrictive real estate policies have created a “ wait-and-see ” mentality among real estate buyers , the cumulative downward price adjustment has triggered the partial release of demand , creating a rise in transaction volumes in the 2013. developers generally have been reducing inventory by adopting more aggressive sales tactics . for fiscal 2013 , our sales volume significantly increased compared to last year . our total revenue , gross profit and net income for fiscal 2013 were $ 67,809,073 , $ 26,280,341 and $ 20,791,565 , respectively , representing an approximately 260 % , 225 % and 302 % increase from last year , respectively in the course of preparing the company 's consolidated financial statements for the year ended september 30 , 2013 , the company reviewed its revenue recognition policy with regard to its large high rise residential projects . upon further research of asc 360-20-40d “ sale of condominium units ” , the company concluded to adopt the percentage of completion method to account for real estate sales from these large high rise residential projects with construction periods over 18 -24 months . we completed and started delivery of 3 new residential buildings with total gfa of 35,749 square meters , compared to 4 new residential buildings with gfa of 64,141 square meters completed in fiscal 2012. since the end of fiscal 2012 , the company has been focusing on developing large high rise residential projects , including mingzhu garden mingzhu beiyuan project , oriental garden project and certain high rise buildings in yangzhou pearl garden project . the individual residential building in these projects are generally over 20 stories . the construction period for these real estate projects are over 18-24 months . as of september 30 , 2013 , all these large high rise residential projects are still under construction . story_separator_special_tag the construction started in the fourth quarter of fiscal 2013. the related pre-sales license is expected to be obtained in later half of fiscal 2014. the construction is expected to be completed in 2-3 years . road construction in addition to the above residential projects , the company was approved by hanzhong local government to construct two municipal roads with a total length of 1,064.09 meters . the budget for these two municipal roads was approximately $ 3 million and was approved by hanzhong ministry of finance . the related construction was substantially completed as of september 30 , 2013. a further extension on these road construction projects was under discussion between the company and the hanzhong local government , and therefore , these two roads have not been delivered to the local government as of september 30 , 2013. for these construction projects , the company recognizes the fee as other revenue using the full accrual method when the project is completed . we expect these initiatives will help us cope with this difficult period and better position us to capitalize on opportunities from a future market upturn . 32 summary of real estate projects completion status actual ( estimated ) completion time of construction estimated time to sell of the property development completed hanzhong city mingzhu garden ( mingzhu nanyuan & mingzhu beiyuan ) majority was completed during the third quarter of fiscal 2012 2014-2015 hanzhong city nan dajie ( mingzhu xinju ) phase one completed in 2010 and phase two completed in 2011 2014 yang county yangzhou pearl garden majority completed in 2011 and 2012 2014-2015 hanzhong city central plaza completed prior to 2010 2014 under development : estimated completion time of construction hanzhong city oriental pearl garden to be completed in 1-1.5 years hanzhong city mingzhu garden ( mingzhu nanyuan & mingzhu beiyuan ) to be completed in 1-1.5 years yang county yangzhou pearl garden to be completed in 1-1.5 years yang county yangzhou palace to be completed in 2-3 year shijin project under planning stage hanzhong city mingzhu road west to be completed and delivered during fiscal 2014 hanzhong city liuhou road to be completed and delivered during fiscal 2014 story_separator_special_tag 10pt '' > revenue from the sales of short term development properties , where the construction period is expected to be 18 months or less is recognized by the full accrual method at the time of the closing of an individual unit sale . this occurs when title to or possession of the property is transferred to the buyer . a sale is not considered consummated until ( a ) the parties are bound by the terms of a contract , ( b ) all consideration has been exchanged , ( c ) any permanent financing for which the seller is responsible has been arranged , ( d ) all conditions precedent to closing have been performed , ( e ) the seller does not have substantial continuing involvement with the property , and ( f ) the usual risks and rewards of ownership have been transferred to the buyer . further , the buyer 's initial and continuing investment is adequate to demonstrate a commitment to pay for the property . 34 the company provides “ mortgage loan guarantees ” only with respect to buyers who make down-payments of 30 % -50 % of the total purchase price of the property . the period of the mortgage loan guarantee begins on the date the bank approves the buyer 's mortgage and we receive the loan proceeds in our bank account and ends on the date the “ certificate of ownership ” evidencing that title to the property has been transferred to the buyer . the procedures to obtain the certificate of ownership take six to twelve months ( the “ mortgage loan guarantee period ” ) . if , after investigation of the buyer 's income and other relevant factors , the bank decides not to grant the mortgage loan , our mortgage-loan based sales contract terminates and there will be no guarantee obligation . if , during the mortgage loan guarantee period , the buyer defaults on his or her monthly mortgage payment for three consecutive months , we are required to refund the loan proceeds back to the bank , although we have the right to keep the customer 's deposit and resell the property to a third party . once the certificate of property has been issued by the relevant government authority , our loan guarantee terminates . if the buyer then defaults on his or her mortgage loan , the bank has the right to take the property back and sell it and use the proceeds to pay off the loan . the company is not liable for any shortfall that the bank may incur in this event . to date , no buyer has defaulted on his or her mortgage payments during the mortgage loan guarantee period and the company has not had to refund any loan proceeds pursuant to its mortgage loan guarantees . for municipal road construction projects , fees are generally recognized by the full accrual method at the time of the projects are completed . revenue recognized under full accrual method the following table summarizes revenue recognized under full accrual method from sales of completed real estate projects for the years ended september 30 , 2013 and 2012 , respectively : replace_table_token_4_th the revenues are derived from the sale of the completed residential buildings , commercial front-stores and parking spaces in projects . revenues before sales tax increased by 113.6 % to approximately $ 40.3 million for the year ended september 30 , 2013 from approximately $ 18.9 million in the last year .
| results of operations revenues the following is a breakdown of revenue for the years ended september 30 , 2013 and 2012 : replace_table_token_3_th adoption of percentage of completion revenue recognition method since the end of fiscal 2012 , the company has been focusing on developing large high rise residential projects , including mingzhu garden mingzhu beiyuan project , oriental garden project and certain high rise buildings in yangzhou pearl garden project . the individual residential buildings in these projects are generally over 20 stories . the construction period for these real estate projects are over 18-24 months . as of september 30 , 2013 , all these large high rise residential projects were still under construction . in the past , the company 's real estate projects were multi-layer apartment buildings and sub-high-rise apartment buildings , which are generally less than 11 stories and the related construction takes around 12 months . if the company continues to applying full accrual method to account for sales from these large high rise real estate projects , the company 's revenue will show significant fluctuation in the next 2-3 years . 33 in the course of preparing the company 's consolidated financial statements for the year ended september 30 , 2013 , the company reviewed its revenue recognition policy with regard to these large high rise residential projects . upon further research of asc 360-20-40d “ sale of condominium units ” , the company concluded to adopt the percentage of completion method to account for real estate sales from these large high rise residential projects with construction periods over 18 -24 months . the adoption of percentage of completion method does not have any impact on the company 's historical annual consolidated financial statements , because the company just started development of these large high rise residential projects at the end of fiscal 2012 and did not report any revenue from these projects in the past .
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ebitda and adjusted ebitda are non-gaap financial measures of performance that have limitations and should not be considered as a substitute for net income ( loss ) or cash provided by ( used in ) operating activities . please see item 6 above for a discussion of our use of ebitda and adjusted ebitda and a reconciliation to net income ( loss ) for the periods presented . a reference to a “ note ” herein refers to the accompanying notes to consolidated and combined financial statements contained in part iv , item 15 - “ exhibits and financial statement schedules ” of this annual report . overview we are a delaware limited partnership formed in june 2011 by sprague holdings and our general partner to engage in the purchase , storage , distribution and sale of refined products and natural gas , and to provide storage and handling services for a broad range of materials . we are one of the largest independent wholesale distributors of refined products in the northeast united states based on aggregate terminal capacity . we own , operate and or control a network of 19 refined products and materials handling terminals strategically located throughout the northeast united states and in quebec , canada that have a combined storage capacity of 14.2 million barrels for refined products and other liquid materials , as well as 2.0 million square feet of materials handling capacity . we also have an aggregate of 2.0 million barrels of additional storage capacity attributable to 45 storage tanks not currently in service . these tanks are not necessary for the operation of our business at current levels . in the event that such additional capacity were desired , additional time and capital would be required to bring any of such storage tanks into service . furthermore , we have access to more than 60 third-party terminals in the northeast united states through which we sell or distribute refined products pursuant to rack , exchange and throughput agreements . we operate under four business segments : refined products , natural gas , materials handling and other operations . we evaluate the performance of our segments using adjusted gross margin , which is a non-gaap financial measure used by management and external users of our consolidated and combined financial statements to assess the economic results of operations . for a description of how we define adjusted gross margin , see part ii , item 7 - “ management 's discussion and analysis of financial condition and results of operations—adjusted gross margin and adjusted ebitda. ” for a reconciliation of adjusted gross margin to the gaap measure most directly comparable thereto , see part ii , item 7 - “ management 's discussion and analysis of financial condition and results of operations—results of operations. ” our refined products segment purchases a variety of refined products , such as heating oil , diesel fuel , residual fuel oil , kerosene , jet fuel , gasoline and asphalt ( primarily from refining companies , trading organizations and producers ) , and sells them to our customers . we have wholesale customers who resell the refined products we sell to them and commercial customers who consume the refined products we sell to them . our wholesale customers consist of more than 1,100 heating oil retailers and diesel fuel and gasoline resellers . our commercial customers include federal and state agencies , municipalities , regional transit authorities , large industrial companies , real estate management companies , hospitals , educational institutions and asphalt paving companies . for each of the years ended december 31 , 2015 and 2014 , we sold 1.7 billion gallons of refined products . for the years ended december 31 , 2015 and 2014 , our refined products segment accounted for 62 % and 60 % of our adjusted gross margin , respectively . we also purchase , sell and distribute natural gas to more than 14,000 commercial and industrial customer locations across 13 states primarily in the northeast and mid-atlantic . we purchase the natural gas we sell from natural gas producers and trading companies . for the years ended december 31 , 2015 and 2014 , we sold 56.9 bcf and 54.4 bcf of natural gas , respectively . for the years ended december 31 , 2015 and 2014 , our natural gas segment accounted for 18 % and 23 % of our adjusted gross margin , respectively . our materials handling business is a fee-based business and is generally conducted under multi-year agreements . we offload , store and or prepare for delivery a variety of customer-owned products , including asphalt , clay slurry , salt , gypsum , coal , petroleum coke , crude oil , caustic soda , tallow , pulp and heavy equipment . for the year ended december 31 , 2015 , we offloaded , stored and or prepared for delivery 2.7 million short tons of products and 266.3 million gallons of liquid materials . for the year ended december 31 , 2014 , we offloaded , stored and or prepared for delivery 2.7 million short tons of products and 309.8 million gallons of liquid materials . for the years ended december 31 , 2015 and 2014 , our materials handling segment accounted for 17 % and 15 % of our adjusted gross margin , respectively . 38 our other operations segment includes the marketing and distribution of coal conducted in our portland , maine terminal , commercial trucking and the heating equipment service business . for the years ended december 31 , 2015 and 2014 , our other operations segment accounted for 3 % and 2 % of our adjusted gross margin , respectively . we take title to the products we sell in our refined products , natural gas and other operations segments . we do not take title to any of the products in our materials handling segment . story_separator_special_tag degree days are based on how much the average temperature departs from a human comfort level of 65°f . each degree of temperature above 65°f is counted as one cooling degree day , and each degree of temperature below 65°f is counted as one heating degree day . degree days are accumulated over the course of a year and can be compared to a monthly or a long-term average ( “ normal , ” ) to see if a month or a year was warmer or cooler than usual . degree days are officially observed by the national weather service and archived by the national climatic data center . for purposes of evaluating our results of operations , we use the normal heating degree day amount as reported by the noaa/national weather service for the new england oil home heating region over the period of 1981-2011. hedging activities we hedge our inventory within the guidelines set in our risk management policy . in a rising commodity price environment , the market value of our inventory will generally be higher than the cost of our inventory . for gaap purposes , we are required to value our inventory at the lower of cost or market , or lcm . the hedges on this inventory will lose value as the value of the underlying commodity rises , creating hedging losses . because we do not utilize hedge accounting , gaap requires us to record those hedging losses in our statement of operations . in contrast , in a declining commodity price market we generally incur hedging gains . gaap requires us to record those hedging gains in our statement of operations . the refined products inventory market valuation is calculated daily using independent bulk market price assessments from major pricing services ( either platts or argus ) . these third-party price assessments are primarily based in new york harbor , or nyh , with our inventory values determined after adjusting the nyh prices to the various inventory locations by adding expected cost differentials ( primarily freight ) compared to a nyh supply source . our natural gas inventory is limited , with the valuation updated monthly based on the volume and prices at the corresponding inventory locations . the prices are based on the most applicable monthly inside ferc , or iferc , assessments published by platts near the beginning of the following month . 40 similarly , we can hedge our natural gas transportation assets ( i.e. , pipeline capacity ) within the guidelines set in our risk management policy . although we do not own any natural gas pipelines , we secure the use of pipeline capacity to support our natural gas requirements by either leasing capacity over a pipeline for a defined time period or by being assigned capacity from a local distribution company for supplying our customers . as the spread between the price of gas between the origin and delivery point widens ( assuming the value exceeds the fixed charge of the transportation ) , the market value of the natural gas transportation contracts assets will increase . if the market value of the transportation asset exceeds costs , we can hedge or “ lock in ” the value of the transportation asset for future periods using available financial instruments . for gaap purposes , the increase in value of the natural gas transportation assets is not recorded as income in the statement of operations until the transportation is utilized in the future ( i.e. , when natural gas is delivered to our customer ) . as the value of the natural gas transportation assets increase , the hedges on the natural gas transportation assets lose value , creating hedging losses in our statement of operations . the natural gas transportation assets market value is calculated daily based on the volume and prices at the corresponding pipeline locations . the daily prices are based on trader assessed quotes which represent observable transactions in the market place , with the end-month valuations primarily based on platts prices where available or adding a location differential to the price assessment of a more liquid location . as described above , pursuant to gaap , we value our commodity derivative hedges at the end of each reporting period based on current commodity prices and record hedging gains or losses , as appropriate . also as described above , and pursuant to gaap , our refined products and natural gas inventory and natural gas transportation contract rights , to which the commodity derivative hedges relate , are not marked to market for the purpose of recording gains or losses . in measuring our operating performance , we rely on our gaap financial results , but we also find it useful to adjust those numbers to show only the impact of hedging gains and losses actually realized in the period being reviewed . by making such adjustments , as reflected in adjusted gross margin and adjusted ebitda , we believe that we are able to align more closely hedging gains and losses to the period in which the revenue from the sale of inventory and income from transportation contracts relating to those hedges is realized . trends and factors that impact our business this section identifies certain factors and industry-wide trends that may affect our financial performance and results of operations . qualifying income status and proposed regulations . pursuant to internal revenue code section 7704 ( c ) ( 2 ) , in order to be treated as a partnership for u.s. federal income tax purposes , more than 90 percent of the income of a partnership must be from certain specified sources , including the exploration , development , mining or production , processing , refining , transportation and marketing of minerals and natural resources . on may 5 , 2015 , the treasury department and the irs issued the proposed regulations regarding qualifying income under section 7704 ( d ) ( 1 ) ( e ) of the code . the proposed regulations provide rules regarding the qualifying income exception .
| results of operations the following table presents information regarding our volume , net sales and adjusted gross margin by segment , as well as our adjusted ebitda and information on weather conditions , for the periods presented . replace_table_token_7_th ( 1 ) inventory is valued at the lower of cost or market . the fair value of the derivatives we use to economically hedge our inventory declines or appreciates in value as the value of the underlying inventory appreciates or declines , which creates unrealized hedging ( losses ) gains with respect to the derivatives that are included in net income ( loss ) . ( 2 ) the unrealized hedging gain ( loss ) on prepaid forward contracts represents our estimate of the change in fair value of the prepaid forward contracts which are not recorded in net income ( loss ) until the forward contract is settled in the future ( i.e. , when the commodity is delivered to the customer ) . as these contracts are prepaid , they do not qualify as 43 derivatives . the fair value of the derivatives we use to economically hedge our prepaid forward contracts declines or appreciates in value as the value of the underlying forward contract appreciates or declines , which creates unrealized hedging gains ( losses ) with respect to the derivatives that are included in net income ( loss ) . ( 3 ) the unrealized ( gain ) loss on natural gas transportation contracts represents our estimate of the change in fair value of the natural gas transportation contracts which are not recorded in net ( loss ) income until the transportation is utilized in the future ( i.e. , when natural gas is delivered to the customer ) , as these contracts are executory contracts that do not qualify as derivatives .
| 5,816 |
we undertake no obligation to publicly update or revise any forward-looking statements , whether as a result of new information , future events or otherwise . overview we are a leader in providing secure email encryption in a saas model . our email encryption service delivers information in a secure manner , enabling the use of internet-based email for the safe delivery of sensitive information , especially for customers in the healthcare , finance , insurance , and government sectors . a core competency is our ability to deliver this complex service offering with a high level of availability , reliability , integrity and security . the company is encouraged by 2011 results and our success is based on continuing to build a solid and predictable business based on our successful subscription business model . additionally , our results indicate we are transitioning to become a part of mainstream demand for email encryption as data security and integrity issues continue to make headline news . we are also benefiting from a trend toward the use of a powerful cloud-based offering along with the growing need for regulatory compliance . our key performance metrics improved compared to the prior year and we reported improved financial performance driven by continued growth in our email encryption business . the company 's operating income for 2011 was $ 10.6 million , an increase of $ 5.4 million over prior year , driven by 15 % growth in revenue . our net income in 2011 included a tax benefit of $ 11.8 million resulting from a decrease in the company 's deferred tax asset valuation allowance . this compares to a decrease in our deferred tax asset valuation and resulting tax benefit of $ 35.3 million in 2010. net income for 2011 and 2010 excluding the impact of this tax benefit was $ 10.8 million and $ 5.9 million , respectively . 17 strategy and focus areas the company 's email encryption subscription service continued to grow in 2011 by adding new customers while retaining a high percentage of existing customers . our subscription model initially required large up-front investment to establish the service , but over time , the fixed set-up costs are exceeded by the recurring subscription and transaction fees , and incremental costs to add new users are relatively low . over the course of 2011 we continued to make investments to strengthen our email encryption services through the development of a number of significant portfolio upgrades . we delivered zixmobility which has set the new standard in simple mobile access for secure email . we also added single sign-on , customer web page integration , flexible form provisioning and application-driven email support features to our suite of zixport service capabilities . the zixgateway appliance policy configuration and processing capabilities were expanded in a number of key areas including intelligent integration of transport layer security ( tls ) technology into our comprehensive message delivery and reporting frameworks . the new tls capabilities and the addition of the new zixaccess inbound service were designed to support continued coverage expansion for our leading transparent message delivery network . operationally , our success is primarily dependent upon the following key metrics : new subscriptions ( termed new first year orders ( nfyo ) ) for the email encryption service ; retention of subscribers to the email encryption service ; total orders ( includes nfyo 's , second and third years on multi-year orders and renewals ) , and ; our ability to increase business volume with minimal cost increases . known trends regarding these key metrics and their implication on our current and future capital requirements are discussed throughout this management 's discussion and analysis of financial condition and results of operations ( md & a ) . there are no assurances we will be successful in our efforts to achieve these key metrics . our continued growth depends on the timely development and market acceptance of our products and services . see item 1a . risk factors for more information on the risks relative to our operations and future prospects . discontinued operations on december 31 , 2010 , zix corporation completed the previously announced ( see current reports filed on form 8-k dated december 8 , 2009 and form 8-k/a dated january 6 , 2010 ) wind down of its e-prescribing business and discontinued operating this line of business . this business had previously been reported as a segment . the wind down of this business entailed the fulfillment of existing contracts . assets used by this segment , primarily business computer servers , were compatible with the remaining business , email encryption , and were therefore absorbed by our remaining business . as a result , no gain or loss on disposal of assets was incurred . prior to the completion of the wind down , this business line had been a reportable segment . the following table summarizes the components of the income ( loss ) from discontinued operations presented in our statement of operations for 2010 and 2009. there was no activity relating to e-prescribing in 2011. replace_table_token_4_th in december of 2009 , the company announced it would wind down the e-prescribing business and exit the business by december 31 , 2010. during 2010 we reduced the costs of operating this business and transferred shared resources to the remaining business while meeting the requirements of our existing contracts . we also discontinued 18 our recruiting efforts for new e-prescribing deployments and reduced the associated recruitment and deployment expenses . additionally , customers requesting to renew existing contracts set to expire during 2010 were renewed to terminate no later than december 31 , 2010. these actions resulted in significantly lower costs and lower revenue in 2010 compared to 2009 for the e-prescribing business . the 2010 income before income taxes of $ 762,000 resulted primarily from the continued recognition of deferred revenue during the year while reducing expenses in cost of revenues , research and development , and sg & a . story_separator_special_tag cost of revenues the following table sets forth a year-over-year comparison of the cost of revenues . replace_table_token_7_th cost of revenues is comprised of costs related to operating and maintaining the zixdata center , a field deployment team , customer service and support and the amortization of company-owned , customer-based computer appliances . a significant portion of the total cost of revenues relates to the zixdata center , which currently has excess capacity . accordingly , cost of revenues is relatively fixed and is therefore expected to grow at a slower pace than revenue . the increase in 2011 of $ 743,000 resulted primarily from shifting shared and fixed costs previously absorbed by the e-prescribing product line . personnel and other costs remained relatively flat year over year . during 2010 , we wound down the operations of our e-prescribing product line and transitioned a significant amount of shared resource costs from e-prescribing to email encryption . additionally , we shifted fixed costs that were previously absorbed by e-prescribing . the cost of revenues increase in 2010 compared to 2009 resulted primarily from this shifting of shared resource costs and allocated fixed costs . research and development expenses the following table sets forth a year-over-year comparison of our research and development expenses from continuing operations : replace_table_token_8_th research and development expenses consist primarily of salary , benefits and stock-based compensation for our development staff , and other costs associated with improving our existing products and services and developing new products and services . the increase in expenses in 2011 compared to 2010 resulted primarily from costs associated with shifting resources from e-prescribing to email encryption , approximately $ 300,000. these costs were partially offset by lower stock-based compensation expense of $ 115,000 and other small reductions across various research and development expenses . during 2010 we wound down the e-prescribing operation and shifted previously shared resources and the related expenses to the remaining business , email encryption . additionally , we shifted fixed expenses previously absorbed by e-prescribing to email encryption . the year over year increase in research and development expenses for 2010 compared to 2009 resulted primarily from this shifting of shared resource costs and fixed expenses to email encryption . 23 selling , general and administrative expenses the following table sets forth a year-over-year comparison of our selling , general and administrative expenses from continuing operations : replace_table_token_9_th selling , general and administrative expenses consist primarily of salary , commissions , travel , stock-based compensation and benefits for marketing , selling and executive and administrative personnel . also included are costs associated with advertising and promotions and fees for professional services and other general corporate activities . the decrease in 2011 compared to 2010 resulted primarily from lower commissions and bonuses on lower nfyos ( $ 1,229,000 ) , lower stock-based compensation expense ( $ 1,013,000 ) , and lower severance expenses ( $ 247,000 ) . these reductions were partially offset by increased professional fees ( $ 831,000 ) including commissions paid to repurchase our stock and the shift of shared and fixed costs in 2011 previously allocated the e-prescribing ( $ 556,000 ) . the small remaining variance ( $ 113,000 ) consists of relatively minor changes in various other sg & a expenses none of which were materially significant . the increase in 2010 compared to 2009 resulted primarily from higher marketing expenses , sales commissions and travel expenses due primarily to sales growth . these increases were partially offset by lower severance and professional fees , both related to the wind down of the e-prescribing business . interest expense interest expense for 2011 , 2010 and 2009 was $ 7,000 , $ 22,000 and $ 21,000 respectively , consisting of interest related to a license subscription promissory note payable . investment and other income investment and other income was $ 95,000 , $ 96,000 , and $ 214,000 for the years ended december 31 , 2011 , 2010 , and 2009 , respectively . the decreasing amounts in all years presented was primarily driven by lower interest rates . income taxes our company or one of our subsidiaries files income tax returns in the u.s. federal jurisdiction and various states and in the canadian federal and provincial jurisdictions . we recognize and measure uncertain tax positions using a two-step approach . the first step is to evaluate the tax position for recognition by determining if the weight of available evidence indicates that it is more likely than not that the position will be sustained on audit , including resolution of related appeals or litigation processes , if any . the second step is to measure the tax benefit as the largest amount that is more than 50 % likely of being realized upon settlement . the company 's income tax ( benefit ) expense for 2011 , 2010 , and 2009 of ( $ 11,889,000 ) , ( $ 35,231,000 ) , and $ 67,000 , respectively , represents refundable u.s. alternative minimum tax , u.s. research and development credits , non-u.s. taxes payable related to the operations of the company 's canadian subsidiary established in late 2002 , state income taxes , and reversals of a portion of the company 's historical valuation allowance . significant judgment is required in determining any valuation allowance recorded against deferred tax assets . in assessing the need for a valuation allowance , we consider available evidence , including past earnings , estimates of future taxable income , and the feasibility of tax planning strategies . at december 31 , 2011 , the company partially reserved its u.s. net deferred tax assets due to the uncertainty of future taxable income sufficient to utilize net loss carryforwards prior to their expiration . the portion of the company 's deferred tax asset not reserved was $ 50,357,000. the majority of this unreserved portion related to $ 41,069,000 u.s. net operating losses ( nols ) because we believe the company will generate sufficient taxable income in future years to utilize these nols prior 24 to their expiration .
| other financial highlights email encryption backlog was $ 53.7 million at the end of 2011 , compared with $ 49.9 million at the end of 2010 total orders for 2011 were $ 42.3 million , an increase of 4 % from the 2010 total orders of $ 40.8 million our deferred revenue at the end of 2011 was $ 17.4 million , compared with $ 16.8 million at the end of 2010 we generated cash flows from operations of $ 13.2 million during fiscal 2011. our cash and cash equivalents were $ 20.7 million at the end of 2011 , compared with $ 24.6 million at the end of 2010. our decline in cash was the result of $ 21.0 million spent in 2011 to repurchase our stock . our shared , cloud-based zixdirectory now has over 30 million members including some of the most respected institutions in the country critical accounting policies and estimates in preparing our consolidated financial statements , we make estimates , assumptions and judgments that can have a significant impact on revenue , income ( loss ) from operations and net income ( loss ) , as well as the value of certain assets and liabilities on our consolidated balance sheet . the application of our critical accounting policies requires an evaluation of a number of complex criteria and significant accounting judgments by us . management bases its estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances , the results of which form the basis for making judgments about the carrying values of assets and liabilities . we evaluate our estimates on a regular basis and make changes accordingly . senior management has discussed the development , selection and disclosure of these estimates with the audit committee of our board of directors . actual results may materially differ from these estimates under different assumptions or conditions .
| 5,817 |
such costs include charges for consulting services and costs for personnel associated with programming , coding , and testing such software . amortization of capitalized software costs begins when the software is ready for use and is included in depreciation expense in the accompanying consolidated statements of operations . software development costs are being amortized using the story_separator_special_tag the following discussion and analysis of our financial condition and results of operations should be read in conjunction with item 1. business , item 6. selected financial data , item 1a . risk factors , forward-looking statements and item 15. consolidated financial statements and the accompanying notes and other data , all of which appear elsewhere in this annual report on form 10-k. business overview we provide healthcare staffing , recruiting and workforce solutions to our customers through our vast network of 74 office locations throughout the u.s. our services include placing clinicians on travel and per diem assignments , local short-term contracts and permanent positions . in addition , we offer flexible workforce management solutions to our customers including : msp , education healthcare , rpo and other outsourcing and value-added services as described in item 1. business . in addition , we provide both retained and contingent placement services for healthcare executives , physicians , and other healthcare professionals . 22 we manage and segment our business based on the nature of our services we offer to our customers . as a result , in accordance with the segment reporting topic of the fasb asc , we report three business segments – nurse and allied staffing , physician staffing , and other human capital management services . ● nurse and allied staffing – nurse and allied staffing represented approximately 86 % of our total revenue . nurse and allied staffing provides traditional staffing , recruiting , and value-added workforce solutions including : temporary and permanent placement of travel and local branch-based nurse and allied professionals , msp services , education healthcare services , and outsourcing services . the results of our msn , mediscan and usr acquisitions have been aggregated with our nurse and allied staffing business segment . see note 3 - acquisitions to our consolidated financial statements . ● physician staffing – physician staffing represented approximately 12 % of our total revenue . physician staffing provides physicians in many specialties , certified registered nurse anesthetists , nurse practitioners and physician assistants under our medical doctor associates ( mda ) brand as independent contractors on temporary assignments throughout the u.s. ● other human capital management services – other human capital management services ( ohcms ) represented approximately 2 % of our total revenue . subsequent to the sale of our education seminars business , cce , on august 31 , 2015 , ohcms is comprised of retained and contingent search services for physicians , healthcare executives , and other healthcare professionals within the u.s. summary of operations for the year ended december 31 , 2016 , consolidated revenue from services grew 8.6 % to $ 833.5 million , entirely from our nurse and allied staffing business that experienced strong demand , increased pricing , and benefited from the acquisition of mediscan . revenue growth of 16.1 % in nurse and allied staffing was partially offset by lower revenue from our physician staffing business . net income attributable to common shareholders was $ 8.0 million , or $ 0.15 per diluted share . during 2016 , we experienced high demand for our nurse and allied staffing services including msp , and as a result , we made investments in revenue producing headcount and marketing spend on candidate attraction which we expect to continue into 2017 to support recent contract wins . we also acquired an rpo business to fuel growth for this offering to our customers . for the year ended december 31 , 2016 , we generated cash flow from operating activities of $ 30.1 million , and in june 2016 , we refinanced our debt and entered into a new senior credit agreement . this resulted in a reduced interest rate effective for the second half of 2016. as of december 31 , 2016 , we had $ 20.6 million of cash and cash equivalents , $ 39.5 million of term loan and $ 25.0 million of convertible notes at par . there were no borrowings drawn on our $ 100.0 million revolving credit facility , and $ 22.2 million of letters of credit outstanding , leaving $ 77.8 million available for borrowing . see note 8 - debt to our consolidated financial statements . see results from operations , segments results and liquidity and capital resources sections that follow for further information . operating metrics we evaluate our financial condition by tracking operating metrics and financial results specific to each of our segments . key operating metrics include hours worked , days filled , number of ftes , revenue per fte , and revenue per day filled . other operating metrics include number of open orders , candidate applications , contract bookings , length of assignment , bill and pay rates , and renewal and fill rates , number of active searches , and number of placements . these operating metrics are representative of trends that assist management in evaluating business performance . due to the timing of our business processes and other factors , certain of these operating metrics may not necessarily correlate to the reported gaap results for the periods presented . some of the segment financial results analyzed include revenue , gross profit margins , operating expenses , and contribution income . in addition , we monitor cash flow as well as operating and leverage ratios to help us assess our liquidity needs . 23 business segment business measurement nurse and allied staffing ftes represent the average number of nurse and allied staffing contract personnel on a full-time equivalent basis . average revenue per fte per day is calculated by dividing the nurse and allied staffing revenue by the number of days worked in the respective periods . story_separator_special_tag interest expense interest expense totaled $ 6.1 million for the year ended december 31 , 2016 and $ 6.8 million for the year ended december 31 , 2015 . we refinanced our debt structure late in the second quarter of 2016 , which resulted in lower overall borrowing costs . the effective interest rate on our borrowings was 8.4 % for the year ended december 31 , 2016 compared to 10.1 % in the year ended december 31 , 2015 . our $ 25.0 million in convertible notes which bear an interest rate of 8.00 % will become callable by us in july 2017 . 26 ( gain ) loss on derivative liability gain on derivative liability of $ 5.8 million and loss on derivative liability of $ 9.9 million for the years ended december 31 , 2016 and december 31 , 2015 , respectively , relate to the change in the fair value of embedded features of our convertible notes from the end of the respective prior year . the gain and loss were primarily a result of a corresponding decrease and increase , respectively , in our share price in the respective periods . the convertible notes include terms that are considered to be embedded derivatives , including conversion and redemption features that primarily protect the investors ' investment with us . each reporting period we are required to fair value the embedded derivative with the changes being recorded as a component of other expense ( income ) on our consolidated statements of operations . see note 9 - convertible notes derivative liability to our consolidated financial statements . loss on early extinguishment of debt loss on early extinguishment of debt was $ 1.6 million for the year ended december 31 , 2016 and related to the write-off of unamortized net debt discount and issuance costs , including a redemption premium of $ 0.6 million , related to our second lien term loan . see note 8 - debt to our consolidated financial statements . i ncome tax benefit income tax benefit from continuing operations totaled $ 4.2 million for the year ended december 31 , 2016 , compared to $ 0.8 million for the year ended december 31 , 2015 . the effective tax rate was negative 92.1 % and negative 19.1 % , including the impact of discrete items , for the years ended december 31 , 2016 and 2015 , respectively . excluding discrete items , our effective tax rate for these years was negative 89.8 % and 41.1 % , respectively . the effective tax rates are different than the statutory rates primarily due to the impact from amortization of indefinite-lived intangible assets for tax purposes , the partial non-deductibility of certain per diem expenses , and international and state minimum taxes . comparison of results for the year ended december 31 , 2015 compared to the year ended december 31 , 2014 replace_table_token_5_th 27 revenue from services revenue from services increased $ 149.6 million , or 24.2 % , to $ 767.4 million for the year ended december 31 , 2015 , as compared to $ 617.8 million for the year ended december 31 , 2014. the increase was entirely from nurse and allied staffing and partially offset by lower revenue from physician staffing and other human capital management services . see further discussion in segment results . direct operating expenses direct operating expenses are comprised primarily of field employee compensation and independent contractor expenses , as well as housing , travel and field insurance expenses . direct operating expenses increased $ 110.0 million , or 23.9 % , to $ 570.1 million for the year ended december 31 , 2015 , as compared to $ 460.0 million for year ended december 31 , 2014 , primarily due to the growth in nurse and allied staffing and the impact of the acquisitions . as a percentage of total revenue , direct operating expenses represented 74.3 % of revenue for the year ended december 31 , 2015 , and 74.5 % for the year ended december 31 , 2014 . selling , general , and administrative expenses selling , general , and administrative expenses increased $ 20.3 million , or 14.4 % , to $ 161.3 million for the year ended december 31 , 2015 , as compared to $ 141.0 million for the year ended december 31 , 2014 . this increase is primarily due to the msn acquisition . as a percentage of total revenue , selling , general , and administrative expenses were 21.0 % and 22.8 % for the years ended december 31 , 2015 and 2013 , respectively , reflecting improved operating leverage . depreciation and amortization expense depreciation and amortization expense in the year ended december 31 , 2015 increased to $ 8.1 million as compared to $ 7.4 million for the year ended december 31 , 2014 , due to the impact of the recent acquisitions . as a percentage of revenue , depreciation and amortization expense was 1.0 % for the year ended december 31 , 2015 and 1.2 % for the year ended december 31 , 2014 . loss on sale of business during the year ended december 31 , 2015 , we sold our education seminars business and recognized a pre-tax loss of $ 2.2 million related to the divestiture of the business . in addition , we recorded a tax benefit of $ 3.5 million for the reversal of valuation allowances associated with this business , resulting in an after-tax gain of $ 1.3 million . acquisition and integration costs during the year ended december 31 , 2015 , we incurred acquisition and integration costs of $ 0.9 million which predominantly were costs related to the mediscan acquisition , which closed october 30 , 2015. during the year ended december 31 , 2014 , we incurred acquisition and integration costs of $ 8.0 million , primarily related to the msn acquisition , and partly related to our december 2013 allied staffing business acquisition .
| segment results information on operating segments and a reconciliation to income ( loss ) from operations for the periods indicated are as follows : replace_table_token_6_th certain statistical data for our business segments for the periods indicated are as follows : replace_table_token_7_th see note 17 - segment data . 30 replace_table_token_8_th ( a ) see definition of business measurements under the operating metrics section of our management 's discussion and analysis . segment comparison - year ended december 31 , 2016 compared to the year ended december 31 , 2015 nurse and allied staffing revenue from the nurse and allied staffing business segment increased $ 100.2 million , or 16.1 % to $ 721.5 million for the year ended december 31 , 2016 , from $ 621.3 million for the year ended december 31 , 2015 . the year-over-year increase was primarily due to a combination of improved pricing and the impact of the mediscan acquisition . contribution income from nurse and allied staffing for the year ended december 31 , 2016 , increased $ 16.3 million or 29.2 % , to $ 72.0 million from $ 55.7 million in year ended december 31 , 2015 . as a percentage of segment revenue , contribution income margin increased to 10.0 % for the year ended december 31 , 2016 from 9.0 % for the year ended december 31 , 2015 , reflecting improvements in bill/pay spread partially offset by an increase in our compensation packages . operating metrics the average number of nurse and allied staffing ftes on contract during the year ended december 31 , 2016 increased 5.0 % over the year ended december 31 , 2015 , primarily due to increased demand and the impact of the mediscan acquisition . average nurse and allied staffing revenue per fte per day increased approximately 10.5 % in the year ended december 31 , 2016 compared to the year ended december 31 , 2015 , primarily due to improved pricing .
| 5,818 |
our net sales in each of these segments for the years ended december 31 , 2013 and 2012 were as follows : replace_table_token_7_th the change in net sales was attributable to the following : replace_table_token_8_th organic net sales in 2013 in the americas wholesale market increased by $ 37.0 million , or 6.3 % , compared to 2012 mainly from increased sales in residential and commercial flow product lines and from our customers continuing to transition to lead free products . organic sales into the americas diy market in 2013 increased $ 4.8 million , or 2.7 % , compared to 2012 , primarily due to increased product sales of $ 1.9 million in residential and commercial flow control products and $ 1.2 million in water quality products . unit sales increases were substantially offset by competitive pricing in the diy market . organic net sales in the emea wholesale market decreased by $ 10.7 million , or 3.7 % , compared to 2012 primarily due to the economic market conditions in france and germany . organic net sales into the emea oem market decreased by $ 6.0 million , or 2.3 % , as compared to 2012 primarily due to a slower hvac market in germany and fewer large project sales in the drains business , offset by increased sales in the electronics business . the net increase in sales due to foreign exchange was primarily due to the appreciation of the euro against the u.s. dollar . we can not predict whether these currencies will appreciate or depreciate against the u.s. dollar in future periods or whether future foreign exchange rate fluctuations will have a positive or negative impact on our net sales . acquired net sales growth in americas was due to tekmar . 29 gross profit . gross profit and gross profit as a percent of net sales ( gross margin ) for 2013 and 2012 were as follows : replace_table_token_9_th in americas , gross margin decreased primarily due to inefficiencies related to our lead free transition program and retail pricing pressure offset partially by product mix and volume growth . emea gross margin increased slightly as compared to 2012 , primarily due to production efficiencies driven from ongoing restructuring programs offsetting lower overhead absorption related to reduced manufacturing volumes . selling , general and administrative expenses . selling , general and administrative expenses , or sg & a expenses , for 2013 increased $ 24.7 million , or 6.5 % , compared to 2012. the increase in sg & a expenses was attributable to the following : replace_table_token_10_th the net organic increase in sg & a is primarily attributable to increased legal costs of $ 12.5 million , increased product liability cost of $ 4.5 million , increased freight and commission costs of $ 4.1 million associated with increased sales , and increased personnel costs of $ 2.2 million , offset by lower depreciation and amortization of $ 1.6 million and lower advertising costs of $ 1.3 million . incremental legal costs include the impact of an agreement in principle to settle all claims in the trabakoolas et al. , v. watts water technologies , inc. , et al. , matter pending in the united states district court for the northern district of california . the net settlement charged to operations amounted to $ 13.6 million in 2013. refer to note 14 of the notes to consolidated financial statements in this annual report on form 10-k for more detail . increased product liability cost of $ 4.5 million in the americas is based on a third-party actuarial analysis that incorporated higher reported claims in 2013 offset to some extent by the impact of the trabakoolas settlement . increased personnel costs primarily relate to investments in new positions and increased stock incentive plan costs . the increase in sg & a expenses from foreign exchange was primarily due to the appreciation of the euro against the u.s. dollar . acquired sg & a expenses related to the tekmar acquisition . total sg & a expense , as a percentage of sales , was 27.5 % in 2013 and 26.7 % in 2012. restructuring and other charges . in 2013 , we recorded a net charge of $ 8.7 million primarily for severance and other costs incurred as part of our previously announced restructuring programs , as compared to $ 4.2 million for 2012. for a more detailed description of our current restructuring plans , see note 4 of notes to consolidated financial statements in this annual report on form 10-k. ( gain on ) adjustment to disposal of business . in 2011 , we booked a net gain of approximately $ 7.7 million relating primarily to the recognition of currency translation adjustments resulting from the sale of twvc . in 2012 and 2013 , we recorded adjustments to decrease the gain on disposal by $ 1.6 million and increase the gain on disposal by $ 0.6 million , respectively . goodwill and other long-lived asset impairment charges . in 2013 , we recorded asset impairment charges of $ 1.2 million , primarily relating to a $ 0.3 million goodwill impairment charge for brae , and 30 trade name impairment charges of $ 0.3 million and $ 0.4 million for the americas and emea , respectively . the goodwill impairment was based on historical results being below our expectations and a reduction in the expected future cash flows to be generated by brae . see the results of operations discussion for the year ended december 31 , 2012 compared to the year ended december 31 , 2011 , for details of the 2012 goodwill and other long-lived asset impairment charges . see also note 2 of notes to consolidated financial statements in this annual report on form 10-k , for additional information regarding these impairments . operating income . story_separator_special_tag operating income by geographic segment for 2013 and 2012 was as follows : replace_table_token_11_th the change in operating income was attributable to the following : replace_table_token_12_th the decrease in consolidated organic operating income was due primarily to an increase in sg & a expenses , as previously discussed . acquired operating income relates to the tekmar acquisition . the increase in restructuring , impairment charges and other from 2013 to 2012 is primarily driven by the emea restructuring programs , as previously discussed . the net increase in operating income from foreign exchange was primarily due to the appreciation of the euro against the u.s. dollar . we can not predict whether the euro will appreciate or depreciate against the u.s. dollar in future periods or whether future foreign exchange rate fluctuations will have a positive or negative impact on our operating income . interest expense . interest expense decreased $ 3.1 million , or 12.6 % , in 2013 compared to 2012 , primarily due to the retirement in mid-may 2013 of $ 75 million in unsecured senior notes and to a lower balance outstanding on our stand-by letters of credit . see note 10 of notes to consolidated financial statements in this annual report on form 10-k , for additional information regarding financing arrangements . other expense ( income ) , net . other expense ( income ) , net increased $ 3.6 million in 2013 compared to 2012 , primarily due to a foreign currency transaction losses in the americas , emea and asia pacific as a result of the appreciation of the chinese yuan and the euro against the u.s. dollar and appreciation of the u.s. dollar against the canadian dollar in 2013. in addition , a favorable customs settlement recorded in 2012 did not repeat in 2013 . 31 income taxes . our effective tax rate for continuing operations increased to 30.6 % in 2013 from 29.7 % in 2012. the 2013 rate is up slightly due to a change in tax laws in france that limited intercompany interest deductions . in 2012 , the rate was favorably impacted by the release of a tax reserve following the completion of a european tax audit . net income from continuing operations . net income from continuing operations for 2013 was $ 60.9 million , or $ 1.71 per common share , compared to $ 70.4 million , or $ 1.95 per common share , for 2012. results for 2013 include net after-tax charges of $ 18.3 million , or $ 0.51 per common share , including legal settlement charges of $ 0.26 , restructuring and other net charges of $ 0.17 , goodwill and other long-lived asset impairments of $ 0.04 , earnout adjustments of $ 0.02 and emea transformation deployment costs of $ 0.02. results for 2012 include net after-tax charges of $ 8.1 million , or $ 0.22 per common share , including restructuring and other net charges of $ 0.07 , goodwill and other long-lived asset impairments of $ 0.07 , a charge to adjust the twvc gain of $ 0.04 , retention costs for our former chief financial officer of $ 0.03 , net legal/customs settlement charges of $ 0.02 , and other net credits of $ 0.01 , primarily related to a favorable tax adjustment due to a change in 2012 in italian tax rules . the appreciation primarily of the euro against the u.s. dollar in 2013 resulted in a positive impact on our operations of $ 0.03 per common share compared to 2012. we can not predict whether the euro , canadian dollar or chinese yuan will appreciate or depreciate against the u.s. dollar in future periods or whether future foreign exchange rate fluctuations will have a positive or negative impact on our net income . loss from discontinued operations . loss from discontinued operations in 2013 of $ 2.3 million , or ( $ 0.07 ) per common share , was related to the operations and loss on disposal of austroflex . see note 3 of notes to consolidated financial statements . story_separator_special_tag style= '' font-family : times ; '' > 34 the decrease in consolidated organic operating income was due primarily to a reduction in gross margin in americas , for reasons previously discussed . their impact was offset partially by a reduction in acquisition costs in emea related to the 2011 socla acquisition . acquired operating income relates to the socla and tekmar acquisitions . the increase in restructuring , impairment charges and other from 2011 to 2012 is primarily driven by the gain on disposal of business recorded in 2011 which did not repeat in 2012 , as previously discussed , offset primarily by decreased restructuring costs . the net decrease in operating income from foreign exchange was primarily due to the depreciation of the euro against the u.s. dollar . we can not predict whether the euro will appreciate or depreciate against the u.s. dollar in future periods or whether future foreign exchange rate fluctuations will have a positive or negative impact on our operating income . interest expense . interest expense decreased $ 1.2 million , or 4.7 % , in 2012 compared to 2011 , primarily due to a decrease in the amounts outstanding under our revolving credit facility that was used to partially finance the socla acquisition in 2011. see note 10 of notes to consolidated financial statements in this annual report on form 10-k , for additional information regarding financing arrangements . other expense ( income ) , net . other expense ( income ) , net decreased $ 1.6 million in 2012 compared to 2011 , primarily due to a reduction in foreign currency transaction losses and a favorable customs settlement in asia pacific in 2012. income taxes . our effective rate for continuing operations increased to 29.7 % in 2012 from 28.5 % in 2011. the primary cause of the lower rate in 2011 was the tax benefit
| results of operations year ended december 31 , 2012 compared to year ended december 31 , 2011 net sales . our business is reported in three geographic segments : americas , emea and asia pacific . our net sales in each of these segments for the years ended december 31 , 2012 and 2011 were as follows : replace_table_token_13_th the change in net sales was attributable to the following : replace_table_token_14_th 32 organic net sales in 2012 into the americas wholesale market increased by $ 4.0 million , or 0.6 % , compared to 2011. minimal increases were noted in our four major product categories ranging from 0.2 % in water quality products to 2.0 % in hvac and gas products . organic sales into the americas diy market in 2012 increased $ 11.2 million , or 6.9 % , compared to 2011 , primarily due to increased product sales of $ 8.5 million in residential and commercial flow control products and $ 2.1 million in water quality products . organic net sales in the emea wholesale market were essentially flat compared to 2011. wholesale sales increased $ 5.7 million due to stronger plumbing and valves sales into the middle east and eastern europe , and increased drain sales on a pan european basis by $ 1.0 million . however , those gains were offset by wholesale sales reductions of $ 3.5 million in italy and $ 2.1 million in france , both due to a poor overall economy , and a reduction of pre-insulated pipe products sales of $ 2.1 million . organic sales into the oem market in 2012 decreased by $ 6.0 million compared to 2011. the decline was primarily due to decreased sales in the nordic region of $ 6.2 million from lower demands by heating pump and electrical heating manufacturers , lower sales in france and italy of $ 3.5 million and $ 1.4 million , respectively , due to the economic slowdown .
| 5,819 |
during the year ended march 31 , 2013 , we reclassified a portion of trademarks story_separator_special_tag the following discussion of our financial condition and results of operations should be read together with the “ selected financial data ” and the consolidated financial statements and related notes included elsewhere in this annual report on form 10-k. this discussion and analysis may contain forward-looking statements that involve certain risks , assumptions and uncertainties . future results could differ materially from the discussion that follows for many reasons , including the factors described in part i , item 1a “ risk factors ” in this annual report on form 10-k , as well as those described in future reports filed with the sec . general we are engaged in the marketing , sales and distribution of brand name otc healthcare and household cleaning products to mass merchandisers , drug stores , supermarkets and dollar and club stores primarily in the united states and canada . we continue to use the strength of our brands , our established retail distribution network , a low-cost operating model , and our experienced management team as a competitive advantage to grow our presence in these categories and , as a result , grow our sales and profits . we have grown our brand portfolio both organically and through acquisitions . we develop our existing brands by investing in new product lines , brand extensions and strong advertising support . acquisitions of otc brands have also been an important part of our growth strategy . we have acquired strong and well-recognized brands from consumer products and pharmaceutical companies . while many of these brands have long histories of brand development and investment , we believe that , at the time we acquired them , most were considered “ non-core ” by their previous owners . as a result , these acquired brands did not benefit from adequate management focus and marketing support during the period prior to their acquisition , which created significant opportunities for us to reinvigorate these brands and improve their performance post-acquisition . after adding a core brand to our portfolio , we seek to increase its sales , market share and distribution in both existing and new channels through our established retail distribution network . we pursue this growth through increased spending on advertising and promotional support , new sales and marketing strategies , improved packaging and formulations , and innovative development of brand extensions . acquisitions acquisition of glaxosmithkline otc brands on december 20 , 2011 , we entered into two separate agreements with gsk to acquire a total of 17 north american otc healthcare brands for $ 660.0 million in cash ( the `` gsk agreement '' ) . on january 31 , 2012 , we completed , subject to a post-closing inventory and apportionment adjustment , as defined in the gsk agreement , the acquisition of the gsk brands i for $ 615.0 million in cash , including the related contracts , trademarks and inventory . the gsk brands i include , among other brands , bc , goody 's and ecotrin brands of pain relievers ; beano , gaviscon , phazyme , tagamet and fiber choice gastrointestinal brands ; and the sominex sleep aid brand . on march 30 , 2012 , we completed , subject to a post-closing inventory and apportionment adjustment , as defined in the gsk agreement , the acquisition of the debrox and gly-oxide brands in the united states for $ 45.0 million in cash , including the related contracts , trademarks and inventory . both the gsk brands i and gsk brands ii are complementary to our existing otc healthcare portfolio . these acquisitions were accounted for in accordance with the business combinations topic of the financial accounting standards board ( “ fasb ” ) accounting standards codification ( “ asc ” ) , which requires that the total cost of an acquisition be allocated to the tangible and intangible assets acquired and liabilities assumed based upon their respective fair values at the date of acquisition . the purchase price of the gsk brands i and gsk brands ii was funded by cash provided by the issuance of long-term debt and additional bank borrowings , which are discussed further in note 11 to the consolidated financial statements in this annual report on form 10-k. in april 2012 , we received the post-closing inventory and apportionment adjustments , attributable to both gsk brands i and gsk brands ii , which required us to pay an additional $ 2.8 million to gsk , and in may 2012 we received a revised post-closing inventory and apportionment adjustment , attributable to gsk brands ii , which required us to pay an additional $ 0.2 million , for a total of $ 3.0 million , to gsk . concurrent with the closing of the gsk brands i transaction , we entered into a transitional services agreement with gsk ( the “ tsa ” ) , whereby gsk provided us with various services including : marketing , operations , finance and other services from the gsk brands i acquisition date through june 30 , 2012 , with additional finance support through august 31 , 2012. as part of the tsa , gsk , among other things , shipped products , invoiced customers , collected from customers and paid certain vendors on our behalf . our initial costs under the tsa were approximately $ 2.5 million per month for the length of the agreement and were 32 reduced during the service period as we removed certain services and transitioned those processes to us . we incurred $ 6.9 million in tsa costs for the year ended march 31 , 2013. pursuant to the tsa , we received on a monthly basis the amount owed to us for revenues and expenses , net of gsk 's tsa fees and inventory that gsk purchased on our behalf . story_separator_special_tag in accounting for the acquisition of the dramamine brand , we considered the business combinations topic of the asc . accordingly , as the dramamine assets acquired do not constitute a business , as defined in the asc , we have accounted for the transaction as an asset acquisition . the total consideration paid , including transaction costs , have been allocated to the tangible and intangible assets acquired based upon their relative fair values at the date of acquisition . the allocation of the purchase price to assets acquired is based on valuations we performed to determine the fair value of such assets as of the acquisition date . the following table summarizes our allocation of the $ 77.1 million purchase price to the assets we acquired comprising the assets of the dramamine brand : ( in thousands ) january 6 , 2011 inventories $ 1,249 trademark 75,866 total purchase price $ 77,115 the $ 75.9 million fair value of the acquired dramamine trademark was comprised of non-amortizable intangible assets . discontinued operations and sale of certain assets on september 1 , 2010 , we sold certain assets related to the cutex nail polish remover brand for $ 4.1 million . in accordance with the discontinued operations topic of the asc , we reclassified the related operating results as discontinued operations in the consolidated financial statements and related notes in this annual report on form 10-k for all periods presented . we recognized a loss of $ 0.9 million on a pre-tax basis and $ 0.6 million , net of related tax effects of $ 0.3 million , on the sale in 2011. as a result of the divestiture of cutex , which comprised a substantial majority of the assets in our previously reported personal care segment , we reclassified the remaining personal care segment assets to the otc healthcare segment for all periods presented . the following table summarizes the results of discontinued operations : ( in thousands ) year ended march 31 , 2013 2012 2011 components of income revenues $ — $ — $ 4,027 income ( loss ) from discontinued operations , net of tax — — 591 35 sale of the phazyme brand on october 31 , 2012 , we divested the phazyme gas treatment brand , which was a non-core otc brand that we acquired from gsk in january 2012. we received $ 21.7 million from the divestiture on october 31 , 2012 and the remaining $ 0.6 million on january 4 , 2013. the proceeds were used to repay debt . no significant gain or loss was recorded as a result of the sale . concurrent with the completion of the sale of the phazyme brand , we entered into a transitional services agreement with the buyer ( the “ phazyme tsa ” ) , whereby we agreed to provide the buyer with various services including : marketing , operations , finance and other services from the date of the acquisition primarily through january 31 , 2013 , with an option for additional support for the canadian portion of that business through october 31 , 2013 , at the buyer 's discretion . all phazyme united states tsa services ended , as agreed , on january 31 , 2013. however , the buyer elected to extend the canadian tsa support on a month to month basis . as part of the ongoing phazyme tsa , our canadian distributor will , among other things , ship products , invoice customers , collect from customers and pay certain vendors on the buyer 's behalf . the following table presents the assets sold at october 31 , 2012 related to the phazyme brand : ( in thousands ) october 31 , 2012 components of assets sold : inventory $ 220 prepaid expenses 100 trade names 15,604 goodwill 6,382 critical accounting policies and estimates our significant accounting policies are described in the notes to the consolidated financial statements included elsewhere in this annual report on form 10-k. while all significant accounting policies are important to our consolidated financial statements , certain of these policies may be viewed as being critical . such policies are those that are both most important to the portrayal of our financial condition and results from operations and require our most difficult , subjective and complex estimates and assumptions that affect the reported amounts of assets , liabilities , revenues , expenses or the related disclosure of contingent assets and liabilities . these estimates are based upon our historical experience and on various other assumptions that we believe to be reasonable under the circumstances . actual results may differ materially from these estimates . the most critical accounting policies are as follows : revenue recognition we recognize revenue when the following revenue recognition criteria are met : ( i ) persuasive evidence of an arrangement exists ; ( ii ) the selling price is fixed or determinable ; ( iii ) the product has been shipped and the customer takes ownership and assumes the risk of loss ; and ( iv ) collection of the resulting receivable is reasonably assured . we have determined that these criteria are met and the transfer of risk of loss generally occurs when product is received by the customer , and , accordingly we recognize revenue at that time . provision is made for estimated discounts related to customer payment terms and estimated product returns at the time of sale based on our historical experience . as is customary in the consumer products industry , we participate in the promotional programs of our customers to enhance the sale of our products . the cost of these promotional programs varies based on the actual number of units sold during a finite period of time . these promotional programs consist of direct-to-consumer incentives , such as coupons and temporary price reductions , as well as incentives to our customers , such as allowances for new distribution , including slotting fees , and cooperative advertising .
| results of operations 2013 compared to 2012 replace_table_token_12_th revenues for 2013 were $ 623.6 million , an increase of $ 182.5 million , or 41.4 % , versus 2012. revenues for 2013 increased versus the prior year primarily due to the impact of the acquisition of 17 gsk brands in the fourth quarter of 2012 , which increased 2013 revenues by $ 180.8 million versus 2012 by adding $ 211.2 million in 2013 to our otc healthcare segment revenues versus $ 30.4 million in 2012. revenues for the household cleaning segment declined 9.8 % during 2013 versus 2012. revenues from customers outside of north america , which represent 2.7 % of total revenues , increased by $ 1.6 million , or 10.6 % , during 2013 versus 2012. otc healthcare segment revenues for the otc healthcare segment increased $ 191.9 million , or 55.6 % , during 2013 versus 2012. the gsk brands added $ 180.8 million , while our legacy otc healthcare brands contributed to the remainder of the net revenue increase . revenue increases for chloraseptic , little remedies , pediacare , dramamine , and efferdent products were partially offset by revenue decreases in our other otc healthcare brands . we believe our core otc healthcare brands have continued to benefit from increased advertising and promotional investment , which has translated into organic sales growth . household cleaning segment revenues for the household cleaning segment decreased $ 9.4 million , or 9.8 % , during 2013 versus 2012. comet revenues decreased primarily due to lower demand for non-abrasive products . spic and span revenues decreased as a result of lower demand for dilutables .
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during the second quarter of 2012 , we recorded an expense of $ 86.8 ( $ 60.6 after-tax , or $ .28 per share ) for actions to remove stranded costs resulting from our decision to exit the homecare business , the reorganization of the merchant business , and story_separator_special_tag replace_table_token_4_th the following discussion should be read in conjunction with the consolidated financial statements and the accompanying notes contained in this report . all comparisons in the discussion are to the corresponding prior year unless otherwise stated . all amounts presented are in accordance with u.s. generally accepted accounting principles ( gaap ) , except as noted . all amounts are presented in millions of dollars , except for share data , unless otherwise indicated . captions such as income from continuing operations attributable to air products , net income attributable to air products , and diluted earnings per share attributable to air products are simply referred to as income from continuing operations , net income , and diluted earnings per share throughout this management 's discussion and analysis , unless otherwise stated . the discussion of results that follows includes comparisons to non-gaap financial measures . in 2012 , the non-gaap measures exclude the photovoltaic ( pv ) market actions charge , the polyurethane intermediates ( pui ) business actions charge , the cost reduction plan charge , the customer bankruptcy charge , the gain on the previously held equity interest in dupont air products nanomaterials llc ( da nanomaterials ) , the spanish tax settlement , and the spanish tax ruling . these non-gaap measures exclude the net loss on airgas transaction in 2011 and 2010. the presentation of non-gaap measures is intended to enhance the usefulness of financial information by providing measures that our management uses internally to evaluate our baseline performance on a comparable basis . the reconciliation of reported gaap results to non-gaap measures is presented on pages 29-30. business overview air products and chemicals , inc. and its subsidiaries serve energy , electronics , chemicals , steel , and manufacturing customers globally with a unique portfolio of products , services , and solutions that include atmospheric , process and specialty gases ; performance materials ; equipment ; and technology . geographically diverse , with operations in over 50 countries , we have sales of $ 9.6 billion , assets of $ 16.9 billion , and a worldwide workforce of approximately 21,300 employees . we organize our operations into four reportable business segments : merchant gases , tonnage gases , electronics and performance materials , and equipment and energy . 2012 in summary in 2012 , the global economy proved to be more challenging than we expected and we did not see the anticipated economic growth we forecasted for the second half of the fiscal year . global manufacturing grew approximately 3 % for the year and limited the opportunities for growth , particularly in our merchant gases and electronics and performance materials segments . underlying volume growth was modest , and overall , sales declined by 1 % resulting from a stronger dollar and lower energy cost pass-through partially offset by acquisitions . our operating income declined 1 % versus the prior year . in response to the current and forecasted economic environment , we took a number of important steps to position our global portfolio for future success . in europe , we sold our homecare business and implemented a restructuring 18 program to better align our cost structure with the slower economy . we took actions to exit our polyurethane intermediates business and restructured our photovoltaic business to reflect current market conditions . additionally , we executed on acquisition opportunities to support our growth strategies . in the merchant segment , we acquired a controlling stake in indura s.a. , the largest independent gas company in latin america . we also purchased a 25 % position in abdullah hashim industrial gases & equipment co. ltd. ( ahg ) , the largest industrial gas company in saudi arabia . finally , in electronics , we purchased the remaining 50 % share of our da nanomaterials joint venture . highlights for 2012 sales of $ 9,611.7 decreased 1 % , or $ 62.0 , as unfavorable currency and lower energy raw material contractual cost pass-through to customers were partially offset by higher volumes and acquisitions . operating income of $ 1,282.4 decreased 15 % , or $ 225.7. on a non-gaap basis , operating income of $ 1,533.7 decreased 1 % , or $ 22.9 , with positive impacts from new plants onstream in the tonnage segment offset by weaker merchant , electronics and performance materials and equipment volumes . unfavorable impacts from a stronger dollar were partially offset by cost productivity , improved pricing , and the impact of acquisitions . income from continuing operations of $ 999.2 decreased 12 % , or $ 135.1 , and diluted earnings per share from continuing operations of $ 4.66 decreased 11 % , or $ .56. on a non-gaap basis , income from continuing operations of $ 1,158.6 decreased 1 % , or $ 7.3 , and diluted earnings per share from continuing operations of $ 5.40 increased 1 % , or $ .04. a summary table of changes in diluted earnings per share is presented below . capital spending was $ 2,559.8 for the year ended 30 september 2012. on a non-gaap basis , capital spending of $ 2,778.3 increased 80 % , primarily from the acquisition of indura s.a and the construction of new plants under contract with customers , primarily in the tonnage gases segment . we purchased .6 million of our outstanding shares at a cost of $ 53.1 under the $ 1,000 share repurchase program announced in the fourth quarter of 2011. at 30 september 2012 , $ 946.9 in share repurchase authorization remains . we increased our quarterly dividend from $ .58 to $ .64 per share . this represents the 30th consecutive year that we have increased our dividend payment . story_separator_special_tag the year ended 30 september 2012 includes a gain of $ 85.9 ( $ 54.6 after-tax , or $ .25 per share ) as a result of revaluing our previously held equity interest to fair market value as of the acquisition date . refer to note 5 , business combinations , to the consolidated financial statements for additional details on this transaction . net loss on airgas transaction for the year ended 30 september 2011 , $ 48.5 ( $ 31.6 after-tax , or $ .14 per share ) in net loss was recognized related to the airgas transaction . refer to note 6 , airgas transaction , to the consolidated financial statements for additional details . customer bankruptcy as a result of events which occurred during the fourth quarter of 2012 , we recognized a charge of $ 9.8 ( $ 6.1 after-tax , or $ .03 per share ) primarily related to the write-off of onsite assets due to a customer bankruptcy and mill shutdown . the customer , which primarily received products from the tonnage gases segment , filed for bankruptcy in may 2012 and announced the mill shutdown in august 2012. sales and operating income associated with this customer are not material to the tonnage gases segment 's results . we do not expect to recognize additional charges related to this customer . in april 2010 , one of our customers emerged from bankruptcy proceedings . we received a final settlement in the amount of $ 22.4 , of which $ 16.0 was applied against the remaining outstanding receivables . income of $ 6.4 ( $ 4.0 after-tax , or $ .02 per share ) was recognized for the recovery of certain receivables that had been previously written off . 23 pension settlement our u.s. supplemental pension plan provides for a lump sum benefit payment option at the time of retirement , or for corporate officers , six months after the participant 's retirement date . we recognize pension settlements when payments exceed the sum of the service and interest cost components of net periodic pension cost of the plan for the fiscal year . a settlement loss is recognized when the pension obligation is settled . we recognized $ 11.5 of settlement charges in 2010. other income , net items recorded to other income arise from transactions and events not directly related to our principal income earning activities . the detail of other income is presented in note 22 , supplemental information , to the consolidated financial statements . 2012 vs. 2011 other income of $ 47.1 increased $ 5.4 , primarily due to favorable foreign exchange and reimbursements from government grants for expense , partially offset by lower gains from the sale of assets . otherwise , no individual items were significant in comparison to the prior year . 2011 vs. 2010 other income of $ 41.7 decreased $ 1.2 , primarily due to unfavorable foreign exchange , offset mainly by reimbursements from government grants for expenses . otherwise , no individual items were significant in comparison to the prior year . interest expense replace_table_token_8_th 2012 vs. 2011 interest incurred increased $ 15.7. the increase was driven primarily by a higher average debt balance and debt issuance costs related to the indura s.a. acquisition , partially offset by the impact of a stronger dollar on the translation of foreign currency interest . the change in capitalized interest was driven by an increase in project spending which qualified for capitalization . 2011 vs. 2010 interest incurred increased $ 2.0. the increase was driven by the impact of a weaker dollar on the translation of foreign currency interest , partially offset by a lower average debt balance . the change in capitalized interest was driven by an increase in project spending which qualified for capitalization . effective tax rate the effective tax rate equals the income tax provision divided by income from continuing operations before taxes . refer to note 21 , income taxes , to the consolidated financial statements for details on factors affecting the effective tax rate . 2012 vs. 2011 on a gaap basis , the effective tax rate was 21.9 % and 24.3 % in 2012 and 2011 , respectively . the current year rate includes reductions in income tax expense of $ 105.0 related to the business restructuring and cost reduction plans , $ 58.3 related to the second quarter spanish tax ruling , and $ 3.7 related to the customer bankruptcy charge , offset by an increase to income tax expense of $ 43.8 related to the first quarter spanish tax settlement and $ 31.3 related to the gain on the previously held equity interest in da nanomaterials . refer to note 4 , business restructuring and cost reduction plans ; note 5 , business combinations ; note 21 , income taxes ; and note 22 , supplemental information , to the consolidated financial statements for details on these transactions . the prior year rate includes a reduction in income tax expense of $ 16.9 related to the airgas transaction . refer to note 6 , airgas transaction , to the consolidated financial statements for details on this transaction . on a non-gaap basis , the effective tax rate was 24.2 % and 24.6 % in 2012 and 2011 , respectively . 24 2011 vs. 2010 on a gaap basis , the effective tax rate was 24.3 % and 24.0 % in 2011 and 2010 , respectively . the tax rate included reductions in income tax expense of $ 16.9 and $ 35.9 for the airgas transaction in 2011 and 2010 , respectively . refer to note 6 , airgas transaction , to the consolidated financial statements for details on this transaction . on a non-gaap basis , the effective tax rate was 24.6 % and 25.0 % in 2011 and 2010 , respectively . discontinued operations in january 2012 , the board of directors authorized the sale of our homecare business , which had previously been reported as part of the merchant gases operating segment .
| results of operations discussion of consolidated results replace_table_token_6_th replace_table_token_7_th 2012 vs. 2011 sales of $ 9,611.7 decreased 1 % , or $ 62.0. underlying business increased 1 % , primarily due to higher volumes in our tonnage gases segment , which were partially offset by lower volumes in the merchant gases segment , particularly in europe . acquisitions increased sales by 2 % . lower energy and raw material contractual cost pass-through to customers and currency both decreased sales by 2 % . 2011 vs. 2010 sales of $ 9,673.7 increased 12 % , or $ 1,057.6. underlying business increased 10 % , with volumes up 8 % and price up 2 % . volumes grew primarily from strong performance in the electronics and performance materials segment , new investments and contracts in the tonnage gases segment , and growth in asia in the merchant gases segment . currency favorably impacted sales 2 % . operating income 2012 vs. 2011 operating income of $ 1,282.4 decreased 15 % , or $ 225.7. on a non-gaap basis , operating income of $ 1,533.7 decreased 1 % , or $ 22.9. the decrease was primarily due to unfavorable volumes , including acquisitions , of $ 39 and unfavorable currency translation and foreign exchange impacts of $ 30 , partially offset by lower costs of $ 31 and higher recovery of raw material costs in pricing of $ 15. the decrease in volumes was primarily from lower merchant gases volumes and unfavorable volume mix due to lower lng plant sales . on a gaap basis , current year operating income includes a charge of $ 327.4 for business restructuring and cost reduction plans , a $ 9.8 charge for a customer bankruptcy , and the gain on the previously held equity interest in da nanomaterials of $ 85.9. the prior year operating income includes a $ 48.5 net loss related to the airgas transaction .
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the company typically does not take delivery of tbas , but rather settles with its trading counterparties on a net basis . the market value of the securities that the company is required to purchase pursuant to a tba transaction may decline below the agreed-upon purchase price . conversely , the market value of the securities that the company is required to sell pursuant to a tba transaction may increase above the agreed upon sale price . as part of its tba activities , the company may roll its tba positions , whereby the company may sell ( buy ) securities for delivery ( receipt ) in an earlier month and simultaneously contract to repurchase ( sell ) similar , but not identical , securities at an agreed-upon price on a fixed date in a later month ( with the later-month price typically lower than the earlier- month price ) . the company accounts for its tba transactions ( including those related to tba rolls ) as purchases and sales . as of december 31 , 2011 , total assets included $ 32.0 million of story_separator_special_tag in this annual report on form 10-k , except where the context suggests otherwise , efc , we , us and our refer to ellington financial llc and its subsidiaries , our manager refers to ellington financial management llc , our external manager , and ellington refers to ellington management group , l.l.c . and its affiliated investment advisory firms . story_separator_special_tag attest to an individual borrower 's ability to repay his/her mortgage ( we believe this attestation requirement had been a major factor in limiting harp 's success previously ) . although it is not yet possible to gauge the ultimate success of the expanded harp program , these changes undoubtedly present an opportunity for many more borrowers to refinance their mortgages at lower interest rates . 57 our agency rmbs strategy involves actively trading and rotating between and within sectors as we deem appropriate based on our analysis of the composition of the underlying mortgage pools . throughout 2011 , we executed a strategy of investing in select agency rmbs pools with prepayment protection characteristics , or prepayment protected pools , such as pools comprised of low-loan balance mortgages and those containing mortgages not eligible for one of the government-sponsored refinancing programs . while these prepayment-protected pools are priced at a premium to more generic pools ( for example those that underlie tba contracts ) , their superior actual and forecast prepayment performance has more than compensated for the premiums we have paid . furthermore , the expansions to the harp program , along with the occasional proposals of even more ambitious government-sponsored refinancing programs , also increased the relative demand for prepayment-protected pools over tbas . these developments were beneficial to our agency rmbs portfolio in two respects : ( 1 ) the relatively slower prepayments on our long agency rmbs portfolio enhanced the realized yields of our long agency rmbs portfolio , and ( 2 ) we recognized gains on agency rmbs that appreciated in price relative to their short tba and other hedging positions . as long as prepayment risk and uncertainty remains high , including uncertainty concerning evolving government policy , we expect that short tba positionswhich are one of the only hedging instruments that benefit from unexpected increases in projected prepayment rateswill continue to represent a significant component of our agency rmbs hedging strategy . while the majority of the government refinancing proposals to date have focused on mortgage loans that are already owned or guaranteed by governmental entities , the obama administration recently put forth a proposal that would provide refinancing for many borrowers whose mortgage loans are privately held , including held in non-agency rmbs . while such a program could in theory lead to higher prepayment rates on our non-agency rmbs , and thereby boost their yields given the deep discount prices at which we hold these securities , we ascribe a very low probability to the implementation of broad-based non-agency mortgage refinancing programs in the near future given the potential costs of such programs and the current political climate . as a result , since most of the mortgage loans underlying our non-agency rmbs remain ineligible for both private and government-sponsored refinancing , we expect prepayment rates on our non-agency rmbs to remain at extremely low levels . foreclosures one of the biggest risks overhanging the rmbs market has been uncertainty around the timing and ability of servicers to remove delinquent borrowers from their homes , so that they can liquidate the underlying properties and ultimately pass the liquidation proceeds through to rmbs holders . given the magnitude of the housing crisis , and in response to the well-publicized failures of many servicers to follow proper foreclosure procedures ( such as involving robo-signing ) , mortgage servicers are being held to much higher foreclosure-related documentation standards than they previously were . however , because many mortgages have been transferred and assigned multiple times ( and by means of varying assignment procedures ) throughout the origination , warehouse and securitization processes , mortgage servicers are generally having much more difficulty furnishing the requisite documentation to initiate or complete foreclosures . this leads to stalled or suspended foreclosure proceedings , and ultimately additional foreclosure-related costs . foreclosure-related delays also tend to increase ultimate loan loss severities as a result of property deterioration , amplified legal and other costs , and other factors . servicers have generally maintained that most of their problems are process-oriented and can be fixed in the near term ; however , many factors delaying foreclosure , such as borrower lawsuits and judicial backlog and scrutiny , are outside of servicers ' control and have delayed , and will likely continue to delay , foreclosure processing in both judicial states ( where foreclosures require court involvement ) and non-judicial states . the risk of extended foreclosure timelines is very difficult to quantify , and uncertainty has often been magnified by court cases with conflicting outcomes . story_separator_special_tag the volcker rule provisions of the dodd-frank act , and the stricter capital requirements to be phased in under the basel iii global banking accords , have reduced the demand by banks for non-agency rmbs , especially the types of distressed non-agency rmbs that we typically acquire . the reduced participation by these financial institutions has several implications for non-agency rmbs : ( 1 ) a decrease in overall demand for these securities , which depresses prices , ( 2 ) reduced liquidity for these securities , and a corresponding reduction in the ability to finance these securities , and ( 3 ) increased market inefficiencies . while these changes may at times have a negative impact on our business or our results ( such as resulting from lower valuations of our assets or from more expensive financing ) , we believe that on balance the reduced competition benefits the company in the longer term . sales of mbs held by the u.s. treasury , the federal reserve and other sellers in march 2011 , the u.s. treasury announced plans to begin selling its $ 142 billion portfolio of mbs purchased during the financial crisis . through august 2011 , the u.s. treasury has realized proceeds from these sales of $ 56 billion ( excluding principal paydowns ) . in september 2011 , the federal reserve changed its strategy of gradually selling its agency rmbs portfolio , and instead began reinvesting principal paydowns in additional agency rmbs . as of january 25 , 2012 , the federal reserve held approximately $ 836 billion in agency rmbs . the federal reserve has not announced any further plans to dispose of this portfolio , but the eventual sale of these securities will add a significant amount of supply to the agency rmbs markets . the federal reserve also held , in an entity known as maiden lane ii , a portfolio of non-agency mbs that it acquired as part of the government bailout of american international group in 2008. during the second quarter of 2011 , the federal reserve sold a portion of these assets in a series of auctions , generating proceeds to the federal reserve of approximately $ 4.7 billion . these sales were ultimately not well absorbed by the marketplace , and are widely viewed as a major contributing factor for the subsequent decline in non-agency mbs prices over most of the rest of the year . in the first quarter of 2012 , the federal reserve held three additional auctions of its maiden lane ii portfolio , ultimately completing the disposition of the entire portfolio . the 2012 auctions were held in response to inquiries by potential purchasers and were conducted using substantially different bidding rules ; the market responded well to these sales . in the first half of 2011 , the sale of non-agency rmbs by other large financial institutions , including european banks , also impacted valuations . the maiden lane ii and european portfolios had large concentrations in newer 2005-2007 vintage subprime securities , and as prices declined ( in some cases by 10 % to 30 % or more ) for these securities , we began to rotate a portion of our non-agency rmbs portfolio into these sectors . in the fourth quarter , the declines in non-agency rmbs prices slowed , and in fact prices began to show signs of stabilization . however , should the european sovereign debt crisis deepen , the non-agency mbs market might see significant additional supply from distressed european banks and other european sellers , whereupon downward pressure on non-agency mbs prices could resume . 60 while 2005-2007 vintage subprime securities experienced some of the greatest price declines over the course of the year among non-agency rmbs , most other sectors of the non-agency rmbs market were also negatively affected . as a result , our non-agency rmbs portfolio experienced valuation declines throughout much of 2011 , and this was the prime contributor of the decline in our net income for the year ended december 31 , 2011 as compared to december 31 , 2010. our credit hedges , however , offset some of the impact of these valuation declines . despite the valuation declines , the fundamental performance of the mortgage loans underlying our non-agency rmbs continued to show signs of stabilization . non-agency rmbs market : other developments two non-agency securitizations totaling $ 665 million were completed in 2011 and a $ 416 million non-agency securitization was completed early in 2012. all of these securitizations were backed by high quality prime jumbo mortgage loans . while these transactions represent a positive sign for the potential return of a healthy non-agency residential mortgage securitization market , the near-term prospects for this market are still extremely uncertain , as the respective roles and requirements of sponsors , investors , underwriters , regulators , policy-makers , and rating agencies all continue to be re-evaluated . we believe that the eventual return of a healthy non-agency securitization market will create additional investment opportunities for us . 2011 highlights and outlook for 2012 during 2011 , our non-agency rmbs portfolio experienced significant changes on both the long and short side . on the long side , the composition of our portfolio changed in response to shifting supply and demand dynamics . for example , we entered the year with a relatively small long position in 2005-2007 vintage subprime rmbs securities , but starting in mid-2011 and as discussed above , after the prices of these securities dropped substantially following the maiden lane ii and european bank sales , we began to rotate a portion of our non-agency rmbs portfolio into this sector . the price declines for other non-agency rmbs , while not as dramatic as the declines in the 2005-2007 vintage subprime sector , were still significant .
| executive summary we are a specialty finance company that acquires and manages mortgage-related assets , including residential mortgage-backed securities backed by prime jumbo , manufactured housing , alt-a and subprime residential mortgage loans , rmbs for which the principal and interest payments are guaranteed by a u.s. government agency or a u.s. government-sponsored entity , mortgage-related derivatives , commercial mortgage-backed securities , commercial mortgage loans and other commercial real estate debt , as well as corporate debt and equity securities and derivatives . we also may opportunistically acquire and manage other types of mortgage-related and financial asset classes , such as residential whole mortgage loans , asset-backed securities backed by consumer and commercial assets , and non-mortgage-related derivatives . we are externally managed and advised by our manager , an affiliate of ellington . ellington is also a registered investment advisor with a 17-year history of investing in a broad spectrum of mortgage-backed securities and related derivatives . our primary objective is to generate attractive , risk-adjusted total returns for our shareholders . we seek to attain this objective by utilizing an opportunistic strategy to make investments , without restriction as to ratings , structure or position in the capital structure , that we believe compensate us appropriately for the risks associated with them rather than targeting a specific yield . our evaluation of the potential risk-adjusted return of any potential investment typically involves weighing the potential returns of such investment under a variety of economic scenarios against the perceived likelihood of the various scenarios . potential investments subject to greater risk ( such as those with lower credit ratings and or those with a lower position in the capital structure ) will generally require a higher potential return to be attractive in comparison to investment alternatives with lower potential return and a lower degree of risk .
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deferred revenue is story_separator_special_tag the following discussion and analysis of our financial condition and results of operations should be read together with the consolidated financial statements and the related notes included in part ii , item 8 , “ financial statements and supplementary data ” in this annual report on form 10-k. this discussion contains forward-looking statements related to future events and our future financial performance that are based on current expectations and subject to risks and uncertainties . our actual results may differ materially from those anticipated in these forward-looking statements as a result of many important factors , including those described in part i , item 1a , “ risk factors ” and elsewhere in this annual report on form 10-k. this section of the form 10-k generally discusses our results of operations for the years ended december 31 , 2020 and 2019 , including a year-to-year comparison between 2020 and 2019. for a full discussion related to the results of operations for the year ended december 31 , 2018 , including a year-to-year comparison between 2019 and 2018 , refer to part ii , item 7 , “ management 's discussion and analysis of financial condition and results of operations ” in our form 10-k for the year ended december 31 , 2019. overview of our business and services we are a leading global biopharmaceutical solutions organization providing a full suite of clinical and commercial services to customers in the pharmaceutical , biotechnology , and healthcare industries . we offer both stand-alone and integrated biopharmaceutical product development solutions ranging from early phase ( phase i ) clinical trials to the full commercialization of biopharmaceutical products , with the goal of increasing the likelihood of regulatory approval and commercial success . our operations are divided into two reportable segments , clinical solutions and commercial solutions . our clinical solutions segment offers a variety of services spanning phases i to iv of clinical development , including full service global studies and real world evidence programs , as well as individual service offerings such as clinical monitoring , investigator recruitment , patient recruitment , data management , and study startup to assist customers with their drug development process . our commercial solutions segment provides commercialization services , including deployment solutions , communication solutions ( public relations , advertising , and medical communications ) , and consulting services . we integrate our clinical and commercial capabilities into customized solutions by sharing knowledge , data , and insights through our biopharmaceutical acceleration model . this collaboration across the development and commercialization continuum facilitates unique insights into patient populations , therapeutic environments , product timelines , and the competitive landscape . for further discussion , refer to part i , item 1 , “ business ” in this annual report on form 10-k . we acquired the following companies during 2020 : synteract , a full service cro , focused on the emerging biopharmaceutical segment . synteract 's client base is primarily comprised of emerging biopharmaceutical companies , a segment in which we have growth opportunities . synteract has more than 700 employees across north america , europe , asia pacific , and africa that have supported more than 4,000 phase i to iv clinical trials across 26,000 sites in more than 60 countries . the transaction provides significant revenue synergy opportunities , as we bring scale and new capabilities to synteract 's existing and prospective customers while maintaining synteract 's focus on the emerging biopharmaceutical segment . building on our track record of delivering cost synergies , we will also leverage our global infrastructure and integration expertise to optimize operational efficiencies and drive improved margins . 70 illingworth research , a leading provider of clinical research home health services . this acquisition enhances our decentralized solutions offering by adding a patient-focused company that meets the growing demand for in-home clinical trial services . illingworth research provides mobile research nurse services , which eliminate s wasted travel t ime and allows patients to remain at home for their participation in a clinical trial . covid-19 pandemic on march 11 , 2020 , the world health organization designated the outbreak of the novel strain of coronavirus that causes the disease known as covid-19 as a global pandemic . governments and businesses around the world have taken unprecedented actions to mitigate the spread of covid-19 , including , but not limited to , shelter-in-place orders , quarantines , significant restrictions on travel , social distancing practices as well as restrictions that prohibit many employees from going to work . the covid-19 pandemic and its adverse effects have impacted the locations where we , our customers , suppliers , and partners conduct significant portions of our business , such as europe and north america , and , as a result , we experienced pronounced disruptions in our operations during the year ended december 31 , 2020 , the largest of which occurred during the second and third quarters of 2020 before starting to gradually recover . as a result of these conditions , we took decisive actions to mitigate the revenue , profitability , and cash flow impacts from covid-19 . these actions included cost management strategies consisting of certain temporary compensation adjustments , hiring restrictions , staffing reductions , voluntary and involuntary employee furloughs , reductions in third-party costs , and other initiatives . the majority of the temporary cost savings measures ended in the third quarter of 2020. in addition to these temporary actions , we continued to implement our forwardbound margin enhancement initiative . we are guided by our global and regional crisis team , which monitors the evolving situation and recommends risk mitigation actions related to business continuity and employee health and safety . throughout the pandemic , we have assessed and implemented continuity plans to provide customers with continued services . we also continue to implement contingency planning to protect the health and well-being of our employees . this includes having employees work remotely where possible , implementing travel restrictions and visitor protocols , and following social distancing practices . story_separator_special_tag our backlog also reflects any cancellation or adjustment activity related to these awards . the average duration of our backlog will fluctuate from period to period based on the contracts comprising our backlog at any given time . the majority of our contracts contain early termination provisions that typically require notice periods ranging from 30 to 90 days . our backlog as of december 31 was as follows ( in millions ) : replace_table_token_1_th we expect approximately $ 4.63 billion of our backlog as of december 31 , 2020 will be recognized as revenue during 2021. we adjust the amount of our backlog each quarter for the effects of fluctuations in foreign currency exchange rates . net new business awards new business awards , net of cancellations , were as follows ( in millions ) : replace_table_token_2_th new business awards have varied and may continue to vary significantly from year to year . fluctuations in our net new business award levels often result from the fact that we may receive a small number of relatively large orders in any given reporting period . because of these large orders , our backlog and net new business awards in a reporting period may reach levels that are not sustainable in subsequent reporting periods . we believe that our backlog and net new business awards might not be consistent indicators of future revenue because they have been , and likely will continue to be , affected by a number of factors , including the variable size and duration of projects , many of which are performed over several years , and changes to the scope of work during the course of projects . additionally , projects may be canceled or delayed by the customer or regulatory authorities . net new business awards and backlog have been and we expect will continue to be affected by the broad effects of the covid-19 pandemic on the global economy and major financial markets , as well as various other risks and uncertainties detailed in part i , item 1a , “ risk factors - risks related to our business - the covid-19 pandemic has adversely impacted our business and results of operations , and is expected to continue to do so ” of this annual report on form 10-k . we generally do not have a contractual right to the full amount of the awards reflected in our backlog . if a customer cancels an award , we might be reimbursed for the costs we have incurred . as we increasingly compete for and enter into large contracts that are more global in nature , we expect that the rate at which our backlog and net new business awards convert into revenue is likely to decrease , and the duration of projects and the period over which related revenue is recognized to lengthen . for more information about risks related to our backlog see part i , item 1a , “ risk factors—risks related to our business—our backlog might not be indicative of our future revenues , and we might not realize all of the anticipated future revenue reflected in our backlog ” of this annual report on form 10-k. 73 results of operations year ended december 31 , 2020 compared to the year ended december 31 , 2019 the following table sets forth amounts from our consolidated financial statements along with dollar and percentage changes ( in thousands , except percentages ) : replace_table_token_3_th revenue for the year ended december 31 , 2020 , our revenue decreased by $ 260.0 million , or 5.6 % , to $ 4.42 billion from $ 4.68 billion for the year ended december 31 , 2019. this decrease was primarily driven by the impacts of the covid-19 pandemic , including the related decline in reimbursable out-of-pocket expenses , in both our clinical solutions and commercial solutions segments , as discussed below . no single customer accounted for greater than 10 % of our total consolidated revenue for the year ended december 31 , 2020 or 2019. revenue from our top five customers accounted for approximately 22 % and 23 % of revenue for the years ended december 31 , 2020 and 2019 , respectively . revenue for each of our segments was as follows ( dollars in thousands ) : replace_table_token_4_th 74 clinical solutions for the year ended december 31 , 2020 , revenue attributable to our clinical solutions segment decreased compared to the prior year primarily due to the impacts of the covid-19 pandemic , including the related decline in reimbursable out-of-pocket expenses , and the sale of the contingent staffing business during the second quarter . for the year ended december 31 , 2020 , revenue was positively impacted by $ 4.3 million from foreign currency exchange rates fluctuations compared to the prior year . the pandemic continues to impact our ability to physically access investigative sites and delay patient enrollment and trial start-up activities . however , there were positive trends related to these activities in the second half of 2020. the negative impacts of the pandemic were partially mitigated by performing remote monitoring visits where these visits had previously been conducted on-site . as a result , revenue for the second half of 2020 was less impacted than it was in the second quarter , although we continue to experience lower reimbursable out-of-pocket expenses primarily as a result of remote monitoring . the decrease in revenue for the year ended december 31 , 2020 was partially offset by revenue growth during the first quarter and incremental revenue from our recent acquisition of synteract in december 2020. although we are aggressively managing our response to the covid-19 pandemic , it may continue to negatively impact our clinical solutions revenue in 2021 , depending on the continuation of the pandemic .
| resulted in a higher gross margin , we continue to aggressively manage our response to the covid-19 pandemic to limit any impact to c linical solutions profitability in 2021. at this time , we continue to believe that the most significant impacts to margins in our clinical solutions segment will be those noted in the above revenue section , partially offset by the impact of our cost management strategies and the impact of lower reimbursable out-of-pocket expenses . the trend of more remote monitoring visits is expected to continue after the pandemic , although below levels necessitated in 2020 , resulting in both lower reimbursable out-of-pocket expenses and related revenue on a per visits basis , with no impact to profitability . as of december 31 , 2020 , a substantial number of our clinical trial sites have returned to allowing physical monitoring visits and we expect an increase in patient enrollment rates to result in a year over year increase in clinical solutions segment direct costs in 2021. commercial solutions direct costs for our commercial solutions segment , excluding share-based compensation expense , were as follows ( dollars in thousands ) : replace_table_token_7_th for the year ended december 31 , 2020 , our commercial solutions segment direct costs decreased by $ 127.3 million , or 12.7 % , compared to the year ended december 31 , 2019. these decreases were primarily related to declines in reimbursable out-of-pocket expenses , reduced billable headcount , and the impact of our cost management strategies , which were all primarily in response to the covid-19 pandemic . these cost management strategies included certain temporary compensation adjustments , hiring restrictions , staffing reductions , voluntary and involuntary employee furloughs , reductions in third-party costs , and other initiatives . the majority of the temporary cost savings measures ended in the third quarter of 2020. in addition to these temporary actions , we continued to implement our forwardbound margin enhancement initiative .
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the 2019 senior credit facility matures ( a ) may 14 , 2024 or b ) december 3 , 2020 , if the new 2l notes ( as defined below ) have not been voluntarily redeemed , repurchased , refinanced or otherwise retired by december 3 , 2020 , which is the date that is 180 days prior to the “ maturity date ” as defined in the indenture governing the new 2l notes ( the “ new 2l notes indenture ” ) as in effect on the issuance date of the new 2l notes . the maximum credit amount under the 2019 senior credit facility is $ 500 million with a current borrowing base of $ 125 million . the borrowing base is scheduled to be redetermined in march and september of each calendar year , and is subject to additional adjustments from time to time , including for asset sales , elimination or reduction of hedge positions and incurrence of other debt . additionally , each of the borrower and the administrative agent may request one unscheduled redetermination of the borrowing base between scheduled redeterminations . the amount of the borrowing base is determined by the lenders at their sole discretion and consistent with their oil and gas lending criteria at the time of the relevant redetermination . the borrower may also request the issuance of letters of credit under the 2019 credit agreement in an aggregate amount up to $ 10 million , which reduce the amount of available borrowings under the borrowing base in the amount of such issued and outstanding letters of credit . on may 14 , 2019 , the company and the subsidiary entered into a purchase agreement with certain funds and accounts managed by franklin advisers , inc. , as investment manager ( each such fund or account , together with its successors and assigns , a “ new 2l notes purchaser ” ) pursuant to which the company issued to the new 2l notes purchasers ( the “ new 2l notes offering ” ) $ 12.0 million aggregate principal amount of the company 's 13.50 % convertible second lien senior secured notes due 2021 ( the “ new 2l notes ” ) . the closing of the new 2l notes offering occurred on may 31 , 2019. proceeds from the sale of the new 2l notes were primarily used to pay down outstanding borrowings under the 2019 senior credit facility . holders of the new 2l notes have a second priority lien on all assets of the company . the new 2l notes , as set forth in the new 2l notes indenture , are scheduled to mature on may 31 , 2021. the new 2l notes bear interest at the rate of 13.50 % per annum , payable quarterly in arrears on january 15 , april 15 , july 15 and october 15 of each year . the company may elect to pay all or any portion of interest in-kind on the then outstanding principal amount of the new 2l notes by increasing the principal amount of the outstanding new 2l notes . we exited 2019 with $ 1.5 million of cash on hand and $ 92.9 million of outstanding borrowings with $ 32.1 million of availability under the current borrowing base of $ 125.0 million on the 2019 senior credit facility . due to the timing of payment of our capital expenditures , we reflected a working capital deficit of $ 19.7 million as of december 31 , 2019. to the extent we operate with a working capital deficit , we expect such deficit to be offset by liquidity available under our 2019 senior credit facility . we are beginning 2020 with $ 33.6 million in immediately available capital resources . see note 5—debt in the notes to consolidated financial statements in “ item 8—financial statements and supplementary data ” of the annual report on form 10-k for more information on the 2019 senior credit facility and the new 2l notes . 40 outlook our total capital expenditures for 2020 are expected to be appro ximately $ 55 to $ 65 million with flexibility to increase or decrease this amount based on the movement of commodity prices . we plan to focus all of our capital on drilling and development of our haynesville shale trend natural gas properties in north louisiana , and we currently contemplate drilling and developing 13 gross ( 5.8 net ) wells utilizing improved completion techniques . we believe the results of the capital investments we made in 2019 will generate additional cash flows and additional value that will allow us to raise capital to continue our capital development in the future . in addition , to support future cash flows , we entered into strategic derivative positions as of december 31 , 2019 covering approximatel y 47 % of our anticipated natural gas sales volumes for 2020 and 54 % of our anticipated oil sales volumes for 2020. see note 9 — derivative activities in the notes to consolidated financial statements in “ item 8 — financial statements and supplementary data ” of the annual report on form 10-k. we continuously monitor our balanc e sheet and coordinate our capital program with our expected cash flows and scheduled debt repayments . we will continue to evaluate funding alternatives as needed . alternatives available to us include : availability under the 2019 senior credit facility ; issuance of debt securities ; joint ventures in our tms and or haynesville shale trend acreage ; sale of non-core assets ; and issuance of equity securities if favorable conditions exist . the table below summarizes our cash flows for the periods indicated ( in thousands ) : replace_table_token_18_th at december 31 , 2019 , our capital expenditures at the end of 2019 resulted in a working capital deficit of $ 19.7 million , which was more than offset by the liquidity available under the 2019 senior credit facility story_separator_special_tag the 2019 senior credit facility matures ( a ) may 14 , 2024 or b ) december 3 , 2020 , if the new 2l notes ( as defined below ) have not been voluntarily redeemed , repurchased , refinanced or otherwise retired by december 3 , 2020 , which is the date that is 180 days prior to the “ maturity date ” as defined in the indenture governing the new 2l notes ( the “ new 2l notes indenture ” ) as in effect on the issuance date of the new 2l notes . the maximum credit amount under the 2019 senior credit facility is $ 500 million with a current borrowing base of $ 125 million . the borrowing base is scheduled to be redetermined in march and september of each calendar year , and is subject to additional adjustments from time to time , including for asset sales , elimination or reduction of hedge positions and incurrence of other debt . additionally , each of the borrower and the administrative agent may request one unscheduled redetermination of the borrowing base between scheduled redeterminations . the amount of the borrowing base is determined by the lenders at their sole discretion and consistent with their oil and gas lending criteria at the time of the relevant redetermination . the borrower may also request the issuance of letters of credit under the 2019 credit agreement in an aggregate amount up to $ 10 million , which reduce the amount of available borrowings under the borrowing base in the amount of such issued and outstanding letters of credit . on may 14 , 2019 , the company and the subsidiary entered into a purchase agreement with certain funds and accounts managed by franklin advisers , inc. , as investment manager ( each such fund or account , together with its successors and assigns , a “ new 2l notes purchaser ” ) pursuant to which the company issued to the new 2l notes purchasers ( the “ new 2l notes offering ” ) $ 12.0 million aggregate principal amount of the company 's 13.50 % convertible second lien senior secured notes due 2021 ( the “ new 2l notes ” ) . the closing of the new 2l notes offering occurred on may 31 , 2019. proceeds from the sale of the new 2l notes were primarily used to pay down outstanding borrowings under the 2019 senior credit facility . holders of the new 2l notes have a second priority lien on all assets of the company . the new 2l notes , as set forth in the new 2l notes indenture , are scheduled to mature on may 31 , 2021. the new 2l notes bear interest at the rate of 13.50 % per annum , payable quarterly in arrears on january 15 , april 15 , july 15 and october 15 of each year . the company may elect to pay all or any portion of interest in-kind on the then outstanding principal amount of the new 2l notes by increasing the principal amount of the outstanding new 2l notes . we exited 2019 with $ 1.5 million of cash on hand and $ 92.9 million of outstanding borrowings with $ 32.1 million of availability under the current borrowing base of $ 125.0 million on the 2019 senior credit facility . due to the timing of payment of our capital expenditures , we reflected a working capital deficit of $ 19.7 million as of december 31 , 2019. to the extent we operate with a working capital deficit , we expect such deficit to be offset by liquidity available under our 2019 senior credit facility . we are beginning 2020 with $ 33.6 million in immediately available capital resources . see note 5—debt in the notes to consolidated financial statements in “ item 8—financial statements and supplementary data ” of the annual report on form 10-k for more information on the 2019 senior credit facility and the new 2l notes . 40 outlook our total capital expenditures for 2020 are expected to be appro ximately $ 55 to $ 65 million with flexibility to increase or decrease this amount based on the movement of commodity prices . we plan to focus all of our capital on drilling and development of our haynesville shale trend natural gas properties in north louisiana , and we currently contemplate drilling and developing 13 gross ( 5.8 net ) wells utilizing improved completion techniques . we believe the results of the capital investments we made in 2019 will generate additional cash flows and additional value that will allow us to raise capital to continue our capital development in the future . in addition , to support future cash flows , we entered into strategic derivative positions as of december 31 , 2019 covering approximatel y 47 % of our anticipated natural gas sales volumes for 2020 and 54 % of our anticipated oil sales volumes for 2020. see note 9 — derivative activities in the notes to consolidated financial statements in “ item 8 — financial statements and supplementary data ” of the annual report on form 10-k. we continuously monitor our balanc e sheet and coordinate our capital program with our expected cash flows and scheduled debt repayments . we will continue to evaluate funding alternatives as needed . alternatives available to us include : availability under the 2019 senior credit facility ; issuance of debt securities ; joint ventures in our tms and or haynesville shale trend acreage ; sale of non-core assets ; and issuance of equity securities if favorable conditions exist . the table below summarizes our cash flows for the periods indicated ( in thousands ) : replace_table_token_18_th at december 31 , 2019 , our capital expenditures at the end of 2019 resulted in a working capital deficit of $ 19.7 million , which was more than offset by the liquidity available under the 2019 senior credit facility
| overview of 2019 results we grew production by 85 % in 2019 as we conducted drilling or completion operations on 16 wells , adding 9 gross ( 7.2 net ) wells to production in the haynesville shale trend ; we grew reserves by 8 % to 517 bcfe of proved oil and natural gas reserves with a pv-10 of $ 297 million ; we increased our oil and natural gas revenues to $ 118.4 million , representing an increase of 35 % from 2018 ; we grew net cash provided by operating activities by 61 % in 2019 to $ 79.1 million and generated net income of $ 13.3 million or $ 1.09 per share ( basic ) and $ 0.96 per share ( diluted ) . haynesville shale trend our relatively low risk development acreage in this trend is primarily centered in caddo , desoto and red river parishes , louisiana and angelina and nacogdoches counties , texas . we held approxim ately 40,000 gross ( 22,000 net ) acres as of december 31 , 2019 producing from or prospective for the haynesville shale trend . we incurred drilling or co mpletion costs on 16 wells in 2019 , spending $ 93.4 million of which $ 0.5 million was leasehold cost . we added 9 gross ( 7.2 net ) wells to production in 2019. our n et production volumes from our haynesville shale trend wells represented approximat ely 97 % of our total equivalent production on a mcfe basis and substantially all of our total natural gas production for the year ended december 31 , 2019 . tuscaloosa marine shale trend we held approximately 48,000 gross ( 33,000 net ) acres in the tms as of december 31 , 2019 with approxi mately 47,000 gross ( 33,000 net ) acr es held by producti on .
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without limitation , any statements preceded or followed by or that include the words “ targets , ” “ plans , ” “ believes , ” “ expects , ” “ intends , ” “ will , ” “ likely , ” “ may , ” “ anticipates , ” “ estimates , ” “ projects , ” “ should , ” “ would , ” “ could , ” “ positioned , ” “ strategy , ” “ future ” or words , phrases or terms of similar substance or the negative thereof , are forward-looking statements . these forward-looking statements are not guarantees of future performance and are subject to risks , uncertainties , assumptions and other factors , some of which are beyond our control , which could cause actual results to differ materially from those expressed or implied by such forward-looking statements . these factors include the overall impact of the covid-19 pandemic on our business ; the duration and severity of the covid-19 pandemic ; actions that may be taken by us , other businesses and governments to address or otherwise mitigate the impact of the covid-19 pandemic , including those that may impact our ability to operate our facilities , meet production demands , and deliver products to our customers ; the negative impacts of the covid-19 pandemic on the global economy , our customers and suppliers , and customer demand ; overall global economic and business conditions impacting our business , including the strength of housing and related markets ; demand , competition and pricing pressures in the markets we serve ; volatility in currency exchange rates ; failure of markets to accept new product introductions and enhancements ; the ability to successfully identify , finance , complete and integrate acquisitions ; the ability to achieve the benefits of our restructuring plans and cost reduction initiatives ; risks associated with operating foreign businesses ; the impact of material cost and other inflation ; the impact of seasonality of sales and weather conditions ; our ability to comply with laws and regulations ; the impact of changes in laws , regulations and administrative policy , including those that limit u.s. tax benefits or impact trade agreements and tariffs ; the outcome of litigation and governmental proceedings ; and the ability to achieve our long-term strategic operating goals . additional information concerning these and other factors is contained in our filings with the u.s. securities and exchange commission ( the “ sec ” ) , including this annual report on form 10-k. all forward-looking statements speak only as of the date of this report . pentair assumes no obligation , and disclaims any obligation , to update the information contained in this report . overview pentair plc and its consolidated subsidiaries ( “ we , ” “ us , ” “ our , ” “ pentair ” or the “ company ” ) is a pure play water industrial manufacturing company comprised of two reporting segments : consumer solutions and industrial & flow technologies . we classify our operations into business segments based primarily on types of products offered and markets served . for the year ended december 31 , 2020 , the consumer solutions and industrial & flow technologies segments represented approximately 58 % and 42 % of total revenues , respectively . although our jurisdiction of organization is ireland , we manage our affairs so that we are centrally managed and controlled in the united kingdom ( the “ u.k. ” ) and therefore have our tax residency in the u.k. on april 30 , 2018 , we completed the separation of our electrical business from the rest of pentair ( the “ separation ” ) by means of a dividend in specie of the electrical business , which was effected by the transfer of the electrical business from pentair to nvent and the issuance by nvent of nvent ordinary shares directly to pentair shareholders ( the “ distribution ” ) . we did not retain an equity interest in nvent . the results of the electrical business have been presented as discontinued operations for all periods presented . the electrical business was previously disclosed as a stand-alone reporting segment . in february 2019 , as part of consumer solutions , we completed the acquisitions of aquion , inc. ( “ aquion ” ) and pelican water systems ( “ pelican ” ) for $ 163.4 million and $ 121.1 million , respectively , in cash , net of cash acquired and final working capital true-ups . aquion offers a diverse line of water conditioners , water filters , drinking-water purifiers , ozone and ultraviolet disinfection systems , reverse osmosis systems and acid neutralizers for the residential and commercial water treatment industry . pelican provides residential whole home water treatment systems . covid-19 pandemic in march 2020 , the world health organization declared the covid-19 outbreak a pandemic . the covid-19 pandemic continues to spread throughout the united states ( “ u.s. ” ) and the world , with the continued potential for significant impact . the covid-19 pandemic has resulted in governments around the world implementing increasingly stringent measures to help control the spread of the virus , including quarantines , “ shelter-in-place ” and “ stay-at-home ” orders , travel restrictions , business curtailments , limits on gatherings , and other measures . in addition , governments and central banks in several parts of the world have enacted fiscal and monetary stimulus measures to counteract the economic impacts of the covid-19 pandemic . the effects of the covid-19 pandemic have had and may continue to have an unfavorable impact on certain parts of our business . 22 health and safety from the earliest signs of the outbreak , we have taken proactive action to protect the health and safety of our employees , customers , and suppliers . story_separator_special_tag the current covid-19 pandemic or continued spread of covid-19 has caused a global economic slowdown , and a possibility of a global recession . in the event of a recession , demand for our products would decline and our business and results of operations would be adversely affected . cost mitigation actions with the continuing uncertainty in light of the covid-19 pandemic , we have taken steps across our organization to align costs with lower sales volumes . these steps include renegotiation with suppliers to reduce input costs , driving manufacturing direct labor reductions in line with volume drop , delaying , reducing or eliminating purchased services and travel and , where appropriate , temporary furloughs and hiring freezes . additionally , we are proactively managing our working capital and reviewing our capital spending plan , but have not deferred strategic ongoing initiatives . we also continue to monitor government economic stabilization efforts and have participated in certain legislative provisions , such as deferring estimated tax payments , and may apply for job retention credits . we continue to monitor the rapidly evolving situation including the development of vaccines and their distribution to address the covid-19 virus and guidance from international and domestic authorities , including federal , state and local public health authorities , and may take additional actions based on their requirements and recommendations . in these circumstances , there may be developments outside our control requiring us to adjust our operating plan . as such , given the dynamic nature of this situation , we can not reasonably estimate the impacts of the covid-19 pandemic on our financial condition , results of operations or cash flows in the future . in addition , see part i —i tem 1a , “ risk factors , ” included herein for our risk factors regarding risks associated with the covid-19 pandemic . key trends and uncertainties regarding our existing business the following trends and uncertainties affected our financial performance in 2020 , and will likely impact our results in the future : there are many uncertainties regarding the covid-19 pandemic , including the anticipated duration and severity of the pandemic , the extent of worldwide social , political and economic disruption it may continue to cause and the development and distribution of vaccines to address the covid-19 virus . the broader implications of the covid-19 pandemic on our business , financial condition , results of operations and cash flows can not be determined at this time , and ultimately will be affected by a number of evolving factors including the length of time that the pandemic continues and the impact of vaccines on it , its effect on the demand for our products and services , our supply chain , and our manufacturing capacity , as well as the impact of governmental regulations imposed in response to the pandemic . see further discussion above under “ covid-19 pandemic ” for key trends and uncertainties with regard to the covid-19 pandemic . during 2020 , we executed certain business restructuring initiatives unrelated to the covid-19 pandemic aimed at reducing our fixed cost structure and realigning our business . we expect these actions to continue into 2021 and to drive margin growth . we have identified specific product and geographic market opportunities that we find attractive and continue to pursue , both within and outside the u.s. we are reinforcing that our businesses more effectively address these opportunities through research and development and additional sales and marketing resources . unless we successfully penetrate these markets , our core sales growth will likely be limited or may decline . we have experienced material and other cost inflation . we strive for productivity improvements , and we implement increases in selling prices to help mitigate this inflation . we expect the current economic environment will result in continuing price volatility for many of our raw materials , and we are uncertain as to the timing and impact of these market changes . 24 in 2021 , our operating objectives remain to focus on delivering our core while continuing to build out our future . we expect to execute these objectives by : delivering revenue growth in our core businesses ; delivering income and cash by managing price/cost inflation , prioritization of growth investments and addressing the cost structures as necessary ; continued focus on capital allocation through : ◦ commitment to maintain our investment grade rating ; ◦ return cash to shareholders through dividends and buybacks ; and ◦ supplement our business with strategically-aligned mergers and acquisitions . focused growth initiatives that accelerate our investments in digital , technology and services expansion ; and building a high performance growth culture and delivering on our commitments while living our win right values . consolidated results of operations the consolidated results of operations were as follows : replace_table_token_4_th n.m. not meaningful 25 net sales the components of the consolidated net sales change were as follows : replace_table_token_5_th the 2.0 percent increase in consolidated net sales in 2020 from 2019 was primarily the result of : selective increases in selling prices to mitigate inflationary cost increases ; increased sales due to the aquion and pelican acquisitions in february 2019 and other small acquisitions in our consumer solutions segment in the fourth quarter of 2019 and first half of 2020 ; volume increase in our consumer solutions segment mainly driven by our pool business ; volume increase in our residential and irrigation flow businesses in our industrial & flow technologies segment ; and favorable foreign currency effects in 2020 compared to the prior year . this increase was partially offset by : sales volume declines in certain businesses within our industrial & flow technologies segment due to the impacts of the covid-19 pandemic .
| summary of cash flows cash flows from continuing operations were as follows : replace_table_token_13_th operating activities in 2020 , net cash provided by operating activities of continuing operations primarily reflects net income from continuing operations of $ 432.2 million , net of non-cash depreciation and amortization . additionally , the company had a cash inflow of $ 109.5 million as a result of changes in net working capital , primarily the result of accounts receivables collections and reduced accounts receivables due to the pool business early buy program shipments with extended payment terms moving from the fourth quarter of 2020 into 2021 due to continued strong demand . in 2019 , net cash provided by operating activities of continuing operations primarily reflects net income from continuing operations of $ 462.9 million , net of non-cash depreciation , amortization and asset impairment , partially offset by a cash outflow of $ 105.4 million as a result of changes in net working capital and $ 20.9 million of pension and other post-retirement plan contributions , including $ 11.1 million of contributions made in conjunction with the termination of the pentair salaried plan during 2019. investing activities net cash used for investing activities of continuing operations in 2020 primarily reflects capital expenditures of $ 62.2 million and cash paid for acquisitions of $ 58.0 million in our consumer solutions reporting segment , net of cash acquired . net cash used for investing activities of continuing operations in 2019 primarily reflects capital expenditures of $ 58.5 million and cash paid for the aquion and pelican acquisitions , partially offset by $ 15.3 million of proceeds received from divestitures primarily related to our former aquaculture business .
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this review should be read in conjunction with the accompanying consolidated financial statements and the related notes to consolidated financial statements contained in item 8 of this annual report on form 10-k ( “ form 10-k ” ) and the “ risk factors ” discussed in item 1a of this form 10-k. forward-looking statements in this review are qualified by the cautionary statement under the heading “ cautionary note regarding forward-looking statements pursuant to the united states private securities litigation reform act of 1995 ” contained at the beginning of part i of this form 10-k. overview we are a leading provider of integrated human capital management ( “ hcm ” ) solutions for payroll , benefits , human resource ( “ hr ” ) , and insurance services for small- to medium-sized businesses . we offer a comprehensive portfolio of hcm services and products that allow our clients to meet their diverse payroll and hr needs . we support small-business companies through our core payroll , utilizing our proprietary , robust , software-as-a-service ( “ saas ” ) paychex flex ® platform , and our surepayroll ® saas-based products . mid-market companies typically have more complex payroll and benefits needs , and are serviced through our paychex flex enterprise solution set , which offers an integrated suite of hcm solutions through the paychex flex platform , or through our legacy platform . our saas solution through paychex flex enterprise integrates payroll processing with hr management , employee benefits administration , time and labor management , applicant tracking , onboarding solutions , and performance and learning management . our portfolio of hcm and employee benefit-related services are as follows : management solutions : · payroll processing services ; · payroll tax administration services ; · employee payment services ; · regulatory compliance services ( new-hire reporting and ga rnishment processing ) ; · hr solutions administrative services organization ( “ aso ” ) ; · retirement services administration ; · hr administration services , including time and attendance , benefit enrollment , recruiting , and onboarding ; · other hr services and products ; and · business services . our wholly owned subsidiary , paychex advance llc ( “ paychex advance ” ) , provides a portfolio of services to the temporary staffing industry , including payroll funding ( via the purchase of accounts receivable ) and outsourcing services , which includes payroll processing , invoicing , and tax preparation . professional employer organization ( “ peo ” ) and insurance services : · peo services provided by our licensed subsidiaries , paychex business solutions , llc , hr outsourcing holdings , inc. ( “ hroi ” ) , and oasis outsourcing group holdings , l.p. ( “ oasis ” ) ; and · insurance services provided by our licensed insurance agency , paychex insurance agency , inc. our mission is to be the leading provider of payroll , benefits , hr , and insurance services for small and mid-sized companies by being an essential partner with america 's businesses . we believe success in this mission will lead to strong long-term financial performance . our strategy focuses on flexible , convenient service ; industry-leading , integrated technology ; solid sales execution ; providing a comprehensive suite of value-added hcm services ; continued service penetration ; and engaging in strategic acquisitions . we continue to focus on driving growth in the number of clients , revenue per client , and revenue and profits , while providing industry-leading service and technology solutions to our clients and their employees . we maintain industry-leading margins by managing our personnel costs and expenses while continuing to invest in our business , particularly in leading-edge technology . we believe these investments are critical to our success . looking to the future , we believe that investing in our products , people , and service capabilities will position us to capitalize on opportunities for long-term growth . 17 our financial results for fiscal 2019 reflect another year of continued growth across our major hcm product lines . peo and insurance services revenue continued to experience strong growth of 46 % for fiscal 2019 as compared with fiscal 2018. excluding the acquisition of oasis , peo and insurance services revenue increased 19 % for fiscal 2019. the impact of the acquisition of hroi on peo and insurance services revenue growth for fiscal 2019 was approximately 4 % . the remaining increases were driven by growth in clients and client worksite employees across our combined existing peo business . manageme nt solutions revenue increased 4 % for fiscal 2019 as compared with fiscal 2018 , primarily driven by growth in our client base across many of our services , growth in revenue per check , which improved as a result of price increases , net of discounts , and increased revenue per client . as of may 31 , 2019 , including the oasis acquisition , we served approximately 670,000 payroll and peo clients . as of may 31 , 2018 , we served over 650,000 payroll and peo clients . client retention was over 82 % of our beginning client base for the fiscal year , in line with our historic best retention rate . effective december 20 , 2018 , the company acquired oasis . upon closing , oasis became a wholly owned subsidiary of the company . oasis is an industry leader in providing hr outsourcing services . the purchase price was $ 99 2.2 million , net of $ 262.3 million in cash acquired , including $ 132.1 million of restricted cash . the acquisition was financed through a combination of cash on hand and the issuance of long-term private placement debt totaling $ 800.0 million . interest rates available on high-quality financial instruments have gradually increased . our combined funds held for clients and corporate investment portfolios earn ed an average rate of return of 1.9 % for fiscal 2019 , compared to 1.5 % for fiscal 2018 and 1.2 % for fiscal 2017 . story_separator_special_tag we believe that our investments as of may 31 , 2019 that were in an unrealized loss position were not other-than-temporarily impaired , nor has any event occurred subsequent to that date that would indicate any other-than-temporary impairment . 19 our primary source of cash is generated by our ongoing operations . cash flows from operations were $ 1.3 billion for fiscal 2019. historically , we have funded our operations , capital purchases , business acquisitions , share repurchases , and dividend payments from our operating activities . however , we funded our most recent acquisition of oasis through a combination of cash and the issuance of long-term private placement debt of $ 800.0 million . our positive operating cash flows for fiscal 2019 allowed us to support our business and to pay substantial dividends to our stockholders . in may 2019 , our board of directors ( the “ board ” ) increased our quarterly dividend by 11 % to $ 0.62 per share from $ 0.56 per share . dividends paid to stockholders were 80 % of net income for fiscal 2019 . it is anticipated that cash , restricted cash , and total corporate investments as of may 31 , 2019 , along with projected operating cash flows and available short-term financing , will support our normal business operations , capital purchases , share repurchases , and dividend payments for the foreseeable future . for further analysis of our results of operations for fiscal years 2019 , 2018 , and 2017 , and our financial position as of may 31 , 2019 , refer to the tables and analysis in the “ results of operations ” and “ liquidity and capital resources ” sections of this item 7 and the discussion in the “ critical accounting policies ” section of this item 7 . story_separator_special_tag beginning client base for fiscal 2018 and fiscal 2017. interest on funds held for clients : interest on funds held for clients increased 27 % for fiscal 2019 and 26 % for fiscal 2018 to $ 80.6 million and $ 63.5 million , respectively . for both fiscal 2019 and fiscal 2018 , the increases were primarily due to higher average interest rates earned . average investment balances for funds held for clients decreased approximately 2 % and 1 % for fiscal 2019 and fiscal 2018 , respectively , primarily driven by the impact of lower client withholdings as a result of the tax cut and jobs act o f 2017 ( the “ tax act ” ) , and changes in client base mix , partially offset by the impact of wage inflation . refer to the “ market risk factors ” section contained in item 7a of this form 10-k for more information on changing interest rates . combined operating and sg & a expenses : the following table summarizes total combined operating and sg & a expenses for fiscal years : replace_table_token_11_th ( 1 ) calculated using actual amounts ( 2 ) amounts have been adjusted to reflect the adoption of asc topic 606 . total expenses increased 15 % for fiscal 2019 and 10 % for fiscal 2018 . the acquisitions of oasis , hroi , and lessor , contributed 10 % and 5 % to the growth in total expenses for fiscal 2019 and fiscal 2018 , respectively . 22 compensation-related expenses increased 13 % for fiscal 2019 and 5 % for fiscal 2018. the acquisitions of oasis , hroi and lessor contributed 6 % and 1 % to the growth in compensation-related expenses for fiscal 2019 and fiscal 2018 , respectively . for both fiscal 2019 and 2018 , the increases in compensation-related expenses were driven by increased headcount due to incremental investments in sales force , technology resources , and operations to support the growth in business and increased performance-based pay . in addition , the increase in compensation-related expenses for fiscal 2018 was impacted by a one-time bonus paid to non-management employees . as of may 31 , 2019 , we had approximately 15,600 employees , including oasis , compared with 14,300 employees as of may 31 , 2018 . depreciation expense is primarily related to buildings , furniture and fixtures , data processing equipment , and both purchased and internally developed software . amortization of intangible assets is primarily related to client list acquisitions , including intangible assets recorded for the oasis acquisition , which are amortized using either straight-line or accelerated methods . the growth in depreciation and amortization for fiscal 2019 was primarily driven by an increase in intangible assets related to the acquisitions of oasis and lessor . the increase in depreciation and amortization for fiscal 2018 was primarily driven by an increase in internally developed software that was placed in service over the prior two years as well as the amortization of customer lists and other intangibles related to the acquisitions of hroi and lessor . peo insurance costs include workers ' compensation and minimum premium health insurance benefit plans and self-insured dental and vision plans where we retain risk . growth in our combined peo business , including the acquisitions of oasis and hroi , contributed to the growth in peo insurance costs for both fiscal 2019 and fiscal 2018. other expenses include items such as non-capital equipment , delivery , forms and supplies , communications , travel and entertainment , professional services , and other costs incurred to support our business . continued investment in product development , supporting technology , and the acquisitions of oasis and hroi impacted other expense growth for both fiscal 2019 and fiscal 2018. for fiscal 2018 , other expenses also reflect a one-time expense of $ 32.6 million related to the termination of certain license agreements . operating income : operating income increased 6 % to $ 1.4 billion for fiscal 2019 and 3 % to $ 1.3 billion for fiscal 2018. the fluctuations in operating income were attributable to the factors previously discussed .
| results of operations summary of results of operations for fiscal years : replace_table_token_6_th ( 1 ) amounts have been adjusted to reflect the adoption of accounting standards codification ( “ asc ” ) topic 606 , “ revenue from contracts with customers ” ( “ asc topic 606 ” ) . n/m – not meaningful 20 we invest in highly liquid , investment-grade fixed income securities and do not utilize derivative instruments to manage interest rate risk . as of may 31 , 2019 , we had no exposure to high-risk or illiquid investments . details regarding our combined funds held for clients and corporate investment portfolios are as follows : replace_table_token_7_th replace_table_token_8_th ( 1 ) the net unrealized gain on ou r investment portfolios was approximately $ 31.6 million as of july 17 , 2019 . ( 2 ) the federal funds rate was in the range of 2.25 % to 2.50 % as of may 31 , 2019 , in the range of 1.50 % to 1.75 % as of may 31 , 2018 , and in the range of 0.75 % to 1.00 % as of may 31 , 2017 . ( 3 ) t hese items exclude the impact of vrdns , as they are tied to short-term interest rates . management solutions revenue : management solutions revenue was $ 2.9 billion for fiscal 2019 and $ 2.8 billion for fiscal 2018 , reflecting growth of 4 % and 3 % , respectively , compared to each of the prior fiscal year periods . both fiscal 2019 and fiscal 2018 benefited from growth in our client base across many of our services and growth in revenue per client , which improved as a result of price increases , net of discounts , and increased product penetration . paychex hr solutions revenue growth for both fiscal 2019 and fiscal 2018 was driven by strong growth in client base and in client worksite employees .
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advertising expense was $ 9.0 million in 2020 , $ 9.8 million in 2019 and $ 10.5 million in 2018. government grants on march 27 , 2020 , the coronavirus aid , relief and economic security act ( `` cares act story_separator_special_tag overview we are north america 's leading provider of environmental and industrial services supporting our customers in finding environmentally responsible solutions to further their sustainability goals in today 's world . everywhere industry meets the environment , we strive to provide eco-friendly products and services that protect and restore north america 's natural environment . we believe we operate , in the aggregate , the largest number of hazardous waste incinerators , landfills and treatment , storage and disposal facilities ( `` tsdfs '' ) in north america . we serve a diverse customer base , including fortune 500 companies , across the chemical , energy , manufacturing and additional markets , as well as numerous government agencies . these customers rely on us to deliver a broad range of services including but not limited to end-to-end hazardous waste management , emergency response , industrial cleaning and maintenance and recycling services . we are also the largest re-refiner and recycler of used oil in north america and the largest provider of parts cleaning and related environmental services to commercial , industrial and automotive customers in north america . we have two operating segments ; ( i ) the environmental services segment and ( ii ) the safety-kleen segment . performance of our segments is evaluated on several factors of which the primary financial measure is adjusted ebitda , as reconciled to our net income and described more fully below . the following is a discussion of how management evaluates its segments including key performance indicators that management uses to assess the segments ' results , as well as certain macroeconomic trends and influences that impact each reportable segment : environmental services - environmental services segment results are predicated upon the demand by our customers for waste services directly attributable to waste volumes generated by them and project work for which waste handling and or disposal is required . in managing the business and evaluating performance , management tracks the volumes and mix of waste handled and disposed of through our incinerators , tsdfs and landfills , as well as utilization of such incinerators , labor and billable hours and equipment among other key metrics . levels of activity and ultimate performance associated with this segment can be impacted by several factors including overall u.s. gdp and u.s. industrial production , weather conditions , efficiency of our operations , technology , changing regulations , competition , market pricing of our services and the management of our related operating costs . environmental services results are also impacted by the demand for planned and unplanned industrial related cleaning and maintenance services at customer sites and for environmental cleanup services on a scheduled or emergency basis , including response to national events such as major chemical spills , natural disasters or other events where immediate and specialized services are required . as a result of the recent coronavirus ( `` covid-19 '' ) pandemic , the business has also seen increased demand for contagion disinfection , decontamination and disposal response services . safety-kleen - safety-kleen segment results are impacted by an array of core service and product offerings that serve to attract small quantity waste producers as customers and integrate them into the clean harbors waste network . core service offerings include parts washer services , containerized waste services , vac services , used motor oil collection and contract blending and packaging services . key performance indicators tracked by the company relative to these services include the number of parts washers placed and services performed and pricing and volume of used motor oil and waste collected . results from these services are primarily driven by the overall number of parts washers placed and services performed at customer sites and volumes of waste collected , as well as the demand for and frequency of other offered services . these factors can be impacted by overall economic conditions in the marketplace , especially in the automotive and manufacturing related areas . both the overall market price of oil and regulations that change the number of potential outlets for used motor oil , including the international maritime organization 's 2020 regulation , impact the premium the segment can charge for used motor oil collections . in addition to its core service offerings , safety-kleen also offers high quality , eco-friendly recycled base and blended oil products to end users including fleet customers , distributors and manufacturers of oil products . other product offerings include automotive related fluids and shop supplies . relative to its oil related products , management tracks the company 's volumes and relative percentages of base and blended oil sales along with various pricing metrics associated with this commodity driven marketplace . the segment 's revenues are significantly impacted by overall market pricing and product mix associated with base and blended oil products . the segment 's results are impacted by the company 's ability to manage the pricing for used oil collections with the overall market pricing for base and blended oil products . costs incurred in connection with the collection of used oil and other raw materials associated with the segment 's oil related products can also fluctuate . our oilplus ® closed loop initiative , which results in the sale of our renewable oil products directly to our end customers , may also be impacted by changes in customer demand for high-quality , environmentally responsible recycled oil . 28 impacts of covid-19 corporate response in response to the covid-19 pandemic , the company created a dedicated crisis response team to proactively monitor and respond to company and customer operations , implement plans to execute on opportunities from covid-19 related decontamination services and enhance health and safety measures for all our employees as well as customers to which we have provided these services . story_separator_special_tag the table below summarizes the benefit of these government programs recorded in the statement of operations for the year ended december 31 , 2020 ( in thousands ) : replace_table_token_5_th in addition to the credits and subsidies outlined above , which do not require any repayment to be made by the company , the cares act also allows for the deferral of payment related to certain payroll taxes . in total , we deferred the remittance of the employer portion of federal payroll tax withholdings of $ 35.4 million during the year ended december 31 , 2020 , which will be required to be paid in two equal installments in the fourth quarters of 2021 and 2022. highlights total direct revenues for 2020 decreased 7.9 % to $ 3.1 billion , compared with $ 3.4 billion in 2019. our environmental services segment direct revenues decreased $ 99.8 million in 2020 compared with 2019 primarily due to lower demand for our industrial and technical related services . lower overall economic activity due to the covid-19 pandemic most notably reduced the demand for industrial turnaround , environmental remediation and waste disposal projects . this decrease was partially offset by increased emergency response decontamination services in the wake of the covid-19 pandemic . direct revenues recorded by safety-kleen decreased $ 167.9 million in 2020 compared to 2019 , predominately due to lower demand across the safety-kleen portfolio of products and core services also resulting from overall lower economic activity , customer shutdowns as well as lower oil demand and pricing driven by the covid-19 pandemic . increased direct revenues from used motor oil collection partially offset these decreases in the safety-kleen segment . foreign currency translation of our canadian operations negatively impacted our consolidated direct revenues by $ 3.8 million in 2020 as compared to 2019. income from operations in 2020 was $ 251.3 million , compared with $ 229.5 million in 2019. we reported net income in 2020 and 2019 of $ 134.8 million and $ 97.7 million , respectively . adjusted ebitda , which is the primary financial measure by which our segments are evaluated , increased 2.8 % to $ 555.3 million in 2020 from $ 540.3 million in 2019. our relatively consistent levels of adjusted ebitda in 2020 , despite the notable decline in direct revenues , can be attributed to cost reduction strategies put in place by the company , improved mix of revenue generating services and benefits received from the government programs discussed above . additional information regarding adjusted ebitda , which is a non-gaap measure , including a reconciliation of adjusted ebitda to net income , appears below under `` adjusted ebitda . '' net cash from operating activities for 2020 was $ 430.6 million , an increase of $ 17.4 million from 2019. adjusted free cash flow , which management uses to measure our financial strength and ability to generate cash , was $ 265.0 million in 2020 , which represented a $ 56.5 million increase over 2019 primarily due to higher earnings , lower capital expenditures , and benefits received from the government programs discussed above . additional information regarding adjusted free cash flow , which is a non-gaap measure , including a reconciliation of adjusted free cash flow to net cash from operating activities , appears below under `` adjusted free cash flow . '' 30 segment performance the primary financial measure by which we evaluate the performance of our segments is adjusted ebitda . the following table sets forth certain financial information associated with our results of operations for the years ended december 31 , 2020 , 2019 and 2018 ( in thousands , except percentages ) : replace_table_token_6_th _ n/m = not meaningful ( 1 ) direct revenue is revenue allocated to the segment performing the provided service . ( 2 ) cost of revenue is shown exclusive of items presented separately on the consolidated statements of operations , which consist of ( i ) accretion of environmental liabilities and ( ii ) depreciation and amortization . direct revenues there are many factors which have impacted and continue to impact our revenues , including a significant impact on our revenue resulting from covid-19 as discussed in impacts of covid-19 above . other factors include , but are not limited to : overall industrial activity and growth in north america , existence or non-existence of large scale environmental waste and remediation projects , competitive industry pricing , miles driven and related lubricant demand , impacts of acquisitions and divestitures , the level of emergency response projects , base and blended oil demand and pricing , market changes relative to the collection of used oil , the number of parts washers placed at customer sites and foreign currency translation . in addition , customer efforts to minimalize hazardous waste and changes in regulation can also impact our revenues . environmental services replace_table_token_7_th environmental services direct revenues for the year ended december 31 , 2020 decreased $ 99.8 million from the comparable period in 2019 driven primarily by lower demand for our industrial and technical related services , partially offset by covid-19 emergency response decontamination services . lower economic activity throughout the covid-19 pandemic 31 reduced the demand for industrial and technical related services as customers postponed and or reduced the levels of industrial turnarounds , environmental remediation projects and other waste disposal services . in addition , direct revenues at our landfill facilities decreased $ 4.4 million when compared with the same period in the prior year due to lower volumes of waste streams , partially offset by pricing increases . in the year ended december 31 , 2020 , the company generated $ 120.4 million of direct revenues from covid-19 related emergency response decontamination services , which partially offset the above direct revenue decreases . additionally , direct revenues at our incinerator facilities increased by $ 29.1 million when compared to 2019 due to disposal of higher value waste streams . utilization at our incinerator facilities remained relatively consistent with the prior year at 84 % .
| summary of capital resources at december 31 , 2020 , cash and cash equivalents and marketable securities totaled $ 571.0 million , compared to $ 414.4 million at december 31 , 2019. at december 31 , 2020 , cash and cash equivalents held by our canadian subsidiaries totaled $ 143.7 million . at december 31 , 2020 , the cash and cash equivalents and marketable securities balance for our u.s. operations was $ 427.2 million , and our u.s. operations had net operating cash flows of $ 341.3 million for the year ended december 31 , 2020. additionally , we have a $ 400.0 million revolving credit facility , of which approximately $ 264.0 million was available to borrow at december 31 , 2020. based on the above and our current plans , we believe that our operations have adequate financial resources to satisfy their current liquidity needs . we assess our liquidity in terms of our ability to generate cash to fund our operating , investing , and financing activities . our primary ongoing cash requirements will be to fund operations , capital expenditures , interest payments and investments in line with our business strategy . we believe our future operating cash flows will be sufficient to meet our future operating and internal investing cash needs . furthermore , our existing cash balance and the availability of additional borrowings under our revolving credit facility provide additional potential sources of liquidity should they be required . financing arrangements terms of our $ 545.0 million of 4.875 % senior unsecured notes due 2027 , $ 300.0 million of 5.125 % senior unsecured notes due 2029 and $ 727.2 million senior secured notes due 2024 which were outstanding at december 31 , 2020 , and our $ 400.0 million revolving credit facility , are discussed further in note 11 , “ financing arrangements , ” to our consolidated financial statements included in item 8 of this report .
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residential real estate term - the overall health of the economy , including unemployment rates and housing prices , has an impact on story_separator_special_tag the first bancorp , inc. ( the `` company '' or `` the first bancorp '' ) was incorporated in the state of maine on january 15 , 1985 , and is the parent holding company of first national bank ( the `` bank '' ) . on january 28 , 2016 , the board of directors voted to change the bank 's name to first national bank from the first , n.a . the company generates almost all of its revenues from the bank , which was chartered as a national bank under the laws of the united states on may 30 , 1864. the bank , which has sixteen offices along coastal and eastern maine , emphasizes personal service to the communities it serves , concentrating primarily on small businesses and individuals . the bank offers a wide variety of traditional banking services and derives the majority of its revenues from net interest income – the spread between what it earns on loans and investments and what it pays for deposits and borrowed funds . while net interest income typically increases as earning assets grow , the spread can vary up or down depending on the level and direction of movements in interest rates . management believes the bank has modest exposure to changes in interest rates , as discussed in `` interest rate risk management '' elsewhere in management 's discussion . the banking business in the bank 's market area historically has been seasonal with lower deposits in the winter and spring and higher deposits in the summer and fall . this seasonal swing is fairly predictable and has not had a materially adverse effect on the bank . non-interest income is the bank 's secondary source of revenue and includes fees and service charges on deposit accounts and services , income from the sale and servicing of mortgage loans , and income from investment management and private banking services through first advisors , a division of the bank . forward-looking statements this report contains statements that are `` forward-looking statements . '' we may also make forward-looking statements in other documents we file with the sec , in our annual reports to shareholders , in press releases and other written materials , and in oral statements made by our officers , directors or employees . you can identify forward-looking statements by the use of the words `` believe '' , `` expect '' , `` anticipate '' , `` intend '' , `` estimate '' , `` assume '' , `` outlook '' , `` will '' , `` should '' , `` may '' , `` might , `` could '' , and other expressions that predict or indicate future events or trends and which do not relate to historical matters . you should not rely on forward-looking statements , because they involve known and unknown risks , uncertainties and other factors , some of which are beyond the control of the company . these risks , uncertainties and other factors may cause the actual results , performance or achievements of the company to be materially different from the anticipated future results , performance or achievements expressed or implied by the forward-looking statements . some of the factors that might cause these differences include the following : changes in general national , regional or international economic conditions or conditions affecting the banking or financial services industries or financial capital markets , adverse economic developments in or affecting the geographic areas by the bank , volatility and disruption in national and international financial markets , government intervention in the u.s. financial system , reductions in net interest income resulting from interest rate volatility as well as changes in the balance and mix of loans and deposits , reductions in the market value of wealth management assets under administration , changes in the value of securities and other assets , reductions in loan demand , changes in loan collectibility , default and charge-off rates , changes in the size and nature of the company 's competition , changes in legislation or regulation and accounting principles , policies and guidelines , and changes in the assumptions used in making such forward-looking statements . in addition , the factors described under `` risk factors '' in item 1a of this annual report on form 10-k may result in these differences . you should carefully review all of these factors , and you should be aware that there may be other factors that could cause these differences . these forward-looking statements were based on information , plans and estimates at the date of this annual report , and we assume no obligation to update any forward-looking statements to reflect changes in underlying assumptions or factors , new information , future events or other changes . although the company believes that the expectations reflected in such forward-looking statements are reasonable , actual results may differ materially from the results discussed in these forward-looking statements . readers are also urged to carefully review and consider the various disclosures made by the company , which attempt to advise interested parties of the factors that affect the company 's business . critical accounting policies management 's discussion and analysis of the company 's financial condition and results of operations is based on the consolidated financial statements which are prepared in accordance with accounting principles generally accepted in the united states of america . the preparation of such financial statements requires management to make estimates and assumptions that affect the reported amounts of assets , liabilities , revenues and expenses and related disclosure of contingent assets and liabilities . on an ongoing basis , management evaluates its estimates , including those related to the allowance for loan losses , goodwill , the valuation of mortgage servicing rights , and other-than-temporary impairment on securities . story_separator_special_tag changes in fair value of a derivative that is effective and that qualifies as a cash flow hedge are recorded in other comprehensive income ( loss ) and are reclassified into earnings when the forecasted transaction or related cash flows affect earnings . changes in fair value of a derivative that qualifies as a fair value hedge and the change in fair value of the hedged item are both recorded in earnings and offset each other when the transaction is effective . those derivatives that are classified as trading instruments are recorded at fair value with changes in fair value recorded in earnings . the company discontinues hedge accounting when it determines that the derivative is no longer effective in offsetting changes in the cash flows of the hedged item , that it is unlikely that the forecasted transaction will occur , or that the designation of the derivative as a hedging instrument is no longer appropriate . the first bancorp - 2017 form 10-k - page 23 use of non-gaap financial measures certain information in management 's discussion and analysis of financial condition and results of operations and elsewhere in this report contains financial information determined by methods other than in accordance with accounting principles generally accepted in the united states of america ( `` gaap '' ) . management uses these `` non-gaap '' measures in its analysis of the company 's performance and believes that these non-gaap financial measures provide a greater understanding of ongoing operations and enhance comparability of results with prior periods as well as demonstrating the effects of significant gains and charges in the current period . the company believes that a meaningful analysis of its financial performance requires an understanding of the factors underlying that performance . management believes that investors may use these non-gaap financial measures to analyze financial performance without the impact of unusual items that may obscure trends in the company 's underlying performance . these disclosures should not be viewed as a substitute for operating results determined in accordance with gaap , nor are they necessarily comparable to non-gaap performance measures that may be presented by other companies . in several places in this report , net interest income is presented on a fully taxable equivalent basis . specifically included in interest income was tax-exempt interest income from certain investment securities and loans . an amount equal to the tax benefit derived from this tax exempt income has been added back to the interest income total , which adjustments increased net interest income accordingly . management believes the disclosure of tax-equivalent net interest income information improves the clarity of financial analysis , and is particularly useful to investors in understanding and evaluating the changes and trends in the company 's results of operations . other financial institutions commonly present net interest income on a tax-equivalent basis . this adjustment is considered helpful in the comparison of one financial institution 's net interest income to that of another institution , as each will have a different proportion of tax-exempt interest from its earning assets . moreover , net interest income is a component of a second financial measure commonly used by financial institutions , net interest margin , which is the ratio of net interest income to average earning assets . for purposes of this measure as well , other financial institutions generally use tax-equivalent net interest income to provide a better basis of comparison from institution to institution . the company follows these practices . the following table provides a reconciliation of tax-equivalent financial information to the company 's consolidated financial statements , which have been prepared in accordance with gaap . a 35.0 % tax rate was used in 2017 , 2016 and 2015 . replace_table_token_5_th the company presents its efficiency ratio using non-gaap information which is most commonly used by financial institutions . the gaap-based efficiency ratio is noninterest expenses divided by net interest income plus noninterest income from the consolidated statements of income and comprehensive income . the non-gaap efficiency ratio excludes securities losses from noninterest expenses , excludes securities gains from noninterest income , and adds the tax-equivalent adjustment to net interest income . the following table provides a reconciliation between the gaap and non-gaap efficiency ratio : replace_table_token_6_th the first bancorp - 2017 form 10-k - page 24 the company presents certain information based upon average tangible common shareholders ' equity instead of total average shareholders ' equity . the difference between these two measures is the company 's intangible assets , specifically goodwill from prior acquisitions . management , banking regulators and many stock analysts use the tangible common equity ratio and the tangible book value per common share in conjunction with more traditional bank capital ratios to compare the capital adequacy of banking organizations with significant amounts of goodwill or other intangible assets , typically stemming from the use of the purchase accounting method in accounting for mergers and acquisitions . the following table provides a reconciliation of tangible average shareholders ' equity to the company 's consolidated financial statements , which have been prepared in accordance with gaap : replace_table_token_7_th story_separator_special_tag style= '' font-family : inherit ; font-size:10pt ; '' > 13.8 % from the $ 56.9 million posted by the company in 2016 . total interest expense in 2017 was $ 13.5 million , an increase of $ 2.7 million or 25.1 % from the $ 10.8 million posted by the company in 2016 . tax-exempt interest income amounted to $ 7.3 million for the year ended december 31 , 2017 , $ 5.8 million for the year ended december 31 , 2016 and $ 5.7 million for the year ended december 31 , 2015 . net interest income on a tax-equivalent basis increased 4.7 % or $ 2.1 million to $ 46.1 million for the year ended december 31 , 2016 from the $ 44.0 million reported for the year ended december 31 , 2015 , with growth in earning assets responsible for the increase .
| executive summary this was the best annual performance in the first bancorp , inc. 's history in terms of total revenue and net income , surpassing our previous best year in 2016. the company 's 2017 performance was driven by increased net interest income , the result of continued strong growth in earning assets . this growth led directly to increased net interest income . the company also increased the quarterly dividend by one cent in the second quarter to 24 cents per share . net income for the year ended december 31 , 2017 was $ 19.6 million , up $ 1.6 million or 8.8 % from the $ 18.0 million posted for the year ended december 31 , 2016 . earnings per common share on a fully diluted basis were $ 1.81 for the year ended december 31 , 2017 , up $ 0.15 or 9.0 % from the $ 1.66 posted for the year ended december 31 , 2016 . net interest income on a tax-equivalent basis increased $ 5.1 million or 11.2 % for the year ended december 31 , 2017 compared to the year ended december 31 , 2016 , with growth in earning assets responsible for the increase . the company 's net interest margin was 3.04 % in 2017 , compared to 3.05 % in 2016 . non-interest income for the year ended december 31 , 2017 was $ 12.5 million , level with the year ended december 31 , 2016 . this was due to an increase in revenue from first advisors , the company 's wealth and investment management division , as well as other operating income , offsetting modest year-over-year reductions in deposit service charge and mortgage banking revenues . non-interest expense for the year ended december 31 , 2017 was $ 31.7 million , or 7.7 % higher than non-interest expense posted for the year ended december 31 , 2016 .
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million and $ 1.6 million as of december 31 , 2018 and december 31 , 2017 , respectively . the contract assets relate to the company 's rights to consideration for services completed during the year ended december 31 , 2018 , and december 31 , 2017 , but not invoiced at the reporting date . contract assets are recorded to accounts receivable when the rights become unconditional and amounts are invoiced . contract liabilities are included in deferred revenue in the consolidated balance sheets . the company has contract liabilities of $ 1.1 million as of december 31 , 2018 and none as of december 31 , 2017. the company 's contract liability relates story_separator_special_tag overview we provide technology-enabled audit , recovery , outsource services , and related analytics services in the united states . our services help identify improper payments , and in some markets , restructure and recover delinquent or defaulted assets and improper payments for both government and private clients in a broad range of markets . our clients typically operate in complex and regulated environments and outsource their audit and recovery needs in order to reduce losses on billions of dollars of defaulted student loans , improper healthcare payments and delinquent state and federal tax and federal treasury and other receivables . we also provide complex outsource services for clients across our various markets , where we handle many or all aspects of our clients ' audit and recovery processes . our revenue model is generally success-based as we earn fees on the aggregate correct audits and or amount of funds that we enable our clients to recover . our services do not require any significant upfront investments by our clients and offer 26 our clients the opportunity to recover significant funds otherwise lost . because our model is based upon the success of our efforts , our business objectives are aligned with those of our clients and we are generally not reliant on their spending budgets . furthermore , our business model does not require significant capital as we do not purchase loans or obligations . sources of revenues we derive our revenues from services for clients in a variety of different markets . these markets include our two largest markets , student lending and healthcare , as well as our other markets which include but are not limited to delinquent state and federal taxes and federal treasury and other receivables . replace_table_token_3_th ( 1 ) includes $ 28.4 million related to the termination of the 2009 cms region a contract ( 2 ) represents outsource services , tax , and irs student lending our revenues from the student lending market are contract-based and consist primarily of contingency fees based on a specified percentage of the amount we enable our clients to recover . our contingency fee percentage for a particular recovery depends on the type of recovery facilitated . our clients in the student loan recovery market mainly consist of several of the largest guaranty agencies , or gas . we believe the size and the composition of our student loan inventory at any point provides us with a significant degree of revenue visibility for our student loan revenues . based on data compiled from over two decades of experience with the recovery of defaulted student loans , at the time we receive a placement of student loans , we are able to make a reasonably accurate estimate of the recovery outcomes likely to be derived from such placement and the revenues we are likely able to generate based on the anticipated recovery outcomes . our key metric in evaluating our student lending business is placement volume . our placement volume represents the dollar volume of defaulted student loans first placed with us during the specified period by public and private clients for recovery . placement volume allows us to measure and track trends in the amount of inventory our clients in the student lending market are placing with us during any period . the revenues associated with the recovery of a portion of these loans may be recognized in subsequent accounting periods , which assists management in estimating future revenues and in allocating resources necessary to address current placement volumes . the following table shows our placement volume for the year ended december 31 , 2018 , 2017 and 2016 , showing separately the placement volume associated with student loans held by great lakes for which we served as the primary recovery contractor until september 2017 and since that time as a subcontractor to navient , the primary servicer of the great lakes portfolio . replace_table_token_4_th 27 there are five potential outcomes to the student loan recovery process from which we generate revenues . these outcomes include : full repayment , recurring payments , rehabilitation , loan restructuring and wage garnishment . of these five potential outcomes , our ability to rehabilitate defaulted student loans is the most significant component of our revenues in this market . generally , a loan is considered successfully rehabilitated after the student loan borrower has made nine consecutive qualifying monthly payments and our client has notified us that it is recalling the loan . once we have structured and implemented a repayment program for a defaulted borrower , we ( i ) earn a percentage of each periodic payment collected up to and including the final periodic payment prior to the loan being considered “ rehabilitated ” by our clients , and ( ii ) if the loan is “ rehabilitated , ” then we are paid a one-time percentage of the total amount of the remaining unpaid balance for each rehabilitated loan . the fees we are paid vary by recovery outcome as well as by contract . for non-government-supported student loans we are generally only paid contingency fees on two outcomes : full repayment or recurring repayments . the table below describes our typical fee structure for each of these five outcomes . story_separator_special_tag other we also derive revenues from the recovery of delinquent state and federal taxes , and federal treasury and other receivables , default aversion and or first party call center services for certain clients and the licensing of hosted technology solutions to certain clients . for our hosted technology services , we license our system and integrate our technology into our clients ' operations , for which we are paid a licensing fee . our revenues for these services include contingency fees , fees based on dedicated headcount to our clients and hosted technology licensing fees . costs and expenses we generally report two categories of operating expenses : salaries and benefits and other operating expense . salaries and benefits expenses consist primarily of salaries and performance incentives paid and benefits provided to our employees . other operating expense includes expenses related to our use of subcontractors , other production related expenses , including costs associated with data processing , retrieval of medical records , printing and mailing services , amortization and other outside services , as well as general corporate and administrative expenses . factors affecting our operating results our results of operations are influenced by a number of factors , including allocation of placement volume , claim recovery volume , contingency fees , regulatory matters , client retention and macroeconomic factors . allocation of placement volume our clients have the right to unilaterally set and increase or reduce the volume of defaulted student loans or other receivables that we service at any given time . in addition , many of our recovery contracts for student loans and other receivables are not exclusive , with our clients retaining multiple service providers to service portions of their portfolios . accordingly , the number of delinquent student loans or other receivables that are placed with us may vary from time to time , which may have a significant effect on the amount and timing of our revenues . we believe the major factors that influence the number of placements we receive from our clients in the student loan market include our performance under our existing contracts and our ability to perform well against competitors for a particular client . to the extent that we perform well under our existing contracts and differentiate our services from those of our competitors , we may receive a relatively greater number of placements under these existing contracts and may improve our ability to obtain future contracts from these clients and other potential clients . further , delays in placement volume , as well as acceleration of placement volume , from any of our large clients may cause our revenues and operating results to vary from quarter to quarter . typically , we are able to anticipate with reasonable accuracy the timing and volume of placements of defaulted student loans and other receivables based on historical patterns and regular communication with our clients . occasionally , however , placements are delayed due to factors outside of our control . contingency fees 29 our revenues consist primarily of contract-based contingency fees . the contingency fee percentages that we earn are set by our clients or agreed upon during the bid process and may change from time to time either under the terms of existing contracts or pursuant to the terms of contract renewals . regulatory matters each of the markets which we serve is highly regulated . accordingly , changes in regulations that affect the types of loans , receivables and claims that we are able to service or the manner in which any such delinquent loans , receivables and claims can be recovered will affect our revenues and results of operations . for example , the passage of the student aid and fiscal responsibility act , or safra , in 2010 had the effect of transferring the origination of all government-supported student loans to the department of education , thereby ending all student loan originations guaranteed by the gas . loans guaranteed by the gas represented approximately 70 % of government-supported student loans originated in 2009. while the gas will continue to service existing outstanding student loans for years to come , this legislation means that there will be no further growth in student loans held by gas . further , we are seeing a larger amount of defaulted student loans in our ga client portfolios that have been previously rehabilitated and by regulation are not subject to rehabilitation for a second time . in addition , our entry into the healthcare market was facilitated by passage of the tax relief and health care act of 2006 , which mandated cms to contract with private firms to audit medicare claims in an effort to increase the recovery of improper medicare payments . any changes to the regulations that affect the student loan industry or the recovery of defaulted student loans or the medicare program generally or the audit and recovery of medicare claims could have a significant impact on our revenues and results of operations . client contract cancellation substantially all of our contracts entitle our clients to unilaterally terminate their contractual relationship with us at any time without penalty . if we lose one or more of our significant clients , including if one of our significant clients is consolidated by an entity that does not use our services , if the terms of compensation for our services change or if there is a reduction in the level of placements provided by any of these clients , our revenues could decline . macroeconomic factors certain macroeconomic factors influence our business and results of operations . these include the increasing volume of student loan originations in the u.s. as a result of increased tuition costs and student enrollment , the default rate of student loan borrowers , the growth in medicare expenditures resulting from increasing healthcare costs , as well as the fiscal budget tightening of federal , state and local governments as a result of general economic weakness and lower tax revenues .
| results of operations year ended december 31 , 2018 compared to the year ended december 31 , 2017 the following table represents our historical operating results for the periods presented : replace_table_token_5_th 32 revenues total revenues were $ 155.7 million for the year ended december 31 , 2018 , an increase of $ 23.6 million or 18 % , compared to total revenues of $ 132.0 million for the year ended december 31 , 2017 . student lending revenues were $ 66.5 million for the year ended december 31 , 2018 , representing a decrease of $ 27.8 million , or 29 % , compared to the year ended december 31 , 2017 . this decrease was primarily a result of the wind down relating to great lakes and decrease in the number of borrowers that are participating in the rehabilitation programs with our ga clients . healthcare revenues were $ 55.9 million for the year ended december 31 , 2018 , representing an increase of $ 46.0 million , or 460 % , compared to the year ended december 31 , 2017 . the increase in healthcare revenues attributable to our cms rac contract and msp crc was $ 40.4 million , and the increase attributable to our revenues from our commercial healthcare clients was $ 5.5 million in 2018. this increase was due primarily to the release of $ 28.4 million of the estimated liability for appeals and the net payable to client balances for the old cms region a contract , and the ramp up of our cms msp crc contract and other contracts with our commercial healthcare customers .
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form 8-k filed on april 12 , 2019 10.4 letter agreement , dated may 17 , 2019 , between registrant and maxim group llc , incorporated herein by reference to exhibit 10.1 of the current report on form 8-k filed on may 22 , 2019 10.5 form of securities purchase agreement , incorporated herein by reference to exhibit 10.2 of the current report on form 8-k filed on story_separator_special_tag overview as of december 31 , 2019 , the company had two business lines , used luxurious car leasing business and commodities trading business . used luxurious car leasing business currently the company has eleven used luxurious cars with net book value of approximately us $ 2.43 million . in addition , the company also leased used luxurious cars from peer companies and individuals to provide more varieties of luxurious cars to our customers . to determine the model of vehicles to be purchased , we collect data related to customers ' demands and preferences through sales and online promotions . our professional procurement personnel will then compare models of vehicles offered by different sellers . the decision to purchase a specific vehicle is based on a number of considerations including time of delivery , vehicle condition , vehicle safety feature , mileage , repairing and maintenance history , accidents history , market scarcity , and etc . for the years ended december 31 , 2019 and 2018 , the company earned income from operating lease of $ 1,830,148 and $ 488,062 , respectively . we rent our luxurious cars to our customers from our offices in beijing , shanghai , zhejiang and chengdu . we market our cars to targeted potential customers via phone calls or messages . the rental price varies based on the rental term which ranges from one day to one months . the longer the rental term , the cheaper the price . the daily rental price is the highest , while the average weekly rental price and average monthly rental price are 10 % to 20 % and 20 % to 30 % cheaper than that of daily rental price . we conduct comprehensive credit check against customers who place orders . we work with credit rating platform such as jd wanxiang and tyi onine to evaluate the customer 's credit . we may reject the order for any reason including unacceptable credit rating . once an order is accepted , we will require deposit ranging from us $ 7,500 and us $ 15,000 based on the vehicle being ordered and the customer 's credit score . the deposit covers vehicle deposit and traffic violation deposit . customer can confirm the time and place for vehicle delivery and rental term via sns messages , phone calls or face-to-face communication with our sales personnel . after then , our sales personnel will deliver the vehicle to the customers to theirdesignated destination . the customer , before signing the car rental agreement , will inspect the vehicle in person and pay the lease fee along with the deposit in credit card , wechat pay or alipay . the customer is responsible for the gas , the toll fee , fees incurred to return the car , and any other expenses related to the use of the vehicle during the rental term . we install five gps on each vehicle to track the location of the vehicle . once the rental period is over , the vehicle should be returned to our designated place . in the event the vehicle is returned with no damage other than normal wear and tear , we will process the refund of the vehicle deposit on the next business day . the traffic deposit will be refunded after we confirm there is no traffic violation record associated with the vehicle from the local police ( approximately a month after the return ) . competition we compete with car rental companies , many of which are more established and have more resources than us . currently we compete primarily with benson , v-fly travel and wagons . 50 commodities trading business in order to diversify the company 's business and generate additional revenue , on november 22 , 2019 , the company 's indirectly wholly-owned subsidiary , hao limo technology ( beijing ) co. , ltd. ( “ hao limo ” ) , entered into a series of contractual agreements ( the “ huamucheng vie agreements ” ) with shenzhen huamucheng trading co. , ltd. ( “ huamucheng ” ) and certain shareholders of huamucheng ( “ huamucheng shareholders ” ) , who collectively hold 100 % of huamucheng . t he huamucheng vie agreements are designed to provide hao limo with the power , rights and obligations equivalent , in all material respects , to those it would possess as the sole equity holder of huamucheng , including absolute control rights and the rights to the management , operations , assets , property and revenue of huamucheng . the purpose of the vie agreements is solely to give hao limo the exclusive control over huamucheng 's management . through huamucheng vie structure , the company is able to consolidate operations of huamucheng effective november 22 , 2019 and now operates a separate commodity trading business . the commodity trading business primarily involves purchasing non-ferrous metal product , such as aluminium ingots , copper , silver , and gold , from upstream metal and mineral suppliers and then selling to downstream customers . in connection with the company 's commodity sales , in order to help customers to obtain sufficient funds to purchase various metal products and also help upstream metal and mineral suppliers to sell their metal products , the company launched its supply chain management service in december 2019. the company primarily generates revenues from bulk non-ferrous commodity products , and from providing related supply chain management services in the prc . story_separator_special_tag however the privately held entity suffered significant net loss and working capital deficit , and the management assessed it was remote to for the privately held entity to make profit . the company provided full impairment on the investment security for the year ended december 31 , 2019 . 55 in 2019 , the company invested $ 289,486 to become a 40 % shareholder of a newly setup entity ( “ equity investee ” ) . due to significant net loss and large balance of uncollectible accounts receivable of equity investee , the shareholders of the equity investee made a decision to dissolve its business in early 2020. as a result , the company provided full impairment on the investment of this equity investee for the year ended december 31 , 2019. in december 2019 , upon receipt of nasdaq approval , the company issued 1,253,814 shares of its common stock with a closing-date fair value of $ 2,219,251. as of december 31 , 2019 , the fair value of the 20 % equity interest ofhangzhou yihe was determined to be $ 410,000 due to recurring losses of hangzhou yihe , the company recorded an investment impairment loss of $ 1,809,251 on the investment of this equity investee for the year ended december 31 , 2019. in may 2019 , the company invested an aggregate of $ 1,000,000 to purchase financial products from harrison fund , llc ( “ harrison fund ” ) , a private equity fund , for investment return . on april 6 , 2020 , we filed a law suit against harrison fund in california seeking the full refund of the $ 1,000,000 investment because we identified problematic information in harrison fund 's brochure . based on the current stage of the proceedings in this case , the outcome of this legal proceeding , including the anticipated legal costs , remains uncertain . therefore we recorded a full investment impairment loss of $ 1,000,000 , which was reflected in the consolidated statements of operation and comprehensive income ( loss ) . for the year ended december 31 , 2019 , the net interest income was comprised of interest income of $ 25,537 recognized on loans to a related party , interest expenses of $ 4,242 incurred on borrowings from three related parties , interest income of $ 77,146 on interest income from investments in financial products , and other net interest expenses of $ 24,253 incurred from various lendings to and borrowings from third parties , as compared with net interest expenses of $ 20,157 from various lendings to and borrowings from third parties for the same period ended december 31 , 2018 net income from discontinued operations during the year ended december 31 , 2018 , the net income was comprised of a net income of $ 277,756 from discontinued operations of microcredit service and a gain of $ 9,689,873 from disposal of the discontinued operations of microcredit service . net ( loss ) income as a result of the foregoing , net loss for the year ended december 31 , 2019 was $ 6,942,522 representing a change of $ 14,589,679 from net income of $ 7,647,157 for the year ended december 31 , 2018. cash flows and capital resources we have financed our operations primarily through shareholder contributions , cash flow from operations , borrowings from third parties and related parties , and equity financing through public offerings of our securities . for the years ended december 31 , 2019 , the company issued an aggregate of 3,120,000 shares of its common stock and raised $ 4,653,440 from such registered direct offerings . in addition , the company raised $ 0.6 million from private placements through issuance of 1,685,000 shares of common stock , and received an advance of subscription fees of $ 1.6 million from private placement investors to whom the company would issue 2,000,000 shares . liquidity for the year ended december 31 , 2019 , the company incurred net loss from continuing operations of approximately $ 6.94 million , and reported cash outflows of approximately $ 2.17 million from operating activities . these factors caused concern as to the company 's liquidity as of december 31 , 2019. in assessing the company 's liquidity , the company monitors and analyzes its cash and its ability to generate sufficient cash flow in the future to support its operating and capital expenditure commitments . the company 's liquidity needs are to meet its working capital requirements and operating expenses obligations . 56 as of december 31 , 2019 , the company had cash balance of $ 2,446,683 and a positive working capital of $ 2,444,466. as of december 31 , 2019 , the company 's balance sheets also reflected current third-party loans receivable of $ 1,955,697 and due from related parties of $ 3,310,883. as of the date of filing , the $ 3,310,883 due from related parties balance has been fully collected . the company also terminated certain third-party loan receivable contracts and collected approximately $ 1.0 million loans receivable from these third-parties . the company 's board of directors passed a resolution to require the remaining balance of loans receivable from third-parties to be collected by june 30 , 2020. the collection of the third-party loans receivable and balances due from related parties increased the available cash to be used as the company 's working capital . as of december 31 , 2019 , the company 's major current liabilities included third party loans payable of $ 2,367,967 , due to related parties of $ 1,017,362 and subscription advance from shareholders of $ 1,600,000. the company believes that most of these third party loan payables can be renewed or extended upon maturity based on the company 's good relationship with these third parties . the company 's due to related parties balance can also be extended upon demand and remain interest free .
| key factors affecting our results of operation the car rental and car service industry in china is competitive and fragmented . the commodities trading industry is also experiencing a decreasing demand as a result of china 's overall economic slowdown . we expect competition in both china 's car leasing industry and commodities trading business to persist and intensify . we have a limited operating history having just launched the car leasing business in may 2018 and started our commodities trading business in late november 2019. we believe our future success depends on our ability to significantly increase sales as well as maintain profitability from our operations . our limited operating history makes it difficult to evaluate our business and future prospects . you should consider our future prospects in light of the risks and challenges encountered by a company with a limited operating history in an emerging and rapidly evolving industry . these risks and challenges include , among other things , ● our ability to integrate commodities trading business with car leasing business ; ● our ability to continue our growth as well as maintain profitability ; ● preservation of our competitive position in both of the luxurious car leasing and car service industry and commodities trading industry in china ; ● our ability to implement our strategies and make timely and effective responses to competition and changes in customer preferences ; and ● recruitment , training and retaining of qualified managerial and other personnel . our business requires a significant amount of capital in large part due to needing to continuously grow our fleet , to purchase bulk volume of commodities , and expand our business in existing markets and to additional markets where we currently do not have operations .
| 5,830 |
of shares issuance upon exercise of outstanding stock options 86,282,508 issuance of future grants under stock option plans 20,471,897 issuance of future grants under employee stock purchase plan 445,701 issuance of common stock related to convertible notes * 197,686,842 issuance upon exercise of warrants 84,377,275 total 389,264,223 * assumes all interest payments are paid-in-kind through the maturity date . note 9 net loss per share basic and diluted net loss per share is computed by dividing net loss by the weighted-average number of common shares outstanding for the applicable period . diluted net loss per share excludes the effect of outstanding potentially dilutive securities because they are anti-dilutive . the following table shows the outstanding potentially dilutive options , unvested restricted stock awards , warrants and convertible notes as of december 31 , 2012 , 2011 and 2010 ( in thousands ) : replace_table_token_22_th note 10 discontinued operations cosmeceutical and toiletry business on july 25 , 2000 , we completed the sale of certain technology rights for our cosmeceutical and toiletry business to rp scherer corporation ( rp scherer ) , a subsidiary of cardinal health , inc. under the terms of the agreement with rp scherer , we guaranteed a minimum gross profit percentage on rp scherer 's combined sales of products to ortho and dermik ( gross profit guaranty ) . in july 2011 , valeant pharmaceuticals announced it was acquiring both ortho and dermik . the guaranty period initially commenced on july 1 , 2000 and was to end on the earlier of july 1 , 2010 or the end of two consecutive guaranty periods where the combined gross profit on sales to ortho and dermik equals or exceeds the guaranteed gross profit ( two period test ) . the gross profit guaranty expense totaled $ 944,000 for the 71 notes to financial statements december 31 , 2012 , 2011 and 2010 first seven guaranty years and in those years profits did not meet the two period test . effective march 2007 , in conjunction with a sale of assets by rp scherer 's successor company to an amcol international subsidiary ( amcol ) , a new agreement was signed between us and amcol to provide continuity of product supply to ortho and dermik . this new agreement potentially extended the gross profit guaranty period an additional two years to july 1 , 2013 , unless it was terminated earlier with the two period test . in february 2013 , an arbitrator ruled that no additional amounts were owed under the gross profit guaranty and that the term of the gross profit guaranty has ended . we had previously recorded a liability of the $ 1.1 story_separator_special_tag this annual report on form 10-k contains forward-looking statements as defined by the private securities litigation reform act of 1995. these forward-looking statements involve risks and uncertainties , including uncertainties associated with : the fda 's response to our resubmitted nda , the progress of our research , development and clinical programs ; the timing of regulatory approval and commercial introduction of apf530 and future product candidates ; the timing of regulatory approval and commercial introduction of apf530 and future product candidates ; our ability to market , commercialize and achieve market acceptance for apf530 and other future product candidates ; our ability to establish collaborations for our technology , apf530 and other future product candidates ; our estimates for future performance ; our estimates regarding our capital requirements and our needs for and ability to obtain additional financing ; our ability to protect or enforce our intellectual property rights ; volatility in the trading price of our common stock ; and other risks and uncertainties identified in our filings with the securities and exchange commission . we caution investors that forward-looking statements reflect our analysis only on their stated date . we do not intend to update them except as required by law . overview we are a specialty pharmaceutical company developing products using our proprietary biochronomer polymer-based drug delivery platform . this drug delivery platform is designed to improve the therapeutic profile of injectable pharmaceuticals by converting them from products that must be injected once or twice per day to products that need to be injected only once every one or two weeks . our lead product candidate , apf530 , is being developed for the prevention of acute cinv for patients undergoing both moderately and highly emetogenic chemotherapy and for the prevention of delayed cinv for patients undergoing moderately emetogenic chemotherapy . one of the most debilitating side effects of cancer chemotherapy , cinv is a leading cause of premature discontinuation of treatment . there is only one injectable 5-ht3 antagonist approved for the prevention of delayed-onset cinv , so this indication represents an area of particular unmet medical need . apf530 contains the 5-ht3 antagonist granisetron formulated in the company 's proprietary biochronomer drug delivery system , which allows therapeutic drug levels to be maintained for five days with a single subcutaneous injection . this five-day range is designed to cover the delayed phase of cinv . granisetron was selected for apf530 because it is widely prescribed by physicians based on a well-established record of safety and efficacy . in may 2009 , we filed the original new drug application ( nda ) seeking approval for apf530 with the u.s. food and drug administration ( fda ) . the fda issued a complete response letter for apf530 in march 2010. we met with the fda in february and march 2011 to clarify the work needed to address the issues identified in the letter . in september 2012 , we resubmitted the nda seeking approval for apf530 with the fda . story_separator_special_tag additionally , we believe that our deferred tax assets may have been limited in accordance with a provision of the internal revenue code of 1986 , whereby net operating loss and tax credit carryforwards available for use in a given period are limited upon the occurrence of certain events , including a significant change in ownership interests . as a result , our deferred tax assets and related valuation allowance were reduced for the estimated impact of the net operating losses and credits that may expire unused ( see note 12 to the financial statements included in item 8 of this annual report on form 10-k ) . should there be a change in our ability to recover our deferred tax assets , we would recognize a benefit to our tax provision in the period in which we determine that it is more likely than not that we will recover our deferred tax assets . stock-based compensation we account for share-based payment arrangements in accordance with asc 718 , compensation stock compensation and asc 505-50 , equity equity based payments to non-employees , which requires the recognition of compensation expense , using a fair-value based method , for all costs related to share-based payments including stock options , restricted stock awards and stock issued under the employee stock purchase plan . these standards require companies to estimate the fair value of share-based payment awards on the date of the grant using an option-pricing model ( see note 8 to the financial statements included in item 8 of this annual report on form 10-k ) . 45 results of operations for the years ended december 31 , 2012 , 2011 and 2010 the following sets forth the statement of operations data and percentage changes as compared to the prior years ( dollar amounts are presented in thousands ) : replace_table_token_7_th revenue contract revenue decreased in 2012 by $ 0.6 million , or 100 % , compared to 2011 as no revenue was earned in 2012. our contract revenue for 2011 was derived from an agreement with merial limited ( merial ) that we entered into in september 2009 for a long-acting pain management product for companion animals . in may 2011 , we received notice of termination from merial , as they did not see the commercial potential of the product under development in the animal health market . contract revenue decreased in 2011 by $ 0.7 million , or 50 % , compared to 2010 as a result of the contract termination mentioned above . the majority of our contract revenue for the fiscal year 2010 was derived from our agreement with merial . research and development research and development expense in 2012 increased by $ 6.8 million , or 83 % , compared to 2011. compared to the prior year , headcount-related costs , including stock compensation expense , and project spending for apf530 in 2012 were higher as we worked to address the issues raised by the fda in the complete response letter . research and development expense for the year 2013 is expected to be lower as compared to 2012 if we receive fda approval for apf530 , as our manufacturing development work is expected to be completed upon commercialization of the product . research and development expense in 2011 increased by $ 0.9 million , or 13 % , compared to 2010. compared to the prior year , headcount-related costs , including stock compensation expense , and project spending for apf530 in 2011 were higher as we worked to address the issues raised by the fda in the complete response letter . the scope and magnitude of future research and development expense is difficult to predict given the number of studies that will need to be conducted for any of our potential products . in general , biopharmaceutical development involves a series of 46 steps , beginning with identification of a product candidate and includes proof-of-concept in animals and phase 1 , 2 and 3 clinical studies in humans . each step of this process is typically more expensive than the previous one , so success in development results in increasing expenditures . we previously submitted ind applications for two product candidates , apf112 and apf580 . since 2009 , further development of these product candidates has been deferred in order to focus both managerial and financial resources on the development of apf530 . we are currently evaluating applications of our biochronomer delivery technology to determine potential pipeline candidates following the approval of apf530 . the major components of research and development expenses were as follows ( in thousands ) : replace_table_token_8_th internal research and development costs consist of employee salaries and benefits , including stock-based compensation , laboratory supplies , depreciation and allocation of overhead . external general technology development costs include expenditures on polymer development and manufacturing , which are performed on our behalf by third parties . story_separator_special_tag division and our cosmeceutical and toiletry business and interest earned on short-term investments . in april 2011 , we entered into definitive agreements for a convertible note financing of up to $ 4.5 million , which served as a bridge loan to fund the company 's operations until additional financing was secured . the initial funding from the bridge loan was approximately $ 1.3 million , net of issuance costs , whereby $ 1.5 million aggregate principal amount of convertible notes was issued . in may 2012 , the purchasers exercised their rights to purchase the remaining $ 3.0 million aggregate principal amount of convertible notes , and we received the additional $ 3.0 million of proceeds . in june 2011 , we entered into definitive agreements for a private placement of units comprised of common stock and warrants , for which we received advance proceeds of $ 20.3 million as of june 30 , 2011. the financing closed in july 2011 , at which time the remaining $ 3.7 million was received
| general and administrative general and administrative expenses increased in 2012 by $ 5.3 million , or 151 % , compared to 2011. the net increase in the fiscal year 2012 was primarily due to headcount-related costs , including stock compensation expense , consulting costs and professional fees related to the nda resubmission and pre-commercialization activities . general and administrative expense for the year 2013 is expected to be higher as compared to 2012 due to increased costs to support anticipated commercialization activities . general and administrative expenses decreased in 2011 by $ 0.5 million , or 12 % , compared to 2010. the net decrease in the fiscal year 2011 was primarily due to compensation expense incurred in the prior year related to the resignation of our former chief executive officer , which was partially offset by higher professional fees and consultant costs . general and administrative expenses consist primarily of salaries and related expenses , professional fees , directors ' fees , investor relations costs , pre-commercialization costs , insurance expense and related overhead cost allocation . other income ( expense ) interest expense , net of $ 0.6 million for the year ended december 31 , 2012 consists primarily of interest expense and amortization of debt discount related to the convertible note financings . interest expense of $ 0.4 million for the fiscal year 2011 also included debt issuance costs related to the convertible note financing . 47 the gain on sale of royalty interest of $ 2.5 million in 2010 represents a milestone payment we received in january 2010 from an affiliate of the paul royalty fund . the payment represents a final milestone payment that became due to us in january 2010 under an agreement that we entered into effective october 1 , 2005 to sell our royalty rights to retin-a micro ® and carac ® .
| 5,831 |
this measure may be different from non-gaap financial measures used by other companies , limiting its usefulness for comparison purposes . moreover , presentation of revenue on a constant currency basis is provided for year-over-year comparison purposes , and investors should be cautioned that the effect of changing foreign currency exchange rates has an actual effect on our operating results . we believe this non-gaap financial measure provides investors with useful supplemental information about the financial performance of our business , enables comparison of financial results between periods where certain items may vary independent of business performance , and allow for greater transparency with respect to key metrics used by management in operating our business . overview tripadvisor , inc. owns and operates a portfolio of leading online travel brands . tripadvisor , our flagship brand , is the world 's largest travel site . our mission is to help people around the world plan and book the perfect trip . we accomplish this by , among other things , aggregating millions of travelers ' reviews and opinions about accommodations , destinations , activities and attractions , and restaurants throughout the world so that our users have access to trusted advice wherever their trip takes them . our platform not only helps users plan their trip with our unique user-generated content , but also enables users to compare real-time pricing and availability so that they can book hotels , vacation rentals , flights , activities and attractions , and restaurants . our tripadvisor-branded websites include tripadvisor.com in the united states and localized versions of the tripadvisor website in 46 countries worldwide . our tripadvisor-branded websites reached 350 million average monthly unique visitors during the year ended december 31 , 2015 , according to our internal log files . we currently feature 320 million reviews and opinions on 6.2 million places to stay , places to eat and things to do – including 995,000 hotels and accommodations and 770,000 vacation rentals , 3.8 million restaurants and 625,000 attractions around the world . in addition to user-generated content , our websites feature price comparison tools and links to partner websites , including travel advertisers , on which users can book their travel arrangements . users may now also complete hotel bookings directly with our partners through tripadvisor.com and also through the tripadvisor mobile 30 application , where coverage is available . in addition to the flagship tripadvisor brand , we now manage and operate 23 other travel media brands , connected b y the common goal of providing users the most comprehensive travel - planning and trip-taking resources in the travel industry . story_separator_special_tag increased 15 % for the year ended december 31 , 2014 over 2013 , largely due to our implementation of hotel metasearch completed in june 2013 , which 31 resulted in higher cpc pricing paid by our partners , due to higher quality clicks being delivered , offset by relatively lower rates of hotel shopper conversion . key drivers of display-based advertising revenue for the years ended december 31 , 2015 , 2014 and 2013 , 11 % , 11 % and 13 % , respectively , of our total revenue came from our display-based advertising products . substantially all of our display-based advertising revenue is included in our hotel segment . the key drivers of our display-based advertising revenue include the growth in number of impressions sold , or the number of times an ad is displayed on our site , and the revenue we received for such impressions , measured in cost per thousand impressions ( “ cpm ” ) . according to our internal log files , the number of impressions sold increased 14 % for the year ended december 31 , 2015 over 2014 and increased 19 % for the year ended december 31 , 2014 over 2013 , primarily due to increased sales productivity , as well as increased sellable inventory due to traffic growth and introduction of new products and features , while pricing decreased 1 % for both the years , respectively . key growth areas we continue to invest in areas of potential growth , including our content and community , product innovation , and international expansion . content & community . tripadvisor is a website on which travelers can research content and share their travel experiences with the rest of the world . establishing and nurturing a sense of community among users and brand loyalty is a key priority and a competitive advantage for tripadvisor . as a result , we continue to look for ways to make it easier for users to plan , compare and book their perfect trip on tripadvisor as well as to share their experiences . mobile . innovating and improving our mobile products is a key priority . as of december 31 , 2015 , we reached 290 million downloads of our mobile app and average monthly unique visitors via smartphone and tablet devices grew 32 % year-over-year , according to our internal log files . we anticipate that the rate of growth in mobile visitors will continue to exceed the growth rate of our overall unique monthly visitors , and that an increasing proportion of users will use mobile devices to access the full range of services available on our sites . we are investing significant resources to improve the features , functionality and commercialization of our mobile websites and applications . direct hotel bookings on our websites . we believe that allowing users to book directly online without leaving our tripadvisor websites will result in a better user experience as well as , ultimately , additional revenue to the company . instant booking is a feature that enables users to book a hotel reservation directly with a hotel or ota partner while remaining on the tripadvisor website . we have been gradually rolling this feature out in the u.s. since june 2014 , and in 2015 , accelerated the rollout of instant booking for hotels across our u.s. and u.k. platforms to all users on all devices . story_separator_special_tag we believe our role in the overall travel experience continues to grow in importance in the travel industry , as we emphasize to travelers that we are the place to come “ plan , compare and book ” their trip . our websites globally reached 350 million average monthly unique visitors during the year ended december 31 , 2015 , according to our internal log files . with 320 million reviews and opinions on 6.2 million places to stay , places to eat and things to do – including 995,000 hotels and accommodations and 770,000 vacation rentals , 3.8 million restaurants and 625,000 attractions in 125,000 destinations throughout the world , we believe we have the best content in the travel industry for research and travel planning decision-making . when combined with our hotel metasearch capabilities to compare and find the best prices , our instant booking feature , allowing users to book their hotels on all devices directly on our website , and subsequent to their trip the ability to submit a traveler review , tripadvisor has become a 360 degree or end to end travel experience . growth in mobile phone and other handheld devices . to access the internet , users are increasingly using devices other than desktop computers , including mobile phone devices and handheld computers such as notebooks and tablets . to address these growing user demands , we continue to extend our platform to develop mobile phone and tablet applications to deliver travel information and resources . although the substantial majority of our mobile phone users also access and engage with our websites on personal computers and tablets where we display advertising , our users could decide to access our products primarily through mobile phone devices . we do display graphic advertising on mobile phone devices ; however , our mobile phone monetization strategies are still developing , as mobile phone monetization is significantly less than desktop and tablet monetization . mobile phone growth and 33 development remains a key strategy and we will continue to invest and innovate in this growing platform to help us maintain and grow our user base , engagement and monetization over the long term . segments we have two reportable segments : hotel and other . our other segment consists of three operating segments : attractions , restaurants and vacation rentals . our operating segments are determined based on how our chief operating decision maker manages our business , regularly assesses information and evaluates performance for operating decision-making purposes , including allocation of resources . the chief operating decision maker for the company is our chief executive officer . for further description of our segments see item 1 . “ business ” in this annual report on form 10-k. 34 results of operations selected financial data ( in millions , except per share data ) year ended december 31 , % change 2015 2014 2013 2015 vs. 2014 2014 vs. 2013 revenue $ 1,492 $ 1,246 $ 945 20 % 32 % costs and expenses : cost of revenue ( 1 ) 58 40 18 45 % 122 % selling and marketing ( 2 ) 692 502 368 38 % 36 % technology and content ( 2 ) 207 171 131 21 % 31 % general and administrative ( 2 ) ( 3 ) 210 128 98 64 % 31 % depreciation 57 47 30 21 % 57 % amortization of intangible assets 36 18 6 100 % 200 % total costs and expenses 1,260 906 651 39 % 39 % operating income 232 340 294 ( 32 ) % 16 % other income ( expense ) : interest expense ( 10 ) ( 9 ) ( 10 ) 11 % ( 10 ) % interest income and other , net 17 ( 9 ) - ( 289 ) % 100 % total other income ( expense ) , net 7 ( 18 ) ( 10 ) ( 139 ) % 80 % income before income taxes 239 322 284 ( 26 ) % 13 % provision for income taxes ( 41 ) ( 96 ) ( 79 ) ( 57 ) % 22 % net income $ 198 $ 226 $ 205 ( 12 ) % 10 % earnings per share attributable to common stockholders : basic $ 1.38 $ 1.58 $ 1.44 ( 13 ) % 10 % diluted $ 1.36 $ 1.55 $ 1.41 ( 12 ) % 10 % weighted average common shares outstanding : basic 144 143 143 1 % 0 % diluted 146 146 145 0 % 1 % other financial data : adjusted ebitda ( 4 ) $ 466 $ 468 $ 379 0 % 23 % ( 1 ) excludes amortization as follows : amortization of acquired technology included in amortization of intangibles assets $ 9 $ 4 $ 1 amortization of website development costs included in depreciation 37 30 20 $ 46 $ 34 $ 21 ( 2 ) includes stock-based compensation expense as follows : selling and marketing $ 16 $ 13 $ 11 technology and content 28 27 21 general and administrative 28 23 17 ( 3 ) includes a non-cash charitable contribution to the foundation of $ 67 million for the year ended december 31 , 2015. see “ note 12— commitments and contingencies ” in the notes to the consolidated financial statements in item 8 for additional information regarding our charitable contributions to the foundation . ( 4 ) see “ adjusted ebitda ” discussion below for more information . 35 adjusted ebitda to provide investors with additional information regarding our financial results , we also disclose adjusted ebitda , which is a non-gaap financial measure . we have provided a reconciliation below of adjusted ebitda to net income , the most directly comparable gaap financial measure .
| executive summary our long-term financial results are principally dependent on our ability to grow click-based advertising revenue , or cpc revenue . we are investing in areas of potential cpc revenue growth , including enabling users to transact directly on our site , or instant booking , international expansion and innovations in the mobile user experience . we are also investing in display-based advertising , business listings , attractions , restaurants and vacation rentals . as the largest online travel website , we believe we are an attractive marketing channel for advertisers—including hotel chains , independent hoteliers , online travel agencies , destination marketing organizations , and other travel-related and non-travel related product and service providers— who seek to sell their products and services to our large user base . the key drivers of our click-based and display-based advertising revenue are described below , as well as a summary of our key growth areas , current trends impacting our business and our reporting segments , which currently consists of our hotel segment and other segment . key drivers of click-based advertising revenue for the years ended december 31 , 2015 , 2014 and 2013 , 64 % , 70 % and 74 % , respectively , of our total revenue came from our cpc product . all of our cpc revenue is included in our hotel segment . the key drivers of our cpc revenue include the growth in monthly unique hotel shoppers and particularly revenue per hotel shopper . · hotel shoppers : we believe total traffic growth , or growth in monthly visits from unique visitors , is reflective of our overall brand growth . additionally , we track and analyze sub-segments of our traffic and their correlation to revenue generation and utilize data regarding hotel shoppers as a key indicator of revenue growth . we use the term “ hotel shoppers ” to refer to visitors who view either a listing of hotels in a city or a specific hotel page .
| 5,832 |
if cash distributions to the partnership 's unitholders exceed $ 1.2938 per common unit in any quarter , the partnership 's unitholders and westlake , as the holder of the partnership 's incentive distribution rights , will receive distributions according to the following percentage allocations : replace_table_token_21_th the partnership 's distribution for the three months ended december 31 , 2019 did not exceed the $ 1.2938 per unit threshold , and , as a result , no distribution story_separator_special_tag overview this management 's discussion and analysis of financial condition and results of operations should be read in conjunction with the accompanying consolidated financial statements , the notes thereto , and the other financial information appearing elsewhere in this report . the following discussion includes forward-looking statements that involve certain risks and uncertainties . see `` cautionary statement regarding forward-looking statements '' and `` item 1a . risk factors '' in this report . we are a delaware limited partnership formed by westlake to operate , acquire and develop ethylene production facilities and related assets . on august 4 , 2014 , we closed our initial public offering ( the `` ipo '' ) of 12,937,500 common units . in connection with the ipo , we acquired a 10.6 % interest in opco and a 100 % interest in opco gp , which is the general partner of opco . on april 29 , 2015 , we purchased an additional 2.7 % newly-issued limited partner interest in opco , resulting in an aggregate 13.3 % limited partner interest in opco effective april 1 , 2015. on september 29 , 2017 , we completed a secondary public offering of 5,175,000 common units and purchased an additional 5.0 % newly-issued limited partner interest in opco , resulting in an aggregate 18.3 % limited partner interest in opco , effective as of july 1 , 2017. the 12,686,115 subordinated units of the partnership , all of which were previously owned by westlake , were converted into common units of the partnership on august 30 , 2017. on march 29 , 2019 , we completed a private placement of 2,940,818 common units and used the net proceeds to purchase an additional 4.5 % interest in opco , effective january 1 , 2019 , resulting in us owning an aggregate 22.8 % limited partner interest in opco . currently , our sole revenue generating asset is our 22.8 % limited partner interest in opco , a limited partnership formed by westlake and us in anticipation of the ipo to own and operate an ethylene production business . we control opco through our ownership of its general partner . westlake retains the remaining 77.2 % limited partner interest in opco as well as a significant interest in us through its ownership of our general partner , 40.1 % of our limited partner units ( consisting of 14,122,230 common units ) and our incentive distribution rights . opco 's assets include ( 1 ) two ethylene production facilities ( `` petro 1 '' and `` petro 2 '' and , collectively , `` lake charles olefins '' ) at westlake 's lake charles , louisiana site ; ( 2 ) one ethylene production facility ( `` calvert city olefins '' ) at westlake 's calvert city , kentucky site ; and ( 3 ) a 200-mile common carrier ethylene pipeline ( the `` longview pipeline '' ) that runs from mont belvieu , texas to westlake 's longview , texas facility . how we generate revenue we generate revenue primarily by selling ethylene and the resulting co-products we produce . opco and westlake have entered into an ethylene sales agreement ( the `` ethylene sales agreement '' ) pursuant to which we generate a substantial majority of our revenue . the ethylene sales agreement is a long-term , fee-based agreement with a minimum purchase commitment and includes variable pricing based on opco 's actual feedstock and natural gas costs and estimated other costs of producing ethylene ( including opco 's estimated operating costs and a five-year average of opco 's expected future maintenance capital expenditures and other turnaround expenditures based on opco 's planned ethylene production capacity for the year ) , plus a fixed margin per pound of $ 0.10 less revenue from co-products sales . pursuant to the ethylene sales agreement , westlake 's obligation to pay for the annual minimum commitment ( 95 % of opco 's budgeted ethylene production ) , which is measured at the end of the year , is generally not reduced for the first 45 days of a force majeure event , but is reduced for the portion of a force majeure event extending beyond the 45th day . westlake has an option to take 95 % of volumes in excess of the minimum commitment on an annual basis under the ethylene sales agreement if we produce more than our planned production . under the ethylene sales agreement , the price for the sale of such excess ethylene to westlake is based on a formula similar to that used for the minimum purchase commitment , with the exception of certain fixed costs . in addition , under the ethylene sales agreement , if production costs billed to westlake on an annual basis are less than 95 % of the actual production costs incurred by opco during the contract year , opco is entitled to recover the shortfall in such production costs ( proportionate to the volume sold to westlake ) in the subsequent year ( `` shortfall '' ) . the shortfall is recognized during the period in which the related operating , maintenance or turnaround activities occur . we sell ethylene production in excess of volumes sold to westlake , as well as all associated co-products resulting from the ethylene production , directly to third parties on either a spot or contract basis . story_separator_special_tag for this purpose , a non-gaap financial measure is generally defined by the securities and exchange commission ( `` sec '' ) as a numerical measure of a registrant 's historical or future financial performance , financial position or cash flows that ( 1 ) excludes amounts , or is subject to adjustments that have the effect of excluding amounts , that are included in the most directly comparable measure calculated and presented in accordance with gaap in the statement of income , balance sheet or statement of cash flows ( or equivalent statements ) of the registrant ; or ( 2 ) includes amounts , or is subject to adjustments that have the effect of including amounts , that are excluded from the most directly comparable measure so calculated and presented . we use the non-gaap measures of mlp distributable cash flow and ebitda to analyze our performance . we define distributable cash flow as net income plus depreciation , amortization and disposition of property , plant and equipment , less contributions for turnaround reserves , maintenance capital expenditures and mark-to-market adjustment on derivative contracts . we define mlp distributable cash flow as distributable cash flow less distributable cash flow attributable to westlake 's noncontrolling interest in opco and distributions attributable to the incentive distribution rights holder . mlp distributable cash flow does not reflect changes in working capital balances . we define ebitda as net income before interest expense , income taxes , depreciation and amortization . mlp distributable cash flow and ebitda are non-gaap supplemental financial measures that management and external users of our consolidated financial statements , such as industry analysts , investors , lenders and rating agencies , may use to assess : our operating performance as compared to other publicly traded partnerships ; our ability to incur and service debt and fund capital expenditures ; and the viability of acquisitions and other capital expenditure projects and the returns on investment of various investment opportunities . mlp distributable cash flow is not a substitute for the gaap measures of net income and net cash provided by operating activities . mlp distributable cash flow has important limitations as an analytical tool because it excludes some but not all items that affect net income and net cash provided by operating activities . ebitda is not a substitute for the gaap measures of net income , income from operations and net cash provided by operating activities . in addition , it should be noted that companies calculate ebitda differently and , therefore , ebitda as presented for us may not be comparable to ebitda reported by other companies . ebitda has material limitations as a performance measure because it excludes interest expense , depreciation and amortization , and income taxes . reconciliations for each of mlp distributable cash flow and ebitda are included in item 6 . `` selected financial data '' above . factors affecting our business supply and demand for ethylene and resulting co-products we generate a substantial majority of our revenue from the ethylene sales agreement . this contract is intended to promote cash flow stability and minimize our direct exposure to commodity price fluctuations in the following ways : ( 1 ) the cost-plus pricing structure of the ethylene sales agreement is expected to generate a fixed margin of $ 0.10 per pound , adjusting automatically for changes in feedstock costs ; and ( 2 ) westlake is committed to purchase 95 % of the annual planned output , subject to a maximum commitment of 3.8 billion pounds of ethylene per year , with an option to purchase an additional 95 % of actual output in excess of the planned output on a contract year basis . as a result , our direct exposure to commodity price risk is limited to approximately 5 % of our total ethylene production , which is that portion sold to third parties , assuming westlake exercises its option to purchase 95 % of the over production , as well as to our co-products sales . 32 we also have indirect exposure to commodity price fluctuations to the extent such fluctuations affect the ethylene consumption patterns of third-party purchasers . demand for ethylene exhibits cyclical commodity characteristics as margins earned on ethylene derivative products are influenced by changes in the balance between supply and demand , the resulting operating rates and general economic activity . while we believe we have substantially mitigated our indirect exposure to commodity price fluctuations during the term of the ethylene sales agreement through the minimum commitment and the cost-plus based pricing , our ability to execute our growth strategy in our areas of operation will depend , in part , on the demand for ethylene derivatives in the geographical areas served by our ethylene production facilities . 33 results of operations the table below and descriptions that follow represent the consolidated results of operations of the partnership for the years 2019 , 2018 and 2017 . replace_table_token_4_th replace_table_token_5_th replace_table_token_6_th ( 1 ) see `` item 6. selected financial data '' , for discussions on non-gaap financial measures . ( 2 ) industry pricing data was obtained through ihs . we have not independently verified the data . ( 3 ) represents average north american spot prices of ethylene over the period as reported by ihs . 34 story_separator_special_tag style= '' line-height:120 % ; padding-top:12px ; text-align : left ; text-indent:32px ; font-size:10pt ; '' > selling , general and administrative expenses . selling , general and administrative expenses decreased by $ 1.7 million , or 5.8 % , to $ 27.6 million in 2018 from $ 29.3 million in 2017. the decrease was mainly attributable to lower service costs , partially offset by an increase in professional consulting fees in 2018 , as compared to 2017. interest expense .
| summary for the year ended december 31 , 2019 , net income was $ 332.9 million on net sales of $ 1,091.9 million , which was comparable to net income of $ 330.6 million on net sales of $ 1,285.6 million for the year ended december 31 , 2018. net income attributable to the partnership in 2019 was $ 61.0 million as compared to $ 49.3 million in 2018 , an increase of $ 11.7 million , which was primarily due to a 4.5 % increase in the partnership 's interest in opco , effective as of january 1 , 2019 , and higher third party sales margins . net sales for 2019 decreased by $ 193.7 million as compared to 2018 mainly due to decreased sales prices to westlake per the terms of the ethylene sales agreement . income from operations was $ 350.2 million for 2019 , which was comparable to $ 349.6 million for 2018 . 2019 compared with 2018 net sales . net sales decreased by $ 193.7 million , or 15.1 % , to $ 1,091.9 million in 2019 from $ 1,285.6 million in 2018 , primarily due to lower ethylene sales prices to westlake per the terms of the ethylene sales agreement . the overall decreased sales price in 2019 contributed to a 15.4 % decrease in net sales , compared to 2018 , which was mainly due to lower sales prices to westlake per the terms of the ethylene sales agreement and lower third party ethylene sales prices . sales volumes in 2019 were comparable to 2018 . gross profit . gross profit was $ 379.4 million in 2019 , which was comparab le to gross profit of $ 377.2 million in 2018 . the gross profit margin was 34.7 % in 2019 as compared to 29.3 % in 2018 .
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we provide funeral and cemetery services and products on both an “ atneed ” ( time of death ) and “ preneed ” ( planned prior to death ) basis . at december 31 , 2020 , we operated 178 funeral homes in 26 states and 32 cemeteries in 12 states within the united states . for additional discussion about our overall business strategy , see part i , item 1 , business – business strategy . funeral home operations factors affecting our funeral operating results include : demographic trends relating to population growth and average age , which impact death rates and number of deaths ; establishing and maintaining leading market share positions supported by strong local heritage and relationships ; effectively responding to increasing cremation trends by selling complementary services and merchandise ; controlling salary and merchandise costs ; and exercising pricing leverage related to our atneed business to increase average revenue per contract . in simple terms , volume and price are the two variables that affect funeral revenue . the average revenue per contract is influenced by the mix of traditional and cremation services because our average cremation service revenue is approximately one-third of the average revenue earned from a traditional burial service . funeral homes have a relatively fixed cost structure . cemetery operations factors affecting our cemetery operating results include : the size and success of our sales organization ; local perceptions and heritage of our cemeteries ; our ability to adapt to changes in the economy and consumer confidence ; and our response to fluctuations in capital markets and interest rates , which affect investment earnings on trust funds , finance charges on installment contracts and our securities portfolio within the trust funds . liquidity and capital resources overview our primary sources of liquidity and capital resources are internally generated cash flows from operating activities and availability under our credit facility . we generate cash in our operations primarily from atneed sales and delivery of preneed sales . we also generate cash from earnings on our cemetery perpetual care trusts . based on our recent operating results , current cash position and anticipated future cash flows , we do not anticipate any significant liquidity constraints in the foreseeable future . we have the ability to draw on our credit facility , subject to its customary terms and conditions . however , if our capital expenditures or acquisition plans change , we may need to access the capital markets to obtain additional funding . further , to the extent operating cash flow or access to and cost of financing sources are materially different than expected , future liquidity may be adversely affected . please read part i , item 1a , risk factors . for 2021 , our plan is to remain focused on integrating our newly acquired businesses and to use cash on hand and borrowings under our credit facility primarily for general corporate purposes , payment of dividends and debt obligations and the redemption of our convertible notes due march 2021. however , if we were to refinance our senior notes when they become callable , it may provide us the ability , from a capital allocation perspective , to potentially resume strategic acquisitions , internal growth capital expenditures , share repurchases , dividend increases and further debt repayments . we also expect continued divestiture activity for the next 6-12 months , which could yield approximately $ 10-11 million of cash from the proceeds of the sale . from time to time we may also use available cash resources ( including borrowings under our credit 24 facility ) to repurchase shares of our common stock , subject to satisfying certain financial covenants in our credit facility . we believe that our existing and anticipated cash resources will be sufficient to meet our anticipated working capital requirements , capital expenditures , scheduled debt payments , commitments and dividends for the next 12 months . cash flows we began 2020 with $ 0.7 million in cash and ended the year with $ 0.9 million in cash . at december 31 , 2020 , we had borrowings of $ 47.2 million outstanding on our credit facility compared to $ 83.8 million as of december 31 , 2019 and $ 27.1 million as of december 31 , 2018. the following table sets forth the elements of cash flow ( in thousands ) : replace_table_token_5_th operating activities for the year ended december 31 , 2020 , cash provided by operating activities was $ 82.9 million compared to $ 43.2 million for the year ended december 31 , 2019 and $ 49.0 million for the year ended december 31 , 2018. the increase of $ 39.7 million for the year ended december 31 , 2020 compared to the year ended december 31 , 2019 is a reflection of the resilient cash generating ability of our portfolio of high-quality funeral home and cemetery operations . our operating income ( excluding the non-cash impact of the divestitures and impairment charges ) increased $ 26.4 million in addition to other favorable working capital changes . the decrease of $ 5.8 million for the year ended december 31 , 2019 compared to the year ended december 31 , 2018 was primarily due to approximately $ 5.0 million in more cash interest paid in 2019 compared to 2018 , as well as additional unfavorable working capital changes . story_separator_special_tag , as administrative agent ( in such capacity , the “ administrative agent ” ) to increase our commitment to $ 190.0 million and incurred $ 0.9 million in transactions costs , which were capitalized and will be amortized over the remaining term of the related debt using the straight-line method . at december 31 , 2020 , our credit facility was comprised of : ( i ) a $ 190.0 million revolving credit facility , including a $ 15.0 million subfacility for letters of credit and a $ 10.0 million swingline , and ( ii ) an accordion or incremental option allowing for future increases in the facility size by an additional amount of up to $ 75.0 million in the form of increased revolving commitments or incremental term loans . the final maturity of the credit facility will occur on may 31 , 2023. the company 's obligations under the credit facility are unconditionally guaranteed on a joint and several basis by the same subsidiaries which guarantee the senior notes ( as defined in part ii , item 8 , financial statements and supplementary data , note 14 ) and certain of the company 's credit facility guarantors . the credit facility is secured by a first-priority perfected security interest in and lien on substantially all of the company 's personal property assets and those of the credit facility guarantors . in the event the company 's actual total leverage ratio is not at least 0.25 less than the required total leverage ratio covenant level , at the discretion of the administrative agent , the administrative agent may unilaterally compel the company and the credit facility guarantors to grant and perfect first-priority mortgage liens on fee-owned real property assets which account for no less than 50 % of funeral operations ebitda . the credit facility contains customary affirmative covenants , including , but not limited to , covenants with respect to the use of proceeds , payment of taxes and other obligations , continuation of the company 's business and the maintenance of existing rights and privileges , the maintenance of property and insurance , amongst others . in addition , the credit facility also contains customary negative covenants , including , but not limited to , covenants that restrict ( subject to certain exceptions ) the ability of the company and its subsidiaries and party thereto as guarantors ( the “ credit facility guarantors ” ) to incur additional indebtedness , grant liens on assets , make investments , engage in mergers and acquisitions , and pay dividends and other restricted payments , and certain financial covenants . at december 31 , 2020 , we were subject to the following financial covenants under our credit facility : ( a ) a total leverage ratio not to exceed , ( i ) 5.75 to 1.00 for the quarters ended march 31 , 2020 , june 30 , 2020 and september 30 , 2020 and ( ii ) 5.50 to 1.00 for the quarter ended december 31 , 2020 and each quarter ended thereafter , ( b ) a senior secured leverage ratio ( as defined in the credit facility ) not to exceed 2.00 to 1.00 as of the end of any period of four consecutive fiscal quarters , and ( c ) a fixed charge coverage ratio ( as defined in the credit facility ) of not less than 1.20 to 1.00 as of the end of any period of four consecutive fiscal quarters . these financial maintenance covenants are calculated for the company and its subsidiaries on a consolidated basis . on may 18 2020 , we received a limited waiver under our credit facility for the failure to comply with the total leverage ratio covenant for the fiscal quarter ended march 31 , 2020. in connection with the waiver , we also entered into a fourth amendment to the credit facility which increased the interest rate margin applicable to borrowings by up to 0.625 % at each pricing level based on the total leverage ratio . we did not incur any transaction costs related to the limited waiver and fourth amendment to the credit facility . on august 7 , 2020 , we obtained a limited consent from the lenders under our credit facility in connection with our privately-negotiated repurchases of our convertible notes ( as defined in part ii , item 8 , financial statements and supplementary data , note 13 ) . see part ii , item 8 , financial statements and supplementary data , note 13 for a discussion of our privately-negotiated repurchases . we were in compliance with the total leverage ratio , fixed charge coverage ratio and senior secured leverage ratio covenants contained in our credit facility at december 31 , 2020. at december 31 , 2020 , we had outstanding borrowings under the credit facility of $ 47.2 million . we had one letter of credit for $ 2.0 million issued on november 30 , 2019 and outstanding under the credit facility , which was increased to $ 2.1 million on september 29 , 2020. the letter of credit bears interest at 3.125 % and will expire on november 26 , 2021. the letter of credit automatically renews annually and secures our obligations under our various self-insured policies . outstanding borrowings under our credit facility bear interest at either a prime rate or a libor rate , plus an applicable margin based upon our leverage ratio . at december 31 , 2020 , the prime rate margin was equivalent to 1.5 % and the libor rate margin was 2.5 % . the weighted average interest rate on our credit facility for the years ended december 31 , 2019 and 2020 was 2.9 % and 3.8 % , respectively . we have no material assets or operations independent of our subsidiaries . all assets and operations are held and conducted by subsidiaries , each of which have fully and unconditionally guaranteed our obligations under the credit facility .
| results of operations the following is a discussion of our results of operations for the year ended december 31 , 2020 compared to the year ended december 31 , 2019. the term “ same store ” refers to funeral homes and cemeteries acquired prior to january 1 , 2016 and owned and operated for the entirety of each period being presented , excluding certain funeral homes and cemeteries that we intend to divest in the near future . the term “ acquired ” refers to funeral homes and cemeteries purchased after december 31 , 2015 , excluding any funeral homes and cemeteries that we intend to divest in the near future . this classification of acquisitions has been important to management and investors in monitoring the results of these businesses and to gauge the leveraging performance contribution that a selective acquisition program can have on total company performance . the term “ divested ” refers to the eight funeral homes we sold in 2020 and three funeral homes whose building leases expired , one funeral home we sold and a funeral home we merged with a funeral home in an existing market in 2019 . “ planned divested ” refers to funeral homes and cemeteries that we intend to divest in the near future . “ ancillary ” represents our flower shop , pet cremation business and online cremation business . cemetery property amortization , field depreciation expense and regional and unallocated funeral and cemetery costs , are not included in operating profit , a non-gaap financial measure . adding back these items will result in gross profit , a gaap financial measure .
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generally , however , the company realizes that investment strategies should be given a full market cycle , normally over a three 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 under item 8 of this annual report on form 10-k. we are a diversified manufacturer of highly engineered industrial products . our business consists of five segments : aerospace & electronics , engineered materials , merchandising systems , fluid handling and controls . our primary markets are aerospace , defense electronics , non-residential construction , recreational vehicle ( rv ) , transportation , automated merchandising , chemical , pharmaceutical , oil , gas , power , nuclear , building services and utilities . our strategy is to grow the earnings of niche businesses with leading market shares , acquire companies that fit strategically with existing businesses , aggressively pursue operational and strategic linkages among our businesses , build a performance culture focused on continuous improvement and a committed management team whose interests are directly aligned with those of the shareholders and maintain a focused , efficient corporate structure . story_separator_special_tag 787 settlement claim ) . as a result of the agreement , our aerospace group recognized an increase in sales and operating profit of $ 18.9 million and $ 16.4 million , respectively , in 2009. fiberglass-reinforced plastics lawsuit on april 17 , 2009 , we reached an agreement to settle a lawsuit brought by a customer alleging failure of the company 's fiberglass-reinforced plastic material in rv sidewalls manufactured by such customers . in mediation , we agreed to a settlement aggregating $ 17.75 million . based upon both insurer commitments and liability estimates previously recorded in 2008 , we recorded a pre-tax charge of $ 7.25 million in connection with this settlement in 2009. restructuring and related costs during 2009 , we substantially completed our restructuring actions initiated during the fourth quarter of 2008 and recorded pre-tax restructuring and related charges in the business segments totaling $ 5.2 million . the charges included workforce reduction expenses and facility exit costs of $ 5.0 million and $ 0.2 million related to asset write-downs . during 2010 , we recorded pre-tax restructuring and related charges in the business segments totaling $ 6.7 million . the charges are primarily related to plant consolidations associated with our crane energy flow solutions business and redundant costs associated with our money controls acquisition . reinvestment of non-u.s. earnings associated with our acquisition of money controls in december 2010 , we considered whether it was necessary to maintain a previously established deferred tax liability representing the additional income tax due upon the ultimate repatriation of a portion of our non-u.s. subsidiaries ' undistributed earnings . we considered our history of utilizing non-u.s. cash to acquire overseas businesses , our current and future needs for cash outside the united states , our ability to satisfy u.s. based cash needs with cash generated by our u.s. operations , and tax reform proposals calling for lower u.s. corporate tax rates . based on these factors , we concluded that as of december 31 , 2010 , all of our non-u.s. subsidiaries ' earnings are indefinitely reinvested outside the united states. , and as a result , we reversed the aforementioned deferred tax liability and recorded a $ 5.6 million tax benefit . 19 m anagement ' s d iscussion and a nalysis of f inancial c ondition and r esults of o perations divestitures in december 2009 , we sold general technology corporation ( gtc ) , generating proceeds of $ 14.2 million and an after-tax gain of $ 5.2 million . gtc , also known as crane electronic manufacturing services , was included in our aerospace & electronics segment , as part of the electronics group . gtc had $ 26 million in sales in 2009. results from operations for the years ended december 31 , 2011 , 2010 and 2009 replace_table_token_4_th * the disclosure of total segment operating profit and total segment operating profit margin provides supplemental information to assist management and investors in analyzing our profitability but is considered a non-gaap financial measure when presented in any context other than the required reconciliation to operating profit in accordance with asc 280 disclosures about segments of an enterprise and related information. management believes that the disclosure of total segment operating profit and total segment operating profit margin , non-gaap financial measures , present additional useful comparisons between current results and results in prior operating periods , providing investors with a clearer view of the underlying trends of the business . management also uses these non-gaap financial measures in making financial , operating , planning and compensation decisions and in evaluating our performance . non-gaap financial measures , which may be inconsistent with similarly captioned measures presented by other companies , should be viewed in addition to , and not as a substitute for our reported results prepared in accordance with gaap . 20 part ii / item 7 2011 compared with 2010 sales in 2011 increased $ 328 million , or 15 % , to $ 2.546 billion compared with $ 2.218 billion in 2010. the sales increase was driven by an increase in core business of $ 217 million ( 10 % ) , a net increase in revenue from acquisitions and dispositions of $ 60 million ( 3 % ) and favorable foreign exchange of $ 51 million ( 2 % ) . our aerospace & electronics segment reported a sales increase of $ 101 million , or 17 % . our aerospace group had a 21 % sales increase in 2011 compared to the prior year , reflecting higher commercial original equipment manufacturer ( oem ) product sales and higher aftermarket product sales . the electronics group experienced a 12 % sales increase due to higher core sales of our power solutions and microelectronics products . story_separator_special_tag our aerospace & electronics segment operating profit was $ 13 million higher , or 14 % , in 2010 compared to the prior year ; our engineered materials segment operating profit was $ 10 million higher , or 53 % , in 2010 compared to the prior year ; and our controls segment operating profit was $ 10 million higher in 2010 compared to the prior year . the significant improvement in the aerospace & electronics segment operating profit reflected a $ 23 million decrease in aerospace engineering expense related to a decline in activities associated with the boeing 787 and several other programs , partially offset by the absence of $ 16.4 million related to the 787 settlement claim . the increase in engineered materials reflected the higher sales volume , partially offset by higher raw material costs . the decline in operating profit 21 m anagement ' s d iscussion and a nalysis of f inancial c ondition and r esults of o perations in our merchandising systems segment primarily reflected an increase in restructuring costs as well as transaction costs related to our acquisition of money controls in 2010 , and the absence of favorable legal settlements in 2009. the decline in our fluid handling segment was primarily attributable to the impact of lower sales volumes . total operating profit was $ 235 million in 2010 compared to $ 208 million in 2009. in addition to the aforementioned segment results , 2009 operating results included a $ 7.3 million charge related to the lawsuit settlement in connection with our fiberglass-reinforced plastic business . net income attributable to common shareholders in 2010 was $ 154.2 million as compared with $ 133.9 million in 2009. in addition to the items mentioned above , net income in 2010 included a $ 5.6 million tax benefit caused by the reinvestment of non-u.s. earnings associated with the acquisition of money controls and net income in 2009 included a $ 5.2 million after-tax gain associated with the divestiture of gtc . aerospace & electronics replace_table_token_5_th * net sales and operating profit for 2009 include $ 18.9 million and $ 16.4 million , respectively , related to the 787 settlement claim . * * the restructuring charges are included in operating profit and operating margin . 2011 compared with 2010. sales of our aerospace & electronics segment increased $ 101 million , or 17 % , in 2011 to $ 678 million , reflecting sales increases of $ 72 million and $ 29 million in our aerospace group and electronics group , respectively . the aerospace & electronics segment 's operating profit increased $ 36 million , or 33 % , in 2011. the increase in operating profit was due to a $ 33 million increase in operating profit in the aerospace group and $ 3 million increase in the electronics group . the operating margin for the segment was 21.5 % in 2011 compared to 18.9 % in 2010. backlog was $ 411 million at december 31 , 2011 , a decrease of 5 % from $ 432 million at december 31 , 2010. aerospace group sales in 2011 by the four solution sets were as follows : landing systems , 34 % ; sensing and utility systems , 33 % ; fluid management , 23 % ; and cabin systems , 10 % . the commercial market accounted for 79 % of aerospace group sales in 2011 , while sales to the military market were 21 % of total aerospace group sales . during 2011 , sales to oems and aftermarket customers were 59 % and 41 % , respectively , compared to 60 % and 40 % , respectively , of the total sales in 2010. aerospace group sales increased 21 % from $ 345 million in 2010 to $ 417 million in 2011. the increase in 2011 was due to higher oem sales which increased $ 37 million , or 18 % , to $ 246 million in 2011 from $ 208 million in 2010 , primarily due to higher commercial product sales associated with large commercial transport , regional and business jets . in addition , the sales increase was attributable to higher aftermarket product sales which increased $ 35 million , or 25 % , to $ 172 million in 2011 from $ 137 million in 2010 primarily due to higher modernization and upgrade ( m & u ) products sales , primarily associated with c130 carbon brake control upgrade program , as well as commercial and military spares sales . aerospace group operating profit increased 46 % over the prior year , primarily reflecting leverage on the higher sales volume . aerospace engineering expense was about 11 % of sales in 2011 versus 13 % in 2010. total engineering expense for the aerospace group was $ 44 million in both 2011 and 2010. electronics group sales by market in 2011 were as follows : military/defense , 61 % ; commercial aerospace , 27 % ; and other , 12 % . sales in 2011 by the group 's solution sets were as follows : power , 64 % ; microwave systems , 26 % ; and microelectronics , 10 % . electronics group sales increased 12 % from $ 232 million in 2010 to $ 261 million in 2011. the core sales increase reflects higher sales of our power solutions and microelectronics products , partially offset by lower sales of our microwave products . the increase in power solutions product sales reflects an increase in demand from the commercial aviation market . the increase in microelectronics product sales reflects higher sales to medical device customers . electronics group operating profit increased 9 % over the prior year reflecting the favorable impact of the higher sales volume , partially offset by program execution inefficiencies and unfavorable sales mix . 2010 compared with 2009. sales of our aerospace & electronics segment decreased $ 13 million , or 2 % , in 2010 to $ 577 million .
| items affecting comparability of reported results the comparability of our operating results for the years ended december 31 , 2011 , 2010 and 2009 is affected by the following significant items : asbestos charge with the assistance of hamilton , rabinovitz & associates , inc. ( hr & a ) , a nationally recognized expert in the field , effective as of december 31 , 2011 , we updated and extended our estimate of the asbestos liability , including the costs of settlement or indemnity payments and defense costs relating to currently pending claims and future claims projected to be filed against us through 2021. our previous estimate was for asbestos claims filed or projected to be filed through 2017. as a result of this updated estimate , we recorded an additional liability of $ 285 million as of december 31 , 2011. our decision to take this action at such date was based on several factors which contribute to our ability to reasonably estimate this liability for the additional period noted , as follows : the number of mesothelioma claims ( which , although constituting approximately 8 % of our total pending asbestos claims , have accounted for approximately 90 % of our aggregate settlement and defense costs ) being filed against us and associated settlement costs have recently stabilized . in our opinion , the outlook for mesothelioma claims expected to be filed and resolved in the forecast period is reasonably stable . there have been favorable developments in the trend of case law , which has been a contributing factor in stabilizing the asbestos claims activity and related settlement costs . there have been significant actions taken by certain state legislatures and courts over the past several years that have reduced the number and types of claims that can proceed to trial , which has been a significant factor in stabilizing the asbestos claims activity .
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the following table presents changes in level 3 warrant liabilities , reflected in accrued expenses measured at fair value for the years ended december 31 , 2020 and 2019 , respectively : warrant liability balance - january 1 , 2019 49,000 change in fair value of warrant liability ( 18,000 ) balance – december 31 , 2019 31,000 change in fair value of warrant liability ( 31,000 ) balance – december 31 , 2020 $ — note 10 : fair value measurements financial assets and liabilities measured at fair value on a recurring basis are summarized below and disclosed on the balance sheet under warrant liability : fair value measured at december 31 , 2020 quoted prices in active significant other significant markets observable inputs unobservable inputs fair value at ( level 1 ) ( level 2 ) ( level 3 ) december 31 , 2020 warrant liability $ — $ — $ — $ — story_separator_special_tag the following discussion of our financial condition , changes in financial condition , plan of operations and results of operations should be read in conjunction with ( i ) our audited consolidated financial statements as at december 31 , 2020 and december 31 , 2019 and ( ii ) the section entitled “ business ” , included in this annual report . the discussion 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 many factors . company overview we are a clinical-stage immuno-oncology company specializing in the development and commercialization of novel t cell-based immunotherapies and innovative peptide-based vaccines for the treatment of hematological malignancies and solid tumor indications . we developed our lead product candidates from our multitaa-specific t cell technology , which is based on the selective expansion of non-engineered , tumor-specific t cells that recognize tumor associated antigens , or taas , which are tumor targets , and then kill tumor cells expressing those targets . these t cells are designed to recognize multiple tumor targets to produce broad spectrum anti-tumor activity . we are advancing two pipelines of product candidates as part of our multitaa-specific t cell program : the autologous t cells for the treatment of lymphoma , multiple myeloma , or mm , and selected solid tumors and the allogeneic t cells for the treatment of acute myeloid leukemia , or aml , and acute lymphoblastic leukemia , or all . because we do not genetically engineer the multitaa-specific t cell therapies , we believe that our product candidates are easier and less expensive to manufacture , have lower toxicities than current engineered chimeric antigen receptor , or car-t , and t cell receptor-based therapies and may provide patients with meaningful clinical benefit . we are also developing innovative peptide-based immunotherapeutic vaccines for the treatment of metastatic solid tumors . we are pursuing post-transplant aml as the lead indication for our first company-sponsored multitaa-specific t cell program . in april 2020 , the fda granted orphan drug designation to mt-401 for the treatment of aml after receiving an allogeneic stem cell transplant . the multitaa-specific t cell therapy has been well tolerated in an ongoing phase 1 clinical trial in aml and myelodysplastic syndrome , or mds , conducted by our strategic partner baylor college of medicine , or bcm . as reported in a recent publication by lulla et al. , 11 of the 17 patients in the adjuvant disease setting dosed with the multitaa-specific t cell therapy after receiving an allogeneic hematopoietic stem cell transplant , or hsct , never relapsed [ median leukemia-free survival , or lfs , not reached at a median follow-up of 1.9 years ] , with 11 of 15 patients remaining alive ( estimated two-year overall survival of 77 % ) at a median follow-up of 1.9 years post-infusion , which compares favorably with hsct outcomes for risk-matched aml/mds patients post-hsct [ median lfs of nine to 15 months and two-year survival probability of 42 % ] . additionally , eight patients were treated for active disease that was resistant to salvage therapy post-hsct with a median of five prior lines of therapy ( range : four to 10 ) . one of the eight patients crossed over from the adjuvant group , while two patients enrolled twice , but all three patients had active aml that failed another line of salvage therapy after their first multitaa-specific t cell infusion . two of the eight patients achieved objective responses , with one complete response and one partial response , with six patients continuing with stable disease . we submitted an investigational new drug , or ind , application to the united states food and drug administration , or the fda , to initiate a phase 2 clinical trial of multitaa-specific t cell therapy , which we refer to as mt-401 ( zedenoleucel ) , in post-allogeneic hsct patients with aml in both the adjuvant and active disease setting . the dose administered in this multicenter trial is the approximate flat dose equivalent of the current maximum tolerated dose from the ongoing phase 1 trial . in the adjuvant setting , patients will be randomized to either multitaa-specific t cell therapy at approximately 90 days post-transplant versus standard of care observation , while the active disease patients will receive mt-401 following relapse post-transplant as part of a single-arm group . story_separator_special_tag the use of cash primarily related to our net loss of $ 21.4 million , in addition to the effect of changes in asset and liability accounts , including an increase in prepaid expenses and deposits of $ 1.4 million , a decrease in accounts payable and accrued liabilities of $ 1.0 million , a decrease in interest receivable of $ 52,000 and a net increase in lease liabilities of $ 0.2 million . investing activities net cash used in investing activities was $ 10.4 million and $ 0.4 million for the purchase of property and equipment during the years ended december 31 , 2020 and 2019 , respectively . the increase relates to $ 6.8 million in construction in progress towards the new modular cleanrooms and the buildout of our manufacturing facility , an additional $ 2.2 million in laboratory equipment , $ 0.6 million in computers and equipment , $ 0.5 million in furniture and fixtures and $ 0.3 million in leasehold improvements at the new research facility . financing activities net cash provided by financing activities was $ 6.7 million during the year ended december 31 , 2020 , mainly due to the sale of 4,113,440 shares of stock under the purchase agreement with aspire capital that provided proceeds to the company of approximately $ 6.2 million , along with $ 0.6 million of proceeds from the exercise of stock warrants . net cash provided by financing activities was $ 0.8 million during the year ended december 31 , 2019 , due to the exercise of stock warrants and stock options . future capital requirements to date , we have not generated any revenues from the commercial sale of approved drug products , and we do not expect to generate substantial revenue for at least the next several years . if we fail to complete the development of our product candidates in a timely manner or fail to obtain their regulatory approval , our ability to generate future revenue will be compromised . we do not know when , or if , we will generate any revenue from our product candidates , and we do not expect to generate significant revenue unless and until we obtain regulatory approval of , and commercialize , our product candidates . we expect our expenses to increase in connection with our ongoing activities , particularly as we continue the research and development of , continue or initiate clinical trials of and seek marketing approval for our product candidates . in addition , if we obtain approval for any of our product candidates , we expect to incur significant commercialization expenses related to sales , marketing , manufacturing and distribution . we anticipate that we will need substantial additional funding in connection with our continuing operations . if we are unable to raise capital when needed or on attractive terms , we could be forced to delay , reduce or eliminate our research and development programs or future commercialization efforts . 80 as of december 31 , 2020 , we had working capital of $ 18.0 million , compared to working capital of $ 43.5 million as of december 31 , 2019. based on our revised clinical and research and development plans and our revised timing expectations related to the progress of our programs , we expect that our cash and cash equivalents as of december 31 , 2020 will enable us to fund our operating expenses and capital expenditure requirements into the third quarter of 2021. we have based this estimate on assumptions that may prove to be wrong , and we could utilize our available capital resources sooner than we currently expect . furthermore , our operating plan may change , and we may need additional funds sooner than planned in order to meet operational needs and capital requirements for product development and commercialization . because of the numerous risks and uncertainties associated with the development and commercialization of our product candidates and the extent to which we may enter into additional collaborations with third parties to participate in their development and commercialization , we are unable to estimate the amounts of increased capital outlays and operating expenditures associated with our current and anticipated clinical trials . our future funding requirements will depend on many factors , as we : ● initiate or continue clinical trials of our product candidates ; ● continue the research and development of our product candidates and seek to discover additional product candidates ; seek regulatory approvals for our product candidates if they successfully complete clinical trials ; ● establish sales , marketing and distribution infrastructure and scale-up manufacturing capabilities to commercialize any product candidates that may receive regulatory approval ; ● evaluate strategic transactions we may undertake ; and ● enhance operational , financial and information management systems and hire additional personnel , including personnel to support development of our product candidates and , if a product candidate is approved , our commercialization efforts . because all of our product candidates are in the early stages of clinical and preclinical development and the outcome of these efforts is uncertain , we can not estimate the actual amounts necessary to successfully complete the development and commercialization of product candidates or whether , or when , we may achieve profitability . until such time , if ever , that we can generate substantial product revenue , we expect to finance our cash needs through a combination of equity or debt financings and collaboration arrangements . during fiscal 2020 , we entered into agreements to buildout a manufacturing facility , to lease a research lab and to expand our corporate headquarters in houston , texas . we plan to continue to fund our operations and capital funding needs through equity and or debt financing . we may also consider new collaborations or selectively partner our technology .
| general and administrative expenses general and administrative expenses consist primarily of salaries and other related costs , including share-based compensation , for personnel in executive , finance , accounting , business development , legal and human resources functions . other significant costs include facility costs not otherwise included in research and development expenses , legal fees relating to patent and corporate matters , insurance costs and professional fees for consultancy , accounting , audit and investor relations . we anticipate that our general and administrative expenses will increase in the future to support our continued research and development activities , and the potential commercialization of our product candidates . income taxes we did not recognize any income tax expense for the years ended december 31 , 2020 and 2019. other income ( expense ) other income ( expense ) , net consists of interest income and change in fair value of warrant liabilities . results of operations for the years ended december 31 , 2020 and 2019 the following table summarizes the results of our operations ( rounded to the thousand except for per share amounts ) for the years ended december 31 , 2020 and 2019 , together with the changes to those items : replace_table_token_1_th 77 revenue we did not generate any revenue during the years ended december 31 , 2020 and 2019 , respectively , from the sales or licensing of our product candidates . during the year ended december 31 , 2020 , we recognized $ 0.5 million of revenue associated with a grant awarded to mayo foundation from the us department of defense for the phase 2 clinical trial of tpiv200 which mayo paid to us for clinical supplies manufactured by us and provided for the clinical trial funded by the grant . we refer to this grant as the mayo grant . during the year ended december 31 , 2019 , we recognized $ 0.2 million of grant income from the mayo grant .
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on january 1 , 2018 , the company adopted the new revenue recognition standard accounting standards update ( “ asu ” ) 2014-09 , “ revenue from contracts with customers ( topic 606 ) ” , using the modified story_separator_special_tag the following management 's discussion and analysis should be read in conjunction with the audited consolidated financial statements and the notes thereto included in part ii , item 8 , “ financial statements and supplementary data ” of this annual report on form 10-k. in this section , “ we , ” “ our , ” “ ours ” and “ us ” refer to apollo medical holdings , inc. ( “ apollomed ” ) and its consolidated subsidiaries and affiliated entities , as appropriate , including its consolidated variable interest entities ( “ vies ” ) . overview we together with our affiliated physician groups and consolidated entities are a physician-centric integrated population health management company working to provide coordinated , outcomes-based medical care in a cost-effective manner and serving patients in california , the majority of whom are covered by private or public insurance such as medicare , medicaid and health maintenance organizations ( “ hmos ” ) , with a small portion of our revenue coming from non-insured patients . we provide care coordination services to each major constituent of the healthcare delivery system , including patients , families , primary care physicians , specialists , acute care hospitals , alternative sites of inpatient care , physician groups and health plans . our physician network consists of primary care physicians , specialist physicians and hospitalists . we operate primarily through the following subsidiaries of apollomed : network medical management ( “ nmm ” ) , apollo medical management , inc. ( “ amm ” ) , apa aco , inc. ( “ apaaco ” ) and apollo care connect , inc. ( “ apollo care connect ” ) , and their consolidated entities . 47 through our next generation accountable organization ( “ ngaco ” ) model and our network of independent practice associations ( “ ipas ” ) with more than 7,000 contracted physicians , which physical groups have agreements with various health plans , hospitals and other hmos , we were responsible for coordinating the care for over 980,000 patients in california as of december 31 , 2019. these covered patients are comprised of managed care members whose health coverage is provided through their employers or who have acquired health coverage directly from a health plan or as a result of their eligibility for medicaid or medicare benefits . our managed patients benefit from an integrated approach that places physicians at the center of patient care and utilizes sophisticated risk management techniques and clinical protocols to provide high-quality , cost effective care . to implement a patient-centered , physician-centric experience , we also have other integrated and synergistic operations , including ( i ) msos that provide management and other services to our affiliated ipas , ( ii ) outpatient clinics and ( iii ) hospitalists . on december 8 , 2017 , apollomed completed its business combination with nmm ( the “ merger ” ) . the combination of apollomed and nmm brought together two complementary healthcare organizations to form one of the nation 's largest integrated population health management companies . as a result of the merger , nmm became a wholly-owned subsidiary of apollomed and the former nmm shareholders received a majority of the issued and outstanding common stock of apollomed . for accounting purposes nmm was considered the accounting acquirer and accordingly , as of the closing of the merger , nmm 's historical results of operations replaced apollomed 's historical results of operations for periods prior to the merger , and the results of operations of both companies are included in the accompanying consolidated financial statements for periods following the merger . 2019 highlights on may 31 , 2019 , allied physicians of california , a professional medical corporation , a california professional medical corporation ( “ apc ” ) , through its consolidated vie , apc-lsma , acquired alpha care medical group , an ipa that has been operating in california since 1993 as a risk bearing organization engaged in providing professional services under capitation arrangements with its contracted health plans through a provider network consisting of primary care and specialty care physicians . alpha care specializes in delivering high-quality healthcare to over 174,000 enrollees , as of december 31 , 2019 , and focuses on medi-cal , medicaid , commercial , medicare and dual eligible members in the riverside and san bernardino counties of southern california . accountable health care is a california based ipa that has served the local community in the greater los angeles county area through a network of physicians and health care providers for more than 20 years . accountable health care currently has a network of over 400 primary care physicians and 700 specialty care physicians , and five community and regional hospital medical centers that provide quality health care services to more than 84,000 members of three federally qualified health plans and multiple product lines , including medi-cal , commercial , medicare and the california healthy families program . on august 30 , 2019 , apc and apc-lsma , acquired the remaining 75 % of outstanding shares of capital stock of accountable health care that were not already owned by apc and apc-lsma . ap-amh medical corporation ( `` ap-amh '' ) was formed on may 7 , 2019 as a designated shareholder professional corporation . dr. thomas lam , a shareholder , and the chief executive officer and chief financial officer of apc and co-chief executive officer and president of apollomed , is the sole shareholder of ap-amh . apollomed makes all the decisions on behalf of ap-amh and funds and receives all the distributions from its operations . apollomed has the right to receive benefits from the operations of ap-amh and has the option , but not the obligation , to cover losses . story_separator_special_tag the form of billing and related risk of collection for such services may vary by type of revenue and the customer . operating expenses our largest expenses consist of the cost of patient care paid to contracted physicians , the cost of information technology equipment and software and the cost of hiring staff to provide management and administrative support services to our affiliated physician groups , as further described below . these services include payroll , benefits , human resource services , physician practice billing , revenue cycle services , physician practice management , administrative oversight , coding services , and other consulting services . story_separator_special_tag , as compared to $ 43.4 million in 2018 , a decrease of $ 1.9 million or 4 % . the decrease was primarily due to a reduction in professional services costs of $ 2.0 million . depreciation and amortization depreciation and amortization expense was $ 18.3 million and $ 19.3 million for the years ended december 31 , 2019 and 2018 , respectively . these amounts included depreciation of property and equipment and the amortization of intangible assets . provision for doubtful accounts during the year ended december 31 , 2019 , we released reserves related to certain management fees in the amount of $ 3.8 million as the collectability of the outstanding amount was no longer in doubt . these reserves related to accountable health care and were no longer necessary as a result of our acquisition of the company . as such our provision for doubtful accounts was a negative $ 1.4 million . impairment of goodwill and intangible assets impairment of goodwill and intangible assets was $ 2.0 million for the year ended december 31 , 2019 , as compared to $ 3.8 million for the year ended december 31 , 2018. during 2019 , we impaired intangible assets related to medicare licenses obtained as part of the merger . in 2018 , we impaired the goodwill related to mmg . we will no longer utilize the medicare licenses and mmg has been wound down . accordingly , we do not expect to receive future economic benefits from such assets and goodwill . loss from equity method investments 52 loss from equity method investments in 2019 was $ 6.9 million , as compared to $ 8.1 million in 2018 , a decrease of $ 1.2 million , or 15 % . the decrease was primarily due to equity losses related to our investments in lma 's ipa line of business , accountable health care , uci , mwn community hospital , llc , and 531 w. college llc of $ 2.8 million , $ 2.5 million , $ 1.2 million , $ 0.2 million and $ 0.2 million , respectively , which was offset by equity earnings of $ 0.3 million from our investment in diagnostic medical group ( `` dmg '' ) for the year ended december 31 , 2019. in addition , during the year ended december 31 , 2019 we recognized an impairment loss of $ 0.3 million related to our investment in pacific ambulatory surgery center , llc ( `` pasc '' ) as we do not expect to recover our investment . this is compared to equity losses of $ 6.0 million , $ 2.4 million , $ 0.4 million and $ 0.3 million allocated from our investments in uci , lsma , 531 w. college , llc and pasc , respectively , which were offset by income of $ 1.0 million allocated from our investment in dmg for the year ended 2018. interest expense interest expense in 2019 was $ 4.7 million as compared to interest expense of $ 0.6 million in 2018. the increase was primarily due to interest incurred from a new credit facility we secured in september 2019 to fund growth , primarily through acquisitions . interest income interest income in 2019 was $ 2.0 million as compared to $ 1.3 million in 2018 , an increase of $ 0.7 million or 61 % . the increase in interest income was a result of additional cash held in money market , certificates of deposit accounts and increased loan receivables issued in 2019. other income other income was $ 3.0 million for 2019 as compared to $ 1.6 million in 2018 , an increase of $ 1.4 million or 87 % . the increase was primarily attributable to the assumption of a loan receivable as a result of the accountable health care acquisition . provision for income taxes provision for income taxes was $ 8.2 million in 2019 , as compared to $ 22.4 million in 2018 , a decrease of $ 14.2 million or 63 % . this decrease was primarily attributable to a decrease in the amount of pre-tax income in 2019 as compared to 2018. net income attributable to noncontrolling interests net income attributable to noncontrolling interests was $ 3.6 million for the year ended december 31 , 2019 , as compared to $ 49.4 million for the year ended december 31 , 2018 , a decrease of $ 45.8 million or 93 % . this decrease was primarily due to reduced net income generated from apc mainly attributable to a decrease in risk pool revenue as a result of the refinement of the assumptions used to estimate the amount of net surplus expected to be received from the risk pools of our affiliated hospitals and our completion of a series of transactions with apc as further described in `` 2019 highlights '' above , which resulted in preferred , cumulative dividends from apc being allocated to ap-amh . 53 2018 compared to 2017 our consolidated operating results for the year ended december 31 , 2018 , as compared to the year ended december 31 , 2017 were as follows : apollo medical holdings , inc. consolidated statements of income replace_table_token_6_th net income our net income in 2018 was $ 60.3 million , as compared to $ 45.8 million in 2017 , an increase of $ 14.5 million or 32 % .
| results of operations as noted above , although apollomed was the legal acquirer in the merger , for accounting purposes , nmm is considered the accounting acquirer and apollomed is the accounting acquiree . accordingly , ( i ) the financial statements included in this annual report , and the description of our results of operations set forth below for the period in 2017 prior to the merger reflect the operations of nmm and its consolidated entities and vies , and ( ii ) the financial statements and the description of our results of operations for 2019 and 2018 reflect the combined operations of apollomed and nmm and their consolidated vies . because the financial results for 2017 exclude the results of apollomed , the results of operations in 2019 and 2018 are not directly comparable to our results of operations in 2017 . 50 2019 compared to 2018 our consolidated operating results for the year ended december 31 , 2019 , as compared to the year ended december 31 , 2018 were as follows : apollo medical holdings , inc. consolidated statements of income replace_table_token_5_th net income our net income in 2019 was $ 17.7 million , as compared to $ 60.3 million in 2018 , a decrease of $ 42.6 million or 71 % . physician groups and patients as of december 31 , 2019 and 2018 , the total number of affiliated physician groups we managed was 13 groups and 11 groups , respectively , and the total number of patients for whom we managed the delivery of healthcare services was 914,000 and 992,100 , respectively . revenue 51 our revenue in 2019 was $ 560.6 million , as compared to $ 519.9 million in 2018 , an increase of $ 40.7 million or 8 % .
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f- 19 applied uv , inc. and subsidiaries notes to consolidated financial statements december 31 , 2019 ( as restated ) and 2018 note 10 - costs and estimated earnings on contracts in progress costs and estimated earnings on contracts in progress , net of progress billings , are as follows as of december 31 , 2019 and 2018 : replace_table_token_13_th contract assets represent amounts earned under contracts in progress but not yet billed under the terms of those contracts . these amounts become billable according to the contract terms , which usually consider passage of time , achievement of certain milestones or completion of the project . substantially all costs and estimated earnings in excess of billings on contracts in progress are expected to be billed and collected in the following year . contract liabilities represent billings to customers in excess of costs and earnings on contracts in progress . substantially all such amounts are expected to be earned in the following year . note 11 - share exchange on march 26 , 2019 , march 27 , 2019 and july 31 , 2019 , we and the shareholder of sterilumen , inc. and the sole member of munn works , llc , completed the transactions contemplated by three share exchange agreements . pursuant to the applicable share exchange agreements , sterilumen , inc. and munn works , llc transferred to us all assets and liabilities . the shareholders of sterilumen , inc. exchanged all of their shares in sterilumen for 2,000 preferred and 2,001,252 common shares of applied uv , inc. the sole member of munn works , llc exchanged all of its membership interest in munn works , llc for 3,000,000 common shares of applied uv , inc. as the share exchanges were transactions between entities that are under common control , accounting rules require that our consolidated financial statements include the results of the transferred businesses for all periods presented , including periods prior to the completion of the share exchanges . note 12 - legal apf management filed and served a complaint in 2013 new york state court against munn works , llc , max munn and various other parties seeking recovery of damages and was awarded various damages on behalf of apf . on june 25 , 2018 , munn works , llc . entered chapter 11 bankruptcy in order to facilitate an appeal and a resolution to this matter . as part of the chapter 11 bankruptcy , apf management filed a claim in the amount of $ 1,474,505 . all of the parties agreed to resolve the disputes whereby , apf would receive $ 400,000 payable by the company . the amount was settled and paid in full in 2019. f- 20 applied uv , inc. and subsidiaries notes to consolidated financial statements december 31 , 2019 ( as restated ) and 2018 note 12 - legal ( continued ) administration of chapter 11 case in june of 2018 , munn works , llc received bankruptcy court approval of certain `` first-day `` motions , which preserved the company 's ability to continue operations without interruption in chapter 11. story_separator_special_tag overview the company was formed on february 26 , 2019 for the purpose of acquiring all of the equity of sterilumen and munnworks . the company acquired all of the capital stock of sterilumen in march of 2019 pursuant to two exchange agreements in which all of the stockholders of sterilumen exchanged their shares in sterilumen for shares of common stock in the company . the company acquired all of the equity of munnworks in july of 2019 pursuant to an exchange agreement in exchange for shares of common stock in the company . the company conducts all of its operations through sterilumen and munnworks . sterilumen was formed to engage in the design , manufacture , assembly and distribution of the sterilumen disinfecting system for use in hospitals and other healthcare facilities . the company has received several patent approvals for the sterilumen disinfecting system from the united states and the european union and is in the process of receiving approval from various countries including china , japan , taiwan , south korea and the gulf cooperation council . the technology of the sterilumen disinfecting system uses uvc led embedded in various bathroom fixtures or as a stand alone unit as a disinfection apparatus for use in inhabited facilities for killing airborne bacteria and other pathogens as well as killing bacteria and other pathogens residing on hard surfaces in proximity to the apparatus . following the company 's initial public offering , product development efforts were accelerated . the system 's technology development roadmap , including connected and data-enabled capabilities has been refined and the clarity d3 application will be launched along with the updated version of the sterilumen ribbon ( now branded lumicide ) in the fall of 2021. the company has also achieved ul certification for both the stand-alone ribbon , and integrated drain products , ensuring that we meet requirements of commercial customers who rely on the ul mark as evicence of safety , quality and reliability . the company works with distributors to sell both sterilumen and munnworks product lines , and is in the process of signing up new sterilumen distributors of significant breadth and scale to introduce the sterilumen products to new markets , including building management , commercial real estate , and environmental health and safety . munnworks is a manufacturer of custom designed fine mirrors specifically for the hospitality industry with one manufacturing facility in mount vernon , new york . our goal is to contribute to the creation of what our design industry clients seek : manufacturing better framed mirrors on budget and on time . as part of our long-term strategy , we have instituted multi-site production for high-value items , complicated designs and finishes . our headquarters in mount vernon , ny serves as the center for multi-country manufacturing . story_separator_special_tag f- 19 applied uv , inc. and subsidiaries notes to consolidated financial statements december 31 , 2019 ( as restated ) and 2018 note 10 - costs and estimated earnings on contracts in progress costs and estimated earnings on contracts in progress , net of progress billings , are as follows as of december 31 , 2019 and 2018 : replace_table_token_13_th contract assets represent amounts earned under contracts in progress but not yet billed under the terms of those contracts . these amounts become billable according to the contract terms , which usually consider passage of time , achievement of certain milestones or completion of the project . substantially all costs and estimated earnings in excess of billings on contracts in progress are expected to be billed and collected in the following year . contract liabilities represent billings to customers in excess of costs and earnings on contracts in progress . substantially all such amounts are expected to be earned in the following year . note 11 - share exchange on march 26 , 2019 , march 27 , 2019 and july 31 , 2019 , we and the shareholder of sterilumen , inc. and the sole member of munn works , llc , completed the transactions contemplated by three share exchange agreements . pursuant to the applicable share exchange agreements , sterilumen , inc. and munn works , llc transferred to us all assets and liabilities . the shareholders of sterilumen , inc. exchanged all of their shares in sterilumen for 2,000 preferred and 2,001,252 common shares of applied uv , inc. the sole member of munn works , llc exchanged all of its membership interest in munn works , llc for 3,000,000 common shares of applied uv , inc. as the share exchanges were transactions between entities that are under common control , accounting rules require that our consolidated financial statements include the results of the transferred businesses for all periods presented , including periods prior to the completion of the share exchanges . note 12 - legal apf management filed and served a complaint in 2013 new york state court against munn works , llc , max munn and various other parties seeking recovery of damages and was awarded various damages on behalf of apf . on june 25 , 2018 , munn works , llc . entered chapter 11 bankruptcy in order to facilitate an appeal and a resolution to this matter . as part of the chapter 11 bankruptcy , apf management filed a claim in the amount of $ 1,474,505 . all of the parties agreed to resolve the disputes whereby , apf would receive $ 400,000 payable by the company . the amount was settled and paid in full in 2019. f- 20 applied uv , inc. and subsidiaries notes to consolidated financial statements december 31 , 2019 ( as restated ) and 2018 note 12 - legal ( continued ) administration of chapter 11 case in june of 2018 , munn works , llc received bankruptcy court approval of certain `` first-day `` motions , which preserved the company 's ability to continue operations without interruption in chapter 11. story_separator_special_tag overview the company was formed on february 26 , 2019 for the purpose of acquiring all of the equity of sterilumen and munnworks . the company acquired all of the capital stock of sterilumen in march of 2019 pursuant to two exchange agreements in which all of the stockholders of sterilumen exchanged their shares in sterilumen for shares of common stock in the company . the company acquired all of the equity of munnworks in july of 2019 pursuant to an exchange agreement in exchange for shares of common stock in the company . the company conducts all of its operations through sterilumen and munnworks . sterilumen was formed to engage in the design , manufacture , assembly and distribution of the sterilumen disinfecting system for use in hospitals and other healthcare facilities . the company has received several patent approvals for the sterilumen disinfecting system from the united states and the european union and is in the process of receiving approval from various countries including china , japan , taiwan , south korea and the gulf cooperation council . the technology of the sterilumen disinfecting system uses uvc led embedded in various bathroom fixtures or as a stand alone unit as a disinfection apparatus for use in inhabited facilities for killing airborne bacteria and other pathogens as well as killing bacteria and other pathogens residing on hard surfaces in proximity to the apparatus . following the company 's initial public offering , product development efforts were accelerated . the system 's technology development roadmap , including connected and data-enabled capabilities has been refined and the clarity d3 application will be launched along with the updated version of the sterilumen ribbon ( now branded lumicide ) in the fall of 2021. the company has also achieved ul certification for both the stand-alone ribbon , and integrated drain products , ensuring that we meet requirements of commercial customers who rely on the ul mark as evicence of safety , quality and reliability . the company works with distributors to sell both sterilumen and munnworks product lines , and is in the process of signing up new sterilumen distributors of significant breadth and scale to introduce the sterilumen products to new markets , including building management , commercial real estate , and environmental health and safety . munnworks is a manufacturer of custom designed fine mirrors specifically for the hospitality industry with one manufacturing facility in mount vernon , new york . our goal is to contribute to the creation of what our design industry clients seek : manufacturing better framed mirrors on budget and on time . as part of our long-term strategy , we have instituted multi-site production for high-value items , complicated designs and finishes . our headquarters in mount vernon , ny serves as the center for multi-country manufacturing .
| results of operations year ended december 31 , 2020 compared to the year ended december 31 , 2019 replace_table_token_2_th net sales and gross profit are the most significant drivers of our operating performance . net sales consist of all sales to customers , net of returns . our net sales for year ended 2020 decreased by 58.7 % to $ 5,732,734 from $ 9,095,150 in year ended 2019. all net sales for all periods presented were substantially generated from our munnworks subsidiary . revenues and margins were significantly impacted from the suspension of operations of hotels and the impact to the hospitality industry from the covid-19 pandemic . accordingly , gross profit expressed as a percentage of net sales can be influenced by many factors including overall sales performance . for year ended 2020 , gross profit decreased 205.7 % to $ 1,009,336 from $ 3,085,420 for year ended 2019. gross profit as a percentage of net sales decreased to 17.6 % for year ended 2020 from 33.9 % in year ended 2019 , primarily driven by a significant decrease in sales generated from our domestic manufacturing . major components and cost drivers of our cost of sales is influenced by the cost of materials , freight , overhead , and labor costs . in order to comply with the payroll protection program foregiveness requirements , the company kept many of their employees and there was significant downtime charged to cost of sales . direct overhead costs from year to year remained consistent which resulted in higher overhead costs as a percentage of revenue . in addition , the company lowered its prices in order to stay competitive within the market . operating expenses , including the costs of operating our corporate office , are also an important component of our operating performance . compensation and benefits comprise the majority of our operating expenses .
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introduction blucora operates a portfolio of leading internet businesses : an internet search business , an online tax preparation business , and an e-commerce business . the search business , infospace , provides search services to distribution partners ' web properties as well as to our owned and operated properties . the tax preparation business consists of the operations of taxact , which we acquired on january 31 , 2012 , and provides online tax preparation service for individuals , tax preparation software for individuals and professional tax preparers , and ancillary services . the e-commerce business consists of the operations of monoprice , which we acquired on august 22 , 2013 , and provides self-branded electronics and accessories to both consumers and businesses . our businesses search the majority of our revenues are generated by our search segment . the infospace search business primarily offers search services through the web properties of its distribution partners , which are generally private-labeled and customized to address the unique requirements of each distribution partner . the search business also distributes aggregated search content through its owned and operated websites , such as dogpile.com and webcrawler.com . our search revenue primarily is derived from search content providers who provide paid search links for display as part of our search services . from these content providers , whom we refer to as our search customers , we license rights to certain search products and services , including both non-paid and paid search links . we receive revenues from our search customers when an end user of our web search services clicks on a paid search link that is provided by that search customer and displayed on one of our owned and operated web properties or displayed on the web property of one of our search distribution partners . revenues are recognized in the period in which such paid clicks occur and are based on the amounts earned and remitted to us by our search customers for such clicks . our main search customer agreements are with google and yahoo ! . we derive a significant portion of our revenue from google , and we expect this concentration to continue in the foreseeable future . for the year ended december 31 , 2013 , search revenue from google accounted for approximately 88 % of our search segment revenue and 66 % of our total revenue . tax preparation our taxact business consists of an online tax preparation service for individuals , tax preparation software for individuals and professional tax preparers , and ancillary services . taxact generates revenue primarily through its online service at www.taxact.com . the taxact business 's basic federal tax preparation online software service is `` free for everyone , '' meaning that any taxpayer can use the services to e-file his or her federal income tax return without paying for upgraded services and may do so for every form that the irs allows to be e-filed . this free offer differentiates taxact 's offerings from many of its competitors who limit their free software and or services offerings to certain categories of customers or certain forms . the taxact business generates revenue from a percentage of these `` free '' users who purchase a state form or choose to upgrade for a fee to the deluxe or ultimate product , which includes additional support , tools , or state forms in the case of the ultimate offering . in addition , revenue is generated from the sale of ancillary services , which include , among other things , tax preparation support services , data archive services , bank and or reloadable pre-paid debit card services , and additional e-filing services . taxact is the recognized value player in the digital do-it-yourself space , offering comparable software and or services at a lower cost to the end user compared to larger competitors . this , coupled with its free for everyone offer , provides taxact a valuable marketing position . taxact 's professional tax preparer software allows professional tax preparers to file individual returns for their clients . revenue from professional tax preparers historically has constituted a relatively small percentage of the 33 taxact business 's overall revenue and requires relatively modest incremental development costs as the basic software is substantially similar to the consumer-facing software and online service . on october 4 , 2013 , taxact acquired balance financial , a provider of web and mobile-based financial management software through its website www.balancefinancial.com . e-commerce our e-commerce business , monoprice , is an online retailer of self-branded electronics and accessories to both consumers and businesses . monoprice offers its products for sale through the www.monoprice.com website , where the majority of our e-commerce revenue is derived , and fulfills those orders from our warehouse in rancho cucamonga , california . we also sell our products through distributor , reseller , and marketplace agreements . monoprice has built a well-respected consumer brand by delivering products with premium quality on par with well-known national brands , selling these products at prices far below the prices for those well-known brands , and providing top-tier service and rapid product delivery . the monoprice website showcases 14 product categories and over 5,800 individual products . monoprice has developed an efficient product cost structure that is enabled by a direct import supply chain solution that eliminates traditional layers of mark-ups imposed by intermediaries . consumers are able to access and purchase products 24 hours a day from the convenience of a computer or a mobile device . monoprice 's team of customer service representatives assists customers primarily by online chat or email . nearly all sales are to customers located in the united states . story_separator_special_tag shipping charges to receive products from our suppliers are included in our inventory and recognized as cost of revenues upon sale of products to our customers . our gross profit margin has been consistent historically , and we expect it to continue to remain consistent based primarily on our efficient product cost structure enabled by a direct import supply solution . the remaining operating expenses primarily consist of personnel expenses ( which include salaries , stock-based compensation , benefits , and other employee-related costs ) related to personnel engaged in sales and marketing ( including fulfillment which includes purchasing , customer and technical support , receiving , inspection , and warehouse functions ) and general and administrative activities , as well as marketing costs , credit card fees , temporary help , contractors , and facility costs . the pro forma segment margin , excluding the impacts of purchase accounting , for fiscal year 2013 and 2012 was 12 % and 11 % , respectively . 39 corporate-level activity replace_table_token_11_th certain corporate-level activity is not allocated to our segments , including certain general and administrative costs ( including personnel and overhead costs ) , stock-based compensation , depreciation , and amortization of intangible assets . for further detail , refer to segment information appearing in note 12 : segment information of the notes to consolidated financial statements in part ii item 8 of this report . year ended december 31 , 2013 compared with year ended december 31 , 2012 operating expenses included in corporate-level activity increased primarily due to a $ 1.5 million increase in personnel expenses mainly related to increased headcount to support operations . stock-based compensation decreased primarily due to $ 5.2 million in expense recognized in 2012 related to the modification of the warrant and the vesting of non-employee stock options upon completion of the taxact acquisition , offset by expense of $ 0.5 million in 2013 related to stock options that vested upon completion of the monoprice acquisition ( for further detail on both items see note 11 : stock-based compensation of the notes to consolidated financial statements in part ii item 8 of this report ) as well as higher expense in 2013 related to increased equity award activity , including the issuance of equity awards to monoprice employees . depreciation increased due to depreciation expense on fixed assets attributable to monoprice . amortization of intangible assets increased primarily due to amortization expense related to intangibles acquired as part of the monoprice acquisition and , to a lesser extent , amortization expense related to taxact intangibles due to the timing of the taxact acquisition . year ended december 31 , 2012 compared with year ended december 31 , 2011 operating expenses included in corporate-level activity increased primarily due to a $ 1.4 million increase in personnel expenses mainly related to increased headcount to support operations and a combined increase of $ 0.9 million in professional service fees mainly related to the taxact acquisition , contractor fees to augment our staff , and public relations fees . stock-based compensation increased primarily due to expenses of $ 4.3 million and $ 0.9 million recorded in the first quarter of 2012 related to the modification of the warrant and the vesting of non-employee stock options , respectively , upon completion of the taxact acquisition . stock-based compensation of $ 1.9 million was recorded in 2011 related to the warrant issuance . for further detail see note 11 : stock-based compensation of the notes to consolidated financial statements in part ii item 8 of this report . the remaining difference is primarily due to stock-based compensation associated with grants to taxact employees subsequent to the acquisition . depreciation decreased primarily due to a decrease in depreciation associated with the data center . amortization of intangible assets increased primarily due to amortization expense of $ 18.4 million related to taxact intangibles acquired , offset by a $ 1.8 million decrease in amortization expense associated with our installed code base technology for make the web better ( which we acquired in 2010 ) , which is amortized proportional to expected revenue . 40 operating expenses cost of revenues replace_table_token_12_th we record the cost of revenues for services and products when the related revenue is recognized . services cost of revenue consists of costs related to search and tax preparation segments , which includes revenue sharing arrangements with our distribution partners , usage-based content fees , royalties , and bank product service fees . in addition , services cost of revenue includes costs associated with the operation of the data centers that serve our search and tax preparation businesses , which include personnel expenses ( including salaries , stock-based compensation , benefits , and other employee-related costs ) , depreciation , and amortization of intangibles . product cost of revenue consists of costs related to our e-commerce segment , which includes product costs , inbound and outbound shipping and handling costs , packaging supplies , and provisions for inventory obsolescence . year ended december 31 , 2013 compared with year ended december 31 , 2012 services cost of revenue increased primarily due to increased search services cost of revenue of $ 35.7 million driven by the increase in revenue generated from distribution partners and the resulting revenue share to our distribution partners , $ 2.8 million increase in data center operations primarily due to the timing of the taxact acquisition and higher personnel expenses from increased headcount to support our online service offering , and , to a lesser extent , increased data center expenses related to the migration of the search data center to the cloud in 2013. these increases were offset by a $ 2.4 million decrease in tax preparation services cost of revenue primarily related to decreased bank service fees on our bank card product and royalties . product cost of revenue represents costs related to monoprice .
| results of operations summary replace_table_token_5_th year ended december 31 , 2013 compared with year ended december 31 , 2012 total revenues increased $ 167.1 million due to an increase of $ 83.7 million in revenue related to our search business driven by increases in revenue from distribution partners and owned and operated web properties , an increase of $ 29.1 million in our tax preparation business primarily due to the timing of the acquisition and , to a lesser extent , revenue growth in 2013 , and the addition of $ 54.3 million in product revenue related to monoprice . operating income increased $ 30.2 million due to the $ 167.1 million increase in revenue , partially offset by a $ 136.9 million increase in operating expenses . key changes in operating expenses were : $ 63.3 million increase in the search segment 's operating expenses primarily as a result of higher search distribution revenue in that segment and the resulting revenue share to our distribution partners and spending on our online marketing . $ 18.6 million increase in the tax preparation segment 's operating expenses primarily due to the timing of the taxact acquisition . $ 49.3 million increase in the e-commerce segment 's operating expenses due to the acquisition of monoprice in 2013 . $ 5.7 million increase in corporate-level expense activity , primarily as a result of amortization expense associated with the acquisitions of monoprice and taxact and higher personnel expenses due to increased headcount to support operations . this was offset by lower stock-based compensation due to $ 5.2 million in expense recognized in 2012 related to the modification of the warrant and the vesting of non-employee stock options upon completion of the taxact acquisition ( for further detail on both items see note 11 : stock-based compensation of the notes to consolidated financial statements in part ii item 8 of this report ) .
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however , given the potential adverse tax consequences to the optionees if the internal revenue story_separator_special_tag the following discussion and analysis should be read in conjunction with our audited financial statements and the related notes that appear elsewhere in this annual report on form 10-k. this discussion contains forward-looking statements within the meaning of section 21e of the securities exchange act of 1934 , as amended . such forward-looking statements involve risks , uncertainties and other factors that may cause our actual results , levels of activity , performance or achievements to be materially different from the information expressed or implied by these forward-looking statements . 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 item 1a . risk factors and elsewhere in this annual report on form 10-k. please refer to the section entitled forward-looking statements in this annual report on form 10-k. overview we are a development stage specialty pharmaceutical company focused on the development and commercialization of innovative therapies for the treatment of acute and breakthrough pain . we were founded to solve the problems associated with post-operative intravenous patient-controlled analgesia , or iv pca . although widely used , iv pca has been shown to cause harm to patients following surgery because of the side effects of morphine , the invasive iv route of delivery and the inherent potential for programming and delivery errors associated with the complexity of infusion pumps . in march 2012 , we initiated the first of three phase 3 clinical trials for our lead product candidate , the sufentanil nanotab pca system , or arx-01 system , or arx-01 . the second phase 3 trial , an open-label active-comparator study is expected to start in the second quarter of 2012. the final planned phase 3 efficacy and safety study , a double-blind , placebo-controlled trial is expected to begin in the third quarter of 2012. we expect top-line data from all three phase 3 trials in late 2012 or early 2013. the arx-01 system is designed to address the problems associated with iv pca by utilizing : sufentanil , a high therapeutic index opioid ; nanotabs , our proprietary , non-invasive sublingual dosage form ; and our novel handheld pca device that enables simple patient-controlled delivery of nanotabs in the hospital setting and eliminates the risk of programming errors . we have completed phase 2 clinical development for two additional product candidates , the sufentanil nanotab btp management system , or arx-02 , for the treatment of cancer breakthrough pain , or btp , and the sufentanil/triazolam nanotab , or arx-03 , designed to provide mild sedation , anxiety reduction and pain relief for patients undergoing painful procedures in a physician 's office . in may 2011 , we announced that the us army medical research and material command , or usamrmc , awarded us a $ 5.6 million grant to support the development of a new product candidate , arx-04 , a sufentanil nanotab for the treatment of moderate-to-severe acute pain . under the terms of the grant , the usamrmc will reimburse us for development , manufacturing and clinical expenses necessary to prepare for and complete the planned phase 2 dose-finding trial in a study of acute moderate-to-severe pain , and to prepare to enter phase 3 development . development of therapeutic products is costly and is subject to a lengthy and uncertain regulatory process by the united states food and drug administration , or fda . adverse events in both our own clinical program and other programs may have a negative impact on regulatory approval , the willingness of potential commercial partners to enter into agreements and the perception of the public . 58 product development arx-01 we continue to make progress in the development of our lead product candidate , arx-01 . planned 2012 activities include the following : completion of the first of three phase 3 clinical trials , a double-blind , placebo-controlled efficacy and safety study of post-operative pain following open-abdominal surgery , which was initiated in march 2012 ; initiation and completion of our second planned phase 3 clinical study , an open-label active-comparator study comparing arx-01 to the current standard of care , iv pca morphine and ; initiation , and planned completion in late 2012 or early 2013 , of our third planned phase 3 clinical study , a double-blind , placebo-controlled efficacy and safety study of post-operative pain following hip and knee replacement surgeries , subject to completion of the final planned summative human factors study . arx-04 we continue to make progress towards the initiation of our planned arx-04 phase 2 dose-finding clinical trial . in october 2011 , we filed an investigational new drug application for arx-04 , our product candidate for management of moderate-to-severe acute pain , with the fda , and we plan to initiate the phase 2 study in the second quarter of 2012 , contingent on approval from the usamrmc , with top-line results anticipated in the second half of 2012. future development of arx-02 and arx-03 is contingent upon additional funding or establishing corporate partnerships . financial overview we are a development stage company with a limited operating history . we have incurred net losses since inception and expect to incur losses in the future as we continue our research and development activities . to date , we have funded our operations primarily from the private placement of convertible preferred stock , proceeds from our initial public offering , or ipo , and proceeds received from our debt financings . from inception through december 31 , 2011 , we have received net proceeds of $ 54.9 million from the sale of convertible preferred stock and $ 41.4 million from our debt financings . story_separator_special_tag we make good faith estimates that we believe to be accurate , but the actual costs and timing of clinical trials are highly uncertain , subject to risks and may change depending upon a number of factors , including our clinical development plan . share-based compensation we measure and recognize compensation expense for all share-based payment awards made to our employees and directors , including employee stock options and employee stock purchases related to the employee share purchase plan , or espp , on estimated fair values . the fair value of equity-based awards is amortized over the vesting period of the award using a straight-line method . to estimate the value of an award , we use the black-scholes option pricing model . this model requires inputs such as expected life , expected volatility and risk-free interest rate . these inputs are subjective and generally require significant analysis and judgment to develop . estimates of expected life are primarily determined using the simplified method in accordance with guidance provided by the securities and exchange commission , or sec . volatility is derived from historical volatilities of several public companies within our industry that are deemed to be comparable to our business because we have limited information on the volatility of our common stock since we had no trading history prior to completion of our ipo in february 2011. the risk-free rate is based on the u.s. treasury yield curve in effect at the time of grant commensurate with the expected life assumption . we review our valuation assumptions quarterly and , as a result , it is likely we will change our valuation assumptions used to value share based awards granted in future periods . further , we are required to estimate forfeitures at the time of grant and revise those estimates in subsequent periods if actual forfeitures differ from those estimates . we use historical data to estimate pre-vesting option forfeitures and record stock-based compensation expense only for those awards that are expected to vest . if factors change and different assumptions are employed in determining the fair value of stock based awards , the stock based compensation expense recorded in future periods may differ significantly from what was recorded in the current period . prior to the ipo , we were also required to estimate the fair value of the common stock underlying our stock-based awards when performing the fair value calculations with the black-scholes option-pricing model . the fair values of the common stock underlying our stock-based awards were estimated on each grant date by our board of directors , with input from management . in valuing our common stock , our board of directors determined the equity value of our business by taking a weighted combination of the value indications under two valuation approaches , an income approach and a market approach . the income approach estimates the present value of future estimated cash flows , based upon forecasted revenue and costs . these future cash flows were discounted to their present values using a discount rate derived from an analysis of the cost of capital of comparable publicly traded companies in our industry or similar lines of business as of each valuation date and was adjusted to reflect the risks inherent in our cash flows . the market approach estimated the fair value by applying market multiples of comparable publicly traded companies in our industry or similar lines of business which were based on key metrics implied by the enterprise values or acquisition values of our comparable publicly traded companies . liability associated with warrants to purchase convertible preferred stock freestanding warrants to purchase shares of our convertible preferred stock were classified as liabilities on our balance sheets at fair value because the warrants could have conditionally obligated us to redeem the underlying convertible preferred stock . the warrants were subject to remeasurement at each balance sheet date , and any change in fair value was recognized as a component of other income ( expense ) , net , in the statements of operations . we estimated the fair value of these warrants at the respective balance sheet dates using the black-scholes option-pricing model . we used assumptions to estimate the fair value of the warrants including the remaining contractual terms of the warrants , risk-free interest rates , expected dividend yields and the fair value and expected volatility of the underlying stock . these assumptions were subjective and the fair value of the warrants to purchase convertible preferred stock could have differed significantly had we used different assumptions . 61 upon the completion of our ipo in february 2011 , all of our warrants to purchase convertible preferred stock had been exercised or converted into warrants to purchase common stock . at that time , the then-current aggregate fair value of these warrants was reclassified from liabilities to additional paid-in capital and we will no longer remeasure the liability associated with these warrants to purchase convertible preferred stock to fair value . bridge loan on september 14 , 2010 , we entered into a bridge loan financing , in which we issued notes to certain existing investors for an aggregate purchase price of $ 8.0 million , or the 2010 notes . the 2010 notes could not be prepaid without the written consent of the holders of the 2010 notes , bore interest at a rate of 4.0 % per annum and had a maturity date of the earliest of ( 1 ) september 14 , 2011 or ( 2 ) an event of default . the principal and the interest under the 2010 notes were converted into common stock in connection with our ipo at a conversion price equal to 80 % of the ipo price , or $ 4.00 per share . under the terms of the bridge loan agreement , upon the election of the holders of a majority of the aggregate principal amount payable under the 2010 notes , we agreed to issue an additional $ 4.0 million of the 2010 notes . this additional $ 4.0
| results of operations years ended december 31 , 2011 , 2010 and 2009 revenue to date , we have not generated any product revenue . we do not expect to receive any revenues from any product candidates that we develop until we obtain regulatory approval and commercialize our products or enter into collaborative agreements with third parties . in may 2011 , we received a grant award of $ 5.6 million from the usamrmc for the development of arx-04 , a sufentanil nanotab for the treatment of moderate-to-severe acute pain . revenue related to this grant award is recognized as the related research and development expenses are incurred . revenue for the year ended december 31 , 2011 was $ 1.1 million , and was generated from our grant with the usamrmc . we did not generate any revenue for the years ended december 31 , 2010 and 2009. research and development expenses conducting research and development is central to our business model . the majority of our operating expenses to date have been for research and development activities related to arx-01 , arx-02 and arx-03 . research and development expenses included the following : expenses incurred under agreements with contract research organizations and clinical trial sites ; employee- and consultant-related expenses , which include salaries , benefits and stock-based compensation ; payments to third party pharmaceutical and engineering development contractors ; payments to third party manufacturers ; and 63 depreciation and other allocated expenses , which include direct and allocated expenses for rent and maintenance of facilities and equipment , depreciation of leasehold improvements and equipment and laboratory and other supply costs . product candidates in late 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 late stage clinical trials .
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in march 2016 , the fasb issued accounting standards update no . 2016-09 , compensation—stock compensation . this standard was issued as part of its simplification initiative . the objective of the simplification initiative is to identify , evaluate , and improve areas of generally accepted accounting principles ( gaap ) for which cost and complexity can be reduced while 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 that appear elsewhere in this annual report on form 10-k ( this “ report ” ) . in addition to historical financial information , the following discussion contains forward-looking statements that involve risks and uncertainties . our actual results may differ materially from those discussed below . factors that could cause or contribute to these differences include those discussed below and elsewhere in this report , particularly in “ risk factors. ” overview we are a renewable chemicals and next generation biofuels company . we have developed proprietary technology that uses a combination of synthetic biology , metabolic engineering , chemistry and chemical engineering to focus primarily on the production of renewable isobutanol as well as related products from renewable feedstocks . isobutanol is a four-carbon alcohol that can be sold directly for use as a specialty chemical in the production of solvents , paints and coatings or as a value-added gasoline blendstock . isobutanol can also be converted into butenes using dehydration chemistry deployed in the refining and petrochemicals industries today . the convertibility of isobutanol into butenes is important because butenes are primary hydrocarbon building blocks used in the production of hydrocarbon fuels , including isooctane , isooctene and alcohol-to-jet fuel ( “ atj ” ) , as well as lubricants , polyester , rubber , plastics , fibers and other polymers . we believe that the products derived from isobutanol have potential applications in substantially all of the global hydrocarbon fuels markets and in approximately 40 % of the global petrochemicals markets . in order to produce and sell isobutanol made from renewable sources , we have developed the gevo integrated fermentation technology ® ( “ gift ® ” ) , an integrated technology platform for the efficient production and separation of renewable isobutanol . gift ® consists of two components , proprietary biocatalysts that convert sugars derived from multiple renewable feedstocks into isobutanol through fermentation , and a proprietary separation unit that is designed to continuously separate isobutanol during the fermentation process . we developed our technology platform to be compatible with the existing approximately 25 bgpy of global operating ethanol production capacity , as estimated by the renewable fuels association . gift ® is designed to permit ( i ) the retrofit of existing ethanol capacity to produce isobutanol , ethanol or both products simultaneously or ( ii ) the addition of renewable isobutanol or ethanol production capabilities to a facility 's existing ethanol production by adding additional fermentation capacity side-by-side with the facility 's existing ethanol fermentation capacity ( collectively referred to as “ retrofit ” ) . having the flexibility to switch between the production of isobutanol and ethanol , or produce both products simultaneously , should allow us to optimize asset utilization and cash flows at a facility by taking advantage of fluctuations in market conditions . gift ® is also designed to allow relatively low capital expenditure retrofits of existing ethanol facilities , enabling a relatively rapid route to isobutanol production from the fermentation of renewable feedstocks . alternatively , gift ® can be deployed at a greenfield or brownfield site to produce isobutanol only . we believe that our production route will be cost-efficient , will enable relatively rapid deployment of our technology platform and allow our isobutanol and related renewable products to be economically competitive with many of the petroleum-based products used in the chemicals and fuels markets today . 2016 highlights and developments ● in february 2016 , we announced that we had entered into a license agreement and a joint development agreement with porta hnos s.a. ( “ porta ” ) to construct multiple isobutanol plants in argentina using corn as a feedstock . ● in april 2016 , we issued and sold 186,071 shares of common stock , series f warrants to purchase an additional 514,644 shares of common stock ( the “ series f warrants ” ) , series g warrants to purchase an additional 328,571 shares of common stock ( the “ series g warrants ” ) and series h warrants to purchase an additional 1,029,286 shares of common stock ( the “ series h warrants ” ) . as of december 31 , 2016 , the series f warrants had an exercise price of $ 5.80 per share , were exercisable from the date of issuance and expire on april 1 , 2021. the series g warrants were fully exercised in the second quarter of 2016. the series h warrants expired on october 1 , 2016. we received gross proceeds of approximately $ 3.5 million , not including any future proceeds from exercise of the warrants . ● in april 2016 , we received notice that astm international completed its process of approving the revision of astm d7566 ( standard specification for aviation turbine fuel containing synthesized hydrocarbons ) to include alcohol to jet synthetic paraffinic kerosene ( atj-spk ) derived from renewable isobutanol . as a result , astm international has published the revision of astm d7566 on its website and gevo 's renewable alcohol to jet fuel ( “ atj ” ) is now eligible to be used as a blending component in standard jet a-1 for commercial airline use in the united states and in many other countries around the globe . gevo 's atj is eligible to be used for up to 30 % blend in conventional jet fuel for commercial flights . ● in june 2016 , we closed a best efforts public offering of approximately 1,054,023 shares of common stock at $ 9.00 per share . story_separator_special_tag these exchanges reduced the outstanding principal amount of the 2022 notes to $ 1.2 million . ● effective january 5 , 2017 , we effected a one-for-twenty reverse split of the company 's issued and outstanding common stock ( the “ reverse stock split ” ) . upon the effectiveness of the stock split , every twenty shares of the company 's common stock 56 issued and outstanding were automatically combined into one share of common stock , without any change in the par value per share . ● in january 2017 , the company received notice from the nasdaq stock market llc that effective january 20 , 2017 it had regained compliance with the nasdaq capital market 's minimum bid price continued listing requirement of at least ten consecutive days with a closing bid price of its common stock in excess of $ 1.00. financial condition for the year ended december 31 , 2016 , we incurred a consolidated net loss of $ 37.2 million and had an accumulated deficit of $ 376.7 million . our cash and cash equivalents at december 31 , 2016 totaled $ 27.9 million which is primarily being used for the following : ( i ) operating activities of our agri-energy facility ; ( ii ) operating activities at our corporate headquarters in colorado , including research and development work ; ( iii ) capital improvements primarily associated with the agri-energy facility , including increasing isobutanol production and adding capacity to produce renewable hydrocarbons ; ( iv ) costs associated with optimizing isobutanol production technology ; and ( v ) debt service obligations . we expect to incur future net losses as we continue to fund the development and commercialization of our products and product candidates . we have financed our operations primarily with proceeds from multiple sales of equity and debt securities , borrowings under debt facilities and product sales . based on our current operating plan , existing working capital at december 31 , 2016 was not sufficient to meet the cash requirements to fund planned operations through the period that is one year after the date our 2016 financial statements are issued unless we are able to restructure and extend our debt obligations and or raise additional capital to fund operations . these conditions raise substantial doubt about our ability to continue as a going concern . our inability to continue as a going concern may potentially affect our rights and obligations under our debt obligations . our t ransition to profitability is dependent upon , among other things , the successful development and commercialization of our products and product candidates and the achievement of a level of revenues adequate to support our cost st ructure . we may never achieve profitability or generate positive cash flows , and unless and until we do , we will continue to need to raise additional cash . we intend to fund future operations through additional private and or public offerings of debt or equity securities . in addition , we may seek additional capital through arrangements with strategic partners or from other sources , may seek to restructure our debt and we will continue to address our cost structure . notwithstanding , there can be no assurance that we will be able to raise additional funds , or achieve or sustain profitability or positive cash flows from operations . we have primarily relied on raising capital to fund our operations and debt service obligations by issuing common stock and warrants in underwritten public offerings . those issuances have caused significant dilution to our existing stockholders . while we have sought , and will continue to seek , other , less dilutive forms financing to fund our operations and debt service obligations , there is no assurance that we will be successful in doing so . 2017 notes restructuring update as previously announced , wb gevo , ltd. ( “ whitebox ” ) , the holder of our issued and outstanding 2017 notes , and the company agreed to extend the maturity date of the 2017 notes from march 15 , 2017 to june 23 , 2017 ( the “ 2017 notes extension transaction ” ) . pursuant to the terms of a supplemental indenture , the terms of the 2017 notes extension transaction include , among other things , the following : ( i ) an increase in the coupon on the 2017 notes by two percent ( 2 % ) to twelve percent ( 12 % ) ; and ( ii ) the requirement that we pay down $ 8 million of principal on the 2017 notes as follows : $ 2 million on each of march 13 , 2017 , april 13 , 2017 , may 12 , 2017 and june 13 , 2017 , with an option for us to prepay all $ 8 million at any time in our sole discretion . in addition , as part of the 2017 notes extension transaction , we agreed to pay whitebox fifteen percent ( 15 % ) of the net proceeds from our next underwritten public offering , completed prior to june 23 , 2017 , and to be used to reduce the then-outstanding principal of the 2017 notes , which would be in addition to the $ 8 million pay-down of the 2017 notes described above . on february 23 , 2017 , we paid whitebox $ 9.6 million in full satisfaction of the 2017 notes extension transaction obligations described above . we continue to engage in discussions with whitebox to reach a long-term restructuring solution with respect to the 2017 notes due june 23 , 2017 and that will allow us to execute our long-term strategy and business plan described below . there can be no assurances , however , that we will be able to enter into a definitive binding agreement with whitebox that will allow us extend the maturity of the 2017 notes or otherwise successfully restructure the debt represented by the 2017 notes .
| results of operations comparison of the years ended december 31 , 2016 and 2015 ( in thousands ) replace_table_token_5_th revenues . during the twelve months ended december 31 , 2016 , we recognized revenue of $ 24.6 million associated with the sale of 14.2 million gallons of ethanol , as well as isobutanol and related products , a decrease of $ 2.5 million from the twelve months ended december 31 , 2015 primarily related to decreased production at the agri-energy facility . hydrocarbon revenue increased during the twelve months ended december 31 , 2016 primarily as a result of increased shipments of isooctane and isooctene during the year . cost of goods sold . our cost of goods sold during the twelve months ended december 31 , 2016 included $ 31.0 million associated with the production of ethanol , isobutanol and related products and $ 6.0 million in depreciation expense . cost of goods sold decreased during the twelve months ended december 31 , 2016 primarily due to decreased production of ethanol as compared to the prior year . research and development expense . research and development expenses decreased during the twelve months ended december 31 , 2016 primarily due to a $ 1.3 million decrease in employee compensation expense . selling , general and administrative expense . the decrease in selling , general and administrative expenses during the twelve months ended december 31 , 2016 primarily resulted from decreases of $ 1.5 million employee compensation expense , $ 6.9 million in professional and legal expenses , partially offset by an increase in $ 0.6 million in other general expenses , including costs associated with restructuring of the company 's debt obligations . gain / ( loss ) on exchange or conversion of debt . during the twelve months ended december 31 , 2016 , we incurred a loss of $ 0.8 million resulting from the exchange of a portion of our 2022 notes for our common stock .
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during the year ended february 28 , 2015 , our operations provided $ 924,000 of cash , we used $ 1,401,000 in our investing activities and $ 193,000 in our financing activities . net increase in marketable securities – for the year ended february 28 , 2015 , our marketable securities increased to $ 1,652,000 from $ 631,000 at february 28 , 2014. the increase is due to additional investments that were made during the year . 12 we currently have a revolving credit line of $ 750,000 and a $ 250,000 equipment purchase facility , both of which are with a bank . the revolving credit line is collateralized by all of the assets of the company , except for the land and buildings . the line of credit is payable on demand and must be retired for a 30 day period once annually . as of february 28 , 2015 , we had no outstanding borrowings under the line of credit . we had outstanding borrowings of $ 20,000 under the equipment facility at february 28 , 2015. the borrowing has a repayment term of 48 months and bears interest at 2.12 % per annum . we had outstanding borrowings under a note payable of $ 1,458,000 at february 28 , 2015. the note is payable over ten years and accrues interest at 4.15 % . the note payable is secured by a mortgage on our land and buildings . story_separator_special_tag reported a net loss of $ 134,000 compared to a net loss of $ 186,000 for the prior year period . the reported losses exclude any inter-company rent . a summary of our real estate operations is as follows : replace_table_token_4_th 15 replace_table_token_5_th for the years ended february 28 , 2015 and 2014 , net cash outflows related to the industrial park were $ 269,000 and $ 494,000 , respectively . these cash outflows are net of rental income and depreciation expense and include the principal payments on the industrial park 's mortgage and the costs of capital improvements . prior to purchasing the industrial park in december 2010 , we had rental expense of approximately $ 136,000 or $ 7.14 per square foot . interest income , interest expense and income taxes : interest income increased to $ 33,000 for the year ended february 28 , 2015 when compared to $ 7,000 for the year ended february 28 , 2014. our present investment policy is to invest excess cash in highly liquid mutual funds . our holdings are rated at or above investment grade . interest expense decreased to $ 65,000 for the year ended february 28 , 2015 as compared to $ 110,000 for the year ended february 28 , 2014. the decrease in interest expense is a result of the refinancing of the industrial park in december 2013. we recorded income tax expense of $ 219,000 for the year ended february 28 , 2015 as compared to $ 130,000 for the year ended february 28 , 2014. as of february 28 , 2015 , we have no net operating loss deductions available to carry forward . the details of the current year 's tax benefit are explained in note 12 in our financial statements . for the year ended february 28 , 2015 , we had net income of $ 606,000 as compared to $ 484,000 for the year ended february 28 , 2014. the increase in our net income is due to an increase in our sales volume combined with an increase in our gross profit margin . for the years ended february 28 , 2015 and 2014 , we do not believe that our sales revenue or net income has been adversely affected by the impact of inflation or changing prices . 16 off - balance sheet arrangements we do not have any off - balance sheet arrangements as of february 28 , 2015. critical accounting policies the discussion and analysis of the company 's financial condition and results of operations are based upon the company 's consolidated financial statements , which have been prepared in accordance with accounting principles generally accepted in the united states of america . the preparation of these financial statements requires the company to make estimates and judgments that affect the reported amount of assets and liabilities , revenues and expenses , and related disclosure on contingent assets and liabilities at the date of the financial statements . actual results may differ from these estimates under different assumptions and conditions . critical accounting policies are defined as those that are reflective of significant judgments and uncertainties , and may potentially result in materially different results under different assumptions and conditions . as of february 28 , 2015 , management believes there are no critical accounting policies applicable to the company that are reflective of significant judgments and or uncertainties . stock-based compensation the computation of the expense associated with stock-based compensation requires the use of a valuation model . asc 718 is a complex accounting standard , the application of which requires significant judgment and the use of estimates , particularly surrounding black-scholes assumptions such as stock price volatility , expected option lives , and expected option forfeiture rates , to value equity-based compensation . we currently use a black-scholes option pricing model to calculate the fair value of stock options . we primarily use historical data to determine the assumptions to be used in the black-scholes model and have no reason to believe that future data is likely to differ materially from historical data . however , changes in the assumptions to reflect future stock price volatility and future stock award exercise experience could result in a change in the assumptions used to value awards in the future and may result in a material change to the fair value calculation of stock-based awards . asc 718 requires the recognition of the fair value of stock compensation in net income . although every effort is made to story_separator_special_tag during the year ended february 28 , 2015 , our operations provided $ 924,000 of cash , we used $ 1,401,000 in our investing activities and $ 193,000 in our financing activities . net increase in marketable securities – for the year ended february 28 , 2015 , our marketable securities increased to $ 1,652,000 from $ 631,000 at february 28 , 2014. the increase is due to additional investments that were made during the year . 12 we currently have a revolving credit line of $ 750,000 and a $ 250,000 equipment purchase facility , both of which are with a bank . the revolving credit line is collateralized by all of the assets of the company , except for the land and buildings . the line of credit is payable on demand and must be retired for a 30 day period once annually . as of february 28 , 2015 , we had no outstanding borrowings under the line of credit . we had outstanding borrowings of $ 20,000 under the equipment facility at february 28 , 2015. the borrowing has a repayment term of 48 months and bears interest at 2.12 % per annum . we had outstanding borrowings under a note payable of $ 1,458,000 at february 28 , 2015. the note is payable over ten years and accrues interest at 4.15 % . the note payable is secured by a mortgage on our land and buildings . story_separator_special_tag reported a net loss of $ 134,000 compared to a net loss of $ 186,000 for the prior year period . the reported losses exclude any inter-company rent . a summary of our real estate operations is as follows : replace_table_token_4_th 15 replace_table_token_5_th for the years ended february 28 , 2015 and 2014 , net cash outflows related to the industrial park were $ 269,000 and $ 494,000 , respectively . these cash outflows are net of rental income and depreciation expense and include the principal payments on the industrial park 's mortgage and the costs of capital improvements . prior to purchasing the industrial park in december 2010 , we had rental expense of approximately $ 136,000 or $ 7.14 per square foot . interest income , interest expense and income taxes : interest income increased to $ 33,000 for the year ended february 28 , 2015 when compared to $ 7,000 for the year ended february 28 , 2014. our present investment policy is to invest excess cash in highly liquid mutual funds . our holdings are rated at or above investment grade . interest expense decreased to $ 65,000 for the year ended february 28 , 2015 as compared to $ 110,000 for the year ended february 28 , 2014. the decrease in interest expense is a result of the refinancing of the industrial park in december 2013. we recorded income tax expense of $ 219,000 for the year ended february 28 , 2015 as compared to $ 130,000 for the year ended february 28 , 2014. as of february 28 , 2015 , we have no net operating loss deductions available to carry forward . the details of the current year 's tax benefit are explained in note 12 in our financial statements . for the year ended february 28 , 2015 , we had net income of $ 606,000 as compared to $ 484,000 for the year ended february 28 , 2014. the increase in our net income is due to an increase in our sales volume combined with an increase in our gross profit margin . for the years ended february 28 , 2015 and 2014 , we do not believe that our sales revenue or net income has been adversely affected by the impact of inflation or changing prices . 16 off - balance sheet arrangements we do not have any off - balance sheet arrangements as of february 28 , 2015. critical accounting policies the discussion and analysis of the company 's financial condition and results of operations are based upon the company 's consolidated financial statements , which have been prepared in accordance with accounting principles generally accepted in the united states of america . the preparation of these financial statements requires the company to make estimates and judgments that affect the reported amount of assets and liabilities , revenues and expenses , and related disclosure on contingent assets and liabilities at the date of the financial statements . actual results may differ from these estimates under different assumptions and conditions . critical accounting policies are defined as those that are reflective of significant judgments and uncertainties , and may potentially result in materially different results under different assumptions and conditions . as of february 28 , 2015 , management believes there are no critical accounting policies applicable to the company that are reflective of significant judgments and or uncertainties . stock-based compensation the computation of the expense associated with stock-based compensation requires the use of a valuation model . asc 718 is a complex accounting standard , the application of which requires significant judgment and the use of estimates , particularly surrounding black-scholes assumptions such as stock price volatility , expected option lives , and expected option forfeiture rates , to value equity-based compensation . we currently use a black-scholes option pricing model to calculate the fair value of stock options . we primarily use historical data to determine the assumptions to be used in the black-scholes model and have no reason to believe that future data is likely to differ materially from historical data . however , changes in the assumptions to reflect future stock price volatility and future stock award exercise experience could result in a change in the assumptions used to value awards in the future and may result in a material change to the fair value calculation of stock-based awards . asc 718 requires the recognition of the fair value of stock compensation in net income . although every effort is made to
| results of operations ultrasonic spraying – sales and gross profit : net sales : replace_table_token_1_th for the year ended february 28 , 2015 , our sales increased by $ 556,000 to $ 10,758,000 as compared to $ 10,202,000 for the year ended february 28 , 2014 , an increase of 5.4 % . during the year ended february 28 , 2015 , we experienced an increase in sales of our nozzles and generators , xyz units , fluxers and stent coating units . we did , however , see a decrease in sales of our widetrack units , lead solder recovery systems and servo units . gross profit : our gross profit increased $ 467,000 , to $ 5,124,000 for the year ended february 28 , 2015 from $ 4,657,000 for the year ended february 28 , 2014. our gross profit margin percentage was 48 % for the year ended february 28 , 2015 compared to 46 % for the year ended february 28 , 2014. the increase in the current year 's gross profit margin is due to increases in sales of our higher gross margin stent coaters , xyz units and fluxer units . 13 export sales : replace_table_token_2_th for the year ended february 28 , 2015 , sales to customers located in european countries increased by $ 252,000 or 14 % , sales to customers located in asian countries decreased by $ 1,181,000 or 35 % and sales to other non-based us customers decreased $ 500,000 or 38 % . for the year ended february 28 , 2015 , sales to the far east decreased by $ 1,181,000. during the year ended february 28 , 2014 , our sales to the far east included approximately $ 800,000 of widetrack equipment .
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the following management 's discussion and analysis ( “ md & a ” ) is intended to help the reader understand our results of operations and financial condition . md & a is provided as a supplement to , and should be read in conjunction with , our audited financial statements and the accompanying notes to the financial statements and other disclosures included in this annual report on form 10-k ( including the disclosures under “ item 1a . risk factors ” ) . cautionary statement the discussion herein contains forward-looking statements within the meaning of section 21e of the securities exchange act of 1934 , as amended ( the “ exchange act ” ) , which are subject to the “ safe harbor ” created in section 21e . forward looking statements regarding our financial condition and our results of operations that are based upon our consolidated financial statements , which have been prepared in accordance with accounting principles generally accepted within the united states ( “ u.s . gaap ” ) , as well as projections for the future . the preparation of these financial statements requires our management 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 evaluate our estimates on an ongoing basis . our estimates are based on historical experience and on various other assumptions that are believed to be reasonable under the circumstances . the results of our estimates form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources . 45 we operate in a highly competitive environment that involves a number of risks , some of which are beyond our control . we are subject to risks common to biotechnology and biopharmaceutical companies , including risks inherent in our drug discovery , drug development and commercialization efforts , clinical trials , uncertainty of regulatory actions and marketing approvals , reliance on collaborative partners , enforcement of patent and proprietary rights , the need for future capital , competition associated with products , potential competition associated with our product candidates and retention of key employees . in order for any of our product candidates to be commercialized , it will be necessary for us , or our collaborative partners , to conduct clinical trials , demonstrate efficacy and safety of the product candidate to the satisfaction of regulatory authorities , obtain marketing approval , enter into manufacturing , distribution and marketing arrangements , and obtain market acceptance and adequate reimbursement from government and private insurers . we can not provide assurance that we will generate significant revenues or achieve and sustain profitability in the future . in addition , we can provide no assurance that we will have sufficient funding to meet our future capital requirements . statements contained in management 's discussion and analysis of financial condition and results of operations and elsewhere in this report which are not historical facts are , or may constitute , forward-looking statements . forward-looking statements involve known and unknown risks that could cause our actual results to differ materially from expected results . the most significant known risks are discussed in the section entitled “ risk factors. ” although we believe the expectations reflected in the forward-looking statements are reasonable , we can not guarantee future results , levels of activity , performance or achievements . we caution you not to place undue reliance on any forward-looking statements . our revenues are difficult to predict and depend on numerous factors , including the prevalence and severity of influenza in regions for which peramivir has received regulatory approval , seasonality of influenza , commercialization efforts and resources dedicated to our products by our collaborative partners , ongoing discussions with government agencies regarding future peramivir and or galidesivir development and stockpiling procurement , as well as entering into , or modifying , licensing agreements for our product candidates . furthermore , revenues related to our collaborative development activities are dependent upon the progress toward and the achievement of developmental milestones by us or our collaborative partners . our operating expenses are also difficult to predict and depend on several factors , including research and development expenses ( and whether these expenses are reimbursable under government contracts ) , drug manufacturing , and clinical research activities , the ongoing requirements of our development programs , and the availability of capital and direction from regulatory agencies , which are difficult to predict . management may be able to control the timing and level of research and development and general and administrative expenses , but many of these expenditures will occur irrespective of our actions due to contractually committed activities and or payments . as a result of these factors , we believe that period to period comparisons are not necessarily meaningful and you should not rely on them as an indication of future performance . due to all of the foregoing factors , it is possible that our operating results will be below the expectations of market analysts and investors . in such event , the prevailing market price of our common stock could be materially adversely affected . overview we are a biotechnology company that discovers novel , oral , small-molecule medicines . we focus on oral treatments for rare diseases in which significant unmet medical needs exist and an enzyme plays the key role in the biological pathway of the disease . we integrate the disciplines of biology , crystallography , medicinal chemistry and computer modeling to discover and develop small molecule pharmaceuticals through the process known as structure-guided drug design . critical accounting policies and estimates the accompanying discussion and analysis of our financial condition and results of operations are based upon our consolidated financial statements and the related disclosures , which have been prepared in accordance with u.s. gaap . story_separator_special_tag bcx9930 was safe and generally well tolerated , and showed rapid , sustained and > 95 % suppression of the alternative pathway ( “ ap ” ) of the complement system at 100 mg every 12 hours , as measured by the ap wieslab ® assay . in part 1 of the trial , a single ascending dose ( “ sad ” ) assessment , six cohorts of healthy volunteers received a single dose of 10 mg , 30 mg , 100 mg , 300 mg , 600 mg or 1200 mg of oral bcx9930 or placebo ( each sad cohort randomized 6:2 ) . in part 2 of the trial , the multiple ascending dose ( “ mad ” ) assessment , two cohorts of healthy volunteers received 50 mg or 100 mg of oral bcx9930 or placebo ( each mad cohort randomized 10:2 ) administered every 12 hours for seven days . healthy volunteers in the mad cohorts were prophylactically dosed with the broad-spectrum antibiotic , amoxicillin/clavulanate . bcx9930 was safe and generally well tolerated at all doses studied . there were no serious adverse events . a clinically benign rash was observed in some healthy volunteers in the mad assessment ( two in the 50 mg cohort , seven in the 100 mg cohort ) , which was self-limited and resolved in 4-8 days after onset . there were no discontinuations from the trial . on january 12 , 2020 , we announced that we have completed an additional mad cohort with 50 mg of oral bcx9930 or placebo administered every 12 hours for 14 days , with vaccination instead of an antibiotic . in the additional mad cohort , a benign rash ( similar to prior mad cohorts ) that was self-limited and resolved in 4 to 8 days post-onset was seen in seven healthy volunteers ; the protocol allowed two of these healthy volunteers with more limited surface area affected by the rash to continue receiving bcx9930 . both of these healthy volunteers successfully dosed-through benign rash , with rash resolving on-drug , in both patients ; biopsies of rashes from multiple subjects confirm the benign nature of the rash . the protocol for part three of the trial in pnh patients allows any patient who develops a clinically benign rash to continue dosing with bcx9930 . based on the safety , tolerability , pk and pd dose-response results from parts 1 and 2 of the phase 1 trial , we plan to complete additional mad dosing cohorts and advance to part 3 of the trial , a proof of concept ( “ poc ” ) study of bcx9930 in pnh patients who are poor responders to eculizumab or ravulizumab , and treatment-naïve patients . we have also successfully dosed mad cohorts of 200 milligrams twice a day and 400 milligrams twice a day . on march 5 , 2020 we announced that we had dosed the first pnh patients in part three of the trial . these patients were naïve to eculizumab and ravulizumab . we expect to report data from the poc study in pnh patients in the second quarter of 2020. fibrodysplasia ossificans progressiva ( “ fop ” ) the goal of the alk2 inhibitor project program at biocryst is to discover and develop orally administered kinase inhibitor drug candidates that are able to slow or prevent the progressive formation of bone in soft tissues , also known as heterotopic ossification ( “ ho ” ) . our lead compound , bcx9250 , reduced ho in an experimental model of alk2-driven ho in laboratory rats , with up to 89 percent reduction in volume of ho compared to controls . on november 1 , 2019 , we announced that we had begun a phase 1 clinical trial with oral bcx9250 for the treatment of fop . the phase 1 trial will evaluate single and multiple ascending doses of oral bcx9250 in healthy volunteers . we expect to report the results from the trial in the second half of 2020. rapivab/alpivab/rapiacta/peramiflu ( peramivir injection ) in september 2018 , the centers for disease control and prevention awarded us a $ 34.7 million contract for the procurement of up to 50,000 doses of rapivab over a five-year period to supply the strategic national stockpile for use in a public health emergency . we delivered two shipments within the award in 2019 , totaling approximately $ 13.9 million , and we expect to deliver at least one shipment within the award in 2020 , totaling approximately $ 6.9 million . galidesivir ( formerly bcx4430 ) on may 9 , 2019 , we announced the completion of a randomized , placebo-controlled phase 1 clinical trial to evaluate intravenous ( iv ) galidesivir in healthy volunteers . in the trial , galidesivir was generally safe and well tolerated . this placebo-controlled trial evaluated the safety , tolerability and pharmacokinetics of escalating doses of galidesivir in four single-dose cohorts of 5mg/kg , 10 mg/kg , 15 mg/kg and 20 mg/kg , with a total of 24 volunteers receiving galidesivir by iv infusion . drug exposures ( cmax and auc ) at the highest dose were 20,500 ng/ml and 44,600 hr.ng/ml , similar to or greater than drug exposures needed in nonclinical galidesivir treatment experiments in marburg virus disease and yellow fever . we are in the process of initiating an exploratory phase 1b clinical trial evaluating galidesivir in yellow fever patients in brazil . we are in active dialogue with niaid , relevant u.s. public health authorities , and clinical investigators as they assess potential approaches to evaluate investigational antiviral drugs for treatment of covid-19 , with the goal of determining if galidesivir is effective against this strain , assessing whether galidesivir should be tested in new or existing clinical trials in patients with covid-19 , and expanding the current supply of the drug .
| recent corporate highlights berotralstat ( bcx7353 ) berotralstat is a second generation hae compound and our lead molecule that is being developed as a once-daily oral therapy for the prevention of hae attacks . we successfully completed our pivotal phase 3 clinical trial , apex-2 , and reported 48-week data from our ongoing long-term safety clinical trial , apex-s , in 2019. based on the data from our clinical program , including apex-2 and apex-s , we submitted a new drug application to the fda in december 2019 for approval of oral , once daily berotralstat for the prevention of hae attacks . in february 2020 , the fda notified us that they had accepted and filed our nda for review and that our prescription drug user fee act ( “ pdufa ” ) date for the nda is december 3 , 2020. in the nda filing acceptance letter , the fda stated that they are not currently planning to hold an advisory committee meeting to discuss the nda . in addition , we have completed apex-j , a clinical trial of berotralstat for the prevention of hae attacks designed to support japanese marketing authorization in conjunction with our other berotralstat clinical trials . on february 3 , 2020 , we announced we had submitted a new drug application ( “ jnda ” ) to the japanese pharmaceuticals and medical devices agency ( “ pdma ” ) for approval of oral , once daily berotralstat for the prevention of hae attacks .
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actual results may differ substantially from those referred to herein due to a number of factors , including but not limited to risks described in item 1a , risk factors and elsewhere in this annual report on form 10-k. overview dolby laboratories has partnered with the entertainment industry for more than 45 years . we provide the products , services , and technologies used to capture and render a superior experience for consumers of entertainment content , regardless of how or where that content is enjoyed . to achieve this we leverage our core competencies , from expertise in signal processing and compression technology , to our ability to develop and deliver compatible tools and technologies for each stage of the content creation , distribution , and playback process . specifically , we provide products and services to help content creators encode in our premium formats , deliver the products , tools , and technologies for distributors to support these formats , and license decoding technologies to the manufacturers of entertainment devices to ensure that content is ultimately experienced as the creator and distributor intended . over the years we have introduced innovations that have significantly improved audio entertainment , such as noise reduction for the recording and cinema industries and surround sound for cinema and home entertainment . today we derive the vast majority of our revenue from our audio technologies . looking forward , we see a number of industry trends that create opportunities for the future growth of our audio business , including the ongoing global transition from analog to digital television and the increasing use of portable devices , such as tablets and smart phones , to play back digital content . we believe our portfolio of technologies and solutions optimize the audio experience for portable devices , providing a rich , clear , and immersive sound , while also meeting the compression needs of the limited bandwidth channels of online and cellular networks . we see opportunities to extend our core competencies beyond audio solutions . for example , we believe that significant improvements can be made in the technology currently used to deliver premium video to displays , and that we have identified solutions that can substantially improve the video experience . similarly , we believe the clarity and quality of voice communications can be improved through the application of our existing audio technologies in areas such as multi-party conferencing . business model we generate revenue by licensing technologies to original equipment manufacturers ( oem ) of consumer entertainment ( ce ) products and software vendors . we also generate revenue by selling products and related services to creators and distributors of entertainment content . we work with the global entertainment industry in three principal ways : first , we offer products and services to content creators and distributors , such as studios and television broadcasters , including satellite and cable operators , and increasingly , content streaming and download service providers . these content creators and distributors use our products , services , and technologies to encode content , creating a rich , clear , and immersive audio experience for consumers . second , we license our technologies , such as dolby digital , dolby digital plus , and dolby pulse , to oems and software vendors for use with consumer products that decode and play back audio content encoded with our proprietary technologies . 41 third , we work directly with standards-setting organizations to promote adoption of our technologies in their specifications in order to ensure a common standard across devices and improve the overall consumer experience . today , our technologies are standard in a wide range of ce products , including virtually all dvd players , blu-ray disc players , audio/video receivers , and personal computer ( pc ) dvd software players . we license our technologies to oems and software vendors in 46 countries and our licensees distribute products incorporating our technologies throughout the world . additionally , we sell our products and provide services in over 80 countries . in fiscal 2009 , 2010 , and 2011 , revenue from outside of the u.s. was 65 % , 66 % , and 68 % of our total revenue , respectively . geographic data for our licensing revenue is based on the location of our licensees ' headquarters . products revenue is based on the destination to which we ship our products , while services revenue is based on the location where services are performed . opportunities , challenges , and risks our revenue increased 4 % in fiscal 2011 from fiscal 2010. our licensing and products markets are characterized by rapid technological changes , new and improved product introductions , changing customer demands , evolving industry standards , changing licensee needs , and product obsolescence . additionally , as described below , our licensing revenue is subject to uncertainties and market and technology trends relating to market growth as well as the mix of ce products incorporating our technologies . our licensing business could be affected by adverse changes in general economic conditions because our technologies are incorporated in ce products , many of which are discretionary goods . furthermore , as described below , our products business and revenue are subject to intense competition and uncertainties relating to the transition to 3d cinema , and events and uncertainties relating to purchasing decisions by our customers . our product sales are likely to be materially affected if demand for our 3d products does not improve . licensing licensing revenue constitutes the majority of our total revenue , representing 83 % , 77 % , and 83 % of total revenue in fiscal 2009 , 2010 , and 2011 , respectively . story_separator_special_tag we continue to face risks relating to : purchasing trends for netbooks , low-cost pcs , and tablets , which may not include operating systems or isv media applications with our technologies ; unauthorized and infringing pc software with our technologies , for which we do not receive royalty payments ; hard disk drive shortages due to the thailand flooding may adversely impact pc sales ; the inclusion of our technologies in business-oriented editions of windows 7 could result in our technologies residing in a greater percentage of pcs , resulting in substantial discounts and reducing the average per unit royalty we receive from microsoft over time ; and certain pc oems have excluded , and we expect others may exclude in the future , isv media applications from their product offerings for windows 7 based pcs , because windows 7 incorporates dvd playback software . our broadcast market , driven by demand for our technologies in televisions and set-top boxes , represented approximately 25 % , 27 % , and 31 % of our licensing revenue in fiscal 2009 , 2010 , and 2011 , respectively . our broadcast market has benefited from increased global shipments in fiscal 2011 of digital televisions and set-top boxes incorporating our technologies . we view the broadcast market as an area for potential continued growth , primarily driven by geographic markets outside of the u.s. we also view broadcast services , such as terrestrial broadcast or iptv services , which operate under particular bandwidth constraints , as another area of opportunity for us to offer dolby digital plus , he aac , and dolby pulse , which enable the delivery of high quality audio content at reduced bit rates , thereby conserving bandwidth . notwithstanding our success in the broadcast market to date , we may not be able to capitalize on these opportunities and actual results may differ from our expectations . our ce market , driven primarily by revenue attributable to sales of dvd players and recorders and blu-ray disc players , represented approximately 25 % , 22 % , and 21 % of licensing revenue in fiscal 2009 , 2010 , and 2011 , respectively . within our ce market in fiscal 2011 , we experienced an increase in revenue from blu-ray disc players and home-theater-in-a-box systems incorporating our technologies . blu-ray disc continues to represent an important source of revenue within our ce market , as blu-ray disc players are required to support dolby digital for primary audio content and dolby digital plus for secondary audio content , and dolby truehd is an optional audio standard . however , there is a risk that revenue from blu-ray disc players may not offset future declines in revenue from dvd players and that blu-ray disc revenue may also decline . revenue generated from our other markets , driven by mobile , gaming , licensing services , and automotive , represented approximately 15 % , 15 % , and 18 % of licensing revenue in fiscal 2009 , 2010 , and 2011 , respectively . mobile revenue in fiscal 2011 was primarily driven by demand for the aac , he aac , dolby digital plus , and dolby digital audio compression technologies incorporated into mobile devices , and to a lesser extent by dolby mobile , our suite of post processing technologies optimized for mobile devices . we view the mobile market as an area of opportunity to increase revenue ; however , actual results may differ from our expectations . revenue from licensing services was primarily driven by demand for standards-based audio compression technologies used in broadcast , pcs , ce , and mobile products . gaming and automotive revenue was primarily driven by sales of video game consoles and in-car entertainment systems with dolby digital , aac , dolby digital plus , dolby truehd , and atrac technologies . consumer entertainment products throughout the world incorporate our technologies . we expect that sales of products incorporating our technologies in emerging economies , such as brazil , china , india , and russia , will increase as consumers in these markets have more disposable income to purchase entertainment products , 44 although there can be no assurance that this will occur . we further expect that oems in lower cost manufacturing countries , including china , will increase production of consumer entertainment products in the future to satisfy this increased demand . additionally , we have seen oems shift product manufacturing to these lower cost manufacturing countries . there are risks associated with the opportunities of doing business in emerging economies that have affected , and will continue to affect , our operating results , such as oems failing to report or underreporting shipments of products incorporating our technologies . products products revenue , driven primarily by sales of equipment to cinema operators and broadcasters , represented 13 % , 20 % , and 14 % of our total revenue in fiscal 2009 , 2010 , and 2011 , respectively . our cinema products represented approximately 82 % , 90 % , and 87 % of total products revenue in fiscal 2009 , 2010 , and 2011 , respectively . sales of our cinema products tend to fluctuate based on the underlying trends in the cinema industry , including the popularity of individual movies , as cinema owners often purchase equipment to meet expected box office demand . cinema products revenue in fiscal 2011 reflects decreased unit shipments for traditional cinema products , as more exhibitors convert to digital cinema , and also increased competition and promotional pricing for 3d products . the cinema industry is in the midst of a transition from traditional film to digital cinema . we estimate that the cinema industry is approximately halfway through this transition . digital cinema offers motion picture studios a means to achieve cost savings in printing and distributing movies , to combat piracy , and to enable repeated movie playback without degradation in image and audio quality .
| results of operations revenue replace_table_token_5_th licensing . the 11 % increase in licensing revenue from fiscal 2010 to fiscal 2011 was primarily driven by an increase in revenue from our broadcast and other markets , and to a lesser extent , by increases in revenue from our ce market , partially offset by decreases from our pc market . the increase in revenue from our broadcast market was primarily driven by higher shipments in fiscal 2011 of digital televisions and set-top boxes that incorporate our technologies . the increase in revenue from our other markets was primarily driven by higher back royalties , in addition to increases in sales of devices incorporating our dolby mobile technology . the increase in revenue from our ce market was primarily driven by increases in revenue from shipments of blu-ray disc players , home-theater-in-a-box systems , digital media adaptors , and audio/video receivers that incorporate our technologies , which were partially offset by a decrease in revenue from shipments of standard dvd players . the decrease in revenue from our pc market was primarily driven by decreased isv media applications in pc shipments . the 19 % increase in licensing revenue from fiscal 2009 to fiscal 2010 was primarily driven by an increase in revenue from our broadcast and pc markets , and to a lesser extent , by increases in revenue from our ce and other markets .
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to the extent the borrowed shares loaned under the share lending agreement are not sold or returned to the company , the borrower has agreed to not vote any borrowed shares of which the borrower is the owner of record story_separator_special_tag the following discussion and analysis should be read in conjunction with the company 's consolidated financial statements and the related notes included elsewhere in this annual report on form 10-k. the following information contains forward-looking statements , which are subject to risks and uncertainties . should one or more of these risks or uncertainties materialize , actual results could differ from those expressed or implied by the forward-looking statements . see “ forward-looking statements ” at the beginning of this annual report on form 10-k for further clarification . executive summary the company is a diversified global technology-driven growth company to the oil , gas , and mining industries by providing oilfield products , services and equipment . the company operates in select domestic and international markets , including the gulf coast , the southwest , the rocky mountains , the northeastern and mid-continental us , canada , mexico , central america , south america , europe , africa and asia and markets products domestically and internationally in over 20 countries . the company 's customers include major integrated oil and natural gas companies , independent oil and natural gas companies , pressure pumping service companies , state-owned oil companies and international service supply chain management companies . the company 's ability to compete in the oilfield services market is dependent on the company 's ability to differentiate products and services , provide superior quality and service , and maintain a competitive cost structure . company operations are impacted by natural gas and oil well drilling activity , the depth and drilling conditions of wells , the number of well completions and the level of work-over activity in north america . drilling activity , is largely dependent on the volatility of natural gas and crude oil prices and expectations of future prices . the company 's results of operations depend heavily upon sustainable prices charged customers , which are impacted by drilling activity levels , availability of equipment and other resources , and competitive pressures . these combined market factors can lead to volatility in both revenue and profitability . historical market conditions are reflected in the table below : replace_table_token_4_th source : rig count : baker hughes , inc. ( www.bakerhughes.com ) ; west texas intermediate crude and natural gas prices : department of energy , energy information administration ( www.eia.doe.gov ) . flotek industries , inc. – form 10-k – 19 back to contents global economic growth and increased demand for oil and natural gas are the primary drivers of customer expenditures to develop and produce oil and natural gas . the recovery within the global economy began in 2010 and is anticipated to continue in 2011. increased economic activity , particularly in emerging asia and middle east economies , and market predictions for continued economic growth supports expectations of increasing demand for oil and natural gas . spending by oil and natural gas exploration and production companies , which is dependent upon forecasts of the expected future supply and future demand for oil and natural gas products and associated estimates of costs to find , develop , and produce reserves , increased in 2010 as compared to 2009. changes in oil and natural gas exploration and production spending resulted in increased demand for the company 's products and services . in north america , customer expenditures increased for both oil and natural gas projects resulting in a 45 % increase in the north american rig count in 2010 as compared to 2009. the increase in oil-directed drilling is a direct reflection of the global price of oil , which is currently trading at a premium , on a btu basis , relative to natural gas in north america . the increase in gas-directed drilling was driven by activity in unconventional shale gas plays due to the favorable prices of wet gas , despite relatively low prices for natural gas . spending on gas-directed projects in 2010 was supported by ( 1 ) hedges on production made in prior periods when futures prices were higher , ( 2 ) the need to drill and produce natural gas to hold leases acquired in earlier periods , ( 3 ) the influx of equity from companies interested in developing a position in the shale resource plays and ( 4 ) associated production of natural gas liquids in certain basins . as a result of streamlining operational costs in 2009 and proactive management of operational costs during 2010 , the company was favorably positioned to respond to increased activity and product demand in 2010. further , innovative sales initiatives and strategic international efforts enabled the company to increase revenues by 30.6 % in 2010 as compared to 2009. forecasting the company 's position in the current recovery cycle is challenging , as it differs from past cycles due to the overlay of continued worldwide uncertainties , including significant political unrest and radical regime and governmental changes in significant oil producing countries . changes in product demand to liquid rich natural gas and oil products from natural gas products affected the type of industry drilling activity and increased petroleum pricing . despite recent favorable activity the company expects continued uncertainty in drilling activity in 2011 due to a number of factors including commodity prices , global demand for oil and natural gas , supply and depletion rates of oil and natural gas reserves , as well as broader variables including government fiscal policies and current and potential political unrest in key petroleum producing countries . the oil field services sector experienced a cyclical low in the third quarter of 2009. stabilization of the business and cost containment measures taken by the company beginning in 2009 were still being realized throughout 2010. the company expects improved economic conditions will continue throughout 2011 despite drilling activity uncertainty . story_separator_special_tag selling , general and administrative costs , ( “ sg & a ” ) are not directly attributable to products sold or services rendered . sg & a costs for the year ended december 31 , 2010 were $ 41.9 million , an increase of 13.3 % , compared to $ 36.9 million in 2009. the comparative period over period increase resulted from increased incentive stock compensation expense of $ 4.0 million and professional fees of $ 2.1 million . non-cash incentive stock compensation expense increased due to recognition of $ 3.0 million of non-cash compensation expense during the second quarter of 2010 related to prior equity grants to the company 's former president and ceo , which vested at the time of his retirement from the company on june 30 , 2010 and vesting of other outstanding existing equity grants . the increase in professional fees related to the company 's march 31 , 2010 financing , defense of class action lawsuits and use of third party technical consultants ( e.g. , information technology ; investment ; and valuation advisors ) . depreciation and amortization costs were $ 4.5 million for the year ended december 31 , 2010 , a decrease of approximately 8.1 % compared to the same period in 2009. flotek industries , inc. – form 10-k – 21 back to contents research and development ( “ r & d ” ) expenses were $ 1.4 million for the year ended december 31 , 2010 , a decrease of 33.3 % , compared to $ 2.1 million during the same period in 2009. the reduction in r & d expense is attributable to more realigned spending objectives on key initiatives driven by the economic recession and management cost containment objectives . the company anticipates 2011 r & d spending levels to remain consistent with 2010. r & d is charged to expense as incurred . costs associated with impairments totaled $ 8.9 million and $ 0.4 million , related to long-lived asset and other intangibles , for the year ended december 31 , 2010 , a decrease of $ 9.2 million or 49.8 % compared to $ 18.5 million in 2009. the impairment valuation recognized during 2010 primarily related to long-lived assets within the drilling segment . during the fourth quarter of 2010 revenue generation trends of certain identified rental assets were not performing as anticipated by management in the company 's 2010 forecast . upon review , management determined the recoverability of the carrying value of certain assets to be less than the expected revenue generation capacity of the assets . the $ 18.5 million recognized in 2009 was attributable to the teledrift division . revenue within the drilling segment increased $ 15.0 million , or 29.6 % in 2010 due to increased demand for products resulting from a shift in the type of drilling activity as well as fluctuations in oil and natural gas commodity prices . management believes the current cost structure is appropriate for 2011 forecast levels of activity and does not foresee significant future adjustments . changes in market demand or forecast assumptions could cause management to pursue additional cost containment efforts . during the year ended december 31 , 2010 , the warrant liability increased by $ 21.5 million to $ 26.2 million . the increase has been recognized in the statement of operations as a noncash expense . this liability will not be settled in cash . future fluctuations in the warrant liability will be recognized as noncash income or expense . interest expense was $ 19.4 million for the year ended december 31 , 2010 , an increase of $ 3.9 million or 25.0 % compared with $ 15.5 million in 2009. the increase was the result of an increase in the interest rate associated with the refinancing of the company 's senior credit facility from 8.5 % to 12.5 % combined with the amortization of related issuance costs of $ 2.0 million incurred during the year ( see “ capital resources and liquidity ” ) , commitment fee payments of $ 7.3 million . an income tax benefit of $ 5.5 million was recorded for the year ended december 31 , 2010 , reflecting an effective tax rate of ( 11.3 ) % , compared to a tax provision of $ 2.0 million for the year ended december 31 , 2009 , reflecting an effective tax rate of ( 4.2 % ) . the change in the company 's effective tax rate is primarily due to a $ 4.2 million increase in the valuation allowance recorded in 2010 against the deferred tax asset of one of our filing jurisdictions and a $ 7.5 million increase to tax expense recorded in 2010 for the nondeductible expense related to the warrant liability . results for 2009 compared to 2008—consolidated revenue for the year ended december 31 , 2009 was $ 112.6 million , a decrease of $ 113.5 million , or 50.2 % , compared to $ 226.1 million for the same period in 2008. revenue decreased across all of the company 's segments as depressed petroleum and natural gas prices drove down rig count and related drilling activity , negatively impacting activity volume in 2009. pricing pressures were also a factor in the decline of revenue as customers switched to less expensive products where possible . consolidated gross margin decreased $ 61.4 million and as a percentage of sales decreased to 26.1 % in 2009 from 40.1 % in 2008 due to margin compression in the drilling segment . although direct expense reductions of $ 5.9 million were realized in 2009 versus 2008 , the decrease in direct expenses did not occur as swiftly as the decline in revenue . sg & a costs were $ 36.9 million for the year ended december 31 , 2009 , a decrease of 20.2 % , compared to $ 46.3 million in 2008. the decrease was primarily due to a $ 9.3 million reduction in indirect personnel and personnel related costs and professional fees due to headcount reduction and cost containment efforts .
| results by segment replace_table_token_6_th results for 2010 compared to 2009—chemicals and logistics chemicals ' revenue for 2010 was $ 66.1 million , an increase of $ 16.8 million , or 34.1 % , as compared to $ 49.3 million in 2009. recovery of previously granted product and service price reductions , increased international sales and increased demand for microemulsion products from new and existing customers drove the increase . additionally , new products generated from the company 's ongoing r & d activities continue to be favorably received by customers . the favorable variance also correlates with an 18.9 % increase in average natural gas rig activity ( 2010 : 1,103 rigs vs. 2009 : 928 rigs ) within the industry and corresponding product sales increases of $ 17.5 million . the favorable variances was offset by a decrease in customer service revenue ( $ 0.7 million ) in the first half of 2010 as compared to the first half of 2009 in response to industry uncertainty regarding ramifications of the british petroleum deepwater horizon oil disaster . correspondingly , the drilling moratorium in the gulf of mexico significantly impacted the company 's logistics division contract in the gulf of mexico . the gross margin increased $ 7.6 million , or 35 % in 2010 as compared to 2009 ; however , the gross margin as a percentage of revenue remained relatively flat at 44.2 % for the year ended december 31 , 2010 , compared to 44.0 % for the year ended december 31 , 2009. favorable variances were due to increased product sales volumes and favorable product mix margins . income from operations was $ 19.8 million for 2010 , an increase of approximately 53.0 % compared to $ 13.0 million in 2009. income from operations as a percentage of revenue increased to 30.0 % for 2010 from 26.3 % for the same period in 2009. favorable variance is attributable to increased product sales and favorable product mix margins .
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the following discussion and analysis of our financial condition and results of operations should be read in conjunction with our consolidated financial statements and the accompanying notes included elsewhere in this annual report on form 10-k. the discussion and analysis below contain certain forward-looking statements about our business and operations that are subject to the risks , uncertainties , and other factors described in the section entitled “ risk factors , ” included in part i , item 1a , and elsewhere in this annual report on form 10-k. these risks , uncertainties , and other factors could cause our actual results to differ materially from those expressed in , or implied by , the forward-looking statements . please read the section entitled “ cautionary note regarding forward-looking statements. ” overview we are a beloved brand in the u.s. pet care industry with more than 55 years of service to pets and the people who love and care for them . since our founding in 1965 , we have been developing new standards in pet care , delivering comprehensive wellness solutions through our products and services , and creating communities that deepen the pet-parent bond . over the last three years , we have transformed the business from a successful traditional retailer to a disruptive , fully integrated , digital-focused provider of pet health and wellness offerings . we revamped our leadership team and invested over $ 375 million to build out leading capabilities across e-commerce and digital , owned brands , data analytics , and a full suite of on-site services including veterinary care . our go-to-market strategy is powered by a multi-channel platform that integrates our strong digital presence with our nationwide physical network . our data-driven digital footprint , consisting of an entirely redesigned e-commerce site and personalized mobile app , delivers an exceptional customer experience and serves as a hub for pet parents to manage their pets ' health , wellness , and merchandise needs , while enabling them to shop wherever , whenever , and however they want . by strategically leveraging our extensive physical network consisting of approximately 1,454 pet care centers located within three miles of 53 % of our customers , we are able to offer our comprehensive product and service offering in a localized manner with a meaningful last-mile advantage over our competition . through our connected platform , we serve our customers in a differentiated manner by offering the convenience of ship-from-store , bopus , curbside pick-up and same day delivery . multi-channel customers , who spend between 3x to 7x more with us compared to single-channel customers , increased by double-digits in fiscal 2020. through our multi-channel platform , we provide a comprehensive offering of differentiated products and services that fulfill all the needs of pet parents and their pets . our product offering leverages our owned brand portfolio and partnerships with premium third-party brands to deliver high quality food that avoids artificial ingredients , complemented by a wide variety of premium pet care supplies . we augment this product offering with a broad suite of professional services , including grooming as well as in-store and online training . our service offering is further enhanced by a rapidly expanding , affordable veterinary service platform , which includes full-service veterinary hospitals , vetco clinics , and tele-veterinarian services . in addition , we are increasingly linking our offerings with subscription programs such as membership and pet health insurance that create deeper engagement with our customers , and with our pals rewards loyalty program members specifically , which members accounted for approximately 80 % of transactions in fiscal 2020. at the end of fiscal 2020 , we launched our vital care membership program , the industry 's first broad-scale , comprehensive membership program covering items including vaccinations , grooming , services and merchandise discounts . in addition to providing differentiated products and services , our over 23,000 knowledgeable , passionate partners provide important high-quality advice to our customers in our pet care centers . how we assess the performance of our business in assessing our performance , we consider a variety of performance and financial measures including the following : comparable sales comparable sales is an important measure throughout the retail industry and includes both retail and digital sales of products and services . a new location or digital site is included in comparable sales beginning on the first day of the fiscal month following 12 full fiscal months of operation and is subsequently compared to like time periods from the previous year . relocated pet care centers become comparable pet care centers on the first day of 41 operation if the original pet care center was open longer than 12 full fiscal months . if , during the period presented , a pet care center was closed , sales from that pet care center are included up to the first day of the month of closing . additionally , our comparable sales exclude the impact of the wind-down and migration of our drs . foster & smith digital site to petco.com in fiscal 2018 and f iscal 2019. there may be variations in the way in which some of our competitors and other retailers calculate comparable sales . as a result , data in this filing regarding our comparable sales may not be comparable to similar data made available by other retailers . comparable sales allow us to evaluate how our overall ecosystem is performing by measuring the change in period-over-period net sales from locations and digital sites that have been open for the applicable period . we intend to improve comparable sales by continuing initiatives aimed to increase customer retention , frequency of visits , and basket size . general macroeconomic and retail business trends are a key driver of changes in comparable sales . non-gaap financial measures management and the board of directors review certain non-gaap financial measures , along with gaap measures ( as defined herein ) , to evaluate our operating performance , generate future operating plans and make strategic decisions regarding the allocation of capital . story_separator_special_tag overall , this macroeconomic trend has favorably impacted our business results to date , but the possible sustained spread or resurgence of the pandemic , and any government response thereto , increases the uncertainty regarding future economic conditions that could impact our business in the future . we quickly adapted our business and operations since the start of the pandemic to ensure , first and foremost , the health and safety of our partners , the animals in our care , and the customers we serve . these adaptations include : providing additional paid-time off and five cycles of appreciation bonuses to our frontline partners ; establishing a $ 2 million employee support fund to assist our partners and their families impacted by the pandemic ; investing in sanitation , plexiglass barriers , signage , and personal protective equipment ; and adopting strict safety protocols that limit direct human interactions and promote social distancing . we were well-positioned to meet the increasing and evolving needs of pets and their parents at the onset of the pandemic . initially , we experienced significant increases in customer pet food purchases , but as the months progressed , our sales growth shifted to our supplies category , due to an increase in pet ownership and shifts in disposable income spending toward pets . in services , we temporarily suspended our training services and vaccination clinic operations , and we reduced our grooming capacity while stay-at-home orders were in place . although we had experienced increasing customer demand for services before the pandemic , sales attributable to such services declined significantly from march through may 2020 as a result of the suspension . 43 we have experienced a significant acceleration of our e-commerce business , particularly as it relates to the integrated offering with our pet care centers . our ship-from-store capability enabled us to maintain regular shipping timelines , and we capitalized on our bopus capability and rolled out curbside pick-up in a matter of weeks , enabling us to get products to customers faster and at a higher margin than online retailers that incur costs to ship products to their customers . additionally , in the fourth quarter of fiscal 2020 , we implemented same day delivery . we have incurred additional expenses to support this business growth . to preserve liquidity during the pandemic , we temporarily suspended capital expenditures , but as our financial results surpassed earlier expectations , we returned to our initial capital plan in the second half of fiscal 2020. in efforts to control expenses , we negotiated discounts and concessions with landlords and vendors and temporarily furloughed or implemented temporary pay cuts for non-frontline partners . significant components of results of operations net sales our net sales comprise gross sales of products and services , net of sales tax and certain discounts and promotions offered to our customers , including those offered under our customer loyalty programs . net sales are driven by comparable sales , new pet center locations , and expanded offerings . cost of sales and gross profit gross profit is equal to our net sales minus our cost of sales . gross profit rate measures gross profit as a percentage of net sales . our cost of sales includes the following types of expenses : direct costs ( net of vendor rebates , allowances , and discounts for products sold ) including inbound freight charges ; shipping and handling costs associated with sales to customers ; freight costs associated with moving merchandise inventories ; inventory shrinkage costs and write-downs ; payroll costs of pet groomers , trainers , veterinarians , and other direct costs of services ; and costs associated with operating our distribution centers including payroll , occupancy costs and depreciation . our digital gross profit rate tends to be lower than the gross profit rate from sales in our pet care centers due to incremental costs associated with shipping and other expenses of delivery to customers . in addition , our gross profit rate tends to be lower for services than for products . selling , general , and administrative expense the following types of expenses are included in our selling , general , and administrative costs ( “ sg & a ” ) : payroll and benefit costs of pet care center employees and corporate employees ; occupancy and operating costs of pet care centers and corporate facilities ; depreciation and amortization related to pet care centers and corporate assets ; credit card fees ; store pre-opening and remodeling costs ; advertising costs ; and other administrative costs . 44 sg & a includes both fixed and variable costs and therefore is not directly correlated with net sales . we expect that our sg & a expenses will increase in future periods due to additional expenses we expect to incur as a result of being a public company , including stock-based compensation . goodwill and indefinite-lived intangible impairment in connection with the fiscal 2015 acquisition by our sponsors , we recorded goodwill of approximately $ 3.0 billion and an indefinite-lived trade name asset of $ 1.1 billion . we evaluate these assets for impairment annually and whenever events or changes in circumstances indicate that the carrying value may not be recoverable . please read the discussion of these assets under “ critical accounting policies and estimates. ” interest expense our interest expense is primarily associated with the senior secured credit facilities , the floating rate senior notes , the 3.00 % senior notes ( as defined herein ) , and interest rate caps . in january 2021 , the floating rate senior notes and the 3.00 % senior notes were exchanged , canceled , and or redeemed in connection with the initial public offering , and our interest rate caps were settled in accordance with their contractual terms .
| executive summary our business transformation initiatives , accelerated by an increase in pet ownership and a shift in customer discretionary spend on pets , have driven strong top- and bottom-line growth in our business . comparing fiscal 2020 and fiscal 2019 , we achieved the following results : increase in net sales from $ 4.43 billion to $ 4.92 billion , representing period-over-period growth of 11.0 % ; comparable sales growth of 11.4 % ; increase in operating income from $ 110.6 million to $ 194.4 million , representing period-over-period growth of 75.8 % ; a decrease in net loss attributable to class a and b-1 common stockholders from $ 95.9 million to $ 26.5 million , representing a period-over-period improvement of 72.4 % ; an increase in adjusted ebitda from $ 424.5 million to $ 484.3 million , representing period-over-period growth of 14.1 % ; and 45 net cash provided by operating activities increased from $ 110.3 million in fiscal 2019 to $ 268.6 million in fiscal 2020. for a description of our non-gaap measures and reconciliations to their most comparable gaap measures , please read the section below titled “ reconciliation of non-gaap financial measures to gaap measures. ” results of operations the following tables summarize our results of operations and the percent of net sales of line items included in our consolidated statements of operations ( dollars in thousands ) : replace_table_token_0_th replace_table_token_1_th 46 replace_table_token_2_th fiscal 2020 ( 52 weeks ) compared with fiscal 2019 ( 52 weeks ) net sales and comparable sales net sales increased $ 485.7 million , or 11.0 % , to $ 4.92 billion in fiscal 2020 compared to net sales of $ 4.43 billion in fiscal 2019 , driven by a 11.4 % increase in our comparable sales . with our investments in our business over the past two years , we were , and continue to be , well-positioned to meet the increasing and evolving needs of pets and their parents .
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our actual results could differ materially from those contained in or implied by any forward-looking statements . factors that could cause or contribute to these differences include those under “ risk factors ” included in part i , item 1a or in other parts of this annual report on form 10-k. overview we provide a comprehensive cybersecurity solution for detecting , preventing , analyzing and resolving today 's advanced cyber-attacks that evade legacy signature-based security products . to address the shortcomings of signature-based security solutions , we developed a new threat prevention platform based on our purpose-built , virtual machine-based detection engine , mvx . our comprehensive platform combines our mvx virtual execution engine and our cloud-based threat intelligence network to identify previously unknown threats and protect organizations at all stages of the attack lifecycle . our cybersecurity platform includes a family of software-based appliances , endpoint agents , cloud-based subscription services , support and maintenance and professional consulting services . our principal threat prevention appliance families address critical vectors of attack : web , email , file , endpoint and mobile . our products initially require a mandatory subscription agreement that provides access to our dti cloud which distributes updated intelligence throughout the network to provide real-time detection of advanced attacks , and we offer optional subscription services that provide additional support and functionality . we also offer a cloud-based threat analysis platform that allows it security analysts to analyze and prioritize attack alerts from security devices utilizing our repository of dynamic and contextual threat intelligence . additionally , we provide a family of forensic and analysis appliances and agents to enable investigation and remediation of breaches . due to our team of highly skilled professional services experts , we provide incident response , security program assessment and other consulting services , as well as our fireeye-as-a-service subscription services for management of our devices and comprehensive monitoring of attacks based on our threat intelligence and security expertise . our adaptive approach to cybersecurity represents a paradigm shift in how it security has been conducted since the earliest days of the information technology industry , and we believe it is imperative for organizations to invest in this new approach to protect their critical assets from the global pandemic of cybercrime , hacktivism , cyber-espionage and cyber-warfare . our business model we generate revenue from sales of our products , subscriptions and services . our product revenue consists primarily of revenue from the sale of our threat prevention platform of vector-specific appliances and cloud-based security solutions , consisting of network threat prevention , email threat prevention , endpoint threat prevention , file content security and mobile threat prevention . we also offer security management and analysis products including our central management system , threat analytics platform and malware analysis system , and security forensics products including our network forensics platform , investigation analysis system and mandiant intelligent response . we offer this portfolio as a complete solution to protect customers from the next generation of cyber-attacks at all stages of the attack lifecycle and across all primary threat vectors , including web , email , file , endpoint and mobile . because the typical customer has more web entry points to protect than email and file entry points , customers that purchase our threat prevention portfolio generally purchase more network threat prevention appliances than any other appliance . as a result , network threat prevention accounts for the largest portion of our threat prevention product revenue . in addition , because most malicious attacks occur through the web threat vector , smaller customers and customers who do not have the budget to purchase the full threat prevention portfolio often only purchase network threat prevention . prior to june 2014 , revenue associated with email threat prevention was recognized ratably over the longer of the contractual term or the estimated period the customer was expected to benefit from the product . beginning in june 2014 , we started shipping all email threat prevention appliances with software that allows customers to benefit from the product without the associated subscription services . as a result , revenue from sales of email threat prevention appliances is now being recognized at the time of shipment , consistent with our other product offerings . we have also experienced steady growth in sales of our endpoint threat prevention and network forensics platform appliances which we began offering early in 2014. we introduced our file content security appliance in the second quarter of 2012. we require customers to purchase a subscription to our dti cloud and support and maintenance services when they purchase any part of our product portfolio . our customers generally purchase these subscriptions and services for a one or three year term , and revenue from such subscriptions is recognized ratably over the subscription period . sales of these subscriptions and services have increased our deferred revenue . as of december 31 , 2015 and 2014 , our total deferred revenue was $ 527.0 million and $ 352.5 million , respectively . amortization of this growing deferred revenue has contributed to the increase in our subscription and services revenue as a percentage of total revenue . for the years ended december 31 , 2015 , 2014 and 2013 , subscription and services revenue as a percentage of total revenue was 65 % , 58 % , and 45 % , respectively . while most of the growth in our subscription and services revenue during such years relates to the amortization of the initial subscription and services agreements , renewals of such agreements have also contributed to this growth . our renewal rate for subscriptions expiring in 2015 and 2014 was in excess of 90 % , and we expect to maintain high renewal rates in the future due to the significant value we believe these subscriptions and services add to the efficacy of our product portfolio . story_separator_special_tag however , we believe that we will need to invest additional resources in targeted international markets to drive awareness and market adoption . the degree to which prospective customers recognize the mission critical need for next-generation threat protection solutions , and subsequently allocate budget dollars for our platform , will drive our ability to acquire new customers and increase renewals and follow-on sales opportunities , which , in turn , will affect our future financial performance . sales productivity . our sales organization consists of a direct sales team , made up of field and inside sales personnel , and indirect channel sales teams to support our channel partner sales . we utilize a direct-touch sales model whereby we work with our channel partners to secure prospects , convert prospects to customers , and pursue follow-on sales opportunities . to date , we have primarily targeted large enterprise and government customers , who typically have sales cycles from three to nine months , but can be more than a year . we have also recently expanded our inside sales teams to pursue customers in the small and medium enterprise , or sme , market . our growth strategy contemplates increased sales and marketing investments internationally . newly hired sales and marketing resources will require several months to establish prospect relationships and drive overall sales productivity . in addition , sales teams in certain international markets will face local markets that have not had significant market education about advanced security threats that our platform addresses . all of these factors will influence the timing and overall levels of sales productivity , impacting the rate at which we will be able to convert prospects to sales and drive revenue growth . renewal rates . new or existing customers that purchase one of our appliances are required to purchase a one or three year subscription to our dti cloud and support and maintenance services . new or existing customers that purchase one of our security forensic products system or central management system appliances are required to purchase support and maintenance services for a term of one or three years . we believe our renewal rate is an important metric to measure the long-term value of customer agreements and our ability to retain our customers . we calculate our renewal rate by dividing the number of renewing customers that were due for renewal in any rolling 12 month period by the number of customers that were due for renewal in that rolling 12 month period . our renewal rate at december 31 , 2015 and 2014 was in excess of 90 % . these high renewal rates are primarily attributable to the incremental value added to our appliances by our cloud subscriptions , support and maintenance and services . as cloud subscriptions , support and maintenance and services represented 65 % , 58 % and 45 % of our total revenue during the years ended december 31 , 2015 , 2014 and 2013 , respectively , we expect our ability to maintain high renewal rates for these subscriptions and services to have a material impact on our future financial performance . 47 follow-on sales . after the initial sale to a new customer , we focus on expanding our relationship with such customer to sell additional products , subscriptions and services . to grow our revenue , it is important that our customers make additional purchases of our products , subscriptions and services . sales to our existing customer base can take the form of incremental sales of appliances , subscriptions and services , either to deploy our platform into additional parts of their network or to protect additional threat vectors . our opportunity to expand our customer relationships through follow-on sales will increase as we add new customers , broaden our product portfolio to support more threat vectors , add new services , increase network performance and enhance functionality . follow-on sales lead to increased revenue over the lifecycle of a customer relationship and can significantly increase the return on our sales and marketing investments . with some of our most significant customers , we have realized follow-on sales that were multiples of the value of their initial purchases . components of operating results revenue we generate revenue from the sales of our products , subscriptions and services . as discussed further in “ —critical accounting policies and estimates—revenue recognition ” under “ management 's discussion and analysis of financial condition and results of operations ” below , revenue is recognized when persuasive evidence of an arrangement exists , delivery has occurred , the fee is fixed or determinable , and collectability is reasonably assured . our total revenue consists of the following : product revenue . our product revenue is generated from sales of our appliances which we generally recognize at the time of shipment , provided that all other revenue recognition criteria have been met . subscription and services revenue . subscription and services revenue is generated primarily from our cloud subscriptions , fireeye-as-a-service , support and maintenance services and other professional services . we recognize revenue from subscriptions and support and maintenance services over the one or three year contract term , as applicable . professional services revenue , which includes incident response and compromise assessments , is offered on a time-and-material basis or through a fixed fee arrangement and is recognized as the services are delivered . cost of revenue our total cost of revenue consists of cost of product revenue and cost of subscription and services revenue . personnel costs associated with our operations and global customer support organizations consist of salaries , benefits , bonuses and stock-based compensation . overhead costs consist of certain facilities , depreciation and information technology costs . cost of product revenue . cost of product revenue primarily consists of costs paid to our third-party contract manufacturers for our appliances and personnel and other costs in our manufacturing operations department . our cost of product revenue also includes product testing costs , shipping costs and allocated overhead costs .
| results of operations the following tables summarize our results of operations for the periods presented and as a percentage of our total revenue for those periods . the period-to-period comparison of results is not necessarily indicative of results for future periods . replace_table_token_9_th 50 replace_table_token_10_th comparison of the years ended december 31 , 2015 and 2014 revenue replace_table_token_11_th product revenue increased by $ 38.4 million , or 22 % , during the year ended december 31 , 2015 compared to the year ended december 31 , 2014 . the increase in product revenue was primarily driven by growth in our installed base of customers , which grew 51 from approximately 3,100 as of december 31 , 2014 to over 4,400 as of december 31 , 2015 , as well as follow-on purchases from customers expanding their initial deployments of our product portfolio . our network threat prevention and email threat prevention products have historically accounted for the largest portion of our product revenue as customers initially focused on protecting web and email entry points when building our their security infrastructure . our product revenue growth rates have declined as new customers began adopting our cloud subscriptions , including fireeye-as-a-service and etp . we expect product revenue growth rates to continue to decline as part of this ongoing transition . subscription and service revenue increased by $ 158.9 million , or 64 % , during the year ended december 31 , 2015 compared to the year ended december 31 , 2014 . this increase is comprised of an increase in subscription revenue of $ 83.4 million , an increase in professional services revenue of $ 39.1 million and an increase in support and maintenance revenue of $ 36.4 million .
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for example , unsecured consumer and commercial loans are generally classified as “ loss ” at 120 days past due , resulting in their outstanding balances being charged off at that time . for the company 's secured loans , the condition of collateral dependency generally serves as the basis upon which a “ loss ” classification is ascribed to a loan 's impairment thereby confirming an expected loss and triggering charge off of that impairment . while the facts and circumstances that effect the manner and likelihood of repayment vary from loan to loan , the company generally considers the referral of a loan to foreclosure , coupled with the absence of other viable sources of loan repayment , to be demonstrable evidence of collateral dependency . depending upon the nature of the collections process applicable to a particular loan , an early determination of collateral dependency could result in a nearly concurrent charge off of a newly identified impairment . by contrast , a presumption of collateral dependency may only be determined after the completion of lengthy loan collection and or workout efforts , including bankruptcy proceedings , story_separator_special_tag story_separator_special_tag primarily reflected a $ 12.2 million increase in interest income to $ 139.1 million from $ 126.9 million . the increase in interest income primarily reflected an increase in the average balance of interest-earning assets coupled with an increase in their average yield . for the year ended june 30 , 2017 , the average balance of interest-earning assets increased by $ 200.6 million to $ 4.25 billion compared to $ 4.05 billion for the year ended june 30 , 2016. for those same comparative periods , the average yield on interest-earning assets increased by 14 basis points to 3.27 % from 3.13 % . the increase in interest income for the year ended june 30 , 2017 was partially offset by a $ 4.6 million increase in interest expense . the increase in interest expense between the two periods reflected an increase in the average balance of interest-bearing liabilities coupled with an increase in their average cost . for the year ended june 30 , 2017 the average balance of interest-bearing liabilities increased by $ 244.2 million to $ 3.22 billion compared to $ 2.97 billion for the year ended june 30 , 2016. for those same comparative periods , the average cost of interest-bearing liabilities increased six basis points to 1.13 % from 1.07 % . the net interest rate spread increased eight basis points to 2.14 % for fiscal 2017 from 2.06 % for fiscal 2016 while the net interest margin increased six basis points to 2.41 % from 2.35 % for those same comparative periods . the provision for loan losses decreased $ 5.3 million to $ 5.4 million for fiscal 2017 from $ 10.7 million for fiscal 2016. the decrease in provision expense partly reflected a net decrease in specific losses recognized on loans evaluated individually for impairment . this decrease was primarily reflected in the lower level of net charge offs recognized on such loans between comparative periods . the decrease in net charge offs also contributed to a decrease in the historical loss factors utilized to measure impairment on collectively evaluated loans . taken together with the updates to environmental loss factors , the provision expense for loans collectively evaluated for impairment decreased year-over-year . to a lesser extent , the net decrease in the provision expense reflected slightly lower growth in the outstanding balance of loans collectively evaluated for impairment during fiscal 2017 compared to fiscal 2016. non-interest income increased $ 621,000 to $ 11.3 million for fiscal 2017 from $ 10.7 million for fiscal 2016. the increase was largely attributable to an increase in loan sale gains that partly reflected an increase in the volume of residential mortgage loans originated and sold as the company continued to expand its mortgage banking business line throughout fiscal 2017. the increase in loan sale gains also reflected an increase in the volume of sba loans originated and sold . the noted increase in non-interest income was partially offset by a decrease in income arising from our investment in bank-owned life insurance due largely to the lingering effects of lower market interest rates on the income earned on the cash surrender value of the various policies held by the company . the increase in non-interest income was also partially offset by a decrease in fees and service charges that was largely attributable to a decrease in deposit-related service charges coupled with a lesser decrease in loan prepayment charges . non-interest expense increased by $ 8.7 million to $ 81.1 million for the year ended june 30 , 2017 from $ 72.4 million for the year ended june 30 , 2016. the increase was reflected across most categories of non-interest expense with the most noteworthy increases reflected in salaries and employee benefits , director compensation and miscellaneous expenses . as described in greater detail below , the increases in salaries and employee benefits and director compensation expense each reflected the impact of the company 's 2016 equity incentive plan approved by shareholders in october 2016. the increase in salaries and employee benefits also reflected increases in employee compensation costs arising from an increase in the number of employees during the year as well as increases in health insurance and retirement-related employee benefit plans . in addition to reflecting the noted impact of the costs associated with the company 's 2016 equity incentive plan , the increase in director compensation expense also reflected an increase in director fees attributable to the addition of two independent directors during the prior fiscal year whose “ full-year ” annual compensation expense were fully reflected during fiscal 2017. while reflecting a variety of increases across a number of general and administrative expenses , the increase in miscellaneous expense for fiscal 2017 reflected the effect of the company 's recognition of a non-recurring recovery of director pension plan expense during the prior fiscal year . story_separator_special_tag if an impairment is determined in the future , we will reflect the loss as an expense in the period in which the impairment is determined , leading to a reduction of our net income for that period by the amount of the impairment . other-than-temporary impairment ( “ otti ” ) of securities . if the fair value of a security is less than its amortized cost , the security is deemed to be impaired . management evaluates all securities with unrealized losses quarterly to determine if such impairments are “ temporary ” or “ other-than-temporary ” in accordance with applicable accounting guidance . we account for temporary impairments based upon the classification of the related security as either available for sale , held to maturity or trading . temporary impairments on “ available for sale ” securities are recognized , on a tax-effected basis , through accumulated other comprehensive income with offsetting entries adjusting the carrying value of the security and the balance of deferred taxes . conversely , we do not adjust the carrying value of “ held to maturity ” securities for temporary impairments , although information concerning the amount and duration of impairments on held to maturity securities is generally disclosed in periodic financial statements . the carrying value of securities held in a trading portfolio is adjusted to their fair value through earnings on a daily basis . however , we maintained no securities in trading portfolios at or during the periods presented in these financial statements . we account for otti based upon several considerations . first , otti on securities that we have decided to sell as of the close of a fiscal period , or will , more likely than not , be required to sell prior to the full recovery of their fair value to a level equal to or exceeding their amortized cost , are recognized in earnings . if neither of these conditions regarding the likelihood of the security 's sale is applicable , then the otti is bifurcated into credit-related and noncredit-related components . a credit-related impairment generally represents the amount by which the present value of the cash flows that are expected to be collected on an other-than-temporarily impaired security fall below its amortized cost . the noncredit-related component represents the remaining portion of the impairment not otherwise designated as credit-related . we recognize credit-related , otti in earnings . however , noncredit-related , other-than-temporary impairments on debt securities are recognized in accumulated other comprehensive income . comparison of financial condition at june 30 , 2017 and june 30 , 2016 general . total assets increased $ 318.1 million to $ 4.82 billion at june 30 , 2017 from $ 4.50 billion at june 30 , 2016. the net increase in total assets primarily reflected an increase in net loans receivable that was partially offset by decreases in balances of securities and cash and cash equivalents . the net increase in total assets was largely funded by increases in deposits and borrowings that were partially offset by a net decrease in stockholders ' equity . cash and cash equivalents . cash and cash equivalents , which consist primarily of interest-earning and non-interest-earning deposits in other banks , decreased by $ 121.0 million to $ 78.2 million at june 30 , 2017 from $ 199.2 million at june 30 , 2016. the balance of cash and cash equivalents at june 30 , 2016 reflected the effects of temporary accumulation of short-term , liquid assets arising from an increase in loan prepayments during the quarter ended june 30 , 2016. the average balance of cash and equivalents decreased steadily in fiscal 2017 reflecting the company 's ongoing effort to enhance earnings by generally reducing the level of lower-yielding , short-term liquid assets to the amount needed to fund the company 's strategic initiatives while meeting its performance and risk management objectives . debt securities available for sale . debt securities classified as available for sale increased by $ 54.6 million to $ 444.5 million at june 30 , 2017 from $ 389.9 million at june 30 , 2016. the net increase in the portfolio partly reflected security purchases totaling $ 138.4 million for the year ended june 30 , 2017 coupled with a $ 10.8 million decrease in the net unrealized loss of the portfolio to a net unrealized loss of $ 1.4 million at june 30 , 2017 from a net unrealized loss of $ 12.2 million at june 30 , 2016. the decrease in the net unrealized loss reflected changes in the fair value of various sectors within the portfolio arising from movements in market interest rates coupled with a tightening of pricing spreads within certain sectors in the portfolio . the noted increases in the portfolio were partially offset by principal repayments , net of premium amortization and discount accretion , totaling $ 94.6 million during the year ended june 30 , 2017. the net unrealized loss on debt securities available for sale was primarily reflected within the applicable “ credit sectors ” of the portfolio which include asset-backed securities , collateralized loan obligations , corporate bonds and non-pooled trust preferred securities . the net unrealized loss on this subset of securities decreased by $ 11.6 million to a net unrealized loss of $ 1.7 million at june 30 , 2017 from a net unrealized loss of $ 13.3 million at june 30 , 2016. the decrease in the unrealized loss largely reflected a general tightening of pricing spreads in the marketplace resulting in an overall increase in the market price of such securities . the decrease in the net unrealized loss on the noted securities was partially offset by a $ 755,000 decline in the fair value of government and agency securities , including u.s. agency debentures and municipal obligations , to an unrealized loss of $ 287,000 at june 30 , 2017 from an unrealized gain of $ 1.0 million at june 30 , 2016 .
| f financial condition and results of operations general this discussion and analysis reflects kearny financial corp. 's consolidated financial statements and other relevant statistical data , and is intended to enhance your understanding of our financial condition and results of operations . you should read the information in this section in conjunction with the business and financial information regarding kearny financial corp. and the consolidated financial statements and notes thereto contained in this annual report on form 10-k. overview financial condition . total assets increased $ 318.1 million to $ 4.82 billion at june 30 , 2017 from $ 4.50 billion at june 30 , 2016. the increase in total assets reflected an increase in net loans receivable that was partially offset by decreases in securities and cash and cash equivalents . the increase in total assets was largely funded by increases in deposits and borrowings that were partially offset by a decrease in stockholders ' equity . the decrease in stockholders ' equity primarily reflected the company 's share repurchases that outpaced the accretion from earnings during the year . for the year ended june 30 , 2017 , loans receivable , excluding loans held for sale , increased by $ 571.3 million to $ 3.25 billion , or 72.8 % of earning assets , at june 30 , 2017 from $ 2.67 billion , or 64.6 % of earning assets , at june 30 , 2016. the growth in loans during fiscal 2017 continued to reflect our strategic emphasis in growing our commercial loan portfolio , including multi-family loans , nonresidential mortgage loans and commercial business loans .
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unless the agreement evidencing an award expressly provides otherwise , no award granted under the 2015 plan may be transferred in any manner ( prior to the vesting and lapse of any and all restrictions applicable to shares issued under such award ) , other than by will or the laws of descent and distribution , provided , however , that an incentive stock option may be transferred or assigned only to the extent consistent with section 422 of the code . adjustments . in the event of a recapitalization , stock split or similar capital transaction , our compensation committee will make appropriate and equitable adjustments to the number of shares reserved for issuance under the 2015 plan , the limitations regarding the total number of shares underlying awards given to an individual participant in any calendar year , the story_separator_special_tag the following management 's discussion and analysis of financial condition and results of operations should be read in conjunction with our audited consolidated financial statements and the accompanying notes thereto included elsewhere in this annual report . this discussion contains forward-looking statements , based on current expectations and related to future events and our future financial performance , that involve risks and uncertainties . our actual results may differ materially from those anticipated in these forward-looking statements as a result of many important factors , including those set forth in the section titled “ risk factors ” included under part i , item 1a of this annual report . story_separator_special_tag costs of services : cost of services for the year ended december 31 , 2016 increased approximately 72 % when compared to the same period in 2015. the change in costs of services is primarily attributable to an increase in sales of our acuitas mdro test services and acuitas lighthouse services ; research and development : research and development expenses for the year ended december 31 , 2016 increased approximately 43 % when compared to the same period in 2015 , primarily due to costs related to the automated pathogen identification project ; general and administrative : general and administrative expenses for the year ended december 31 , 2016 increased approximately 13 % when compared to the same period in 2015 , primarily due to a full-year of payroll and facility costs associated with the advandx acquisition in 2015 and public company costs ; sales and marketing : sales and marketing expenses for the year ended december 31 , 2016 increased approximately 28 % when compared to the same period in 2015 , primarily due to costs associated with our expanded sales and marketing team , the intermountain healthcare retrospective study , and industry trade show expenses ; and transaction expenses : transaction expenses for the year ended december 31 , 2016 decreased 100 % when compared to the same period in 2015 due to the prior year acquisition of advandx inc. other income ( expense ) replace_table_token_5_th other expense for the year ended december 31 , 2016 decreased to a net expense of $ 157,416 from a net expense of $ 2,422,005 in the same period of 2015 , and was primarily the result of a reduction in interest expense due to the settlement of a significant portion of our debt upon the closing of our ipo and the reclassification of derivative warrant liabilities , which were reclassified to stockholders ' equity upon the closing of our ipo when their net cash-settlement features lapsed . the company recognized a benefit for income taxes of $ 0.1 million for the year ended december 31 , 2015 ( none in 2016 ) as a result of the net deferred tax liabilities in a u.s. taxing jurisdiction related to the advandx merger . liquidity and capital resources at december 31 , 2016 , the company had cash and cash equivalents of $ 4.1 million , compared to $ 7.8 million at december 31 , 2015. the company has funded its operations primarily through external investor financing arrangements and has raised significant funds in 2016 and 2015 , including : on september 13 , 2016 , the company entered into the sales agreement with cowen and company llc ( “ cowen ” ) pursuant to which the company may offer and sell from time to time , up to an aggregate of $ 25 million of shares of its common stock through cowen , as sales agent , with initial sales limited to an aggregate of $ 11.5 million . pursuant to the sales agreement , cowen may sell the shares of common stock by any method permitted by law deemed to be an `` at the market ” offering as defined in rule 415 of the securities act of 1933 , as amended ( the “ securities act ” ) , including , without limitation , sales made by means of ordinary brokers ' transactions on the nasdaq capital market or otherwise at market prices prevailing at the time of sale , in block transactions , or as otherwise directed by the company . the company pays cowen compensation equal to 3.0 % of the gross proceeds from the sales of common stock pursuant to the terms of the sales agreement . as of december 31 , 2016 , the company has sold an aggregate of approximately 3.6 million shares of its common stock under this at the market offering resulting in aggregate net proceeds to the 51 company of approximately $ 4.4 million , and gross proceeds of $ 4.7 million . as of december 31 , 2016 , remaining availability under the at the market offe ring is $ 6.8 million . subsequent to december 31 , 2016 , the company has sold an aggregate of approximately 2.1 million shares of its common stock under this at the market offering resulting in aggregate net proceeds to the company of approximately $ 2.1 mill ion , and gross proceeds of $ 2.2 million . under the initial sales agreement , remaining availability under the at the market offering is $ 4.6 million . story_separator_special_tag the preparation of financial statements in conformity with gaap requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amount of revenues and expenses during the reporting period . in our audited consolidated financial statements , estimates are used for , but not limited to , share-based compensation , allowances for doubtful accounts and inventories , valuation of derivative financial instruments , beneficial conversion features of convertible debt , deferred tax assets and liabilities and related valuation allowance , and depreciation and amortization and estimated useful lives of long-lived assets . actual results could differ from those estimates . a summary of our significant accounting policies is included in note 3 to the accompanying audited consolidated financial statements . certain of our accounting policies are considered critical , as these policies require significant , difficult or complex judgments by management , often requiring the use of estimates about the effects of matters that are inherently uncertain . revenue recognition revenue for the sales of quickfish , pna fish and xpressfish diagnostic test products is recognized upon shipment to the customer . the company recognizes revenue associated with laboratory services contracts when the service has been performed and reports are made available to the customer . the company recognizes revenue primarily from sales of the argus system , sales of extended warranty service contracts for the argus system , sales of advandx diagnostic products , providing laboratory services , and from “ funded software development ” arrangements with collaborative parties . revenue is recognized when the following criteria are met : persuasive evidence of an arrangement exists ; delivery has occurred ; the selling price is fixed or determinable ; and collectability is reasonably assured . at times , the company sells products and services , or performs software development , under multiple-element arrangements with separate units of accounting ; in these situations , total consideration is allocated to the identified units of accounting based on their relative fair value and revenue is then recognized for each unit based on its specific characteristics . when an argus system is sold without the genome builder software , total arrangement consideration is recognized as revenue when the system is delivered to the customer . ancillary performance obligations , including installation , limited customer training and limited consumables , are considered inconsequential and are combined with the argus system as one unit of accounting . when an argus system is sold with the genome builder software in a multiple-element arrangement , total arrangement consideration is allocated to the argus system and to the genome builder software ( considered multiple elements ) based on their relative selling prices . selling prices are determined based on sales of similar systems to similar customers and , where no sales have occurred , on management 's best estimate of the expected selling price relative to similar products . revenue related to the argus system is recognized when it is delivered to the customer ; revenue for the genome builder software is recognized when it is delivered to the customer . revenue is recognized for genome builder software and for consumables , when sold on a stand-alone basis , upon delivery to the customer . the company recognizes revenue associated with extended warranty service contracts over the service period in proportion to the costs expected to be incurred over that same period . the company 's funded software development arrangements generally consist of multiple elements . total arrangement consideration is allocated to the identified units of accounting based on their relative selling 53 prices and revenue is the n recognized for each unit based on its specific characteristics . when funded software development arrangements include substantive research and development milestones , revenue is recognized for each such milestone when the milestone is achieved and is due and collectible . milestones are considered substantive if all of the following conditions are met : ( 1 ) the milestone is nonrefundable ; ( 2 ) achievement of the milestone was not reasonably assured at the inception of the arrangement ; ( 3 ) substantive effort is involved to achieve the milestone ; and ( 4 ) the amount of the milestone appears reasonable in relation to the effort expended , the other milestones in the arrangement and the related risk associated with achievement of the milestone . impairment of long-lived assets property and equipment is 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 . recoverability measurement and estimating of undiscounted cash flows is done at the lowest possible level for which we can identify assets . if such assets are considered to be impaired , impairment is recognized as the amount by which the carrying amount of assets exceeds the fair value of the assets . definite-lived intangible assets include trademarks , developed technology and customer relationships . if any indicators were present , the company would test for recoverability by comparing the carrying amount of the asset to the net undiscounted cash flows expected to be generated from the asset . if those net undiscounted cash flows do not exceed the carrying amount ( i.e. , the asset is not recoverable ) , the company would perform the next step , which is to determine the fair value of the asset and record an impairment loss , if any . goodwill represents the excess of the purchase price for advandx over the fair values of the acquired tangible or intangible assets and assumed liabilities .
| overview opgen was incorporated in delaware in 2001. on july 14 , 2015 , opgen completed the merger with advandx ( “ the merger ” ) ( see note 4 ) . pursuant to the terms of a merger agreement , velox acquisition corp. , opgen 's wholly owned subsidiary formed for the express purpose of effecting the merger , merged with and into advandx with advandx surviving as opgen 's wholly-owned subsidiary . opgen , advandx are collectively referred to hereinafter as the “ company. ” the company 's headquarters are in gaithersburg , maryland , and its principal operations are in gaithersburg , maryland and woburn , massachusetts . the company also has operations in copenhagen , denmark . the company operates in one business segment . opgen is a precision medicine company using molecular diagnostics and bioinformatics to help combat infectious disease . the company is developing molecular information products and services to combat infectious disease in global healthcare settings , helping to guide clinicians with more rapid information about life threatening infections , improve patient outcomes , and decrease the spread of infections caused by multidrug-resistant microorganisms . its proprietary dna tests and bioinformatics address the rising threat of antibiotic resistance by helping physicians and other healthcare providers optimize patient care decisions and protect the hospital biome through customized screening and surveillance products and services . the company 's molecular diagnostics and bioinformatics offerings combine its acuitas dna tests , acuitas lighthouse bioinformatics services , and clia lab services for mdro surveillance . the company is working to deliver its products and services , some in development , to a global network of customers and partners . these include : its acuitas dna tests , which provide rapid microbial identification , and antibiotic resistance gene information .
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business overview primoris is a holding company of various subsidiaries , which form one of the largest publicly traded specialty contractors and infrastructure companies in the united states . serving diverse end-markets , primoris provides 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 . with our acquisitions of jcg in 2009 , rockford in 2010 and four additional acquisitions in 2012 , primoris has more than tripled its size in revenues since 2009. the company 's national footprint now extends nearly nationwide and in to canada . we install , replace , repair and rehabilitate natural gas , refined product , water and wastewater pipeline systems , large diameter gas and liquid pipeline facilities , heavy civil projects , earthwork and site development and also construct mechanical facilities and other structures , including power plants , petrochemical facilities , refineries and parking structures . in addition , we provide maintenance services , including inspection , overhaul and emergency repair services , to cogeneration plants , refineries and similar mechanical facilities . through our subsidiary onquest , inc. , we provide engineering and design services for fired heaters and furnaces primarily used in refinery applications . through our subsidiary cardinal contractors , inc. , we construct water and wastewater facilities in florida and texas . 25 our service capabilities and geographic footprint have expanded through the following acquisitions . first , on december 18 , 2009 , we acquired james construction group , llc , a privately-held florida limited liability company ( jcg ) . jcg is one of the largest general contractors based in the gulf coast states and is engaged in highway , industrial and environmental construction , primarily in louisiana , texas and florida . jcg is the successor company to t. l. james and company , inc. , a louisiana company that has been in business for over 80 years . headquartered in baton rouge , louisiana , jcg serves government and private clients in a broad geographical region that includes the entire gulf coast region of the united states . second , on november 8 , 2010 , the company entered into an agreement ( the rockford agreement ) to acquire privately-held rockford corporation ( rockford ) . upon completion of the transaction on november 12 , 2010 , rockford became a wholly owned subsidiary . based in hillsboro ( portland ) , oregon , rockford specializes in construction of large diameter natural gas and liquid pipeline projects and related facilities . and third , during 2012 , we made four acquisitions : 1. on march 12 , 2012 , we purchased certain assets of sprint pipeline services , l.p. ( sprint ) , headquartered in pearland ( outside houston ) , texas . sprint provides a comprehensive range of pipeline construction , maintenance , upgrade , fabrication and specialty services primarily in the southeastern united states . 2. on may 30 , 2012 , we purchased certain assets of silva contracting company , inc. , tarmac materials , llc and c3 interest , llc ( collectively , silva ) . based outside of houston , texas , silva provides transportation infrastructure maintenance , asphalt paving , and material sales in the gulf coast region of the united states . following this acquisition , silva was merged with the operations of jcg . 3. on september 28 , 2012 , we purchased certain assets of the saxon group , inc. ( saxon ) . based in suwannee , georgia , outside atlanta , saxon is a full service industrial construction enterprise with special expertise in the industrial gas processing and power plant sectors . 4. on november 17 , 2012 , we purchased all of the issued and outstanding shares of stock of q3c contracting , inc. , a privately-held minnesota corporation ( q3c ) . the sellers elected to treat the acquisition as an asset purchase under section 338 ( h ) ( 10 ) of the internal revenue code . based in little canada , minnesota , north of st. paul , minnesota , q3c specializes in small diameter pipeline and gas distribution construction , restoration and other services , primarily in the upper midwest region of the united states . the company segregates the business into three operating segments : the east construction services segment , the west construction services segment and the engineering segment . range of services east and west construction services both the east construction services and the west construction services segments specialize in a range of services that include designing , building/installing , replacing , repairing/rehabilitating and providing management services for construction related projects . our services include : · providing installation of underground pipeline , cable and conduits for entities in the petroleum , petrochemical and water industries ; · providing installation and maintenance of industrial facilities for entities in the petroleum , petrochemical and water industries ; · providing installation of complex commercial and industrial cast-in-place structures ; and · providing construction of highways and industrial and environmental construction . 26 east construction services the east construction services segment consists of business located primarily in the southeastern united states and along the gulf coast . the segment includes the jcg heavy civil , industrial and infrastructure and maintenance operations headquartered in baton rouge , louisiana ; water and wastewater construction operations of cardinal contractors , inc. located in sarasota , florida ; and the operations of sprint , silva and saxon . west construction services the west construction services segment consists of businesses located primarily in the western united states . story_separator_special_tag please note that our 2013 outlook and 2013 financial results could be adversely impacted by the factors discussed in item 1a risk factors in this annual report on form 10-k. this 2013 outlook consists of forward-looking statements . critical accounting policies and estimates general the preparation of financial statements in conformity with accounting principles generally accepted in the united states requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities as of the date of the financial statements and also affect the amounts of revenues and expenses reported for each period . these estimates and assumptions must be made because certain information that is used in the preparation of our financial statements can not be calculated with a high degree of precision from data available , is dependent on future events , or is not capable of being readily calculated based on generally accepted methodologies . often , these estimates are particularly difficult to determine and we must exercise significant judgment . estimates may be used in our assessments of revenue recognition under percentage-of-completion accounting , the allowance for doubtful accounts , useful lives of property and equipment , fair value assumptions in analyzing goodwill and long-lived asset impairments , self-insured claims liabilities and deferred income taxes . actual results could differ from those that result from using the estimates under different assumptions or conditions . an accounting policy is deemed to be critical if it requires an accounting estimate to be based on assumptions about matters that are highly uncertain at the time the estimate is made , and different estimates that reasonably could have been used , or changes in the accounting estimates that are reasonably likely to occur periodically , could materially impact our consolidated financial statements . the following accounting policies are based on , among other things , judgments and assumptions made by management that include inherent risks and uncertainties . management 's estimates are based on the relevant information available at the end of each period . we periodically review these accounting policies with the audit committee of the board of directors . revenue recognition historically , substantial portions of the company 's revenues have been generated under fixed-price contracts . fixed-price contracts carry certain inherent risks , including underestimation of costs , problems with new technologies and economic and other changes that may occur over the contract period . the company recognizes revenues using the percentage-of-completion method for fixed-price contracts , which may result in uneven and irregular results . unforeseen events and circumstances can alter the estimate of the costs and potential profit associated with a particular contract . to the extent that original cost estimates are modified , estimated costs to complete increase , delivery schedules are delayed , or progress under a contract is otherwise impeded , cash flow , revenue recognition and profitability from a particular contract may be adversely affected . revenue is recognized on the cost-to-total-cost percentage-of-completion method for fixed price contracts . 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 . 28 other contract forms 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 $ 764 and $ 917 for the years ended december 31 , 2012 and 2011 , 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 determined . 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 . the caption costs and estimated earnings in excess of billings 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 , or ( c ) amounts arising from routine lags in billing . 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 scope change but a price change associated with the scope change has not yet been agreed upon .
| results of operations revenue , gross profit , operating income and net income for the years ended december 31 , 2012 , 2011 and 2010 were as follows : replace_table_token_10_th 2012 and 2011 revenue in 2012 grew to $ 1.5 billion , an increase of $ 81 million , or 5.6 % from the prior year . the 2012 acquisitions 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 on 2011 revenues . with the substantial completion of that pipeline in 2011 , revenues associated with the project decreased $ 262 million from 2011 to 2012. excluding the impact of ruby , organic revenues grew by $ 230 million reflecting growth at arb , jcg and rockford 's non-ruby business . gross profit for 2012 increased by $ 7.5 million , or 4.1 % , from 2011. the 2012 acquisitions contributed gross profit of $ 17 million . excluding the impact of the ruby project , gross profit from organic operations , increased by $ 28 million compared to the previous year . as a percentage of revenue , gross profit decreased to 12.5 % from 12.7 % , reflecting the impact of the end of the ruby project . an overall increase in selling , general and administrative expenses ( sg & a ) of $ 10 million , was due primarily to additional expenses at the acquired companies . operating income decreased by $ 2.7 million from 2011 primarily as a result of the decrease in the gross profit percentage . income from non-consolidated entities decreased by $ 4 million primarily due to the completion of the st.-bernard levee joint venture project . 2011 and 2010 revenue increased by $ 518.4 million , or 55.0 % , in 2011 compared to 2010 with acquisitive and organic growth .
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overview ruth 's hospitality group , inc. develops and operates fine dining restaurants under the trade name ruth 's chris steak house . as of december 31 , 2017 , there were 155 ruth 's chris steak house restaurants , including 77 company-owned restaurants , two restaurants operating under contractual agreements and 76 franchisee-owned restaurants , including 21 international franchisee-owned restaurants in aruba , canada , china , hong kong , indonesia , japan , mexico , panama , singapore , taiwan and the united arab emirates . on december 12 , 2017 , we completed the acquisition of substantially all of the assets of the hawaiian restaurants for a cash purchase price of $ 35.4 million . the results of operations , financial position and cash flows of the hawaiian restaurants are included in our consolidated financial statements as of the date of the acquisition . for additional information , see note 3 of the consolidated financial statements . on january 21 , 2015 , the company sold eighteen mitchell 's fish markets and three mitchell's/cameron 's steakhouse restaurants ( collectively , the mitchell 's restaurants ) , to a third party . for financial reporting purposes , the mitchell 's restaurants are classified as a discontinued operation for all periods presented . the ruth 's chris menu features a broad selection of high-quality usda prime and choice grade steaks and other premium offerings served in ruth 's chris ' signature fashion— “ sizzling ” and topped with butter—complemented by other traditional menu items inspired by our new orleans heritage . the ruth 's chris restaurants reflect the fifty year commitment to the core values instilled by our founder , ruth fertel , of caring for our guests by delivering the highest quality food , beverages and service in a warm and inviting atmosphere . our ruth 's chris restaurants cater to special occasion diners and frequent customers , in addition to the business clientele traditionally served by upscale steakhouses , by providing a dining experience designed to appeal to a wide range of guests . we believe our focus on creating this broad appeal provides us with opportunities to expand into a wide range of markets , including many markets not traditionally served by upscale steakhouses . we offer usda prime and other high quality steaks that are aged and prepared to exact company standards and cooked in 1,800-degree broilers . we also offer veal , lamb , poultry and seafood dishes and a broad selection of appetizers . we complement our distinctive food offerings with an award-winning wine list . during the fiscal year 2017 , the average check was $ 82 per person at company-owned ruth 's chris restaurants . all company-owned ruth 's chris steak house restaurants are located in the united states . the franchisee-owned ruth 's chris steak house restaurants include 21 international franchisee-owned restaurants in aruba , canada , china ( hong kong and shanghai ) , indonesia , japan , mexico , panama , singapore , taiwan and the united arab emirates . we opened two new company-owned ruth 's chris steak house restaurants in 2015 – one in st. petersburg , fl in february and one in dallas , tx in november . two new company-owned ruth 's chris steak house restaurants opened during 2016 , in albuquerque , nm and el paso , tx . franchisees opened two new restaurants during 2016 , in jakarta , indonesia and greenville , sc . the franchisee-owned ruth 's chris steak house restaurant in san salvador , el salvador closed in january 2016. due to local market conditions and disappointing financial results , we closed our ruth 's chris steak house restaurant in columbus , oh in february 2016 after nearly seventeen years of operations . in 2017 , the company opened three new ruth 's chris steak house restaurants – one in waltham , ma in january , one in cleveland , oh in march and one in denver in december . one new ruth 's chris steak house restaurant operating under a contractual agreement opened in tulsa , ok in january 2017. franchisees opened two new restaurants in 2017 , in chengdu , china and kauai , hi . the kauai , hi restaurant was acquired by the company in december 2017. during the company 's fiscal year 2017 , a franchisee-owned ruth 's chris steak house restaurant in san juan , puerto rico was closed . sale of mitchell 's restaurants the company acquired the mitchell 's restaurants in 2008. mitchell 's fish market is an upscale seafood concept and mitchell's/cameron 's steakhouse is a modern american steakhouse concept . in november 2014 , the company and landry 's , inc. and mitchell 's entertainment , inc. , an affiliate of landry 's inc. ( together with landry 's inc. , landry 's ) , entered into an asset purchase agreement ( the agreement ) . pursuant to the agreement , the company agreed to sell the mitchell 's restaurants and related assets to landry 's for $ 10 million . the sale of the mitchell 's restaurants closed on january 21 , 2015. the assets sold consist primarily of leasehold interests , leasehold improvements , restaurant equipment and 23 furnishings , inventory , and related intangible a ssets , including brand names and trademarks associated with the 21 mitchell 's restaurants . under the terms of the agreement , landry 's assumed the mitchell 's restaurants ' facility lease obligations and the company will reimburse landry 's for gift cards sol d prior to the closing date and used at the mitchell 's restaurants during the eighteen months following the closing date . during the third quarter of fiscal year 2016 , the company recognized a $ 466 thousand benefit from the extinguishment of the liability related to these gift cards . for financial reporting purposes , the mitchell 's restaurants are classified as a discontinued operation for all periods presented . story_separator_special_tag general and administrative costs include costs relating to all corporate and administrative functions that support development and restaurant operations and provide an infrastructure to support future company and franchisee growth . general and administrative costs are comprised of management , supervisory and staff salaries and employee benefits , travel , performance-based compensation , stock compensation , information systems , training , corporate rent , professional and consulting fees , technology and market research . we measure our general and administrative expense efficiency by tracking these costs as a percentage of total revenues . depreciation and amortization . depreciation and amortization includes depreciation of fixed assets and certain definite life intangible assets . we depreciate capitalized leasehold improvements over the shorter of the total expected lease term or their estimated useful life . pre-opening costs . pre-opening costs consist of costs incurred prior to opening a company-owned restaurant , which are comprised principally of manager salaries and relocation costs , employee payroll and related training costs for new employees , including practice and rehearsal of service activities as well as lease costs incurred prior to opening . 25 story_separator_special_tag tax assets resulted in a one-time , non-cash tax charge of $ 1.1 million . income from continuing operations . income from continuing operations of $ 30.2 million during fiscal year 2017 decreased by $ 510 thousand compared to fiscal year 2016 due to the factors noted above . loss from discontinued operations , net of income taxes . loss from discontinued operations , net of income taxes during fiscal year 2017 was a loss of $ 108 thousand compared to a loss of $ 290 thousand during fiscal year 2016. discontinued operations includes the recurring revenues and expenses of closed restaurants and related income taxes . the fiscal year 2017 loss from discontinued operations is primarily attributable to expenses related to the mitchell 's restaurants . the fiscal year 2016 loss from discontinued operations is primarily attributable to $ 842 thousand of occupancy related costs from a closed ruth 's chris steak house restaurant partially offset by a $ 466 thousand benefit from the extinguishment of a liability related to mitchell 's restaurant gift cards and a $ 186 thousand income tax benefit . net income . net income was $ 30.1 million during fiscal year 2017 compared to $ 30.5 million net income during fiscal year 2016 due to the factors noted above . fiscal year 2016 compared to fiscal year 2015 restaurant sales . restaurant sales increased $ 11.3 million , or 3.2 % , to $ 363.1 million during fiscal year 2016 from fiscal year 2015. the increase was attributable to a $ 5.9 million increase in comparable company-owned restaurant sales and $ 5.5 million from new or relocated restaurants . excluding discontinued operations , total operating weeks during fiscal year 2016 increased to 3,489 from 3,433 during fiscal year 2015. comparable company-owned restaurant sales increased 1.6 % , which consisted of an average check increase of 2.5 % , partially offset by a traffic decrease of 0.8 % . 27 franchise income . franchise income increased $ 640 thousand , or 3.8 % , to $ 17.3 million during fiscal year 2016 from fiscal year 2015. the increase was driven pr imarily by a $ 426 thousand increase from new or re-located locations which opened during fiscal years 2016. the remaining increase is from an increase in comparable franchisee-owned restaurant sales of 1.0 % . other operating income . other operating income during fiscal year 2016 increased $ 602 thousand , or 12.3 % , to $ 5.5 million during fiscal year 2016 from fiscal year 2015. other operating income includes gift card breakage revenue , our share of income from a managed restaurant and miscellaneous restaurant income . fiscal year 2016 gift card breakage revenue increased $ 218 thousand from fiscal year 2015 due to an increase in gift card sales . our management fee and our share of income from the cherokee location was $ 1.4 million during fiscal year 2016 and $ 992 thousand during fiscal year 2015. food and beverage costs . food and beverage costs decreased $ 1.0 million , or 0.9 % , to $ 107.1 million during fiscal year 2016 from fiscal year 2015. food and beverage costs , as a percentage of restaurant sales , decreased 124 basis points to 29.5 % compared to fiscal year 2015 largely due to a 2.5 % increase in menu pricing and 5.5 % lower beef costs . restaurant operating expenses . restaurant operating expenses increased $ 7.2 million , or 4.3 % , to $ 173.0 million during fiscal year 2016 from fiscal year 2015. restaurant operating expenses , as a percentage of restaurant sales , increased 51 basis points to 47.6 % compared to fiscal year 2015 primarily due to increased labor costs . marketing and advertising . marketing and advertising expenses increased $ 481 thousand to $ 11.4 million during fiscal year 2016 from fiscal year 2015. the increase in marketing and advertising expenses during fiscal year 2016 was attributable to a planned increase in advertising . marketing and advertising was 3.0 % of total revenues , which was relatively unchanged from fiscal year 2015. general and administrative . general and administrative expenses increased $ 1.2 million to $ 31.5 million during fiscal year 2016 from fiscal year 2015 , primarily due to an increase in legal fees of $ 1.1 million and salaries of $ 459 thousand , partially offset by a decrease in incentive and stock-based compensation of $ 757 thousand . depreciation and amortization expenses . depreciation and amortization expense increased $ 914 thousand to $ 13.4 million during fiscal year 2016 , primarily due to property additions related to new restaurants and remodel projects placed in service in fiscal years 2015 and 2016. pre-opening costs . pre-opening costs increased $ 954 thousand to $ 2.0 million during fiscal year 2016 , primarily due to two new restaurant openings in 2016 and two new restaurant openings in january 2017 compared to two new openings in 2015. interest expense .
| results of operations the table below sets forth certain operating data expressed as a percentage of restaurant sales and total revenues for the periods indicated . our historical results are not necessarily indicative of the operating results that may be expected in the future . certain prior year amounts have been reclassified to conform to the current year presentation of discontinued operations . replace_table_token_9_th fiscal year 2017 compared to fiscal year 2016 restaurant sales . restaurant sales increased $ 27.3 million , or 7.5 % , to $ 390.4 million during fiscal year 2017 from fiscal year 2016. the increase was attributable to a $ 14.5 million increase in comparable company-owned restaurant sales and $ 12.8 million from new or relocated restaurants . excluding discontinued operations , total operating weeks during fiscal year 2017 increased to 3,715 from 3,489 during fiscal year 2016. the 53 rd week contributed $ 12.4 million in sales in fiscal year 2017. comparable company-owned restaurant sales increased 1.0 % on a comparable 53-week basis , which consisted of an average check increase of 1.0 % , and flat traffic . franchise income . franchise income increased $ 244 thousand , or 1.4 % , to $ 17.5 million during fiscal year 2017 from fiscal year 2016. the increase is primarily attributable to an increase in comparable franchisee-owned restaurant sales of 1.3 % offset by a $ 90 thousand decrease in fees from new or re-located locations or ownership transfers . other operating income . other operating income increased $ 1.3 million , or 24.5 % , to $ 6.8 million during fiscal year 2017 from fiscal year 2016. other operating income includes our share of income from managed restaurants , gift card breakage revenue and miscellaneous restaurant income . the increase in other operating income was primarily due to an increase of $ 972 thousand in income from restaurants operating under contractual agreements , including the new location in tulsa , ok.
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consequently , any forward-looking statements contained in this report , in a report incorporated by reference to this report , or made by management of united in this report , in any other reports and filings , in press releases and in oral statements , involve numerous assumptions , risks and uncertainties . actual results could differ materially from those contained in or implied by united 's statements for a variety of factors including , but not limited to : changes in economic conditions ; business conditions in the banking industry ; movements in interest rates ; competitive pressures on product pricing and services ; success and timing of business strategies ; the nature and extent of governmental actions and reforms ; and rapidly changing technology and evolving banking industry standards . recent developments on august 17 , 2016 , united entered into an agreement and plan of reorganization ( the agreement ) with cardinal financial corporation ( cardinal ) , a virginia corporation headquartered in tysons corner , virginia . in accordance with the agreement , cardinal will merge with and into a wholly-owned subsidiary of united ( the merger ) . at the effective time of the merger , cardinal will cease to exist and the wholly-owned subsidiary of united shall survive and continue to exist as a virginia limited liability company . after the effective time of the merger , cardinal bank , a wholly-owned subsidiary of cardinal , will merge with and into united bank , a wholly-owned indirect subsidiary of united ( the bank merger ) . united bank will survive the bank merger and continue to exist as a virginia banking corporation . the acquisition of cardinal will afford united the opportunity to significantly enhance its existing footprint in the washington , d.c. metropolitan statistical area . as of december 31 , 2016 , cardinal had $ 4.21 billion in assets with 30 banking offices throughout the washington d.c. metropolitan region . cardinal also operates george mason mortgage , llc , a residential mortgage lending company based in fairfax , virginia with offices located in virginia , maryland and the district of columbia , and cardinal wealth services inc. on july 1 , 2015 , the durbin amendment became effective for united . the durbin amendment , passed as part of the dodd-frank financial reform legislation , limits fees for debit card processing paid by merchants to banking companies with assets in excess of $ 10 billion . the durbin amendment significantly affected united 's fees from deposit services for the year of 2016 and 2015 as discussed in the other income section of this management 's discussion and analysis of financial condition and results of operations ( md & a ) . on january 1 , 2015 , the basel iii capital rules became effective for united and its banking subsidiaries ( subject to a phase-in period ) . the basel iii capital rules establishes a new comprehensive capital framework for u.s. banking organizations . the rules implement the basel committee 's december 2010 framework known as basel iii for strengthening international capital standards as well as certain provisions of the dodd-frank act . the basel iii capital rules substantially revise the risk-based capital requirements applicable to bank holding companies and depository institutions , including united and its banking subsidiaries , compared to the current u.s. risk-based capital rules . the basel iii capital rules define the components of capital and address other issues affecting the numerator in banking institutions ' regulatory capital ratios . the basel iii capital rules also address risk weights and other issues affecting the denominator in banking institutions ' regulatory capital ratios and replace the existing risk-weighting approach , which was derived from basel i capital accords of the basel committee , with a more risk-sensitive approach based , in part , on the standardized approach in the basel committee 's 2004 basel ii capital accords . the basel iii capital rules also implement the requirements of section 939a of the dodd-frank act to remove references to credit ratings from the federal banking agencies ' rules . 35 introduction the following discussion and analysis presents the significant changes in financial condition and the results of operations of united and its subsidiaries for the periods indicated below . this discussion and the consolidated financial statements and the notes to consolidated financial statements include the accounts of united bankshares , inc. and its wholly-owned subsidiaries , unless otherwise indicated . management has evaluated all significant events and transactions that occurred after december 31 , 2016 , but prior to the date these financial statements were issued , for potential recognition or disclosure required in these financial statements . in addition , after the close of business on june 3 , 2016 , united acquired 100 % of the outstanding common stock of bank of georgetown , a privately held community bank headquartered in washington , d.c. the results of operations of bank of georgetown are included in the consolidated results of operations from the date of acquisition . the acquisition of bank of georgetown enhances united 's existing footprint in the washington , d.c. msa . bank of georgetown was merged with and into united bank , an indirect wholly-owned subsidiary of united ( the merger ) in a transaction accounted for under the acquisition method of accounting . at consummation , bank of georgetown had assets of approximately $ 1.28 billion , loans of $ 999.77 million , and deposits of $ 971.37 million . this discussion and analysis should be read in conjunction with the unaudited consolidated financial statements and accompanying notes thereto , which are included elsewhere in this document . use of non-gaap financial measures this discussion and analysis contains certain financial measures that are not recognized under gaap . story_separator_special_tag for a discussion of concentrations of credit risk , see item 1 , under the caption of loan concentrations in this form 10-k. investment securities accounting estimates are used in the presentation of the investment portfolio and these estimates impact the presentation of united 's financial condition and results of operations . united classifies its investments in debt as either held to maturity or available for sale and its equity securities as available for sale . securities held to maturity are accounted for using historical costs , adjusted for amortization of premiums and accretion of discounts . securities available for sale are accounted for at fair value , with the net unrealized gains and losses , net of income tax effects , presented as a separate component of shareholders ' equity . when available , fair values of securities are based on quoted prices or prices obtained from third party vendors . third party vendors compile prices from various sources and may determine the fair value of identical or similar securities by using pricing models that consider observable market data . prices obtained from third party vendors that do not reflect forced liquidation or distressed sales are not adjusted by management . where prices reflect forced liquidation or distressed sales , as is the case with united 's portfolio of trust preferred securities ( trup cdos ) , management estimates fair value based on a discounted cash flow methodology using appropriately adjusted discount rates reflecting nonperformance and liquidity risks . due to the subjective nature of this valuation process , it is possible that the actual fair values of these securities could differ from the estimated amounts , thereby affecting united 's financial position , results of operations and cash flows . the potential impact to united 's financial position , results of operations or cash flows for changes in the valuation process can not be reasonably estimated . 37 if the estimated value of investments is less than the cost or amortized cost , the investment is considered impaired and management evaluates whether an event or change in circumstances has occurred that may have a significant adverse effect on the fair value of the investment . if such an event or change has occurred , management must exercise judgment to determine the nature of the potential impairment ( i.e. , temporary or other-than-temporary ) in order to apply the appropriate accounting treatment . if united intends to sell , or is more likely than not they will be required to sell an impaired debt security before recovery of its amortized cost basis less any current period credit loss , other-than-temporary impairment is recognized in earnings . the amount recognized in earnings is equal to the entire difference between the security 's amortized cost basis and its fair value at the balance sheet date . if united does not intend to sell , and is not more likely than not they will be required to sell the impaired debt security prior to recovery of its amortized cost basis less any current-period credit loss , the other-than-temporary impairment is separated into the following : 1 ) the amount representing the credit loss , which is recognized in earnings , and 2 ) the amount related to all other factors , which is recognized in other comprehensive income . for additional information on management 's consideration of investment valuation and other-than-temporary impairment , see note c and note u , notes to consolidated financial statements . accounting for acquired loans loans acquired are initially recorded at their acquisition date fair values . the fair value of the acquired loans are based on the present value of the expected cash flows , including principal , interest and prepayments . periodic principal and interest cash flows are adjusted for expected losses and prepayments , then discounted to determine the present value and summed to arrive at the estimated fair value . fair value estimates involve assumptions and judgments as to credit risk , interest rate risk , prepayment risk , liquidity risk , default rates , loss severity , payment speeds , collateral values and discount rate . acquired loans are divided into loans with evidence of credit quality deterioration , which are accounted for under accounting standards codification ( asc ) topic 310-30 ( acquired impaired ) and loans that do not meet this criteria , which are accounted for under asc topic 310-20 ( acquired performing ) . acquired impaired loans have experienced a deterioration of credit quality from origination to acquisition for which it is probable that united will be unable to collect all contractually required payments receivable , including both principal and interest . in the assessment of credit quality , numerous assumptions , interpretations and judgments must be made , based on internal and third-party credit quality information and ultimately the determination as to the probability that all contractual cash flows will not be able to be collected . this is a point in time assessment and inherently subjective due to the nature of the available information and judgment involved . subsequent to the acquisition date , united continues to estimate the amount and timing of cash flows expected to be collected on acquired impaired loans . increases in expected cash flows will generally result in a recovery of any previously recorded allowance for loan losses , to the extent applicable , and or a reclassification from the nonaccretable difference to accretable yield , which will be recognized prospectively . the present value of any decreases in expected cash flows after the acquisition date will generally result in an impairment charge recorded as a provision for loan losses , resulting in an increase to the allowance for loan losses . for acquired performing loans , the difference between the acquisition date fair value and the contractual amounts due at the acquisition date represents the fair value adjustment .
| financial condition summary united 's total assets as of december 31 , 2015 were $ 12.58 billion which was an increase of $ 249.13 million or 2.02 % from december 31 , 2014. cash and cash equivalents increased $ 104.27 million or 13.85 % , loans held for sale increased $ 2.00 million or 23.05 % and portfolio loans increased $ 279.43 million or 3.07 % , while investment securities decreased $ 111.86 million or 8.50 % and other assets decreased $ 24.01 million or 5.97 % . portfolio loans , net of unearned income , increased $ 279.43 million or 3.07 % from year-end 2014. since year-end 2014 , commercial , financial and agricultural loans increased $ 72.34 million or 1.35 % as commercial real estate loans increased $ 47.56 million while commercial loans ( not secured by real estate ) increased $ 24.78 million . in addition , construction and land development loans increased $ 139.80 million or 12.34 % and consumer loans increased $ 61.98 million or 16.80 % while residential real estate loans were relatively flat . cash and cash equivalents at december 31 , 2015 increased $ 104.27 million or 13.85 % from year-end 2014. of this total increase , interest-bearing deposits with other banks increased $ 143.29 million or 24.85 % as united placed more cash in an interest-bearing account with the federal reserve . partially offsetting this increase in interest-bearing deposits with other banks is a decrease of $ 39.02 million or 22.21 % in cash and due from banks . federal funds sold were flat . investment securities at december 31 , 2015 decreased $ 111.86 million or 8.50 % from year-end 2014. securities available for sale decreased $ 114.05 million or 9.66 % . this change in securities available for sale reflects $ 191.13 million in sales , maturities and calls of securities , $ 85.25 million in purchases , and a decrease of $ 6.81 million in market value .
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these forward looking statements represent plans , estimates , objectives , goals , guidelines , expectations , intentions , projections and statements of our beliefs concerning future events , business plans , objectives , expected operating results and the assumptions upon which those statements are based . forward looking statements include without limitation , any statement that may predict , forecast , indicate or imply future results , performance or achievements , and are typically identified with words such as “ may , ” “ could , ” “ should , ” “ will , ” “ would , ” “ believe , ” “ anticipate , ” “ estimate , ” “ expect , ” “ intend , ” “ plan , ” or words or phases of similar meaning . these forward looking statements are based largely on our expectations and are subject to a number of known and unknown risks and uncertainties that are subject to change based on factors which are , in many instances , beyond our control . actual results , performance or achievements could differ materially from those contemplated , expressed , or implied by the forward looking statements . the following factors , among others , could cause our financial performance to differ materially from that expressed in such forward looking statements : ● the strength of the united states economy , in general , and the strength of the local economies in which we conduct operations ; ● geopolitical conditions , including acts or threats of terrorism , actions taken by the united states or other governments in response to acts or threats of terrorism and or military conflicts , which could impact business and economic conditions in the united states and abroad ; ● the effects of , and changes in , trade , monetary and fiscal policies and laws , including interest rate policies of the federal reserve board , inflation , interest rate , market and monetary fluctuations ; ● results of examinations of us by our regulators , including the possibility that our regulators may , among other things , require us to increase our allowance for credit losses , to write-down assets or to hold more capital ; ● our management of risks inherent in our real estate loan portfolio , and the risk of a prolonged downturn in the real estate market , which could impair the value of , and our ability to sell , properties which stand as collateral for loans we make ; ● changing bank regulatory conditions , policies or programs , whether arising as new legislation or regulatory initiatives , that could lead to restrictions on activities of banks generally , or our subsidiary bank in particular , more restrictive regulatory capital requirements , increased costs , including deposit insurance premiums , regulation or prohibition of certain income producing activities or changes in the secondary market for loans and other products ; ● the effects or impact of any litigation , regulatory proceeding , including enforcement proceedings , and any possibly resulting fines , judgments , expenses or restrictions on our business activities ; ● the timely development of competitive new products and services and the acceptance of these products and services by new and existing customers ; ● the willingness of customers to substitute competitors ' products and services for our products and services ; ● the impact of changes in financial services policies , laws and regulations , including laws , regulations and policies concerning taxes , banking , securities and insurance , and the application thereof by regulatory bodies ; ● the effect of changes in accounting policies and practices , as may be adopted from time-to-time by bank regulatory agencies , the securities and exchange commission , the public company accounting oversight board or the financial accounting standards board ; ● technological and social media changes ; ● cybersecurity breaches , threats , and cyber-fraud that cause the bank to sustain financial losses ; ● the effect of acquisitions we may make , including , without limitation , the failure to achieve the expected revenue growth and or expense savings from such acquisitions ; ● the growth and profitability of noninterest or fee income being less than expected ; ● changes in the level of our nonperforming assets and charge-offs ; 42 ● changes in consumer spending and savings habits ; ● unanticipated regulatory or judicial proceedings ; and ● the factors discussed under the caption “ risk factors ” in this report . if one or more of the factors affecting our forward looking information and statements proves incorrect , then our actual results , performance or achievements could differ materially from those expressed in , or implied by , forward looking information and statements contained in this report . you should not place undue reliance on our forward looking information and statements . we will not update the forward looking statements to reflect actual results or changes in the factors affecting the forward looking statements . general the company is a growth-oriented , one-bank holding company headquartered in bethesda , maryland , which is currently celebrating twenty-one years of successful operations . the company provides general commercial and consumer banking services through the bank , its wholly owned banking subsidiary , a maryland chartered bank which is a member of the federal reserve system . the company was organized in october 1997 , to be the holding company for the bank . the bank was organized in 1998 as an independent , community oriented , full service banking alternative to the super regional financial institutions , which dominate the company 's primary market area . the company 's philosophy is to provide superior , personalized service to its customers . the company focuses on relationship banking , providing each customer with a number of services and becoming familiar with and addressing customer needs in a proactive , personalized fashion . story_separator_special_tag during 2019 , the company enhanced its marketplace positioning by remaining proactive in growing client relationships . the company has had the financial resources to meet , and has remained committed to meeting , the credit needs of its community , resulting in continued growth in the bank 's loan portfolio during 2019. furthermore , the company 's capital position remained strong in 2019 as a result of very strong and consistent earnings despite higher legal expenses . as a result of the company 's strong capital position and earnings , it was able to initiate a quarterly dividend and to implement a share repurchase program . the company believes its strategy of remaining growth-oriented , retaining talented staff and maintaining focus on seeking quality lending and deposit relationships has proven successful and is evidenced in its financial and performance ratios . additionally , the company believes such focus and strategy of relationship building has fostered future growth opportunities , as the company 's reputation in the marketplace has continued to grow . at december 31 , 2019 , the company had total assets of approximately $ 8.99 billion , total loans of $ 7.55 billion , total deposits of $ 7.22 billion and twenty branches in the washington , d.c. metropolitan area . operating in the more competitive economic environment of 2019 , the bank was able to produce solid growth in loans . additionally , the bank was able to grow its net interest spread earnings , maintain an above average net interest margin in spite of margin compression , retain a strong position regarding asset quality , and generate continued favorable enhanced operating leverage due to its seasoned and professional staff . critical accounting policies the company 's consolidated financial statements are prepared in accordance with gaap and follow general practices within the banking industry . application of these principles requires management to make estimates , assumptions , and judgments that affect the amounts reported in the financial statements and accompanying notes . these estimates , assumptions and judgments are based on information available as of the date of the consolidated financial statements ; accordingly , as this information changes , the consolidated financial statements could reflect different estimates , assumptions , and judgments . certain policies , including for the year ended december 31 , 2019 those identified below , inherently have a greater reliance on the use of estimates , assumptions and judgments and , as such , have a greater possibility of producing results that could be materially different than originally reported . estimates , assumptions , and judgments are necessary when assets and liabilities are required to be recorded at fair value , when a decline in the value of an asset not carried on the financial statements at fair value warrants an impairment write-down or a valuation reserve to be established , or when an asset or liability needs to be recorded contingent upon a future event . carrying assets and liabilities at fair value inherently results in more financial statement volatility . investment securities the fair values and the information used to record valuation adjustments for investment securities available-for-sale are based either on quoted market prices or are provided by other third-party sources , when available . the company 's investment portfolio is categorized as available-for-sale with unrealized gains and losses net of income tax being a component of shareholders ' equity and accumulated other comprehensive income ( loss ) . 44 allowance for credit losses the allowance for credit losses is an estimate of the losses that may be sustained in our loan portfolio . the allowance is based on two principles of accounting : ( a ) asc topic 450 , “ contingencies , ” which requires that losses be accrued when they are probable of occurring and are estimable and ( b ) asc topic 310 , “ receivables , ” which requires that losses be accrued when it is probable that the company will not collect all principal and interest payments according to the contractual terms of the loan . the loss , if any , can be determined by the difference between the loan balance and the value of collateral , the present value of expected future cash flows , or values observable in the secondary markets . three components comprise our allowance for credit losses : a specific allowance , a formula allowance and a nonspecific or environmental factors allowance . each component is determined based on estimates that can and do change when actual events occur . the specific allowance allocates a reserve to identified impaired loans . impaired loans are assigned specific reserves based on an impairment analysis . under asc topic 310 , “ receivables , ” a loan for which reserves are individually allocated may show deficiencies in the borrower 's overall financial condition , payment record , support available from financial guarantors and for the fair market value of collateral . when a loan is identified as impaired , a specific reserve is established based on the company 's assessment of the loss that may be associated with the individual loan . the formula allowance is used to estimate the loss on internally risk rated loans , exclusive of those identified as requiring specific reserves . the portfolio of unimpaired loans is stratified by loan type and risk assessment . allowance factors relate to the type of loan and level of the internal risk rating , with loans exhibiting higher risk and loss experience receiving a higher allowance factor . the environmental factors allowance is also used to estimate the loss associated with pools of non-classified loans .
| results of operations overview for the year ended december 31 , 2019 , the company 's net income was $ 142.9 million , a 6 % decrease as compared to $ 152.3 million for the year ended december 31 , 2018 . 46 where appropriate , parenthetical references refer to operating earnings , which the company believes are more relevant comparisons to current and historical period results of operations . reconciliations of 2017 gaap earnings to operating earnings are contained in the tables under “ selected financial data ” . for the year ended december 31 , 2019 , net income was $ 4.18 per basic and diluted common share as compared to $ 4.44 per basic common share and $ 4.42 per diluted common share for 2018 , a 6 % decrease in basic and 5 % decrease in diluted earnings per share for the full year of 2019 as compared to 2018. for the year ended december 31 , 2019 , the company reported a return on average assets , or roaa , of 1.61 % as compared to 1.91 % for the year ended december 31 , 2018. the return on average common equity , or roace , for the year ended december 31 , 2019 was 12.20 % , as compared to 14.89 % for the year ended december 31 , 2018. the return on average tangible common equity , or roatce , for the year ended december 31 , 2019 was 13.40 % , as compared to 16.63 % for the year ended december 31 , 2018. the company 's earnings are largely dependent on net interest income , the difference between interest income and interest expense , which represented 92 % and 93 % of total revenue ( defined as net interest income plus noninterest income ) for the full year of 2019 and 2018 , respectively . the net interest margin , which measures the difference between interest income and interest expense ( i.e.
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” the company conducts its business through two primary operating segments : entertainment golf business | drive shack our entertainment golf business is primarily focused on competitive socializing within the leisure and social entertainment industry , combining chef-inspired food and beverage offerings , with innovative technology modernizing ways to experience golf as a sport and form of entertainment that appeals to a broad range of audiences and competitive appetites . during the second half of 2019 , we opened three generation 2.0 drive shack venues in raleigh , north carolina ; richmond , virginia and west palm beach , florida . we opened our first drive shack venue in orlando , florida in april 2018 , which has largely served as our research and development and testing venue . during the fourth quarter of 2019 , we briefly closed this venue to retrofit with generation 2.0 enhancements , including new ball tracking technology ( trackman ) , enhanced gaming and a redesigned outfield to provide a more engaging guest experience . additionally , the company is committed to leases in new orleans , louisiana and in manhattan ( randall 's island ) , new york for its entertainment golf venues . traditional golf business our traditional golf business , american golf , is one of the largest operators of golf properties in the united states . as of december 31 , 2020 , we owned , leased or managed 60 properties across 9 states and have more than 30,000 members . during 2020 , the company sold one golf property for an aggregate sale price of $ 34.5 million . as of december 31 , 2020 , we have successfully sold 25 of our 26 owned golf properties for a total aggregate sales price of $ 204.2 million , which was reinvested in our entertainment golf business as part of our overall growth strategy to expand golf as a sport and form of entertainment , after repayment of the traditional golf loan in december 2018. during 2020 , the company entered into a total of four new management agreements . one of the new management agreements related to the golf property sold during the year and another related to a terminated lease but in both instances , the company was retained as manager . for further information relating to our business , see “ item 1. business. ” market considerations our ability to execute our business strategy , particularly the development of our entertainment golf business , depends to a degree on our ability to monetize our remaining investments in loans and securities , optimize our traditional golf business , including sales of certain owned properties , and obtain additional capital . we have substantially monetized our historical investments in loans and securities and have a small number of positions remaining that we could sell or use as collateral or support in a lending transaction . we recently raised capital through the equity markets in february 2021 ; however , rising interest rates or stock market volatility could impair our future ability to raise equity capital on attractive terms . our ability to generate income is dependent on , among other factors , our ability to raise capital and finance properties on favorable terms , deploy capital on a timely basis at attractive returns , and exit properties at favorable yields . market conditions 30 outside of our control , such as interest rates , inflation , consumer discretionary spending and stock market volatility affect these objectives in a variety of ways . entertainment golf business our ability to open our targeted number of entertainment golf-related venue formats in 2021 and beyond will depend on many factors , including our ability to identify sites that meet our requirements and negotiate acceptable purchase or lease terms . there is competition within the bid process , and land development and construction are subject to obtaining the necessary regulatory approvals . delays in these processes , as well as completing construction and recruiting and training the necessary talent , could impact our business . trends in consumer spending , as well as climate and weather patterns , could have an impact on the markets in which we currently , or will in the future operate . in addition , our entertainment golf business could be impacted on a season-to-season basis , based upon corporate event and social gatherings during peak and off-peak times . traditional golf business our traditional golf business is subject to trends in consumer discretionary spending , as well as climate and weather patterns , which has a significant impact on the markets in which we operate . traditional golf is generally subject to seasonal fluctuations caused by significant reductions in golf activities due to shorter days and colder temperatures in the first and fourth quarters of each year . consequently , a significantly larger portion of our revenue from our traditional golf operations is earned in the second and third quarters of our fiscal year . in addition , severe weather patterns can also negatively impact our results of operations . while consumer spending in the traditional golf industry has not grown in recent years , we believe improving economic conditions and improvements in local housing markets have helped and will continue to help drive membership growth and increase the number of golf rounds played . in addition , we believe growth in related industries , including leisure , fitness and entertainment , may positively impact our traditional golf business . application of critical accounting policies 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. generally accepted accounting principles , or gaap . the preparation of financial statements in conformity with gaap requires the use of estimates and assumptions that could affect the reported amounts of assets and liabilities , the disclosure of contingent assets and liabilities and the reported amounts of revenue and expenses . story_separator_special_tag 34 interest expense , net interest expense , net increased by $ 2.2 million during the year ended december 31 , 2020 compared to the year ended december 31 , 2019 primarily due to a decrease of interest expense capitalized into construction in progress balances associated with the opening of three golf entertainment golf venues in 2019 compared to one entertainment golf venue with significant construction activities in 2020. other income , net other income , net decreased by $ 28.5 million during the year ended december 31 , 2020 compared to the year ended december 31 , 2019 primarily due to an other-than-temporary impairment charge of $ 24.7 million in 2020 on the company 's equity method investment and a decrease of $ 2.9 million in gains on the sale of traditional golf properties over the same period . replace_table_token_5_th n.m. – not meaningful ( a ) includes $ 52.4 million and $ 22.1 million for the years ended december 31 , 2019 and 2018 , respectively , due to management contract reimbursements reported under revenue accounting standard , asc 606. revenues from golf operations revenues from golf operations decreased by $ 28.1 million during the year ended december 31 , 2019 compared to the year ended december 31 , 2018 primarily due to decreases of : ( i ) $ 66.6 million related to fewer traditional golf properties owned or operated in 2019 , ( ii ) $ 3.1 million related to greens fees and cart rental fees for traditional golf business operating in early 2019 , and ( iii ) $ 0.5 million driven by fewer events at our traditional golf properties , partially offset by an increase of ( iv ) $ 33.4 million in revenues from management contracts including $ 30.3 million of reimbursed expenses , ( v ) $ 1.6 million related to increases in the players ' club memberships , ( vi ) $ 1.6 million related to increases in dues at private golf properties , and ( vii ) $ 5.6 million in our entertainment golf business due to three new venues that opened in 2019. sales of food and beverages 35 sales of food and beverages decreased by $ 14.2 million during the year ended december 31 , 2019 compared to the year ended december 31 , 2018 primarily due to a decreases of : ( i ) $ 21.1 million due to fewer traditional golf properties owned or operated in 2019 and ( ii ) $ 2.3 million driven by fewer events at our traditional golf properties , partially offset by an increase of ( iii ) $ 9.2 million in our entertainment golf business due to three new venues that opened in 2019. operating expenses operating expenses decreased by $ 22.5 million during the year ended december 31 , 2019 compared to the year ended december 31 , 2018 primarily due to decreases of : ( i ) $ 64.7 million due to fewer traditional golf properties owned or operated in 2019 , ( ii ) $ 1.4 million due to decreased utility and water usage , partially offset by increases of : ( iii ) $ 30.3 million of reimbursed expenses from management contracts , ( iv ) $ 2.0 million in traditional golf repairs and maintenance expenses due to the benefit of insurance proceeds in 2018 , ( v ) $ 0.5 million in payroll expense primarily due to an increase in california minimum wage , and ( vi ) $ 11.0 million in our entertainment golf business due to three new venues that opened in 2019. cost of sales - food and beverages cost of sales - food and beverages decreased by $ 4.9 million during the year ended december 31 , 2019 compared to the year ended december 31 , 2018 primarily due to decreases of ( i ) $ 7.0 million due to fewer traditional golf properties owned or operated in 2019 and ( ii ) $ 0.2 million due to lower sales volumes for traditional golf properties operated in both periods , partially offset by ( iii ) an increase of $ 2.3 million in our entertainment golf business due to three new venues that opened in 2019. general and administrative expense ( including acquisition and transaction expense ) general and administrative expense increased by $ 9.4 million during the year ended december 31 , 2019 compared to the year ended december 31 , 2018 primarily due to increases of : ( i ) $ 5.2 million of higher payroll and payroll related expenses primarily related to the hiring of employees in our entertainment golf segment , ( ii ) $ 1.3 million of higher travel and other related expenses as part of the development of the entertainment golf business , ( iii ) $ 0.6 million of expenses associated with entertainment golf sites that we are no longer pursuing , ( iv ) $ 0.5 million of higher rent and related office expenses associated with our corporate offices in new york and dallas , ( v ) $ 1.0 million of higher marketing expenses primarily related to the re-branding of our entertainment golf business in 2019 , and ( vi ) $ 0.7 million of higher costs primarily related to the negotiation and development of potential entertainment golf venue locations . depreciation and amortization depreciation and amortization expense increased by $ 2.7 million during the year ended december 31 , 2019 compared to the year ended december 31 , 2018 due to increases of : ( i ) $ 2.9 million in depreciation of assets placed into service in our entertainment golf business for our orlando , florida venue in april 2018 and for our three venues in raleigh , north carolina ; richmond , virginia ; and west palm beach , florida in august , september and october 2019 , respectively , ( ii ) $ 1.1 million due to amortization on additional finance lease right-of-use ( `` rou '' ) assets for equipment , and ( iii ) depreciation of additional assets placed in service at traditional golf properties , partially offset by (
| results of operations the following tables summarize the changes in our consolidated results of operations from year-to-year ( dollars in thousands ) : replace_table_token_4_th n.m. – not meaningful ( a ) includes $ 50.4 million and $ 52.4 million for the years ended december 31 , 2020 and 2019 , respectively , due to management contract reimbursements reported under revenue accounting standard , asc 606. revenues from golf operations revenues from golf operations decreased by $ 26.5 million during the year ended december 31 , 2020 compared to the year ended december 31 , 2019 primarily due to a $ 29.2 million decrease in traditional golf revenue , partially offset by a $ 2.7 million increase in entertainment golf revenue . the decrease in traditional golf revenue was primarily due to lost revenues during temporary closures in response to the covid-19 pandemic , a $ 13.7 million decrease due to fewer leased and owned traditional golf properties in 2020 , and a $ 2.0 million decrease in revenues from managed courses , primarily due to a decrease in reimbursed expenses . entertainment golf revenue increased by $ 2.7 million due to three additional venues operating in 2020 for more months as compared to the prior period , offset by lower event revenue due to covid-19 restrictions . sales of food and beverages sales of food and beverages decreased by $ 25.6 million during the year ended december 31 , 2020 compared to the year ended december 31 , 2019 primarily due to a $ 28.3 million decrease in traditional golf sales , partially offset by a $ 2.7 million increase in entertainment golf sales .
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licensing revenues are included in the company 's wholesale segment . the company 's retail segment consisted of 13 company-owned retail stores and an internet business in the united states as of december 31 , 2016. sales in retail outlets are made directly to consumers by company employees . the company 's other operations include the company 's wholesale and retail businesses in australia , south africa and asia pacific ( collectively , florsheim australia ) and europe ( florsheim europe ) . the majority of the company 's operations are in the united states , and its results are primarily affected by the economic conditions and the retail environment in the united states . 12 this discussion summarizes the significant factors affecting the consolidated operating results , financial position and liquidity of the company for the three-year period ended december 31 , 2016. this discussion should be read in conjunction with item 8 , financial statements and supplementary data below . executive overview sales and earnings highlights consolidated net sales were $ 296.9 million in 2016 , a decrease of 7 % as compared to $ 320.6 million in 2015. earnings from operations were $ 21.2 million this year , down 29 % as compared to $ 29.8 million in 2015. net earnings attributable to weyco group , inc. decreased 10 % to $ 16.5 million in 2016 , from $ 18.2 million last year . diluted earnings per share were $ 1.56 in 2016 , as compared to $ 1.68 in 2015. earnings for 2016 included an impairment of long-lived assets charge of $ 1.8 million ( $ 1.1 million after tax ) related to the umi trademark , offset by a $ 3.1 million adjustment to reverse the deferred tax liability on corporate-owned life insurance policies . earnings for 2015 included $ 458,000 ( $ 279,000 after tax ) of income representing the final adjustment to the bogs/rafters earnout payment . without these non-recurring adjustments , earnings from operations and net earnings attributable to the company would have been down 22 % and 20 % , respectively , for the year . diluted earnings per share were $ 1.56 in 2016 , as compared to $ 1.68 per share in 2015. without the non-recurring adjustments described above , diluted earnings per share on an adjusted basis would have been $ 1.36 per share in 2016 and $ 1.65 in 2015. net sales in the company 's wholesale segment decreased $ 23.8 million , or 9 % for the year , primarily due to lower sales of bogs and nunn bush branded footwear . net sales in the company 's retail segment decreased 1 % , and net sales of the company 's other businesses ( florsheim australia and florsheim europe ) increased 1 % for the year . consolidated earnings from operations decreased $ 8.5 million for the year . excluding the non-recurring adjustments related to the umi trademark and the bogs/rafters final earnout payment , consolidated earnings from operations would have been down $ 6.3 million for the year . this decrease was primarily due to lower sales volumes in the company 's wholesale segment . earnings from operations in the company 's retail segment were also down for the year , due to lower sales at the company 's brick and mortar locations . earnings from operations of the company 's other businesses were down for the year , mainly due to lower operating earnings at the company 's retail store in macau , resulting from lower sales . story_separator_special_tag normal ; text-transform : none ; padding-top : 3pt ; padding-right : 0pt ; padding-left : 4px ; padding-bottom : 3pt ; margin-top : 0pt ; margin-right : 0pt ; margin-left : 0pt ; margin-bottom : 0pt '' > the company reviews its long-lived assets for impairment in accordance with accounting standards codification ( asc ) 360 , property plant and equipment ( asc 360 ) . see note 2 in the notes to consolidated financial statements for further information . a $ 113,000 impairment charge was recognized in 2016. no impairment charges were recognized in 2015. other the company 's other businesses include its wholesale and retail operations in australia , south africa , asia pacific and europe . in 2016 , net sales of the company 's other businesses were $ 47.5 million , up 1 % as compared with $ 47.1 million in 2015. this increase was primarily due to higher net sales in florsheim europe 's wholesale business . earnings from operations at florsheim australia and florsheim europe were $ 2.7 million in 2016 , down 9 % as compared to $ 3.0 million last year . this decrease was primarily due to lower operating earnings at the company 's retail store in macau , resulting from lower sales . 2015 vs. 2014 segment analysis net sales and earnings from operations for the company 's segments , as well as its other operations , in the years ended december 31 , 2015 and 2014 , were as follows : replace_table_token_8_th 16 north american wholesale segment net sales net sales in the company 's north american wholesale segment for the years ended december 31 , 2015 and 2014 , were as follows : replace_table_token_9_th the increase in stacy adams 2015 net sales was driven by strong new product sales . net sales of the bogs/rafters brands were up in 2015 compared to 2014 due to strong sales of bogs women 's and children 's footwear in the u.s. licensing revenues consist of royalties earned on sales of branded apparel , accessories and specialty footwear in the united states and on branded footwear in mexico and certain overseas markets . earnings from operations gross margins for the wholesale segment increased to 32.5 % in 2015 , from 32.3 % in 2014. gross margins in the u.s. increased to 32.4 % in 2015 , from 31.4 % in 2014 , however , this increase was offset by lower gross margins in canada . story_separator_special_tag the increase in 2015 was primarily due to a higher state tax liability as well as higher effective tax rates at the company 's foreign locations . 18 liquidity & capital resources the company 's primary sources of liquidity are its cash and short-term marketable securities , which aggregated $ 18.3 million at december 31 , 2016 , and $ 22.4 million at december 31 , 2015 , and its revolving line of credit . in 2016 , the company generated $ 46.9 million of cash from operations , compared with using $ 5.7 million of cash in operations in 2015 , and generating $ 17.8 million of cash from operations in 2014. fluctuations in net cash from operating activities over the three-year period have mainly resulted from changes in net earnings and operating assets and liabilities , and most significantly the year-end inventory and accounts receivable balances . the increase in 2016 was related to the reduction in inventory levels in accordance with customer orders , and also to reflect a more conservative position based on the overall retail environment . the company 's capital expenditures were $ 6.0 million , $ 2.5 million and $ 2.9 million in 2016 , 2015 and 2014 , respectively . the company expects capital expenditures to be between $ 2 million and $ 3 million in 2017. the increase in 2016 was due to improvements that were made to the company 's distribution center in glendale , wisconsin to increase its capacity , as well as remodeling projects to improve two of the company 's florida retail stores , and the build out for the new store opened in florida this year . the company paid cash dividends of $ 8.9 million , $ 8.5 million and $ 8.2 million in 2016 , 2015 and 2014 , respectively . the company continues to repurchase its common stock under its share repurchase program when the company believes market conditions are favorable . in 2016 , the company repurchased 410,983 shares for a total cost of $ 11.0 million . in 2015 , the company repurchased 354,741 shares for a total cost of $ 9.9 million . in 2014 , the company repurchased 297,576 shares for a total cost of $ 8.0 million . at december 31 , 2016 , the remaining total shares available to purchase under the program was approximately 565,000 shares . at december 31 , 2016 , the company had a $ 60 million unsecured revolving line of credit with a bank expiring november 3 , 2017. the line of credit bears interest at libor plus 0.75 % . at december 31 , 2016 , outstanding borrowings were approximately $ 4.3 million at an interest rate of 1.52 % . the highest balance during the year was $ 28.4 million . at december 31 , 2015 , outstanding borrowings were $ 26.6 million at an interest rate of 1.18 % . the highest balance during 2015 was $ 42.0 million . in connection with the bogs acquisition , the company had two earn-out payments due to the former shareholders of bogs . the company made the first earn-out payment of $ 1,270,000 in the first quarter of 2013. the second and final earn-out payment of $ 5,217,000 was made in march 2016. for additional information , see note 10 in the notes to consolidated financial statements . as of december 31 , 2016 , $ 3.1 million of cash and cash equivalents was held by the company 's foreign subsidiaries . if these funds are needed for operations in the u.s. , the company would be required to accrue and pay u.s. taxes to repatriate these funds . management believes that under the current tax law , the related tax impact of any such repatriation would not be material to the company 's financial statements . for additional information , see note 12 in the notes to consolidated financial statements . in the fourth quarter of 2016 , the company reviewed its liquidity needs and sources of capital , including evaluating whether it would need the cash available under corporate-owned life insurance policies on two former executives . it was determined that the chances were remote that the company would need to surrender the policies to satisfy liquidity needs , and , as a result , the company reversed the $ 3.1 million deferred tax liability related to the policies . the company will continue to evaluate the best uses for its available liquidity , including , among other uses , capital expenditures , continued stock repurchases and additional acquisitions . 19 the company believes that available cash and marketable securities , cash provided by operations , and available borrowing facilities will provide adequate support for the cash needs of the business through march 2018 , although there can be no assurances . off-balance sheet arrangements the company does not utilize any special purpose entities or other off-balance sheet arrangements . commitments the company 's significant contractual obligations are its supplemental pension plan , short-term borrowings , and its operating leases . these obligations are discussed further in the notes to consolidated financial statements . the company also has significant obligations to purchase inventory . future obligations under operating leases are disclosed in note 13 of the notes to consolidated financial statements . the table below provides summary information about these obligations as of december 31 , 2016. replace_table_token_10_th * purchase obligations relate entirely to commitments to purchase inventory . 20 other non-gaap information the comparability of certain of the company 's financial measures was impacted by non-recurring adjustments related to the umi trademark impairment , an adjustment to reverse the deferred tax liability on corporate-owned life insurance policies , and the gain from the final adjustment to the earnout payment related to the 2011 acquisition of bogs . to provide additional information to investors to facilitate the comparison of past and present performance , the company presented non-gaap financial measures that exclude the financial impact of these non-recurring adjustments .
| financial position highlights at december 31 , 2016 , cash and marketable securities totaled $ 39.4 million and outstanding debt totaled $ 4.3 million . at december 31 , 2015 , cash and marketable securities totaled $ 43.1 million and outstanding debt totaled $ 26.6 million . during 2016 , the company generated $ 46.9 million of cash from operations , and used funds to pay $ 22.4 million on its revolving line of credit , purchase $ 11.0 million of its common stock , and pay $ 8.9 million of dividends . in addition , the company paid the $ 5.2 million bogs/rafters final earn-out payment , and spent $ 6.0 million on capital expenditures . 13 2016 vs. 2015 non-recurring adjustments in the fourth quarter of 2016 , the company evaluated the current state of its umi business and determined the brand did not fit the long-term strategic objectives of the company . as a result , the company recorded a $ 1.8 million impairment charge ( $ 1.1 million after tax ) to write off the majority of the value of the umi trademark . the company is currently reviewing a number of alternatives for the future of the umi brand . additionally , in the fourth quarter 2016 , the company reviewed its liquidity needs and sources of capital , including evaluating whether it would need the cash available under corporate-owned life insurance policies on two former executives . it was determined that the chances were remote that the company would need to surrender these policies to satisfy liquidity needs , and , as a result , the company reversed the $ 3.1 million deferred tax liability related to these policies . finally , in 2015 , the company recorded a $ 458,000 adjustment ( $ 279,000 after tax ) to the final earnout payment related to the 2011 acquisition of the bogs/rafters brands .
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the company classifies inventories into various categories based upon their stage in the product life cycle , future marketing sales plans and the disposition process . the company also records an inventory obsolescence reserve , which represents the excess of the cost of the inventory over its estimated market value , based on various product sales projections . this reserve is calculated using an estimated obsolescence percentage applied to the inventory based on age , historical trends , and requirements to support forecasted sales . in addition , and as necessary , the company may establish specific reserves for future known or anticipated events . property and equipment and other long-lived assets property and equipment is stated at cost less accumulated depreciation or amortization . the story_separator_special_tag the following discussion and analysis of the financial condition and results of operations of coty inc. and its consolidated subsidiaries , should be read in conjunction with the information contained in the consolidated financial statements and related notes included elsewhere in this document . when used in this discussion , the terms “ coty , ” the “ company , ” “ we , ” “ our , ” or “ us ” mean , unless the context otherwise indicates , coty inc. and its majority and wholly-owned subsidiaries . the following discussion contains forward-looking statements . see “ special note regarding forward-looking statements ” and “ risk factors ” for a discussion on the uncertainties , risks and assumptions associated with these statements as well as any updates to such discussion as may be included in subsequent reports we file with the sec . actual results may differ materially from those contained in any forward-looking statements . the following discussion includes certain non-gaap financial measures . see “ overview—non-gaap financial measures ” for a discussion of non-gaap financial measures and how they are calculated . all dollar amounts in the following discussion are in millions of united states ( “ u.s. ” ) dollars , unless otherwise indicated . overview we are a global beauty company and our strategic vision is to be a new global leader and challenger in the beauty industry . we manufacture , market , sell and distribute branded beauty products , including fragrances , color cosmetics , hair care products and skin & body related products throughout the world . operating and reportable segments on october 1 , 2016 , we acquired certain assets and liabilities related to the procter & gamble company 's global fine fragrances , salon professional , cosmetics and retail hair color businesses , along with select hair styling brands ( such brands “ p & g beauty business ” , and such acquisition and the other transactions contemplated by the related acquisition agreement , the “ transactions ” ) . prior to the transactions , we operated and managed our business as four operating and reportable segments : fragrances , color cosmetics , skin & body care , and the brazil acquisition . following the close of the transactions , we reorganized our business into three divisions : luxury , consumer beauty and professional beauty , and we determined that our operating and reportable segments would reflect this new divisional structure . as a result of this change in segment reporting , we retrospectively revised prior period results , by segment , to conform to current period presentation . certain shared costs and the results of corporate initiatives are managed outside of our three segments by corporate . our organizational structure is product category focused , putting the consumer first , by specifically targeting how and where they shop and what and why they purchase . each division has full end-to-end responsibility to optimize the consumers ' beauty experiences in their relevant categories and channels in this new organizational design and translate this into profitable growth . the new operating and reportable segments are : luxury — primarily focused on prestige fragrances , premium skin care and premium cosmetics ; consumer beauty — primarily focused on color cosmetics , retail hair coloring and styling products , mass fragrance , mass skin care and body care ; professional beauty — primarily focused on hair and nail care products for professionals . 26 geographic structure additionally , in connection with the company 's acquisition of the p & g beauty business , the company reorganized its geographical structure to be north america ( canada and the united states ) , europe and almea ( asia , latin america , the middle east , africa and australia ) . business overview we continue to operate in a challenging environment , currently with declines in several of our segments and geographies in which we compete and , particularly for our consumer beauty segment , increasing competitive pressure and changing consumer preferences . in particular , declines in the retail nail , color cosmetics and hair color categories in the u.s. and mass fragrance in western europe and the u.s. continue to impact our business and financial results . we consistently introduce new products and support new and established products through our focus on strategic advertising and merchandising , which we must continuously develop and evolve in response to competitors ' new products and shifting consumer preferences in order to offset the gradual decline of demand for products that are later in their lifecycles . the economics of developing , producing , launching , supporting and discontinuing products impact the timing of our sales and operating performance each period . we also continuously evaluate strategic transactions and new brand licenses to enhance our portfolio . during the fiscal year , we entered into an agreement to acquire the exclusive long-term global license rights for burberry beauty luxury fragrances , cosmetics and skincare , which will be managed within the luxury division . we believe our business has attractive opportunities , including the continued performance of our professional beauty segment and improving performance of our luxury segment . story_separator_special_tag adjusted operating income excludes restructuring costs and business structure realignment programs , amortization , acquisition-related costs and acquisition accounting impacts , the impact of accounting modifications from liability plan accounting to equity plan accounting as a result of amended share-based compensation plans , asset impairment charges and other adjustments as described below . we do not consider these items to be reflective of our core operating performance due to the variability of such items from period-to-period in terms of size , nature and significance . they are primarily incurred to realign our operating structure and integrate new acquisitions , and fluctuate based on specific facts and circumstances . additionally , adjusted net income attributable to coty inc. and adjusted net income attributable to coty inc. per common share are adjusted for certain interest and other ( income ) expense as described below and the related tax effects of each of the items used to derive adjusted net income as such charges are not used by our management in assessing our operating performance period-to-period . the adjusted performance measures were changed in the fourth quarter of fiscal 2016 to incorporate the exclusion of expense and tax effects associated with the amortization of acquisition-related intangible assets . our management believes that such amortization is not reflective of the results of operations in a particular year because the intangible assets result from the allocation of the acquisition purchase price to the fair value of identifiable intangible assets acquired . the effect of this exclusion on our non-gaap presentation was to amend adjusted operating income in a manner that provides investors with a measure of our operating performance that facilitates period to period comparisons , as well as comparability to our peers . exclusion of the amortization expense allows investors to compare operating results that are consistent over time for the consolidated company , including newly acquired and long-held businesses , to both acquisitive and nonacquisitive peer companies . adjusted performance measures reflect adjustments based on the following items : costs related to acquisition activities : we have excluded acquisition-related costs and acquisition accounting impacts such as those related to transaction costs and costs associated with the revaluation of acquired inventory in connection with business combinations because these costs are unique to each transaction . the nature and amount of such costs vary significantly based on the size and timing of the acquisitions and the maturities of the businesses being acquired . also , the size , complexity and or volume of past acquisitions , which often drives the magnitude of such expenses , may not be indicative of the size , complexity and or volume of any future acquisitions . restructuring and other business realignment costs : we have excluded costs associated with restructuring and business structure realignment programs to allow for comparable financial results to historical operations and forward-looking guidance . in addition , the nature and amount of such charges vary significantly based on the size and timing of the programs . by excluding the referenced expenses from our non-gaap financial measures , our management is able to further evaluate our ability to utilize existing assets and estimate their long-term value . furthermore , our management 28 believes that the adjustment of these items supplement the gaap information with a measure that can be used to assess the sustainability of our operating performance . amortization expense : we have excluded the impact of amortization of finite-lived intangible assets , as such non-cash amounts are inconsistent in amount and frequency and are significantly impacted by the timing and or size of acquisitions . our management believes that the adjustment of these items supplement the gaap information with a measure that can be used to assess the sustainability of our operating performance . although we exclude amortization of intangible assets from our non-gaap expenses , our management believes that it is important for investors to understand that such intangible assets contribute to revenue generation . amortization of intangible assets that relate to past acquisitions will recur in future periods until such intangible assets have been fully amortized . any future acquisitions may result in the amortization of additional intangible assets . asset impairment charges : we have excluded the impact of asset impairments as such non-cash amounts are inconsistent in amount and frequency and are significantly impacted by the timing and or size of acquisitions . our management believes that the adjustment of these items supplement the gaap information with a measure that can be used to assess the sustainability of our operating performance . share-based compensation adjustment : during fiscal 2016 and 2015 , we excluded the impact of the fiscal 2013 accounting modification from liability plan to equity plan accounting for the share-based compensation plans as well as other share-based compensation transactions that are not reflective of the ongoing and planned pattern of recognition for such expense . refer to “ management 's discussion and analysis of financial condition and results of operations – critical accounting policies and estimates ” contained in our annual report on form 10-k filed with the sec for the fiscal year ended june 30 , 2016 for a full discussion of the share-based compensation adjustment . interest and other ( income ) expense : we have excluded foreign currency impacts associated with acquisition-related and debt financing related forward contracts as the nature and amount of such charges are not consistent and are significantly impacted by the timing and size of such transactions . loss on early extinguishment of debt : we have excluded loss on extinguishment of debt as this represents a non-cash charge , and the amount and frequency of such charges is not consistent and is significantly impacted by the timing and size of debt financing transactions . redeemable noncontrolling interest : this adjustment represents the after-tax impact of the non-gaap adjustments included in net income attributable to redeemable noncontrolling interests based on the relevant non-controlling interest percentage . tax : this adjustment represents the impact of the tax effect of the pretax items excluded from adjusted net income .
| overview our cash and cash equivalents balances increased by approximately $ 198.3 during fiscal 2017 primarily as a result of our cash generated from operations , borrowings from issuance of debt and committed and uncommitted lines of credit provided by banks and lenders in the u.s. and abroad , offset by the repayment of debt and cash used for acquisitions . as of june 30 , 2017 , we had cash and cash equivalents of $ 535.4 compared with $ 372.4 at june 30 , 2016 . our cash flows are subject to seasonal variation throughout the year , including demands on cash made during our first fiscal quarter in anticipation of higher global sales during the second quarter and strong cash generation in the second fiscal quarter as a result of increased demand by retailers associated with the holiday season . our principal uses of cash are to fund planned operating expenditures , capital expenditures , interest payments , acquisitions , dividends , share repurchases and any principal payments on debt . the working capital movements are based on the sourcing of materials related to the production of products within each of our segments . as a result of the cash on hand , our ability to generate cash from operations and through access to our revolving credit facility and other lending sources , we believe we have sufficient liquidity to meet our ongoing needs on both a near term and long-term basis . debt the balances consisted of the following as of june 30 , 2017 and june 30 , 2016 , respectively : replace_table_token_12_th ( a ) consists of unamortized debt issuance costs of $ 17.5 and $ 22.7 for the coty revolving credit facility , $ 33.2 and $ 30.3 for the coty term loan a facility and $ 11.3 and $ 11.6 for the coty term loan b facility as of june 30 , 2017 and june 30 , 2016 , respectively .
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our annual reports on form 10-k , quarterly reports on form 10-q , current reports on form 8-k , and any amendments to these reports are available free of charge through our website as soon as reasonably practicable after those reports are electronically filed with or furnished to the sec . the information on our website is not a part of or incorporated by reference into , this or any other report of the company filed with , or furnished to , the sec . overview we have three operating segments : ( 1 ) broadcast , ( 2 ) digital media , and ( 3 ) publishing , which also qualify as reportable segments . our operating segments reflect how our chief operating decision makers , which we define as a collective group of senior executives , assess the performance of each operating segment and determine the appropriate allocations of resources to each segment . we continually review our operating segment classifications to align with operational changes in our business and may make changes as necessary . during the third quarter of 2016 we reclassed salem consumer products , our e-commerce business that sells books , dvd 's and editorial content developed by our on-air personalities , from digital media to broadcast to assess the performance of each network program based on all revenue sources . changes to our operating segments did not impact the reporting units used to test non-amortizable assets for impairment . all prior periods presented are updated to reflect the new composition of our operating segments . refer to note 20 – segment data in the notes to our consolidated financial statements contained in item 8 of this annual report on form 10-k for additional information . we measure and evaluate our operating segments based on operating income and operating expenses that exclude costs related to corporate functions , such as accounting and finance , human resources , legal , tax and treasury . we also exclude costs such as amortization , depreciation , taxes and interest expense when evaluating the performance of our operating segments . our principal sources of broadcast revenue include : · the sale of block program time to national and local program producers ; · the sale of advertising time on our radio stations to national and local advertisers ; · the sale of advertising time on our national network ; · the syndication of programming on our national network ; · product sales and royalties for on-air host materials , including podcasts and programs ; · the sale of banner advertisements on our station websites or on our mobile applications ; · the sale of digital streaming advertisements on our station websites or on our mobile applications ; · the sale of advertisements included in digital newsletters ; · fees earned for creating custom web pages or social media promotions on behalf of our advertisers ; · revenue from station events , including ticket sales and sponsorships ; and · listener purchase programs , often called non-traditional revenue , where revenue is generated by promoting discounted goods and services to our listeners from special discounts and incentives offered to our listeners . the rates we are able to charge for broadcast air time and other advertisements are dependent upon several factors , including : · audience share ; · how well our stations and digital platform perform for our clients ; · the size of the market and audience reached ; · the number of impressions delivered ; · the number of page views achieved ; · the number of events held , the number of event sponsorships sold and the attendance at each event ; 49 · the general economic conditions in each market ; and · supply and demand on both a local and national level . our principal sources of digital media revenue include : · the sale of digital banner advertisements on our websites and mobile applications ; · the sale of digital streaming advertisements on websites and mobile applications ; · the support and promotion to stream third-party content on our websites ; · the sale of advertisements included in digital newsletters ; · the digital delivery of newsletters to subscribers ; · the number of video and graphic downloads ; and · the sale and delivery of wellness products . our principal sources of publishing revenue include : · the sale of books and e-books ; · subscription fees for our magazines ; · the sale of print magazine advertising ; and · publishing fees from authors . broadcasting our foundational business is the ownership and operation of radio stations in large metropolitan markets . we also own and operate salem radio network® ( “ srn ” ) , srn news network ( “ snn ” ) , today 's christian music ( “ tcm ” ) , singing news network ( formerly solid gospel network ) , and salem media representatives tm ( “ smr ” ) . srn , snn , and singing news network are networks that develop , produce and syndicate a broad range of programming specifically targeted to christian and family-themed talk stations , music stations and news talk stations throughout the united states , including salem-owned and operated stations . smr , a national advertising sales firm with offices in nine u.s. cities , specializes in placing national advertising on religious and other commercial radio stations . in december 2014 , we merged vista media representatives ( “ vmr ” ) , our national advertising sales firm established for non-christian format stations , into smr as our smr and vmr sales teams consistently pursue advertising for all station formats . we currently program 40 of our stations with our christian teaching and talk format , which is talk programming with christian and family themes . we also program 32 news talk stations , 13 contemporary christian music stations , 13 business format stations , and eight spanish-language christian teaching and talk stations . the business format features financial commentators , business talk , and nationally recognized bloomberg programming . story_separator_special_tag like our broadcasting segment , our second and fourth quarter advertising revenue generally exceeds our first and third quarter advertising revenue . this seasonal fluctuation in advertising revenue corresponds with quarterly fluctuations in the retail advertising industry . we also experience fluctuations in quarter-over-quarter comparisons based on the date on which the easter holiday is observed , as this holiday generates a higher volume of video downloads from our church product sites . additionally , we experience increased demand for advertising time and placement during election years for political advertisements . the primary operating expenses incurred by our digital media businesses include : ( i ) employee salaries , commissions and related employee benefits and taxes , ( ii ) facility expenses such as rent and utilities , ( iii ) marketing and promotional expenses , ( iv ) royalties , ( v ) streaming costs , and ( vi ) cost of goods sold associated with e-commerce sites . publishing our publishing operations include book publishing through regnery publishing , print magazines and our self-publishing services . regnery publishing has published dozens of bestselling books by leading conservative authors and personalities , including ann coulter , newt gingrich , david limbaugh , ed klein , mark steyn and dinesh d'souza . books are sold in traditional printed form and as ebooks . salem publishing produces and distributes numerous christian and conservative opinion print magazines , including : homecoming ® the magazine , youthworker journal , singing news ® , faithtalk magazine , and preaching magazine salem author services includes xulon press and hillcrest media , which offer print-on-demand self-publishing services for authors . xulon press publishes books for christian authors while hillcrest media publishes books for all general market publications . the revenues generated from this segment are reported as publishing revenue in our consolidated statements of operations included in this annual report on form 10-k. publishing revenue is impacted by the retail price of books and e-books , the number of books sold , the number and retail price of e-books sold , the number and rate of print magazine subscriptions sold , the rate and number of pages of advertisements sold in each print magazine , and the number and rate at which self-published books are made . regnery publishing revenue has been impacted by elections as they generate higher levels of interest and demand for publications containing conservative and political based opinions . 51 the primary operating expenses incurred by our publishing businesses include : ( i ) employee salaries , commissions and related employee benefits and taxes , ( ii ) facility expenses such as rent and utilities , ( iii ) marketing and promotional expenses , ( iv ) printing and production costs , including paper costs , ( v ) cost of goods sold , and ( vi ) inventory reserves . known trends and uncertainties broadcast revenue growth remains challenged , which we believe is due to several factors , including increasing competition from other forms of content distribution and time spent listening by audio streaming services , podcasts and satellite radio . this increase in competition and mix of radio listening time may lead advertisers to conclude that the effectiveness of radio has diminished . to minimize the impact of these factors , we continue to enhance our digital assets to complement our broadcast content . we also support industry initiatives to increase the number of smartphones and other wireless devices that contain an enabled fm tuner as well as provide initiatives for wireless carriers in the united states to permit these fm tuners to receive the free over-the-air local radio stations . our broadcast revenues are particularly dependent on our los angeles and dallas markets , which generated 11.9 % and 11.0 % , respectively , of our total net broadcasting revenue for the year ended december 31 , 2016. revenues from print magazines , including advertising revenue and subscription revenues , are challenged both economically and by the increasing use of other mediums that deliver comparable information . book sales are contingent upon overall economic conditions and our ability to attract and retain authors . because digital media has been a growth area for us , decreases in digital revenue streams could adversely affect our operating results , financial condition and results of operations . digital revenue is impacted by the nature and delivery of page views . we have experienced a shift in the number of page views from desktop devices to mobile devices . while mobile page views have increased dramatically , they carry a lower number of advertisements per page which are generally sold at lower rates . digital media revenue is impacted by page views and the number of advertisements per page . declines in desktop page views impact revenue as mobile devices carry lower rates and less advertisement per page . to minimize the impact that any one of these areas could have , we continue to explore opportunities to cross-promote our brands and our content , and to strategically monitor costs . key financial performance indicators – same station definition in the discussion of our results of operations below , we compare our broadcast operating results between periods on an as-reported basis , which includes the operating results of all radio stations and networks owned or operated at any time during either period and on a same-station basis . same station is a non-gaap financial measure used both in presenting our results to stockholders and the investment community as well as in our internal evaluations and management of the business . we believe that same station operating income provides a meaningful comparison of period over period performance of our core broadcast operations as this measure excludes the impact of new stations , the impact of stations we no longer own or operate , and the impact of stations operating under a new programming format . our presentation of same station operating income is not intended to be considered in isolation or as a substitute for the most directly comparable financial measures reported in accordance with gaap .
| results of operations year ended december 31 , 2016 compared to the year ended december 31 , 2015 the following factors affected our results of operations and our cash flows for the year ended december 31 , 2016 as compared to the prior year : financing throughout the year ended december 31 , 2016 , we repaid $ 11.0 million in principal from $ 274.0 million to $ 263.0 million on our term loan of $ 300.0 million ( “ term loan b ” ) and paid interest through each repayment date compared to principal repayments of $ 2.0 million , from $ 276.0 million to $ 274.0 million , plus interest through each repayment date during the prior year . 52 broadcast acquisitions we acquired or entered agreements to acquire several fm translators or fm translator construction permits during the year . the fcc permits am and fm radio stations to operate fm translators . the fcc began an am revitalization program , or “ amr , ” that included several initiatives intended to benefit am broadcasters . one of these benefits , intended to promote the use of fm translators by am broadcasters , allows an am station to relocate one fm translator up to 250 miles from its authorized site and operate the translator on any non-reserved band fm channel in the am station 's market , subject to coverage and interference rules ( “ 250 mile window ” ) . on february 23 , 2017 , the fcc amended its rules to allow an am station using a rebroadcasting fm translator to locate the fm translator anywhere within the am station 's daytime service contour or anywhere within a 25-mile radius of the transmitter , even if the contour extends farther than 25 miles from the transmitter . this rule change , when it becomes effective , will be particularly useful for finding a location for these translators .
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you should read this discussion in conjunction with our consolidated financial statements , the notes thereto and other financial information included elsewhere in this annual report . our financial statements are prepared in accordance with gaap . capitalized terms used , but not defined , in this management 's discussion and analysis of financial condition and results of operations ( `` md & a '' ) have the same meanings as in such notes . overview we are principally engaged in the acquisition , ownership , development , redevelopment , management and leasing of diversified retail real estate throughout the united states . as of december 31 , 2016 , our portfolio included over 42.2 million square feet of gla , consisting of 235 wholly owned properties totaling over 36.8 million square feet of gla across 49 states and puerto rico , and interests in 31 jv properties totaling over 5.4 million square feet of gla across 17 states . as of december 31 , 2016 , we leased a substantial majority of the space in our portfolio at all but 15 of the wholly owned properties ( such 15 properties , the “ third-party properties ” ) to sears holdings under a master lease agreement , with the remainder of such space leased to third-party tenants . the third-party properties , which do not contain a sears holdings store or have any space leased to sears holdings , are leased solely to third-party tenants . a substantial majority of the space at the jv properties is also leased to sears holdings by , as applicable , the ggp jv , the simon jv or the macerich jv in each case under a separate jv master lease . we generate revenues primarily by leasing our properties to tenants , including both sears holdings and third-party tenants , who operate retail stores ( and potentially other uses ) in the leased premises , a business model common to many publicly traded reits . in addition to revenues generated under the master lease through rent payments from sears holdings , we generate revenue through leases to third-party tenants under existing and future leases for space at our properties . the master lease provides us with the right to recapture up to approximately 50 % of the space occupied by sears holdings at the 224 wholly owned properties initially included in the master lease ( subject to certain exceptions and limitations ) . in addition , seritage has the right to recapture any automotive care centers which are free-standing or attached as “ appendages ” to the properties , and all outparcels or outlots and certain portions of parking areas and common areas . upon exercise of this recapture right , we will generally incur certain costs and expenses for the separation of the recaptured space from the remaining sears holdings space and can reconfigure and rent the recaptured space to third-party tenants on potentially superior terms determined by us and for our own account . we also have the right to recapture 100 % of the space occupied by sears holdings at each of 21 identified wholly owned properties by making a specified lease termination payment to sears holdings , after which we expect to be able to reposition and re-lease those stores on potentially superior terms determined by us and for our own account . with respect to the jv properties , each jv master lease provides for similar recapture rights as the master lease governing the company 's wholly owned properties . our primary objective is to create value for our shareholders through the re-leasing and redevelopment of the majority of our wholly owned properties and jv properties . in doing so , we expect to meaningfully grow noi and diversify our tenant base while transforming our portfolio from one with a single-tenant orientation to one comprised predominately of first-class , multi-tenant shopping centers . in order to achieve our objective , we intend to execute the following strategies : convert single-tenant buildings into multi-tenant properties at meaningfully higher rents ; maximize value of vast land holdings through retail and mixed-use densification ; leverage existing and future joint venture relationships with leading landlords and financial partners ; and maintain a flexible capital structure to support value creation activities . - 38 - story_separator_special_tag information technology , and other overhead expenses . for the year ended december 31 , 2016 , the company incurred general and administrative expenses of $ 17.5 million compared to general and administrative expenses of $ 10.0 million for the period from july 7 , 2015 ( date operations commenced ) to december 31 , 2015. the increase in general and administrative expenses was primarily due to additional days in the reporting period and the hiring of additional personnel , offset by reduced up-front personnel costs related to the hiring of certain employees . the period from july 7 , 2015 ( date operations commenced ) to december 31 , 2015 included $ 1.9 million of such up-front personnel costs . litigation charge in october 2016 , an agreement-in-principle was reached to settle a legal action to which we were a party , which agreement ultimately was reflected in a definitive stipulation and agreement of settlement , compromise and release executed on february 8 , 2017 ( see note 10 ) . the defendants , including the company , continue to deny the claims asserted and have entered into the settlement solely to avoid the burden , expense , distraction , and inherent risk in and of litigation . while there can be no assurance that the settlement agreement will result in a definitive , court-approved agreement , we have determined that the company 's liability is both probable and estimable . story_separator_special_tag such restrictions also include cash flow sweep provisions based upon certain measures of the company 's and sears holdings ' financial and operating performance , including ( a ) where the “ debt yield ” ( the ratio of net operating income for the mortgage borrowers to their debt ) is less than 11.0 % , ( b ) if the performance of sears holdings at the stores subject to the master lease with sears holdings fails to meet specified rent ratio thresholds , ( c ) if the company fails to meet specified tenant diversification tests and ( d ) upon the occurrence of a bankruptcy or insolvency action with respect to sears holdings or if there is a payment default under the master lease with sears holdings , in each case , subject to cure rights , including providing specified amounts of cash collateral or satisfying tenant diversification thresholds . all obligations under the loan agreements are non-recourse to the borrowers and the pledgors of the jv interests and the guarantors thereunder , except that ( i ) the borrowers and the guarantors will be liable , on a joint and several basis , for losses incurred by the lenders in respect of certain matters customary for commercial real estate loans , including misappropriation of funds and certain environmental liabilities and ( ii ) the indebtedness under the loan agreements will be fully recourse to the borrowers and guarantors upon the occurrence of certain events customary for commercial real estate loans , including without limitation prohibited transfers , prohibited voluntary liens , and bankruptcy . additionally , the guarantors delivered a limited completion guaranty with respect to future redevelopments undertaken by the borrowers at the properties , and the company must maintain ( i ) a net worth of not less than $ 1 billion and ( ii ) a minimum liquidity of not less than $ 50.0 million , throughout the term of the loan agreements . the company has incurred $ 22.3 million of debt issuance and other costs related to the mortgage loans and future funding facility which are recorded as a direct deduction from the carrying amount of the mortgage loans and future funding facility and amortized over the term of the loan agreements . as of december 31 , 2016 , the unamortized balance of the company 's debt issuance costs was $ 14.3 million as compared to $ 18.8 million as december 31 , 2015. in november 2016 , the company and the servicer for our mortgage loans entered into amendments to our loan agreements to resolve a disagreement regarding one of the cash flow sweep provisions in our loan agreements . the principal terms of these amendments are that the company has ( i ) posted $ 30 million , and will post $ 3.3 million on a monthly basis , to a redevelopment project reserve account , which amounts may be used by the company to fund redevelopment activity and ( ii ) extended the spread maintenance provision for prepayment of the loan by two months through march 9 , 2018 ( with the spread maintenance premium for the second month at a reduced amount ) . as a result of this amendment and the resolution of the related disagreement , no cash flow sweep was imposed . - 41 - the company believes it is currently in compliance with all material terms and conditions of the loan agreements . unsecured term loan on february 23 , 2017 ( the “ closing date ” ) , the operating partnership , as borrower , and the company , as guarantor , entered into a $ 200.0 million senior unsecured delayed draw term loan facility ( the “ unsecured term loan ” ) with jpp , llc ( “ jpp ” ) and jpp ii , llc , as lenders ( collectively , the “ initial lenders ” ) , and jpp , as administrative agent ( the “ administrative agent ” ) . loans under the unsecured term loan ( which was undrawn on the closing date ) may be requested by the operating partnership at any time from the closing date until thirty days prior to the stated maturity date , upon five business days prior notice to the administrative agent . the total commitments of the lenders under the unsecured term loan is $ 200.0 million , provided , that , the maximum draw amount under the unsecured term loan through april 30 , 2017 is $ 100.0 million , which amount increases to $ 150.0 million on may 1 , 2017 and $ 200.0 million on september 1 , 2017 , in each instance so long as no cash flow sweep period is then in effect and continuing as of such date under the company 's mortgage loan agreement . amounts drawn under the unsecured term loan and repaid may not be redrawn . the unsecured term loan will mature the earlier of ( i ) december 31 , 2017 and ( ii ) the date on which the outstanding indebtedness under the loan agreements are repaid or refinanced in full . the unsecured term loan may be prepaid at any time in whole or in part , without any penalty or premium . the principal amount of loans outstanding under the unsecured term loan will bear a base annual interest rate of 6.50 % . if a cash flow sweep period were to occur and be continuing under the company 's mortgage loan agreement ( i ) the interest rate on any outstanding advances would increase from and after such date by 1.5 % per annum above the base interest rate and ( ii ) the interest rate on any advances made after such date would increase by 3.5 % per annum above the base interest rate .
| results of operations we derive substantially all of our revenue from rents received from tenants under existing leases at each of our properties . this revenue generally includes fixed base rents and recoveries of expenses that we have incurred and that we pass through to the individual tenants , in each case as provided in the respective leases . our primary cash expenses consist of our property operating expenses , general and administrative expenses , interest expense and construction and development related costs . property operating expenses include : real estate taxes , repairs and maintenance , management expenses , insurance , ground lease costs and utilities ; general and administrative expenses include payroll , office expenses , professional fees , and other administrative expenses ; and interest expense is primarily on our mortgage loan payable . in addition , we incur substantial non-cash charges for depreciation and amortization on our properties and related intangible assets and liabilities resulting from the transaction . we did not have any revenues or expenses until we completed the transaction on july 7 , 2015. rental income for the year ended december 31 , 2016 , the company recognized total rental income of $ 186.4 million as compared to $ 86.6 million for the period from july 7 , 2015 ( date operations commenced ) to december 31 , 2015. the $ 99.8 million increase was primarily due to additional days in the reporting period , new rents from completed redevelopments and the annual increase in base rent under the master lease , offset by reduced base rent under the master lease as a result of recapture activity initiated by the company . in addition , the company recorded $ 5.3 million of termination fee income as a result of the termination of the master lease at 17 properties by sears holdings . straight-line rent for the twelve months ended december 31 , 2016 was $ 12.9 million and other adjustments were approximately $ 0.9 million .
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please refer to the cautionary language at the beginning of part i of this annual report on form 10-k regarding forward-looking statements . business overview we develop solutions that our customers use to design increasingly small and complex integrated circuits , or ics , and electronic devices . our solutions are designed to help our customers reduce the time to bring an ic or electronic device to market and to reduce their design , development and manufacturing costs . our product offerings include eda software , emulation hardware and two categories of intellectual property , or ip , commonly referred to as verification ip , or vip , and design ip . we provide maintenance for our hardware , software and ip product offerings . we also provide engineering services related to methodology , education , hosted design solutions and design services for advanced ics and development of custom ip , which help our customers manage and accelerate their electronics product development processes . during fiscal 2013 , we acquired tensilica , inc. , or tensilica , a privately held provider of configurable dataplane processing units , and cosmic circuits private limited , or cosmic , a privately held provider of intellectual property used in system-on-chip design . these acquisitions , along with other acquired technology and internal development , expanded our design ip offering , enabling us to offer customized ip as well as broader analog and mixed signal ip solutions to our customers . substantially all of our business is generated from semiconductor and electronics systems companies that deliver a wide range of electronics products in a number of market segments . the renewal of many of our customer contracts , and the decisions for new purchases are dependent upon our customers ' commencement of new design projects . as a result , our business is significantly influenced by our customers ' business outlook and investment in new designs and products . we have identified certain items that management uses as performance indicators to manage our business , including revenue , certain elements of operating expenses and cash flow from operations , and we describe these items further below under `` results of operations '' and `` liquidity and capital resources . '' critical accounting estimates in preparing our consolidated financial statements , we make assumptions , judgments and estimates that can have a significant impact on our revenue , operating income and net income , as well as on the value of certain assets and liabilities on our consolidated balance sheets . we base our assumptions , judgments and estimates on historical experience and various other factors that we believe to be reasonable under the circumstances . actual results could differ materially from these estimates under different assumptions or conditions . at least quarterly , we evaluate our assumptions , judgments and estimates , and make changes as deemed necessary . we believe that the assumptions , judgments and estimates involved in the accounting for income taxes , revenue recognition , business combinations , intangible asset and goodwill impairments and fair value of financial instruments have the greatest potential impact on our consolidated financial statements ; therefore , we consider these to be our critical accounting estimates . for information on our significant accounting policies , see note 2 in the notes to consolidated financial statements . accounting for income taxes we provide for the effect of income taxes in our consolidated financial statements using the asset and liability method . we also apply a two-step approach to determine the financial statement recognition and measurement of uncertain tax positions . we must make significant assumptions , judgments and estimates to determine our current provision ( benefit ) for income taxes , our deferred tax assets and liabilities and any valuation allowance to be recorded against our deferred tax assets . our judgments , assumptions and estimates relating to the current provision ( benefit ) for income taxes include the geographic mix and amount of income ( loss ) , our interpretation of current tax laws , and possible outcomes of current and future audits conducted by foreign and domestic tax authorities . our judgments also include anticipating the tax positions we will take on tax returns before actually preparing and filing the tax returns . changes in our business , tax laws or our interpretation of tax laws , and developments in current and future tax audits , could significantly impact the amounts provided for income taxes in our results of operations , financial position or cash flows . 26 deferred tax assets and liabilities are recognized for the estimated future tax consequences attributable to tax benefit carryforwards and to differences between the financial statement amounts of assets and liabilities and their respective tax basis . we regularly review our deferred tax assets for recoverability and establish a valuation allowance if it is more likely than not that some portion or all of the deferred tax assets will not be realized . to make this judgment , we must make predictions of the amount and category of taxable income from various sources and weigh all available positive and negative evidence about these possible sources of taxable income . we give greater weight to evidence that can be objectively verified . for the year ended december 28 , 2013 , we judged that our history of operating profits in the united states , and our expectations of future profits , considering our software ratable revenue recognition model and ending backlog of revenue as of december 28 , 2013 , were sufficient positive evidence to determine that a significant portion of our united states deferred tax assets is more likely than not to be realized in future years . however , if in the future , we determine that we no longer meet the realization threshold for some or all of our deferred tax assets then we would need to establish a valuation allowance that could result in a material provision for income taxes in the period such determination is made . story_separator_special_tag if a service contract is considered to be part of a multiple element arrangement , or mea , that includes a software contract , revenue is generally recognized ratably over the duration of the software contract . for contracts with fixed or not-to-exceed fees , we estimate on a monthly basis the percentage of completion based on the completion of milestones relating to the arrangement . we have a history of accurately estimating project status and the costs necessary to complete projects . a number of internal and external factors can affect our estimates , including labor rates , utilization and efficiency variances , and specification and testing requirement changes . if different conditions were to prevail such that accurate estimates could not be made , then the use of the completed contract method would be required and the recognition of all revenue and costs would be deferred until the project was completed . such a change could have a material impact on our results of operations . if a group of contracts is so closely related that they are , in effect , part of a single arrangement , such arrangements are deemed to be an mea . we exercise significant judgment to evaluate the relevant facts and circumstances in determining whether the separate contracts should be accounted for individually as distinct arrangements or whether the separate contracts are , in substance , an mea . our judgments about whether a group of contracts is an mea can affect the timing of revenue recognition under those contracts , which could have an effect on our results of operations for the periods involved . for example , a term or perpetual license agreement that would otherwise result in up-front revenue upon delivery may be deemed part of an mea when it is executed within close proximity , or in contemplation of , other license agreements that require ratable revenue recognition with the same customer , in which event all the revenue is recognized over the longest term of any component of the mea instead of up front . for an mea that includes software and nonsoftware elements , we allocate consideration to all software elements as a group and all nonsoftware elements based on their relative standalone selling prices . revenue allocated to each deliverable is then recognized when all four criteria are met . in these circumstances , there is a hierarchy to determine the standalone selling price to be used for allocating consideration to the deliverables as follows : vendor-specific objective evidence of fair value , or vsoe ; third-party evidence of selling price , or tpe ; and best estimate of the selling price , or besp . we calculate the besp of our hardware products based on our pricing practices , including the historical average prices charged for comparable hardware products , because vsoe or tpe can not be established . our process for determining besp for our software deliverables without vsoe or tpe takes into account multiple factors that vary depending upon the unique facts and circumstances related to each deliverable . key external and internal factors considered in developing the besps include prices charged by us for similar arrangements , historical pricing practices and the nature of the product . in addition , when developing besps , we may consider other factors as appropriate , including the pricing of competitive alternatives if they exist , and product-specific business objectives . we exercise significant judgment to evaluate the relevant facts and circumstances in calculating the besp of the deliverables in our arrangements . 28 business combinations when we acquire businesses , we allocate the purchase price to the acquired tangible assets and assumed liabilities , including deferred revenue , liabilities associated with the fair value of contingent consideration and acquired identifiable intangible assets . any residual purchase price is recorded as goodwill . the allocation of the purchase price requires us to make significant estimates in determining the fair values of these acquired assets and assumed liabilities , especially with respect to intangible assets and goodwill . these estimates are based on information obtained from management of the acquired companies , our assessment of this information , and historical experience . these estimates can include , but are not limited to , the cash flows that an acquired business is expected to generate in the future , the cash flows that specific assets acquired with that business are expected to generate in the future , the appropriate weighted-average cost of capital , and the cost savings expected to be derived from acquiring an asset . these estimates are inherently uncertain and unpredictable , and if different estimates were used , the purchase price for the acquisition could be allocated to the acquired assets and assumed liabilities differently from the allocation that we have made to the acquired assets and assumed liabilities . in addition , unanticipated events and circumstances may occur that may affect the accuracy or validity of such estimates , and if such events occur , we may be required to adjust the value allocated to acquired assets or assumed liabilities . we also make significant judgments and estimates when we assign useful lives to the definite lived intangible assets identified as part of our acquisitions . these estimates are inherently uncertain and if we used different estimates , the useful life over which we amortize intangible assets would be different . in addition , unanticipated events and circumstances may occur that may impact the useful life assigned to our intangible assets , which would impact our amortization of intangible assets expense and our results of operations . intangible asset and goodwill impairments we assess the impairment of long-lived assets , including certain intangibles , whenever events or changes in circumstances indicate that we will not be able to recover an asset group 's carrying amount .
| results of operations financial results for fiscal 2013 , as compared to fiscal 2012 and 2011 , reflect the following : an increase in our product and maintenance revenue , primarily because of increased business levels , increased revenue recognized from bookings in prior periods , incremental revenue from the license of the ip that we acquired as part of our fiscal 2013 acquisitions and incremental revenue from our fiscal 2012 acquisition ; an increase in employee-related costs , including incremental costs related to employees added from our fiscal 2013 and 2012 acquisitions and costs related to hiring additional employees ; an increase in stock-based compensation ; an increase in restructuring charges due to restructuring activities during fiscal 2013 ; an increase in amortization of acquired intangibles resulting from our fiscal 2013 and 2012 acquisitions ; and a decrease in the benefit for income taxes in fiscal 2013 as compared to the benefit for income taxes recognized in fiscal 2012 that resulted from the release of a significant portion of our united states valuation allowance and from the effective settlement of a california franchise tax board , or ftb , examination of our tax returns . our fiscal year ends on the saturday closest to december 31. fiscal 2013 , 2012 and 2011 were 52-week years , while fiscal 2014 will be a 53-week year , which will impact revenue and expenses during the fourth quarter of fiscal 2014. revenue we primarily generate revenue from licensing our software and ip , selling or leasing our emulation hardware technology , providing maintenance for our software , hardware and ip , providing engineering services and earning royalties generated from the use of our ip . the timing of our revenue is significantly affected by the mix of software , hardware and ip products in the bookings executed in any given period and whether the revenue for such bookings is recognized over multiple periods or up front , upon completion of delivery .
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the company believes the fuddruckers ' brand name has an expected original story_separator_special_tag management 's discussion and analysis of the financial condition and results of operations should be read in conjunction with the consolidated financial statements and footnotes for the fiscal years ended august 29 , 2012 ( fiscal year 2012 ) , august 31 , 2011 ( fiscal year 2011 ) and august 25 , 2010 ( fiscal year 2010 ) , included in item 8 of this report . overview in fiscal year 2012 , we generated revenues primarily by providing quality food to customers at our 94 luby 's cafeteria branded restaurants located primarily in texas and 60 fuddruckers restaurants located throughout the united states , 3 koo koo roo restaurants in california , and 122 fuddruckers franchises located primarily in the united states . on july 26 , 2010 , we became a multi-brand restaurant company with a national footprint through the acquisition of substantially all of the assets of fuddruckers . the fuddruckers acquisition added 59 company-operated restaurants and a franchise network of 130 franchisee operated units . this acquisition further expanded our family-friendly , value-oriented portfolio of restaurants located in close proximity to retail centers , business developments and residential areas . in addition to our restaurant business model , we also provide culinary contract services for organizations that offer on-site food service , such as health care facilities , colleges and universities , as well as businesses and institutions . in fiscal years 2012 and 2011 , we continued to operate our two core brands in the competitive fast casual segment of the restaurant industry . much of our strategic focus centered around refining our prototype restaurant designs , exploring new avenues for revenue growth , re-investing in our core restaurant models via remodel activity , and supporting our growth initiatives with various marketing techniques . since the acquisition of fuddruckers , we have opened 7 franchise units , four new prototype company units and acquired 3 units from franchisees . we were able to grow sales at our company operated fuddruckers restaurants through a combination of local market outreach , upgrading the décor of some of our restaurants , and training our restaurant management and crews for the highest level of customer service . some specific local market outreach programs included partnering with local youth sporting teams , customer surveying , and further establishing relationships with other local businesses so that there is high awareness of the fuddruckers offerings among their employees and customers . at our luby 's cafeteria brand , we were very encouraged by the full year results of our newest cafeteria that opened at the end of fiscal year 2011. this was a location where we relocated from an in-line shopping center to a newly constructed luby 's prototype on a pad side in the parking lot . the sales at this unit give us further confidence that the luby 's cafeteria brand has broad appeal and generates solid cash flow returns with this prototype at the right location . through focused efforts , the cafeteria brand also found solid success with growing the catering business , which includes large take-out orders as well as delivery to a customer 's location . we continue menu development and innovation at both brands and rotate seasonal offerings throughout the year to generate interest and excitement at our restaurants . our all-you-can-eat breakfast buffet that we rolled out at a majority of our cafeteria locations in fiscal year 2011 continued to contribute to our sales volume in fiscal year 2012. we also reduced the breadth and frequency of limited time offers in fiscal year 2012 compared to fiscal year 2011 in efforts to improve gross profit margins while offering everyday value menu pricing to our guests . store level profit margin improved to 15.4 % in fiscal year 2012 compared to 12.7 % in fiscal year 2011. the food commodity price inflation that we experienced in the first two quarters of fiscal year 2012 subsided in the third and fourth quarter and the food cost management practices that we implemented were effective at reducing waste and identifying areas for food cost savings . training of our restaurant management and crew members in restaurant unit economics , with a focus on matching the cost structure to the sales and traffic volume at each restaurant , contributed to year-over-year improvement in store level profit margins . average customer spend increased at both of our core restaurant brands as we reduced our limited time offers ( removing the inherent discounts from these specially priced items ) , improved the mix of menu items sold , and encouraged the purchase 22 of additional add-on menu items through suggestive selling initiatives . customer counts increased at fuddruckers and decreased at our cafeteria units . the decrease in customer counts at our cafeteria units was primarily a reduction in the quantity of kids meals sold and a reduction in the quantity of limited time offers . our goal in fiscal year 2013 will continue to be balance the trade-off between customer growth and average customer spend . our aim is always to increase customer frequency by marketing quality offerings and building long term brand loyalty and increased profitability . capital spending increased to $ 25.8 million in fiscal year 2012 from $ 11.0 million in fiscal year 2011. this capital investment included the development of one cafeteria and three fuddruckers ( two restaurants opened on the first day of fiscal year 2013 ) , funding our remodeling program , recurring maintenance capital including infrastructure projects , as well as property that we acquired and leased to a franchisee . we remain committed to maintaining the attractiveness of all of our restaurant locations where we anticipate operating over the long term . in fiscal year 2013 , we anticipate making capital investments of between $ 22 million and $ 27 million , primarily for maintaining and remodeling of existing units , purchase of property , and construction of new restaurant units . story_separator_special_tag comparability between quarters may be affected by the varying lengths of the quarters , as well as the seasonality associated with the restaurant business . same-store sales the restaurant business is highly competitive with respect to food quality , concept , location , price , and service , all of which may have an effect on same-store sales . our same-store sales calculation measures the relative performance of a certain group of restaurants . to qualify for inclusion in this group , a store must have been in operation for 18 consecutive accounting periods . the fuddruckers units that were acquired in july 2010 were included in the same-store grouping beginning with the third quarter of fiscal yaer 2012. stores that close on a permanent basis are removed from the group in the fiscal quarter when operations cease at the restaurant , but remain in the same-store group for previously reported fiscal quarters . although management believes this approach leads to more effective year-over-year comparisons , neither the time frame nor the exact practice may be similar to those used by other restaurant companies . same-store sales at our restaurant units increased 2.2 % for fiscal year 2012 , increased 2.5 % for fiscal year 2011 and decreased 7.4 % for fiscal year 2010 . 24 the following table shows the same-store sales change for comparative historical quarters : replace_table_token_6_th discontinued operations our cash flow improvement and capital redeployment plan called for the closure of 24 underperforming units . in accordance with the plan , the entire fiscal activity of the applicable stores closed after the inception of the plan has been classified as discontinued operations . results related to these same locations have also been classified as discontinued operations for all periods presented . story_separator_special_tag realized sales volume increases or were open for a greater portion of fiscal year 2012 than fiscal year 2011. one location that opened in quarter 2 of fiscal year 2012 contributed $ 0.6 million to the revenue increase while four locations that ceased operations prior to the start of fiscal year 2012 reduced revenue by $ 0.8 million . cost of culinary contract services cost of ccs includes the food , payroll and related , and other direct operating expenses associated with generating culinary contract sales . cost of ccs increased approximately $ 2.0 million , or 14.0 % , in fiscal year 2012 compared to fiscal year 2011 due to a commensurate increase in culinary contract sales volume . opening costs opening costs include labor , supplies , occupancy , and other costs necessary to support the restaurant through its opening period . opening costs were approximately $ 0.4 million in fiscal year 2012 compared to approximately $ 0.3 million in fiscal year 2011. opening costs in fiscal year 2012 included the cost associated with opening three fuddruckers units and one cafeteria , as well as the carrying costs for property slated for development . opening costs in fiscal year 2011 included the costs associated with opening one luby 's cafeteria unit , three fuddruckers units , one fuddruckers express , the carrying costs for one property slated for future development , and the support costs associated with franchisees opening one unit . depreciation and amortization depreciation and amortization expense increased by approximately $ 0.8 million , or 4.5 % , in fiscal year 2012 compared to fiscal year 2011 primarily due to the investments made in new locations as well as the capital we have used to remodeling existing locations . general and administrative expenses general and administrative expenses include corporate salaries and benefits-related costs , including restaurant area leaders , share-based compensation , professional fees , travel and recruiting expenses and other office expenses . general and administrative expenses increased by approximately $ 1.1 million , or 3.9 % , in fiscal year 2012 compared to fiscal year 2011. the increase was due to an increase of $ 1.7 million in salaries and benefits expense in fiscal year 2012 as result of higher base and variable incentive compensation , offset by a $ 0.8 reduction in professional fees and corporate services . increases in travel expense and insurance expense offset by corporate supplies and other corporate expenses increased by $ 0.2 million in the aggregate . as a percentage of total sales , general and administrative expenses increased to 8.8 % in fiscal year 2012 compared to 8.5 % in fiscal year 2011 primarily due to the increase in corporate salary and benefit expense . provision for asset impairments , net the provision for asset impairments , net , increased $ 0.4 million in fiscal year 2012 compared to fiscal year 2011. the impairment charges in fiscal year 2012 relate to one terminated culinary location , and two leased restaurant properties that we continue to operate . the impairment charges in fiscal year 2011 relate to one closed restaurant property that was sold during the fiscal year and one closed restaurant property at the end of the fiscal year that was under contract to be sold . in each case , the actual or estimated net sales proceeds were less than the net carrying value of the assets . net loss ( gain ) on disposition of property and equipment the disposition of property and equipment in fiscal year 2012 resulted in a net loss of approximately $ 0.3 million , which included normal asset retirement activity in our restaurant units as well as the loss on disposition of assets at two restaurant locations that closed during fiscal year 2012. the disposition of property and 27 equipment in fiscal year 2011 resulted in a net gain of approximately $ 1.4 million , which included gain on sales of restaurant properties in excess of net book value , partially offset by asset retirement activity in our restaurant units . interest income interest income increased by approximately $ 4 thousand primarily due to marginally higher cash and cash equivalent balances .
| results of operations fiscal year 2012 ( 52 weeks ) compared to fiscal year 2011 ( 53 weeks ) sales total company sales increased approximately $ 1.3 million , or 8.4 % , in fiscal year 2012 compared to fiscal year 2011 , consisting primarily of a $ 2.1 million increase in ccs sales , offset by a $ 0.8 million decrease in restaurant sales . the other components of total sales are franchise revenue and vending income . the company operates with three reportable operating segments : company owned restaurants , franchise operations , and ccs . company owned restaurants restaurant sales restaurant sales decreased $ 0.8 million in fiscal year 2012 compared to fiscal year 2011. the decrease in restaurant sales included a $ 3.6 million decrease in sales at luby 's cafeteria-branded restaurants offset by a $ 2.8 million increase in sales from fuddruckers-branded restaurants . part of this decrease was also due to the inclusion of one more week in fiscal year 2011 compared to fiscal year 2012. the extra week in fiscal 2011 accounted for approximately $ 4.3 million in sales at our cafeteria units and $ 1.9 million in sales at our company-operated fuddruckers units in that year . on a same store-store basis , restaurant sales increased 2.2 % . the improved same store sales is primarily due to improving economic conditions , our focus on continued local restaurant marketing efforts , expansion of our catering business , and the remodeling efforts at specific restaurant units . cost of food food costs decreased approximately $ 3.8 million , or 4.0 % , in fiscal year 2012 compared to fiscal year 2011 primarily due to more effective cost management practices and benefits from the restaurant back office system we implemented before the start of fiscal year 2012 , and the inclusion of one additional week in fiscal year 2011. the additional week in fiscal year 2011 accounted for approximately $ 1.8 million in food costs .
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notwithstanding the above , if the class a ordinary shares at the time of any exercise of a warrant not listed on a national securities exchange such that it satisfies the definition of a “ covered security ” under section 18 ( b ) ( 1 ) of the securities act , the company may , at its option , require holders of public warrants who exercise their warrants to do so on a “ cashless basis ” in accordance with section 3 ( a ) ( 9 ) of the securities act and , in the event the company so elects , the company will not be required to file or maintain in effect a registration statement , but will be required to use its best efforts to register or qualify the shares under applicable blue sky laws to the extent an exemption is not available . redemptions of warrants — once the warrants become exercisable , the company may redeem the public warrants : ● in whole and not in part ; ● at a price of $ 0.01 per warrant ; ● upon not less than 30 days ' prior written notice of redemption to each warrant holder ; and ● if , and only if , the reported last sale price of the company 's class a ordinary shares equals or exceeds $ 18.00 per share for any 20 trading days within a 30-trading day period ending three business days before the company sends the notice of redemption to each warrant holder . f- 14 thunder bridge acquisition ii , ltd. notes to financial statements note 7 — shareholders ' equity ( cont . ) if and when the warrants become redeemable by the company , the company may exercise its redemption right even if it is unable to register or qualify the underlying securities for sale under all applicable state securities laws . if the company calls the public warrants for redemption , management will have the option to require all holders that wish to exercise the public warrants to do so on a “ cashless basis , ” as described in the warrant agreement . the exercise price and number of shares of class a ordinary shares issuable upon exercise of the warrants may be adjusted in certain circumstances including in the event of a stock dividend , or recapitalization , reorganization , merger or consolidation . however , the warrants will not be adjusted for issuance of class a ordinary shares at a price below its exercise price . additionally , in no event will the company be required to net cash settle the warrants . if the company is unable to complete a business combination within the combination period and the company liquidates the funds held in the trust account , holders of warrants will not receive any of such funds with respect to their warrants , nor will they receive any distribution from the company 's assets held outside of the trust account with the respect to such warrants . accordingly , the warrants may expire worthless . in addition , if the company issues additional ordinary shares or equity-linked securities for capital raising purposes in connection with the closing of a business combination at a newly issued price of less than $ 9.20 per ordinary share ( with such issue price or effective issue price to be determined in good faith by the company 's board of directors , and in the case of any such issuance to the sponsor or its affiliates , without taking into account any founder shares held by the sponsor or such affiliates , as applicable , prior to such issuance ) , the exercise price of the warrants will be adjusted ( to the nearest cent ) to be equal to 115 % of the newly issued price and the redemption price of the warrants shall be adjusted to equal 180 % of the newly issued price . the private placement warrants will be identical to the public warrants underlying the units being sold in the initial public offering , except that the private placement warrants and the class a ordinary shares issuable upon the exercise of the private placement warrants will not be transferable , assignable or saleable until 30 days after the completion of a business combination , subject to certain limited exceptions . additionally , the placement warrants will be exercisable on a cashless basis and be non-redeemable so long as they are held by the initial purchasers or their permitted transferees . if the private placement warrants are held by someone other than the initial purchasers or their permitted transferees , the private placement warrants will be redeemable by the company and exercisable by such holders on the same basis as the public warrants . at december 31 , 2020 and 2019 , there were 17,250,000 whole public warrants and 8,650,000 private placement warrants outstanding , respectively . note 8 — business combination on december 14 , 2020 , the company ( including its successor after the domestication ( as defined below ) , “ thunder bridge ii ” ) , entered into a master transactions agreement ( the “ mta ” ) with thunder bridge ii surviving pubco , inc. , a delaware corporation ( “ surviving pubco ” ) , tbii merger sub inc. , a delaware corporation and wholly-owned subsidiary of surviving pubco ( “ tbii merger sub ” ) , adk merger sub llc , a delaware limited liability company and wholly owned subsidiary of surviving pubco ( “ adk merger sub ” ) , adk service provider merger sub llc , a delaware limited liability company and wholly owned subsidiary of surviving pubco ( “ adk story_separator_special_tag story_separator_special_tag times new roman , times , serif ; margin : 0pt 0 ; text-indent : 0.5in ; text-align : justify '' > 50 contractual obligations at december 31 , 2020 , we did not have any long-term debt , capital lease obligations , operating lease obligations or long-term liabilities . the underwriters were paid a cash underwriting fee of 2 % of gross proceeds of the initial public offering , or $ 6,900,000. in addition , the underwriters are entitled to aggregate deferred underwriting commissions of $ 12,075,000 consisting of ( i ) 3.5 % of the gross proceeds of the initial public offering . the deferred underwriting commissions will become payable to the underwriters from the amounts held in the trust account solely in the event that the company completes an initial business combination , subject to the terms of the underwriting agreement by and among the company , morgan stanley & co. llc and cantor fitzgerald & co. critical accounting policies the preparation of financial statements and related disclosures in conformity with gaap requires the company 's management to make estimates and assumptions that affect the reported amounts of assets and liabilities , disclosure of contingent assets and liabilities at the date of the financial statements , and income and expenses during the periods reported . actual results could materially differ from those estimates . the company has identified the following as its critical accounting policies : emerging growth company the company is an “ emerging growth company , ” as defined in section 2 ( a ) of the securities act , as modified by the jumpstart our business startups act of 2012 ( the “ jobs act ” ) , and it may take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not emerging growth companies including , but not limited to , not being required to comply with the auditor attestation requirements of section 404 of the sarbanes-oxley act , reduced disclosure obligations regarding executive compensation in its periodic reports and proxy statements , and exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and shareholder approval of any golden parachute payments not previously approved . further , section 102 ( b ) ( 1 ) of the jobs act exempts emerging growth companies from being required to comply with new or revised financial accounting standards until private companies ( that is , those that have not had a securities act registration statement declared effective or do not have a class of securities registered under the exchange act ) are required to comply with the new or revised financial accounting standards . the jobs act provides that a company can elect to opt out of the extended transition period and comply with the requirements that apply to non-emerging growth companies but any such election to opt out is irrevocable . the company has elected not to opt out of such extended transition period which means that when a standard is issued or revised and it has different application dates for public or private companies , the company , as an emerging growth company , can adopt the new or revised standard at the time private companies adopt the new or revised standard . net income ( loss ) per ordinary share basic loss per ordinary share is computed by dividing net income ( loss ) applicable to ordinary shareholders by the weighted average number of ordinary shares outstanding during the period . consistent with fasb 480 , ordinary shares subject to possible redemption , as well as their pro rata share of undistributed trust earnings consistent with the two-class method , have been excluded from the calculation of loss per ordinary share the year ended december 31 , 2020 and for the period from february 13 , 2019 ( date of inception ) through december 31 , 2019. such shares , if redeemed , only participate in their pro rata share of trust earnings . diluted loss per share includes the incremental number of shares of ordinary shares to be issued to settle warrants , as calculated using the treasury method . for the year ended december 31 , 2020 and for the period from february 13 , 2019 ( date of inception ) through december 31 , 2019 , the company did not have any dilutive warrants , securities or other contracts that could potentially , be exercised or converted into ordinary shares . as a result , diluted loss per ordinary share is the same as basic loss per ordinary share for all periods presented . 51 a reconciliation of net loss per ordinary share as adjusted for the portion of income that is attributable to ordinary shares subject to redemption is as follows : replace_table_token_2_th fair value of financial instruments the fair value of the company 's assets and liabilities , which qualify as financial instruments under fasb asc 820 , “ fair value measurements and disclosures , ” approximates the carrying amounts represented in the balance sheet primarily due to their short term nature . offering cost offering costs consist of legal , accounting , underwriting fees and other costs incurred through the balance sheet date that are directly related to our initial public offering . offering costs amounting to $ 19,483,537 were charged to stockholders ' equity upon the completion of our initial public offering . income taxes the company accounts for income taxes under fasb asc 740 , income taxes ( “ asc 740 ” ) . asc 740 requires the recognition of deferred tax assets and liabilities for both the expected impact of differences between the financial statement and tax basis of assets and liabilities and for the expected future tax benefit to be derived from tax loss and tax credit carry forwards . asc 740 additionally requires a valuation allowance to be established when it is more likely than not that all or
| results of operations for the year ended december 31 , 2020 , we had net income of $ 501,449 and a loss from operations of $ 1,620,837. for the period from february 13 , 2019 ( date of inception ) through december 31 , 2019 , we had a net income of $ 2,081,499 , and a loss from operations of $ 379,352. our entire activity from inception to august 13 , 2019 was in preparation for our initial public offering . since the consummation of our initial public offering through december 31 , 2019 , our activity has been limited to the evaluation of potential initial business combination candidates , and we will not be generating any operating revenues until the closing and completion of our initial business combination . we are incurring increased expenses as a result of being a public company ( for legal , financial reporting , accounting and auditing compliance ) , as well as for due diligence expenses . 49 liquidity and capital resources prior to the consummation of our initial public offering , our only sources of liquidity were an initial purchase of founder shares for $ 25,000 by the sponsor , and a total of $ 277,000 of loans and advances by the sponsor . on august 13 , 2019 , we consummated our initial public offering in which we sold 34,500,000 units at a price of $ 10.00 per unit generating gross proceeds of $ 345,000,000 before underwriting fees and expenses .
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story_separator_special_tag the following discussion provides additional information regarding our operations for the years ending december 31 , 2014 , 2013 , and 2012 , and our financial condition at december 31 , 2014 and 2013. this discussion should be read in conjunction with “ selected financial data ” and our consolidated financial statements and the accompanying notes thereto included or incorporated by reference elsewhere in this document . story_separator_special_tag times new roman , times , serif '' > the net interest margin declined 11 basis points from 3.14 % to 3.03 % . the company 's management closely monitors and manages net interest margin . from a profitability standpoint , an important challenge for the company 's subsidiary banks and leasing company is the improvement of their net interest margins . management continually addresses this issue with pricing and other balance sheet management strategies . 27 during 2014 , the company placed an emphasis on shifting its balance sheet mix . with a stated goal of increasing loans/leases as a percentage of assets to at least 70 % , the company plans to fund this loan/lease growth with a mixture of core deposits and cash from the investment securities portfolio . strategies are continuously being evaluated in which securities are sold and the cash is redeployed into the loan portfolio , with little to no extension of duration and a significant increase in yield . additionally , the company is recognizing gains on these sales due to the current rate environment . as rates rise , the company will also have less market volatility in the investment securities portfolio , as this becomes a smaller portion of the balance sheet . over the past three years , the company 's management has emphasized improving its funding mix by reducing its reliance on wholesale funding , which tends to be at a higher cost than deposits . the following strategies were executed by the company to reduce reliance on wholesale funding or reducing the cost of portions of the company 's wholesale funding . during the second quarter of 2012 , the company 's subsidiary banks modified $ 25.0 million of fixed rate wholesale structured repurchase agreements ( “ structured repos ” ) with a weighted average interest rate of 3.77 % and a weighted average maturity of december 2015 into new fixed rate structured repos with a weighted average interest rate of 3.21 % and a weighted average maturity of april 2019. during the first quarter of 2013 , qcbt modified $ 50.0 million of structured repos with a weighted average interest rate of 3.21 % and a weighted average maturity of february 2016 into new fixed rate structured repos with a weighted average interest rate of 2.65 % and a weighted average maturity of may 2020. during the second quarter of 2013 , crbt modified $ 20.0 million of fixed rate fhlb advances with a weighted average rate of 4.82 % and a weighted average maturity of october 2016 into new fixed rate fhlb advances with a weighted average interest rate of 4.12 % and a weighted average maturity of june 2019. these modifications serve to reduce interest expense and improve net interest margin , and minimize the exposure to rising rates through the duration extension of fixed rate liabilities . the company continues to monitor and evaluate both prepayment and debt restructuring opportunities within the wholesale funding portion of the balance sheet , as executing on such a strategy could potentially increase net interest margin at a much quicker pace than holding the debt until maturity . 28 the company 's average balances , interest income/expense , and rates earned/paid on major balance sheet categories are presented in the following table : replace_table_token_12_th ( 1 ) interest earned and yields on nontaxable investment securities and loans are determined on a tax equivalent basis using a 35 % tax rate in each year presented . ( 2 ) loan/lease fees are not material and are included in interest income from loans/leases receivable in accordance with accounting and regulatory guidance . ( 3 ) non-accrual loans/leases are included in the average balance for gross loans/leases receivable in accordance with accounting and regulatory guidance . 29 the company 's components of change in net interest income are presented in the following table : replace_table_token_13_th ( 1 ) the column `` inc/ ( dec ) from prior year '' is segmented into the changes attributable to variations in volume and the changes attributable to changes in interest rates . the variations attributable to simultaneous volume and rate changes have been proportionately allocated to rate and volume . ( 2 ) interest earned and yields on nontaxable investment securities and loans are determined on a tax equivalent basis using a 35 % tax rate in each year presented . ( 3 ) loan/lease fees are not material and are included in interest income from loans/leases receivable in accordance with accounting and regulatory guidance . the company 's operating results are also impacted by various sources of noninterest income , including trust department fees , investment advisory and management fees , deposit service fees , gains from the sales of residential real estate loans and government guaranteed loans , earnings on boli , and other income . offsetting these items , the company incurs noninterest expenses which include salaries and employee benefits , occupancy and equipment expense , professional and data processing fees , fdic and other insurance expense , loan/lease expense , and other administrative expenses . the company 's operating results are also affected by economic and competitive conditions , particularly changes in interest rates , income tax rates , government policies , and actions of regulatory authorities . 30 critical accounting policies the company 's financial statements are prepared in accordance with accounting principles generally accepted in the united states of america . the financial information contained within these statements is , to a significant extent , financial information that is based on approximate measures of the financial effects of transactions and events that have already occurred . story_separator_special_tag noninterest income jumped $ 9.2 million , or 55 % , propelled by acquisition-related gains of $ 4.1 million ( bargain purchase gain of $ 1.8 million and the gains on branch sales of $ 2.3 million ) , growth in wealth management fee income of $ 1.5 million , increased gains on sales of government guaranteed portions of loans of $ 1.1 million , as well as increases across many of the core recurring noninterest income sources as a result of the acquisition of cnb . noninterest expenses grew $ 12.2 million , or 23 % , in 2013. acquisition and data conversion costs totaled $ 2.4 million for the year . the addition of cnb 's cost structure contributed to increased costs for more than half of the year . interest income . for 2014 , interest income grew $ 4.1 million , or 5 % . in total , the company 's average interest-earning assets increased $ 119.2 million , or 5 % , year-over-year . this growth more than offset the continued impact of declining yields on loans . average loans/leases grew 8 % , while average securities declined 2 % . this shift was part of the company 's strategy to shift the mix of earning assets from lower yielding securities to higher yielding loans and leases . additionally , the company continued to diversify its securities portfolio , included increasing its portfolio of tax exempt municipal securities . the large majority of these are privately placed debt issuances located in the midwest and require a thorough underwriting process before investment . execution of this strategy has led to increased interest income on a tax equivalent basis over the past several years . management understands that this strategy has extended the duration of its securities portfolio and continually evaluates the combined benefit of increased interest income and reduced effective income tax rate and the impact on interest rate risk . for 2013 , interest income grew $ 4.5 million , or 6 % , with the addition of the cnb 's earning assets ( approximately $ 255.9 million at acquisition which was later reduced by the branch sales in october 2013 ) . in total , the company 's average interest-earning assets increased $ 304.1 million , or 16 % , year-over-year . this growth more than offset the continued impact of declining yields on loans and securities . average loans/leases grew 17 % and average securities jumped 16 % . of the latter , the company continued to grow and diversify its securities portfolio , included increasing its portfolio of tax exempt municipal securities . the company intends to continue to grow quality loans and leases as well as diversify the securities portfolio to maximize yield while minimizing credit and interest rate risk . 32 interest expense . comparing 2014 to 2013 , interest expense declined $ 872 thousand , or 5 % , year-over-year . average interest-bearing liabilities grew 4 % in 2014 with most of this in deposits . the company was successful in continuing to manage down its cost of funds as follows : ● continued reduction of interest rates paid across all deposits without runoff ( the average cost of interest-bearing deposits fell from 0.44 % for 2013 to 0.40 % for 2014 ) ; ● focus on continued growth in noninterest bearing deposit accounts ( average noninterest bearing balances grew 11 % in 2014 , primarily due to successful growth in the correspondent banking area ) ; and ● continued shift of funding from high-cost borrowings to deposits and or low-cost borrowings . comparing 2013 to 2012 , interest expense declined $ 2.0 million , or 10 % , year-over-year . average interest-bearing liabilities grew 13 % in 2013 with most of this in deposits as borrowings were flat . the acquisition of cnb was the primary contributor to the deposit growth . more than offsetting the growth , the company was successful in continuing to manage down its cost of funds as follows : ● continued reduction of interest rates paid across all deposits without runoff ( the average cost of interest-bearing deposits fell from 0.61 % for 2012 to 0.44 % for 2013 ) ; ● the impact of the aforementioned balance sheet restructuring strategies executed in 2012 and 2013 ; and ● continued shift of funding from borrowings ( higher cost of funds ) to deposits . the company 's management intends to continue to shift the mix of funding from wholesale funds to core deposits , including noninterest-bearing deposits . continuing this trend will strengthen the company 's franchise value , reduce funding costs , and increase fee income opportunities through deposit service charges . provision for loan/lease losses . the provision is established based on a number of factors , including the company 's historical loss experience , delinquencies and charge-off trends , the local and national economy and the risk associated with the loans/leases in the portfolio as described in more detail in the “ critical accounting policies ” section . the company 's provision totaled $ 6.8 million for 2014 which was an increase of $ 877 thousand , or 15 % , from 2013 due to strong loan/lease growth coupled with charge-offs that addressed asset quality issues in the fourth quarter of 2014. comparing 2013 to 2012 , the company 's provision increased $ 1.5 million , or 36 % , from $ 4.4 million for 2012 to $ 5.9 million for 2013. despite the drop in nonperforming loans ( decline of $ 4.9 million , or 19 % ) in 2013 , the company had an increased need for specific reserves for certain existing nonperforming loans as the workouts of these loans progressed .
| overview the company was formed in february 1993 for the purpose of organizing qcbt . over the past twenty years , the company has grown to include two additional banking subsidiaries ( including the 2013 acquisition of cnb which was merged into one of the company 's legacy banking subsidiaries ) and a number of nonbanking subsidiaries . as of december 31 , 2014 , the company had $ 2.52 billion in consolidated assets , including $ 1.63 billion in total loans/leases and $ 1.68 billion in deposits . the company recognized net income and net income attributable to qcr holdings , inc. of $ 15.0 million for the year ended december 31 , 2014. after preferred stock dividends of $ 1.1 million , the company reported net income available to common stockholders of $ 13.9 million , or diluted earnings per common share ( “ eps ” ) of $ 1.72. for the same period in 2013 , the company recognized net income and net income attributable to qcr holdings , inc. of $ 14.9 million . after preferred stock dividends of $ 3.2 million , the company reported net income available to common stockholders of $ 11.8 million , or eps of $ 2.08. by comparison , for 2012 , the company recognized net income of $ 13.1 million , and net income attributable to qcr holdings , inc. of $ 12.6 million , which excluded the net income attributable to noncontrolling interests of $ 488 thousand .
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the following table discloses certain information regarding our unsecured notes payable under our revolving credit facilities ( in thousands , except percentages ) : replace_table_token_37_th related to a development project in sheridan , colorado , we have provided a guaranty for the payment of story_separator_special_tag the following discussion should be read in conjunction with the consolidated financial statements and notes thereto and the comparative summary of selected financial data appearing elsewhere in this report . historical results and trends which might appear should not be taken as indicative of future operations . our results of operations and financial condition , as reflected in the accompanying consolidated financial statements and related footnotes , are subject to management 's evaluation and interpretation of business conditions , retailer performance , changing capital market conditions and other factors which could affect the ongoing viability of our tenants . executive overview weingarten realty investors is a reit organized under the texas business organizations code . we , and our predecessor entity , began the ownership and development of shopping centers and other commercial real estate in 1948. our primary business is leasing space to tenants in the shopping and industrial centers we own or lease . we also manage centers for joint ventures in which we are partners or for other outside owners for which we charge fees . we operate a portfolio of rental properties which includes neighborhood and community shopping centers and industrial properties that total approximately 76.1 million square feet . we have a diversified tenant base with our largest tenant comprising only 3.2 % of total rental revenues during 2011. our long-term strategy is to focus on improving our core operations and increasing shareholder value . we accomplish this through hands-on leasing and management , selective redevelopment of the existing portfolio of properties , disciplined growth from strategic acquisitions and new developments , as well as dispositions of assets that no longer meet our ownership criteria . we remain committed to maintaining a conservatively leveraged balance sheet , a well-staggered debt maturity schedule and strong credit agency ratings . during 2011 , we announced our intentions to dispose of over $ 600 million of non-core operating properties over the next few years , which will recycle capital for growth opportunities , strengthen our operating fundamentals and allow for further deleveraging of our balance sheet . in the course of executing this disposition plan , given proper pricing , we will consider selling both retail and industrial properties . to date , we have successfully disposed of $ 155.6 million , either directly or through our interest in real estate joint ventures or partnerships , and have approximately $ 76.9 million currently under contracts or letters of intent . upon the completion of this program , we believe our remaining portfolio of properties will be among the strongest in our sector . improvements in the economy earlier in 2011 reopened markets to create more favorable pricing for dispositions . however , the federal debt ceiling crisis and volatility in greece and other european markets have resulted in deteriorated market conditions and access to the cmbs debt markets for potential purchasers . despite these conditions , we continue to believe we will successfully execute our disposition plan ; although continued weakness in the cmbs debt markets and further worsening of the economy could impact our ability to execute this plan . nonetheless , competition for quality acquisition opportunities remains substantial . during 2011 , we were successful in identifying selected properties that met our return hurdles , and we will continue to actively evaluate other opportunities as they enter the market . we strive to maintain a strong , conservative capital structure which provides ready access to a variety of attractive long and short-term capital sources . we carefully balance obtaining low cost financing while matching long-term liabilities associated with acquired or developed long-term assets . an amendment and extension of our revolving credit facility during 2011 enhances our liquidity for the next four years and provides favorable borrowing rates at a margin over libor . while the availability of capital has improved over the past year , there can be no assurance that such pricing and availability will not deteriorate in the future . at december 31 , 2011 , we owned or operated under long-term leases , either directly or through our interest in real estate joint ventures or partnerships , a total of 380 developed income-producing properties and 11 properties under various stages of construction and development . the total number of centers includes 313 neighborhood and community shopping centers , 75 industrial projects and three other operating properties located in 23 states spanning the country from coast to coast . 31 we also owned interests in 40 parcels of land held for development that totaled approximately 30.0 million square feet . we had approximately 7,500 leases with 5,200 different tenants at december 31 , 2011. leases for our properties range from less than a year for smaller spaces to over 25 years for larger tenants . rental revenues generally include minimum lease payments , which often increase over the lease term , reimbursements of property operating expenses , including real estate taxes , and additional rent payments based on a percentage of the tenants ' sales . the majority of our anchor tenants are supermarkets , value-oriented apparel/discount stores and other retailers or service providers who generally sell basic necessity-type goods and services . through this challenging economic environment , we believe the stability of our anchor tenants , combined with convenient locations , attractive and well-maintained properties , high quality retailers and a strong tenant mix , should ensure the long-term success of our merchants and the viability of our portfolio . in assessing the performance of our properties , management carefully monitors various operating metrics of the portfolio . story_separator_special_tag after specifically identifying potential disposition properties and analyzing current market data , we recognized an impairment charge of $ 31.7 million for the year ended december 31 , 2011 on the properties we believe we are likely to sell as part of this initiative or properties that have been sold during 2011. summary of critical accounting policies our discussion and analysis of financial condition and results of operations is based on our consolidated financial statements , which have been prepared in accordance with accounting principles generally accepted in the united states of america ( gaap ) . the preparation of these consolidated financial statements requires us to make estimates and judgments that affect the reported amounts of assets , liabilities and contingencies as of the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting periods . we evaluate our assumptions and estimates on an ongoing basis . we base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances , the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources . actual results may differ from these estimates under different assumptions or conditions . we believe the following critical accounting policies require more significant judgments and estimates used in the preparation of our consolidated financial statements . real estate joint ventures and partnerships to determine the method of accounting for partially owned real estate joint ventures and partnerships , management evaluates the characteristics of associated entities and determines whether an entity is a variable interest entity ( vie ) and , if so , determines which party is the primary beneficiary by analyzing whether we have both the power to direct the entity 's significant economic activities and the obligation to absorb potentially significant losses or receive potentially significant benefits . significant judgments and assumptions inherent in this analysis include the nature of the entity 's operations , future cash flow projections , the entity 's financing and capital structure , and contractual relationships and terms . we consolidate a vie when we have determined that we are the primary beneficiary . primary risks associated with our vies include the potential of funding the entities ' debt obligations or making additional contributions to fund the entities ' operations . partially owned , non variable interest real estate joint ventures and partnerships over which we have a controlling financial interest are consolidated in our consolidated financial statements . in determining if we have a controlling financial interest , we consider factors such as ownership interest , authority to make decisions , kick-out rights and substantive participating rights . partially owned real estate joint ventures and partnerships where we do not have a controlling financial interest , but have the ability to exercise significant influence , are accounted for using the equity method . 33 management continually analyzes and assesses reconsideration events , including changes in the factors mentioned above , to determine if the consolidation treatment remains appropriate . decisions regarding consolidation of partially owned entities frequently require significant judgment by our management . errors in the assessment of consolidation could result in material changes to our consolidated financial statements . property acquisitions of properties are accounted for utilizing the acquisition method and , accordingly , the results of operations of an acquired property are included in our results of operations from the date of acquisition . estimates of fair values are based upon future cash flows and other valuation techniques in accordance with our fair value measurements accounting policy . fair values are used to record the purchase price of acquired property among land , buildings on an as if vacant basis , tenant improvements , other identifiable intangibles and any goodwill or gain on purchase . other identifiable intangible assets and liabilities include the effect of out-of-market leases , the value of having leases in place ( as is versus as if vacant and absorption costs ) , out-of-market assumed mortgages and tenant relationships . depreciation and amortization is computed using the straight-line method , generally over estimated useful lives of 40 years for buildings and over the lease term which includes bargain renewal options for other identifiable intangible assets . the impact of these estimates , including incorrect estimates in connection with acquisition values and estimated useful lives , could result in significant differences related to the purchased assets , liabilities and resulting depreciation or amortization . acquisition costs are expensed as incurred . impairment our property is reviewed for impairment if events or changes in circumstances indicate that the carrying amount of the property , including any capitalized costs and any identifiable intangible assets , may not be recoverable . if such an event occurs , a comparison is made of the current and projected operating cash flows of each such property into the foreseeable future , with consideration of applicable holding periods , on an undiscounted basis to the carrying amount of such property . if we determine the carrying amount is not recoverable , our basis in the property is reduced to its estimated fair value to reflect impairment in the value of the asset . fair values are determined by management utilizing cash flow models , market capitalization and discount rates , or by obtaining third-party broker or appraisal estimates in accordance with our fair value measurements accounting policy . we review current economic considerations each reporting period , including the effects of tenant bankruptcies , the suspension of tenant expansion plans for new development projects , declines in real estate values and any changes to plans related to our new development projects including land held for development , to identify properties where we believe market values may be deteriorating .
| results of operations comparison of the year ended december 31 , 2011 to the year ended december 31 , 2010 revenues total revenues were $ 541.6 million for the year ended 2011 versus $ 535.1 million for the year ended 2010 , an increase of $ 6.5 million or 1.2 % . this increase is attributable to an increase in net rental revenues of $ 5.2 million associated primarily with the acquisition of six properties in the latter half of 2010 and two properties in 2011 , as well as new development completions . depreciation and amortization depreciation and amortization for the year ended 2011 was $ 153.0 million versus $ 145.9 million for the year ended 2010 , an increase of $ 7.1 million or 4.9 % . this increase is primarily attributable to the acquisition of six properties in the latter half of 2010 and two properties in 2011 , new development completions and other capital activities . real estate taxes , net net real estate taxes for the year ended 2011 were $ 64.2 million versus $ 61.5 million for the year ended 2010 , an increase of $ 2.7 million or 4.4 % . the increase resulted primarily from rate and assessed valuation changes from the prior year , as well as acquisitions in both 2010 and 2011. impairment loss the impairment loss in 2011 of $ 58.7 million is primarily attributable to our impairment of land held for development , properties where we changed our anticipated hold periods or were sold , our equity interest in certain unconsolidated real estate joint ventures and the net credit loss on the exchange of tax increment revenue bonds .
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the following table shows the activity within the liability account during the year ended december 31 , 2014 and for the period from the inception of the royalty transaction on february 24 , 2012 ( inception ) to december 31 , 2014 ( in thousands ) : replace_table_token_24_th pursuant to the purchase and sale agreement , in march 2014 and march 2013 , we were required to pay rpi $ 7.0 million and $ 3.0 million , respectively , as a result of worldwide net sales of mircera ® for the story_separator_special_tag overview strategic direction of our business we are a biopharmaceutical company developing a pipeline of drug candidates that utilize our pegylation and advanced polymer conjugate technology platforms , which are designed to enable the development of new molecular entities that target known mechanisms of action . our current proprietary pipeline is comprised of drug candidates across a number of therapeutic areas including oncology , pain , anti-infectives , and immunology . our research and development activities involve small molecule drugs , peptides and other biologic drug candidates . we create innovative drug candidates by using our proprietary advanced polymer conjugate technologies and expertise to modify the chemical structure of pharmacophores to create new molecular entities . polymer chemistry is a science focused on the synthesis or bonding of polymer architectures with drug molecules to alter the properties of a molecule . additionally , we may utilize established pharmacologic targets to engineer a new drug candidate relying on a combination of the known properties of these targets and our proprietary polymer chemistry technology and expertise . our drug candidates are designed to improve the overall benefits and use of a drug for patients by improving the metabolism , distribution , pharmacokinetics , pharmacodynamics , half-life and or bioavailability of drugs . our objective is to apply our advanced polymer conjugate technology platform to create new drug candidates in multiple therapeutic areas that address large potential markets . in 2014 , we achieved the first approval of one of our proprietary drug candidates , movantik ( previously referred to as naloxegol and nktr-118 ) , under a global license agreement with astrazeneca . movantik is an oral peripherally-acting opioid antagonist , for the treatment of opioid-induced constipation , or oic , a side effect caused by chronic administration of prescription opioid pain medicines . movantik was developed using our oral small molecule polymer conjugate technology and we advanced this drug through the completion of phase 2 clinical studies prior to licensing it to astrazeneca . on september 16 , 2014 , the united states food and drug administration , or fda , approved movantik as the first once-daily oral peripherally-acting mu-opioid receptor antagonist ( pamora ) medication for the treatment of opioid-induced constipation ( oic ) , in adult patients with chronic , non-cancer pain . on december 9 , 2014 , the european commission , or ec , granted marketing authorisation to moventig ® ( the naloxegol brand name in the european union , or eu ) as the first once-daily oral pamora to be approved in the european union ( eu ) for the treatment of oic in adult patients who have had an inadequate response to laxative ( s ) . the ec 's approval applies to all 28 european union member countries plus iceland and norway . on january 23 , 2015 , the dea published the final rule in the federal register , effective immediately on the date it was published , removing naloxegol and its salts from the schedules of the controlled substances act . astrazeneca is planning the commercial launch of movantik in the united states late in the first quarter of 2015 and moventig ® in the second half of 2015. given the significant milestones and royalty opportunity for us associated with movantik under our astrazeneca license agreement , the level of sales achieved by astrazeneca for movantik will have a significant impact on our operating results and financial condition over the coming years . 54 etirinotecan pegol ( also known as nktr-102 ) , is a next-generation topoisomerase i ( topo i ) inhibitor proprietary drug candidate , currently being evaluated in a phase 3 open-label , randomized , multicenter clinical study as a single-agent therapy for women with metastatic breast cancer . this phase 3 clinical study , which we call the beacon study ( breast cancer outcomes with nktr-102 ) , has completed enrollment of approximately 850 women with locally recurrent or metastatic breast cancer who have had prior treatment with anthracycline , taxane and capecitabine in either the adjuvant or metastatic setting . patients in the beacon study were randomized on a 1:1 basis to receive either single-agent etirinotecan pegol or a single agent of physician 's choice . the primary endpoint of the beacon study is overall survival , and secondary endpoints include progression-free survival and objective tumor response rate . we have now achieved the necessary number of events in the beacon study to assess the overall survival endpoint and certain other topline data . we are now conducting blinded data verification activities and currently plan to unblind and announce the top-line data from the beacon study in march 2015. if the beacon study is successful and etirinotecan pegol is ultimately approved by the fda , our current plan would be to market and sell etirinotecan pegol in the united states ourselves for the fda approved metastatic breast cancer indication and license the commercial rights outside of the u.s. to one or more collaboration partners . as a result , the outcome of the beacon study will have a significant impact on whether or not we invest significant capital in building and maintaining a sales and market organization for the u.s. that we currently do not have in place . nktr-181 is a novel mu-opioid analgesic drug candidate for chronic pain conditions . story_separator_special_tag this year we plan to advance nktr-214 , an engineered immunostimulatory cytokine being developed for the treatment of solid tumors , into a phase 1 clinical study . nktr-214 is engineered to selectively activate il-2 receptors on cytotoxic t cells that kill tumor cells , with relatively low affinity for il-2 receptors on regulatory t cells that dampen the immune response to tumors . we are also advancing numerous other drug candidates in preclinical development in the areas of cancer immunotherapy , pain and other therapeutic indications . while we believe that our substantial investment in research and development has the potential to create significant value if one or more of our drug candidates demonstrate positive clinical results , receive regulatory approval in one or more major markets and achieve commercialization success , drug research and development is an inherently uncertain process and there is a high risk of failure at every stage prior to approval and the timing and outcome of clinical trial results are extremely difficult to predict . clinical development successes and failures can have a disproportionate positive or negative impact on our scientific and medical prospects , financial condition and prospects , results of operation and market value . historically , we have entered into a number of license and supply contracts under which we manufactured and supplied our proprietary pegylation reagents on a cost-plus or fixed price basis . our current strategy is to manufacture and supply pegylation reagents to support our proprietary drug candidates or our third-party collaborators where we have a strategic development and commercialization relationship or where we derive substantial economic benefit . key developments and trends in liquidity and capital resources as of december 31 , 2014 , we estimated that we had at least twelve months of working capital to fund our current business plans . at december 31 , 2014 , we had approximately $ 262.8 million in cash and investments in marketable securities , of which $ 25.0 million was restricted in relation to our 12.0 % senior secured notes , and $ 151.8 million in indebtedness . the indebtedness includes $ 125.0 million in aggregate principal amount of 56 12.0 % senior secured notes due july 15 , 2017 , but excludes our long-term liability relating to the sale of future royalties under the purchase and sale agreement with rpi finance trust . as is further described in note 7 to our consolidated financial statements , this royalty obligation liability will not be settled in cash . story_separator_special_tag phase 3 clinical trial by bayer . license , collaboration and other revenue increased for the year ended december 31 , 2013 compared to the year ended december 31 , 2012 primarily as a result of the recognition of a $ 25.0 million payment from astrazeneca achieved in september 2013 , the recognition of the $ 10.0 million milestone achieved upon the start of the amikacin inhale phase 3 clinical trial by bayer in april 2013 , and the recognition of the remaining $ 6.7 million deferred revenue balance related to our agreement with affymax as noted above . in addition , we recognized $ 7.9 million related to the delivery of additional quantities of our proprietary pegylation reagent to roche in the fourth quarter of 2013. we expect license , collaboration and other revenue in 2015 will be significantly impacted by the outcome and timing of astrazeneca 's launch of movantik as we are entitled to $ 140.0 million of development milestone payments due upon the commercial launches of movantik in the u.s. ( $ 100.0 million ) and in the e.u . ( $ 40.0 million ) . if these activities occur in 2015 , our license , collaboration and other revenue in 2015 will increase from 2014 . 58 the timing and future success of our drug development programs and those of our collaboration partners are subject to a number of risks and uncertainties . see part i , item 1a risk factors for discussion of the risks associated with the complex nature of our collaboration agreements . revenue by geography revenue by geographic area is based on locations of our partners . the following table sets forth revenue by geographic area ( in thousands ) : replace_table_token_6_th the increase in revenue attributable to european countries for the year ended december 31 , 2014 compared to the year ended december 31 , 2013 is primarily attributable to increased milestone and royalty revenues from our existing european based collaboration partners , including the recognition of the $ 105.0 million milestone payments from astrazeneca described above . the increase in revenue attributable to european countries for the year ended december 31 , 2013 compared to the year ended december 31 , 2012 is primarily attributable to increased milestone and royalty revenues from our existing european based collaboration partners , including the $ 25.0 million milestone payment from astrazeneca described above . cost of goods sold ( in thousands , except percentages ) replace_table_token_7_th cost of goods sold decreased during the year ended december 31 , 2014 compared to the year ended december 31 , 2013 primarily due to the decrease in product sales of $ 19.7 million in the year ended december 31 , 2014 compared to the year ended december 31 , 2013. during the year ended december 31 , 2014 , our gross profit was negative . the manufacturing arrangement with one of our collaboration partners includes a fixed price for proprietary pegylation reagent sales , which is less than the fully burdened manufacturing cost for the reagent in 2014 and this situation is expected to continue in future years . as a result of decreased overall manufacturing volume in 2014 as compared to 2013 and given the increase in the percentage of overall sales attributable to this partner , gross profit for the year was negative . in addition to product sales from the reagent , we also receive royalty revenues from this collaboration .
| results of operations years ended december 31 , 2014 , 2013 , and 2012 revenue ( in thousands , except percentages ) replace_table_token_5_th our revenue is derived from our collaboration agreements , under which we may receive product sales revenue , royalties , license fees , milestone payments or contract research payments . revenue is recognized when there is persuasive evidence that an arrangement exists , delivery has occurred , the price is fixed or determinable , and collection is reasonably assured . the amount of upfront fees received under our license and collaboration agreements allocated to continuing obligations , such as manufacturing and supply commitments , are recognized ratably over our expected performance period under the arrangement . as a result , there may be significant variations in the timing of receipt of cash payments and our recognition of revenue . we make our best estimate of the period over which we expect to fulfill our performance obligations . given the uncertainties in research and development collaborations , significant judgment is required by us to determine the performance periods . product sales product sales include fixed price and cost-plus manufacturing and supply agreements with our collaboration partners and result from the receipt of firm purchase orders from those partners . the timing of shipments is based solely on the demand and requirements of our collaboration partners and is not ratable throughout the year . product sales decreased for the year ended december 31 , 2014 compared to the year ended december 31 , 2013 primarily as a result of decreased product demand from a number of our collaboration partners . product sales increased for the year ended december 31 , 2013 compared to the year ended december 31 , 2012 primarily as a result of a $ 9.0 million increase in product sales to one of our collaboration partners .
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in situations in which the tax effects of a transaction were initially recognized directly in other comprehensive income , this story_separator_special_tag our fiscal year ends on the sunday closest to january 31 of the following year , typically resulting in a 52 week year , but occasionally giving rise to an additional week , resulting in a 53 week year . fiscal 2017 , fiscal 2016 , and fiscal 2015 were 52 week years . the following discussion and analysis should be read in conjunction with our consolidated financial statements and the related notes included elsewhere in this annual report on form 10-k. this discussion and analysis contains forward-looking statements based on current expectations that involve risks , uncertainties and assumptions , such as our plans , objectives , expectations , and intentions set forth in the `` special note regarding forward-looking statements . '' our actual results and the timing of events may differ materially from those anticipated in these forward looking statements as a result of various factors , including those set forth in the `` item 1a . risk factors '' section and elsewhere in this annual report on form 10-k. overview fiscal 2017 was a strong year for our company . new stores and new store formats , product innovations , and an enhanced e-commerce offering , combined with successful community and brand initiatives helped drive a 13 % increase in net revenue . we had a 7 % increase in total comparable sales . our product design and development teams launched a number of new category innovations this year . for women , our newest fabric everlux was created for high intensity , indoor workouts and the enlite bra offers guests proprietary technology for running and high impact training . for men , we expanded our popular abc pant franchise to include slim and jogger styles , and all of our men 's fixed waist bottoms now feature our abc construction . we look forward to delivering on a strong pipeline of innovation and product rollouts in fiscal 2018. during the year , we opened 46 net new lululemon branded company-operated stores , including 30 in north america , 14 in asia pacific , and two in europe . our multiple formats now include standard , co-located , local , and select flagship locations , which allow us to cater to our guests where they live , work , and sweat . as of january 28 , 2018 , we had 57 stores in asia pacific and 13 stores in europe , including our european flagship on london 's regent street which showcases the fullest expression of our brand to both local and travelling guests . we expanded in germany in fiscal 2017 with a new location in munich . in asia , we opened nine new stores in china during fiscal 2017 , in addition to growing our local e-commerce presence via tmall , and opening company-operated stores in japan . we relaunched our websites at the end of the third quarter of fiscal 2017 , improving the online experience through upgraded visuals , added video content , more intuitive navigation , enhanced storytelling , and the integration of ivivva . the sales performance of our e-commerce business , which accelerated throughout the year , culminated in a 44 % increase in direct to consumer net revenue in the fourth quarter of fiscal 2017 compared to the fourth quarter of fiscal 2016. in fiscal 2018 we plan to continue to develop our omni-channel experience to serve guests wherever and however they choose to shop , including launching a wechat store in china . our grassroots approach to brand-building - locally led by stores and store associates , who we call educators - enables us to connect with and uniquely understand our guest . we hosted several events during the year , including our annual seawheeze half marathon in vancouver , the ghost race in 15 cities in north america , the sweatlife festival in london , and unroll china across multiple cities . we complemented our local efforts with our first global marketing campaign `` this is yoga '' , followed by men 's focused `` strength to be '' and finally , for holiday , `` breathe it all in '' . we look forward to continuing this strong momentum into fiscal 2018 , focusing on our four key strategic growth pillars : digital , men 's , north america , and international , underpinned by innovations in product , our distinctive brand and community approach , and our vertically-integrated model . financial highlights the summary below provides both gaap and non-gaap financial measures . in connection with the restructuring of our ivivva operations , we recognized pre-tax costs totaling $ 47.2 million in fiscal 2017 , and a related income tax recovery of $ 12.7 million . we recognized a provisional income tax expense of $ 59.3 million in fiscal 2017 related to the u.s. tax cuts and jobs act . the adjusted financial measures exclude these items , and also exclude certain discrete items related to our transfer pricing arrangements and taxes on repatriation of foreign earnings which were recognized during the fiscal 2016. for the fiscal year ended january 28 , 2018 , compared to the fiscal year ended january 29 , 2017 : net revenue increased 13 % to $ 2.6 billion . on a constant dollar basis , net revenue increased 12 % . 20 total comparable sales , which includes comparable store sales and direct to consumer , increased 7 % . on a constant dollar basis , total comparable sales increased 7 % . – comparable store sales increase d 1 % , or increased 1 % on a constant dollar basis . – direct to consumer net revenue increased 27 % , or increased 27 % on a constant dollar basis . gross profit increased 17 % to $ 1.4 billion . adjusted gross profit increased 17 % to $ 1.4 billion . gross margin increased 160 basis points to 52.8 % . story_separator_special_tag comparable store sales increased 1 % , or $ 5.4 million on a constant dollar basis . the increase in comparable store sales was primarily a result of improved conversion rates and increased dollar value per transaction . this was partially offset by a decrease in store traffic , due in part to shifting retail traffic trends from in-store to online . these increases in net revenue were partially offset by the closure of 48 of our ivivva branded company-operated stores as part of the restructuring of our ivivva operations . these closures reduced our fiscal 2017 net revenue from company-operated stores by $ 26.6 million compared to fiscal 2016 . direct to consumer . net revenue from our direct to consumer segment increased $ 124.3 million , or 27 % , to $ 577.6 million in fiscal 2017 from $ 453.3 million in fiscal 2016 . direct to consumer net revenue increased 27 % on a constant dollar basis . the increase in net revenue from our direct to consumer segment was primarily the result of increased traffic on our e-commerce websites , improved conversion rates , and increased dollar value per transaction . during the second quarter of fiscal 2017 , we held online warehouse sales in the united states and canada which generated net revenue of $ 12.3 million . we did not hold any online warehouse sales during fiscal 2016. excluding the impact of the online warehouse sales , direct to consumer net revenue increased 25 % . other . net revenue from our other segment increased $ 47.8 million , or 26 % , to $ 234.5 million in fiscal 2017 from $ 186.7 million in fiscal 2016 . this increase was primarily the result of an increase in the number of outlets , increased net revenue at existing outlets , and an increase in the number of temporary locations . the increase in net revenue from our other segment was partially offset by lower net revenue from showrooms , primarily due a decrease in the number of showrooms open during fiscal 2017 compared to fiscal 2016. gross profit gross profit increased $ 199.2 million , or 17 % , to $ 1.4 billion in fiscal 2017 from $ 1.2 billion in fiscal 2016 . gross profit as a percentage of net revenue , or gross margin , increase d 160 basis points , to 52.8 % in fiscal 2017 from 51.2 % in fiscal 2016 . the increase in gross margin was primarily the result of : an increase in product margin of 200 basis points which was primarily due to lower product costs and a favorable mix of higher margin product , partially offset by higher markdowns , and higher shrink and damages ; and a favorable impact of foreign exchange rates of 10 basis points . this was partially offset by an increase in fixed costs related to our product and supply chain departments of 20 basis points , and costs incurred in connection with the restructuring of our ivivva operations of 30 basis points . during fiscal 2017 , as a result of the restructuring of our ivivva operations , we recognized costs totaling $ 8.7 million within costs of goods sold , as outlined in note 13 to the audited consolidated financial statements included in item 8 of part ii 23 of this report . excluding these charges , adjusted gross profit increase d 17.3 % to $ 1.4 billion and adjusted gross margin increase d 190 basis points to 53.1 % compared to fiscal 2016 . selling , general and administrative expenses selling , general and administrative expenses increased $ 125.8 million , or 16 % , to $ 904.3 million in fiscal 2017 from $ 778.5 million in fiscal 2016 . the increase in selling , general and administrative expenses was primarily due to : an increase in costs related to our operating channels of $ 91.4 million , comprised of : – an increase in employee costs of $ 32.8 million primarily from a growth in labor hours and benefits , mainly associated with new company-operated stores and other new operating locations ; – an increase in variable costs such as distribution costs and credit card fees of $ 16.4 million primarily as a result of increased net revenue ; and – an increase in other costs of $ 42.2 million primarily due to an increase in digital marketing expenses , website related costs including photography costs , brand and community costs , information technology related costs , and other costs associated with our operating locations ; an increase in head office costs of $ 50.0 million , comprised of : – an increase in employee costs of $ 19.3 million primarily due to additional employees to support the growth in our business ; and – an increase in other costs of $ 30.7 million primarily due to increases in information technology related costs , brand and community costs , and professional fees . the increase in selling , general , and administrative expenses was partially offset by an increase in net foreign exchange and derivative gains of $ 15.6 million . there were net foreign exchange and derivative gains of $ 7.3 million in fiscal 2017 compared to net foreign exchange losses of $ 8.3 million in fiscal 2016 . the net foreign exchange gains and losses primarily relate to the revaluation of u.s. dollar denominated monetary assets and liabilities held by canadian subsidiaries . during fiscal 2017 , we began entering into forward currency contracts designed to economically hedge these foreign exchange revaluation gains and losses . we have not applied hedge accounting to these instruments and the change in fair value of these derivatives is recorded within selling , general and administrative expenses . as a percentage of net revenue , selling , general and administrative expenses increased 90 basis points , to 34.1 % in fiscal 2017 from 33.2 % in fiscal 2016 .
| resulted in a $ 61.3 million increase to net revenue . comparable store sales increased 5 % , or $ 66.4 million on a constant dollar basis . the increase in comparable store sales was primarily as a result of increased dollar value per transaction and improved conversion rates . direct to consumer . net revenue from our direct to consumer segment increased $ 51.8 million , or 13 % , to $ 453.3 million in fiscal 2016 from $ 401.5 million in fiscal 2015 . direct to consumer net revenue increase d 13 % on a constant dollar basis . the increase in net revenue from our direct to consumer segment was primarily the result of increased traffic on our e-commerce websites , increased dollar value per transaction and improved conversion rates . other . net revenue from our other segment increased $ 44.1 million , or 31 % , to $ 186.7 million in fiscal 2016 from $ 142.7 million in fiscal 2015 . this increase was primarily the result of an increased number of outlets which were open for the full year in fiscal 2016 , increased net revenue at other existing outlets , and an increase in the number of temporary locations . gross profit gross profit increased $ 202.5 million , or 20 % , to $ 1.2 billion in fiscal 2016 from $ 997.2 million in fiscal 2015 . gross profit as a percentage of net revenue , or gross margin , increase d 280 basis points , to 51.2 % in fiscal 2016 from 48.4 % in fiscal 2015 . the increase in gross margin was primarily the result of an increase in product margin of 330 basis points , primarily due to lower product costs , improved average retail prices , and lower costs related to our raw material commitments .
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54 as of october 31 , 2013 , the company also entered into an agreement with mr. sheerr to leaseback the aforementioned story_separator_special_tag this item 7 , “ management 's discussion and analysis of financial condition and results of operations , ” and other parts of this form 10-k contain forward-looking statements , within the meaning of the private securities litigation reform act of 1995 , that involve risks and uncertainties . forward-looking statements provide current expectations of future events based on certain assumptions and include any statement that does not directly relate to any historical or current fact . forward-looking statements can also be identified by words such as “ future , ” “ anticipates , ” “ believes , ” “ estimates , ” “ expects , ” “ intends , ” “ plans , ” “ predicts , ” “ will , ” “ would , ” “ could , ” “ can , ” “ may , ” and similar terms . forward-looking statements are not guarantees of future performance and the company 's actual results may differ significantly from the results discussed in the forward-looking statements . 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 or quarters refer to the company 's fiscal years ended in april and the associated quarters of those fiscal years . the company assumes no obligation to revise or update any forward-looking statements for any reason , except as required by law . overview dataram corporation ( the `` company '' ) is a developer , manufacturer and marketer of large capacity memory products primarily used in high performance network servers and workstations . the company is also a developer , manufacturer and marketer of a line of high performance storage caching products . the company provides customized memory solutions for original equipment manufacturers ( `` oems '' ) and compatible memory for leading brands including dell , hp , ibm and sun microsystems . the company also manufactures a line of memory products for intel and amd motherboard based servers for sale to oems and channel assemblers . the company 's memory products are sold worldwide to oems , distributors , value-added resellers and end-users . the company has one leased manufacturing facility in the united states with sales offices in the united states , europe and japan . the company is an independent memory manufacturer specializing in high-capacity memory and competes with several other large independent memory manufacturers as well as the oems mentioned above . the primary raw material used in producing memory boards is dynamic random access memory ( “ dram ” ) chips . the purchase cost of drams is the largest single component of the total cost of a finished memory board . consequently , average selling prices for computer memory boards are significantly dependent on the pricing and availability of dram chips . in the fiscal year ended april 30 , 2009 , the company acquired certain assets of micro memory bank , inc. ( `` mmb '' ) , a privately held corporation . mmb is a manufacturer of legacy to advanced solutions in laptop , desktop and server memory products . the acquisition expanded the company 's memory product offerings and routes to market . its products include memory upgrades for ibm , sun , hp and compaq computer systems . mmb also markets and sells new and refurbished factory original memory upgrades manufactured by ibm , sun , hp and compaq as well as factory original modules manufactured by micron , hynix , samsung , elpida and nanya , and purchases excess memory inventory from other parties as well . 25 during the third quarter of the fiscal year ended april 30 , 2012 , the company 's xcelasan ( “ xcelasan ” ) product was available for general release and generated approximately $ 8,000 of revenue , which was significantly lower than expected . the company capitalized approximately $ 907,000 of xcelasan development cost in the first six months of the fiscal year ended april 30 , 2012. the company capitalized approximately $ 1,480,000 of xcelasan research and development costs in the fiscal year ended april 30 , 2011. the company determined in the fiscal year ended april 30 , 2012 's third quarter based on the estimated future net realizable value for the expected periods of benefit that the carrying value of capitalized software development cost was impaired . as such , approximately $ 2,387,000 of capitalized software development cost was written down to zero . in the fourth quarter of the fiscal year ended april 30 , 2012 , the company sold thirteen patents and two patent applications ( covering covered solid state storage and caching products based on dram , flash , and other solid state technologies ) for a purchase price of $ 5,000,000. under terms of the sale , the company retains a license to continue to use the patents in current and future company products ( including xcelasan ) with limited rights to transfer its license . at the time , the company believed that this transaction represented an exceptional opportunity to fund new growth initiatives such as the amd branded products while at the same time protecting the company 's current product portfolio . the transaction also delivered a significant return on the investment the company made several years ago when it committed to use funds to convert certain intellectual property to tangible patent assets . story_separator_special_tag other income ( expense ) for fiscal year ended april 30 , 2013 totaled approximately $ 341,000 of expense versus $ 3,627,000 of income in the fiscal year ended april 30 , 2012. other income ( expense ) for the fiscal year ended april 30 , 2013 includes $ 311,000 of interest expense and $ 22,000 of interest income . other income ( expense ) in the fiscal year ended april 30 , 2013 also includes $ 52,000 of foreign currency transaction losses , primarily as a result of the us dollar strengthening against the euro . other income ( expense ) in the fiscal year ended april 30 , 2012 includes approximately $ 4,078,000 of income recorded for the sale of thirteen patents and two patent applications , net of expenses . other income ( expense ) in the fiscal year ended april 30 , 2012 also includes $ 386,000 of interest expense and $ 65,000 of foreign currency transaction losses , primarily the result of the us dollar strengthening against the euro . 29 the company 's consolidated statements of operations for the fiscal year ended april 30 , 2013 and 2012 include tax expense of approximately $ 5,000 each year that consists of state minimum tax payments . the company 's nol carry-forwards are a component of its deferred income tax assets which are reported net of a full valuation allowance in the company 's consolidated financial statements for the fiscal years ended april 30 , 2013 and 2012. the company has recorded a full valuation allowance related to its deferred tax asset in both 2013 and 2012. liquidity and capital resources the company 's financial statements are prepared using the accrual method of accounting in accordance with accounting principles generally accepted in the united states of america and have been prepared on a going concern basis , which contemplates the realization of assets and the settlement of liabilities in the normal course of business . for the fiscal years ended april 30 , 2014 , 2013 and 2012 , the company incurred losses in the amounts of approximately $ 2,609,000 , $ 4,625,000 and $ 3,259,000 , respectively . our continuation as a going concern is dependent upon obtaining the additional working capital necessary to sustain our operations . we may raise additional working capital by obtaining financing , raising capital through the sales of equity and or debt securities and upon future profitable operations . we may also seek to reduce our expenses . for example , in the first quarter of the fiscal year ended april 30 , 2014 , the company eliminated approximately $ 900,000 of total expenses on an annual basis . there is no assurance that our current operations will be profitable or that we will raise sufficient funds to continue operating . the company continues to seek out opportunities to reduce overhead expenses to meet revenues . these factors raise substantial doubt about the company 's ability to continue as a going concern . the financial statements do not include any adjustments relating to the recoverability and classification of recorded assets , or the classification of liabilities that might be necessary in the event we can not continue in operations . as of april 30 , 2014 , we had cash and cash equivalents totaling $ 258,000. during the year then ended , we had a net loss of $ 2,609,000 and used cash in operating activities of $ 1,554,000. we believe our existing capital resources should be sufficient to fund the activities contemplated by our current operating plan into the third quarter of fiscal 2015. we intend to seek external funding prior to that time , however , most likely through bank debt and the issuance and sale of securities . we can not predict with any certainty when we will need additional funds or how much we will need or if additional funds will be available to us . our need for future funding will depend on numerous factors , many of which are outside our control . net cash used in operating activities totaled approximately $ 1,554,000 for the fiscal year ended april 30 , 2014. net loss totaled approximately $ 2,609,000 and included stock-based compensation expense of approximately $ 43,000 , depreciation and amortization expense of approximately $ 300,000 and bad debt expense of approximately $ 186,000. there was a gain on sale of property and equipment that totaled approximately $ 139,000. inventories decreased by approximately $ 612,000. the decrease in inventories was a management decision to reduce inventory levels and conserve working capital . accounts payable increased by approximately $ 491,000. accrued liabilities increased by approximately $ 172,000. trade receivables decreased by approximately $ 689,000 . 30 net cash provided by investing activities totaled $ 500,000 for the fiscal year ended april 30 , 2014 and was the result of the proceeds received from the sale of property and equipment . the proceeds were used to pay down debt to mr. sheerr . net cash provided by financing activities totaled approximately $ 988,000 for the fiscal year ended april 30 , 2014 and consisted of net borrowings of $ 227,000 made under revolving credit facilities . the company also received net proceeds from the sale of common shares and warrants in the amount of $ 1,561,000. the company also made principal payments of $ 800,000 to mr. sheerr under the note and security agreement . on july 27 , 2010 , the company entered into an agreement with a financial institution for formula-based secured debt financing of up to $ 5,000,000. borrowings were secured by substantially all assets . on march 2 , 2012 , the agreement was amended to reduce the amount available under the credit facility to $ 3,500,000. on may 17 , 2012 , the agreement was amended and restated . the amended and restated documents reduced the interest rate to prime plus 6 % , subject to a minimum of 9.25 % and also not less than $ 8,000 per month .
| results of operations the following table sets forth consolidated operating data expressed as a percentage of revenues for the periods indicated . replace_table_token_5_th 26 fiscal 2014 compared with fiscal 2013 revenues for the fiscal year ended april 30 , 2014 were $ 30,399,000 compared to $ 27,616,000 in the fiscal year ended april 30 , 2013 , a 10.1 % increase . average selling prices decreased approximately 13 % from the prior year periods , attributable to a decline in the price of dram chips , the primary raw material used in the company 's products . the decline in average selling price was offset by an increase in volume of approximately 27 % . revenues for the fiscal years ended april 30 , 2014 and 2013 by geographic region were : replace_table_token_6_th the company expects that the entire backlog on hand will be filled during the fiscal year ending april 30 , 2015 and mostly in the first quarter . the company 's backlog at april 30 , 2014 was $ 216,000. at april 30 , 2013 , the company 's backlog was $ 234,000. cost of sales was $ 24,353,000 in the fiscal year ended april 30 , 2014 or 80.1 % of revenues compared to $ 22,042,000 or 79.8 % of revenues in the fiscal year ended april 30 , 2013. fluctuations in cost of sales as a percentage of revenues are not unusual and can result from many factors , some of which are a rapid change in the price of drams , or a change in product mix possibly resulting from a large order or series of orders for a particular product or a change in customer mix .
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llc ( facilitysource ) in 2018 and our acquisition of telford homes plc ( telford ) on october 1 , 2019. other intangible assets that have indefinite estimated useful lives that are not being amortized include certain management contracts identified in the reim acquisitions , a trademark , which was separately identified as 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 included elsewhere in this annual report . discussion regarding our financial condition and results of operations for the year ended december 31 , 2018 and comparisons between the years ended december 31 , 2019 and 2018 is included in part ii , item 7 . “ management 's discussion and analysis of financial condition and results of operations ” in the company 's annual report filed with the sec on march 2 , 2020. overview we are the world 's largest commercial real estate services and investment firm , based on 2020 revenue , with leading global market positions in our leasing , property sales , occupier outsourcing and valuation businesses . as of december 31 , 2020 , the company has more than 100,000 employees ( excluding affiliates ) serving clients in more than 100 countries . our business is focused on providing services to real estate investors and occupiers . for investors , we provide capital markets ( property sales , mortgage origination , sales and servicing ) , property leasing , investment management , property management , valuation and development services , among others . for occupiers , we provide facilities management , project management , transaction ( both property sales and leasing ) and consulting services , among others . we provide services under the following brand names : “ cbre ” ( real estate advisory and outsourcing services ) ; “ cbre global investors ” ( investment management ) ; “ trammell crow company ” ( u.s. development ) ; “ telford homes ” ( u.k. development ) and “ hana ” ( flexible-space solutions ) . in 2020 , cbre sponsored a spac , cbre acquisition holdings , which has the sole purpose of acquiring a privately held company with significant growth potential and to create value by supporting the company in the public markets . the company that it acquires is expected to operate in an industry that will benefit from the experience , expertise and operating skills of cbre . cbre acquisition holdings trades on the nyse under the symbols “ cbah , ” “ cbah.u , ” and “ cbah.w. ” our revenue mix has shifted toward more stable revenue sources , particularly occupier outsourcing , and our dependence on highly cyclical property sales and lease transaction revenue has declined markedly over the past decade . we believe we are well-positioned to capture a substantial and growing share of market opportunities at a time when investors and occupiers increasingly prefer to purchase integrated , account-based services on a national and global basis . we generate revenue from both management fees ( large multi-year portfolio and per-project contracts ) and commissions on transactions . in 2020 , we generated revenue from a highly diversified base of clients , including more than 90 of the fortune 100 companies . we have been an s & p 500 company since 2006 and in 2020 we were ranked # 128 on the fortune 500. we have been voted the most recognized commercial real estate brand in the lipsey company survey for 20 years in a row ( including 2021 ) . we have also been rated a world 's most ethical company by the ethisphere institute for eight consecutive years ( including 2021 ) , and are included in both the dow jones world sustainability index and the bloomberg gender-equality index for two years in a row . critical accounting policies our consolidated financial statements have been prepared in accordance with gaap , which require us to make estimates and assumptions that affect reported amounts . the estimates and assumptions are based on historical experience and on other factors that we believe to be reasonable . actual results may differ from those estimates . we believe that the following critical accounting policies represent the areas where more significant judgments and estimates are used in the preparation of our consolidated financial statements . revenue recognition to recognize revenue in a transaction with a customer , we evaluate the five steps of the accounting standards codification ( asc ) topic 606 revenue recognition framework : ( 1 ) identify the contract ; ( 2 ) identify the performance obligations ( s ) in the contract ; ( 3 ) determine the transaction price ; ( 4 ) allocate the transaction price to the performance obligation ( s ) and ( 5 ) recognize revenue when ( or as ) the performance obligations are satisfied . 33 table of contents our revenue recognition policies are consistent with this five step framework . understanding the complex terms of agreements and determining the appropriate time , amount , and method to recognize revenue for each transaction requires significant judgement . these significant judgements include : ( i ) determining what point in time or what measure of progress depicts the transfer of control to the customer ; ( ii ) applying the series guidance to certain performance obligations satisfied over time ; ( iii ) estimating how and when contingencies , or other forms of variable consideration , will impact the timing and amount of recognition of revenue and ( iv ) determining whether we control third party services before they are transferred to the customer in order to appropriately recognize the associated fees on either a gross or net basis . the timing and amount of revenue recognition in a period could vary if different judgments were made . our revenues subject to the most judgment are brokerage commission revenue , incentive-based management fees , development fees and third party fees associated with our occupier outsourcing and property management services . story_separator_special_tag the ffcr act and the cares act contain numerous tax provisions , such as net operating loss carry-back periods , alternative minimum tax credit refunds , deferral of employer payroll taxes deferring payroll tax payments , establishing a credit for the retention of certain employees , relaxing limitations on the deductibility of interest , and updating the definition of qualified improvement property . this legislation currently has no material impact to income tax expense on the company 's financial statements . our future effective tax rate could be adversely affected by earnings being lower than anticipated in countries that have lower statutory rates and higher than anticipated in countries that have higher statutory rates , changes in the valuation of our deferred tax assets or liabilities , or changes in tax laws , regulations , or accounting principles , as well as certain discrete items . see note 15 of the notes to consolidated financial statements set forth in item 8 of this annual report for further information regarding income taxes . new accounting pronouncements see new accounting pronouncements discussion within note 3 of the notes to consolidated financial statements set forth in item 8 of this annual report . seasonality in a typical year , a significant portion of our revenue is seasonal , which an investor should keep in mind when comparing our financial condition and results of operations on a quarter-by-quarter basis . historically , our revenue , operating income , net income and cash flow from operating activities have tended to be lowest in the first quarter and highest in the fourth quarter of each year . revenue , earnings and cash flow have generally been concentrated in the fourth calendar quarter due to the focus on completing sales , financing and leasing transactions prior to year-end . the severe and ongoing impact of the covid-19 pandemic may cause seasonality to deviate from historical patterns . 35 table of contents inflation our commissions and other variable costs related to revenue are primarily affected by commercial real estate market supply and demand , which may be affected by inflation . however , to date , we believe that general inflation has not had a material impact upon our operations . items affecting comparability when you read our financial statements and the information included in this annual report , you should consider that we have experienced , and continue to experience , several material trends and uncertainties ( particularly those caused or exacerbated by covid-19 ) that have affected our financial condition and results of operations that make it challenging to predict our future performance based on our historical results . we believe that the following material trends and uncertainties are crucial to an understanding of the variability in our historical earnings and cash flows and the potential for continued variability in the future . macroeconomic conditions economic trends and government policies affect global and regional commercial real estate markets as well as our operations directly . these include overall economic activity and employment growth , with specific sensitivity to growth in office-based employment ; interest rate levels and changes in interest rates ; the cost and availability of credit ; and the impact of tax and regulatory policies . periods of economic weakness or recession , significantly rising interest rates , fiscal uncertainty , declining employment levels , decreasing demand for commercial real estate , falling real estate values , disruption to the global capital or credit markets , or the public perception that any of these events may occur , will negatively affect the performance of our business . compensation is our largest expense and our sales and leasing professionals generally are paid on a commission and or bonus basis that correlates with their revenue production . as a result , the negative effects on our operating margins of difficult market conditions , such as we are currently experiencing with the covid-19 pandemic , is partially mitigated by the inherent variability of our compensation cost structure . in addition , when negative economic conditions have been particularly severe , like during the current covid-19 pandemic , we have moved decisively to lower operating expenses to improve financial performance , and then have restored certain expenses as economic conditions improved . additionally , our contractual revenue has increased primarily as a result of growth in our outsourcing business , and we believe this contractual revenue should help offset the negative impacts that macroeconomic deterioration could have on other parts of our business . nevertheless , adverse global and regional economic trends could pose significant risks to the performance of our consolidated operations and financial condition . from 2010 to early 2020 , commercial real estate markets had generally been characterized by increased demand for space , falling vacancies , higher rents and strong capital flows , leading to solid property sales and leasing activity . this healthy backdrop changed abruptly in the first quarter of 2020 with the emergence of the covid-19 pandemic and resultant sharp contraction of economic activity across much of the world . since then , there has been a severe impact on commercial real estate markets , as many property owners and occupiers have put transactions on hold and withdrawn existing mandates , sharply reducing sales and leasing volumes . we expect to see the highly challenging operating environment continue , as covid-19 caseloads remain elevated across our major markets , business travel and face-to-face business dealings are limited and the overwhelming majority of workers remain out of their offices . the recovery of real estate markets around the world remain uncertain as of the date of this report . covid-19 is putting downward pressure on parts of our business and creating larger opportunities in other parts . the severe economic effects of the pandemic continued to weigh most heavily on higher-margin property lease and sales revenue in the advisory services segment . however , global industrial leasing revenue , fueled by e-commerce , grew strongly during the fourth quarter , reflecting the resiliency of this asset type .
| results of operations the following table sets forth items derived from our consolidated statements of operations for the years ended december 31 , 2020 and 2019 ( dollars in thousands ) : replace_table_token_5_th fee revenue and adjusted ebitda are not recognized measurements under gaap . when analyzing our operating performance , investors should use these measures in addition to , and not as an alternative for , their most directly comparable financial measure calculated and presented in accordance with gaap . we generally use these non-gaap financial measures to evaluate operating performance and for other discretionary purposes . we believe these measures provide a more complete understanding of ongoing operations , enhance comparability of current results to prior periods and may be useful for investors to analyze our financial performance because they eliminate the impact of selected charges that may obscure trends in the underlying performance of our business . because not all companies use identical calculations , our presentation of fee revenue and adjusted ebitda may not be comparable to similarly titled measures of other companies . 39 table of contents fee revenue is gross revenue less both client reimbursed costs largely associated with employees that are dedicated to client facilities and subcontracted vendor work performed for clients . we believe that investors may find this measure useful to analyze the company 's overall financial performance because it excludes costs reimbursable by clients , and as such provides greater visibility into the underlying performance of our business . ebitda represents earnings before depreciation and amortization , asset impairments , interest expense , net of interest income , write-off of financing costs on extinguished debt , and provision for income taxes .
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you should read the following discussion together with the sections entitled “ risk factors , ” “ business ” and the audited consolidated financial statements , including the related notes , appearing elsewhere in this annual report on form 10-k. all references to years , unless otherwise noted , refer to our fiscal years , which end on december 31 . as used in this annual report on form 10-k , unless the context suggests otherwise , “ we , ” “ us , ” “ our , ” “ the company ” or “ osmotica ” refer to osmotica pharmaceuticals plc . this discussion and analysis is based upon the historical financial statements of osmotica pharmaceuticals plc included in this annual report on form 10-k. prior to the reorganization ( as defined in the accompanying notes to consolidated financial statements ) , osmotica pharmaceuticals plc was a subsidiary of osmotica holdings s.c.sp . and had no material assets and conducted no operations other than activities incidental to its formation , the reorganization and its initial public offering . we are a fully integrated biopharmaceutical company focused on the development and commercialization of specialty products that target markets with underserved patient populations . in 2020 , we continued to transition our business to a specialty pharmaceutical company focused on proprietary products primarily in the eye care and neuroscience areas . we generated total revenues in 2020 across our existing portfolio of promoted women 's health products , specialty neurology , as well as our non-promoted products , which are primarily complex formulations of generic drugs . in 2018 , we received regulatory approval from the fda for osmolex er ( amantadine extended-release tablets ) for the treatment of parkinson 's disease and drug-induced extrapyramidal reactions , which are involuntary muscle movements caused by certain medications , in adults . we completed the launch of osmolex er in january 2019. in january 2021 , we concluded the sale of osmolex er . in july 2020 , we received regulatory approval from the fda for rvl-1201 , or upneeq , ( oxymetazoline hydrocholoride ophthalmic solution , 0.1 % ) , for the treatment of acquired blepharoptosis , or droopy eyelid , in adults . we launched upneeq in september 2020 to a limited number of eyecare professionals . our core competencies span drug development , manufacturing and commercialization . our sales representatives are fully engaged in the launch and in-person promotion of upneeq , while we continue to maintain non-personal promotional efforts for certain other products in our portfolio , including m-72 in specialty neurology ; ob complete , our family of prescription prenatal dietary supplements , and divigel ( estradiol gel , 0.1 % ) in women 's health . as of december 31 , 2020 , our commercial portfolio of promoted and non-promoted products consists of approximately 35 products . certain of our key products , particularly those that incorporate our proprietary osmodex drug delivery system , are manufactured in our marietta , georgia facility . some of our products benefit from intellectual property protection , formulation and manufacturing complexities , data exclusivity , as well as u.s. drug enforcement administration , or dea , regulation and quotas for api . many of our generic products compete in generic markets where barriers to entry are lower than markets in which certain of our promoted products compete . generic products generally contribute most significantly to revenues and gross margins at the time of launch or in periods where no other or a limited number of competing products have been approved and launched . in the u.s. , the consolidation of buyers in recent years has increased competitive pressures on the industry as a whole . as such , the timing of new product launches can have a significant impact on a company 's financial results . the entrance into the market of additional competition can have a negative impact on the pricing and volume of the affected products which are outside the company 's control . in particular , methylphenidate er tablets , venlafaxine er tablets , or vert , and lorzone have experienced , and are expected to continue to experience , significant pricing and market erosion due to additional competition from other generic pharmaceutical companies . this generic pricing erosion has resulted in lower net sales , revenue and profitability from methylphenidate er tablets , vert and lorzone in 2020 , and this erosion is expected to continue in subsequent years . on july 8 , 2020 , the fda approved our nda for upneeq for the treatment of acquired blepharoptosis in adults . upneeq was approved based on three phase iii clinical studies that supported upneeq 's efficacy and safety . results from 89 upneeq 's first phase iii clinical trial showed that the formulation met its primary efficacy endpoint and was well-tolerated . we believe upneeq is the first non-surgical treatment option approved by the fda for acquired blepharoptosis . we currently make upneeq available exclusively through rvl pharmacy , inc. our wholly-owned pharmacy . we acquired upneeq as part of our asset acquisition of revitalid , inc. , now known as rvl pharmaceuticals , inc. , in 2017. as part of the acquisition , we agreed to make future earn-out , milestone and royalty payments based on net sales and regulatory developments with respect to upneeq . upneeq is manufactured and supplied to us by nephron pharmaceuticals corporation under an exclusive supply agreement that has a term of five years from the production of the initial commercial batches , and automatically renews for additional one-year periods unless either party provides at least 90 days ' advance written notice of non-renewal . on july 28 , 2020 , we entered into a license agreement with santen pharmaceutical co. ltd , or santen , granting santen the exclusive development , registration , and commercialization rights to rvl-1201 in japan , china , and other asian countries as well as emea countries . story_separator_special_tag for these sales we recognize revenue when control has transferred to the customer , which is typically on delivery to the customer . the amount of revenue we recognize is equal to the selling price , adjusted for any variable consideration , which includes estimated chargebacks , commercial rebates , discounts and allowances at the time revenues are recognized . royalty revenue —for arrangements that include sales-based royalties , including milestone payments based on the level of sales , and the license is deemed to be the predominant item to which the royalties relate , we recognize revenue at the later of ( a ) when the related sales occur , or ( b ) when the performance obligation to which some or all the royalty has been allocated has been satisfied ( or partially satisfied ) . licensing and contract revenue —we have arrangements with commercial partners that allow for the purchase of product from the company by the commercial partners for purpose of sub-distribution . licensing revenue is recognized when the performance obligation identified in the arrangement is completed . variable considerations , such as returns on product sales , government program rebates , price adjustments and prompt pay discounts associated with licensing revenue , are generally the responsibility of our commercial partners . 91 selling , general and administrative expenses selling , general and administrative expenses consist primarily of personnel expenses , including salaries and benefits for employees in executive , sales , marketing , finance , accounting , business development , legal and human resource functions . general and administrative expenses also include corporate facility costs , including rent , utilities , insurance , legal fees related to corporate matters and fees for accounting and other consulting services . we expect to continue to incur additional general and administrative expenses as a public company , including costs associated with the preparation of our sec filings , increased legal and accounting costs , investor relations costs , incremental director and officer liability insurance costs , as well as costs related to compliance with the sarbanes-oxley act of 2002 and the dodd-frank wall street reform and consumer protection act . research and development costs for research and development are charged as incurred and include employee-related expenses ( including salaries and benefits , travel and expenses incurred under agreements with contract research organizations , or cros , contract manufacturing organizations and service providers that assist in conducting clinical and preclinical studies ) , costs associated with preclinical activities and development activities and costs associated with regulatory operations . costs for certain development activities , such as clinical studies , are recognized based on an evaluation of the progress to completion of specific tasks using data such as patient enrollment , clinical site activations or information provided to us by our vendors on their actual costs incurred . payments for these activities are based on the terms of the individual arrangements , which may differ from the patterns of costs incurred , and are reflected in our consolidated financial statements as prepaid expenses or accrued expenses as applicable . story_separator_special_tag partially offset by higher marketing expenses associated with the launch of upneeq and higher general and administrative expenses largely due to costs associated with the santen license transaction and legal expenses during the year . research and development expenses research and development expenses decreased by $ 12.6 million in the year ended december 31 , 2020 to $ 19.7 million as compared to $ 32.3 million in the year ended december 31 , 2019. the decrease primarily reflects the completion of the phase iii clinical trials of both arbaclofen er and rvl-1201 during the first and second quarters of 2019 , respectively , and the nda filing fees for rvl-1201 incurred in the third quarter of 2019. the following table summarizes our research and development expenses incurred for the periods indicated ( dollars in thousands ) : replace_table_token_5_th 94 impairment of intangible assets and goodwill impairments of intangible assets and goodwill for the year-ended december 31 , 2020 was $ 72.2 million primarily consisting of write-downs to fair value for methylphenidate er , vert , arbaclofen er and oxybutynin of $ 19.5 million , $ 20.2 million , $ 28.9 million and $ 3.6 million , respectively , including an indefinite-lived in-process r & d asset , arbaclofen er , which resulted in an impairment charge of $ 28.9 million due to a delay in the anticipated launch of the product candidate , if approved . the impairments of methylphenidate er , vert and oxybutynin reflect the competitive generic environment which has continued to erode net realized pricing and volumes of these products , while the impairment of onitnua er reflects a delay in its anticpated commericialization should the product be approved by the fda . in the fourth quarter of 2020 we recognized an impairment of finite-lived development technology and product rights for vert of $ 10.7 million and $ 9.5 million , respectively due to the approval of a competing product and the anticipated deterioration of pricing and volumes , and an impairment of indefinite-lived intangible assets for arbaclofen er of $ 28.9 million . impairment of intangible assets was $ 283.7 million during the year ended december 31 , 2019 primarily consisting of write-downs to fair value of methylphenidate er , vert , osmolex er , and corvite of $ 128.1 million , $ 137.7 million , $ 17.7 million , and $ 0.2 million , respectively . methylphenidate er tablets and vert were impaired due to lower revenues reflecting an increasingly competitive environment which deteriorated pricing and volumes ; osmolex er was impaired due to underperforming revenue expectations subsequent to the launch of the product ; and corvite was impaired due to the discontinuation of the product . in the third and fourth quarter of 2019 , we also recognized an impairment of finite-lived development technology and product rights for vert of $ 73.0 million and $ 64.7 million , respectively , due to approvals of competing products which deteriorated pricing and volumes .
| results of operations comparison of years ended december 31 , 2020 and 2019 financial operations overview the following table presents revenues and expenses for the years ended december 31 , 2020 and 2019 ( dollars in thousands ) : replace_table_token_2_th 92 revenue the following table presents total revenues for the years ended december 31 , 2020 and 2019 ( dollars in thousands ) : replace_table_token_3_th total revenues decreased by $ 62.1 million to $ 177.9 million for the year ended december 31 , 2020 , as compared to $ 240.0 million for the year ended december 31 , 2019 primarily due to a decrease in net product sales , partially offset by higher licensing and contract revenue . net product sales . net product sales decreased by $ 89.6 million to $ 145.9 million for the year ended december 31 , 2020 , as compared to $ 235.5 million for the year ended december 31 , 2019. approximately $ 52.2 million of this decrease was attributable to lower realized prices , and approximately $ 37.4 million was due to lower volumes of products sold . net product sales of methylphenidate er ( including m-72 ) , decreased 57 % due to price erosion from generic competitors resulting in significantly lower net selling prices and lower volumes . product sales from vert decreased by 66 % for the year ended december 31 , 2020 due to additional generic competition resulting in lower volumes and net realized selling prices . during the first quarter of 2020 two competitors launched competing dosage strengths of vert which negatively affected selling prices and volumes . we expect that the additional competition for both methylphenidate er and vert from these competitors , as well as additional generic product approvals and launches in the future , if any , will continue to negatively affect our sales of these products in 2021 and future years .
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forward-looking statements provide current expectations of future events based on certain assumptions and include any statement that does not directly relate to any historical or current fact . forward-looking statements can also be identified by words such as future , anticipates , believes , estimates , expects , intends , plans , predicts , will , would , could , can , may , and similar terms . forward-looking statements are not guarantees of future performance and the company 's actual results may differ significantly from the results discussed in the forward-looking statements . 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 . overview and highlights the company designs , manufactures and markets mobile communication and media devices , personal computers and portable digital music players , and sells a variety of related software , services , accessories , networking solutions and third-party digital content and applications . 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 online and retail stores . the company sells to consumers , small and mid-sized businesses and education , enterprise and government customers . story_separator_special_tag font-family : arial '' > the following table presents ipad net sales and unit sales information for 2015 , 2014 and 2013 ( dollars in millions and units in thousands ) : replace_table_token_7_th net sales and unit sales for ipad declined during 2015 compared to 2014. the company believes the decline in ipad sales is due in part to a longer repurchase cycle for ipads and some level of cannibalization from the company 's other products . ipad asps declined by 5 % during 2015 compared to 2014 , primarily as a result of the effect of weakness in most foreign currencies relative to the u.s. dollar and a shift in mix to lower-priced ipads . net sales and unit sales for ipad declined in 2014 compared to 2013. ipad net sales and unit sales grew in the greater china and japan segments but this growth was more than offset by a decline in all other segments . overall ipad asps were relatively flat in 2014 compared to 2013 with a shift in mix to higher-priced ipads being offset by the october 2013 price reduction of ipad mini . asps increased in the japan and rest of asia pacific segments but were slightly down in other segments . mac the following table presents mac net sales and unit sales information for 2015 , 2014 and 2013 ( dollars in millions and units in thousands ) : replace_table_token_8_th the year-over-year growth in mac net sales and unit sales during 2015 was driven by strong demand for mac portables . mac asps declined 3 % during 2015 compared to 2014 largely due to the effect of weakness in most foreign currencies relative to the u.s. dollar . the year-over-year growth in mac net sales and unit sales for 2014 was primarily driven by increased sales of macbook air , macbook pro and mac pro . mac net sales and unit sales increased in all of the company 's operating segments . mac asps decreased during 2014 compared to 2013 primarily due to price reductions on certain mac models and a shift in mix towards mac portable systems . apple inc. | 2015 form 10-k | 25 services the following table presents net sales information of services for 2015 , 2014 and 2013 ( dollars in millions ) : replace_table_token_9_th the increase in net sales of services during 2015 compared to 2014 was primarily due to growth from internet services and licensing . the app store , included within internet services , generated strong year-over-year net sales growth of 29 % . the increase in net sales of services in 2014 compared to 2013 was primarily due to growth in net sales from internet services , applecare and licensing . internet services generated a total of $ 10.2 billion in net sales during 2014 compared to $ 9.3 billion during 2013. growth in net sales from internet services was driven by increases in revenue from app sales reflecting continued growth in the installed base of ios devices and the expanded offerings of ios apps and related in-app purchases . this was partially offset by a decline in sales of digital music . segment operating performance the company manages its business primarily on a geographic basis . the company 's reportable operating segments consist of the americas , europe , greater china , japan and rest of asia pacific . the americas segment includes both north and south america . the europe segment includes european countries , as well as india , the middle east and africa . the greater china segment includes china , hong kong and taiwan . story_separator_special_tag the year-over-year increase in the gross margin percentage in 2014 was driven by multiple factors including lower commodity costs , a favorable shift in mix to products with higher margins and improved leverage on fixed costs from higher net sales , which was partially offset by the weakness in several foreign currencies relative to the u.s. dollar , price reductions on select products and higher cost structures on certain new products . the company anticipates gross margin during the first quarter of 2016 to be between 39 % and 40 % . the foregoing statement regarding the company 's expected gross margin percentage in the first quarter of 2016 is forward-looking and could differ from actual results . the company 's future gross margins can be impacted by multiple factors including , but not limited to , those set forth in part i , item 1a of this form 10-k under the heading risk factors and those described in this paragraph . in general , the company believes gross margins will remain under downward pressure due to a variety of factors , including continued industry wide global product pricing pressures , increased competition , compressed product life cycles , product transitions , potential increases in the cost of components , and potential strengthening of the u.s. dollar , as well as potential increases in the costs of outside manufacturing services and a potential shift in the company 's sales mix towards products with lower gross margins . in response to competitive pressures , the company expects it will continue to take product pricing actions , which would adversely affect gross margins . gross margins could also be affected by the company 's ability to manage product quality and warranty costs effectively and to stimulate demand for certain of its products . due to the company 's significant international operations , its financial condition and operating results , including gross margins , could be significantly affected by fluctuations in exchange rates . operating expenses operating expenses for 2015 , 2014 and 2013 are as follows ( dollars in millions ) : replace_table_token_16_th research and development the year-over-year growth in r & d expense in 2015 and 2014 was driven primarily by an increase in headcount and related expenses , including share-based compensation costs , and material costs to support expanded r & d activities . the company continues to believe that focused investments in r & d are critical to its future growth and competitive position in the marketplace and are directly related to timely development of new and updated products that are central to the company 's core business strategy . selling , general and administrative the year-over-year growth in selling , general and administrative expense in 2015 and 2014 was primarily due to increased headcount and related expenses , including share-based compensation costs , and higher spending on marketing and advertising . apple inc. | 2015 form 10-k | 28 other income/ ( expense ) , net other income/ ( expense ) , net for 2015 , 2014 and 2013 are as follows ( dollars in millions ) : replace_table_token_17_th the increase in other income/ ( expense ) , net during 2015 compared to 2014 was due primarily to higher interest income , partially offset by higher expenses associated with foreign exchange activity and higher interest expense on debt . the decrease in other income and expense during 2014 compared to 2013 was due primarily to higher interest expense on debt and higher expenses associated with foreign exchange rate movements , partially offset by lower premium expenses on foreign exchange contracts and higher interest income . the weighted-average interest rate earned by the company on its cash , cash equivalents and marketable securities was 1.49 % , 1.11 % and 1.03 % in 2015 , 2014 and 2013 , respectively . provision for income taxes provision for income taxes and effective tax rates for 2015 , 2014 and 2013 are as follows ( dollars in millions ) : replace_table_token_18_th the company 's effective tax rates for 2015 , 2014 and 2013 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 higher effective tax rate during 2015 compared to 2014 was due primarily to higher foreign taxes . the effective tax rate in 2014 compared to 2013 was relatively flat . as of september 26 , 2015 , the company had deferred tax assets arising from deductible temporary differences , tax losses and tax credits of $ 7.8 billion and deferred tax liabilities of $ 24.1 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 u.s. internal revenue service is currently examining the years 2010 through 2012 , and all years prior to 2010 are closed . in addition , the company is 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 .
| fiscal 2015 highlights net sales rose 28 % or $ 50.9 billion during 2015 compared to 2014 , driven by a 52 % year-over-year increase in iphone ® net sales . iphone net sales and unit sales in 2015 increased in all of the company 's reportable operating segments . the company also experienced year-over-year net sales increases in mac ® , services and other products . apple watch ® , which launched during the third quarter of 2015 , accounted for more than 100 % of the year-over-year growth in net sales of other products . net sales growth during 2015 was partially offset by the effect of weakness in most foreign currencies relative to the u.s. dollar and lower ipad ® net sales . total net sales increased in each of the company 's reportable operating segments , with particularly strong growth in greater china where year-over-year net sales increased 84 % . in april 2015 , the company announced a significant increase to its capital return program by raising the expected total size of the program to $ 200 billion through march 2017. this included increasing its share repurchase authorization to $ 140 billion and raising its quarterly dividend to $ 0.52 per share beginning in may 2015. during 2015 , the company spent $ 36.0 billion to repurchase shares of its common stock and paid dividends and dividend equivalents of $ 11.6 billion . additionally , the company issued $ 14.5 billion of u.s. dollar-denominated , 4.8 billion of euro-denominated , sfr1.3 billion of swiss franc-denominated , £1.3 billion of british pound-denominated , a $ 2.3 billion of australian dollar-denominated and ¥250.0 billion of japanese yen-denominated term debt during 2015. fiscal 2014 highlights net sales rose 7 % or $ 11.9 billion during 2014 compared to 2013. this was driven by increases in net sales of iphone , mac and services .
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for pay-for-click services , the group introduces internet users to its advertisers through its auction-based pay-for-click systems and charges advertisers on a per-click basis when the users click on the displayed links . revenue for pay-for-click services is recognized on a per-click basis when the users click on the displayed links . online marketing services on the sogou web directory online marketing services on story_separator_special_tag overview sohu ( nasdaq : sohu ) is a leading chinese online media , search , gaming , community and mobile service group . we operate one of the most comprehensive matrices of chinese language content and services , and we developed and operate one of the most popular mmogs and two popular web games in china . most of our operations are conducted through our indirect wholly-owned and majority-owned china-based subsidiaries and variable interest entities . our businesses consist of the online advertising business , which consists of the brand advertising business as well as the search and others business , the online game business , the mobile business and the others business , of which online advertising and online games are our core businesses . factors and trends affecting our business the internet and internet-related markets in china continued to evolve rapidly during 2013. according to an annual report issued by the china internet network information center ( cnnic ) , the total number of internet users in china had reached 618 million by the end of december 2013 , an increase of 54 million from the end of 2012. in 2013 , there were 431 million desktop computer internet users , which was 33 million higher than the prior year . there was also a continuous shift in user activities from desktop computers to mobile devices , driven by rapidly growing smart phone penetration and enriched mobile-friendly content . the cnnic data showed that , by the end of december 2013 , the number of mobile internet users in china had reached 500 million , an increase of 80 million from the end of 2012. we believe that this large and expanding user base will continue to provide significant opportunities to expand our product offerings and to explore new revenue streams . in china , online video has become one of the most widely-used internet applications . there were over 428 million online video viewers as of december 31 , 2013 , an increase of 56 million from the end of 2012 , according to cnnic . as the sizable user base generates continuous demand for online video services , we expect brand advertisers will allocate more advertising dollars to online video . during 2013 , mobile video services have penetrated into the mainstream internet population . as of december 31 , 2013 , there were 247 million mobile video viewers , an increase of 112 million from the end of 2012 , according to cnnic . the surge in mobile video usage drew brand advertisers ' attention , and has allowed online video providers to start offering mobile advertising solutions to advertisers . our search and others business continued to grow , which was attributable to the growth of pay-for-click services , as well as online marketing services on the sogou web directory . on september 16 , 2013 , we entered into a strategic cooperation with tencent , whereby tencent invested in our search subsidiary sogou . we believe that this strategic cooperation has reinforced and strengthened sogou as a leader in the large and fast-growing china market for search and internet services , particularly for the mobile platform . we expect our search and others business to sustain healthy revenue growth through 2014 . 86 our online games business grew as we continue to release content updates in the form of expansion packs for our games on a regular basis , which we believe helps to extend the popularity of our games in china . we developed and currently operate three popular games in china , including tlbb , wartune and ddtank , which account for a majority of our online game revenues . we expect to launch new mmogs and web games to diversify our product offering and revenues . in addition , we own the leading game information portal in china , 17173.com , which is one of the major online mediums for advertising games in china . we believe online advertising revenues on the 17173 website will continue to benefit from the solid demand for game advertising as the number of game companies and the number of game launches in china increases . with the growing penetration of mobile devices in china and overseas , we are increasing spending on mobile games and software for mobile devices in order to adapt to industry trends and an evolving market environment . we expect changyou to sustain net losses in the near future as a result of increased spending on mobile . summary of our business for the year ended december 31 , 2013 , our total revenues increased by 31 % to $ 1,400 million and gross margin increased from 65 % to 66 % . our online advertising business generated revenues of $ 627.4 million with 51 % annual growth , representing 45 % of total revenues . our online game business generated revenues of $ 669.2 million with 17 % annual growth , representing 48 % of total revenues . net income contributed by the online game business was $ 286.4 million , which represented 172 % of our total net income . story_separator_special_tag any subsequent net income from sogou will be allocated in the following order : ( i ) net income will be allocated between sohu and noncontrolling shareholders based on their shareholding percentage in sogou until their basis in sogou increases to zero ; ( ii ) additional net income will be allocated to the holder of sogou series b preferred shares to bring its basis back ; ( iii ) additional net income will be allocated to holders of sogou series a preferred shares to bring their basis back ; ( iv ) further net income will be allocated to holders of sogou class a ordinary shares and the holder of sogou class b ordinary shares to bring their basis back ; and ( v ) further net income will be allocated between sohu and noncontrolling shareholders based on their shareholding percentage in sogou . segment reporting our group 's segments are business units that offer different services and are reviewed separately by the chief operating decision maker ( the codm ) , or the decision making group , in deciding how to allocate resources and in assessing performance . the codm is sohu.com inc. 's chief executive officer . there are five segments in our group , consisting of brand advertising , sogou ( which mainly consists of the search and others business ) , changyou ( which mainly consists of the online game business ) , mobile and others . 88 historical accounting error regarding net income attributable to sohu.com inc. and basic and diluted net income per share attributable to sohu.com inc. in the third quarter of 2013 , as previously reported in an amendment no . 1 to current report on form 8-k/a that we filed with the sec on september 20 , 2013 , management noted an accounting error in the company 's quarterly report on form 10-q for the three months ended june 30 , 2012 regarding net income attributable to sohu.com inc. and the calculation of basic and diluted net income per share attributable to sohu.com inc. in june 2012 , sohu had purchased from alibaba 24.0 million series a preferred shares of sogou for cash consideration of $ 25.8 million . under asc 260-10-s99-2 , this transaction gave rise to a deemed dividend in the amount of $ 14.2 million , which was the difference between the consideration sohu paid to alibaba and the carrying amount of these 24.0 million series a preferred shares in the group 's consolidated financial statements . accordingly , this amount of $ 14.2 million should have been subtracted from net income to arrive at net income available to common shareholders in the group 's calculation of net income per share . this deemed dividend was inappropriately accounted for when calculating the net income attributable to the group , resulting in an error in the calculation of basic and diluted net income per share attributable to sohu.com inc. there was a carry-forward effect of this accounting error to the net income attributable to sohu.com inc. and the net income per share calculation as reported for the nine months ended september 30 , 2012 in the company 's quarterly report on form 10-q for the three months then ended ( the 3rd quarter 2012 10-q ) , and as reported for the year ended december 31 , 2012 in the company 's annual report on form 10-k for the year then ended . in addition , there was a carry-forward effect of the error to the classification of retained earnings and additional paid-in capital in the company 's quarterly report on form 10-q for the three months ended june 30 , 2012 , september 30 , 2012 , march 31 , 2013 and june 30 , 2013 , and the company 's annual report on form 10-k for the year ended december 31 , 2012. management performed an assessment of the impact of this accounting error from both a quantitative and a qualitative perspective in accordance with the guidance contained in sab 99 , and concluded that the error was not material to the group 's relevant historical financial statements taken as a whole . therefore , management concluded that the relevant affected historical financial statements could continue to be relied upon but would be revised to correct the error . revenue recognition we recognize revenue when persuasive evidence of an arrangement exists , delivery has occurred , the sales price is fixed or determinable , and collectability is reasonably assured . the recognition of revenues involves certain management judgments . the amount and timing of our revenues could be materially different for any period if management made different judgments or utilized different estimates . under asc 845 , barter trade transactions in which physical goods or services ( other than advertising services ) are received in exchange for advertising services should be recorded based on the fair values of the goods and or services received . for our online advertising-for-online advertising barter transactions , no revenue or expense is recognized because the fair value of neither the advertising surrendered nor the advertising received is determinable . online advertising revenues online advertising revenues include revenues from brand advertising services as well as search and others services . we recognize gross revenue for the amount of fees we receive from our advertisers . determining whether revenue should be reported gross or net is based on an assessment of various factors . the primary factor is whether we are acting as the principal in offering services to the customer or whether we are acting as an agent in the transaction . whether we are serving as principal or agent in a transaction is judgmental in nature and is determined by evaluating the terms of the arrangement . our revenues from online advertising services are recognized on a gross basis , as we have the primary responsibility for fulfillment and acceptability . these revenues are recognized after deducting agent rebates paid to advertising agencies and applicable taxes and related surcharges .
| results of operations in 2011 , we adjusted our business groupings from brand advertising business , online game business , sponsored search business , and wireless and others business to online advertising business ( consisting of the brand advertising business as well as the search and others business ) , online game business , wireless business and others business . accordingly , we adjusted our presentation based on the new classification . in 2012 , with the development of our business , we reclassified certain expenses for our search and others business and our video division . accordingly , we adjusted our presentation based on the new classification . commencing january 1 , 2013 , in order to provide a better foundation for understanding changyou 's performance , both revenues and costs generated from the operation of third-party web games on the 17173.com website were reclassified from the online game business and the online advertising business to ivas in the others business . to conform to current period presentations , the relevant amounts for prior periods have been reclassified accordingly . such reclassifications amounted to $ 4.3 million and $ 1.9 million , respectively , for revenues and $ 1.5 million and nil , respectively , for costs for the years ended december 31 , 2012 and 2011. commencing in the second quarter of 2013 , in order to provide a better description of the segment of our business formerly known as wireless , we changed the name of the wireless business to the mobile business .
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, inc. and its subsidiaries on a consolidated basis . business segments the company 's businesses are grouped into five reportable segments for management and internal financial reporting purposes : north american retail , europe , asia , north american wholesale and licensing . the company 's operating segments are the same as its reportable segments . management evaluates segment performance based primarily on revenues and earnings ( loss ) from operations before restructuring charges , if any . the company believes this segment reporting reflects how its five business segments are managed and each segment 's performance is evaluated by the company 's chief operating decision maker to assess performance and make resource allocation decisions . the north american retail segment includes the company 's retail and e-commerce operations in north america and its retail operations in central and south america . the europe segment includes the company 's wholesale , retail and e-commerce operations in europe and the middle east . the asia segment includes the company 's wholesale , retail and e-commerce operations in asia . the north american wholesale segment includes the company 's wholesale operations in north america and central and south america . the licensing segment includes the worldwide licensing operations of the company . the business segment operating results exclude corporate overhead costs , which consist of shared costs of the organization , and restructuring charges . these costs are presented separately and generally include , among other things , the following unallocated corporate costs : accounting and finance , executive compensation , facilities , global advertising and marketing , human resources , information technology and legal . information regarding these segments is summarized in note 17 to the consolidated financial statements . products we derive our net revenue from the sale of guess ? , g by guess , guess kids and marciano apparel and our licensees ' products through our worldwide network of retail stores , wholesale customers and distributors , as well as our online sites . we also derive royalty revenue from worldwide licensing activities . global economic conditions economic and market conditions have continued to be volatile and uncertain in many markets around the world and consumer behavior remains cautious . in north america , highly promotional conditions among retailers and softer mall traffic may persist for some time . in europe , government austerity programs and bank credit issues have impacted the capital markets of numerous european countries , resulting in reduced consumer confidence and lower discretionary spending in those countries . these circumstances have had , and could in the future have , a negative impact on our business , particularly in our more mature markets in southern europe . when these conditions occur , the impact is greater in our multi-brand wholesale channel , particularly in italy , where many customers are relatively small and are not well capitalized . while the economic environment in southern europe has shown signs of improvement , the recovery is still vulnerable . in addition , the geopolitical tension in russia and ukraine has impacted economic sentiment and could continue to negatively impact our business . we are also seeing evidence of a more cautious consumer in china and south korea due to the macro-economic conditions in these countries . foreign currency volatility since the majority of our international operations are conducted in currencies other than the u.s. dollar ( primarily the euro , canadian dollar , korean won and mexican peso ) , currency fluctuations can have a significant impact on the translation of our international revenues and earnings into u.s. dollar amounts . in addition , some of our transactions that occur primarily in europe , canada , south korea and mexico are denominated in u.s. dollars , swiss francs and british pounds , exposing them to exchange rate fluctuations when these transactions ( such as inventory purchases ) are converted to their functional currencies . as a result , fluctuations in exchange rates can impact the operating margins of our foreign operations and reported earnings , largely dependent on the transaction timing and magnitude during the period that the currency fluctuates . when these foreign exchange rates weaken versus the u.s. dollar at the time u.s. dollar denominated inventory is purchased relative to the purchases 28 of the comparable period , our product margins could be unfavorably impacted if the relative sales prices do not change . during fiscal 2015 , the average u.s. dollar rate was stronger against the euro and the canadian dollar and weaker against the korean won compared to the average rate in fiscal 2014 . as a result , our product margins in canada and europe were negatively impacted by exchange rate fluctuations for the fiscal year ended january 31 , 2015 compared to the prior year . there was also an overall negative impact on the translation of our international revenues and earnings from operations during the fiscal year ended january 31 , 2015 compared to the prior year . so far during the first quarter of fiscal 2016 , the euro and canadian dollar continue to be volatile against the u.s. dollar and the exchange rates have fallen significantly below the prior-year exchange rates . if the u.s. dollar remains strong relative to the fiscal 2015 foreign exchange rates , we expect that foreign exchange will have a significant negative impact on our fiscal 2016 revenues and operating results as well as our international cash and other balance sheet items , particularly in europe and canada . the company enters into derivative financial instruments to offset some but not all of the exchange risk on foreign currency transactions . for additional discussion regarding our exposure to foreign currency risk , forward contracts designated as hedging instruments and forward contracts not designated as hedging instruments , refer to “ item 7a . quantitative and qualitative disclosures about market risk. ” strategy omni-channel strategy . story_separator_special_tag the de crease in revenue was driven primarily by lower european wholesale shipments and negative comparable store sales in north american retail . gross profit . gross profit de creased by $ 108.2 million , or 11.1 % , to $ 867.9 million for fiscal 2015 , from $ 976.1 million in fiscal 2014 . the de cline in gross profit , which included the unfavorable impact of currency translation , was due primarily to the unfavorable impact from lower wholesale sales in europe , negative comparable store sales in north american retail and lower overall product margins . gross margin de creased 210 basis points to 35.9 % for fiscal 2015 , from 38.0 % in fiscal 2014 , due to a higher occupancy rate and lower overall product margins . the higher occupancy rate was driven by negative comparable store sales in north american retail and lower wholesale shipments in europe . product margins declined due primarily to more retail markdowns in north america . the company 's gross margin may not be comparable to that of other entities since some entities include all of the costs related to their distribution in cost of product sales and others , like the company , generally exclude wholesale-related distribution costs from gross margin , including them instead in sg & a expenses . additionally , some entities include retail store occupancy costs in sg & a expenses and others , like the company , include retail store occupancy costs , including rent and depreciation , in cost of product sales . selling , general and administrative expenses . sg & a expenses in creased by $ 0.9 million , or 0.1 % , to $ 742.0 million for fiscal 2015 , from $ 741.1 million in fiscal 2014 . the in crease in sg & a expenses , which included the favorable impact of currency translation , was driven primarily by higher asset impairment charges related to certain under-performing retail stores and expected store closures , partially offset by lower selling and merchandising expenses in europe . 32 the company 's sg & a rate in creased by 180 basis points to 30.7 % for fiscal 2015 , from 28.9 % in fiscal 2014 . the in crease was driven by higher asset impairment charges related to certain under-performing retail stores and expected store closures and the negative impact on the company 's fixed cost structure resulting from negative comparable store sales in north american retail and lower wholesale shipments in europe . restructuring charges . there were no restructuring charges incurred during fiscal 2015 . during fiscal 2014 , the company incurred restructuring charges of $ 12.4 million . earnings from operations . earnings from operations de creased by $ 96.7 million , or 43.4 % , to $ 125.9 million for fiscal 2015 , from $ 222.6 million in fiscal 2014 . currency translation fluctuations relating to our foreign operations unfavorably impacted earnings from operations by $ 5.2 million . operating margin de creased 350 basis points to 5.2 % for fiscal 2015 , compared to 8.7 % in fiscal 2014 . operating margin was negatively impacted by lower overall gross margins and the higher sg & a rate discussed above , partially offset by restructuring charges incurred during the prior year . interest income ( expense ) , net . interest expense , net was $ 0.9 million for fiscal 2015 , compared to interest income , net of $ 0.1 million in fiscal 2014 and includes the impact of hedge ineffectiveness of foreign currency forward contracts designated as cash flow hedges . the change in interest expense , net for fiscal 2015 compared to the prior year was driven primarily by lower interest income due to lower value-added tax receivables in europe and lower investments in marketable securities during fiscal 2015 compared to the prior year . other income , net . other income , net was $ 18.0 million for fiscal 2015 , compared to $ 10.3 million in fiscal 2014 . other income , net in fiscal 2015 consisted primarily of net unrealized and realized mark-to-market revaluation gains on foreign currency contracts . other income , net in fiscal 2014 consisted primarily of net unrealized and realized gains on non-operating assets and net realized and unrealized mark-to-market gains on foreign currency contracts and other foreign currency balances . income tax expense . income tax expense for fiscal 2015 was $ 45.8 million , or a 32.0 % effective tax rate , compared to income tax expense of $ 75.2 million , or a 32.3 % effective tax rate , in fiscal 2014 . net earnings attributable to noncontrolling interests . net earnings attributable to noncontrolling interests for fiscal 2015 was $ 2.6 million , net of taxes , compared to $ 4.3 million , net of taxes , in fiscal 2014 . net earnings attributable to guess ? , inc. net earnings attributable to guess ? , inc. de creased by $ 58.8 million , or 38.4 % , to $ 94.6 million for fiscal 2015 , from $ 153.4 million in fiscal 2014 . diluted earnings per share de creased to $ 1.11 per share for fiscal 2015 , compared to $ 1.80 per share in fiscal 2014 . the results for fiscal 2014 included the unfavorable $ 0.11 per share after-tax impact of the restructuring charges . excluding the impact of the restructuring charges and the related tax impact , adjusted net earnings attributable to guess ? , inc. was $ 162.5 million and adjusted diluted earnings was $ 1.91 per common share for fiscal 2014 . references to financial results excluding the impact of the restructuring charges are non-gaap measures and are addressed below under “ non-gaap measures.
| executive summary overview net earnings attributable to guess ? , inc. de creased 38.4 % to $ 94.6 million , or diluted earnings of $ 1.11 per common share , for fiscal 2015 , compared to net earnings attributable to guess ? , inc. of $ 153.4 million , or diluted earnings of $ 1.80 per common share , in fiscal 2014 . during the first quarter of fiscal 2014 , the company implemented plans to streamline its structure and reduce expenses in both europe and north america . during the second quarter of fiscal 2014 , the company expanded these plans to include the consolidation and streamlining of certain operations in europe and asia . these actions resulted in restructuring charges for fiscal 2014 of $ 12.4 million ( or $ 9.0 million after considering the $ 3.4 million reduction to income tax expense as a result of the charge ) , or an unfavorable after-tax impact of $ 0.11 per share . excluding the impact of the restructuring charges and the related tax impact , adjusted net earnings attributable to guess ? , inc. was $ 162.5 million and adjusted diluted earnings was $ 1.91 per common share for fiscal 2014 . references to financial results excluding the impact of the restructuring charges are non-gaap measures and are addressed below under “ non-gaap measures. ” highlights of the company 's performance for fiscal 2015 compared to the prior year are presented below , followed by a more comprehensive discussion under “ results of operations ” : operations total net revenue de creased 5.9 % to $ 2.42 billion for fiscal 2015 , from $ 2.57 billion in the prior year . in constant currency , net revenue decrease d by 4.6 % . gross margin ( gross profit as a percentage of total net revenue ) de creased 210 basis points to 35.9 % for fiscal 2015 , compared to 38.0 % in the prior year .
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the actual results may differ materially from those anticipated in these forward-looking statements as a result of certain factors , including , but not limited to , those which are not within our control . overview the following discussion highlights significant factors influencing the consolidated financial position and results of operations of united insurance holdings corp. and its subsidiaries ( referred to in this document as we , our , us , the company and upc insurance ) . this discussion should be read in conjunction with the consolidated financial statements and related notes found under part ii . item 8 contained herein . the most important factors we monitor to evaluate the financial condition and performance of our company include : for results of operations : premiums written , policies in-force , premiums earned , retention , price changes , claim frequency ( rate of claim occurrence per policies in-force ) , severity ( average cost per claim ) , catastrophes , loss ratio , expenses , combined ratio , underwriting results , reinsurance costs , premium to probable maximum loss , and geographic concentration ; for investments : credit quality , maximizing total return , investment income , cash flows , realized gains and losses , unrealized gains and losses , asset diversification , and portfolio duration ; and for financial condition : liquidity , reserve strength , financial strength , ratings , operating leverage , book value per share , capital preservation , return on investment , and return on equity . 2013 highlights consolidated net income was $ 20,342,000 in 2013 compared to $ 9,705,000 in 2012 . net income per diluted share was $ 1.26 in 2013 compared to $ 0.91 in 2012 . our combined ratio ( calculated as operating expenses plus other income ( expenses ) less interest expense relative to net premiums earned ) was 88 % in 2013 compared to 95 % in 2012 . total revenues were $ 208,080,000 in 2013 compared to $ 131,234,000 in 2012 . investment and cash holdings were $ 323,814,000 at december 31 , 2013 , compared to $ 223,385,000 at december 31 , 2012 . investment income was $ 3,871,000 in 2013 compared to $ 3,083,000 in 2012 . realized losses were $ ( 129,000 ) in 2013 compared to realized gains of $ 2,160,000 in 2012 . book value per diluted share ( ratio of stockholders ' equity to total shares outstanding and dilutive potential shares outstanding ) was $ 6.64 at december 31 , 2013 , a 16 % increase from $ 5.70 at december 31 , 2012 . return on average equity for the twelve months ended december 31 , 2013 was 21 % , compared to 16 % for the twelve months ended december 31 , 2012 . policies in-force were 202,454 at december 31 , 2013 , a 50 % increase from 135,297 policies in-force at december 31 , 2012 . 27 united insurance holdings corp. consolidated net income replace_table_token_6_th 1 loss ratio , net is losses and loss adjustment expenses relative to net premiums earned . 2 expense ratio is calculated as the sum of all operating expenses less interest expense relative to net premiums earned . 3 combined ratio is the sum of the loss ratio , net and the expense ratio . 4 underlying combined ratio , a measure that is not based on accounting principles generally accepted in the united states of america ( gaap ) , is reconciled above to the combined ratio , the most directly comparable gaap measure . additional information regarding non-gaap financial measures presented in this document is in the `` definitions of non-gaap measures `` section of this document . definitions of non-gaap measures we believe that investors ' understanding of upc insurance 's performance is enhanced by our disclosure of the following non-gaap measures . our methods for calculating these measures may differ from those used by other companies and therefore comparability may be limited . 28 united insurance holdings corp. combined ratio excluding the effects of current year catastrophe losses , reserve development and figa assessment ( underlying combined ratio ) is a non-gaap ratio , which is computed as the difference between four gaap operating ratios : the combined ratio , the effect of current year catastrophe losses on the combined ratio , the effect of prior year development on the combined ratio and the effect of the figa assessment on the combined ratio . we believe that this ratio is useful to investors and it is used by management to reveal the trends in our business that may be obscured by current year catastrophe losses , prior year development and assessments . current year catastrophe losses cause our loss trends to vary significantly between periods as a result of their incidence of occurrence and magnitude , and can have a significant impact on the combined ratio . prior year development is caused by unexpected loss development on historical reserves . figa assessments primarily relate to amounts paid to the florida insurance guaranty association to cover claims paid by the association to policyholders from insolvent insurance companies . we believe it is useful for investors to evaluate these components separately and in the aggregate when reviewing our performance . the most direct comparable gaap measure is the combined ratio . the underlying combined ratio should not be considered as a substitute for the combined ratio and does not reflect the overall profitability of our business . net loss and lae excluding the effects of current year catastrophe losses and reserve development ( underlying loss and lae ) is a non-gaap measure which is computed as the difference between loss and lae , current year catastrophe losses and prior year reserve development . we use underlying loss and lae figures to analyze our loss trends that may be impacted by current year catastrophe losses and prior year development on our reserves . as discussed previously , these two items can have a significant impact on our loss trend in a given period . story_separator_special_tag for this discussion of our loss reserving process , the word `` segment '' refers to a subgrouping of our claims data , such as by geographic area and or by particular line of business ; it does not refer to operating segments . 30 united insurance holdings corp. loss development method – this method estimates ultimate losses based on the historical development patterns of losses by accident year . data known as loss development factors drive the loss-development-based methods . we calculate loss development factors by age period ( i.e. , 12-24 months , 24-36 months , etc . ) by taking the total incurred or paid losses for each accident year as of the current period 's balance sheet date and dividing by the total incurred or paid losses for each accident year as of the prior period 's balance sheet date . we then calculate averages of the resulting loss development factors in each age period , such as the three-year average , five-year average , cumulative average , and cumulative average excluding the high and low . finally , we evaluate the calculated loss development factors and their resulting averages and use judgment to select a particular loss development factor per age period , which we then use to project expected ultimate losses by accident year . expected loss cost method – this method relies on exposures and an estimate of the expected loss cost , and is used primarily for determining an estimate of the recent years ' ultimate loss . we calculate loss costs for each prior accident year based on the ratio of ultimate loss to earned house years and perform a regression analysis to develop an annual fitted loss trend . an estimate of the expected current year loss cost is based on various trended averages to apply to the actual earned house years in the current year to arrive at estimated losses . bornhuetter-ferguson method – this method estimates ultimate losses based on earned exposures , expected loss costs and the historical development patterns of losses . we use earned exposures as a proxy for the number of risks insured , and we calculate loss costs as described above . this method combines the results of the loss development method with an estimate of ultimate losses based on an expected loss cost . the bornhuetter-ferguson method assumes that the unreported losses are a function of the expected losses at a given point of development . the key assumptions are ( 1 ) the expected payment ( incurred ) pattern , and ( 2 ) the expected loss cost . an estimate of the individual accident year 's initial ultimate losses is determined by multiplying the earned exposures by the expected loss cost . each year 's expected ultimate loss liability is then separated into expected paid ( incurred ) and expected unpaid components using development factors derived in the paid ( incurred ) loss development method . the expected paid ( incurred ) losses are replaced with actual paid ( incurred ) losses to calculate estimated ultimate losses . paid-to-paid method - in addition to the aforementioned methods , we also rely upon the paid-to-paid development method to project estimates of ultimate allocated loss adjustment expense ( alae ) . triangles of paid alae to paid loss ratios are compiled and loss development factors are selected to project an ultimate paid-to-paid ratio . the ultimate paid-to-paid ratio is multiplied by the selected ultimate losses to calculate estimated ultimate alae . this puts the alae in context , and generally results in a more stability in the alae projections . the loss-development-based methods are easy to use and comparable to industry benchmarks , but potential volatility in the calculated factors , as well as an element of subjectivity in the selected factors , slightly weakens the effectiveness of the method . the volatility arises from a number of factors such as inflation , changes in reserving practices , changes in underwriting criteria and geographic concentration . the expected loss cost method is generally more stable than the loss-development-based methods , but this relative strength comes at the cost of less responsiveness to actual changes in loss experience . the bornhuetter-ferguson method is a blend of the loss development and expected loss cost methods . reliance and selection of methods the various methods we use have strengths and weaknesses that depend upon the circumstances of the segment and the age of the claims experience we analyze . the nature of our book of business allows us to place substantial , but not exclusive , reliance on the loss-development-based methods . ultimately , this means the main assumptions of the loss-development-based methods , the selected loss development factors , represent the most critical aspect of our loss reserving process . we use the same set of loss development factors in the methods during our loss reserving process that we also use to calculate the premium necessary to pay expected ultimate losses . reasonably-likely changes in variables as previously noted , we evaluate several factors when exercising our judgment in the selection of the loss development factors that ultimately drive the determination of our loss reserves . the process of establishing our reserves is complex and necessarily imprecise , as it involves using judgment that is affected by many variables . we believe a reasonably-likely change 31 united insurance holdings corp. in almost any of these aforementioned factors could have an impact on our reported results , financial condition and liquidity . however , we do not believe any reasonably likely changes in the frequency or severity of claims would have a material impact on us . fair value of investments fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date . we are responsible for the determination of fair value of financial assets and the supporting assumptions and methodologies .
| results of operations - 2013 compared to 2012 revenues revenues for the year ended december 31 , 2013 increased $ 76,846,000 , or 59 % , to $ 208,080,000 , from $ 131,234,000 for the twelve-months ended december 31 , 2012 , primarily due to a $ 75,410,000 , or 62 % , increase in net premiums earned . in 2013 , our gross written premiums increased $ 126,443,000 , or 50 % , to $ 381,352,000 , from $ 254,909,000 in 2012 because we wrote approximately 54,800 more new and renewal policies in 2013 compared to 2012 as we expanded our business in florida and in other states . in addition to our organic growth , gross written premiums increased because we assumed over 33,000 policies , representing approximately $ 51,578,000 of assumed premiums from citizens property insurance corporation during 2013. our year-over-year growth in written premiums and new and renewal policies by state are shown below : replace_table_token_8_th replace_table_token_9_th * includes homeowner and dwelling fire policies in-force only we expect our gross written premium growth to continue as we increase our policies in-force in the states in which we currently write , as we commence operations in georgia and new hampshire in the current year and as we expand into the other states discussed previously . realized gains decreased $ 2,289,000 in 2013 because we sold fixed maturities in an unrealized gain position during the fourth quarter of 2012 to reposition our portfolio , whereas in 2013 our realized losses were driven by sales of our short-term investments . 36 united insurance holdings corp. expenses expenses for the twelve months ended december 31 , 2013 increased $ 57,589,000 , or 50 % , primarily due to increased losses , policy acquisition costs and general and administrative expenses .
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, could negatively impact credit and or asset quality and result in credit losses and increases in the company 's allowance for loan losses ; ( iii ) changes in consumer spending could negatively impact the company 's credit quality and financial results ; ( iv ) increasing competition from larger regional and out-of-state banking organizations as well as non-bank providers of various financial services could adversely affect the company 's competitive position within its market area and reduce demand for the company 's products and services ; ( v ) deterioration of securities markets could adversely affect the value or credit quality of the company 's assets and the availability of funding sources necessary to meet the company 's liquidity needs ; ( vi ) changes in technology could adversely impact the company 's operations and increase technology-related expenditures ; ( vii ) increases in employee compensation and benefit expenses could adversely affect the company 's financial results ; ( viii ) changes in laws and regulations that apply to the company 's business and operations , including without limitation the dodd-frank act , the jumpstart our business startups act ( the `` jobs act '' ) , the basel iii rules adopted by the federal banking regulators and the additional regulations that will be forthcoming as a result thereof , could adversely affect the company 's business environment , operations and financial results ; ( ix ) changes in accounting standards , policies and practices , as may be adopted or established by the regulatory agencies , the financial accounting standards board ( the “ fasb ” ) or the public company accounting oversight board could negatively impact the company 's financial results ; ( x ) our ability to enter new markets successfully and capitalize on growth opportunities ; ( xi ) future regulatory compliance costs , including any increase caused by new regulations imposed by the consumer finance protection bureau ; ( xii ) changes to the regulatory capital requirements mandated under rulemaking pursuant to basel iii ; and ( xiii ) some or all of the risks and uncertainties described above in item 1a could be realized , which could have a material adverse effect on the company 's business , financial condition and results of operation . therefore , the company cautions readers not to place undue reliance on any such forward-looking information and statements . critical accounting estimates the company 's significant accounting policies are described in note 1 , “ summary of significant accounting policies , ” to the consolidated financial statements contained in item 8. in applying these accounting policies , management is required to exercise judgment in determining many of the methodologies , assumptions and estimates to be utilized . certain of the critical accounting estimates are more dependent on such judgment and in some cases may contribute to volatility in the company 's reported financial performance should the assumptions and estimates used change over time due to changes in circumstances . the three most significant areas in which management applies critical assumptions and estimates include the areas described further below . 36 allowance for loan losses the allowance for loan losses is an estimate of credit risk inherent in the loan portfolio as of the specified balance sheet dates . the allowance for loan losses is established through a provision for loan losses , which is a direct charge to earnings . loan losses are charged against the allowance when management believes that the collectability of the loan principal is unlikely . recoveries on loans previously charged off are credited to the allowance . the company maintains the allowance at a level that it deems adequate to absorb all reasonably anticipated losses from specifically known and other credit risks associated with the portfolio . arriving at an appropriate level of allowance for loan losses involves a high degree of management judgment . the company uses a systematic methodology to measure the amount of estimated loan loss exposure inherent in the portfolio for purposes of establishing a sufficient allowance for loan losses . the methodology makes use of specific reserves for loans individually evaluated and deemed impaired and general reserves for larger groups of homogeneous loans which rely on a combination of qualitative and quantitative factors that could have an impact on the credit quality of the portfolio . management believes that the allowance for loan losses is adequate to absorb probable losses from specifically known and other credit risks associated with the loan portfolio as of the balance sheet dates reflected in this annual report . while management uses available information to recognize losses on loans , future additions to the allowance may be necessary . in addition , 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 recognize additions to the allowance based on judgments different from those of management . management 's assessment of the adequacy of the allowance for loan losses is contained under the headings “ credit risk/asset quality ” and “ allowance for loan losses , ” which are contained in the “ financial condition ” section of this item 7. impairment review of investment securities there are inherent risks associated with the company 's investment activities which could adversely impact the fair market value and the ultimate collectability of the company 's investments . the determination of other-than-temporary impairment involves a high degree of judgment and requires management to make significant estimates of current market risks and future trends . story_separator_special_tag the company continued to build for the future by strengthening our franchise in massachusetts and southern new hampshire , with the 2013 opening of branch offices in lawrence , ma and nashua , nh , bringing our number of full service branch offices to 22. total assets increased $ 184.2 million , or 11 % , since december 31 , 2012 , primarily due to loan growth . loans outstanding and deposits , excluding brokered deposits , have increased $ 164.4 million , or 12 % , and $ 112.4 million , or 8 % , respectively , since december 31 , 2012 . net income for the year ended december 31 , 2013 amounted to $ 13.5 million , an increase of $ 1.2 million , or 9 % , compared to 2012 . diluted earnings per share were $ 1.36 for the year ended december 31 , 2013 , an increase of 6 % compared to 2012 . in 2013 , the company 's financial results included increases in net interest income , non-interest income , operating expenses and the provision for loan losses over the prior year , due primarily to the company 's growth . non-interest income also increased as a result of higher gains on securities sales in the current year . composition of earnings the company 's earnings are largely dependent on its net interest income , which is the difference between interest earned on loans and investments and the cost of funding ( primarily deposits and borrowings ) . net interest income expressed as a 38 percentage of average interest earning assets is referred to as net interest margin . the company reports net interest margin on a tax equivalent basis ( `` margin '' ) . the re-pricing frequency of the company 's assets and liabilities are not identical , and therefore subject the company to the risk of adverse changes in interest rates . this is often referred to as “ interest rate risk ” and is reviewed in more detail in item 7a , “ quantitative and qualitative disclosures about market risk , ” of this form 10-k. net interest income for the year ended december 31 , 2013 amounted to $ 65.8 million , an increase of $ 3.9 million , or 6 % , compared to the same period in 2012 . this increase in net interest income was due primarily to revenue generated from loan growth , mainly in commercial real estate loans , partially offset by a decrease in margin . average loan balances ( including loans held for sale ) increased $ 156.0 million for year ended december 31 , 2013 , compared to the same period in 2012 . margins were 4.07 % and 4.27 % for the year ended december 31 , 2013 and 2012 , respectively . net interest margin was 4.04 % for the quarter ended december 31 , 2013 , compared to 4.21 % for the quarter ended december 31 , 2012 and was relatively consistent with the quarterly margin at september 30 , 2013 of 4.02 % . consistent with the industry , the margin continued to trend downward through most of 2013 , as the yield on interest-earning assets declined faster than the cost of funding , as funding rates have reached a level leaving little room for significant reductions . for the year ended december 31 , 2013 and 2012 , the provision for loan losses amounted to $ 3.3 million and $ 2.8 million , respectively . in determining the provision to the allowance for loan losses , management takes into consideration the level of loan growth and an estimate of credit risk , which includes such items as adversely classified and non-performing loans , the estimated specific reserves needed for impaired loans , the level of net charge-offs , and the estimated impact of current economic conditions on credit quality . the level of loan growth for the year ended december 31 , 2013 , was $ 164.4 million , compared to $ 114.2 million during the same period in 2012 . total non-performing assets as a percentage of total assets were 1.00 % at december 31 , 2013 , compared to 1.33 % at december 31 , 2012 . for the year ended december 31 , 2013 , the company recorded net charge-offs of $ 566 thousand compared to $ 1.7 million for the year ended december 31 , 2012 . management continues to closely monitor the non-performing assets , charge-offs and necessary allowance levels , including specific reserves . the allowance for loan losses to total loans ratio was 1.77 % at december 31 , 2013 and 1.78 % at december 31 , 2012 . for further information regarding loan quality statistics and the allowance for loan losses , see the sections below under the heading `` financial condition '' titled `` credit risk/asset quality '' and `` allowance for loan losses . '' non-interest income for the year ended december 31 , 2013 amounted to $ 13.8 million , an increase of $ 1.6 million , or 13 % , compared to 2012 . current year non-interest income benefited from gains on securities sales , with the majority of sales occurring in the first six months of 2013 , as well as , increases in investment advisory fee income and deposit and interchange fees , partially offset by lower loan sale income in 2013 , primarily in the current quarter . for the year ended december 31 , 2013 , non-interest expense amounted to $ 55.8 million , an increase of $ 3.2 million , or 6 % , compared to the prior year .
| results of operations comparison of years ended december 31 , 2012 and 2011 unless otherwise indicated , the reported results are for the year ended december 31 , 2012 with the “ comparable year ” or “ prior year ” being the year ended december 31 , 2011. average yields are presented on a tax equivalent basis . net income the company earned net income in 2012 of $ 12.4 million compared to $ 10.9 million for 2011 , an increase of 13 % . earnings per share for 2012 were $ 1.29 and $ 1.28 on a basic and diluted basis , compared to $ 1.16 on both a basic and diluted basis for the year ended 2011 , which represented increases of 11 % and 10 % , respectively . the company 's growth contributed to increases in net interest income and the level of operating expenses for the year ended december 31 , 2012. additionally , in 2012 , the provision for loan losses decreased compared to the 2011 periods , while non-interest income increased . net interest margin tax equivalent net interest margin decreased by 10 basis points , to 4.27 % for the year ended december 31 , 2012 , compared to 4.37 % for the prior year . consistent with the industry , the 2012 margin continued to trend downward , as the yield on interest-earning assets declined faster than the cost of funding , as funding rates have reached a level leaving little room for significant reductions . interest earning asset yields declined 30 basis points compared to the prior year , while the cost of funding declined by 21 basis points over the same period . net interest income the company 's net interest income was $ 61.9 million for the year ended december 31 , 2012 , an increase of $ 3.6 million , or 6 % , over the prior year .
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the portfolio investments of mscc and its consolidated subsidiaries are typically made to support management buyouts , recapitalizations , growth financings , refinancings and acquisitions of companies that operate in a variety of industry sectors . mscc seeks to partner with entrepreneurs , business owners and management teams and generally provides `` one stop '' financing alternatives within its lmm portfolio . mscc and its consolidated subsidiaries invest primarily in secured debt investments , equity investments , warrants and other securities of lmm companies based in the united states and in secured debt investments of middle market companies generally headquartered in the united states . mscc was formed in march 2007 to operate as an internally managed business development company ( `` bdc '' ) under the investment company act of 1940 , as amended ( the `` 1940 act '' ) . mscc wholly owns several investment funds , including main street mezzanine fund , lp ( `` msmf '' ) , main street capital ii , lp ( `` msc ii '' ) and main street capital iii , lp ( `` msc iii '' and , collectively with msmf and msc ii , the `` funds '' ) , and each of their general partners . the funds are each licensed as a small business investment company ( `` sbic '' ) by the united states small business administration ( `` sba '' ) . because mscc is internally managed , all of the executive officers and other employees are employed by mscc . therefore , mscc does not pay any external investment advisory fees , but instead directly incurs the operating costs associated with employing investment and portfolio management professionals . msc adviser i , llc ( the `` external investment manager '' ) was formed in november 2013 as a wholly owned subsidiary of mscc to provide investment management and other services to parties other than mscc and its subsidiaries or their portfolio companies ( `` external parties '' ) and receives fee income for such services . mscc has been granted no-action relief by the securities and exchange commission ( `` sec '' ) to allow the external investment manager to register as a registered investment adviser under the investment advisers act of 1940 , as amended . since the external investment manager conducts all of its investment management activities for external parties , it is accounted for as a portfolio investment of mscc and is not included as a consolidated subsidiary of mscc in mscc 's consolidated financial statements . mscc has elected to be treated for u.s. federal income tax purposes as a regulated investment company ( `` ric '' ) under subchapter m of the internal revenue code of 1986 , as amended ( the `` code '' ) . as a result , mscc generally will not pay corporate-level u.s. federal income taxes on any net ordinary taxable income or capital gains that it distributes to its stockholders . mscc has certain direct and indirect wholly owned subsidiaries that have elected to be taxable entities ( the `` taxable subsidiaries '' ) . the primary purpose of the taxable subsidiaries is to permit mscc to hold equity investments in portfolio companies which are `` pass-through '' entities for tax purposes . unless otherwise noted or the context otherwise indicates , the terms `` we , '' `` us , '' `` our , '' the `` company '' and `` main street '' refer to mscc and its consolidated subsidiaries , which include the funds and the taxable subsidiaries . 55 overview our principal investment objective is to maximize our portfolio 's total return by generating current income from our debt investments and capital appreciation from our equity and equity-related investments , including warrants , convertible securities and other rights to acquire equity securities in a portfolio company . our lmm companies generally have annual revenues between $ 10 million and $ 150 million , and our lmm portfolio investments generally range in size from $ 5 million to $ 50 million . our middle market investments are made in businesses that are generally larger in size than our lmm portfolio companies , with annual revenues typically between $ 150 million and $ 1.5 billion , and our middle market investments generally range in size from $ 3 million to $ 20 million . our private loan ( `` private loan '' ) portfolio investments are primarily debt securities in privately held companies which have been originated through strategic relationships with other investment funds on a collaborative basis . private loan investments are typically similar in size , structure , terms and conditions to investments we hold in our lmm portfolio and middle market portfolio . we seek to fill the financing gap for lmm businesses , which , historically , have had limited access to financing from commercial banks and other traditional sources . the underserved nature of the lmm creates the opportunity for us to meet the financing needs of lmm companies while also negotiating favorable transaction terms and equity participations . our ability to invest across a company 's capital structure , from secured loans to equity securities , allows us to offer portfolio companies a comprehensive suite of financing options , or a `` one stop '' financing solution . providing customized , `` one stop '' financing solutions is important to lmm portfolio companies . we generally seek to partner directly with entrepreneurs , management teams and business owners in making our investments . our lmm portfolio debt investments are generally secured by a first lien on the assets of the portfolio company and typically have a term of between five and seven years from the original investment date . our middle market portfolio investments primarily consist of direct investments in or secondary purchases of interest-bearing debt securities in privately held companies that are generally larger in size than the companies included in our lmm portfolio . story_separator_special_tag as of december 31 , 2016 , there was no cost basis in this investment and the investment had a fair value of approximately $ 30.6 million , which comprised approximately 1.5 % of our investment portfolio at fair value . our portfolio investments are generally made through mscc and the funds . mscc and the funds share the same investment strategies and criteria , although they are subject to different regulatory regimes . an investor 's return in mscc will depend , in part , on the funds ' investment returns as they are wholly owned subsidiaries of mscc . the level of new portfolio investment activity will fluctuate from period to period based upon our view of the current economic fundamentals , our ability to identify new investment opportunities that meet our investment criteria , and our ability to consummate the identified opportunities . the level of new investment activity , and associated interest and fee income , will directly impact future investment income . in addition , the level of dividends paid by portfolio companies and the portion of our portfolio debt investments on non-accrual status will directly impact future investment income . while we intend to grow our portfolio and our investment income over the long term , our growth and our operating results may be more limited during depressed economic periods . however , we intend to appropriately manage our cost structure and liquidity position based on applicable economic conditions and our investment outlook . the level of realized gains or losses and unrealized appreciation or depreciation on our investments will also fluctuate depending upon portfolio activity , economic conditions and the performance of our individual portfolio companies . the changes in realized gains and losses and unrealized appreciation or depreciation could have a material impact on our operating results . because we are internally managed , we do not pay any external investment advisory fees , but instead directly incur the operating costs associated with employing investment and portfolio management professionals . we believe that our internally managed structure provides us with a beneficial operating expense structure when compared to other publicly traded and privately held investment firms which are externally managed , and our internally managed structure allows us the opportunity to leverage our non-interest operating expenses as we grow our investment portfolio . for the years ended december 31 , 2017 and 2016 , the ratio of our total operating expenses , excluding interest expense and the non-recurring professional fees and other expenses discussed below , as a percentage of our quarterly average total assets was 1.5 % . including the effect of the non-recurring expenses , the ratio for the year ended december 31 , 2017 was 1.6 % . 58 during may 2012 , we entered into an investment sub-advisory agreement with hms adviser , lp ( `` hms adviser '' ) , which is the investment advisor to hms income , a non-listed bdc , to provide certain investment advisory services to hms adviser . in december 2013 , after obtaining required no-action relief from the sec to allow us to own a registered investment adviser , we assigned the sub-advisory agreement to the external investment manager since the fees received from such arrangement could otherwise have negative consequences on our ability to meet the source-of-income requirement necessary for us to maintain our ric tax treatment . under the investment sub-advisory agreement , the external investment manager is entitled to 50 % of the base management fee and the incentive fees earned by hms adviser under its advisory agreement with hms income . the external investment manager has conditionally agreed to waive a limited amount of the incentive fees otherwise earned . during the years ended december 31 , 2017 , 2016 and 2015 , the external investment manager earned $ 10.9 million , $ 9.5 million , and $ 7.8 million , respectively , of management fees ( net of fees waived , if any ) under the sub-advisory agreement with hms adviser . during april 2014 , we received an exemptive order from the sec permitting co-investments by us and hms income in certain negotiated transactions where co-investing would otherwise be prohibited under the 1940 act . we have made , and in the future intend to continue to make , such co-investments with hms income in accordance with the conditions of the order . the order requires , among other things , that we and the external investment manager consider whether each such investment opportunity is appropriate for hms income and , if it is appropriate , to propose an allocation of the investment opportunity between us and hms income . because the external investment manager may receive performance-based fee compensation from hms income , this may provide it an incentive to allocate opportunities to hms income instead of us . however , both we and the external investment manager have policies and procedures in place to manage this conflict . critical accounting policies basis of presentation our consolidated financial statements are prepared in accordance with generally accepted accounting principles in the united states of america ( `` u.s. gaap '' ) . for each of the periods presented herein , our consolidated financial statements include the accounts of mscc and its consolidated subsidiaries . the investment portfolio , as used herein , refers to all of our investments in lmm portfolio companies , investments in middle market portfolio companies , private loan portfolio investments , other portfolio investments , and the investment in the external investment manager . our results of operations and cash flows for the years ended december 31 , 2017 , 2016 and 2015 and financial position as of december 31 , 2017 and 2016 , are presented on a consolidated basis . the effects of all intercompany transactions between us and our consolidated subsidiaries have been eliminated in consolidation .
| discussion and analysis of results of operations comparison of the year ended december 31 , 2017 and 2016 replace_table_token_14_th replace_table_token_15_th ( a ) distributable net investment income is net investment income as determined in accordance with u.s. gaap , excluding the impact of share-based compensation expense which is non-cash in nature . we believe presenting distributable net investment income and related per share amounts is useful and appropriate supplemental disclosure of information for analyzing our financial performance since share-based compensation does not require settlement in cash . however , distributable net investment income is a non-u.s. gaap measure and should not be considered as a replacement to net investment income and other earnings measures presented in accordance with u.s. gaap . 65 instead , distributable net investment income should be reviewed only in connection with such u.s. gaap measures in analyzing our financial performance . a reconciliation of net investment income in accordance with u.s. gaap to distributable net investment income is presented in the table above . investment income for the year ended december 31 , 2017 , total investment income was $ 205.7 million , a 15 % increase over the $ 178.3 million of total investment income for the corresponding period of 2016. this comparable period increase was principally attributable to ( i ) a $ 23.2 million increase in interest income primarily related to higher average levels of portfolio debt investments and increased activities involving existing investment portfolio debt investments , ( ii ) a $ 2.5 million increase in dividend income from investment portfolio equity investments and ( iii ) a $ 1.8 million increase in fee income .
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disclosure controls and procedures ( as defined in rules 13a-15 ( e ) and 15d-15 ( e ) ) of the securities exchange act of 1934 , as amended ( the “ exchange act ” ) are designed to ensure that ( 1 ) information required to be disclosed in reports filed or submitted under the exchange act is recorded , processed , summarized and reported within the time periods specified in sec rules and forms ; and ( 2 ) that such information is accumulated and communicated to management , including the principal executive officer and principal financial officer , to allow timely decisions regarding required disclosures . there are inherent limitations to the effectiveness of any system of disclosure controls and procedures , including the possibility of human error and the circumvention or overriding of controls and procedures . accordingly , even effective disclosure controls and procedures can only provide reasonable assurance of achieving their control objectives . the company 's management , including the company 's chief executive officer and chief financial officer , evaluated the effectiveness of the design and operation of the company 's disclosure controls and procedures as of june 30 , 2018 . the company 's management has concluded that the company 's disclosure controls and procedures as of june 30 , 2018 were effective . management 's annual report on internal controls over financial reporting . the company 's management , including its chief executive officer and chief financial officer , is responsible for establishing and maintaining adequate internal control over financial reporting ( as defined in exchange act rules 13a-15 ( f ) and 15d-15 ( f ) ) and designing such internal controls to provide reasonable assurances regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with accounting principles generally accepted in the united states of america . there are inherent limitations to the effectiveness of any system of internal control over financial reporting , including the possibility of human error or the circumvention or overriding of controls and procedures . accordingly , even effective internal control over financial reporting can only provide reasonable assurance of achieving its control objectives . management conducted its evaluation of the effectiveness of its internal control over financial reporting based on the framework in the “ 1992 internal control-integrated framework , ” the 2006 `` internal control over financial reporting - guidance for smaller public companies , '' and the `` 2013 coso framework & sox compliance , '' all issued by the committee of sponsoring organizations of the treadway commission ( “ coso ” ) . in connection with this evaluation , there were no changes in the company 's internal control over financial reporting ( as such term is defined in rule 13a-15 ( f ) and 15d-15 ( f ) of the exchange act ) during the quarter ended june 30 , 2018 that have materially affected , or are reasonably likely to materially affect , the company 's internal control over financial reporting . based on this evaluation , management has concluded that the company 's internal control over financial reporting as of june 30 , 2018 was effective . 15 part iii item 10. directors , executive officers and corporate governance . this information is incorporated by reference to the sections entitled `` information as to the nominees , '' `` board committees - audit committee , '' `` code of ethics , '' `` executive officers , '' and `` section 16 ( a ) beneficial ownership reporting compliance '' from koss corporation 's proxy statement for its 2018 annual meeting of stockholders filed with the commission under regulation 14a within 120 days of the end of the fiscal year covered by this form 10-k. the company adopted a code of ethics , which is a `` code of ethics '' as defined by applicable rules of the sec , which is applicable to its directors , officers and employees . the code of ethics is publicly available on the company 's website at investors.koss.com . if the company makes any substantive amendments to the code of ethics or grants any waiver , including any implicit waiver , from a provision of the code to its principal executive officer , principal financial officer , principal accounting officer or controller or persons performing similar functions , the company will disclose the nature of the amendment or waiver on that website or in a report on form 8-k. item 11. executive compensation . this information is incorporated by reference to the sections entitled `` board committees - compensation committee , '' `` summary compensation table , '' `` outstanding equity awards at fiscal year end , '' and `` director compensation table '' from koss corporation 's proxy statement for its 2018 annual meeting of stockholders filed with the commission under regulation 14a within 120 days of the end of the fiscal year covered by this form 10-k. item 12. security ownership of certain beneficial owners and management and related stockholder matters . this information is incorporated by reference to the sections entitled `` beneficial ownership of company securities '' and `` outstanding equity awards at fiscal year end '' from koss corporation 's proxy statement for its 2018 annual meeting of stockholders filed with the commission under regulation 14a within 120 days of the end of the fiscal year covered by this form 10-k. item 13. certain relationships and related transactions , and director independence . this information is incorporated by reference to the sections entitled `` board committees , '' `` independence of the board '' and `` related party transactions '' from koss corporation 's proxy statement for its 2018 annual meeting of stockholders filed with the commission under regulation 14a within 120 days of the end of the fiscal year covered by this form 10-k. item 14. principal accountant fees and services . this information is incorporated by story_separator_special_tag disclosure controls and procedures ( as defined in rules 13a-15 ( e ) and 15d-15 ( e ) ) of the securities exchange act of 1934 , as amended ( the “ exchange act ” ) are designed to ensure that ( 1 ) information required to be disclosed in reports filed or submitted under the exchange act is recorded , processed , summarized and reported within the time periods specified in sec rules and forms ; and ( 2 ) that such information is accumulated and communicated to management , including the principal executive officer and principal financial officer , to allow timely decisions regarding required disclosures . there are inherent limitations to the effectiveness of any system of disclosure controls and procedures , including the possibility of human error and the circumvention or overriding of controls and procedures . accordingly , even effective disclosure controls and procedures can only provide reasonable assurance of achieving their control objectives . the company 's management , including the company 's chief executive officer and chief financial officer , evaluated the effectiveness of the design and operation of the company 's disclosure controls and procedures as of june 30 , 2018 . the company 's management has concluded that the company 's disclosure controls and procedures as of june 30 , 2018 were effective . management 's annual report on internal controls over financial reporting . the company 's management , including its chief executive officer and chief financial officer , is responsible for establishing and maintaining adequate internal control over financial reporting ( as defined in exchange act rules 13a-15 ( f ) and 15d-15 ( f ) ) and designing such internal controls to provide reasonable assurances regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with accounting principles generally accepted in the united states of america . there are inherent limitations to the effectiveness of any system of internal control over financial reporting , including the possibility of human error or the circumvention or overriding of controls and procedures . accordingly , even effective internal control over financial reporting can only provide reasonable assurance of achieving its control objectives . management conducted its evaluation of the effectiveness of its internal control over financial reporting based on the framework in the “ 1992 internal control-integrated framework , ” the 2006 `` internal control over financial reporting - guidance for smaller public companies , '' and the `` 2013 coso framework & sox compliance , '' all issued by the committee of sponsoring organizations of the treadway commission ( “ coso ” ) . in connection with this evaluation , there were no changes in the company 's internal control over financial reporting ( as such term is defined in rule 13a-15 ( f ) and 15d-15 ( f ) of the exchange act ) during the quarter ended june 30 , 2018 that have materially affected , or are reasonably likely to materially affect , the company 's internal control over financial reporting . based on this evaluation , management has concluded that the company 's internal control over financial reporting as of june 30 , 2018 was effective . 15 part iii item 10. directors , executive officers and corporate governance . this information is incorporated by reference to the sections entitled `` information as to the nominees , '' `` board committees - audit committee , '' `` code of ethics , '' `` executive officers , '' and `` section 16 ( a ) beneficial ownership reporting compliance '' from koss corporation 's proxy statement for its 2018 annual meeting of stockholders filed with the commission under regulation 14a within 120 days of the end of the fiscal year covered by this form 10-k. the company adopted a code of ethics , which is a `` code of ethics '' as defined by applicable rules of the sec , which is applicable to its directors , officers and employees . the code of ethics is publicly available on the company 's website at investors.koss.com . if the company makes any substantive amendments to the code of ethics or grants any waiver , including any implicit waiver , from a provision of the code to its principal executive officer , principal financial officer , principal accounting officer or controller or persons performing similar functions , the company will disclose the nature of the amendment or waiver on that website or in a report on form 8-k. item 11. executive compensation . this information is incorporated by reference to the sections entitled `` board committees - compensation committee , '' `` summary compensation table , '' `` outstanding equity awards at fiscal year end , '' and `` director compensation table '' from koss corporation 's proxy statement for its 2018 annual meeting of stockholders filed with the commission under regulation 14a within 120 days of the end of the fiscal year covered by this form 10-k. item 12. security ownership of certain beneficial owners and management and related stockholder matters . this information is incorporated by reference to the sections entitled `` beneficial ownership of company securities '' and `` outstanding equity awards at fiscal year end '' from koss corporation 's proxy statement for its 2018 annual meeting of stockholders filed with the commission under regulation 14a within 120 days of the end of the fiscal year covered by this form 10-k. item 13. certain relationships and related transactions , and director independence . this information is incorporated by reference to the sections entitled `` board committees , '' `` independence of the board '' and `` related party transactions '' from koss corporation 's proxy statement for its 2018 annual meeting of stockholders filed with the commission under regulation 14a within 120 days of the end of the fiscal year covered by this form 10-k. item 14. principal accountant fees and services . this information is incorporated by
| summary net sales decreased 2.2 % to $ 23,515,441 on volume declines with distributors in export markets in general as well as to an original equipment manufacturer ( `` oem '' ) customer in asia . this was partially offset by improvement in the domestic market and an increase in sales to distributors in scandinavia and the czech republic . gross profit as a percent of sales decreased 0.7 % to 28.0 % . the decrease was primarily due to a change in the mix of sales by product and by channel , as well as write-downs of excess and obsolete inventory to the expected net realizable value . selling , general and administrative spending was lower as a result of decreased costs for sales commissions , salaries , travel and marketing expense . these reductions were partially offset by an increase in legal expense . income tax expense increased compared to the same period in the prior year due to the write-down of deferred tax assets to the new federal statutory rate as well as an increase in the valuation allowance to include all deferred tax assets . 10 consolidated results the following table presents selected consolidated financial data for each of the past two fiscal years : replace_table_token_4_th 2018 results of operations compared with 2017 net sales for 2018 decreased primarily due to decreased sales to distributors in export markets and to an export oem customer . the decline in export sales was partially offset by increased sales to a mass retailer which drove improvement in the domestic market . export net sales decreased by $ 1,138,605 to $ 6,950,517 . the distributor in asia , which had sales of $ 337,747 in the prior year , did not order in 2018 . sales to an oem customer in asia decreased by $ 730,116 to $ 1,602,588 in fiscal 2018 .
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this management 's discussion and analysis , or md & a , should be read in conjunction with our audited consolidated financial statements included in part ii , item 8 of this annual report on form 10-k. overview we manage our operations through three reportable segments : commercial and specialty business , government business and other . we regularly evaluate the appropriateness of our reportable segments , particularly in light of organizational changes , merger and acquisition activity and changing laws and regulations . therefore , these reportable segments may change in the future . our commercial and specialty business segment includes our local group , national accounts , individual and specialty businesses . business units in the commercial and specialty business segment offer fully-insured health products ; provide a broad array of managed care services to self-funded customers including claims processing , underwriting , stop loss insurance , actuarial services , provider network access , medical cost management , disease management , wellness programs and other administrative services ; and provide an array of specialty and other insurance products and services such as dental , vision , life and disability insurance benefits , radiology benefit management and analytics-driven personal health care guidance . our government business segment includes medicare and medicaid businesses , national government services , or ngs , and services provided to the federal government in connection with the federal employee program , or fep . medicare business includes services such as medicare advantage , medicare part d , and medicare supplement . medicaid business includes our managed care alternatives through publicly funded health care programs , including medicaid ; temporary assistance for needy family , or tanf , programs ; programs for seniors and people with disabilities , or spd ; programs for long-term services and support , or ltss ; children 's health insurance programs , or chip , and medicaid expansion programs . ngs acts as a medicare contractor for the federal government in several regions across the nation . our other segment includes other businesses that do not meet the quantitative thresholds for an operating segment as defined by financial accounting standards board , or fasb , guidance , as well as corporate expenses not allocated to the other reportable segments . our operating revenue consists of premiums , administrative fees and other revenue . premium revenue comes from fully-insured contracts where we indemnify our policyholders against costs for covered health and life benefits . administrative fees come from contracts where our customers are self-insured , or where the fee is based on either processing of transactions or a percent of network discount savings realized . additionally , we earn administrative fee revenues from our medicare processing business and from other health-related businesses including disease management programs . other revenue includes miscellaneous income other than premium revenue and administrative fees . our benefit expense primarily includes costs of care for health services consumed by our fully-insured members , such as outpatient care , inpatient hospital care , professional services ( primarily physician care ) and pharmacy benefit costs . all four components are affected both by unit costs and utilization rates . unit costs include the cost of outpatient medical procedures per visit , inpatient hospital care per admission , physician fees per office visit and prescription drug prices . utilization rates represent the volume of consumption of health services and typically vary with the age and health status of our members and their social and lifestyle choices , along with clinical protocols and medical practice patterns in each of our markets . a portion of benefit expense recognized in each reporting period consists of actuarial estimates of claims incurred but not yet paid by us . any changes in these estimates are recorded in the period the need for such an adjustment arises . while we offer a diversified mix of managed care products and services through our managed care plans , our aggregate cost of care can fluctuate based on a change in the overall mix of these products and services . our managed care plans include : preferred provider organizations , or ppos ; health maintenance organizations , or hmos ; point-of-service plans , or pos plans ; - 44 - traditional indemnity plans and other hybrid plans , including consumer-driven health plans , or cdhps ; and hospital only and limited benefit products . we classify certain claims-related costs as benefit expense to reflect costs incurred for our members ' traditional medical care , as well as those expenses which improve our members ' health and medical outcomes . these claims-related costs may be comprised of expenses incurred for : ( i ) medical management , including case and utilization management ; ( ii ) health and wellness , including disease management services for such conditions as diabetes , high-risk pregnancies , congestive heart failure and asthma management and wellness initiatives like weight-loss programs and smoking cessation treatments ; and ( iii ) clinical health policy . these types of claims-related costs are designed to ultimately lower our members ' cost of care . our selling expense consists of external broker commission expenses , and generally varies with premium or membership volume . our general and administrative expense consists of fixed and variable costs . examples of fixed costs are depreciation , amortization and certain facilities expenses . certain variable costs , such as premium taxes , vary directly with premium volume . other variable costs , such as salaries and benefits , do not vary directly with changes in premium , but are more aligned with changes in membership . the acquisition or loss of a significant block of business would likely impact staffing levels , and thus associated compensation expense . other variable costs include professional and consulting expenses and advertising . other factors can impact our administrative cost structure , including systems efficiencies , inflation and changes in productivity . story_separator_special_tag in accordance with financial accounting standards board , or fasb , guidance , we have elected to not separately disclose net cash provided by or used in operating , investing , and financing activities and the net effect of those cash flows on cash and cash equivalents for discontinued operations during the periods presented . for additional information regarding these transactions , see note 3 , `` business acquisitions and divestiture - divestiture of 1-800 contacts , '' included in part ii , item 8 of this annual report on form 10-k. our future results of operations will also be impacted by certain external forces and resulting changes in our business model and strategy . in 2010 , the patient protection and affordable care act , or aca , as well as the health care and education reconciliation act of 2010 , or collectively , health care reform , became law , causing significant changes to the u.s. health care system . since then , significant regulations have been enacted by the u.s. department of health and human services , or hhs , the department of labor and the department of the treasury . the legislation and regulations are far-reaching and are intended to expand access to health insurance coverage over time by mandating that most individuals obtain health insurance coverage , increasing the eligibility thresholds for most state medicaid programs and providing certain other individuals and small businesses with tax credits to subsidize a portion of the cost of health insurance coverage . as a result of the complexity of the law , its impact on health care in the united states and the continuing modification and interpretation of health care reform rules , we continue to analyze and refine our estimates of the ultimate impact of health care reform on our business , cash flows , financial condition and results of operations . health care reform presents us with new growth opportunities , but also introduces new risks , regulatory challenges and uncertainties , and required changes in the way products are designed , underwritten , priced , distributed and administered . for additional discussion , see part i , item 1 “ business - regulation , ” and part i , item 1a “ risk factors ” in this annual report on form 10-k. pricing in our commercial and specialty business segment , including our individual and small group lines of business , remains competitive and we strive to price our health care benefit products consistent with anticipated underlying medical trends . we believe our pricing strategy , based on predictive modeling , proprietary research and data-driven processes , as well as our overall investments for health care reform , have positioned us to benefit from the potential growth opportunities available in fully-insured commercial products as a result of health care reform . in the individual and small group markets , we offer on-exchange products through state or federally facilitated marketplaces , referred to as public exchanges , and off-exchange products . federal premium subsidies are available only for certain members who purchase certain public exchange products . the public exchanges have increased the risk that our products will be selected by individuals who have a higher risk profile or utilization rate than the pool of participants we anticipated when we established the pricing for these public exchange products . we believe that our pricing strategy , brand name and network quality will provide a strong foundation for commercial risk membership growth opportunities in the future . in our individual markets we offer bronze , silver and gold products , both on and off the public exchanges , in california , colorado , connecticut , georgia , indiana , kentucky , maine , missouri , nevada , new hampshire , new york , ohio , virginia and wisconsin . additionally , we offer platinum products , both on and off the public exchanges , in california and new york . - 46 - in our small group markets , we offer bronze , silver and gold products , off the public exchanges , in california , colorado , connecticut , georgia , indiana , kentucky , maine , missouri , nevada , new hampshire , ohio , virginia and wisconsin . we offer bronze , silver and gold products , on the public exchanges , in colorado , connecticut , georgia , indiana , kentucky , maine , missouri , new hampshire , ohio and virginia . additionally , we offer platinum products , off the public exchanges , in california , connecticut , georgia , kentucky , maine , nevada and virginia . private exchanges have gained visibility in the marketplace based on the promise of helping employers reduce costs , increase consumer engagement and manage the complexities created by the aca and other market forces . while private exchanges have been a distribution channel in the medicare and individual markets for some time , the heightened level of activity and investment among the consulting and broker communities and other health insurance carriers has generated an increasing level of interest among employers in the commercial market . to date , adoption levels have been lower than analyst predictions . while the ultimate volume , pace of growth and winning business models remain highly uncertain , we believe private exchanges will provide opportunities for growth . health care reform also imposes new regulations on the health insurance sector , including , but not limited to , guaranteed coverage and expanded benefit requirements ; prohibitions on some annual and all lifetime limits on amounts paid on behalf of or to our members ; increased restrictions on rescinding coverage ; establishment of minimum medical loss ratio , or mlr , and customer rebate requirements ; establishment of a mandatory annual health insurance provider fee , or hip fee ; creation of a federal rate review process ; a requirement to cover preventive services on a first dollar basis ; the establishment of public exchanges and essential benefit packages and greater limitations on how we price certain of our products .
| consolidated results of operations our consolidated summarized results of operations for the years ended december 31 , 2015 , 2014 and 2013 are discussed in the following section . replace_table_token_5_th certain of the following definitions are also applicable to all other results of operations tables in this discussion : 1 includes interest expense , amortization of other intangible assets and gain/loss on extinguishment of debt . 2 the operating results of 1-800 contacts are reported as discontinued operations as a result of the divestiture completed on january 31 , 2014 . 3 calculation not meaningful . 4 benefit expense ratio represents benefit expense as a percentage of premium revenue . premiums for the years ended december 31 , 2015 , 2014 and 2013 were $ 73,385.1 , $ 68,389.8 and $ 66,119.1 , respectively . premiums are included in total operating revenue presented above . 5 bp = basis point ; one hundred basis points = 1 % . 6 selling , general and administrative expense ratio represents selling , general and administrative expense as a percentage of total operating revenue . - 56 - year ended december 31 , 2015 compared to the year ended december 31 , 2014 total operating revenue increased $ 5,383.1 , or 7.4 % , to $ 78,404.8 in 2015 , resulting primarily from higher premiums , and , to a lesser extent , increased administrative fees . higher premiums were mainly due to membership increases across our government business segment , including membership obtained through the acquisition of simply healthcare , and rate increases across our businesses designed to cover overall cost trends and the increase in the hip fee . the increase in premiums was further attributable to membership increases in our aca-compliant on- and off-exchange individual business product offerings and refinement of estimates associated with medicare risk score revenue in the prior year .
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employment and change of control arrangements set forth below are the employment and change of control arrangements story_separator_special_tag financial condition and results of operations you should read the following discussion and analysis of our financial condition and results of operations together with our financial statements and 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 , including information with respect to our plans and strategy for our business , includes forward-looking statements that involve risks and uncertainties . see “ special note regarding forward-looking statements ” and “ risk factors ” for a discussion of forward-looking statements and important factors that could cause actual results to differ materially from the results described in or implied by the forward-looking statements . overview we are a clinical-stage immunotherapy company developing a novel class of t cell engagers that harness the power of the body 's immune system to treat patients suffering from cancer and other diseases . t cell engagers are engineered proteins that direct a patient 's own t cells to kill target cells that express specific proteins , or antigens , carried by the target cells . using our proprietary tritac platform , we are developing a pipeline of novel t cell engagers , or tritacs , initially focused on the treatment of solid tumors and hematologic malignancies . since commencing operations in 2015 , we have devoted substantially all of our resources to performing research and development and manufacturing activities in support of our product development efforts , hiring personnel , raising capital to support and expand such activities and providing general and administrative support for these operations . we do not have any products approved for sale and have not generated any revenue from product sales . we have funded our operations to date primarily from the issuance of convertible notes , the sale of convertible preferred stock and payments received under our discovery collaboration agreement with abbvie . 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 $ 27.4 million , $ 16.8 million and $ 11.4 million for the years ended december 31 , 2018 , 2017 and 2016 , respectively . as of december 31 , 2018 , we had an accumulated deficit of $ 62.6 million . our primary use of cash is to fund operating expenses , which consist primarily of research and development expenditures , and to a lesser extent , general and administrative expenditures . we expect to continue to incur net losses for the foreseeable future , and we expect our research and development expenses , general and administrative expenses , and capital expenditures will continue to increase . we expect to continue to incur significant expenses and increasing operating losses for at least the next several years . our net losses may fluctuate significantly from period to period , depending on the timing of our planned clinical trials and expenditures on other research and development activities . we expect our expenses will increase substantially over time as we : continue the research and development of hpn424 and hpn536 , as well as our other product candidates ; initiate preclinical studies and clinical trials for any additional product candidates that we may pursue in the future ; seek marketing approvals for product candidates that successfully complete clinical trials ; establish a sales , marketing , manufacturing and distribution infrastructure to commercialize any product candidate for which we may obtain marketing approval ; continue to invest in our technology platforms , including tritac and protritac ; maintain , protect and expand our portfolio of intellectual property rights , including patents , trade secrets and know-how ; implement operational , financial and management systems ; and attract , hire and retain additional administrative , clinical , regulatory and scientific personnel . furthermore , we expect to incur additional costs associated with operating as a public company , including significant legal , accounting , investor relations and other expenses that we did not incur as a private company . in february 2019 , we closed our initial public offering of our common stock , in which we issued and sold an aggregate of 5,400,000 shares of common stock at a price of $ 14.00 per share for gross proceeds of approximately $ 75.6 million . shortly following the close of the offering , the underwriters exercised in part their option to purchase an additional 369,201 shares at the initial public offering price for gross proceeds of approximately $ 5.2 million . in the aggregate , we received net proceeds from the offering of approximately $ 70.7 million , after deducting underwriting discounts , commissions and offering expenses . 79 collaboration agreement with abbvie on october 10 , 2017 , we entered into a discovery collaboration and license agreement , or the collaboration agreement , with abbvie . pursuant to the collaboration agreement , we granted to abbvie worldwide exclusive rights to develop and commercialize products that incorporate our proprietary tritac technology together with soluble tcrs provided by abbvie that bind to targets accepted by the parties . under the terms of the collaboration agreement , abbvie is allowed to designate up to two targets , subject to confirmation of target availability . during a period of up to four years following the date of abbvie 's designation of each target for the products , and confirmation of target availability , we and abbvie will conduct certain research and discovery activities under a mutually agreed discovery and research plan in connection with the creation and evaluation of constructs comprising our proprietary tritac technology in conjunction with the soluble tcr sequences directed at the agreed upon targets of interest . story_separator_special_tag the process of conducting the necessary preclinical and clinical research to obtain regulatory approval is costly and time consuming . the actual probability of success for our product candidates may be affected by a variety of factors , including the safety and efficacy of our product candidates , early clinical data , investment in our clinical programs , the ability of collaborators to successfully develop our licensed product candidates , competition , manufacturing capability and commercial viability . we may never succeed in achieving regulatory approval for any of our product candidates . as a result of the uncertainties discussed above , we are unable to determine the duration and completion costs of our research and development projects or when and to what extent we will generate revenue from the commercialization and sale of our product candidates . general and administrative our general and administrative expenses consist primarily of personnel costs , allocated facilities costs and other expenses for outside professional services , including legal , human resource , audit and accounting services . personnel costs consist of salaries , benefits and stock-based compensation . we expect to incur additional expenses as a result of operating as a public company , including expenses related to compliance with the rules and regulations of the sec , nasdaq and any other securities exchange on which our securities are traded , additional insurance expenses , investor relations activities and other administrative and professional services . we also expect to increase the size of our administrative function to support the growth of our business . other expense other expense is primarily comprised of foreign currency transaction losses related to certain transactions with european third-party vendors . story_separator_special_tag :10pt ; '' > the number and characteristics of product candidates that we pursue ; the cost , timing and outcomes of regulatory approvals ; the cost and timing of establishing sales , marketing and distribution capabilities ; the terms and timing of any other collaborative , licensing and other arrangements that we may establish ; the timing , receipt and amount of sales , profit sharing or royalties , if any , from our potential products ; the cost of preparing , filing , prosecuting , defending and enforcing any patent claims and other intellectual property rights the extent to which we acquire or invest in businesses , products or technologies , although we currently have no commitments or agreements relating to any of these types of transactions ; the compliance and administrative costs associated with being a public company ; and the cost of attracting , hiring and retaining additional administrative , clinical , regulatory and scientific personnel . 84 based on our current business plans , we believe that our existing cash and cash equivalents , will be sufficient to fund our planned operations for at least the next 12 months from the issuance date of these financials . however , we will require additional funding in order to complete development of our product candidates and commercialize our products , if approved . we may seek to raise any necessary additional capital through a combination of public or private equity offerings , debt financings , collaborations , strategic alliances , licensing arrangements and other marketing and distribution arrangements . there can be no assurance that we will be successful in acquiring additional funding at levels sufficient to fund our operations or on terms favorable to us . if we are unable to obtain adequate financing when needed , we may have to delay , reduce the scope of or suspend one or more of our preclinical studies and clinical trials , research and development programs or commercialization efforts . because of the numerous risks and uncertainties associated with the development and commercialization of our product candidates and the extent to which we may enter into additional collaborations with third parties to participate in their development and commercialization , we are unable to estimate the amounts of increased capital outlays and operating expenditures associated with our current and anticipated preclinical studies and clinical trials . to the extent that we raise additional capital through additional collaborations , strategic alliances or licensing arrangements with third parties , we may have to relinquish valuable rights to our product candidates , future revenue streams , research programs or product candidates or to grant licenses on terms that may not be favorable to us . if we do raise additional capital through public or private equity or convertible debt offerings , the ownership interest of our existing stockholders will be diluted , and the terms of these securities may include liquidation or other preferences that adversely affect our stockholders ' rights . if we raise additional capital through debt financing , we may be subject to covenants limiting or restricting our ability to take specific actions , such as incurring additional debt , making capital expenditures or declaring dividends . please see the section entitled “ risk factors ” for additional risks associated with our substantial capital requirements and the challenges we may face in raising capital . cash flows replace_table_token_8_th cash flows from operating activities in 2018 , cash used in operating activities was $ 27.1 million , which consisted of a net loss of $ 27.4 million and a net change of $ 1.1 million in our net operating assets and liabilities , partially offset by $ 1.3 million in non-cash charges . the non-cash charges consisted of stock-based compensation of $ 0.7 million and depreciation and amortization of $ 0.6 million . the change in operating assets and liabilities was primarily due to a decrease in deferred revenue of $ 4.3 million resulting from the recognition of collaboration revenue , an increase in accounts payable and accrued liabilities of $ 3.6 million , and an increase in prepaid expenses and other current assets of $ 0.5 million resulting from the timing of payments made for research and development activities .
| results of operations comparison of years ended december 31 , 2018 and 2017 replace_table_token_4_th * not meaningful 81 revenue collaboration and license revenue of $ 4.8 million for the year ended december 31 , 2018 consisted of the amortized portion of the deferred $ 17.0 million upfront payment received by us in october 2017 under the collaboration agreement , and the $ 0.5 million upfront payment received by us in may 2018 under the werewolf agreement . collaboration revenue of $ 0.7 million for the year ended december 31 , 2017 consisted entirely of the amortized portion of the deferred $ 17.0 million upfront payment received by us in october 2017 under the collaboration agreement . research and development the following table summarizes our research and development expenses incurred during the respective periods : replace_table_token_5_th research and development expenses increased by $ 12.7 million , or 94 % , in 2018 compared to 2017. the increase was primarily due to a $ 4.2 million increase in pharmacology services and product and clinical development expense due to development of four identified product candidates , including conducting preclinical studies and manufacturing runs to support preparation for potential nda filings for our lead product candidates , a $ 2.6 million increase in research and technology services due to an increase in experimental studies , a $ 2.8 million increase in personnel-related expenses due to an increase in headcount , a $ 1.5 million increase in consulting expenses due to increased activity related to project management , quality assurance and regulatory matters , a $ 1.2 million increase in facility and other allocated expenses related to the new lease entered into in march 2017 , and a $ 0.4 million increase in laboratory supplies and equipment to support increased activity related to all of our product candidates .
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under maryland law , a maryland corporation also may not indemnify a director or officer in a suit by or in the right of the corporation in which story_separator_special_tag you should read the following discussion of our financial condition and results of operations in conjunction with our audited consolidated financial statements and the notes thereto included in this form 10-k , and the consolidated financial statements and the notes thereto . for more detailed information regarding the basis of presentation for the following information , you should read the notes to the audited consolidated financial statements included in this form 10-k. company overview we are a maryland corporation formed with the principle objective of acquiring , financing , developing , leasing , owning and managing income producing , strip centers , neighborhood centers , grocery-anchored centers , community centers and free-standing retail properties . our strategy is to opportunistically acquire quality , well-located , predominantly retail properties in secondary and tertiary markets that generate attractive risk-adjusted returns . we generally target competitively protected properties located within developed areas , commonly referred to as in-fill , that possess minimal competition risk and are surrounded by communities that have strong demographics and dynamic , diversified economies that will continue to generate jobs and future demand for commercial real estate . our primary target markets include the northeast , mid-atlantic , southeast and southwest . our portfolio is comprised of thirty-nine retail shopping centers , three free-standing retail properties , our office building and ten undeveloped land parcels . fourteen of these properties are located in virginia , three are located in florida , six are located in north carolina , twelve are located in south carolina , eight are located in georgia , two are located in kentucky , two are located in tennessee , one is located in new jersey , three are located in oklahoma , one is located in alabama and one is located in west virginia . our operating portfolio has a total gla of 3,151,358 square feet and an occupancy level of approximately 94 % . recent trends and activities there have been several significant events in 2015 that have positively impacted our company . these events are summarized below . property acquisitions on january 9 , 2015 , we completed our acquisition of 1.5 acres of undeveloped land located on laskin road in virginia beach , virginia ( `` laskin road '' ) for a contract price of $ 1.6 million . the company acquired laskin road for future development opportunities . we paid cash of $ 150,000 with the balance of the contract price to be paid in common units on the earlier of the one year anniversary of the acquisition or the completion of any development activities . on january 19 , 2016 , 807,727 common units were issued by the operating partnership to finalize this transaction . on january 14 , 2015 , we completed our acquisition of pierpont centre , a 122,259 square foot shopping center located in morgantown , west virginia ( `` pierpont centre '' ) for a contract price of $ 13.9 million , paid through a combination of cash and debt . pierpont centre was 100 % leased as of the acquisition date and its major tenants include gnc , hallmark , michael 's , ruby tuesday and outback steakhouse . on march 27 , 2015 , we completed our acquisition of brook run properties , llc ( `` brook run properties '' ) from a related party , consisting of a 2 acre parcel of undeveloped real estate located adjacent to the brook run shopping center in richmond , virginia , for a contract price of $ 300,000 in cash . we acquired the property for potential development and to compliment the adjacent shopping center . 19 on april 1 , 2015 , the we completed our acquisition of alex city marketplace , a 147,791 square foot shopping center located in alexander city , alabama ( `` alex city marketplace '' ) for a contract price of $ 10.3 million , paid through a combination of cash and debt . alex city marketplace was 86 % leased as of the the acquisition date and its major tenants include winn dixie and goody 's . on april 15 , 2015 , we completed our acquisition of butler square , a 82,400 square foot shopping center located in mauldin , south carolina ( `` butler square '' ) for a contract price of $ 9.4 million , paid through a combination of cash and debt . butler square was 100 % leased as of the acquisition date and its major tenants include bi-lo and dollar tree . on june 2 , 2015 , we completed our acquisition of brook run shopping center , a 147,738 square foot shopping center located in richmond , virginia ( `` brook run '' ) from a related party for a contract price of $ 18.5 million . brook run was 92 % leased as of the acquisition date and its major tenants include martin 's food store and cvs . we acquired brook run from a related party through a combination of cash , the issuance of 574,743 common units in the operating partnership and debt . on july 1 , 2015 , we completed our acquisition of beaver ruin village , a 74,048 square foot shopping center located in lilburn , georgia ( `` beaver ruin village '' ) for a contract price of $ 12.4 million , paid through a combination of cash and debt . beaver ruin village was 91 % leased as of the acquisition date and its major tenants include chase bank , firehouse subs and state farm insurance . on july 1 , 2015 , we completed our acquisition of beaver ruin village ii , a 34,925 square foot shopping center located in lilburn , georgia ( `` beaver ruin village ii '' ) for a contract price of $ 4.4 million , paid through a combination of cash and debt . story_separator_special_tag the credit agreement also contains certain events of default that if they occur may cause keybank to terminate the credit agreement and declare amounts owed to become immediately payable . as of december 31 , 2015 , we have not incurred an event of default . on november 24 , 2015 , we entered into a promissory note for $ 4,620,000 to refinance the winslow plaza loan . the new loan matures on december 1 , 2025 with principal due at maturity and bears interest at 4.82 % . certain debt agreements into which we have entered have covenants with which we must comply . as of december 31 , 2015 , we believe we are in compliance with the applicable covenants . new leases , leasing renewals and expirations new leases during the year ended december 31 , 2015 were comprised of twenty-three deals totaling 45,161 square feet with a weighted average rate of $ 13.35 per square foot . the commission rate per square foot equated to $ 1.34 . renewals during the year ended december 31 , 2015 were comprised of sixty-two deals totaling 334,928 square feet with a weighted average increase of $ 0.64 per square foot , representing an increase of 6.9 % over prior rates . the rates on negotiated renewals resulted in a weighted average increase of $ 1.11 per square foot on forty-one renewals , a $ 1.48 per square foot decrease on five renewals and no changes on sixteen renewals . fifteen of these renewals represented options being exercised . we also had a lease assignment for a 4,100 square foot space with all lease terms remaining the same . approximately 5.97 % of our gross leasable area is subject to leases that expire during the twelve months ending december 31 , 2016 that have not already been renewed . based on recent market trends , we believe that these leases will be renewed at amounts and terms comparable to existing lease agreements . funds from operations we use funds from operations ( “ ffo ” ) as an alternative measure of our operating performance , specifically as it relates to results of operations and liquidity . we compute ffo in accordance with standards established by the board of governors of the national association of real estate investment trusts ( “ nareit ” ) in its march 1995 white paper ( as amended in november 1999 and april 2002 ) . as defined by nareit , ffo represents net income ( computed in accordance with accounting principles generally accepted in the united states , or “ gaap ” ) , excluding gains ( or losses ) from sales of 21 property , plus real estate related depreciation and amortization ( excluding amortization of loan origination costs ) and after adjustments for unconsolidated partnerships and joint ventures . most industry analysts and equity reits , including us , consider ffo to be an appropriate supplemental measure of operating performance because , by excluding gains or losses on dispositions and excluding depreciation , ffo is a helpful tool that can assist in the comparison of the operating performance of a company 's real estate between periods , or as compared to different companies . management uses ffo as a supplemental measure to conduct and evaluate our business because there are certain limitations associated with using gaap net income alone as the primary measure of our operating performance . historical cost accounting for real estate assets in accordance with gaap implicitly assumes that the value of real estate assets diminishes predictably over time , while historically real estate values have risen or fallen with market conditions . accordingly , we believe ffo provides a valuable alternative measurement tool to gaap when presenting our operating results . critical accounting policies the following discussion and analysis of our financial condition and results of operations are based upon our consolidated financial statements included in this form 10-k , 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 . on an on-going basis , we evaluate our estimates based on historical experience and on various other assumptions that are believed to be reasonable under the circumstances , the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources . actual results may differ from these estimates under different assumptions or conditions . the critical accounting policies summarized in this section are discussed in further detail in the notes to the financial statements appearing elsewhere in this form 10-k. we believe that the application of these policies on a consistent basis enables us to provide useful and reliable financial information about our operating results and financial condition . revenue recognition principal components of our total revenues include base and percentage rents and tenant reimbursements . we accrue minimum ( base ) rent on a straight-line basis over the terms of the respective leases which results in an unbilled rent asset or deferred rent liability being recorded on the balance sheet . certain lease agreements contain provisions that grant additional rents based on tenants ' sales volumes ( contingent or percentage rent ) which we recognize when the tenants achieve the specified targets as defined in their lease agreements . we periodically review the valuation of the asset/liability resulting from the straight-line accounting treatment of our leases in light of any changes in lease terms , financial condition or other factors concerning our tenants . receivables we record a tenant receivable for amounts due from tenants such as base rents , tenant reimbursements and other charges allowed under the lease terms .
| results of operations the following table presents a comparison of the consolidated statements of operations for the years ended december 31 , 2015 and 2014 , respectively . replace_table_token_16_th ( 1 ) excludes riversedge north that ceased paying rent upon acquiring the operating companies . same store and new store operating income the following table provides same store and new store financial information . same stores consist of those properties we owned during all periods presented in their entirety , while new stores consist of those properties acquired during the periods presented . same store discontinued operations financial information reflects the activity of the following properties : harps at harbor point bixby commons jenks reasors starbucks/verizon 27 new store discontinued operations financial information reflects the activity for the following entities : outback steakhouse and ruby tuesday ground leases at pierpont centre ( acquired january 14 , 2015 ) same store and new store operating income the following table provides same store and new store financial information . replace_table_token_17_th property revenues total same store property revenues for the year ended december 31 , 2015 was $ 12.78 million , compared to $ 12.23 million for the year ended december 31 , 2014 . same store revenues increased primarily due to increases in tenant reimbursements , contractual rent adjustments , positive rent spreads on renewals and increases in occupancy . these increases were offset by wheeler interests ceasing to pay rent to riversedge north due to the internalization of the operating companies . riversedge north contributed $ 336,000 to property revenues for the year ended december 31 , 2014 . excluding the impact of riversedge north on the 2014 property revenues , same store property revenues increased approximately $ 894,000 for the year ended december 31 , 2015 as compared to the prior period .
| 5,878 |
contract assets as of december 31 , 2020 and december 31 , 2019 were $ 9.4 million and $ 0.4 million , respectively . the increase in contract assets is primarily due to the anthem enterprise license agreement that results in revenue recognized ahead of invoicing in the first year of that agreement . revenue of $ 10.4 million and $ 19.7 million was recognized during the years ended december 31 , 2020 and 2019 , respectively , that was included in the deferred revenue balances at the beginning of the respective periods . the company recorded favorable cumulative catch-up adjustments to revenue arising from changes in variable consideration of $ 3.6 million and $ 2.8 million during the years ended december 31 , 2020 and 2019 , respectively . the aggregate balance of remaining performance obligations from non-cancelable contracts with customers as of december 31 , 2020 was $ 163.0 million . the company expects to recognize approximately 70 % of this balance over the next 12 months , with the remaining balance recognized thereafter . remaining performance obligations are defined as deferred revenue and amounts yet to be billed for the non-cancelable portion of contracts . anthem agreement in october 2019 , castlight entered into a 30 -month enterprise license agreement with anthem , inc. , effective january 1 , 2020 , that extends and expands the company 's existing relationship with anthem first announced in 2015. the agreement includes castlight 's core care guidance technology , the engage health navigation platform , and a new , non-exclusive license for some of castlight 's underlying health navigation platform technology services , such as transparency and personalization . for these services , anthem will pay the company license fees of $ 168 million over 30 months . the company began recognizing subscription revenue starting january 2020. note 4 . deferred costs changes in the balance of total deferred commissions and deferred professional service costs for the year ended december 31 , 2020 are as follows ( in thousands ) : replace_table_token_16_th these costs are reviewed for impairment quarterly . impairment charges were $ 2.1 million , $ 3.2 million and $ 1.9 million for the years ended december 31 , 2020 , 2019 and 2018 respectively . 72 castlight health , inc. notes to consolidated financial statements note 5. goodwill and intangible assets impairment the company determined that the significant decline in the u.s. economy as a result of the covid-19 pandemic , together with the decline in the company 's stock price , constituted a triggering event , which required the company to perform interim impairment analyses related to its long-lived assets and goodwill during the first quarter of 2020. the impairment analysis for long-lived assets indicated that the assets were recoverable ; therefore , no impairment was recorded . after assessing long-lived assets , the company performed a goodwill impairment analysis and determined that the carrying value of its only reporting unit exceeded its fair value by approximately $ 50.3 million . the fair value was determined using the income approach . the company believes that the income approach is the most reliable indication of fair value since it incorporates future estimated revenues and expenses for the reporting unit that the market approach may not directly incorporate . in addition to future estimated revenue and expenses , the determination of fair value included assumptions related to a discount rate . as of december 31 , 2020 , the company determined that there were no indicators present to suggest that it was more likely than not that the fair value of the reporting unit was less than its carrying amount . the company will continue to monitor its goodwill on a quarterly basis for indicators of impairment , including but not limited to , further declines in the stock price . accordingly , there may be future impairments . goodwill the company 's goodwill relates entirely to the acquisition of jiff in 2017. the excess of purchase consideration over the fair value of net tangible and identifiable intangible assets acquired was recorded as goodwill . as of december 31 , 2020 , the gross amount of goodwill was $ 91.8 million and accumulated goodwill impairment was $ 50.3 million , all of which was recorded in the first quarter of 2020. the goodwill impairment did not involve any cash expenditures . intangible assets , net identified intangible assets are recorded at their estimated fair values at the date of acquisition and are amortized over their respective estimated useful lives using a method of amortization that reflects the pattern in which the economic benefits of the intangible assets are used . subsequent to the end of the second quarter of 2019 , the company realized elevated churn related to legacy jiff customers . as a result , the company performed an analysis of realized churn and future forecasts and updated its estimate of the original useful life of customer relationships and backlog in the third quarter of 2019. the estimated useful life of customer relationships was revised from 10 years to 6 years , and the estimated useful life of backlog was revised from 3 years to 2.5 years . these updates in useful lives were accounted for as a change in accounting estimate and were applied prospectively to the remaining carrying amounts . the following tables set forth the fair value components of identifiable acquired intangible assets ( dollars in thousands ) : replace_table_token_17_th 73 castlight health , inc. notes to consolidated financial statements replace_table_token_18_th amortization expense from acquired intangible assets for the years ended december 31 , 2020 , 2019 and 2018 was $ 4.2 million , $ 4.0 million and $ 4.0 million and is included in cost of subscription , general and administrative , and sales and marketing expenses . future estimated amortization expense for acquired intangible assets is as follows ( in thousands ) : replace_table_token_19_th note 6. marketable securities the amortized cost and story_separator_special_tag contract assets as of december 31 , 2020 and december 31 , 2019 were $ 9.4 million and $ 0.4 million , respectively . the increase in contract assets is primarily due to the anthem enterprise license agreement that results in revenue recognized ahead of invoicing in the first year of that agreement . revenue of $ 10.4 million and $ 19.7 million was recognized during the years ended december 31 , 2020 and 2019 , respectively , that was included in the deferred revenue balances at the beginning of the respective periods . the company recorded favorable cumulative catch-up adjustments to revenue arising from changes in variable consideration of $ 3.6 million and $ 2.8 million during the years ended december 31 , 2020 and 2019 , respectively . the aggregate balance of remaining performance obligations from non-cancelable contracts with customers as of december 31 , 2020 was $ 163.0 million . the company expects to recognize approximately 70 % of this balance over the next 12 months , with the remaining balance recognized thereafter . remaining performance obligations are defined as deferred revenue and amounts yet to be billed for the non-cancelable portion of contracts . anthem agreement in october 2019 , castlight entered into a 30 -month enterprise license agreement with anthem , inc. , effective january 1 , 2020 , that extends and expands the company 's existing relationship with anthem first announced in 2015. the agreement includes castlight 's core care guidance technology , the engage health navigation platform , and a new , non-exclusive license for some of castlight 's underlying health navigation platform technology services , such as transparency and personalization . for these services , anthem will pay the company license fees of $ 168 million over 30 months . the company began recognizing subscription revenue starting january 2020. note 4 . deferred costs changes in the balance of total deferred commissions and deferred professional service costs for the year ended december 31 , 2020 are as follows ( in thousands ) : replace_table_token_16_th these costs are reviewed for impairment quarterly . impairment charges were $ 2.1 million , $ 3.2 million and $ 1.9 million for the years ended december 31 , 2020 , 2019 and 2018 respectively . 72 castlight health , inc. notes to consolidated financial statements note 5. goodwill and intangible assets impairment the company determined that the significant decline in the u.s. economy as a result of the covid-19 pandemic , together with the decline in the company 's stock price , constituted a triggering event , which required the company to perform interim impairment analyses related to its long-lived assets and goodwill during the first quarter of 2020. the impairment analysis for long-lived assets indicated that the assets were recoverable ; therefore , no impairment was recorded . after assessing long-lived assets , the company performed a goodwill impairment analysis and determined that the carrying value of its only reporting unit exceeded its fair value by approximately $ 50.3 million . the fair value was determined using the income approach . the company believes that the income approach is the most reliable indication of fair value since it incorporates future estimated revenues and expenses for the reporting unit that the market approach may not directly incorporate . in addition to future estimated revenue and expenses , the determination of fair value included assumptions related to a discount rate . as of december 31 , 2020 , the company determined that there were no indicators present to suggest that it was more likely than not that the fair value of the reporting unit was less than its carrying amount . the company will continue to monitor its goodwill on a quarterly basis for indicators of impairment , including but not limited to , further declines in the stock price . accordingly , there may be future impairments . goodwill the company 's goodwill relates entirely to the acquisition of jiff in 2017. the excess of purchase consideration over the fair value of net tangible and identifiable intangible assets acquired was recorded as goodwill . as of december 31 , 2020 , the gross amount of goodwill was $ 91.8 million and accumulated goodwill impairment was $ 50.3 million , all of which was recorded in the first quarter of 2020. the goodwill impairment did not involve any cash expenditures . intangible assets , net identified intangible assets are recorded at their estimated fair values at the date of acquisition and are amortized over their respective estimated useful lives using a method of amortization that reflects the pattern in which the economic benefits of the intangible assets are used . subsequent to the end of the second quarter of 2019 , the company realized elevated churn related to legacy jiff customers . as a result , the company performed an analysis of realized churn and future forecasts and updated its estimate of the original useful life of customer relationships and backlog in the third quarter of 2019. the estimated useful life of customer relationships was revised from 10 years to 6 years , and the estimated useful life of backlog was revised from 3 years to 2.5 years . these updates in useful lives were accounted for as a change in accounting estimate and were applied prospectively to the remaining carrying amounts . the following tables set forth the fair value components of identifiable acquired intangible assets ( dollars in thousands ) : replace_table_token_17_th 73 castlight health , inc. notes to consolidated financial statements replace_table_token_18_th amortization expense from acquired intangible assets for the years ended december 31 , 2020 , 2019 and 2018 was $ 4.2 million , $ 4.0 million and $ 4.0 million and is included in cost of subscription , general and administrative , and sales and marketing expenses . future estimated amortization expense for acquired intangible assets is as follows ( in thousands ) : replace_table_token_19_th note 6. marketable securities the amortized cost and
| and results of operations stock-based compensation all stock-based compensation to employees is measured based on the grant-date fair value of the awards and recognized in the company 's consolidated statements of operations over the period during which the employee is required to perform services in exchange for the award ( generally the vesting period of the award ) . the company accounts for forfeitures as they occur . the company estimates the fair value of all other stock options and stock purchase rights under the employee stock purchase plan using the black-scholes option valuation model . for restricted stock units , fair value is based on the closing price of the company 's class b common stock on the grant date . compensation expense is recognized over the vesting period of the applicable award using the straight-line method . for awards with performance based and service vesting conditions , compensation expense is recognized over the requisite service period if it is probable that the performance-based condition will be satisfied based on the accelerated attribution method . for awards with market based and service vestingconditions , compensation expense is recognized over the requisite service period using the accelerated attribution method .
| 5,879 |
to the extent allowable pursuant to applicable law , each member of our board of directors and the plan administrator and any officer or other employee to whom authority to administer any component of the 2018 plan is delegated shall be indemnified and held harmless by the company from any loss or expense that may be reasonably incurred by such member in connection with any claim , action or proceeding in which he or she may be involved by reason of any action or failure to act pursuant to the 2018 plan and against all amounts paid by him or her in satisfaction of judgment in such claim , story_separator_special_tag presentation of information as used in this annual report , the terms “ we , ” “ us ” “ our ” and the “ company ” mean guardion health sciences , inc. and its subsidiaries unless the context requires otherwise . the following discussion and analysis should be read in conjunction with the company 's audited ( and unaudited ) financial statements and the related notes thereto . all dollar amounts in this annual report refer to u.s. dollars unless otherwise indicated . certain prior period amounts have been reclassified to conform to current period presentation . overview guardion health sciences , inc. ( the “ company ” or “ we ” ) was formed in december 2009 in california as a limited liability company under the name p4l health sciences , llc , and it subsequently changed its name to guardion health sciences , llc . on june 30 , 2015 , the company converted from a california limited liability company to a delaware corporation , changing its name to guardion health sciences , inc. the company is a specialty health sciences company formed to develop , formulate and distribute condition-specific medical foods with an initial medical food product on the market under the brand name lumega-z ® that replenishes and restores the macular protective pigment . a depleted macular protective pigment is a modifiable risk factor for retina-based diseases such as age-related macular degeneration ( “ amd ” ) , computer vision syndrome ( “ cvs ” ) and diabetic retinopathy . this risk may be modified by taking lumega-z to maintain a healthy macular protective pigment . additional research has also shown a depleted macular protective pigment to be a biomarker for neurodegenerative diseases such as alzheimer 's disease and dementia . 35 in september 2017 , the company , through its wholly-owned subsidiary vectorvision ocular health , inc. , acquired substantially all of the assets and certain liabilities of vectorvision , inc. , a company that specializes in the standardization of contrast sensitivity , glare sensitivity , low contrast acuity , and early treatment diabetic retinopathy study ( “ etdrs ” ) visual acuity testing . vectorvision 's standardization system is designed to provide the practitioner or researcher with the ability to delineate very small changes in visual capability , either as compared to the population or from visit to visit . vectorvision develops , manufactures and sells equipment and supplies for standardized vision testing for use by eye doctors in clinical trials , for real-world vision evaluation , and industrial vision testing . the acquisition expands the company 's technical portfolio . the company believes the acquisition of vectorvision , adding the csv-1000 and esv-3000 to its product portfolio , further establishes its position at the forefront of early detection , intervention and monitoring of a range of eye diseases . the company has had limited operations to date and has been primarily engaged in research and development , product commercialization and capital raising activities . the company invented a proprietary technology , embodied in the company 's medical device , the mapcatsf ® that accurately measures the macular pigment optical density ( “ mpod ” ) . on november 8 , 2016 , the united states patent and trademark office ( “ uspto ” ) issued patent number 9,486,136 for the mapcatsf invention . using the mapcatsf to measure the mpod allows one to monitor the increase in the density of the macular protective pigment after taking lumega-z . the mapcatsf is a non-mydriatic , non-invasive device that accurately measures the mpod , the lens optical density and lens equivalent age , thereby creating an evidence-based protocol that is shared with the patient . a non-mydriatic device is one that does not require dilation of the pupil for it to function . the mapcatsf is the first medical device using a patented “ single fixation ” process and “ automatic lens density correction ” that produces accurate serialized data . lumega-z is a medical food product that has a patent-pending formula that replenishes and restores the macular protective pigment simultaneously delivering critical and essential nutrients to the eye . management believes , based on review of products on the market and knowledge of the industry , that lumega-z is the first liquid ocular health formula to be classified as a medical food ( as defined in section 5 ( b ) of the “ orphan drug act ” ) . however , the fda has not monitored nor approved lumega-z as a medical food . formulated by dr. sheldon hendler in 2010 , modifications were made over a two-year period to improve the taste and method of delivery . the current formulation has been delivered to patients and used in clinics since 2014. medical foods are not considered to be either dietary or nutritional supplements . the company believes that there is an increasing level of acceptance of medical foods as a primary therapy by patients and healthcare providers to treat pain syndromes , sleep and cognitive disorders , obesity , hypertension , and viral infection . in clinical practice , medical foods are being prescribed as both a standalone therapy and as an adjunct therapy to low doses of commonly prescribed drugs . the company believes that medical foods will continue to grow in importance over the coming years . story_separator_special_tag in an irb-approved , ind registered study conducted at the new york eye and ear infirmary and presented at the american glaucoma society 2018 , glaucohealth tm reversed mitochondrial metabolic dysfunction as determined by the retinal metabolic analyzer , which measures retinal flavoprotein activity , a direct measure of mitochondrial activity . the company 's glaucocetin tm product was developed in collaboration with dr. robert ritch , a world-renowned glaucoma specialist from manhattan eye and ear infirmary and mount sinai medical center in new york city . dr. ritch has also been a member of the company 's medical advisory board for the past three years . the company is preparing to launch glaucocetin tm in upcoming quarters . going concern the financial statements have been prepared assuming the company will continue as a going concern . the company had a net loss of $ 7,767,407 and utilized cash in operating activities of $ 4,173,831 during the year ended december 31 , 2018. the company expects to continue to incur net losses and negative operating cash flows in the near-term . as a result , management has concluded that there is substantial doubt about the company 's ability to continue as a going concern within one year of the date that the financial statements are issued . the company 's independent registered public accounting firm has also included explanatory language in their opinion accompanying the company 's audited financial statements for the year ended december 31 , 2018. the company 's financial statements do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets or the amounts and classifications of liabilities that may result from the possible inability of the company to continue as a going concern . 37 the company will continue to incur significant expenses for continued commercialization activities related to lumega-z , the mapcatsf ® medical device , and vectorvision products . development and commercialization of medical foods and medical devices involves a lengthy and complex process . additionally , the company 's long-term viability and growth may depend upon the successful development and commercialization of new complementary products or product lines . the company is continuing to attempt to raise additional debt and or equity capital to fund future operations , but there can be no assurances that the company will be able to secure such additional financing in the amounts necessary to fully fund its operating requirements on acceptable terms or at all . if the company is unable to access sufficient capital resources on a timely basis , the company may be forced to reduce or discontinue its technology and product development programs and curtail or cease operations . reverse stock split on january 30 , 2019 , following stockholder and board approval , the company filed a certificate of amendment to its amended certificate of incorporation , as amended ( the “ amendment ” ) , with the secretary of state of the state of delaware to effectuate a one-for-two ( 1:2 ) reverse stock split ( the “ reverse stock split ” ) of its common stock , par value $ 0.001 per share , without any change to its par value . the amendment became effective on the filing date . the number of shares authorized for common and preferred stock were not affected by the reverse stock split . no fractional shares were issued in connection with the reverse stock split as all fractional shares were “ rounded up ” to the next whole share . proportional adjustments for the reverse stock split were made to the company 's outstanding common stock , stock options , and warrants as if the split occurred at the beginning of the earliest period presented . recent accounting pronouncements see note 2 to the financial statements for management 's discussion of recent accounting pronouncements . critical accounting policies and estimates the company 's financial statements have been prepared in conformity with accounting principles generally accepted in the united states of america ( “ gaap ” ) . the preparation of its financial statements in conformity with gaap requires management to make certain estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and reported amounts of expenses during the reporting period . actual results could differ from those estimates . the company 's financial statements included herein include all adjustments , consisting of only normal recurring adjustments , necessary to present fairly the company 's financial position , results of operations and cash flows . the following critical accounting policies affect the more significant judgments and estimates used in the preparation of the company 's financial statements . intangible assets in connection with the vectorvision transaction , the company identified and allocated estimated fair values to intangible assets including goodwill and customer relationships . in accordance with accounting standard codification ( “ asc ” ) 350 – intangibles – goodwill and other , the company determined whether these assets are expected to have indefinite ( such as goodwill ) or limited useful lives , and for those with limited lives , the company established an amortization period and method of amortization . the company 's goodwill and other intangible assets are subject to periodic impairment testing . the company utilized the services of an independent third-party valuation firm to assist it in identifying intangible assets and in estimating their fair values . the useful lives for its intangible assets other than goodwill were estimated based on management 's consideration of various factors , including assumptions that market participants might use about sales expectations as well as potential effects of obsolescence , competition , technological progress and the regulatory environment . because the future pattern in which the economic benefits of these intangible assets may not be reliably determined , amortization expense is generally calculated on a straight-line basis . the company reviews all intangible assets for impairment when circumstances indicate that their carrying values may not be recoverable .
| results of operations in november 2017 , the company received gross proceeds of $ 5,000,001 pursuant to the issuance and sale of 2,173,914 shares of common stock . during 2018 , the company has deployed significant efforts and capital resources to focus on development and commercialization activities related to its medical foods , the mapcatsf ® medical device , the vectorvision csv-1000 and esv-3000 medical devices , and its newly incorporated subsidiary , transcranial doppler solutions , inc. , which was formed to provide transcranial doppler ultrasound services on patients at medical facilities to further the company 's position at the forefront of early detection , intervention and monitoring of a range of eye diseases . 40 substantial resources were devoted in 2018 to the redesign and improvement of the sales and marketing infrastructure . the company now has dedicated sales personnel located in and responsible for key strategic sales territories in the united states . in conjunction with hiring sales staff , the company procured equipment and supplies to support the sales staff and incurs travel expenses related to their sales activities . the company developed an ecommerce platform and has upgraded and added new website access for products and information . the company 's first targeted marketing campaign for lumega-z began in the second quarter of 2018. the company also dedicated resources to attend certain trade shows to increase the presence of the company and vectorvision in pertinent industries . engineering and product development efforts in 2018 have resulted in the first group of commercially available upgraded mapcatsf ® devices . the acquisition and development of intellectual property has enabled both the improvement of existing products and the development of new ones .
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the committee chooses not to base its benchmarking on the compensation practices of other propane marketers due to the fact that the other , story_separator_special_tag the following is a discussion of our financial condition and results of operations , which should be read in conjunction with our consolidated financial statements and notes thereto included elsewhere in this annual report . executive overview the following are factors that regularly affect our operating results and financial condition . in addition , our business is subject to the risks and uncertainties described in item 1a of this annual report . product costs and supply the level of profitability in the retail propane , fuel oil , natural gas and electricity businesses is largely dependent on the difference between retail sales price and product cost . the unit cost of our products , particularly propane , fuel oil and natural gas , is subject to volatility as a result of supply and demand dynamics or other market conditions , including , but not limited to , economic and political factors impacting crude oil and natural gas supply or pricing . we enter into product supply contracts that are generally one-year agreements subject to annual renewal , and also purchase product on the open market . we attempt to reduce price risk by pricing product on a short-term basis . our propane supply contracts typically provide for pricing based upon index formulas using the posted prices established at major supply points such as mont belvieu , texas , or conway , kansas ( plus transportation costs ) at the time of delivery . to supplement our annual purchase requirements , we may utilize forward fixed price purchase contracts to acquire a portion of the propane that we resell to our customers , which allows us to manage our exposure to unfavorable changes in commodity prices and to assure adequate physical supply . the percentage of contract purchases , and the amount of supply contracted for under forward contracts at fixed prices , will vary from year to year based on market conditions . product cost changes can occur rapidly over a short period of time and can impact profitability . there is no assurance that we will be able to pass on product cost increases fully or immediately , particularly when product costs increase rapidly . therefore , average retail sales prices can vary significantly from year to year as product costs fluctuate with propane , fuel oil , crude oil and natural gas commodity market conditions . in addition , periods of sustained higher commodity prices can lead to customer conservation , resulting in reduced demand for our product . seasonality the retail propane and fuel oil distribution businesses , as well as the natural gas marketing business , are seasonal because these fuels are primarily used for heating in residential and commercial buildings . historically , approximately two-thirds of our retail propane volume is sold during the six-month peak heating season from october through march . the fuel oil business tends to experience greater seasonality given its more limited use for space heating and approximately three-fourths of our fuel oil volumes are sold between october and march . consequently , sales and operating profits are concentrated in our first and second fiscal quarters . cash flows from operations , therefore , are greatest during the second and third fiscal quarters when customers pay for product purchased during the winter heating season . we expect lower operating profits and either net losses or lower net income during the period from april through september ( our third and fourth fiscal quarters ) . to the extent necessary , we will reserve cash from the second and third quarters for distribution to holders of our common units in the fourth quarter and following fiscal year first quarter . weather weather conditions have a significant impact on the demand for our products , in particular propane , fuel oil and natural gas , for both heating and agricultural purposes . many of our customers rely heavily on propane , fuel oil or natural gas as a heating source . accordingly , the volume sold is directly affected by the severity of the winter weather in our service areas , which can vary substantially from year to year . in any given area , sustained warmer than normal temperatures , as was the case with the fiscal 2012 heating season , will tend to result in reduced propane , fuel oil and natural gas consumption , while sustained colder than normal temperatures will tend to result in greater consumption . 28 hedging and risk management activities we engage in hedging and risk management activities to reduce the effect of price volatility on our product costs and to ensure the availability of product during periods of short supply . we enter into propane forward , options and swap agreements with third parties , and use futures and options contracts traded on the new york mercantile exchange ( nymex ) to purchase and sell propane , fuel oil and crude oil at fixed prices in the future . the majority of the futures , forward and options agreements are used to hedge price risk associated with propane and fuel oil physical inventory , as well as , in certain instances , forecasted purchases of propane or fuel oil . in addition , we sell propane and fuel oil to customers at fixed prices , and enter into swap agreements to hedge a portion of our exposure to fluctuations in commodity prices as a result of selling the fixed price contracts . forward contracts are generally settled physically at the expiration of the contract whereas futures , options and swap contracts are generally settled in cash at the expiration of the contract . although we use derivative instruments to reduce the effect of price volatility associated with priced physical inventory and forecasted transactions , we do not use derivative instruments for speculative trading purposes . story_separator_special_tag when only a range of possible loss can be established , the most probable amount in the range is accrued . if no amount within this range is a better estimate than any other amount within the range , the minimum amount in the range is accrued . fair values of acquired assets and liabilities . from time to time , we enter into material business combinations . in accordance with accounting guidance associated with business combinations , the assets acquired and liabilities assumed are recorded at their estimated fair value as of the acquisition date . fair values of assets acquired and liabilities assumed are based upon available information and may involve us engaging an independent third party to perform an appraisal . estimating fair values can be complex and subject to significant business judgment . estimates most commonly impact property , plant and equipment and intangible assets , including goodwill . generally , we have , if necessary , up to one year from the acquisition date to finalize our estimates of acquisition date fair values . story_separator_special_tag offset to an extent by the addition of propane volumes sold from inergy propane since august 1 , 2012 , which contributed 27.0 million gallons of propane gallons sold in fiscal 2012. average propane selling prices for fiscal 2012 decreased 5.0 % compared to the prior year due to lower wholesale product costs . included within the propane segment are revenues from other propane activities of $ 74.2 million for fiscal 2012 , which decreased $ 2.3 million compared to the prior year . revenues from the distribution of fuel oil and refined fuels of $ 114.3 million for fiscal 2012 decreased $ 25.3 million , or 18.1 % , from $ 139.6 million in the prior year , primarily due to lower volumes sold , partially offset by higher average selling prices associated with higher wholesale product costs . fuel oil and refined fuels gallons sold in fiscal 2012 decreased 8.7 million gallons , or 23.5 % , to 28.5 million gallons from 37.2 million gallons in the prior year . average selling prices in our fuel oil and refined fuels segment for fiscal 2012 increased 6.6 % compared to the prior year due to higher wholesale product costs . revenues in our natural gas and electricity segment decreased $ 17.3 million , or 20.4 % , to $ 67.4 million in fiscal 2012 compared to $ 84.7 million in the prior year as a result of lower natural gas and electricity volumes sold , which was primarily attributable to the record warm weather in the northeast , discussed above . 32 cost of products sold replace_table_token_5_th the cost of products sold reported in the consolidated statements of operations represents the weighted average unit cost of propane , fuel oil and refined fuels , natural gas and electricity sold , including transportation costs to deliver product from our supply points to storage or to our customer service centers . cost of products sold also includes the cost of appliances and related parts sold or installed by our customer service centers computed on a basis that approximates the average cost of the products . unrealized ( non-cash ) gains or losses from changes in the fair value of derivative instruments that are not designated as cash flow hedges are recorded within cost of products sold . cost of products sold excludes depreciation and amortization ; these amounts are reported separately within the consolidated statements of operations . average posted prices for propane for fiscal 2012 were 19.7 % lower than the prior year , and average fuel oil prices for fiscal 2012 were 7.4 % higher than the prior year . total cost of products sold decreased $ 79.7 million , or 11.7 % , to $ 599.1 million in fiscal 2012 , compared to $ 678.7 million in the prior year due to lower volumes sold and lower propane average product costs , partially offset by higher fuel oil average product costs . the net change in the fair value of derivative instruments resulted in unrealized ( non-cash ) gains reported in cost of product sold of $ 4.6 million and $ 1.4 million during fiscal 2012 and 2011 , respectively , resulting in a decrease of $ 3.2 million in cost of products sold in fiscal 2012 compared to the prior year ( $ 4.8 million decrease and $ 1.6 million increase in cost of products sold reported in the propane segment and fuel oil and refined fuels segment , respectively ) . cost of products sold associated with the distribution of propane and related activities of $ 448.1 million for fiscal 2012 decreased $ 58.4 million , or 11.5 % , compared to the prior year . lower average propane costs and lower propane volumes sold resulted in a decrease in cost of products sold of $ 30.5 million and $ 23.7 million , respectively , in fiscal 2012 compared to the prior year . cost of products sold from other propane activities increased $ 0.6 million in fiscal 2012 compared to the prior year . cost of products sold associated with our fuel oil and refined fuels segment of $ 91.2 million for fiscal 2012 decreased $ 9.7 million , or 9.6 % , compared to the prior year . lower fuel oil and refined fuels volumes sold resulted in a decrease of $ 22.6 million in cost of products sold during fiscal 2012 compared to the prior year . the impact of the decrease in volumes sold was partially offset by higher average fuel oil and refined fuels costs , which resulted in an $ 11.3 million increase in cost of products sold during fiscal 2012 compared to the prior year . cost of products sold in our natural gas and electricity segment of $ 46.9 million for fiscal 2012 decreased $ 14.6 million , or 23.7 % , compared to the prior year , primarily due to lower natural gas and electricity volumes sold .
| results of operations and financial condition record warm temperatures across much of the country had a significant negative affect on volumes sold and overall profitability during fiscal 2012. nonetheless , we had several notable achievements during fiscal 2012 , including : ( i ) the completion of the inergy propane acquisition for approximately $ 1.9 billion on august 1 , 2012 , including the subsequent issuance of approximately 7.2 million common units in a secondary public offering , the net proceeds of which were used to fund a portion of the acquisition ; ( ii ) the amendment and restatement of our revolving credit facility to a new five-year facility at lower interest rates , as well as to increase the capacity under the facility by $ 150.0 million ; and ( iii ) for the sixth consecutive year , we funded all cash needs from cash on hand without the need to borrow under our revolving credit facility and ended the year with $ 134.3 million of cash . fiscal 2012 includes 53 weeks of operations , compared to 52 weeks in the prior year , and includes the results of operations for inergy propane for two months since the date of acquisition . net income for fiscal 2012 amounted to $ 1.9 million , or $ 0.05 per common unit , compared to $ 115.0 million , or $ 3.24 per common unit , in fiscal 2011. earnings before interest , taxes , depreciation and amortization ( ebitda ) for fiscal 2012 amounted to $ 86.4 million , compared to $ 178.9 million for fiscal 2011. adjusted ebitda ( as defined and reconciled below ) amounted to $ 108.5 million in fiscal 2012 , compared to $ 179.4 million in fiscal 2011 .
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as our merchandise sales are recognized net of returns , we use judgments and estimates for the amount of future returns we expect to receive . if our sales return rate were to change by 100 basis points , it would not materially impact our revenue . cost of sales and merchandise inventories . merchandise inventories are stated at lower of cost or market , with the majority of our inventory determined using the retail inventory method . under the retail inventory method , the valuation of inventories at cost and the resulting gross profits are determined by applying a calculated cost to retail ratio to the retail value of inventories . the cost of the inventory reflected on the balance sheet is decreased by charges to cost of sales at the time the retail value of the inventory is lowered through the use of markdowns , which are reductions in prices due to customers ' perception of value . hence , earnings are negatively impacted as the merchandise is marked down prior to sale . markdowns establish a new cost basis for inventory . changes in facts or circumstances do not result in the reversal of previously recorded markdowns or an increase in the newly established cost basis . markdowns require management to make assumptions regarding customer preferences , fashion trends and consumer demand . inherent in the calculation of inventories are certain significant management judgments and estimates , including setting the original merchandise retail value , markdowns , and estimates of losses between physical inventory counts , or shrinkage , which combined with the averaging process within the retail inventory method , can significantly impact the ending inventory valuation at cost and the resulting gross profit . we record a reduction to inventories and a charge to cost of sales for shrinkage . shrinkage is calculated as a percentage of sales from the last physical inventory date . estimates are based on both historical experience as well as recent physical inventory results . if the reduction to inventories for markdowns and shrink were to change by 10 % , it would result in a corresponding change in cost of sales of approximately $ 4.2 million . 24 policy judgments and estimates effect if actual results differ from assumptions customer loyalty program . we maintain a customer loyalty program for dsw in which program members earn reward certificates that result in discounts on future purchases . upon reaching the target-earned threshold , the members receive reward certificates for these discounts , which expire three months after being issued . we accrue the anticipated redemptions of the discount earned at the time of the initial purchase . to estimate these costs , we make assumptions related to customer purchase levels and redemption rates based on historical experience . if our redemption rate were to change by 100 basis points , it would not materially impact our financial statements . investments . we evaluate our investments for impairment and whether impairment is other-than-temporary . based on the nature of any impairments , we would record other-than-temporary impairments in earnings . the investment is written down to its current market value at the time the impairment is deemed to have occurred . in determining whether impairment has occurred , we review information about the underlying investment that is publicly available and assess our ability to hold the securities for the foreseeable future . our total investments , including both short-term and long-term , as of january 28 , 2017 were $ 176.4 million and we believe that our fair value estimates are reasonable . contingent consideration . we agreed to a contingent payment to the sellers of ebuys based upon the achievement of certain negotiated future performance goals . we recorded a contingent consideration liability for this obligation at fair value based on our projections . we estimate the contingent consideration liability based on projected performance of ebuys compared to the performance goals . we present value the liability based on estimated payments over the performance period . our contingent consideration liability as of january 28 , 2017 was $ 33.2 million . to the extent our future projections change , our ultimate payments may differ from our current estimates . goodwill and impairment . we evaluate goodwill for impairment annually during our fourth quarter , or more frequently if an event occurs or circumstances change , such as material deterioration in performance or a significant and sustained decline in our stock price , that would indicate that impairment may exist . when evaluating goodwill for impairment , we may first perform a qualitative assessment to determine whether it is more likely than not that a reporting unit is impaired . if we do not perform a qualitative assessment , or if we determine that it is not more likely than not that the fair value of the reporting unit exceeds its carrying amount , we calculate the estimated fair value of the reporting unit . fair value is the price a willing buyer would pay for the reporting unit and is typically calculated using a discounted cash flow model . for certain reporting units , where deemed appropriate , we may also utilize a market approach for estimating fair value . when assessing goodwill for impairment , our decision to perform a qualitative impairment assessment for an individual reporting unit is influenced by a number of factors , including the significance of the excess of the reporting unit 's estimated fair value over carrying value at the last assessment date and the amount of time in between quantitative fair value assessments and the date of acquisition . if we perform a quantitative assessment of an individual reporting unit 's goodwill , our impairment calculations contain uncertainties as we are required to make assumptions and to apply judgment when estimating future cash flows , including projected revenue growth and operating income , as well as selecting an appropriate discount rate . estimates story_separator_special_tag as our merchandise sales are recognized net of returns , we use judgments and estimates for the amount of future returns we expect to receive . if our sales return rate were to change by 100 basis points , it would not materially impact our revenue . cost of sales and merchandise inventories . merchandise inventories are stated at lower of cost or market , with the majority of our inventory determined using the retail inventory method . under the retail inventory method , the valuation of inventories at cost and the resulting gross profits are determined by applying a calculated cost to retail ratio to the retail value of inventories . the cost of the inventory reflected on the balance sheet is decreased by charges to cost of sales at the time the retail value of the inventory is lowered through the use of markdowns , which are reductions in prices due to customers ' perception of value . hence , earnings are negatively impacted as the merchandise is marked down prior to sale . markdowns establish a new cost basis for inventory . changes in facts or circumstances do not result in the reversal of previously recorded markdowns or an increase in the newly established cost basis . markdowns require management to make assumptions regarding customer preferences , fashion trends and consumer demand . inherent in the calculation of inventories are certain significant management judgments and estimates , including setting the original merchandise retail value , markdowns , and estimates of losses between physical inventory counts , or shrinkage , which combined with the averaging process within the retail inventory method , can significantly impact the ending inventory valuation at cost and the resulting gross profit . we record a reduction to inventories and a charge to cost of sales for shrinkage . shrinkage is calculated as a percentage of sales from the last physical inventory date . estimates are based on both historical experience as well as recent physical inventory results . if the reduction to inventories for markdowns and shrink were to change by 10 % , it would result in a corresponding change in cost of sales of approximately $ 4.2 million . 24 policy judgments and estimates effect if actual results differ from assumptions customer loyalty program . we maintain a customer loyalty program for dsw in which program members earn reward certificates that result in discounts on future purchases . upon reaching the target-earned threshold , the members receive reward certificates for these discounts , which expire three months after being issued . we accrue the anticipated redemptions of the discount earned at the time of the initial purchase . to estimate these costs , we make assumptions related to customer purchase levels and redemption rates based on historical experience . if our redemption rate were to change by 100 basis points , it would not materially impact our financial statements . investments . we evaluate our investments for impairment and whether impairment is other-than-temporary . based on the nature of any impairments , we would record other-than-temporary impairments in earnings . the investment is written down to its current market value at the time the impairment is deemed to have occurred . in determining whether impairment has occurred , we review information about the underlying investment that is publicly available and assess our ability to hold the securities for the foreseeable future . our total investments , including both short-term and long-term , as of january 28 , 2017 were $ 176.4 million and we believe that our fair value estimates are reasonable . contingent consideration . we agreed to a contingent payment to the sellers of ebuys based upon the achievement of certain negotiated future performance goals . we recorded a contingent consideration liability for this obligation at fair value based on our projections . we estimate the contingent consideration liability based on projected performance of ebuys compared to the performance goals . we present value the liability based on estimated payments over the performance period . our contingent consideration liability as of january 28 , 2017 was $ 33.2 million . to the extent our future projections change , our ultimate payments may differ from our current estimates . goodwill and impairment . we evaluate goodwill for impairment annually during our fourth quarter , or more frequently if an event occurs or circumstances change , such as material deterioration in performance or a significant and sustained decline in our stock price , that would indicate that impairment may exist . when evaluating goodwill for impairment , we may first perform a qualitative assessment to determine whether it is more likely than not that a reporting unit is impaired . if we do not perform a qualitative assessment , or if we determine that it is not more likely than not that the fair value of the reporting unit exceeds its carrying amount , we calculate the estimated fair value of the reporting unit . fair value is the price a willing buyer would pay for the reporting unit and is typically calculated using a discounted cash flow model . for certain reporting units , where deemed appropriate , we may also utilize a market approach for estimating fair value . when assessing goodwill for impairment , our decision to perform a qualitative impairment assessment for an individual reporting unit is influenced by a number of factors , including the significance of the excess of the reporting unit 's estimated fair value over carrying value at the last assessment date and the amount of time in between quantitative fair value assessments and the date of acquisition . if we perform a quantitative assessment of an individual reporting unit 's goodwill , our impairment calculations contain uncertainties as we are required to make assumptions and to apply judgment when estimating future cash flows , including projected revenue growth and operating income , as well as selecting an appropriate discount rate . estimates
| financial summary total net sales increased to $ 2.7 billion for fiscal 2016 from $ 2.6 billion for fiscal 2015 . the 3.5 % increase in total net sales was driven by the incremental sales from ebuys , which was acquired during the beginning of fiscal 2016 , and non-comparable store sales , partially offset by the 3.0 % decrease in comparable sales . in fiscal 2016 , dsw 's gross profit as a percentage of net sales was 28.5 % , a decrease of 80 basis points from 29.3 % in the previous year . the decrease in the gross profit rate was primarily driven by the addition of ebuys during the current year at lower margins . net income for fiscal 2016 was $ 124.5 million , or $ 1.52 per diluted share , which included net favorable pre-tax adjustments of $ 12.4 million , or $ 0.09 per share , related to the acquisition of ebuys , including a reduction of the contingent consideration liability , the amortization of intangibles , transaction costs , and inventory step-up costs , as well as pre-tax charges of $ 4.5 million , or $ 0.03 per share , from restructuring costs . net income for fiscal 2015 was $ 136.0 million , or $ 1.54 per diluted share . we have continued making investments in our business that support our long-term growth objectives . on march 4 , 2016 , we acquired ebuys , a leading off price footwear and accessories retailer operating in digital marketplaces , for a total purchase price of $ 113.1 million . during fiscal 2016 , we invested $ 87.6 million in capital expenditures compared to $ 103.9 million during fiscal 2015 . our capital expenditures during fiscal 2016 were primarily related to 34 new store openings , store remodels and business infrastructure . we plan to open approximately 15 to 17 stores in fiscal 2017 .
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accounting for the acquisition of columbia gas description of the matter as discussed in note 5 to the consolidated financial statements , the company completed the acquisition of all of the equity interests in columbia midstream group , llc and its 47 % interest in columbia pennant , llc ( “ the cmg acquisition ” ) on august 1 , 2019 for total consideration of $ 1,284 million and accounted for this transaction using the acquisition method . auditing the company 's accounting for the cmg acquisition was complex due to the significant estimation uncertainty inherent in determining the fair value of the property , plant and equipment and the identified customer story_separator_special_tag md & a discusses our results of operations for fiscal 2019 , fiscal 2018 and fiscal 2017 , and our financial condition . md & a should be read in conjunction with our items 1 & 2 , “ business and properties , ” our item 1a , “ risk factors , ” and our consolidated financial statements in item 8 below including “ segment information ” included in note 22 to consolidated financial statements . because most of our businesses sell or distribute energy products used in large part for heating purposes , our results are significantly influenced by temperatures in our service territories , particularly during the peak heating-season months of october through march . accordingly , our results of operations , after adjusting for the effects of gains and losses on derivative instruments not associated with current-period transactions as further discussed below under “ non-gaap financial measures - adjusted net income attributable to ugi and adjusted diluted earnings per share , ” are significantly higher in our first and second fiscal quarters . ugi management uses “ adjusted net income attributable to ugi corporation ” and “ adjusted diluted earnings per share , ” both of which are financial measures not in accordance with gaap , when evaluating ugi 's overall performance . management believes that these non-gaap measures provide meaningful information to investors . adjusted net income attributable to ugi corporation excludes ( 1 ) net after-tax gains and losses on commodity and certain foreign currency derivative instruments not associated with current-period transactions and ( 2 ) other significant discrete items that management believes affect the comparison of period-over-period results ( as such items are further described below ) . ugi does not designate its commodity and certain foreign currency derivative instruments as hedges under gaap . volatility in net income attributable to ugi corporation as determined in accordance with gaap can occur as a result of gains and losses on commodity and certain foreign currency derivative instruments not associated with current-period transactions . these gains and losses result principally from recording changes in unrealized gains and losses on these derivative instruments . however , because these derivative instruments economically hedge anticipated future purchases or sales of energy commodities or , in the case of certain foreign currency derivatives , reduce volatility in anticipated future earnings associated with our foreign operations , we expect that such gains and losses will be largely offset by gains or losses on anticipated future energy commodity transactions or mitigate the volatility in anticipated future earnings associated with our european operations . for further information , see “ non-gaap financial measures - adjusted net income attributable to ugi and adjusted diluted earnings per share ” below and note 22 to consolidated financial statements . executive overview fiscal 2019 financial review net income attributable to ugi corporation and diluted eps by segment ( gaap ) replace_table_token_3_th ( a ) fiscal 2018 net income attributable to ugi corporation reflects the remeasurement of income tax assets and liabilities resulting from the tcja in the u.s. , and the remeasurement effects of the december 2017 french finance bills . fiscal 2017 includes the remeasurement effects of the december 2016 french finance bills . see “ impact of tax reform ” below and notes 7 and 22 to consolidated financial statements . ( b ) corporate & other includes certain adjustments made to our reporting segments in arriving at net income attributable to ugi corporation . these adjustments have been excluded from the segment results to align with the measure used by our codm in assessing segment performance and allocating resources . see “ non-gaap financial measures - adjusted net income attributable to ugi and adjusted diluted earnings per share ” below and note 22 to consolidated financial statements for additional information related to these adjustments , as well as other items included within corporate & other . 42 from a financial performance perspective , the company faced a number of operational challenges in fiscal 2019 , including average temperatures that were warmer than normal and slightly warmer than the prior year across three of our four business segments ( with amerigas propane being the exception ) . at our midstream & marketing segment , fiscal 2019 results were significantly below the prior year due principally to the impact on capacity management margin of pipeline restrictions and limited weather volatility in the marcellus region . ugi international faced a second consecutive year of significantly warmer than normal weather and the effects of a very warm and dry crop-drying season , which reduced lpg volumes . despite these significant challenges , our adjusted diluted earnings per share ( as further described below ) of $ 2.28 demonstrate the resiliency of our business unit portfolio and our ability to manage expenses to adjust to these adverse conditions . story_separator_special_tag in addition to the fiscal 2018 remeasurement adjustments related to our u.s. and french income tax assets and liabilities described above , our income tax expense for fiscal 2018 was further impacted by a net reduction of approximately $ 35.0 million ( equal to $ 0.20 per diluted share ) principally as a result of a lower fiscal 2018 blended u.s. income tax rate of 24.5 % compared to 35 % previously , partially offset by an after-tax reduction in ugi utilities ' revenues resulting from a may 2018 papuc order . in accordance with this papuc order , ugi utilities reduced its revenues by $ 24.1 million , and established an associated regulatory liability , related to $ 17.1 million of tax benefits resulting from the change in the federal tax rate from 35 % to 21 % for the period january 1 , 2018 through june 30 , 2018. in addition to the requirement to establish this regulatory liability , the may 2018 papuc order also directed each regulated utility that was not currently in a general base rate case proceeding to reduce their rates through a reconcilable negative surcharge applied to bills rendered on or after july 1 , 2018 until the effective date of new rates was established in the next general base rate proceeding . this ratemaking effectively offset the effects of the tcja on income taxes at ugi utilities until the tcja 's effects were considered in rate proceedings . for further information on the tcja , the december 2017 french finance bills , the regulatory impacts on ugi utilities resulting from the tcja and the actions of the papuc , see notes 7 and 9 to consolidated financial statements . strategic initiatives fiscal 2019 was defined by two significant strategic transactions that we believe will have a transformational impact on our future performance and strategic direction . the larger of these transactions was the purchase of all of the public 's ownership interest in amerigas partners for 34.6 million ugi shares and $ 529 million in cash . this transaction resulted in ugi owning 100 % of the partnership effective august 21 , 2019. we will use the enhanced cash flow from our full ownership of the partnership to reduce debt over time and help fund future major capital investments in our natural gas businesses . the second significant strategic transaction in fiscal 2019 was the acquisition of columbia midstream group from tc energy on august 1 , 2019. the cmg acquisition resulted in a four-fold increase in our natural gas gathering assets as well as the acquisition of important gas processing assets in the marcellus and utica shale formations . we anticipate executing on a number of system expansion projects associated with these assets over the next several years . in addition to the amerigas merger and the cmg acquisition , during fiscal 2019 we continued to focus on executing critical elements of our long-term strategy at each of our business segments . we believe these initiatives will provide a platform for sustainable future growth . some of these initiatives are described below . at our midstream & marketing business , we continued to focus on organic growth associated with infrastructure build-out projects in the marcellus and utica shale . one such project is our auburn iv pipeline expansion project in northern pennsylvania , which was completed in november 2019 and is supported by a ten-year take or pay contract . we continued to expand our infield gathering capabilities including the build-out of our texas creek and other gathering assets located in northern pennsylvania , and are continuing to expand our portfolio of lng assets . our largest lng project currently underway is the construction of an lng storage and vaporization facility located in bethlehem , pennsylvania . we expect this facility to be operational in early fiscal 2021. our existing portfolio of lng assets and assets under construction , such as the bethlehem lng project , are vital to filling the gap between available pipeline capacity and peak day demand for natural gas . early in fiscal 2019 , we also expanded our energy marketing customer base with the acquisition of south jersey energy company 's natural gas marketing business , adding several thousand customers to our portfolio . ugi utilities had a busy and productive fiscal 2019. we continue to see strong natural gas demand across our gas utility service territory . ugi utilities added approximately 14,000 new residential and commercial heating customers during fiscal 2019 with conversions accounting for the majority of the additions . ugi utilities ' electric utility base rate case , filed in january 2018 , went into effect in late october 2018. in january 2019 , ugi utilities filed its first combined gas utility rate case and successfully concluded the base rate case with an approved settlement that increases base rate revenue by approximately $ 30 million . the new base rates went into effect on october 11 , 2019. ugi utilities continues to invest in its distribution system and in fiscal 2019 spent over $ 355 million in capital expenditures , including approximately $ 201 million in replacement and betterment capital . we expect this high level of capital expenditures at ugi utilities to continue for the foreseeable future . 44 amerigas propane continued to experience the successful expansions of its ace cylinder and national accounts programs . through both of these programs , amerigas propane distinguishes itself by providing exceptional service to key customer groups , leveraging upon its national footprint to serve these customers efficiently and effectively . fiscal 2019 was another year of strong growth in both programs , with ace volumes up 8 % and national accounts volumes up more than 5 % . during fiscal 2019 , we continued to deliver value-added technologies such as our second generation ace vending solution for our largest cylinder exchange customers , and we introduced cynch , our propane home delivery service for customers in select markets .
| consolidated results net income attributable to ugi corporation by segment : replace_table_token_12_th ( a ) corporate & other includes certain adjustments made to our reporting segments in arriving at net income attributable to ugi corporation . these adjustments have been excluded from the segment results to align with the measure used by our codm in assessing segment performance and allocating resources . these items totaled $ 233.1 million and $ 30.5 million in fiscal 2018 and fiscal 2017 , respectively . see “ non-gaap financial measures - adjusted net income attributable to ugi and adjusted diluted earnings per share ” above and note 22 to consolidated financial statements for further information . n.m. — variance is not meaningful . replace_table_token_13_th ( a ) total margin represents total revenues less total cost of sales . ( b ) operating and administrative expenses in fiscal 2017 include a $ 7.5 million environmental accrual associated with the site of a former mgp obtained in a prior-year acquisition . see note 16 to consolidated financial statements . ( c ) fiscal 2017 reflects adjustments to correct previously recorded gains on sales of fixed assets ( $ 8.8 million ) and decreased depreciation expense ( $ 1.1 million ) relating to certain assets acquired with the heritage propane acquisition in 2012 , which reduced partnership adjusted ebitda by $ 8.8 million and reduced operating income / earnings before interest expense and income taxes by $ 7.7 million . ( d ) amounts in fiscal 2017 reflect an adjustment to correct depreciation expense associated with prior periods which reduced operating income / earnings before interest expense and income taxes by $ 7.5 million . ( e ) partnership adjusted ebitda is a non-gaap financial measure and is not in accordance with , or an alternative to , gaap and should be considered in addition to , and not a substitute for , the comparable gaap measures .
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the fair value of amortizable intangible assets and ipr & d was based , in part , on a valuation using a discounted cash flow approach and other valuation techniques as well as management 's estimates and assumptions . the amortizable intangible assets are all related to developed technology and are included in purchased technology within note 6 intangible assets and goodwill. purchased technology , which comprises products that have reached technological feasibility , was primarily related to smartread ® . smartread is patented technology , primarily comprised of a set of algorithms that reduce storage input-output when performing maintenance tasks such as backup , replication or migration of virtual machines . pancetera products containing the story_separator_special_tag overview quantum corporation ( quantum , the company , us or we ) , founded in 1980 , is a is a leading expert in scale-out storage , archive and data protection , providing solutions for capturing , sharing and preserving digital assets over the entire data lifecycle . our customers , ranging from small businesses to major enterprises , have trusted us to address their most demanding data workflow challenges . we provide solutions for storing and protecting information in physical , virtual and cloud environments that are designed to help customers be certain tm they have an end-to-end storage foundation to maximize the value of their data by making it accessible whenever and wherever needed , retaining it indefinitely and reducing total cost and complexity . we work closely with a broad network of distributors , value-added resellers ( vars ) , direct marketing resellers ( dmrs ) , original equipment manufacturers ( oems ) and other suppliers to meet customers ' evolving needs . our stock is traded on the new york stock exchange under the symbol qtm . business we believe our combination of expertise , innovation and platform independence enables us to solve data protection and scale-out storage challenges more easily , cost-effectively and securely . we earn our revenue from the sale of products , systems and services through an array of channel partners and our sales force . our products are sold under both the quantum brand name and the names of various oem customers . our scale-out storage and archive solutions , stornext ® file system and archive software , stornext appliances and lattus tm object storage systems , are designed to help customers manage large unstructured data sets in an information workflow , encompassing high-performance ingest , real-time collaboration , scalable processing , intelligent protection and high-value monetization . our data protection solutions include dxi ® deduplication systems and scalar ® automated tape libraries that optimize backup and recovery , simplify management and lower cost . our vmpro tm virtual server backup and disaster recovery offerings protect virtual environments while minimizing the impact on servers and storage . in addition , we also offer software for cloud backup and disaster recovery of physical and virtual servers . we have a full range of services and the global scale and scope to support our worldwide customer base . our goals for fiscal 2014 were to continue to capitalize on market opportunities while balancing cash flow generation and operating profit against revenue growth associated with potential opportunities and go-to-market strategies , with an emphasis on delivering results that we expect to be more predictable going forward . in some cases , as was the case in the second through fourth quarters of fiscal 2014 , this means we may generate lower overall revenue but more cash flow and profit in order to provide greater operating leverage for future revenue increases . our revenue growth strategy in fiscal 2014 was focused on leveraging our stornext and lattus solutions to drive deeper into rich media and other vertical markets and extending the reach of these solutions into the data center and the cloud in addition to expanding relationships with our partners and gaining additional access to end users through existing and new channel partners . we continued our efforts to further leverage our tape automation and dxi expertise , our installed product base and our broad data protection product portfolio in order to gain market share in the data center . during fiscal 2014 , we improved our operational efficiency and effectiveness in a number of areas . we initiated and completed a transition to outsource our manufacturing and repair operations , streamlined our service capabilities and refined our sales model . in addition , we realigned our engineering and product groups to leverage our product development strengths from our data center products to scale-out storage products in an effort to increase our overall product development capabilities , reduce our time-to-market , especially in launching new scale-out storage products , decrease our operational costs and increase our operational leverage across the company . refinement of our operational model in fiscal 2014 included focusing our scale-out storage go-to-market and sales team on vertical markets where they are particularly strong , while enabling our larger data center sales team to focus on sales of tape automation and disk solutions in the data center and identifying stornext and lattus opportunities around specific data center use cases . we believe these operational improvements contributed to the record revenue from scale-out storage products in fiscal 2014 , in part from key sales in the media and entertainment vertical market and specific use cases in the data center . we continued to improve our strategic positioning and visibility among end user customers and channel partners in our core markets of tape automation , purpose built deduplication appliances and scale-out storage in fiscal 2014. we focused on new product introductions , providing a broad range of products to solve customer problems and expanding our strategic and channel partners in an effort to gain greater end-user access and additional market share in fiscal 2014. we are a smaller market participant in some of the markets we participate in and compete against well known , larger companies in all the markets for our products . story_separator_special_tag product margin fiscal 2014 compared to fiscal 2013 product gross margin dollars decreased $ 20.4 million , or 15 % , compared to fiscal 2013 , and our product gross margin rate decreased 110 basis points primarily due to a 13 % decrease in product revenue . the decreased product revenue was mostly offset in fiscal 2014 by decreased costs as a result of several items . product material costs decreased the most , commensurate with the decrease in product revenue , and we also had decreased freight costs as a result of fewer shipments . a number of expenses decreased compared to fiscal 2013 as a result of cost reduction initiatives that began in the second half of fiscal 2013 and continued throughout fiscal 2014. the most significant decreased cost as a result of these initiatives was compensation and benefits expense from reduced staffing levels in addition to decreased facility expenses from additional reductions to our warehouse footprint . we also had lower intangible amortization in fiscal 2014 from certain intangible assets becoming fully amortized . fiscal 2013 compared to fiscal 2012 product gross margin dollars decreased $ 29.5 million , or 18 % , compared to fiscal 2012 , and our product gross margin rate decreased 270 basis points primarily due to a 12 % decrease in product revenue . as noted above , some of our product costs of goods sold are relatively fixed in the short term ; therefore , product revenue increases or decreases impact the product gross margin rate . the change in the mix of products sold , as described above in product revenue , also contributed to decreased product margins in fiscal 2013. in addition , we had an increase in compensation and benefits in fiscal 2013 compared to fiscal 2012 primarily due to investment in our software support team . we also had an increase in the manufacturing inventory allowance in fiscal 2013 compared to the prior year largely due to more products nearing end of life . partially offsetting these factors was lower intangible amortization in fiscal 2013 due to certain intangible assets becoming fully amortized in fiscal 2013 and fiscal 2012 , decreased facility expense from reducing our warehouse footprint and lower freight expense as a result of fewer shipments compared to fiscal 2012. service margin fiscal 2014 compared to fiscal 2013 service gross margin dollars increased $ 6.8 million , or 11 % , compared to fiscal 2013 , and service gross margin percentage increased 370 basis points on a 2 % increase in service revenue . the increase in service margin was primarily due to lower costs across our service delivery model largely due to reduced compensation and benefits from lower staffing levels , including outsourcing geographies with lower service and repair volumes and improving utilization of our service team . in addition , our service activities continue to reflect a larger proportion of branded products under contract , which have relatively higher margins than margins for oem repair services . 30 table of contents fiscal 2013 compared to fiscal 2012 service gross margin dollars increased $ 8.5 million , or 15 % , compared to fiscal 2012 , and service gross margin percentage increased 600 basis points while service revenue was unchanged . the increase in service margin was primarily due to reduced costs across our service delivery model from a decreased volume of repairs and in part due to bringing repair of certain product lines in-house . the more significant cost decreases in fiscal 2013 compared to fiscal 2012 were for compensation and benefits , external service providers , third party warehouse and service materials . compensation and benefits decreased due to reduced staffing requirements from decreased repair volumes . external service provider expense decreased due to a combination of having repair of certain product lines in-house for the full fiscal year , decreased repair volumes and negotiating lower rates on the renewals of contracts with certain service providers in fiscal 2012. third party warehouse expenses decreased due to efforts to reduce service parts inventory levels including reduced usage of third party warehouses . service material decreases were primarily due to lower repair volumes compared to the prior year . additionally , our service activities continue to reflect a larger proportion of branded products under contract , which have relatively higher margins than margins for oem repair services . research and development expenses replace_table_token_7_th fiscal 2014 compared to fiscal 2013 the decrease in research and development expenses compared to fiscal 2013 was primarily due to cost reduction measures that resulted in a $ 6.6 million decrease in compensation and benefits from reduced staffing levels due to focusing investments in scale-out storage technology while continuing to invest in targeted future generation tape and disk technology . we also had a decrease of $ 1.5 million in external service provider expense and a decrease of $ 0.9 million in depreciation expense due to equipment becoming fully depreciated . additionally , there was a $ 0.3 million decrease in project material expenses due to the nature of projects under development and specific development activities in the prior year periods that were not repeated at the same levels and a $ 0.3 million decrease in expensed equipment . fiscal 2013 compared to fiscal 2012 the decrease in research and development expenses compared to fiscal 2012 was the net result of several factors . due to the implementation of cost reduction measures in the second half of fiscal 2013 , including restructuring actions that decreased headcount , we had a decrease of $ 0.8 million in compensation and benefits and also had smaller decreases in several other areas including travel expenses , dues and subscriptions and facilities expense . in addition , we had a $ 0.6 million decrease in project materials as a result of the types of products under development and related testing material requirements compared to the prior year .
| results we had total revenue of $ 553.2 million in fiscal 2014 , a 6 % decrease from fiscal 2013 primarily due to the combination of the changing storage environment , including reduced demand for tape products and increased market demand for scale-out storage and archive solutions , and our actions to reduce our investment in sales while improving the efficiency of our sales model . we had record revenue for scale-out storage solutions largely due to increased revenue from sales in north america . service revenue increased slightly from fiscal 2013 primarily due to increased revenue from branded service contracts associated with our stornext appliances , and royalty revenue increased 30 % from fiscal 2013 due to a $ 15.0 million royalty received in connection with finalizing an intellectual property agreement in the first quarter of fiscal 2014. the proportion of non-royalty revenue from branded products and services continued to increase , growing to 84 % in fiscal 2014 compared to 83 % in fiscal 2013 and 81 % in fiscal 2012. our gross margin percentage increased 230 basis points from fiscal 2013 to 43.3 % , largely due to the increased royalty revenue followed by improvements in our service delivery model . operating expenses decreased $ 31.3 million , or 11 % from fiscal 2013 , primarily from lower compensation and benefits as a result of headcount reductions implemented over the past year and a half .
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in december 2015 , we provided cash collateral to one of our insurance carriers to secure our obligations in connection with certain workers ' compensation insurance policies instead of issuing a letter of credit . we can replace the cash collateral with a letter of credit at our option at any time . as of december 31 , 2015 , the amount of funds that we had deposited with the insurance carrier was $ 2,187 . we deposited an additional $ 593 of cash collateral for our workers ' compensation obligations in january 2016. beginning in 2014 , we were required to provide cash collateral in an amount equal to 109 % of the face amount of a letter of credit payable to the ed ( ed letter of credit ) and 103 % of the face amount of all other letters of credit issued for our account . the balance of this cash collateral was $ 109 as of december 31 , 2015 and $ 89,304 as of december 31 , 2014. of the amount as of december 31 , 2014 , $ 86,882 related to the letter of credit that was issued on october 31 , 2014 to the ed . the funds held as cash collateral could be paid to the issuing bank for the letters of credit if the letters of credit are drawn story_separator_special_tag the following discussion should be read with the selected financial data and the consolidated financial statements and notes to consolidated financial statements included elsewhere in this report . this management 's discussion and analysis of financial condition and results of operations is based on our consolidated financial statements , which have been prepared in conformity with generally accepted accounting principles in the united states . the preparation of these financial statements requires us to make estimates and judgments that affect the reported amount of assets , liabilities , revenue , expenses and contingent assets and liabilities . actual results may differ from those estimates and judgments under different assumptions or conditions . in this management 's discussion and analysis of financial condition and results of operations , when we discuss factors that contributed to a change in our financial condition or results of operations , we disclose the primary factors that materially contributed to that change in the order of significance . the information in this management 's discussion and analysis of financial condition and results of operations related to 2014 reflects the impact of the restatements on the affected line items of our consolidated financial statements . executive summary in 2015 , a number of events and factors impacted our results of operations , financial position , cash flows and liquidity , the most significant of which included the following : new and total student enrollment in education programs decreased , in each case , compared to the prior year ; total operating expenses decreased $ 115.6 million ; we made payments aggregating $ 43.2 million under the peaks guarantee and the cuso rsa ; we made principal , interest and fee payments aggregating $ 39.5 million under the financing agreement ; we received a refund of federal income taxes of $ 18.2 million ; and we reduced the amount of cash held as collateral or escrowed funds from $ 97.9 million to $ 91.2 million . these events and factors are described further in this management 's discussion and analysis of financial condition and results of operations and in the notes to consolidated financial statements contained in this annual report on form 10-k. -46- we continue to have significant cash payment obligations in connection with the peaks program and the cuso program . based on various assumptions , including the historical and projected performance and collection of the peaks trust student loans , we believe that we will make payments under the peaks guarantee of approximately : $ 11.7 million in 2016 ; $ 0.1 million in 2017 ; and $ 9.7 million in 2020. based on various assumptions , including the historical and projected performance and collections of the cuso student loans , we believe that we will make payments under the cuso rsa of approximately : $ 16.0 million in 2016 , which includes , pursuant to the sixth amendment to cuso rsa , $ 6.1 million of regular payments that were due from june 2015 through december 2015 that we deferred to january 2016 , offset by $ 0.8 million of recoveries of charged-off loans in 2015 owed to us and $ 1.0 million of recoveries estimated to be owed to us in 2016 ; $ 13.0 million in 2017 , which is net of $ 1.0 million of recoveries estimated to be owed to us in 2017 ; $ 13.4 million in 2018 , which is net of $ 1.0 million of recoveries estimated to be owed to us in 2018 ; and approximately $ 97.0 million in the aggregate in 2019 and later years . our estimates of the future payment amounts under the cuso rsa and the timing of those payments assume , among other factors , that we do not make any discharge payments in 2016 or future years , based on the uncertainty related to the amount of future operating cash flows that will be available to us to make discharge payments . if we do make discharge payments in any future years , the effect of those discharge payments will be to reduce the total amount of our projected future payments under the cuso rsa . the estimated amount of future payments under the cuso rsa assumes that an offset that we made in 2013 of certain payment obligations under the cuso rsa against the cuso 's obligations owed to us under the revolving note will not be determined to have been improper . see note 15 commitments and contingencies of the notes to consolidated financial statements for a further discussion of that offset . story_separator_special_tag the following tables set forth selected data from our statements of operations for the years ended : december 31 , 2015 , regarding : the core operations on a stand-alone basis ; the peaks trust on a stand-alone basis ; the cuso on a stand-alone basis ; and the core operations , the cuso and the peaks trust consolidated in accordance with gaap ; and december 31 , 2014 , regarding : the core operations on a stand-alone basis ; the peaks trust on a stand-alone basis ; the cuso on a stand-alone basis ; the elimination of transactions between the cuso and core operations as a result of the cuso consolidation ; and the core operations , the peaks trust and the cuso consolidated in accordance with gaap ; and december 31 , 2013 , regarding : the core operations on a stand-alone basis ; the peaks trust on a stand-alone basis ; the elimination of transactions between the peaks trust and core operations as a result of the peaks consolidation ; and the core operations and the peaks trust consolidated in accordance with gaap . -48- the information presented related to 2015 , 2014 and 2013 also constitutes the reconciliation of our non-gaap core operations , peaks trust and cuso data to the related gaap consolidated financial measures . following the tables , we describe the effect of the peaks consolidation and the cuso consolidation , as applicable , on the financial statement information presented , including the components attributable to the core operations , the peaks trust and the cuso . certain reclassifications have been made to the presentation of the selected data in the following tables for the year ended december 31 , 2013 to conform to the current year presentation . replace_table_token_9_th replace_table_token_10_th -49- replace_table_token_11_th the peaks consolidation and the cuso consolidation impact the presentation of our statements of operations in a number of ways . following the applicable consolidation , our revenue consists of : revenue from the core operations , primarily from tuition , tool kit sales and student fees ; student loan interest income on the peaks trust student loans and the cuso student loans ( collectively , the private education loans ) , which is the accretion of the accretable yield on the private education loans ; and administrative fees earned by the cuso . following the applicable consolidation , our student services and administrative expenses are comprised of : expenses related to the core operations , including marketing expenses , an expense for uncollectible accounts and administrative expenses incurred primarily at our corporate headquarters ; and expenses incurred by the peaks trust and the cuso , primarily related to fees for servicing the private education loans and various other administrative fees and expenses of the peaks trust and the cuso . the loss related to loan program guarantees represents : in 2013 , the contingent liability accruals that we recorded related to the cuso rsa , because the contingent liability related to the peaks guarantee was eliminated from our consolidated financial statements as a result of the peaks consolidation ( though our obligations under the peaks guarantee remain in effect ) ; and in 2014 , the contingent liability accruals that we recorded related to the cuso rsa prior to september 30 , 2014 , because after that date , the contingent liability related to the cuso rsa was eliminated from our consolidated financial statements as a result of the cuso consolidation ( though our obligations under the cuso rsa remain in effect ) . following the applicable consolidation , our provision for private education loan losses in a reporting period represents the increase in the allowance for loan losses that occurred during that period . the allowance for loan losses is the difference between the carrying value and the total present value of the expected principal and interest collections of each loan pool of the private education loans , discounted by the loan pool 's effective interest rate as of december 31 , 2015 , 2014 or 2013 , as applicable . in the year ended december 31 , 2014 , we recognized a gain upon the cuso consolidation that represented the difference between ( i ) the fair value of the net liabilities of the cuso that we recorded upon the cuso consolidation , and ( ii ) the carrying value of the net liabilities related to the cuso program that had been recorded in our consolidated financial statements and were eliminated upon the cuso consolidation , in each case as of september 30 , 2014. in the year ended december 31 , 2013 , we recognized a loss upon the peaks consolidation that represented the amount by which the fair value of the peaks trust 's liabilities exceeded the fair -50- value of the peaks trust 's assets as of february 28 , 2013 , partially reduced by the net amount of the carrying value of the assets and liabilities related to the peaks program that had been recorded in our consolidated financial statements as of february 28 , 2013 and were eliminated upon the peaks consolidation . following the applicable consolidation , our interest expense includes : interest expense from matters related to the core operations , primarily the interest expense on the outstanding balance under the amended credit agreement ( prior to december 4 , 2014 ) and the financing agreement ( on and after december 4 , 2014 ) ; interest expense on the peaks senior debt , which includes the contractual interest obligation and the accretion of the discount on the peaks senior debt ; and interest expense on the cuso secured borrowing obligation , which includes the amount of interest expense on the cuso student loans that is accrued for payment to the owners of the cuso and the accretion of the discount of the adjustment associated with accounting for the cuso secured borrowing obligation at fair value upon the cuso consolidation .
| results of operations the following table sets forth the percentage relationship of certain statement of operations data to revenue for the periods indicated : replace_table_token_14_th the following table sets forth our total student enrollment in education programs as of the dates indicated : replace_table_token_15_th -53- ( 1 ) amount reflects the revised definition of a new student that was effective beginning in the quarter ended september 2015 , as described below and resulted in approximately 340 fewer students being included in this total student enrollment number than would have been included using the previous definition of new student . total student enrollment in education programs includes all new and continuing students . a continuing student is any student who , in the academic term being measured , is enrolled in an education program at one of our campuses and was enrolled in the same program at any of our campuses at the end of the immediately preceding academic term . a new student is any student who , in the academic term being measured , enrolls in and begins attending any education program at one of our campuses : for the first time at that campus ; after graduating in a prior academic term from a different education program at that campus ; or after having withdrawn or been terminated from an education program at that campus . beginning in the three months ended september 30 , 2015 , we revised our definition of a new student to include any student who ( 1 ) met the above criteria , and ( 2 ) if the student was a first-time student and was enrolled in an online degree program , continued to attend their program of study beyond the first 15 days of the program 's term ( or 30 days , if the student was only enrolled in courses that are taught over a 12-week period ) .
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company contributions to this plan included in expense totaled $ 513 thousand , $ 430 thousand , and $ 501 thousand for 2012 , 2011 , and 2010 , respectively . the expense increased in 2012 when compared to 2011 because there were larger forfeitures available to reduce 401 ( k ) costs during 2011. note 13. stock-based compensation as of december 31 , 2012 , the company maintained the shore bancshares , inc. 2006 stock and incentive compensation plan ( “ 2006 equity plan ” ) under which shore bancshares , inc. may issue shares of its common stock or grant other equity-based awards . shore bancshares , inc. 's ability to grant options under the shore bancshares , inc. 1998 stock option plan ( the “ 1998 option plan ” ) expired on march 3 , 2008 and all story_separator_special_tag the following discussion compares the company 's financial condition at december 31 , 2012 to its financial condition at december 31 , 2011 and the results of operations for the years ended december 31 , 2012 , 2011 , and 2010. this discussion should be read in conjunction with the consolidated financial statements and the notes thereto appearing in item 8 of part ii of this annual report . performance overview the company recorded a net loss of $ 9.6 million in 2012 , compared to a net loss of $ 897 thousand for 2011 and a net loss of $ 1.7 million for 2010. the basic and diluted loss per common share was $ 1.14 , $ 0.11 and $ 0.20 for 2012 , 2011 and 2010 , respectively . when comparing 2012 to 2011 , the principal factors for the difference in results were an $ 8.3 million increase in the provision for credit losses , a $ 4.4 million decline in net interest income and a $ 1.3 million loss incurred to terminate the ineffective portion of a cash flow hedge . during 2012 , the slow economic recovery on the delmarva peninsula continued to negatively impact our loan portfolio performance and our overall financial performance . for 2011 , the main contributors to the lower net loss when compared to 2010 were a $ 1.7 million decrease in goodwill and other intangible assets impairment charges and a $ 1.6 million decrease in the provision for credit losses , which were partially offset by a decline in net interest income of $ 2.9 million . return on average assets was ( 0.82 ) % for 2012 , compared to ( 0.08 ) % for 2011 and ( 0.15 ) % for 2010. return on average stockholders ' equity for 2012 was ( 8.07 ) % , compared to ( 0.74 ) % for 2011 and ( 1.33 ) % for 2010. average assets were $ 1.172 billion for 2012 , a 2.9 % increase when compared to 2011. average loans decreased 6.8 % to $ 814.2 million while average earning assets increased 2.7 % to $ 1.098 billion . average deposits increased 3.7 % to $ 1.029 billion while average stockholders ' equity decreased 1.8 % to $ 119.4 million for 2012. comparing 2011 to 2010 , average assets increased less than 1.0 % , average loans decreased 3.7 % , and average earning assets remained relatively unchanged . average deposits increased 1.2 % while average stockholders ' equity decreased 3.3 % for 2011. critical accounting policies the company 's consolidated financial statements are prepared in accordance with accounting principles generally accepted in the united states of america and follow general practices within the industries in which it operates . application of these principles requires management to make estimates , assumptions , and judgments that affect the amounts reported in the financial statements and accompanying notes . these estimates , assumptions , and judgments are based on information available as of the date of the financial statements ; accordingly , as this information changes , the financial statements could reflect different estimates , assumptions , and judgments . certain policies inherently have a greater reliance on the use of estimates , assumptions , and judgments and as such have a greater possibility of producing results that could be materially different than originally reported . estimates , assumptions , and judgments are necessary when assets and liabilities are required to be recorded at fair value , when a decline in the value of an asset not carried on the financial statements at fair value warrants an impairment write-down or valuation reserve to be established , or when an asset or liability needs to be recorded contingent upon a future event . carrying assets and liabilities at fair value inherently results in more financial statement volatility . the fair values and the information used to record valuation adjustments for certain assets and liabilities are based on quoted market prices , collateral value or are provided by other third-party sources , when available . the most significant accounting policies that the company follows are presented in note 1 to the consolidated financial statements . these policies , along with the disclosures presented in the notes to the financial statements and in this discussion , provide information on how significant assets and liabilities are valued in the financial statements and how those values are determined . based on the valuation techniques used and the sensitivity of financial statement amounts to the methods , assumptions , and estimates underlying those amounts , management has determined that the accounting policy with respect to the allowance for credit losses to be the accounting area that requires the most subjective or complex judgments , and , as such , could be most subject to revision as new information becomes available . accordingly , the allowance for credit losses is considered to be a critical accounting policy , along with goodwill and other intangible assets and fair value , as discussed below . the allowance for credit losses represents management 's estimate of credit losses inherent in the loan portfolio as of the balance sheet date . story_separator_special_tag the lower money market deposit account balances will reduce our excess liquidity and the lower related interest expense is expected to benefit the net interest margin going forward . the effects of these transactions are expected to impact the company 's financial results beginning in the first quarter of 2013. see the discussion below relating to interest expense and note 20 in the notes to consolidated financial statements for additional information . 27 the following table sets forth the major components of net interest income , on a tax-equivalent basis , for the years ended december 31 , 2012 , 2011 , and 2010. replace_table_token_10_th ( 1 ) all amounts are reported on a tax-equivalent basis computed using the statutory federal income tax rate of 34.0 % , exclusive of the alternative minimum tax rate and nondeductible interest expense . the tax-equivalent adjustment amounts used in the above table to compute yields aggregated $ 163 thousand in 2012 , $ 219 thousand in 2011 and $ 265 thousand in 2010 . ( 2 ) average loan balances include nonaccrual loans . ( 3 ) interest income on loans includes amortized loan fees , net of costs , and all are included in the yield calculations . ( 4 ) interest on money market and savings deposits includes an adjustment to expense related to interest rate caps and the hedged deposits from the promontory insured network deposits program associated with them . this adjustment increased interest expense by $ 2.0 million for 2012 , $ 1.3 million for 2011 and $ 429 thousand for 2010. on a tax-equivalent basis , total interest income was $ 46.1 million for 2012 , compared to $ 51.1 million for 2011 and $ 55.7 million for 2010. the decline in interest income for both 2012 and 2011 was primarily due to loan activity . during 2012 and 2011 , average loans decreased $ 59.0 million and $ 33.6 million , respectively , and the yield earned on loans decreased 20 and 29 basis points , respectively . excluding average nonaccrual loans , the yield on loans would have been 5.57 % , 5.78 % and 5.97 % for 2012 , 2011 , and 2010 , respectively . the changes in all other average earning assets included an increase in interest-bearing deposits with other banks of $ 76.9 million and an increase of four basis points in the related yield , which increased interest income $ 181 thousand . beginning in 2011 and continuing in 2012 , the investment of excess cash from customers ' deposits shifted from federal funds sold to interest-bearing deposits in other banks , primarily with the federal reserve bank , to take advantage of higher yields on these deposits . while taxable investment securities increased $ 25.6 million , the related yield declined 69 basis points , which reduced interest income by $ 216 thousand . the yield on taxable investment securities decreased because the reinvestment rates on investment securities purchased during 2012 were lower than the yields on the investment securities that matured during the period . the remaining earning assets , federal funds sold and tax-exempt investment securities , declined $ 13.6 million and $ 1.5 million , respectively . the yield on tax-exempt securities increased six basis points while the yield on federal funds sold remained the same . the changes in the balances and yields of these earning assets reduced interest income a combined $ 92 thousand . 28 similarly for 2011 , average interest-bearing deposits and taxable investment securities increased $ 44.4 million and $ 7.9 million , respectively , and the yield on interest-bearing deposits increased four basis points while the yield on taxable securities decreased 39 basis points . the changes in the balances and yields of interest-bearing deposits increased interest income $ 75 thousand while the changes in taxable securities reduced interest income $ 178 thousand when compared to 2010. federal funds sold and tax-exempt investment securities declined $ 16.0 million and $ 1.6 million , respectively , and the yields on these assets declined five and 10 basis points , respectively , which reduced interest income by a combined $ 122 thousand . as a percentage of total average earning assets , loans , investment securities , federal funds sold and interest-bearing deposits were 74.2 % , 12.5 % , 0.9 % and 12.4 % , respectively , for 2012. the comparable percentages were 81.7 % , 10.6 % , 2.2 % , and 5.5 % , respectively , for 2011 and 84.9 % , 10.0 % , 3.7 % and 1.4 % , respectively , for 2010. when comparing 2012 to 2011 , the overall decrease in yields on and average balances of earning assets both produced $ 2.5 million less in interest income , as seen in the rate/volume variance analysis below . in 2011 , the overall decrease in yields on earning assets produced $ 3.0 million less in interest income and the decrease in average balances of earning assets produced $ 1.7 million less in interest income . interest expense was $ 10.6 million for 2012 , compared to $ 11.1 million for 2011 and $ 12.8 million for 2010. the decline in interest expense for both 2012 and 2011 was primarily due to lower expense on time deposits partially offset by higher expense on money market and savings accounts . interest expense on time deposits ( certificates of deposit of $ 100,000 or more and other time deposits ) declined $ 1.1 million when compared to 2011 due to a decrease of $ 7.5 million in average time deposits and a decrease of 23 basis points on rates paid on these deposits . the decrease in average time deposits reflected a decrease in the company 's liquidity needs and the lower rates reflected current market conditions . during 2012 , average interest-bearing demand deposits and money market and savings deposits increased $ 28.4 million , offsetting the decline in average time deposits .
| review of financial condition asset and liability composition , capital resources , asset quality , market risk , interest sensitivity and liquidity are all factors that affect our financial condition . assets total assets increased 2.4 % from $ 1.158 billion at december 31 , 2011 to $ 1.186 billion at december 31 , 2012. total assets increased 2.5 % from the end of 2010 to the end of 2011. average total assets were $ 1.172 billion , $ 1.140 billion and $ 1.137 billion for 2012 , 2011 and 2010 , respectively . the loan portfolio is the primary source of our income , and it represented 74.2 % , 81.7 % and 84.9 % of average earning assets for 2012 , 2011 and 2010 , respectively . 31 funding for loans is provided primarily by core deposits . additional funding is obtained through short-term and long-term borrowings . average total deposits increased 3.7 % to $ 1.029 billion at december 31 , 2012 , compared to a 1.2 % increase for 2011. deposits provided funding for approximately 93.7 % , 92.8 % and 91.8 % of average earning assets for 2012 , 2011 and 2010 , respectively . the following table sets forth the average balance of the components of average earning assets as a percentage of total average earning assets for the year ended december 31. replace_table_token_14_th interest-bearing deposits with other banks and federal funds sold we invest excess cash balances ( i.e . , the excess cash remaining after funding loans and investing in securities with deposits and borrowings ) in interest-bearing accounts and federal funds sold offered by our correspondent banks . these liquid investments are maintained at a level that management believes is necessary to meet current liquidity needs .
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such amounts were included in `` impairment of long-lived assets `` in the consolidated statement of operations ( note 8 ) . additionally , we recorded a long-lived asset impairment charge for our discontinued industrial solutions division of $ 26.4 million in `` loss from discontinued operations , net of income taxes `` in the consolidated statements of operations for the year ended december 31 , 2014 ( note 21 ) . asset retirement obligations we record the fair value of estimated asset retirement obligations ( `` aros `` ) associated with tangible long-lived story_separator_special_tag this management 's discussion and analysis of financial condition and results of operations should be read in conjunction with our consolidated financial statements , and the notes and schedules related thereto , which are included in this annual report . company overview nuverra environmental solutions , inc. is among the largest companies in the united states dedicated to providing comprehensive , full-cycle environmental solutions to customers focused on the development and ongoing production of oil and natural gas from shale formations . nuverra 's strategy is to provide one-stop , total environmental solutions , including delivery , collection , treatment , recycling , and disposal of water , wastewater , waste fluids , hydrocarbons , and restricted solids that are part of the drilling , completion , and ongoing production of shale oil and natural gas . we operate in shale basins where customer exploration and production ( “ e & p ” ) activities are predominantly focused on shale oil and natural gas as follows : oil shale areas : includes our operations in the bakken , eagle ford , mississippian and tuscaloosa marine ( both of which we substantially exited during the three months ended march 31 , 2015 ) and permian basin shale areas . natural gas shale areas : includes our operations in the marcellus , utica , haynesville and barnett ( which we substantially exited during the three months ended march 31 , 2014 ) shale areas . nuverra supports its customers ' demand for diverse , comprehensive and regulatory compliant environmental solutions required for the safe and efficient drilling , completion and production of oil and natural gas from shale formations . current services , as well as prospective services in which nuverra has made investments , include ( i ) fluid logistics via water procurement , delivery , collection , storage , treatment , recycling and disposal , ( ii ) solid drilling waste collection , treatment , recycling and disposal , ( iii ) permanent and portable pipeline facilities , water infrastructure services and equipment rental services , and ( iv ) other ancillary services for e & p companies focused on the extraction of oil and natural gas resources . to meet our customers ' environmental needs , nuverra utilizes a broad array of assets to provide comprehensive environmental solutions . our logistics assets include trucks and trailers , temporary and permanent pipelines , temporary and permanent storage facilities , ancillary rental equipment , treatment facilities , and liquid and solid waste disposal sites . we continue to expand our suite of solutions to customers who demand environmental compliance and accountability from their service providers . as a result of our historical acquisition activity to expand our presence in existing shale basins , access new markets and to expand the breadth and scope of services we provide , we have accumulated a large level of indebtedness . due to the continued decline in oil and natural gas prices , and the resulting decrease in drilling and completion activities , there is lower demand for our services . the decrease in demand for our services , which we expect to continue into 2016 , impacts our overall liquidity and our ability to generate sufficient cash to meet our debt obligations and operating needs . trends affecting our operating results our results are driven by demand for our services , which are in turn affected by e & p spending trends in the shale areas in which we operate , in particular the level of drilling activity ( which impacts the amount of environmental waste products being managed ) and active wells ( which impacts the amount of produced water being managed ) . in general , drilling activity in the oil and natural gas industry is affected by the market prices ( or anticipated prices ) for those commodities . persistent low natural gas prices have resulted in reduced drilling activity in “ dry ” gas shale areas such as the haynesville and marcellus shale areas where natural gas is the predominant natural resource . in addition , the low natural gas prices have in the past caused many natural gas producers to curtail capital budgets and these cuts in spending curtailed drilling programs , as well as discretionary spending on well services in certain shale areas , and accordingly reduced demand for our services in these areas . drilling and completion activities in the oil and `` wet '' gas basins such as the eagle ford , permian basin , utica and bakken shale areas experienced a dramatic decline in oil prices that began in the fourth quarter of 2014 , which substantially reduced drilling and completion activity in these areas . accordingly , our customer base reduced their capital programs and drilling and completion activity levels for 2015. we anticipate that the decrease in demand for our services will continue into 2016. our results are also driven by a number of other factors , including ( i ) our available inventory of equipment , which we have built through acquisitions and capital expenditures over the past several years , ( ii ) transportation costs , which are affected by fuel 36 costs , ( iii ) utilization rates for our equipment , which are also affected by the level of our customers ' drilling and production activities and competition , and our ability to relocate our equipment to areas in which oil and natural gas exploration and production activities are growing , ( iv ) the availability of qualified drivers ( story_separator_special_tag as part of the second step , we determined that for the rocky mountain reporting unit , the carrying value of the goodwill ( or $ 104.7 million ) exceeded the implied fair value of the reporting unit goodwill ( or $ 0 ) . accordingly , during the three months ended september 30 , 2015 , we recognized an impairment charge of $ 104.7 million related to our rocky mountain division , thereby eliminating all remaining goodwill . this impairment charge is shown as `` impairment of goodwill '' in the consolidated statement of operations . during the three months ended december 31 , 2015 , due to the continued decline in activities in all basins as a result of further decreasing oil prices , we determined it was no longer cost effective to move the remaining equipment still located in the mississippian ( or `` midcon '' ) basin ( which we exited during the three months ended march 31 , 2015 ) to other basins as originally planned . additionally , based upon current market re-sale prices , we determined that we should keep the remaining equipment for future use in other basins when activities increase rather than sell these assets . based upon these facts , we determined that the midcon basin should be a separate asset group for purposes of reviewing our long-lived assets for impairment during the three months ended december 31 , 2015. as of december 31 , 2015 , we have total long-lived assets of $ 423.1 million that remain subject to impairment . continued drops in oil and natural gas prices and rig counts , combined with lower revenues than expected would likely result in further asset impairments . our impairment review of our long-lived assets during the three months ended december 31 , 2015 , concluded that the undiscounted cash flows for all asset groups other than than the midcon basin were greater than the carrying amount , thus additional impairment analyses were not required . for the midcon basin , which did not pass the recoverability test , the asset group 's fair value was compared to the carrying amount . as the asset group 's fair value was less than the carrying amount , an impairment charge of $ 5.9 million was recorded for the amount by which the carrying amount exceeded the fair value . this impairment charge was recorded to `` other , net '' in the consolidated statement of operations as part of restructuring expenses related to the exit of the midcon shale area ( note 9 ) . if reduced customer activity levels continue to result in decreased demand for our services for a prolonged period of time , or if we otherwise make further downward adjustments to our projections , our actual cash flows could be less than our estimated cash flows , which could result in future impairment charges for long-lived assets . during the year ended december 31 , 2014 , we recognized total impairment charges of $ 416.4 million . during the three months ended september 30 , 2014 , in coordination with our annual goodwill impairment test , we recognized a goodwill impairment charge of $ 100.7 million ( $ 66.9 million in the southern division and $ 33.8 million in the northeast division ) , which is included in `` impairment of goodwill '' in our consolidated statement of operations . during the three months ended december 31 , 2014 , due to the continued significant decline in oil and natural gas prices and the market condition of our common stock , we recognized an impairment charge of $ 112.4 million related to the customer relationship intangible asset in the rocky mountain division which is reported in `` impairment of long-lived assets '' in our consolidated statement of operations . additionally during the three months ended december 31 , 2014 , we recognized a goodwill impairment charge for the rocky mountain division of $ 203.3 million , which was included in `` impairment of goodwill '' in the our consolidated statement of operations . during the year ended december 31 , 2013 , we recognized long-lived asset impairment charges totaling $ 111.9 million for write-downs to the carrying values of our freshwater pipeline in the haynesville shale basin of $ 27.0 million and certain other long-lived assets including customer relationships and disposal permit intangibles totaling $ 4.5 million and disposal wells and equipment of $ 80.4 million in the haynesville , eagle ford , tuscaloosa marine and barnett shale basins , which is characterized as `` impairment of long-lived assets '' in the consolidated statement of operations . 38 story_separator_special_tag the unamortized deferred financing costs associated with our previous amended revolving credit facility of approximately $ 3.2 million during the year ended december 31 , 2014. income taxes the income tax benefit for the year ended december 31 , 2015 was $ 0.1 million ( a 0.0 % effective rate ) compared to $ 12.5 million ( effective rate of 2.7 % ) in the prior year . the lower effective tax benefit rate in 2015 is primarily the result of the tax impact of the impairment of goodwill and an increased valuation allowance related to deferred tax assets . we have significant deferred tax assets , consisting primarily of net operating losses ( “ nols ” ) , which have a limited life , generally expiring between the years 2029 and 2035 and capital losses , which have a five year carryforward expiring in 2020. management regularly assesses the available positive and negative evidence to estimate if sufficient future taxable income will be generated to use the existing deferred tax assets . a significant piece of objective negative evidence evaluated was the cumulative losses incurred this year and in recent years . such objective evidence limits the ability to consider other subjective evidence such as our projections for future taxable income .
| results of operations year ended december 31 , 2015 compared to the year ended december 31 , 2014 the following table sets forth for each of the periods indicated our statements of operations data and expresses revenue and expense data as a percentage of total revenues for the periods presented ( dollars in thousands ) : replace_table_token_6_th non-rental revenue non-rental revenue consists of fees charged to customers for the sale and transportation of fresh water and saltwater by our fleet of logistics assets and or through water midstream assets owned by us to customer sites for use in drilling and completion activities and from customer sites to remove and dispose of flowback and produced water originating from oil and natural gas wells . non-rental revenue also includes fees for solids management services . non-rental revenue for the year ended december 31 , 2015 was $ 327.7 million , down $ 135.8 million , or 29.3 % , from $ 463.4 million for the year ended december 31 , 2014 . in the rocky mountain division , lower drilling and completion activities during the year , as well as pricing pressures , led to lower non-rental revenue as compared to the prior year . lower non-rental revenue in the southern division was driven by our exit from the mississippian shale area and tuscaloosa marine shale logistics business , pricing pressures and overall reduced drilling and completion activities .
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risk factors ” , “ item 2. properties ” , “ item 6. selected financial data , ” and “ item 8. financial statements and supplementary data , ” respectively , included in this annual report on form 10-k. cautionary statement for the purpose of safe harbor provisions of the private securities litigation reform act of 1995 this annual report on form 10-k contains certain “ forward-looking statements , ” as defined in the private securities litigation reform act of 1995 ( “ pslra ” ) , of expected future developments that involve risks and uncertainties . you can identify forward-looking statements because they contain words such as “ believes , ” “ expects , ” “ may , ” “ should , ” “ seeks , ” “ approximately , ” “ intends , ” “ plans , ” “ estimates , ” “ anticipates ” or similar expressions that relate to our strategy , plans or intentions . all statements we make relating to our estimated and projected earnings , margins , costs , expenditures , cash flows , growth rates and financial results or to our strategies , objectives , intentions , resources and expectations regarding future industry trends are forward-looking statements made under the safe harbor of the pslra except to the extent such statements relate to the operations of a partnership or limited liability company . in addition , we , through our senior management , from time to time make forward-looking public statements concerning our expected future operations and performance and other developments . these forward-looking statements are subject to risks and uncertainties that may change at any time , and , therefore , our actual results may differ materially from those that we expected . we derive many of our forward-looking statements from our operating budgets and forecasts , which are based upon many detailed assumptions . while we believe that our assumptions are reasonable , we caution that it is very difficult to predict the impact of known factors , and , of course , it is impossible for us to anticipate all factors that could affect our actual results . important factors that could cause actual results to differ materially from our expectations , which we refer to as “ cautionary statements , ” are disclosed under “ item 1a . risk factors , ” and “ item 7. management 's discussion and analysis of financial condition and results of operations ” and elsewhere in this annual report on form 10-k. all forward-looking information in this annual report on form 10-k and subsequent written and oral forward-looking statements attributable to us , or persons acting on our behalf , are expressly qualified in their entirety by the cautionary statements . some of the factors that we believe could affect our results include : supply , demand , prices and other market conditions for our products , including volatility in commodity prices ; the effects of competition in our markets ; changes in currency exchange rates , interest rates and capital costs ; adverse developments in our relationship with both our key employees and unionized employees ; our ability to operate our businesses efficiently , manage capital expenditures and costs ( including general and administrative expenses ) and generate earnings and cash flow ; o ur indebtedness ; our expectations and timing with respect to our acquisition activity and whether such acquisitions are accretive or dilutive to shareholders ; our expectations with respect to our capital improvement and turnaround projects ; our supply and inventory intermediation arrangements expose us to counterparty credit and performance risk ; termination of our inventory intermediation agreements with j. aron , which could have a material adverse effect on our liquidity , as we would be required to finance our intermediate and refined products inventory covered by the agreements . additionally , we are obligated to repurchase from j. aron certain intermediates and finished products located at the paulsboro and delaware city refineries ' storage tanks upon termination of these agreements ; restrictive covenants in our indebtedness that may adversely affect our operational flexibility ; payments by pbf energy to the current and former holders of pbf llc series a units and pbf llc series b units under pbf energy 's tax receivable agreement for certain tax benefits we may claim ; our assumptions regarding payments arising under pbf energy 's tax receivable agreement and other arrangements relating to our organizational structure are subject to change due to various factors , including , among other factors , the timing of exchanges of pbf llc series a units for shares of pbf energy class a common stock as contemplated 64 by the tax receivable agreement , the price of pbf energy class a common stock at the time of such exchanges , the extent to which such exchanges are taxable , and the amount and timing of our income ; the impact of disruptions to crude or feedstock supply to any of our refineries , including disruptions due to problems at pbfx or with third-party logistics infrastructure or operations , including pipeline , marine and rail transportation ; the possibility that we might reduce or not make further dividend payments ; the inability of our subsidiaries to freely pay dividends or make distributions to us ; the impact of current and future laws , rulings and governmental regulations , including the implementation of rules and regulations regarding transportation of crude oil by rail ; the impact of the newly enacted federal income tax legislation on our business ; the effectiveness of our crude oil sourcing strategies , including our crude by rail strategy and related commitments ; adverse impact related to regulation by the federal government lifting the restrictions on exporting u.s. crude oil ; adverse impacts from changes in our regulatory environment , such as the effects of compliance with the california global warming solutions act ( also referred to as “ ab32 ” ) , or from actions taken by environmental interest groups ; market risks related to the volatility in the price of rins required to comply with the renewable fuel standards and story_separator_special_tag as of december 31 , 2018 , including the offerings described above , pbf energy owns 119,895,422 pbf llc series c units and our current and former executive officers and directors and certain employees and others beneficially own 1,206,325 pbf llc series a units , and the holders of our issued and outstanding shares of pbf energy class a common stock have 99.0 % of the voting power in us and the members of pbf llc other than pbf energy through their holdings of class b common stock have the remaining 1.0 % of the voting power in us . pbfx equity offerings on july 30 , 2018 , pbfx closed on a common unit purchase agreement with certain funds managed by tortoise capital advisors , l.l.c . providing for the issuance and sale in a registered direct offering ( the “ registered direct offering ” ) of an aggregate of 1,775,750 common units for net proceeds of approximately $ 34.8 million . on august 17 , 2016 , pbfx completed a public offering of an aggregate of 4,000,000 common units , and granted the underwriter an option to purchase an additional 600,000 common units , of which 375,000 units were subsequently purchased on september 14 , 2016 , for total net proceeds of $ 86.8 million , after deducting underwriting discounts and commissions and other offering expenses . 66 on april 5 , 2016 , pbfx completed a public offering of an aggregate of 2,875,000 common units , including 375,000 common units that were sold pursuant to the full exercise by the underwriter of its option to purchase additional common units , for net proceeds of $ 51.6 million , after deducting underwriting discounts and commissions and other offering expenses . as a result of the pbfx equity offerings , as of december 31 , 2018 , pbf llc held a 44.0 % limited partner interest in pbfx and owned all of pbfx 's idrs , with the remaining 56.0 % limited partner interest owned by public common unitholders . immediately following the closing of the idr restructuring , the idrs will be canceled and pbf llc will hold an approximately 54.1 % limited partner interest in pbfx . pbfx assets and transactions pbfx 's assets consist of various logistics assets ( as described in “ item 1. business ” ) . apart from certain third-party acquisitions , pbfx 's revenue is derived from long-term , fee-based commercial agreements with subsidiaries of pbf holding , which include minimum volume commitments , for receiving , handling , transferring and storing crude oil , refined products and natural gas . these transactions are eliminated by pbf energy and pbf llc in consolidation . since the inception of pbfx in 2014 , pbf llc and pbfx have entered into a series of drop-down transactions . such transactions and third-party acquisitions made by pbfx occurring in the three years ended december 31 , 2018 are discussed below . on july 16 , 2018 , pbfx entered into an agreement with crown point to purchase its wholly-owned subsidiary , cpi operations llc for total consideration of approximately $ 127.0 million , including working capital and the contingent consideration ( as defined in “ note 4 - acquisitions ” of our notes to consolidated financial statements ) , comprised of an initial payment at closing of $ 75.0 million with a remaining $ 32.0 million balance being payable one year after closing . the east coast storage assets acquisition closed on october 1 , 2018. on july 16 , 2018 , pbfx entered into the development assets contribution agreements between pbfx and pbf llc , pursuant to which pbfx acquired from pbf llc all of the issued and outstanding limited liability company interests of the development assets . the acquisition of the development assets closed on july 31 , 2018 for total consideration of $ 31.6 million consisting of 1,494,134 common units representing limited partner interests in pbfx , issued to pbf llc ( the “ development assets acquisition ” ) . on april 16 , 2018 , pbfx completed the purchase of knoxville terminals from cummins terminals , inc. for total cash consideration of $ 58.0 million , excluding working capital adjustments ( the “ knoxville terminals purchase ” ) . the transaction was financed through a combination of cash on hand and borrowings under the pbfx revolving credit facility . on february 15 , 2017 , we entered into the chalmette storage services agreement under which pbfx , through pbfx op co , assumed construction of the chalmette storage tank . the chalmette storage tank commenced operations in november 2017 upon completion of construction . on february 15 , 2017 , pbfx entered into the pngpc contribution agreement between pbfx and pbf llc , pursuant to which pbfx op co acquired from pbf llc all of the issued and outstanding limited liability company interests of pngpc . pngpc owns and operates an existing interstate natural gas pipeline . in august 2017 , pbfx op co completed the construction of a new pipeline which replaced the existing pipeline and commenced services . on august 31 , 2016 , pbfx acquired from pbf llc 50 % of the issued and outstanding limited liability company interests of tvpc , whose assets consist of the torrance valley pipeline . on april 29 , 2016 , pbfx 's wholly-owned subsidiary , pbf logistics products terminals llc , completed the purchase of the four refined products terminals in the greater philadelphia region ( the “ east coast terminals ” ) from an affiliate of plains all american pipeline , l.p. 67 pbf holding revolving credit facility on may 2 , 2018 , pbf holding and certain of its wholly-owned subsidiaries , as borrowers or subsidiary guarantors , replaced our existing asset-based revolving credit agreement dated as of august 15 , 2014 ( the “ august 2014 revolving credit agreement ” ) with the revolving credit facility .
| operating highlights replace_table_token_10_th ( 1 ) see non-gaap financial measures below . ( 2 ) we define heavy crude oil as crude oil with american petroleum institute ( api ) gravity less than 24 degrees . we define medium crude oil as crude oil with api gravity between 24 and 35 degrees . we define light crude oil as crude oil with api gravity higher than 35 degrees . 77 the table below summarizes certain market indicators relating to our operating results as reported by platts . replace_table_token_11_th 2018 compared to 2017 overview— net income for pbf energy was $ 175.3 million for the year ended december 31 , 2018 compared to net income of $ 483.4 million for the year ended december 31 , 2017 . pbf llc net income was $ 180.1 million for the year ended december 31 , 2018 compared to net income of $ 551.2 million for the year ended december 31 , 2017 . net income attributable to pbf energy stockholders was $ 128.3 million , or $ 1.10 per diluted share , for the year ended december 31 , 2018 ( $ 1.10 per share on a fully-exchanged , fully-diluted basis based on adjusted fully-converted net income , or $ 3.26 per share on a fully-exchanged , fully-diluted basis based on adjusted fully-converted net income excluding special items , as described below in non-gaap financial measures ) compared to net income attributable to pbf energy stockholders of $ 415.5 million , or $ 3.73 per diluted share , for the year ended december 31 , 2017 ( $ 3.73 per share on a fully-exchanged , fully-diluted basis based on adjusted fully-converted net income , or $ 1.14 per share on a fully-exchanged , fully-diluted basis based on adjusted fully-converted net income excluding special items , as described below in non-gaap financial measures ) .
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the value of the portion of the award that is ultimately expected to vest is recognized as an expense over the requisite service periods in the company 's consolidated statements of story_separator_special_tag the following discussion and analysis should be read in conjunction with “ part i. item 6. selected financial data ” and our consolidated financial statements and the related notes included elsewhere in this annual report . this discussion contains forward-looking statements that are based on our management 's current expectations , estimates and projections for our business , which are subject to a number of risks and uncertainties . our actual results may differ materially from those anticipated in these forward-looking statements as a result of many factors , including those set forth under “ special note regarding forward-looking statements and “ part i. item 1a . risk factors. ” overview we are an innovative medical device that derives revenue from selling the rewalk personal and rewalk rehabilitation exoskeleton devices that allow individuals with paraplegia the ability to stand and walk once again . since obtaining fda clearance in june 2014 we have continued to increase our focus on selling the personal device through third party payors in the u.s. and germany , and through distributors in other parts of the world . we expect to generate revenues from a combination of third-party payors , self-payors and institutions . while no uniform policy of coverage and reimbursement by third-party payors currently exists for electronic exoskeleton technologies such as rewalk , we plan to pursue various paths to obtain broad commercial and government reimbursement coverage . in december 2015 , the va issued a national policy for the evaluation , training and procurement of rewalk personal exoskeleton systems for all qualifying veterans across the united states . the va policy , is the first national coverage policy in the united states for qualifying individuals who have suffered spinal cord injury . additionally , to date several private insurers in the united states have provided reimbursement for rewalk in certain cases . for more information regarding reimbursement of our products , see “ part i. item 1. business—third party reimbursement and “ part i. item 1. business — other funding sources. ” we have incurred net losses and negative cash flows from operations since inception and anticipate this to continue in the near term . as previously announced , we have set a goal to reduce total operating expenses in 2017 by up to 30 % as compared to 2016. these reductions will be achieved through a combination of targeted savings , including the completion of specific projects focused on quality improvement initiatives and efforts to reduce overall product cost , a realignment of and reduction in staffing to match the company 's 2017 business goals , and a reduction in other corporate spending . the company plans to focus its resources mainly on reimbursement efforts , clinical studies to expand data on the effectiveness of the spinal cord injury products , field sales , service and training efforts for the rewalk system and the commercialization pathway for the stroke softsuit program . components of our statements of operations revenues we currently rely , and in the future will rely , on sales and rentals of our rewalk systems and related service contracts and extended warranties for our revenue . our revenue is generated from a combination of third-party payors , institutions and self-payors . payments for our products by third party payors have been made primarily through case-by-case determinations . third-party payors include , without limitation , private insurance plans and managed care programs , government programs including the us department of veterans affairs , worker 's compensation and medicare and medicaid . we expect that third-party payors will be an increasingly important source of revenue in the future . in december 2015 , the va issued a national policy for the evaluation , training and procurement of rewalk personal exoskeleton systems for all qualifying veterans across the united states . the va policy is the first national coverage policy in the united states for qualifying individuals who have suffered spinal cord injury . all of our rewalk systems are covered by a two-year warranty from the date of purchase , which is included in the purchase price . we offer customers the ability to purchase , any time during the initial warranty period , an extended warranty for up to three additional years . both warranties cover all elements of the rewalk system , including the batteries , other than normal wear and tear . revenues are presented net of the amounts of any provision we record for expected future product returns . 50 cost of revenues and gross profit ( loss ) cost of revenue consists primarily of systems purchased from our outsourced manufacturer , sanmina , salaries , personnel costs including non-cash share based compensation , associated with manufacturing and inventory management , training and inspection , warranty and service costs , shipping and handling and manufacturing startup and transition costs . prior to the first quarter of 2014 , when we completed the manufacturing transition to sanmina , cost of revenues also included costs of components , compensation related costs associated with manufacturing and costs to transition manufacturing to sanmina . cost of revenues also includes royalties and expenses related to royalty-bearing research and development grants and sales and marketing grants . in the future we expect our unit cost to decrease as our sales increase due to product cost improvements including economies of scale realized in connection with larger quantities and increased efficiency . our gross profit ( loss ) and gross margin as a percentage of sales is influenced by a number of factors , including primarily the volume and price of our products sold and fluctuations in our cost of revenues . story_separator_special_tag the repayment requirement is equal to the amount of the grant multiplied by an increasing contractual percentage in an amount up to 150 % . under the agreement ao & p is responsible for repayment of its grant . however , pursuant to the agreement , we are required to make any payments on which ao & p defaults . as of december 31 , 2015 and through december 31 , 2016 , there was no contingent liability to the bird foundation . in 2014 , we recorded an expense of $ 466,000 as a settlement for the prepayment , at a discount , of amounts due under the agreement . israel innovation authority ( formerly known as office of the chief scientist ) from our inception through december 31 , 2016 we have received a total of $ 740,000 in funding from the iia , $ 340,000 of which are royalty-bearing grants , while $ 400,000 were received in consideration for an investment in our preferred shares . out of the royalty-bearing grants received , we have paid royalties to the iia in the total amount of $ 50,000. we may apply to receive additional grants to support our research and development activities in 2017. the agreements with iia require us to pay royalties at a rate of 3 % to 3.5 % on sales of rewalk systems and related services up to the total amount of funding received , linked to the dollar and bearing interest at an annual rate of libor applicable to dollar deposits . if we transfer iia-supported technology or know-how outside of israel , we will be liable for additional payments to iia depending upon the value of the transferred technology or know-how , the amount of iia support , the time of completion of the iia-supported research project and other factors . as of december 31 , 2016 , the aggregate contingent liability to the iia was $ 300,000 . 52 story_separator_special_tag by $ 780 thousand , or 44 % . during 2015 our sales transitioned to focus on third party payors of our personal devices , compared to 2014 when initial demand from fda clearance in june 2014 drove a majority of self funded and donated personal device sales . gross profit ( loss ) our gross profit ( loss ) for 2015 and 2014 were as follows ( in thousands ) : replace_table_token_12_th gross profit was 6 % of revenue for the year 2015 , compared to gross loss of 16 % of revenue for the year 2014 . the increase in gross profit is driven by the manufacturing economies of scale which resulted from the completing of our process of transitioning all manufacturing to sanmina in the second half of 2014 , partially offset by costs associated with the transition of that manufacturing with respect to the rewalk personal 6.0 in 2015. additionally , in the fourth quarter of 2014 we incurred a one-time charge related to the early settlement , at a discount , of a royalty-bearing grant from the bird foundation in the amount of $ 466 thousand . research and development expenses , net our research and development expenses , net for 2015 and 2014 were as follows ( in thousands ) : replace_table_token_13_th research and development expenses , net , decreased $ 2.6 million , or 31 % , during 2015 compared to 2014 . the decrease in expenses is attributable to a one-time , non-cash , share-based compensation award to our founder at the time of our initial public offering in 2014 , which is offset by increased personnel and personnel-related costs related to regulatory , quality and research and development activities during 2015 . 55 sales and marketing expenses our sales and marketing expenses for 2015 and 2014 were as follows ( in thousands ) : replace_table_token_14_th sales and marketing expenses increased $ 5.7 million , or 77 % , during 2015 compared to 2014 . this increase is attributable to an increase in personnel and personnel-related costs and marketing and reimbursement related costs as we expanded commercialization of the rewalk personal and rehabilitation systems . general and administrative expenses our general and administrative expenses for 2015 and 2014 were as follows ( in thousands ) : replace_table_token_15_th general and administrative expenses increased $ 3.0 million , or 91 % , during 2015 compared to 2014 . the increase in expenses is primarily attributable to personnel and personnel-related costs , professional services and other expenses related to our being a publicly traded company for the first full year . financial expenses , net our financial expenses , net for 2015 and 2014 were as follows ( in thousands ) : replace_table_token_16_th financial expenses , net , decreased $ 1.5 million , or 89 % during 2015 compared to 2014 . this decrease is attributable mainly to the revaluation of the fair value of warrants to purchase preferred shares and the issuance of convertible preferred shares and warrants to purchase convertible preferred shares during 2014 . income tax our income tax for 2015 and 2014 were as follows ( in thousands ) : replace_table_token_17_th income taxes increased $ 8 thousand for the year ended december 31 , 2015 , compared to the year ended december 31 , 2014 . 56 critical accounting policies our consolidated financial statements are prepared in accordance with united states generally accepted accounting principles . the preparation of our financial statements requires us to make estimates , judgments and assumptions that can 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 . we base our estimates , judgments and assumptions on historical experience and other factors that we believe to be reasonable under the circumstances . materially different results can occur as circumstances change and additional information becomes known . besides the estimates identified above that are considered critical , we make many other accounting estimates in preparing our financial statements and related disclosures .
| results of operations year ended december 31 , 2016 compared to year ended december 31 , 2015 revenues our revenues for 2016 and 2015 were as follows ( dollars in thousands , except unit amounts ) replace_table_token_4_th revenues increased $ 2.1 million , or 57 % , during 2016 compared to 2015 explained by our increased sales of rewalk personal devices of $ 2.4 million , or 88 % , derived primarily from 22 rewalk personal devices placed with the va for use in the va 's clinical studies . this increase also reflects 51 positive reimbursement coverage decisions in 2016 compared to 23 in 2015. revenues from rewalk rehabilitation units decreased by $ 308 thousand , or 31 % during 2016 compared to 2015 , primarily driven by the personal market and third-party payors . in the future we expect our growth to be driven by sales of our rewalk personal device to third-party payors as we plan to focus our resources on reimbursement policies with third-party payors . gross profit ( loss ) our gross profit ( loss ) for 2016 and 2015 were as follows ( in thousands ) : replace_table_token_5_th gross profit was 13 % of revenue for 2016 , compared to gross profit of 6 % of revenue for 2015. the increase in gross profit was driven by the increase in units sales , as described in `` revenues '' above , partially offset by increased service costs and personnel and personnel-related costs . we expect our gross profit to gradually improve as we increase revenue and lower our unit manufacturing costs through specific cost reduction projects and economies of scale . research and development expenses , net our research and development expenses , net for 2016 and 2015 were as follows ( in thousands ) : replace_table_token_6_th research and development expenses , net , increased $ 3.1 million , or 52 % , during 2016 compared to 2015 .
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stock-based compensation expense in the tables above includes compensation for restricted shares of $ 515,000 , $ 406,000 and $ 296,000 for the years ended may 30 , 2015 , may 31 , 2014 and may 25 , 2013 , respectively . the company granted 49,840 , 34,632 and 34,622 shares of restricted stock for the years ended may 30 , 2015 , may 31 , 2014 and may 25 , 2013 , respectively . there were 35,390 and 23,441 restricted shares that vested in fiscal 2015 and 2014 , respectively . there were 97,938 , 84,379 and 73,708 unvested restricted shares as of may 30 , 2015 , may 31 , 2014 and may 25 , 2013 , respectively . at may 30 , 2015 , there was approximately $ 1.2 million of total unrecognized compensation cost related to restricted shares , which is expected to be recognized over a weighted-average period of 34 months . excess tax benefits related to stock-based compensation expense are recognized as an increase to additional paid-in capital and tax shortfalls are recognized as income tax expense unless there are excess tax benefits from previous equity awards to which it can be offset . on the adoption date of the required accounting for stock-based compensation expense , the company calculated the amount of eligible excess tax benefits available to offset future 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 . this discussion and analysis 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 certain factors including , but not limited to , those discussed in part i item 1a . risk factors. and elsewhere in this annual report on form 10-k. overview rgp is a multinational consulting firm that provides consulting and business initiative support services to its global client base in the areas of accounting ; finance ; corporate governance , risk and compliance management ; corporate advisory , strategic communications and restructuring ; information management ; human capital ; supply chain management ; healthcare solutions ; and legal and regulatory . we assist our clients with projects requiring specialized expertise in : finance and accounting services including process transformation and improvement ; financial reporting and analysis ; technical and operational accounting ; merger and acquisition due diligence ; audit response ; implementation of new accounting standards such as the new requirements for revenue recognition ; and remediation support ; information management services including strategy development ; program and project management ; business and technology integration ; data strategy , including data security and privacy ; and business performance management ; corporate advisory , strategic communications and restructuring services ; corporate governance , risk and compliance management services including contract and regulatory compliance efforts under , for example , the dodd-frank wall street reform and consumer protection act and the sarbanes oxley act of 2002 ( sarbanes ) ; enterprise risk management ; internal controls management ; and operation and it audits ; supply chain management services including supply chain strategy development ; procurement and supplier management ; logistics and materials management ; supply chain planning and forecasting ; and conflict minerals and unique device identification compliance ; human capital services including change management ; organization development and effectiveness ; and optimization of human resources technology and operations ; and legal and regulatory services with projects , secondments or tactical needs including commercial transactions ; compliance initiatives ; law department operations and business strategy ; and litigation support . we were founded in june 1996 by a team at deloitte , led by our chairman , donald b. murray , who was then a senior partner with deloitte . our founders created resources connection to capitalize on the increasing demand for high quality outsourced professional services . we operated as a part of deloitte until april 1999. in april 1999 , we completed a management-led buyout in partnership with several investors . in december 2000 , we completed our initial public offering of common stock and began trading on the nasdaq stock market . we currently trade on the nasdaq global select market . we operate under the acronym rgp , branding for our operating entity name of resources global professionals . we operated solely in the united states until fiscal year 2000 , when we opened our first three international offices and began to expand geographically to meet the demand for project consulting services across the world . as of may 30 , 2015 , we served clients from offices in 20 countries , including 23 international offices and 45 offices in the united states . our global footprint allows the company to support the global initiatives of our multinational client base . we expect to continue opportunistic domestic and multinational expansion while also investing in complementary professional services lines that we believe will augment our service offerings . we primarily charge our clients on an hourly basis for the professional services of our consultants . we recognize revenue once services have been rendered and invoice the majority of our clients in the united states on a weekly basis . some of our clients served by our international offices are billed on a monthly basis . our clients are contractually obligated to pay us for all hours 33 billed . to a much lesser extent , we also earn revenue if a client hires one of our consultants . this type of contractually non-refundable revenue is recognized at the time our client completes the hiring process and represented 0.5 % of our revenue for each of the years ended may 30 , 2015 , may 31 , 2014 and may 25 , 2013. we periodically review our outstanding accounts receivable balance and determine an estimate of the amount of those receivables we believe may prove uncollectible . our provision for bad debts , if any , is included in our selling , general and administrative expenses . story_separator_special_tag to a much lesser extent , we also earn revenue if a client hires one of our consultants . this type of contractually non-refundable revenue is recognized at the time our client completes the hiring process . stock-based compensation under our 2014 performance incentive plan , officers , employees , and outside directors have received or may receive grants of restricted stock , stock units , options to purchase common stock or other stock or stock-based awards . under our espp , eligible officers and employees may purchase our common stock in accordance with the terms of the plan . the company estimates a value for employee stock options on the date of grant using an option-pricing model . we have elected to use the black-scholes option-pricing model which takes into account assumptions regarding a number of highly complex and subjective variables . these variables include the expected stock price volatility over the term of the awards and actual and projected employee stock option exercise behaviors . additional variables to be considered are the expected term , expected dividends and the risk-free interest rate over the expected term of our employee stock options . in addition , because stock-based compensation expense recognized in the consolidated statements of operations is based on awards ultimately expected to vest , it is reduced for estimated forfeitures . forfeitures must be estimated at the time of grant and revised , if necessary , in subsequent periods if actual forfeitures differ from those estimates . forfeitures are estimated based on historical experience . if facts and circumstances change and we employ different assumptions in future periods , the compensation expense recorded may differ materially from the amount recorded in the current period . the company uses its historical volatility over the expected life of the stock option award to estimate the expected volatility of the price of its common stock . the risk-free interest rate assumption is based upon observed interest rates appropriate for the term of our employee stock options . the impact of expected dividends ( $ 0.08 per share for each quarter during fiscal 2015 and $ 0.07 per share for each quarter of fiscal 2014 ) is also incorporated in determining the estimated value per share of employee stock option grants . such dividends are subject to quarterly board of director approval . the company 's expected life of stock option grants is 5.5 years for non-officers and 7.5 years for officers . the company uses its historical volatility over the expected life of the stock option award to estimate the expected volatility of the price of its common stock . the company reviews the underlying assumptions related to stock-based compensation at least annually . we base our estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances , the results of which form the basis for making judgments about the carrying value of assets and liabilities . actual results may differ from these estimates under different assumptions or conditions . 35 results of operations the following tables set forth , for the periods indicated , our consolidated statements of operations data . these historical results are not necessarily indicative of future results . replace_table_token_7_th our operating results for the periods indicated are expressed as a percentage of revenue below . replace_table_token_8_th 36 we also assess the results of our operations using ebitda , adjusted ebitda and adjusted ebitda margin . ebitda is defined as our earnings before interest , taxes , depreciation and amortization . we define adjusted ebitda as ebitda plus stock-based compensation expense . adjusted ebitda margin is calculated by dividing adjusted ebitda by revenue . these measures assist management in assessing our core operating performance . the following table presents ebitda , adjusted ebitda and adjusted ebitda margin for the periods indicated and includes a reconciliation of such measures to net income , the most directly comparable gaap financial measure : replace_table_token_9_th the financial measures and key performance indicators we use to assess our financial and operating performance above are not defined by , or calculated in accordance with , gaap . a non-gaap financial measure is defined as a numerical measure of a company 's financial performance that ( i ) excludes amounts , or is subject to adjustments that have the effect of excluding amounts , that are included in the comparable measure calculated and presented in accordance with gaap in the consolidated statement of operations ; or ( ii ) includes amounts , or is subject to adjustments that have the effect of including amounts , that are excluded from the comparable measure so calculated and presented . ebitda , adjusted ebitda and adjusted ebitda margin are non-gaap financial measures . we believe that ebitda , adjusted ebitda and adjusted ebitda margin provide useful information to our investors because they are financial measures used by management to assess the core performance of the company . ebitda , adjusted ebitda and adjusted ebitda margin are not measurements of financial performance or liquidity under gaap and should not be considered in isolation or construed as substitutes for net income or other cash flow data prepared in accordance with gaap for purposes of analyzing our profitability or liquidity . these measures should be considered in addition to , and not as a substitute for , net income , earnings per share , cash flows or other measures of financial performance prepared in conformity with gaap .
| quarterly results the following table sets forth our unaudited quarterly consolidated statements of operations data for each of the eight quarters in the two-year period ended may 30 , 2015. in the opinion of management , this data has been prepared on a basis substantially consistent with our audited consolidated financial statements appearing elsewhere in this document , and includes all adjustments , consisting of normal recurring adjustments , necessary for a fair presentation of the data . the quarterly data should be read together with our consolidated financial statements and related notes appearing elsewhere in this document . the operating results are not necessarily indicative of the results to be expected in any future period . replace_table_token_12_th ( 1 ) the quarter ended may 31 , 2014 consists of fourteen weeks . all other quarters presented consist of thirteen weeks . ( 2 ) net income per common share calculations for each of the quarters were based upon the weighted average number of shares outstanding for each period , and the sum of the quarters may not necessarily be equal to the full year net income per common share amount . our quarterly results have fluctuated in the past and we believe they will continue to do so in the future . certain factors that could affect our quarterly operating results are described in part i item 1a . risk factors. due to these and other factors , we believe that quarter-to-quarter comparisons of our results of operations are not meaningful indicators of future performance . 43 liquidity and capital resources our primary source of liquidity is cash provided by our operations and , historically , to a lesser extent , stock option exercises .
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corporate overview con edison 's principal business operations are those of the utilities . con edison 's business operations also include those of the clean energy businesses and con edison transmission . see “ significant developments and outlook ” in the introduction to this report , “ the utilities , ” “ clean energy businesses ” and `` con edison transmission '' in item 1 , and segment financial information in note n to the financial statements in item 8. certain financial data of con edison 's businesses are presented below : replace_table_token_23_th ( a ) net income for common stock from the clean energy businesses for the year ended december 31 , 2019 includes $ ( 21 ) million of net after-tax mark-to-market losses and reflects $ 74 million ( after-tax ) of income attributable to the non-controlling interest of a tax equity investor in renewable electric production projects accounted for under the hlbv method of accounting . see note q to the financial statements in item 8 . ( b ) other includes parent company and consolidation adjustments . story_separator_special_tag style= '' vertical-align : top ; background-color : # e5e5e5 ; padding-left:12px ; padding-top:2px ; padding-bottom:2px ; padding-right:2px ; '' > depreciation , property taxes and other tax matters ( 0.54 ) ( 168 ) reflects higher property taxes of $ ( 0.26 ) a share and higher depreciation and amortization expense of $ ( 0.23 ) a share , both of which are recoverable under the rate plans , and the absence of new york state sales and use tax refunds received in 2018 of $ ( 0.07 ) a share , offset , in part , by lower sales and use tax of $ 0.02 a share , upon conclusion of the audit assessment . other ( 0.01 ) 59 reflects the dilutive effect of con edison 's stock issuances of $ ( 0.21 ) a share , offset , in part , by lower costs associated with components of pension and other postretirement benefits other than service cost of $ 0.19 a share . total cecony ( 0.04 ) 54 o & r ( a ) changes in rate plans 0.08 24 reflects an electric base rate increase , offset , in part , by a gas base rate decrease under the company 's rate plans , effective january 1 , 2019. operations and maintenance expenses ( 0.01 ) ( 3 ) reflects higher stock-based compensation . depreciation , property taxes and other tax matters ( 0.02 ) ( 6 ) reflects higher depreciation and amortization expense . other ( 0.03 ) ( 4 ) includes the dilutive effect of con edison 's stock issuances of $ ( 0.01 ) a share . total o & r 0.02 11 clean energy businesses operating revenues less energy costs 0.53 167 reflects higher revenues from renewable electric production projects resulting from the december 2018 acquisition of sempra solar holdings , llc , including the consolidation of certain jointly-owned projects that were previously accounted for as equity investments of $ 0.81 a share , offset , in part , by lower engineering , procurement and construction services revenues of $ ( 0.34 ) a share . operations and maintenance expenses 0.15 47 reflects lower engineering , procurement and construction costs of $ 0.19 a share and lower energy services costs of $ 0.04 a share , offset , in part , by higher costs associated with additional renewable electric production projects in operation resulting from the december 2018 acquisition of sempra solar holdings , llc . of $ ( 0.06 ) a share . depreciation and amortization ( 0.34 ) ( 105 ) reflects an increase in renewable electric production projects resulting from the december 2018 acquisition of sempra solar holdings , llc . net interest expense ( 0.29 ) ( 90 ) reflects an increase in debt resulting from the december 2018 acquisition of sempra solar holdings , llc . hlbv effects ( 0.22 ) ( 74 ) gain on acquisition of sempra solar holdings , llc , net of transaction costs in 2018 ( 0.28 ) ( 89 ) other ( 0.07 ) ( 19 ) reflects the absence in 2019 of equity income from certain jointly-owned projects that were accounted for as equity investments in 2018 but consolidated after the december 2018 acquisition of sempra solar holdings , llc . total clean energy businesses ( 0.52 ) ( 163 ) con edison transmission 0.01 5 reflects higher allowance for funds used during construction from the mountain valley pipeline project . other , including parent company expenses 0.19 54 reflects lower new york state capital tax of $ 0.02 a share . also reflects 2018 tcja re-measurement of $ 0.14 a share and transaction costs related to the acquisition of sempra solar holdings , llc of $ 0.02 a share . total reported ( gaap basis ) $ ( 0.34 ) $ ( 39 ) a. under the revenue decoupling mechanisms in the utilities ' new york electric and gas rate plans and the weather-normalization clause applicable to their gas businesses , revenues are generally not affected by changes in delivery volumes from levels assumed when rates were approved . in general , the utilities recover on a current basis the fuel , gas purchased for resale and purchased power costs they incur in supplying energy to their full-service customers . accordingly , such costs do not generally affect con edison 's results of operations . 52 con edison annual report 2019 variation for the years ended december 31 , 2018 vs. 2017 earnings per share net income for common stock ( millions of dollars ) cecony ( a ) changes in rate plans $ 0.84 $ 258 reflects primarily higher electric and gas net base revenues of $ 0.59 a share and $ 0.16 a share , respectively , and growth in the number of gas customers of $ 0.06 a share . electric and gas base rates increased in january 2018 in accordance with the company 's rate plans . story_separator_special_tag ( c ) other electric operating revenues generally reflect changes in the revenue decoupling mechanism current asset or regulatory liability and changes in regulatory assets and liabilities in accordance with other provisions of the company 's rate plan . ( d ) after adjusting for variations , primarily weather and billing days , electric delivery volumes in the company 's service area decreased 1.1 percent in 2019 compared with 2018 . operating revenues increased $ 91 million in 2019 compared with 2018 due primarily to an increase in revenues from the rate plan ( $ 215 million ) , including earnings adjustment mechanism incentives for energy efficiency ( $ 22 million ) , offset , in part , by lower purchased power expenses ( $ 69 million ) and fuel expenses ( $ 59 million ) . purchased power expenses decreased $ 69 million in 2019 compared with 2018 due to lower unit costs ( $ 199 million ) , offset , in part , by higher purchased volumes ( $ 130 million ) . 56 con edison annual report 2019 fuel expenses decreased $ 59 million in 2019 compared with 2018 due to lower unit costs ( $ 54 million ) and purchased volumes from the company 's electric generating facilities ( $ 5 million ) . other operations and maintenance expenses increased $ 98 million in 2019 compared with 2018 due primarily to higher costs for pension and other postretirement benefits ( $ 91 million ) , surcharges for assessments and fees that are collected in revenues from customers ( $ 40 million ) and higher stock-based compensation ( $ 23 million ) , offset , in part , by lower other employee benefits ( $ 41 million ) and municipal infrastructure support costs ( $ 12 million ) . depreciation and amortization increased $ 69 million in 2019 compared with 2018 due primarily to higher electric utility plant balances . taxes , other than income taxes increased $ 93 million in 2019 compared with 2018 due primarily to higher property taxes ( $ 86 million ) and the absence of a new york state sales and use tax refund received in 2018 ( $ 26 million ) , offset , in part , by higher deferral of under-collected property taxes ( $ 11 million ) , the reduction in the sales and use tax reserve upon conclusion of an audit assessment ( $ 6 million ) and lower state and local taxes ( $ 2 million ) . gas cecony 's results of gas operations for the year ended december 31 , 2019 compared with the year ended december 31 , 2018 were as follows : replace_table_token_30_th cecony 's gas sales and deliveries , excluding off-system sales , in 2019 compared with 2018 were : replace_table_token_31_th ( a ) revenues from gas sales are subject to a weather normalization clause and a revenue decoupling mechanism , as a result of which , delivery revenues are generally not affected by changes in delivery volumes from levels assumed when rates were approved . ( b ) after adjusting for variations , primarily billing days , firm gas sales and transportation volumes in the company 's service area increased 1.8 percent in 2019 compared with 2018 , reflecting primarily increased volumes attributable to the growth in the number of gas customers . ( c ) includes 5,484 thousands and 3,326 thousands of dt for 2019 and 2018 , respectively , which are also reflected in firm transportation and other . ( d ) other gas operating revenues generally reflect changes in the revenue decoupling mechanism and weather normalization clause current asset or regulatory liability and changes in regulatory assets and liabilities in accordance with other provisions of the company 's rate plans . see note b to the financial statements in item 8. operating revenues increased $ 54 million in 2019 compared with 2018 due primarily to an increase in revenues from the rate plan ( $ 99 million ) , offset , in part , by lower gas purchased for resale expense ( $ 37 million ) . con edison annual report 2019 57 gas purchased for resale decreased $ 37 million in 2019 compared with 2018 due to lower unit costs ( $ 34 million ) and purchased volumes ( $ 3 million ) . other operations and maintenance expenses decreased $ 21 million in 2019 compared with 2018 due primarily to lower surcharges for assessments and fees that are collected in revenues from customers . depreciation and amortization increased $ 26 million in 2019 compared with 2018 due primarily to higher gas utility plant balances . taxes , other than income taxes increased $ 36 million in 2019 compared with 2018 due primarily to higher property taxes ( $ 37 million ) , the absence of a new york state sales and use tax refund received in 2018 ( $ 3 million ) and higher state and local taxes ( $ 2 million ) , offset , in part , by higher deferral of under-collected property taxes ( $ 4 million ) and the reduction in the sales and use tax reserve upon conclusion of an audit assessment ( $ 1 million ) . steam cecony 's results of steam operations for the year ended december 31 , 2019 compared with the year ended december 31 , 2018 were as follows : replace_table_token_32_th cecony 's steam sales and deliveries in 2019 compared with 2018 were : replace_table_token_33_th ( a ) other steam operating revenues generally reflect changes in regulatory assets and liabilities in accordance with the company 's rate plan . see note b to the financial statements in item 8 . ( b ) after adjusting for variations , primarily weather and billing days , steam sales and deliveries in the company 's service area decreased 4.4 percent in 2019 compared with 2018 .
| results of operations net income for common stock and earnings per share for the years ended december 31 , 2019 , 2018 and 2017 were as follows : replace_table_token_24_th ( a ) net income for common stock from the clean energy businesses for the year ended december 31 , 2019 reflects $ 74 million or $ 0.22 a share ( after-tax ) of income attributable to the non-controlling interest of a tax equity investor in renewable electric production projects accounted for under the hlbv method of accounting . see note q to the financial statements in item 8. net income for common stock from the clean energy businesses for the year ended december 31 , 2017 includes $ 1 million or $ 0.00 a share of net after-tax gain on the sale of a solar electric production project in 2017. see note u to the financial statements in item 8. net income for common stock from the clean energy businesses also includes $ ( 21 ) million or $ ( 0.07 ) a share , $ ( 6 ) million or $ ( 0.02 ) a share and $ 1 million or $ 0.00 a share of net after-tax mark-to-market gains/ ( losses ) in 2019 , 2018 and 2017 , respectively . ( b ) in december 2018 , the clean energy businesses acquired sempra solar holdings , llc . upon completion of the acquisition , the clean energy businesses recognized an after-tax gain of $ 89 million or $ 0.28 per share with respect to jointly-owned renewable energy production projects . see note u to the financial statements in item 8 . ( c ) upon enactment of the tcja in december 2017 , con edison re-measured its deferred tax assets and liabilities based upon the 21 percent corporate income tax rate under the tcja .
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other significant accounting policies the company 's other significant accounting policies are described in the following notes : investments in agency mbs , subsequent measurement note 4 borrowings note 5 to-be-announced agency mbs transactions , including “ dollar rolls ” note 6 derivative instruments note 6 balance sheet offsetting note 7 fair value measurements note 8 income taxes note 9 stock-based compensation note 12 recent accounting pronouncements the following table provides a brief description of recently issued accounting pronouncements and their actual or expected effect on the company 's consolidated financial statements : standard description date of adoption effect on the consolidated financial statements recently adopted accounting guidance accounting standards update ( “ asu ” ) no . 2015-14 , revenue from contracts with customers ( topic 606 ) : deferral of the effective date this amendment defers the effective story_separator_special_tag of financial condition and results of operations overview we are an investment firm that focuses on acquiring and holding a levered portfolio of residential mbs , consisting of agency mbs and private-label mbs . agency mbs include residential mortgage pass-through certificates for which the principal and interest payments are guaranteed by either a u.s. government sponsored enterprise ( “ gse ” ) , such as the federal national mortgage association ( “ fannie mae ” ) and the federal home loan mortgage corporation ( “ freddie mac ' ) , or by a u.s. government agency , such as the government national mortgage association ( “ ginnie mae ” ) . private-label mbs , or non-agency mbs , include residential mbs that are not guaranteed by a gse or the u.s. government . as of december 31 , 2018 , nearly all of our investment capital was allocated to agency mbs . we leverage prudently our investment portfolio so as to increase potential returns to our shareholders . we fund our investments primarily through short-term financing arrangements , principally through repurchase agreements . we enter into various hedging transactions to mitigate the interest rate sensitivity of our cost of borrowing and the value of our mbs portfolio . for our tax years ended december 31 , 2018 and earlier , we were taxed as a c corporation for u.s. federal tax purposes . commencing with our taxable year ending december 31 , 2019 , we intend to elect to be taxed as a reit under the internal revenue code . as a reit we will be required to distribute annually 90 % of our reit taxable income ( subject to certain adjustments ) . so long as we continue to qualify as a reit , we will generally not be subject to u.s. federal or state corporate income taxes on our taxable income that we distribute to our shareholders on a timely basis . at present , it is our intention to distribute 100 % of our taxable income , although we will not be required to do so . we intend to make distributions of our taxable income within the time limits prescribed by the internal revenue code , which may extend into the subsequent taxable year . we are a virginia corporation that is internally managed company and do not have an external investment advisor . factors that affect our results of operations and financial condition our business is materially affected by a variety of industry and economic factors , including : conditions in the global financial markets and economic conditions generally ; changes in interest rates and prepayment rates ; conditions in the residential real estate and mortgage markets ; actions taken by the u.s. government , u.s. federal reserve , the u.s. treasury and foreign central banks ; changes in laws and regulations and industry practices ; and other market developments . current market conditions and trends the 10-year u.s. treasury rate was 2.69 % as of december 31 , 2018 , a 28 basis point increase from the prior year end . the u.s. rate curve continued to flatten during the year as the spread between the 2-year and 10-year u.s. treasury rate narrowed 32 basis points with the short-end outpacing the long-end of the interest rate curve . the spread between 10-year u.s. treasury rates and interest rate swaps widened three basis during the year with the 10-year swap rate ending at 2.71 % . interest rate and market volatility were at heighted levels during 2018. reduced federal reserve support for agency mbs , rate volatility and other factors led to the spread between the market yield on agency mbs and benchmark interest rates widening meaningfully during 2018 resulting in the pricing of agency mbs underperforming interest rate hedges . on december 19 , 2018 , the federal open market committee ( “ fomc ” ) announced that it was raising the target federal funds rate by 25 basis points to a range of 2.25 % to 2.50 % , its fourth 25 basis point increase in 2018. the fomc commented that the labor market has continued to strengthen and that economic activity has been rising at a strong rate . in its statement , the fomc stated that some further gradual increases in the target range for the federal funds rate will be consistent with sustained expansion of economic activity , strong labor market conditions , and inflation near its 2 % objective over the medium term . in determining the timing and size of future adjustments to the target range for the federal funds rate , the fomc is expected to assess realized and expected economic conditions relative to its maximum employment objective and its symmetric 2 % inflation objective . story_separator_special_tag non-cash stock-based compensation includes expenses associated with stock-based awards granted to employees , including the company 's performance share units to named executive officers that are earned only upon the attainment of company performance measures over the relevant measurement period . 39 “ other general and administrative expenses ” primarily consists of the following : professional services expenses , including accounting , legal and consulting fees ; insurance expenses , including liability and property insurance ; occupancy and equipment expense , including rental costs for our facilities , and depreciation and amortization of equipment and software ; fees and commissions related to transactions in interest rate derivative instruments ; board of director fees ; and other operating expenses , including information technology expenses , business development costs , public company reporting expenses , proxy solicitation expenses , corporate registration fees , office supplies and other miscellaneous expenses . comparison of the years ended december 31 , 2018 and 2017 the following table presents the net income ( loss ) available ( attributable ) to common stock reported for the years ended december 31 , 2018 and 2017 , respectively ( dollars in thousands , except per share amounts ) : replace_table_token_10_th gaap net interest income net interest income determined in accordance with gaap ( “ gaap net interest income ” ) decreased $ 23.6 million , or 33.9 % , from $ 69.7 million for the year ended december 31 , 2017 to $ 46.1 million for the year ended december 31 , 2018. the decrease from the comparative period is primarily attributable to a 90 basis point increase in the average interest costs of our short-term secured financing arrangements due primarily to an increase in prevailing benchmark short-term interest rates , partially offset by an increase in the average asset yields of our specified agency mbs due to reinvestments from portfolio repositioning and monthly paydowns into higher current investment yields as a result of a rise in long-term interest rates and widening agency mbs spreads . the components of gaap net interest income from our mbs portfolio is summarized in the following table for the periods indicated ( dollars in thousands ) : replace_table_token_11_th 40 ( 1 ) net interest income/spread and net interest margin excludes interest on long-term unsecured debt . the effects of changes in the composition of our investments on our gaap net interest income from our mbs investment activities are summarized below ( dollars in thousands ) : replace_table_token_12_th economic net interest income economic net interest income , a non-gaap financial measure , represents the interest income earned net of the interest expense incurred from all of our interest bearing financial instruments as well as the agency mbs which underlie , and are implicitly financed through , our tba dollar roll transactions . economic net interest income is comprised of the following : ( i ) net interest income determined in accordance with gaap , ( ii ) tba agency mbs “ dollar roll ” income , and ( iii ) net interest income earned or expense incurred from interest rate swap agreements . we believe that economic net interest income assists investors in understanding and evaluating the financial performance of the company 's long-term-focused , net interest spread-based investment strategy , prior to the deduction of core general and administrative expenses . a full description of each of the three aforementioned components of economic net interest income is included within the “ non-gaap core operating income ” section of this document . the components of our economic net interest income are summarized in the following table for the periods indicated ( dollars in thousands ) : replace_table_token_13_th ( 1 ) tba dollar roll average balance ( average cost basis ) is based upon the contractual price of the initial tba purchase trade of each individual series of dollar roll transactions . tba dollar roll income is net of implied financing costs . ( 2 ) interest rate swap cost represents the weighted average net receive ( pay ) rate in effect for the period , adjusted for “ price alignment interest ” income earned or expense incurred on cumulative variation margin paid or received , respectively . ( 3 ) economic net interest margin excludes interest on long-term unsecured debt . the effects of changes in the composition of our investments on our economic net interest income from our mbs investment and related funding and hedging activities are summarized below ( dollars in thousands ) : 41 replace_table_token_14_th economic net interest income for the year ended december 31 , 2018 decreased relative to the prior year primarily due to higher financing costs on the unhedged portion of our short-term secured financing arrangements and implied tba financing driven primarily by an increase in prevailing benchmark short-term interest rates , partially offset by higher average portfolio balances primarily driven by deployment of capital raised during the periods and an increase in the average asset yields of our specified agency mbs . investment gain ( loss ) , net as prevailing longer-term interest rates increase ( decrease ) , the fair value of our investments in fixed rate agency mbs and tba commitments generally decreases ( increases ) . conversely , the fair value of our interest rate derivative hedging instruments increases ( decreases ) in response to increases ( decreases ) in prevailing interest rates . while our interest rate derivative hedging instruments are designed to mitigate the sensitivity of the fair value of our agency mbs portfolio to fluctuations in interest rates , they are not generally designed to mitigate the sensitivity of our net book value to spread risk , which is the risk of an increase of the market spread between the yield on our agency mbs and the benchmark yield on u.s. treasury securities or interest rate swaps . accordingly , irrespective of fluctuations in interest rates , an increase ( decrease ) in mbs spreads will generally result in the underperformance ( outperformance ) of the values of agency mbs relative to interest rate hedging instruments .
| executive summary the following are some key financial highlights for the year ended december 31 , 2018 : $ 8.71 per common share of book value as of december 31 , 2018 , a decrease of 35.0 % from the prior year , primarily driven by a net investment loss on the company 's hedged investment portfolio due to the underperformance of the pricing of the company 's agency mbs investments relative to its interest rate hedges due to agency mbs spread widening $ 1.675 of declared dividends per common share , resulting in an economic loss of 22.5 % measured as the change in tangible book value per common share plus dividends declared during the year 36 $ 3 . 18 per diluted common share of gaap net loss $ 2.06 per diluted common share of non-gaap core operating income ( 1 ) net interest income of $ 46.1 million compared to $ 69.7 million in the prior year , driven primarily by : o a 90 basis point increase in weighted average short-term secured financing costs resulting primarily from hikes in the targeted federal funds rate from the federal reserve , partially offset by o higher weighted average asset yields on our investments in agency mbs ( 3.10 % versus 2.84 % ) due to current year reinvestments at higher current yields economic net interest income , which includes tba dollar roll income and net interest income earned or expense incurred from interest rate swaps , of $ 73.3 million compared to $ 73.7 million in the prior year ( 1 ) as of december 31 , 2018 , our agency mbs investment portfolio totaled $ 3,982 million in fair value , consisting solely of specified agency mbs .
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these statements can be considered as “ forward-looking statements ” within the meaning of the private securities litigation reform act of 1995. these forward‑looking statements involve various assumptions , risks and uncertainties which can change over time . actual results or future events may be different from those anticipated in our forward-looking statements and may not align with historical performance and events . as forward-looking statements involve significant risks and uncertainties , caution should be exercised against placing undue reliance upon such statements . forward-looking statements are typically identified by words such as `` believe , '' `` plan , '' `` expect , '' `` anticipate , '' `` intend , '' `` outlook , '' `` estimate , '' `` forecast , '' `` will , '' `` should , '' `` project , '' `` goal , '' and other similar words and expressions . we do not assume any duty to update forward-looking statements , except as required by federal securities laws . our forward-looking statements are subject to the following principal risks and uncertainties : our business , financial results and balance sheet values are affected by business and economic circumstances , including , but not limited to : ( i ) developments with respect to the u.s. and global financial markets ; ( ii ) actions by the frb , ust , occ and other governmental agencies , especially those that impact money supply , market interest rates or otherwise affect business activities of the financial services industry ; ( iii ) a slowing or reversal of current u.s. economic environment ; and ( iv ) the impacts of tariffs or other trade policies of the u.s. or its global trading partners . business and operating results are affected by our ability to identify and effectively manage risks inherent in our businesses , including , where appropriate , through effective use of systems and controls , third-party insurance , derivatives , and capital management techniques , and to meet evolving regulatory capital and liquidity standards . competition can have an impact on customer acquisition , growth and retention , and on credit spreads , deposit gathering and product pricing , which can affect market share , deposits and revenues . our ability to anticipate and continue to respond to technological changes can also impact our ability to respond to customer needs and meet competitive demands . business and operating results can also be affected by widespread natural and other disasters , epidemics , pandemics or contagious diseases , dislocations , terrorist activities , system failures , security breaches , significant political events , cyberattacks or international hostilities through impacts on the economy and financial markets generally , or on us or our counterparties specifically . legal , regulatory and accounting developments could have an impact on our ability to operate and grow our businesses , financial condition , results of operations , competitive position , and reputation . reputational impacts could affect matters such as business generation and retention , liquidity , funding , and the ability to attract and retain management . these developments could include : ◦ changes resulting from a change in the u.s. presidential administration or legislative and regulatory reforms , including changes affecting oversight of the financial services industry , consumer protection , pension , bankruptcy and other industry aspects , and changes in accounting policies and principles . ◦ changes to regulations governing bank capital and liquidity standards . ◦ unfavorable resolution of legal proceedings or other claims and regulatory and other governmental investigations or other inquiries . these matters may result in monetary judgments or settlements or other remedies , including fines , penalties , restitution or alterations in our business practices , and in additional expenses and collateral costs , and may cause reputational harm to fnb . ◦ results of the regulatory examination and supervision process , including our failure to satisfy requirements imposed by the federal bank regulatory agencies or other governmental agencies . ◦ the impact on our financial condition , results of operations , financial disclosures and future business strategies related to the upcoming implementation of the new fasb asu 2016-13 financial instruments - credit losses commonly referred to as the “ current expected credit loss ” standard , or cecl . 37 the risks identified here are not exclusive . actual results may differ materially from those expressed or implied as a result of these risks and uncertainties , including , but not limited to , the risk factors and other uncertainties described under item 1a . risk factors and risk management sections in this annual report on form 10-k ( including the md & a section ) , our subsequent 2020 quarterly reports on form 10-q 's ( including the risk factors and risk management discussions ) and our other subsequent filings with the sec , which will be available on our corporate website at https : //www.fnb-online.com/about-us/investor-relations-shareholder-services . we have included our web address as an inactive textual reference only . information on our website is not part of this report . application of critical accounting policies our consolidated financial statements are prepared in accordance with gaap . application of these principles requires management to make estimates , assumptions and judgments that affect the amounts reported in the consolidated financial statements and accompanying notes . these estimates , assumptions and judgments are based on information available as of the date of the consolidated financial statements ; accordingly , as this information changes , the consolidated financial statements could reflect different estimates , assumptions and judgments . certain policies inherently are based to a greater extent on estimates , assumptions and judgments of management and , as such , have a greater possibility of producing results that could be materially different than originally reported . the most significant accounting policies followed by fnb are presented in note 1 , “ summary of significant accounting policies ” in the notes to consolidated financial statements , which is included in item 8 of this report . story_separator_special_tag subsequent to the acquisition date , the methods utilized to estimate the required allowance for credit losses for these loans is similar to originated loans ; however , we record a provision for credit losses only when the required allowance exceeds the remaining fair value adjustment . these estimates are inherently subjective and can result in significant changes in the cash flow estimates over the life of the loan . to the extent actual outcomes differ from management estimates , the outcome may affect our earnings or financial position in future periods . see note 1 , “ summary of significant accounting policies ” and note 5 , “ loans and leases ” in the notes to consolidated financial statements for further discussion of accounting for loans acquired in a business combination . fair value of financial instruments we use fair value measurements to record fair value adjustments to certain financial assets and liabilities and determine fair value disclosures . additionally , from time to time we may be required to record at fair value other assets on a non-recurring basis , such as loans held for sale , certain impaired loans , oreo and certain other assets . the accounting guidance for fair value measurements includes a three-level hierarchy for disclosure of assets and liabilities recorded at fair value based on whether the inputs to the valuation methodology used for measurement are observable or unobservable . judgment is required to determine which level of the three-level hierarchy certain assets or liabilities measured at fair value are classified . fair value represents the price that would be received to sell a financial asset or paid to transfer a financial liability in an orderly transaction between market participants at the measurement date . we use significant and complex estimates , assumptions and judgments when assets and liabilities are required to be recorded at , or adjusted to reflect , fair value . where available , fair value and information used to record valuation adjustments for certain assets or liabilities is based on either quoted market prices or are provided by independent third-party sources , including appraisers and valuation specialists . when such third-party information is not available , we may estimate fair value by using cash flow and other financial modeling techniques . our assumptions about what a market participant would use in pricing an asset or liability is developed based on the best information available in the circumstances . these estimates are inherently subjective and can result in significant changes in the fair value estimates over the life of the asset or liability . assets and liabilities carried at fair value inherently result in a higher degree of financial statement volatility . 39 see note 1 , “ summary of significant accounting policies ” and note 24 , “ fair value measurements ” in the notes to consolidated financial statements for further discussion of accounting for financial instruments . goodwill and other intangible assets as a result of acquisitions , we have recorded goodwill and other identifiable intangible assets on our consolidated balance sheets . goodwill represents the cost of acquired companies in excess of the fair value of net assets , including identifiable intangible assets , at the acquisition date . our recorded goodwill relates to value inherent in our community banking , wealth management and insurance segments . the value of goodwill and other identifiable intangibles is dependent upon our ability to provide high quality , cost-effective services in the face of competition . as such , these values are supported ultimately by revenue that is driven by the volume of business transacted . a decline in earnings as a result of a lack of growth or our inability to deliver cost-effective services over sustained periods can lead to impairment in value , which could result in additional expense and adversely impact earnings in future periods . goodwill and other intangibles are subject to impairment testing at the reporting unit level , which must be conducted at least annually . we perform impairment testing during the fourth quarter of each year , or more frequently if impairment indicators exist . we also continue to monitor other intangibles for impairment and to evaluate carrying amounts , as necessary . determining fair values of each reporting unit , of its individual assets and liabilities , and also of other identifiable intangible assets requires considering market information that is publicly available , as well as the use of significant estimates and assumptions . these estimates and assumptions could have a significant impact on whether or not an impairment charge is recognized and also the magnitude of any such charge . inputs used in determining fair values where significant estimates and assumptions are necessary include discounted cash flow calculations , market comparisons and recent transactions , projected future cash flows , discount rates reflecting the risk inherent in future cash flows , long-term growth rates and determination and evaluation of appropriate market comparables . see note 1 , “ summary of significant accounting policies ” and note 9 , “ goodwill and other intangible assets ” in the notes to consolidated financial statements for further discussion of accounting for goodwill and other intangible assets . income taxes and deferred tax assets we are subject to the income tax laws of federal , state and other taxing jurisdictions where we conduct business . the laws are complex and subject to different interpretations by the taxpayer and various taxing authorities . in determining the provision for income taxes , management must make judgments and estimates about the application of these inherently complex tax statutes , related regulations and case law . in the process of preparing our tax returns , management attempts to make reasonable interpretations of the tax laws . these interpretations are subject to challenge by the taxing authorities or based on management 's ongoing assessment of the facts and evolving case law . we determine deferred income taxes using the balance sheet method .
| results of operations year ended december 31 , 2019 compared to year ended december 31 , 2018 net income available to common stockholders for 2019 was $ 379.2 million or $ 1.16 per diluted common share , compared to net income available to common stockholders for 2018 of $ 364.8 million or $ 1.12 per diluted common share . operating earnings per diluted common share ( non-gaap ) was $ 1.18 for 2019 compared to $ 1.13 for 2018 . the results for 2019 included $ 4.5 million of branch consolidation costs and $ 4.3 million of service charge refunds . in comparison , the results for 2018 included a $ 5.1 million gain recognized from the sale of regency , the impact of $ 6.6 million of costs related to branch consolidations and the impact of a $ 0.9 million discretionary 401 ( k ) contribution made following tax reform . average diluted common shares outstanding increased 0.4 million shares , or 0.1 % , to 326.1 million shares for 2019 . 43 the major categories of the consolidated statements of income and their respective impact to the increase ( decrease ) in net income are presented in the following table : table 1 replace_table_token_3_th the following table presents selected financial ratios and other relevant data used to analyze our performance : table 2 replace_table_token_4_th ( 1 ) period-end ( 2 ) non-gaap 44 the following table provides information regarding the average balances and yields earned on interest-earning assets ( non-gaap ) and the average balances and rates paid on interest-bearing liabilities : table 3 replace_table_token_5_th ( 1 ) the average balances and yields earned on securities are based on historical cost .
| 5,893 |
we offer a wide selection of brand name and private label merchandise through various channels : our nordstrom ' branded full-line stores and website , our off-price nordstrom rack ' stores , our online private sale subsidiary hautelook , ' our jeffrey ' boutiques and our philanthropic treasure & bond ' store . our stores are located in 30 states throughout the united states . in addition , we offer our customers a variety of payment products and services , including credit and debit cards with an associated loyalty program . in 2011 , we achieved record total net sales of $ 10,497 , an increase of 12.7 % , while growing earnings before interest and taxes ( ebit ) by 11.7 % . this reflects our ongoing efforts to improve the customer experience across all channels , combined with consistent execution and various growth initiatives . as customers ' expectations of service evolve , the consistency of the customer experience across all channels becomes more important , including factors such as expanded selection , multi-channel capabilities , personalization , speed , convenience and price . to enhance the customer experience online , we have accelerated our investments in e-commerce . we acquired hautelook , a leader in the online private sale marketplace . we believe this acquisition will help us further develop our mobile and e-commerce capabilities and enable us to participate in the fast-growing private sales channel . in the third quarter , we began offering free standard shipping and free returns for online purchases and did limited testing of same-day delivery . we also made enhancements to our website and mobile website . we believe these changes make it easier and more convenient to shop with us . our combined efforts to enhance the online experience led to a meaningful sales increase in the online channel , which is where we expect to have the strongest percentage growth in the future . our strong financial position enables us to continue to make investments in the customer experience to improve our store and online business while also growing through new stores , remodels and other initiatives . during 2011 , we opened three nordstrom full-line stores , eighteen nordstrom rack stores and remodeled six nordstrom full-line stores . we also opened a philanthropic store in new york called treasure & bond . in 2012 , we plan to open one nordstrom full-line store and have announced twelve new nordstrom rack stores . in addition , we have announced plans to relocate two existing nordstrom rack stores and remodel eight nordstrom full-line stores . our overall goals are to achieve high single-digit total sales growth and mid-teens return on invested capital ( roic ) . we believe that top-line growth and roic correlate strongly with shareholders ' return . as we continue to invest in new stores and remodels , we also want to enhance the customer experience through increased spending on e-commerce and technology . these investments flow through our expenses at a faster pace than other investments in previous years . we believe they will increase our roic through high growth in sales dollars and ebit , as opposed to ebit margin , with an incrementally productive capital base . fashion rewards plays an important part in building customer loyalty , and our fashion rewards members shop more frequently and spend more with us on average than non-members . approximately one-third of our sales are from fashion rewards customers and the program continues to grow as more members use our tender as a convenient way to shop and earn rewards . during the year , customer payment rates continued to improve , resulting in decreasing delinquency and write-off trends , while our credit and debit card volumes increased . in january 2012 , we enhanced our fashion rewards program , giving customers more control over how and when they can earn rewards and extending more benefits to our cardholders . as we look forward to 2012 , we remain focused on improving customer service and providing a superior shopping experience . we have a customer-driven strategy , allowing us to execute our current operating plans across all channels while targeting investments in e-commerce and technology to enhance our platform for sustainable , profitable growth . results of operations our reportable segments are retail and credit . our retail segment includes our nordstrom branded full-line stores and website , our nordstrom rack stores , and our other retail channels including hautelook , our jeffrey stores and our treasure & bond store . for purposes of discussion and analysis of our results of operations , we combine our retail segment results with revenues and expenses in the corporate/other column of our segment reporting footnote ( collectively , the retail business ) . we analyze our results of operations through earnings before interest and income taxes for our retail business and earnings before income taxes for credit , while interest expense and income taxes are discussed on a total company basis . nordstrom , inc. and subsidiaries 19 retail business summary the following table summarizes the results of our retail business for the fiscal years ended january 28 , 2012 , january 29 , 2011 and january 30 , 2010 : replace_table_token_13_th retail business net sales replace_table_token_14_th 1 other retail includes our hautelook online private sale subsidiary , our jeffrey stores and our treasure & bond store . net sales 2011 vs 2010 net sales for 2011 increased 12.7 % compared with 2010 driven by the strength of our nordstrom full-line stores , rapid growth in our online business and improving results at nordstrom rack . during the year , we opened three nordstrom full-line stores , eighteen nordstrom rack stores and one treasure & bond store , relocated two nordstrom rack stores and acquired hautelook . these additions represented 4.0 % of our total net sales for 2011 , and increased our gross square footage by 3.8 % . same-store sales increased 7.2 % , with increases of 8.2 % at nordstrom and 3.7 % at nordstrom rack . story_separator_special_tag these include hautelook operating and purchase accounting expenses , planned increases in marketing and technology spending and increased fulfillment expenses associated with the introduction of free standard shipping and free returns for online purchases in the third quarter of 2011. the increase was also due in part to higher sales volume and the opening of twenty-two stores in 2011. as a result , our retail sg & a rate increased 84 basis points for 2011 compared with 2010. we continue to leverage sg & a expense in our stores , with improvements of approximately 35 basis points in 2011 , compared with 2010. selling , general and administrative expenses 2010 vs 2009 our retail selling , general and administrative expenses increased $ 303 in 2010 compared with 2009. the majority of the increase in expense dollars was due to higher sales volume and expenses for new stores . our retail sg & a rate increased 38 basis points for 2010 compared with 2009. the increase was in part due to planned increases in marketing and technology expenses in areas such as online marketing and social media . the increased retail sg & a rate also reflects higher fulfillment costs as we shipped more items to our customers . 22 credit segment the nordstrom credit and debit card products are designed to strengthen customer relationships and grow retail sales by providing valuable services , loyalty benefits and payment products . we believe that owning all aspects of our credit business allows us to fully integrate our rewards program with our retail stores and provide better service to our customers , thus deepening our relationship with them and driving greater customer loyalty . our cardholders tend to visit our stores more frequently and spend more with us than non-cardholders , and we believe the nordstrom fashion rewards ® program helps drive sales in our retail segment . our nordstrom private label credit and debit cards can be used only in nordstrom stores and on our website ( inside volume ) , while our nordstrom visa cards also may be used for purchases outside of nordstrom ( outside volume ) . cardholders participate in the fashion rewards program , through which they accumulate points based on their level of spending ( generally two points per dollar spent at nordstrom and one point per dollar spent outside of nordstrom ) . upon reaching two thousand points , customers receive twenty dollars in nordstrom notes ® , which can be redeemed for goods or services in our stores or online . starting in january 2012 , all fashion rewards customers receive a credit for complimentary alterations and personal triple points days , in addition to early access to sales events . as part of these changes , nordstrom rack is also now included with all bonus points events and the spend requirements for customers to achieve our two highest benefit levels have been lowered . with increased spending , fashion rewards customers can receive additional amounts of these benefits as well as access to exclusive fashion and shopping events . the table below provides a detailed view of the operational results of our credit segment , consistent with the segment disclosure provided in the notes to consolidated financial statements . in order to better reflect the economic contribution of our credit and debit card program , intercompany merchant fees are also included in the table below . intercompany merchant fees represent the estimated intercompany income of our credit segment from the usage of our cards in the retail segment . to encourage the use of nordstrom cards in our stores , the credit segment does not charge the retail segment an intercompany interchange merchant fee . on a consolidated basis , we avoid costs that would be incurred if our customers used third-party cards . interest expense is assigned to the credit segment in proportion to the amount of estimated capital needed to fund our credit card receivables , which assumes a mix of 80 % debt and 20 % equity . the average credit card receivable investment metric included in the following table represents our best estimate of the amount of capital for our credit segment that is financed by equity . based on our research , debt as a percentage of credit card receivables for other credit card companies ranges from 70 % to 90 % . we believe that debt equal to 80 % of our credit card receivables is appropriate given our overall capital structure goals . replace_table_token_17_th nordstrom , inc. and subsidiaries 23 credit card revenues replace_table_token_18_th credit card revenues include finance charges , interchange fees , late fees and other revenue . finance charges represent interest earned on unpaid balances while late fees are assessed when cardholders pay less than their minimum balance by the payment due date . interchange fees are earned from the use of nordstrom visa credit cards at merchants outside of nordstrom . credit card revenues 2011 vs 2010 credit card revenues decreased $ 10 in 2011 compared with 2010 primarily due to a decrease in finance charge revenue , partially offset by an increase in interchange fees . continued improvements in customer payment rates drove lower finance charge yields and slightly lower receivables , which resulted in a decrease in finance charge revenue . our average credit card receivable balance in 2011 was $ 2,047 , a decrease of $ 41 , or 1.9 % , from 2010. these decreases were partially offset by an increase in interchange revenue due to increased use of our nordstrom visa credit cards at third parties . credit card revenues 2010 vs 2009 credit card revenues increased $ 20 in 2010 compared with 2009 primarily due to higher late fees , particularly in the first half of the year . improving economic conditions over the year led to an increase in general consumer spending , improved payment rates , lower revolving balances and reduced delinquencies . our average credit card receivable balance in 2010 was $ 2,088 , a decrease of $ 11 , or 0.5
| fourth quarter results replace_table_token_24_th nordstrom 's fourth quarter performance was consistent with the strong trends the company experienced throughout 2011. net earnings for the fourth quarter of 2011 were $ 236 , or $ 1.11 per diluted share , compared with $ 232 , or $ 1.04 per diluted share , in 2010. net sales total sales for the quarter increased 12.5 % to $ 3,169. same-store sales increased 7.1 % , with increases of 8.4 % at nordstrom and 2.2 % at nordstrom rack . nordstrom same-store sales increased 8.4 % for the quarter . both the average selling price of our merchandise and the number of items sold increased for the quarter ended january 28 , 2012 compared with the same period last year . category highlights for the quarter were handbags , designer and cosmetics . the south and midwest were the top-performing geographic regions relative to the fourth quarter of 2010. the direct channel continued to show strong performance , with a net sales increase of 35.1 % in the fourth quarter of 2011 , compared with the same period in 2010. nordstrom rack net sales increased $ 85 , or 17.7 % for the quarter . nordstrom rack same-store sales increased 2.2 % for the fourth quarter of 2011 compared with the fourth quarter of 2010. the average selling price of nordstrom rack merchandise increased while the number of items sold decreased for the quarter , compared with the same period in the prior year . shoes and accessories were the leading categories for nordstrom rack . 26 gross profit our gross profit rate increased 12 basis points to 37.7 % from 37.6 % last year . the increase was driven by the ability to leverage buying and occupancy expenses .
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there are no comparable recent events which may provide guidance as to the effect of the spread of covid-19 , and , as a result , the ultimate impact of covid-19 story_separator_special_tag and results of operations in addition to historical financial information , this discussion of the business of sigmatron international , inc. ( “ sigmatron ” ) , its wholly-owned subsidiaries standard components de mexico s.a. , ablemex , s.a. de c.v. , digital appliance controls de mexico , s.a. de c.v. , spitfire controls ( vietnam ) co. ltd. , spitfire controls ( cayman ) co. ltd. , wholly-owned foreign enterprises wujiang sigmatron electronics co. , ltd. and sigmatron electronic technology co. , ltd. ( collectively , “ sigmatron china ” ) and international procurement office sigmatron taiwan branch ( collectively , the “ company ” ) and other items in this annual report on form 10-k contain forward-looking statements concerning the company 's business or results of operations . words such as “ continue , ” “ anticipate , ” “ will , ” “ expect , ” “ believe , ” “ plan , ” and similar expressions identify forward-looking statements . these forward-looking statements are based on the current expectations of the company . because these forward-looking statements involve risks and uncertainties , the company 's plans , actions and actual results could differ materially . such statements should be evaluated in the context of the direct and indirect risks and uncertainties inherent in the company 's business including , but not necessarily limited to , the company 's continued dependence on certain significant customers ; the continued market acceptance of products and services offered by the company and its customers ; pricing pressures from the company 's customers , suppliers and the market ; the activities of competitors , some of which may have greater financial or other resources than the company ; the variability of the company 's operating results ; the results of long-lived assets impairment testing ; the ability to achieve the expected benefits of acquisitions ; the collection of aged account receivables ; the variability of the company 's customers ' requirements ; the availability and cost of necessary components and materials ; the ability of the company and its customers to keep current with technological changes within its industries ; regulatory compliance , including conflict minerals ; the continued availability and sufficiency of the company 's credit arrangements , including the phase-out of libor ; the ability to meet the company 's financial covenant ; changes in u.s. , mexican , chinese , vietnamese or taiwanese regulations affecting the company 's business ; the turmoil in the global economy and financial markets ; the spread of covid-19 ( commonly known as “ coronavirus ” ) which has threatened the company 's financial stability by causing a decrease in consumer revenues , caused a disruption to the company 's global supply chain , caused plant closings or reduced operations thus reducing output at those facilities ; the stability of the u.s. , mexican , chinese , vietnamese and taiwanese economic , labor and political systems and conditions ; currency exchange fluctuations ; and the ability of the company to manage its growth . these and other factors which may affect the company 's future business and results of operations are identified throughout the company 's annual report on form 10-k , and as risk factors , may be detailed from time to time in the company 's filings with the securities and exchange commission . these statements speak as of the date of such filings , and the company undertakes no obligation to update such statements in light of future events or otherwise unless otherwise required by law . overview the company operates in one business segment as an independent provider of ems , which includes printed circuit board assemblies and completely assembled ( box-build ) electronic products . in connection with the production of assembled products , the company also provides services to its customers , including ( 1 ) automatic and manual assembly and testing of products ; ( 2 ) material sourcing and procurement ; ( 3 ) manufacturing and test engineering support ; ( 4 ) design services ; ( 5 ) warehousing and distribution services ; and ( 6 ) assistance in 24 obtaining product approval from governmental and other regulatory bodies . the company provides these manufacturing services through an international network of facilities located in the united states , mexico , china , vietnam and taiwan . the company relies on numerous third-party suppliers for components used in the company 's production process . certain of these components are available only from single-sources or a limited number of suppliers . in addition , a customer 's specifications may require the company to obtain components from a single-source or a small number of suppliers . the loss of any such suppliers could have a material impact on the company 's results of operations . further , the company could operate at a cost disadvantage compared to competitors who have greater direct buying power from suppliers . the company does not enter into long-term purchase agreements with major or single-source suppliers . the company believes that short-term purchase orders with its suppliers provides flexibility , given that the company 's orders are based on the changing needs of its customers . sales can be a misleading indicator of the company 's financial performance . sales levels can vary considerably among customers and products depending on the type of services ( turnkey versus consignment ) rendered by the company and the demand by customers . consignment orders require the company to perform manufacturing services on components and other materials supplied by a customer , and the company charges only for its labor , overhead and manufacturing costs , plus a profit . in the case of turnkey orders , the company provides , in addition to manufacturing services , the components and other materials used in assembly . story_separator_special_tag the company has concluded that control of the products it sells and transfers to its customers and an enforceable right to receive payment is customarily established at the point in time when the finished goods are shipped to its customers , or in some cases delivered pursuant to the specified shipping terms of each customer arrangement . with respect to consignment arrangements , control transfers and revenue is recognized at the point in time when the goods are shipped to the customer from the consignment location or when delivered to the customer ( pursuant to agreed upon shipping terms ) . in those limited instances where finished goods delivered to the customer location are stored in a segregated area which are not controlled by the customer ( title transfer , etc . ) until they are pulled from the segregated area and consumed by the company 's customer , revenue is recognized upon consumption . for tooling services , the company 's performance obligation is satisfied at the point in time when the customer takes possession of dies or molds . for engineering , design , and testing services , the company 's performance obligations are satisfied over time as the respective services are rendered as its customers simultaneously derive value from the company 's performance . from the time that a customer purchase order is received and contract is established , the company 's performance obligations are typically fulfilled within a few weeks . the company does not have any performance obligations that require more than one year to fulfill . each customer purchase order sets forth the transaction price for the products and services purchased under that arrangement . the company evaluates the credit worthiness of its customers and exercises judgment to recognize revenue based upon the amount the company expects to be paid for each sales transaction it enters into with its customers . some customer arrangements include variable consideration , such as volume rebates , some of which depend upon the company 's customers meeting specified performance criteria , such as a purchasing level over a period of time . the company exercises judgment to estimate the most likely amount of variable consideration at each reporting date . 26 inventories - inventories are valued at cost . cost is determined by an average cost method and the company allocates labor and overhead to work-in-process and finished goods . in the event of an inventory write-down , the company records expense to state the inventory at lower of cost or net realizable value . the company establishes inventory reserves for valuation , shrinkage , and excess and obsolete inventory . the company records provisions for inventory shrinkage based on historical experience to account for unmeasured usage or loss . of the company 's raw materials inventory , a substantial portion has been purchased to fulfill committed future orders or for which the company is contractually entitled to recover its costs from its customers . for the remaining raw materials inventory , a provision for excess and obsolete inventories is recorded for the difference between the cost of inventory and its estimated realizable value based on assumptions about future product demand and market conditions . for convenience , the company records these inventory reserves against the inventory cost through a contra asset rather than through a new cost basis . upon a subsequent sale or disposal of the impaired inventory , the corresponding reserve is relieved to ensure the cost basis of the inventory reflects any reductions . actual results differing from these estimates could significantly affect the company 's inventories and cost of products sold as the inventory is sold or otherwise relieved . intangible assets - intangible assets are comprised of finite life intangible assets including non-compete agreements and customer relationships . finite life intangible assets are amortized on a straight line basis over their estimated useful lives of 7 years for non-compete agreements except for customer relationships which are amortized on an accelerated basis over their estimated useful life of 15 years . impairment of long-lived assets - the company reviews long-lived assets , including amortizable intangible assets , for impairment . property , machinery and equipment and finite life intangible assets are reviewed whenever events or changes in circumstances occur that indicate possible impairment . if events or changes in circumstances occur that indicate possible impairment , the company first performs an impairment review based on an undiscounted cash flow analysis at the lowest level at which cash flows of the long-lived assets are largely independent of other groups of its assets and liabilities . this analysis requires management judgment with respect to changes in technology , the continued success of product lines , and future volume , revenue and expense growth rates . if the carrying value exceeds the undiscounted cash flows , the company records an impairment , if any , for the difference between the estimated fair value of the asset group and its carrying value . the company further conducts annual reviews for idle and underutilized equipment , and reviews business plans for possible impairment . the company 's analysis for fiscal year 2020 and 2019 did not indicate that any of its other long-lived assets were impaired . for more information on the potential impact of the covid-19 pandemic on the company , see “ item 1a . risk factors – the ongoing covid-19 global pandemic and measures taken in response thereto have adversely affected the company 's results of operations and its financial condition , and the full impact of the pandemic will depend on future developments , which are highly uncertain and can not be predicted . ” income tax - the company 's income tax expense , deferred tax assets and liabilities and reserves for unrecognized tax benefits reflect management 's best assessment of estimated future taxes to be paid . the company is subject to income taxes in both the u.s. and several foreign jurisdictions . significant judgments and estimates by management are required in determining the consolidated income tax expense assessment .
| results of operations : fiscal year ended april 30 , 2020 compared to fiscal year ended april 30 , 2019 the following table sets forth the percentage relationships of expense items to net sales for the years indicated : replace_table_token_2_th net sales decreased 3.3 % to $ 281,042,482 in fiscal year 2020 from $ 290,553,951 in the prior year . the company 's sales decreased in fiscal year 2020 in consumer electronics and industrial electronics compared to the prior year . the decrease in sales dollars for these marketplaces was partially offset by an increase in sales dollars in the medical/life science marketplace . in the fourth quarter of fiscal 2020 sales were negatively impacted by the covid -19 pandemic due to temporary closing s of several of the company 's manufacturing operations . gross profit decreased to $ 25,104,890 , or 8.9 % of net sales , in fiscal year 2020 compared to $ 26,341,769 or 9.1 % of net sales , in the prior fiscal year . the decrease in gross profit dollars for fiscal year 2020 was primarily the result of decreased sales . selling and administrative expenses decreased in fiscal year 2020 to $ 22,292,309 , or 7.9 % of net sales compared to $ 23,263,117 , or 8.0 % of net sales , in fiscal year 2019. the decrease in selling and administrative dollars was attributable to sales salaries , bad debt expense , financing fees and other professional fees . the decrease in the foregoing selling and administrative expenses were partially offset by an increase in legal fees , bonus expense and other general administrative expenses . selling and administrative expenses decreased as a percent of net sales due to a decrease in total selling and administrative dollars in fiscal year 2020 compared to the prior year .
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f-8 hyster-yale materials handling , inc. and subsidiaries consolidated statements of equity accumulated other comprehensive income ( loss ) class a story_separator_special_tag hyster-yale materials handling , inc. and subsidiaries ( tabular amounts in millions , except per share , percentage data and as otherwise noted ) overview hyster-yale materials handling , inc. ( `` hyster-yale '' or the `` company '' ) and its subsidiaries , including its operating company hyster-yale group , inc. ( `` hyg '' ) , is a leading , globally integrated , full-line lift truck manufacturer . the company offers a broad array of solutions aimed at meeting the specific materials handling needs of its customers , including attachments and hydrogen fuel cell power products , telematics , automation and fleet management services , as well as a variety of other power options for its lift trucks . the company , through hyg , designs , engineers , manufactures , sells and services a comprehensive line of lift trucks , attachments and aftermarket parts marketed globally primarily under the hyster ® and yale ® brand names , mainly to independent hyster ® and yale ® retail dealerships . the materials handling business historically has been cyclical because the rate of orders for lift trucks fluctuates depending on the general level of economic activity in the various industries and countries its customers serve . lift trucks and component parts are manufactured in the united states , china , northern ireland , mexico , the netherlands , the philippines , japan , italy , brazil and vietnam . the company owns a 75 % majority interest in hyster-yale maximal forklift ( zhejiang ) co. , ltd. ( `` hyster-yale maximal '' ) . hyster-yale maximal is a chinese manufacturer of low-intensity and standard lift trucks and specialized material handling equipment . hyster-yale maximal also designs and produces specialized products in the port equipment and rough terrain forklift markets . the results of hyster-yale maximal are included in the japic segment since the date of acquisition . the company operates bolzoni s.p.a. ( `` bolzoni '' ) . bolzoni is a leading worldwide producer and distributor of attachments , forks and lift tables marketed under the bolzoni ® , auramo ® and meyer ® brand names . bolzoni products are manufactured in the united states , italy , china , germany and finland . through the design , production and distribution of a wide range of attachments , bolzoni has a strong presence in the market niche of lift-truck attachments and industrial material handling . the company operates nuvera fuel cells , llc ( `` nuvera '' ) . nuvera is an alternative-power technology company focused on the design , manufacture and sale of hydrogen fuel-cell stacks and engines . competition in the materials handling industry is intense and is based primarily on strength and quality of distribution , brand loyalty , customer service , new lift truck sales prices , availability of products and aftermarket parts , comprehensive product line offerings , product performance , product quality and features and the cost of ownership over the life of the lift truck . the company competes with several global lift truck manufacturers that operate in all major markets , as well as other niche companies . the lift truck industry also competes with alternative methods of materials handling , including conveyor systems and automated guided vehicle systems . the company 's aftermarket parts offerings compete with parts manufactured by other lift truck manufacturers , as well as companies that focus solely on the sale of generic parts . the company 's mission is to be a leading , globally integrated designer , manufacturer and marketer of a complete range of lift truck solutions , offering the lowest cost of ownership and the best overall value by leveraging its high-quality , application-tailored lift trucks , attachments and power solutions . the company 's core competency is lift truck manufacturing , but its goal is to become the lift truck solutions partner to the materials handling market , one customer and one industry at a time . the company 's objective is to provide a wide-range of solutions to its customers to generate profitable growth through increasing volumes , which in turn are expected to generate market share gains and drive improved margins . the company plans to accomplish these objectives by implementing its core strategic initiatives to : provide the lowest cost of ownership , while enhancing productivity for customers ; be the leader in the delivery of industry- and customer-focused solutions ; be the leader in independent distribution ; grow in emerging markets ; be the leader in the attachments business and be a leader in fuel cells and their applications . see item 7 , `` management 's discussion and analysis of financial condition and results of operations '' in the company 's 2019 annual report on form 10-k for discussion of financial condition and results of operations for 2019 compared with 2018. during 2020 , broad measures taken by governments , businesses and others across the globe to limit the spread of novel coronavirus ( `` covid-19 '' ) adversely affected the company . the resulting significant decline in economic activity also reduced the demand for the company 's products and limited the availability of components from certain suppliers . production was significantly reduced or suspended at the company 's chinese and european facilities for certain periods during the first and second quarters of 2020. the company also initiated several cost reduction measures designed to ease liquidity pressure . these cost containment actions included spending and travel restrictions , significant reductions in temporary personnel , furloughs , suspension of incentive compensation and profit sharing , benefit reductions and salary reductions . in addition , the company 14 adjusted production levels at its manufacturing plants to align more closely with the reduced levels of demand , and worked closely with suppliers to help ensure current needs were met while also ensuring continuity as the market improved . story_separator_special_tag these risk factors are discussed in item 1a , `` risk factors , '' of this form 10-k. in addition , changes in the weighted average cost of capital could also impact impairment testing results . the company will continue to monitor its reporting units and asset groups for any indicators of impairment . product liabilities : the company provides for the estimated cost of personal and property damage relating to its products based on a review of historical experience and consideration of any known trends . reserves are recorded for estimates of the costs for known claims and estimates of the costs of incidents that have occurred but for which a claim has not yet been reported , up to the stop-loss insurance coverage . while the company engages in extensive product quality reviews and customer education programs , the product liability provision is affected by the number and magnitude of claims of alleged product-related injury and property damage and the cost to defend those claims . in addition , the estimates regarding the magnitude of claims are affected by changes in assumptions regarding medical costs , inflation rates and trends in damages awarded by juries . changes in the assumptions regarding any one of these factors could result in a change in the estimate of the magnitude of claims . a one percent increase in the estimate of the number of claims or the magnitude of claims would increase the product liability reserve and reduce operating profit by approximately $ 0.1 million to $ 0.5 million . although there can be no assurances , the company is not aware of any circumstances that would be reasonably likely to materially change the estimates in the future . self-insurance liabilities : the company is generally self-insured for product liability , environmental liability and medical and workers ' compensation claims . for product liability , catastrophic insurance coverage is retained for potentially significant individual claims . the company also has insurance for certain historic product liability claims . an estimated provision for claims reported and for claims incurred but not yet reported under the self-insurance programs is recorded and revised periodically based on industry trends , historical experience and management judgment . in addition , industry trends are considered within management 's judgment for valuing claims . changes in assumptions for such matters as legal judgments and settlements , legal defense costs , inflation rates , medical costs and actual experience could cause estimates to change in the near term . changes in any of these factors could materially change the estimates for these self-insurance obligations causing a related increase or decrease in reported net operating results in the period of change in the estimate . product warranties : the company provides for the estimated cost of product warranties at the time revenues are recognized . while the company engages in extensive product quality programs and processes , including actively monitoring and evaluating the quality of component suppliers , the warranty obligation is affected by product failure rates , labor costs and replacement component costs incurred in correcting a product failure . if actual product failure rates , labor costs or replacement component costs differ from the company 's estimates , which are based on historical failure rates and consideration of known trends , revisions to the estimate of the cost to correct product failures would be required . if the estimate of the cost to correct product failures were to increase by one percent over 2020 levels , the reserves for product warranties would increase and additional expense of $ 3.6 million would be incurred . the company 's past results of operations have not been materially affected by a change in the estimate of product warranties and although there can be no assurances , the company is not aware of any circumstances that would be reasonably likely to materially change the estimates in the future . revenue recognition : revenue is recognized when obligations under the terms of a contract with the customer are satisfied which occurs when control of products or services are transferred to the customer . revenue is measured as the amount of consideration expected to be received in exchange for transferring goods or providing services . the satisfaction of performance obligations under the terms of a revenue contract generally gives rise for the right to payment from the customer . the company 's standard payment terms vary by the type and location of the customer and the products or services offered . generally , the time between when revenue is recognized and when payment is due is not significant . given the insignificant days between revenue recognition and receipt of payment , financing components do not exist between the company and its customers . taxes collected from customers are excluded from revenue . the estimated costs of product warranties are recognized as expense when the products are sold . see note 16 for further information on product warranties . the majority of the company 's sales contracts contain performance obligations satisfied at a point in time when title and risks and rewards of ownership have transferred to the customer . revenue for service contracts are recognized as the services are provided . see note 3 for further information on revenue recognition . retirement benefit plans : the company maintains various defined benefit pension plans that provide benefits based on years of service and average compensation during certain periods . pension benefits are frozen for all employees other than certain employees in the netherlands . all other eligible employees , including employees whose pension benefits are frozen , receive retirement benefits under defined contribution retirement plans . the company 's policy is to periodically make contributions to fund the defined benefit pension plans within the range allowed by applicable regulations . the defined benefit pension plan assets consist primarily of publicly traded stocks and government and corporate bonds .
| consolidated financial review the following table identifies the components of change for 2020 compared with 2019 by segment : replace_table_token_4_th 17 financial review the segment and geographic results of operations for the company were as follows for the year ended december 31 : replace_table_token_5_th 18 favorable / ( unfavorable ) % change 2020 2019 2020 vs. 2019 net income ( loss ) attributable to stockholders americas $ 71.6 $ 61.2 17.0 % emea 5.6 9.0 ( 37.8 ) % japic ( 14.3 ) ( 11.9 ) ( 20.2 ) % lift truck business 62.9 58.3 7.9 % bolzoni 0.2 2.8 ( 92.9 ) % nuvera ( 25.6 ) ( 25.2 ) ( 1.6 ) % eliminations ( 0.4 ) ( 0.1 ) n.m. $ 37.1 $ 35.8 3.6 % diluted earnings per share $ 2.21 $ 2.14 3.3 % reported income tax rate 8.8 % 23.6 % n.m. - not meaningful following is the detail of the company 's unit shipments , bookings and backlog of unfilled orders placed with its manufacturing and assembly operations for new lift trucks , reflected in thousands of units . as of december 31 , 2020 , substantially all of the company 's backlog is expected to be sold within the next twelve months . replace_table_token_6_th the following is the detail of the approximate sales value of the company 's lift truck unit bookings and backlog , reflected in millions of dollars . the dollar value of bookings and backlog is calculated using the current unit bookings and backlog and the forecasted average sales price per unit .
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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 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 . 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 health care providers . 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 intend to elect and qualify to be taxed as a reit for federal income tax purposes commencing with our short taxable year ending december 31 , 2013. we completed our ipo and related formation transactions on july 24 , 2013 , issuing 11,753,597 common shares , including shares issued upon exercise of the underwriters ' over-allotment option , and received net proceeds of approximately $ 123.8 million , after deducting the underwriting discounts and expenses of the ipo payable by us . we contributed the net proceeds of the ipo to our operating partnership in exchange for 11,753,597 op units . our operating partnership used the net proceeds of the ipo to repay approximately $ 36.9 million of outstanding indebtedness related to properties in our initial portfolio and to purchase the 50 % interest in the arrowhead common property not owned by the ziegler funds for approximately $ 850,000 , after which we became the 100 % owner of that property , and to pay certain expenses related to debt and transfer and our senior secured revolving credit facility . prior to completion of our ipo on july 24 , 2013 , we had no operations or assets , other than $ 1,000 of cash from our initial capitalization . we acquired 19 properties upon the completion of our ipo and related formation transactions on july 24 , 2013. since the completion of our ipo , we have acquired 8 additional properties containing an aggregate of 377,295 square feet . at december 31 , 2013 , our portfolio consisted of 27 properties located in 13 states with approximately 901,343 net leasable square feet , which were approximately 90.1 % leased with a weighted average remaining lease term of approximately 9.3 years . we receive a cash rental stream from these healthcare providers under our leases . approximately 98.4 % of the annualized base rent payments from our properties as of december 31 , 2013 are from 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 . we seek to structure our triple net leases to generate attractive returns on a long-term basis . our leases typically have initial terms of 5 to 15 years and include annual rent escalators of approximately 2 % . our operating results depend significantly upon the ability of our tenants to make required rental payments . we believe that our portfolio of medical office buildings and other healthcare facilities will enable us to generate stable cash flows over time because of the diversity of our tenants , staggered lease expiration schedule , long-term leases , and low historical occurrence of tenants defaulting under their leases . as of december 31 , 2013 , leases representing 3.2 % , 1.4 % and 4.8 % of leasable square feet in our portfolio will expire in 2014 , 2015 and 2016 , respectively . we did not conduct business operations prior to completion of our ipo on july 24 , 2013 , therefore , the financial information herein for periods prior to july 24 , 2013 reflects the operations of the four healthcare real estate funds managed by ziegler , which we refer to as the ziegler funds , from whom we acquired the equity interests in the 19 properties that constituted our initial properties upon completion of our ipo and formation transactions . we determined the ziegler funds to be our accounting predecessor . the financial information herein since july 24 , 2013 reflect our operations since completion of the ipo and formation transactions and include the results of operations of the eight acquisition properties described below from the date of our acquisition . 68 we are a self-managed reit and conduct our operations through our operating partnership and wholly-owned subsidiaries of our operating partnership . we have entered into a $ 75 million senior secured revolving credit facility and intend to use borrowings under the facility to finance future acquisitions and developments , fund tenant improvements , leasing commissions to third parties , capital expenditures , provide for working capital and for other general corporate purposes . story_separator_special_tag on january 29 , 2014 , through our operating partnership , we entered into an agreement of sale and purchase with octopods , llc to purchase an approximately 45,200 square foot medical official building known as the south bend orthopaedics medical office building , located in mishawaka , indiana for $ 14.9 million payable in cash less approximately $ 8.5 million in assumed debt . the closing is subject to customary conditions , including accuracy of representations , satisfaction of a due diligence investigation and consent of the lender to assumption of the debt . on february 19 , 2014 , through our operating partnership , we closed on the acquisition of the eagles landing family practice medical office buildings located in mcdonough , jackson and conyers , georgia . the four medical office buildings occupy approximately 68,711 square feet , are 100 % occupied as of february 19 , 2014 and were acquired for approximately $ 20.8 million in cash . see part i , item 1. business - recent developments for a further discussion of this acquisition . on february 19 , 2014 , through our operating partnership , we entered into and closed an agreement of sale and purchase with foundation bariatric real estate of san antonio , lllp to purchase a surgical hospital located in san antonio , texas . the hospital occupies approximately 46,000 square feet , is 100 % occupied as of february 19 , 2014 and was acquired for approximately $ 18.9 million in cash minus an amount equal to the principal balance , accrued interest and fees related to certain indebtedness with respect the surgical hospital to be assumed by the company at the closing . as of february 19 , 2014 , the principal balance of such debt was approximately $ 10.8 million . the surgical hospital is leased to foundation bariatric hospital of san antonio , l.l.c . in addition , on february 28 , 2014 , through our operating partnership , we acquired a medical office building nearby the hospital in san antonio , texas for $ 6.8 million in cash from an affiliate of the seller of the hospital . the building is 100 % occupied as of february 28 , 2014. on february 21 , 2014 , through our operating partnership , as borrower , and we and certain of our subsidiaries , as guarantors , entered into the second incremental commitment agreement and third amendment to the existing credit agreement dated august 29 , 2013 with regions bank , as administrative agent , regions capital markets , as sole lead arranger and sole book runner , and various other lenders ( the credit agreement ) , pursuant to which we agreed with the lenders to increase the borrowing capacity under the senior secured revolving credit facility from $ 90 million to $ 140 million . all other material terms of the credit agreement remain substantially unchanged . subject to satisfaction of certain conditions , including additional lender commitments , we have the option to increase the borrowing capacity under the senior secured revolving credit facility to up to $ 250 million . on february 26 , 2014 , through our operating partnership , we closed on the acquisition of four medical office buildings located in sarasota , venice , engelwood and port charlotte , florida from entities primarily owned by dr. alan porter . the buildings total approximately 44,295 square feet , are 100 % occupied as of february 26 , 2014 and were acquired for approximately $ 17.5 million in cash . the buildings are leased to 21st century oncology , the nation 's largest provider of advanced oncology radiation therapy and other integrated cancer care services . the buildings were acquired pursuant to an agreement of sale and purchase , dated as of february 10 , 2014 , by and between those sellers set forth in exhibit a thereto , and our operating partnership . on february 28 , 2014 , through our operating partnership , we entered into and closed an agreement of sale and purchase with north american property corporation to acquire an approximately 131,000 square foot medical office building known as the peachtree dunwoody medical center , located in atlanta , georgia for approximately $ 36.6 70 million in cash and payment of approximately $ 3 million in prepayment penalties related to the prepayment of the seller 's indebtedness secured by the property . components of our revenues , expenses and cash flow the financial information of our predecessor , the ziegler funds , prior to completion of the ipo , reflects a different structure , principally relating to expenses , than our operations following the inception of operations upon completion of our ipo and as a result , the results of operations of the predecessor and our results since our inception of operations may not be comparable . while the financial presentation of revenues pursuant to the leases at the properties in our initial portfolio and certain expenses , such as depreciation and amortization , are substantially consistent for the predecessor and for us , the expense structure of our company since completion of the ipo and the formation transactions differs from the historical expense structure of the predecessor . during the periods of financial information for the predecessor , the ziegler funds had no direct employees and paid a fixed annual management fee to ziegler , which managed the operations of the ziegler funds . by contrast , as a self-managed reit , we do not pay management fees to third parties ( other than to third party property management companies with respect to certain of our properties ) but rather we pay cash and other forms of compensation to our officers and employees . also , effective upon completion of the formation transactions , we entered into a shared services agreement with ziegler pursuant to which we pay ziegler a fixed annual fee for office space , it support , accounting support and similar services .
| results of operations overview as described above , following the completion of the ipo and the formation transactions , our structure and operations differ from the historical structure and operations of the ziegler funds . for this and other reasons set forth in management 's discussion and analysis of financial condition and results of operations , we do not believe that the predecessor 's historical results of operations are indicative of our future operating results . year ended december 31 , 2013 compared to the year ended december 31 , 2012 we were organized on april 9 , 2013 and commenced operations on july 24 , 2013. the 2013 results disclosed in this section include our results from july 24 , 2013 through december 31 , 2013 , combined with the results of our predecessor from january 1 , 2013 through july 23 , 2013. comparative results reflect only the results of the predecessor . the following table summarizes our historical results of operations and the historical operations of our predecessor for the year ended december 31 , 2013 compared to the year ended december 31 , 2012 ( in thousands ) : replace_table_token_9_th nm = not meaningful revenues total revenues increased $ 3.9 million , or 29.8 % , for the year ended december 31 , 2013 as compared to the predecessor 's year ended december 31 , 2012. rental revenues . rental revenues increased $ 3.7 million , or 38.1 % , from $ 9.8 million for the year ended december 31 , 2012 to $ 13.6 million for the year ended december 31 , 2013. the increase in rental revenues primarily resulted from eight property acquisitions which closed in the third and fourth quarters of 2013 and resulted in an additional $ 3.6 million in revenue for the year ended december 31 , 2013. the remaining increase was the result of contract rent increases and new leases within the initial 19 properties . expense recoveries .
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we consider the classification of the underlying hedged story_separator_special_tag cautionary note concerning forward-looking statements the discussion under this caption `` management 's discussion and analysis of financial condition and results of operations '' and elsewhere in this document , including , for example , under the `` risk factors '' and `` business '' captions , includes `` forward-looking statements '' within the meaning of the private securities litigation reform act of 1995. all statements other than statements of historical fact , including statements regarding guidance ( including our expectations for the first quarter and full year of 2016 , our earnings and yield estimates for 2016 set forth under the heading `` outlook '' below and expectations regarding the timing and results of our double-double program ) , business and industry prospects or future results of operations or financial position , made in this annual report on form 10-k are forward-looking . words such as `` anticipate , '' `` believe , '' `` could , '' `` estimate , '' `` expect , '' `` goal , '' `` intend , '' `` may , '' `` plan , '' `` project , '' `` seek , '' `` should , '' `` will , '' and similar expressions are intended to further identify any of these forward-looking statements . forward-looking statements reflect management 's current expectations but they are based on judgments and are inherently uncertain . furthermore , they are subject to risks , uncertainties and other factors , that could cause our actual results , performance or achievements to differ materially from the future results , performance or achievements expressed or implied in those forward-looking statements . examples of these risks , uncertainties and other factors include , but are not limited to , those discussed in this annual report on form 10-k and , in particular , the risks discussed under the caption `` risk factors '' in part i , item 1a of this report . all forward-looking statements made in this annual report on form 10-k speak only as of the date of this document . given these risks and uncertainties , readers are cautioned not to place undue reliance on such forward-looking statements . we undertake no obligation to publicly update or revise any forward-looking statements , whether as a result of new information , future events or otherwise . overview the discussion and analysis of our financial condition and results of operations have been organized to present the following : a review of our critical accounting policies and of our financial presentation , including discussion of certain operational and financial metrics we utilize to assist us in managing our business ; a discussion of our results of operations for the year ended december 31 , 2015 compared to the same period in 2014 and the year ended december 31 , 2014 compared to the same period in 2013 ; a discussion of our business outlook , including our expectations for selected financial items for the first quarter and full year of 2016 ; and a discussion of our liquidity and capital resources , including our future capital and contractual commitments and potential funding sources . critical accounting policies our consolidated financial statements are prepared in accordance with accounting principles generally accepted in the united states of america ( `` gaap '' ) . ( refer to note 1. general and note 2. summary of significant accounting policies to our consolidated financial statements under item 8. financial statements and supplementary data ) . certain of our accounting policies are deemed `` critical , '' as they require management 's highest degree of judgment , estimates and assumptions . we have discussed these accounting policies and estimates with the audit committee of our board of directors . we believe our most critical accounting policies are as follows : ship accounting our ships represent our most significant assets and are stated at cost less accumulated depreciation and amortization . depreciation of ships is generally computed net of a 15 % projected residual value using the straight-line method over the estimated useful life of the asset , which is generally 30 years . the 30-year useful life of our newly constructed ships and 15 % associated residual value are both based on the weighted-average of all major components 37 of a ship . our useful life and residual value estimates take into consideration the impact of anticipated technological changes , long-term cruise and vacation market conditions and historical useful lives of similarly-built ships . in addition , we take into consideration our estimates of the weighted-average useful lives of the ships ' major component systems , such as hull , superstructure , main electric , engines and cabins . given the very large and complex nature of our ships , our accounting estimates related to ships and determinations of ship improvement costs to be capitalized require considerable judgment and are inherently uncertain . we do not have cost segregation studies performed to specifically componentize our ship systems . therefore , we estimate the costs of component systems based principally on general and technical information known about major ship component systems and their lives and our knowledge of the cruise vacation industry . we do not identify and track depreciation by ship component systems , but instead utilize these estimates to determine the net cost basis of assets replaced or refurbished . improvement costs that we believe add value to our ships are capitalized as additions to the ship and depreciated over the shorter of the improvements ' estimated useful lives or that of the associated ship . the estimated cost and accumulated depreciation of replaced or refurbished ship components are written off and any resulting losses are recognized in cruise operating expenses . we use the deferral method to account for drydocking costs . story_separator_special_tag if necessary , goodwill is then written down to its implied fair value . the impairment review for indefinite-life intangible assets consists of a comparison of the fair value of the asset with its carrying amount . we estimate the fair value of our indefinite-life intangible assets , which consist of trademarks and trade names related to pullmantur , using a discounted cash flow model and the relief-from-royalty method . the royalty rate used is based on comparable royalty agreements in the tourism and hospitality industry . the discount rate used is comparable to the rate used in valuing the pullmantur reporting unit in our goodwill impairment test . if the carrying amount exceeds its fair value , an impairment loss is recognized in an amount equal to that excess . if the fair value exceeds its carrying amount , the indefinite-life intangible asset is not considered impaired . other intangible assets assigned finite useful lives are amortized on a straight-line basis over their estimated useful lives . we review our ships , aircraft and other long-lived assets for impairment whenever events or changes in circumstances indicate , based on estimated undiscounted future cash flows , that the carrying amount of these assets may not be fully recoverable . we evaluate asset impairment at the lowest level for which identifiable cash flows are largely independent of the cash flows of other assets and liabilities . the lowest level for which we maintain identifiable cash flows that are independent of the cash flows of other assets and liabilities is at the ship level for our ships and at the aggregated asset group level for our aircraft . if estimated future cash flows are less than the carrying value of an asset , an impairment charge is recognized to the extent its carrying value exceeds fair value . we estimate fair value based on quoted market prices in active markets , if available . if active markets are not available we base fair value on independent appraisals , sales price negotiations and projected future cash flows discounted at a rate estimated by management to be commensurate with the business risk . quoted market prices are often not available for individual reporting units and for indefinite-life intangible assets . accordingly , we estimate the fair value of a reporting unit and an indefinite-life intangible asset using an expected present value technique . 2015 impairment of pullmantur related assets pullmantur is a brand that historically targeted primarily the spanish and latin american markets . these markets have experienced significant volatility and the brand has adopted various changes to its operating strategy as a result . most recently , in response to favorable economic expectations in latin america , especially brazil , management undertook a positioning of the brand to increase sourcing of guests and to deliver deployment for latin american consumers ; transferring newer and more efficient capacity to the brand ; and selling pullmantur 's non-core businesses to allow the brand to focus on the core cruise business . however , the latin american resurgence was short lived and the core latin american economies , including brazil , mexico , argentina and venezuela , have regressed and their currencies have materially depreciated versus the 39 us dollar . most notably , the brazilian real devalued by approximately 22 % relative to the us dollar during the third quarter of 2015. in light of the increased challenges facing pullmantur 's latin american strategy , we made a decision to significantly change that strategy from growing the brand through vessel transfers to a right-sizing strategy during the third quarter of 2015. this right-sizing strategy includes reducing our exposure to latin america , refocusing on the brand 's core market of spain and , consequently , reducing the size of pullmantur 's fleet . this strategic change includes a decision to redeploy pullmantur 's empress to the royal caribbean international brand as well as a decision to cancel the intended transfer of the majesty of the seas to pullmantur . as we previously disclosed , the planned growth of the pullmantur fleet through the transfer of vessels into the brand has been the most significant assumption within pullmantur 's projected cash flows supporting the recoverability of the pullmantur reporting unit 's goodwill and trademarks and trade names . our decision to reduce the size of pullmantur 's fleet significantly decreases the cash flow projections which have been the basis of our impairment analysis . as a result of these developments , we performed an interim impairment evaluation of pullmantur 's goodwill and trademarks and trade names in connection with the preparation of our financial statements during the quarter ended september 30 , 2015. due to the previously described market conditions and our recent decision to reduce our exposure to latin america , refocus on the brand 's core spanish market and reduce the brand 's overall capacity , we reviewed the two-step goodwill impairment test based on the updated cash flow projections . as a result of this analysis , we determined that the carrying value of the pullmantur reporting unit exceeded its fair value . similarly , we determined that the carrying value of pullmantur 's trademarks and trade names exceeded their fair value as well . accordingly , upon the completion of the two-step impairment test , we recognized impairment charges of $ 123.8 million and $ 174.3 million for goodwill and trademark and trade names , respectively , during the quarter ended september 30 , 2015. these charges reflected the full carrying amounts of the goodwill and trademark and trade names leaving pullmantur with no intangible assets on its books . additionally , in conjunction with performing the two-step goodwill impairment test , we identified that the estimated fair value of certain long-lived assets , consisting of two ships and three aircraft , were less than their carrying values . as a result of this determination , we evaluated these assets pursuant to our long-lived asset impairment test .
| results of operations in addition to the items discussed above under `` executive overview , '' significant items for 2015 include : the effect of changes in foreign currency exchange rates related to our passenger ticket and onboard and other revenue transactions and cruise operating expenses denominated in currencies other than the us dollar resulted in a decrease to total revenues of $ 384.4 million for the year ended december 31 , 2015 compared to the same period in 2014 and a decrease to cruise operating expenses of $ 157.6 million for the year ended december 31 , 2015 compared to the same period in 2014 ; total revenues and total expenses decreased $ 38.1 million and $ 40.4 million , respectively , for the year ended december 31 , 2015 compared to the same period in 2014 due to sale of pullmantur 's non-core businesses in 2014. total revenues , excluding the unfavorable effect of changes in foreign currency exchange rates and the decrease in revenues from the sale of pullmantur 's non-core businesses discussed above , increased 8.0 % for the year ended december 31 , 2015 compared to the same period in 2014 primarily due to an increase in overall capacity and ticket prices . total cruise operating expenses , excluding the favorable effect of changes in foreign currency exchange rates and the decrease in cruise operating expenses from the sale of pullmantur 's non-core businesses discussed above , remained consistent for the year ended december 31 , 2015 as compared to the same period in 2014. as of september 30 , 2014 , we changed our voyage proration methodology and recognized passenger ticket revenues , revenues from onboard and other goods and services and all associated cruise operating costs for all of our uncompleted voyages on a pro-rata basis .
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following is story_separator_special_tag management 's discussion and analysis of financial condition and results of operations ( md & a ) is designed to provide information that is supplemental to , and shall be read together with , the consolidated financial statements and the accompanying notes contained in this form 10-k. information in md & a is intended to assist the reader in obtaining an understanding of the consolidated financial statements , information about the company 's business segments and how the results of those segments impact the company 's results of operations and financial condition as a whole , and how certain accounting principles affect the company 's consolidated financial statements . executive summary the company is a leading global manufacturer and supplier of ( i ) safety , security and communication equipment , ( ii ) street sweepers and other environmental vehicles and equipment , and ( iii ) vehicle-mounted , aerial platforms for fire fighting , rescue , electric utility and industrial uses . we also are a designer and supplier of technology-based products and services for the public safety market . in addition , we sell parts and tooling and provide service , repair , equipment rentals and training as part of a comprehensive offering to our customer base . we operate 11 manufacturing facilities in six countries around the world and provide our products and integrated solutions to municipal , governmental , industrial and commercial customers in approximately 100 countries in all regions of the world . the company 's business units are organized and managed in three operating segments as follows : safety and security systems group our safety and security systems group is a leading manufacturer and supplier of comprehensive systems and products that law enforcement , fire rescue , emergency medical services , campuses , military facilities and industrial sites use to protect people and property . offerings include systems for campus and community alerting , emergency vehicles , public safety interoperable communications , industrial communications and command and municipal networked security . specific products include vehicle lightbars and sirens , public warning sirens and public safety software . products are sold primarily under the federal signal , federal signal vama , target tech ® and victor brand names . the group operates manufacturing facilities in north america , europe , and south africa . 16 fire rescue group our fire rescue group is a leading manufacturer and supplier of sophisticated , vehicle-mounted , aerial platforms for fire fighting , rescue , electric utility and industrial uses . end customers include fire departments , industrial fire services , electric utilities and maintenance rental companies for applications such as fire fighting and rescue , transmission line maintenance , and installation and maintenance of wind turbines . the group 's telescopic/articulated aerial platforms are designed in accordance with various regulatory codes and standards , such as en , nfpa and ansi . in addition to equipment sales , the group sells parts , service and training as part of a complete offering to its customer base . the group manufactures in finland and sells globally under the bronto skylift ® brand name . environmental solutions group our environmental solutions group is a leading manufacturer and supplier of a full range of street sweeper and vacuum trucks and high-performance waterblasting equipment for municipal and industrial customers . we also manufacture products for the newer markets of hydro-excavation , glycol recovery and surface cleaning for utility and industrial customers . products are sold under the elgin ® , vactor ® , guzzler ® and jetstream brand names . the group primarily manufactures its vehicles and equipment in the united states . under the elgin brand name , the company sells the leading u.s. brand of street sweepers primarily designed for large-scale cleaning of curbed streets , parking lots and other paved surfaces utilizing mechanical sweeping , vacuum , and recirculating air technology . vactor is a leading manufacturer of municipal combination catch basin/sewer cleaning vacuum trucks . guzzler is a leader in industrial vacuum loaders used to manage industrial waste or recover and recycle valuable raw materials . jetstream manufactures high pressure waterblast equipment and accessories for commercial and industrial cleaning and maintenance operations . in addition to equipment sales , the group is increasingly engaged in the sale of parts and tooling , service and repair , equipment rentals and training as part of a complete offering to its customer base . story_separator_special_tag financing agreements as of february 2012. for further discussion of the debt agreements , refer to note 5 to the consolidated financial statements contained under item 8 of part ii of this form 10-k. other expense totaled $ 0.2 million in 2011 and $ 1.2 million in 2010 and primarily includes realized losses from foreign currency transactions and on derivative contracts . the 2011 effective tax rate on income from continuing operations decreased primarily due to aggregate tax expense of $ 76.0 million relating to a domestic valuation allowance recorded in 2010. the company 's 2011 effective tax rate of 21.1 % reflects no recorded tax benefits for domestic operating losses or domestic loss carryforwards . however , an income tax provision is recorded for foreign operations and other jurisdictions that are not in a cumulative loss position . 19 income from continuing operations was $ 13.1 million in 2011 compared to a loss of $ 74.1 million in 2010. the increase of $ 87.2 million was primarily due to the absence of the $ 76.0 million tax expense related to establishing the domestic valuation allowance in 2010 and from other changes in operating income as described above . loss from discontinued operations and disposal , net of tax , was $ 27.3 million in 2011 and $ 101.6 million in 2010. for 2011 , $ 20.6 million was related to goodwill and intangibles impairment charges for the discontinued fstech group and $ 6.7 million was related to the loss from operations of the discontinued fstech group . story_separator_special_tag there were no restructuring costs recorded in 2011 , while $ 1.7 million of restructuring charges were incurred in 2010. fire rescue the following table presents the fire rescue group 's results of operations for each of the three years in the period ended december 31 ( $ in millions ) : replace_table_token_8_th orders in 2012 decreased $ 1.1 million or 1 % compared to the prior year . net sales in 2012 increased $ 25.6 million or 23 % compared to the prior year , primarily due to increased sales volume of $ 28.8 million , pricing increases of $ 2.5 million , and favorable product mix of $ 4.8 million , partially offset by unfavorable currency impacts of $ 10.5 million . cost of sales in 2012 increased $ 20.7 million or 24 % compared to the prior year due to increased sales volume impacts of $ 22.3 million and product mix of $ 6.7 million , partially offset by favorable currency impacts of $ 8.3 million . 21 operating income in 2012 increased $ 2.3 million or 35 % compared to the prior year primarily due to higher sales volumes impacts of $ 6.5 million , partially offset by higher selling , engineering , general and administrative ( sg & a ) expenses of $ 1.5 million , unfavorable product mix of $ 2.0 million , and unfavorable currency impacts of $ 0.7 million . orders in 2011 increased $ 36.3 million or 36 % compared to the prior year , primarily as a result of strong demand for fire-lift products in asia and australia , partially offset by lower demand for industrial products in europe . net sales in 2011 increased $ 0.7 million or 1 % compared to the prior year , primarily due to favorable currency impacts of $ 5.3 million and favorable product mix of $ 1.8 million . these increases were offset by lower pricing attributable to sales commissions of $ 0.5 million and lower sales volume in local currency of $ 5.9 million . the decline in sales volume was primarily due to lower demand for fire-lift products in europe . cost of sales in 2011 increased $ 4.9 million or 6 % compared to the prior year . the increase primarily resulted from unfavorable product mix impacts of $ 5.0 million and unfavorable currency impacts of $ 4.3 million , partially offset by decreased sales volumes impacts of $ 4.4 million . the unfavorable product mix of $ 5.0 million includes higher purchase costs for chassis of $ 1.7 million and other product mix impacts of $ 3.3 million . operating income in 2011 decreased $ 2.8 million or 30 % compared to the prior year . the decrease was primarily due to unfavorable product mix impacts of $ 3.1 million and lower sales volumes impacts of $ 1.5 million , partially offset by lower sg & a expenses of $ 1.5 million and favorable currency impacts of $ 0.3 million . environmental solutions the following table presents the environmental solutions group 's results of operations for each of the three years in the period ended december 31 ( $ in millions ) : replace_table_token_9_th orders in 2012 decreased $ 10.6 million or 2 % compared to the prior year . u.s. orders decreased $ 13.2 million or 4 % from the prior year , primarily due to decreases in vacuum trucks of $ 35.1 million and sweepers of $ 2.7 million , partially offset by increases in sewer cleaners of $ 14.4 million and waterblasters of $ 8.6 million . non-u.s. orders increased $ 2.6 million or 3 % compared to the prior year , with increases in u.s. export orders to canada and asia . net sales in 2012 increased $ 70.0 million or 20 % compared to the prior year . u.s. sales increased $ 56.7 million with increases in all product lines as a result of strong opening backlog and solid orders during the year . non-u.s. sales were up $ 13.3 million , resulting from an increase in shipments to canada and asia , partially offset by declines in shipments to the middle east . cost of sales in 2012 increased $ 51.1 million or 17 % over the prior year . increases in cost of sales were primarily associated with volume increases of $ 56.2 million , partially offset by favorable product mix of $ 5.1 million between domestic and international markets . 22 operating income in 2012 increased $ 17.5 million or 71 % , primarily as a result of higher gross margins of $ 18.9 million , partially offset by increased sg & a expenses of $ 1.4 million . the increase in sg & a expenses was related to additional commission expense associated with increased sales and increases in salary and benefit programs . orders in 2011 increased $ 130.3 million or 40 % compared to the prior year . u.s. orders increased $ 100.8 million or 37 % in 2011 , primarily as a result of increases in orders for vacuum trucks of $ 51.9 million , sewer cleaners of $ 28.3 million , sweepers of $ 12.2 million , and waterblasters of $ 3.6 million . non-u.s. orders increased $ 29.5 million or 52 % from the prior year , with increases in u.s. export orders from canada , mexico and the middle east . all product lines contributed to the overall increase in u.s. export orders . net sales in 2011 increased $ 48.0 million or 15 % compared to the prior year . u.s. sales were up $ 42.4 million , primarily resulting from improvements within the industrial market , which is consistent with vacuum truck order increases . non-u.s. sales were up $ 5.6 million due to improved sweeper and waterblaster sales .
| results of operations orders replace_table_token_5_th orders of $ 826.3 million in 2012 decreased 1 % compared to 2011 as slower demand for industrial vacuum trucks more than offset strong municipal demand for sewer cleaners and market share gains in police and fire markets . u.s. municipal and government orders increased 8 % in 2012 driven by a $ 14.4 million increase in orders for sewer cleaners and a $ 10.4 million increase in police and fire markets and outdoor warning systems . u.s. industrial and commercial orders decreased 7 % primarily due to decreases in industrial vacuum truck orders of $ 35.1 million , partially offset by increased industrial safety and security product orders of $ 5.4 million due to higher market demand and increased waterblaster orders of $ 8.6 million . non-u.s. orders decreased 3 % compared to 2011 with decreases across most segments , partially offset by a $ 2.6 million increase in u.s. export orders to canada and asia . orders of $ 831.4 million in 2011 increased 29 % compared to 2010 with increases across all segments , primarily fueled by strong demand for industrial vacuum trucks and sewer cleaners and improved demand for fire-lift products in asia and australia . u.s. municipal and government orders increased 22 % in 2011 driven by a $ 28.3 million increase in orders for sewer cleaners , $ 12.2 million increase in sweepers and a $ 9.1 million 17 increase in outdoor warning systems , partly offset by soft demand for police products . u.s. industrial and commercial orders increased 36 % due to strong order intake of industrial vacuum trucks and industrial safety and security products . non-u.s. orders increased 30 % compared to 2010 with increases across all segments , primarily led by a $ 35.4 million increase in orders for bronto units and a $ 29.5 million increase in sweeper orders .
| 5,899 |
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