document stringlengths 8.64k 13.4k | summary stringlengths 179 2.97k | __index_level_0__ int64 0 16.8k |
|---|---|---|
such statements reflect the current view of company with respect to future events and are subject to risks , uncertainties , assumptions , and other factors ( including the risks contained in item 1a . “ risk factors ” and the section “ results of operations ” below ) . should one or more of these risks or uncertainties materialize , or should the underlying assumptions prove incorrect , actual results may differ significantly from those anticipated , believed , estimated , expected , intended , or planned . although the company believes that the expectations reflected in the forward-looking statements are based on reasonable assumptions , the company can not guarantee future results , levels of activity , performance , or achievements . except as required by applicable law , including the securities laws of the united states , the company does not intend to update any of the forward-looking statements to conform these statements to actual results . readers are urged to carefully review and consider the various disclosures made throughout the entirety of this annual report , which attempt to advise interested parties of the risks and factors that may affect our business , financial condition , results of operations , and prospects . our financial statements are prepared in us dollars and in accordance with accounting principles generally accepted in the united states . see “ foreign currency translation and comprehensive income ( loss ) ” below for information concerning the exchange rates at which renminbi ( “ rmb ” ) were translated into us dollars ( “ usd ” ) at various pertinent dates and for pertinent periods . overview of business background china recycling energy corporation ( the “ company ” or “ creg ” ) was incorporated on may 8 , 1980 as boulder brewing company under the laws of the state of colorado . on september 6 , 2001 , the company changed its state of incorporation to the state of nevada . in 2004 , the company changed its name from boulder brewing company to china digital wireless , inc. and on march 8 , 2007 , the company again changed its name from china digital wireless , inc. to its current name , china recycling energy corporation . the company , through its subsidiaries , sells and leases energy saving systems and equipment to its customers . typically , the company transfers ownership of the waste energy recycling power generating projects to its customers at the end of each sales-type lease and finances its customers for the cost of the projects as described below . our subsidiaries our business is primarily conducted through our wholly-owned subsidiary , sifang holdings , its wholly-owned subsidiaries , huahong new energy technology co. , ltd. ( “ huahong ” ) and shanghai tch , shanghai tch 's wholly-owned subsidiaries , xi'an tch energy technology company , ltd ( “ xi'an tch ” ) , xi'an tch 's wholly-owned subsidiary erdos tch energy saving development co. , ltd ( “ erdos tch ” ) and xi'an tch 's 90 % owned subsidiary xi'an zhonghong new energy technology co. , ltd. zhonghong is engaged to provide energy saving solutions and services , including constructing , selling and leasing energy saving systems and equipment to customers . 32 the company 's organizational chart is as follows : shanghai tch and its subsidiaries shanghai tch was established as a foreign investment enterprise in shanghai under the laws of the prc on may 25 , 2004 and has a registered capital of $ 29.80 million . xi'an tch was incorporated in xi'an , shaanxi province under the laws of the prc on november 8 , 2007. in february 2009 , huahong was incorporated in xi'an , shaanxi province . erdos tch was incorporated in april 2009 in erdos , inner mongolia autonomous region . on july 19 , 2013 , xi'an tch formed a new company called xi'an zhonghong new energy technology co. , ltd ( “ zhonghong ” ) . xi'an tch owns 90 % of zhonghong , which provides energy saving solutions and services , including constructing , selling and leasing energy saving systems and equipment to customers . as of december 31 , 2013 , shanghai tch had sales or sales-type leases with the following parties : ( i ) zhangzhi ( for one top gas recovery turbine ( “ trt ” ) system ) ; ( ii ) jing yang shengwei ( for one cement waste heat power generator ( “ chpg ” ) system ) ; ( iii ) erdos ( for five recycling waste heat power generating systems ) ; ( iv ) zhongbao ( for one waste heat power generation ( “ whpg ” ) system ) ; ( v ) sinosteel jilin ferroalloys co. , ltd. ( for one waste heat power generation system ( “ whpg ” ) ) ; ( vi ) pucheng ( for two biomass power generation ( “ bmpg ” ) systems ) ; ( vii ) shenqiu ( for two biomass power generation ( “ bmpg ” ) systems ) ; and ( viii ) shanxi datong coal group steel co. , ltd ( for two trt systems ) . the fund management company and the hyref fund on june 25 , 2013 , xi'an tch and hongyuan huifu venture capital co. ltd ( “ hongyuan huifu ” ) jointly established hongyuan recycling energy investment management beijing co. , ltd ( the ” fund management company ” ) with registered capital of rmb 10 million . xi'an tch made an initial capital contribution of rmb 4 million ( $ 650,000 ) and has a 40 % ownership interest in the fund management company . with respect to the fund management company , voting rights and dividend rights are allocated 80 % and 20 % between hongyuan huifu and xi'an tch , respectively . 33 the fund management company serves as the general partner of beijing hongyuan recycling energy investment center , llp ( the “ hyref fund ” ) , a limited liability partnership established on july 18 , 2013 in beijing . story_separator_special_tag as of december 31 , 2013 , the company had construction in progress of $ 17.01 million for the remaining shanxi datong coal group power generation project and is committed to paying an additional $ 3.77 million . the company expects to complete the shanxi datong project by june 2014 . 34 shenqiu yuneng biomass power generation ( “ bmpg ” ) projects on may 25 , 2011 , xi'an tch entered into a letter of intent with shenqiu yuneng thermal power co. , ltd. ( “ shenqiu ” ) to reconstruct and transform a thermal power generation system owned by shenqiu into a 75t/h biomass power generation system for $ 3.57 million ( rmb 22.5 million ) . the project commenced in june 2011 and was completed in the third quarter of 2011. on september 28 , 2011 , xi'an tch entered into a biomass power generation asset transfer agreement with shenqiu ( the “ shenqiu transfer agreement ” ) . pursuant to the shenqiu transfer agreement , shenqiu sold xi'an tch a set of 12 mw biomass power generation systems ( after xi'an tch converted the system for biomass power generation purposes ) . as consideration for the biomass power generation systems , xi'an tch agreed to pay shenqiu $ 10,937,500 ( rmb 70 million ) in cash in three installments within six ( 6 ) months upon the transfer of ownership of the systems . by the end of 2012 , all of the consideration was paid . on september 28 , 2011 , xi'an tch and shenqiu also entered into a biomass power generation project lease agreement ( the “ 2011 shenqiu lease ” ) . under the 2011 shenqiu lease , xi'an tch agreed to lease a set of 12mw biomass power generation systems to shenqiu at a monthly rental rate of $ 286,000 ( rmb 1,800,000 ) for eleven ( 11 ) years . upon expiration of the 2011 shenqiu lease , ownership of this system will be transferred from xi'an tch to shenqiu at no additional cost . in connection with the 2011 shenqiu lease , shenqiu paid one ( 1 ) month 's rent as a security deposit to xi'an tch , in addition to providing personal guarantees . on october 8 , 2012 , xi'an tch entered into a letter of intent for technical reformation of shenqiu project phase ii with shenqiu for technical reformation to enlarge the capacity of the shenqiu project phase i ( the “ shenqui phase ii project ” ) . the technical reformation involved the construction of another 12mw biomass power generation system . after the reformation , the generation capacity of the power plant increased to 24mw . the project commenced on october 25 , 2012 and was completed during the first quarter of 2013. the total cost of the project was $ 11.1 million ( rmb 68 million ) . on march 30 , 2013 , xi'an tch and shenqiu entered into a biomass power generation project lease agreement ( the “ 2013 shenqiu lease ” ) . under the 2013 shenqiu lease , xi'an tch agreed to lease the second set of 12mw biomass power generation systems to shenqiu for $ 239,000 ( rmb 1.5 million ) per month for 9.5 years . when the 2013 shenqiu lease expires , ownership of this system will be transferred from xi'an tch to shenqiu at no additional cost . pucheng biomass power generation ( “ bmpg ” ) projects on september 5 , 2013 , xi'an tch entered into a biomass power generation asset transfer agreement ( the “ pucheng transfer agreement ” ) with pucheng xin heng yuan biomass power generation corporation ( “ pucheng ” ) , a limited liability company incorporated in china . the pucheng transfer agreement provided for the sale by pucheng to xi'an tch of a set of 12mw biomass power generation systems with completion of system transformation for a purchase price of rmb 100,000,000 ( $ 16.48 million ) in the form of 8,766,547 shares of common stock of the company at the price of $ 1.87 per share . also on september 5 , 2013 , xi'an tch also entered into a biomass power generation project lease agreement with pucheng ( the “ pucheng lease ” ) . under the pucheng lease , xi'an tch will lease this same set of 12mw biomass power generation system to pucheng , and combine this lease with the lease for the 12mw biomass power generation station of pucheng phase i project , under a single lease to pucheng for rmb 3,800,000 million ( $ 0.63 million ) per month ( the “ pucheng phase ii project ” ) . the term for the combined lease is from september 2013 to june 2025 , and the lease agreement for the 12mw station from pucheng phase i project terminated upon the execution of the pucheng lease on september 1 , 2013. the ownership of two 12 mw bmpg systems will be transferred to pucheng at no additional charge when the pucheng lease expires . jitie power generation projects in may 2013 , xi'an tch signed a contract with sinosteel jilin ferroalloys co. , ltd. ( “ jitie ” ) to build furnace gas waste heat power generation systems for electricity generation from recycled heat and steam from groups of ferroalloy furnaces and electric furnaces ( the “ jitie project ” ) . according to the contract , xi'an tch will install a 7.5 mw and a 3 mw turbine power generation system with a total of 10.5 mw power capacity for an estimated total investment of $ 9.71 million ( rmb 60 million ) . the lease term is twenty-four ( 24 ) years . during the term of this lease , jitie will pay a service fee to xi'an tch based on the actual generating capacity with a minimum service fee per month of $ 300,000 ( rmb 1.8 million ) . xi'an tch will be responsible for the systems operation and will own the power generation systems . in december 2013 , the jitie project was completed and began operations .
| results of operations comparison of years ended december 31 , 2013 and 2012 the following table sets forth the results of our operations for the periods indicated as a percentage of net sales : replace_table_token_2_th sales . total sales , including system sales and contingent rental income , for the year ended december 31 , 2013 were $ 63.19 million while total sales for the year ended december 31 , 2012 were $ 1.25 million , an increase of $ 61.94 million as a result of increases in the sales of systems . of the total sales , sales of systems for the year ended december 31 , 2013 were $ 62.01 million , as compared to $ 0 for the year ended december 31 , 2012 , an increase of $ 62.01 million . for the year ended december 31 , 2013 , shenqiu phase ii project , datong project , pucheng biomass phase ii project and jitie project were completed and sold . in comparison , in the year ended december 31 , 2012 , none of the company 's power generation system were completed and sold . for the year ended december 31 , 2013 , the company received contingent rental income of $ 1.18 million from the usage of electricity in addition to the minimum lease payments , compared to $ 1.25 million for the year ended december 31 , 2012. for the sales-type lease , sales and cost of sales ( “ cos ” ) are recorded at the time of the lease ; in addition to sales revenue , our other major source of revenue is interest income from the sales-type leases . cost of sales . cos for the year ended december 31 , 2013 was $ 47.85 million while our cos for the year ended december 31 , 2012 was $ 0 , an increase of $ 47.85 million . this increase was mainly due to the completion and sale of the shenqiu phase ii , datong project , pucheng biomass phase ii project and jitie project . gross profit .
| 7,100 |
we intend to increase the volume of feedstock we aggregate from third-party collectors by expanding our existing relationships and developing new vendor relationships . we believe that our ability to acquire large feedstock volumes will help to cultivate new vendor relationships because collectors often prefer to work with a single , reliable customer rather than manage multiple relationships and the uncertainty of excess inventory . broaden existing customer relationships and secure new large accounts . we intend to broaden our existing customer relationships by increasing sales of used motor oil and re-refined products to these accounts . in some cases , we may also seek to serve as our customers ' primary or exclusive supplier . we also believe that as we increase our supply of feedstock and re-refined products that we will secure larger customer accounts that require a partner who can consistently deliver high volumes . re-refine higher value end products . we intend to develop , lease , or acquire technologies to re-refine our feedstock supply into higher-value end products . we believe that the expansion of our facilities and our technology , and investments in additional technologies , will enable us to upgrade feedstock into end products , such as lubricating base oil , that command higher market prices than the current re-refined products we produce . pursue selective strategic relationships or acquisitions . we plan to grow market share by consolidating feedstock supply through partnering with or acquiring collection and aggregation assets . such acquisitions and or partnerships could increase our revenue and provide better control over the quality and quantity of feedstock available for resale and or upgrading as well as providing additional locations for the implementation of tcep , if we deem such commercially reasonable . in addition , we intend to pursue further vertical integration opportunities by acquiring complementary recycling and processing technologies where we can realize synergies by leveraging our customer and vendor relationships , infrastructure , and personnel , and by eliminating duplicative overhead costs . story_separator_special_tag , as compared to the same period in 2016 . replace_table_token_4_th 56 each of our segments ' gross profit during the three months ended december 31 , 2017 and 2016 were as follows : replace_table_token_5_th total revenues increased 33 % for the fourth quarter of 2017 , compared to the same period in 2016 , due primarily to higher commodity prices as well as increased volumes of product produced during the fourth quarter 2017 at our marrero and heartland facilities compared to the same period in 2016 . total volume decreased 1 % ; however gross profit increased 61 % for the three months ended december 31 , 2017 compared to 2016 . additionally , our per barrel margin increased 62 % relative to the three months ended december 31 , 2016 . the majority of this increase was the result of the improvements in our finished product pricing during the fourth quarter of 2017 which resulted in positive gross profit during this period . in our collection division we successfully maintained a charge for services program . as a result of this program we currently have customers who are charged for each service performed and others who are charged a monthly fee for as many services performed in that month . the combination of our fee structure change along with our increased third party supply we were able to make progress in lowering our cost of feedstock during the fourth quarter . our black oil division 's volume increased approximately 4 % during the three months ended december 31 , 2017 compared to the same period in 2016 . this increase was due to the increase in production at our marrero and heartland facilities during the three months ended december 31 , 2017 . overall volume for the refining and marketing division increased 1 % during the three month period ended december 31 , 2017 as compared to the same period in 2016 . this division experienced an increase in production of 7 % for its gasoline blendstock for the three months ended december 31 , 2017 , compared to the same period in 2016 . our fuel oil cutter volumes were unchanged for the three months ended december 31 , 2017 , compared to the same period in 2016 . our pygas volumes decreased 1 % for the three months ended december 31 , 2017 as compared to the same period in 2016 . during the three months ended december 31 , 2017 , our refining and marketing cost of revenues were $ 4,222,872 of which the processing costs for our refining and marketing business located at kmtex were $ 502,142. revenues for the same period were $ 4,660,406 while gross profit from operations was $ 437,534 . during the three months ended december 31 , 2016 , our refining and marketing cost of revenues were $ 2,893,913 , which included the processing costs at kmtex of $ 479,608. revenues for the same period were $ 3,168,730 , while gross profit from operations was $ 274,817 . in addition , commodity prices increased approximately 29 % for the three months ended december 31 , 2017 , compared to the same period in 2016 . the average posting ( u.s. gulfcoast residual fuel no . 6 3 % ) for the three months ended december 57 31 , 2017 increased $ 11.76 per barrel from a three month average of $ 41.16 per barrel during the three months ended december 31 , 2016 to $ 52.92 per barrel during the three months ended december 31 , 2017 . overall gross profit increased 61 % and our margin per barrel increased approximately 62 % for the three months ended december 31 , 2017 , compared to the same period in 2016 . story_separator_special_tag the average posting ( u.s. gulfcoast no . 2 waterborne ) during 2017 increased $ 12.43 per barrel from $ 51.00 per barrel for the year ended december 31 , 2016 to $ 63.43 per barrel for the year ended december 31 , 2017. our pygas production increased 53 % for the year ended december 31 , 2017 , compared to the same period in 2016 and commodity prices decreased approximately 20 % for our pygas finished product for 2017 , compared to the same period in 2016 . our gasoline blendstock volumes decreased 20 % for the year ended december 31 , 2017 as compared to 2016 . the average posting ( u.s. gulfcoast unleaded 87 waterborne ) during 2017 increased $ 0.27 per gallon from $ 1.35 per gallon for 2016 to $ 1.62 per gallon during 2017. the overall increase in revenues associated with our refining and marketing division was due to increases in volumes as well as commodity prices for the year ended december 31 , 2017 . overall volume for the refining and marketing division increased 21 % during the year ended december 31 , 2017 , compared to the year ended december 31 , 2016 . margins per barrel decreased in the refining and marketing division as a result of market conditions during the first half of 2017. during the year ended december 31 , 2017 , our refining and marketing cost of revenues were $ 18,444,945 , of which the processing costs for our refining and marketing business located at kmtex were $ 2,331,719. revenues for the same period were $ 20,097,325 while gross profit from operations was $ 1,652,380 . during the year ended december 31 , 2016 , our refining and marketing cost of revenues were $ 10,772,867 , which included the processing costs at kmtex of $ 1,992,433. revenues for the same period were $ 13,154,777 while gross profit was $ 2,381,910 . our tcep technology was not operated during the years ended december 31 , 2017 and 2016 producing finished product due to market conditions . the tcep process is currently being utilized as a pre-treatment for the used motor oil being purchased in the texas market and then being sent to our marrero , louisiana facility . we currently do not have an estimate as to when or if we may utilize this technology for the production of finished cutterstock in the future . our recovery division includes the business operations of vertex recovery management . revenues for this division increased during 2017 as compared to the same period in 2016 . this division periodically participates in project work that is not ongoing , thus we expect to see fluctuations in revenue and gross profit from period to period . these projects are typically bid related and can take time to line out and get going ; however we believe these are very good projects for the company and we anticipate more in the upcoming periods . prevailing prices of certain commodity products can significantly impact our revenues and cash flows . as noted above the revenue variances from fiscal 2016 to 2017 were largely impacted due to the changes in commodity pricing between the two periods as detailed below . the following table sets forth the high and low spot prices during 2017 for our key benchmarks . 2017 benchmark high date low date u.s. gulfcoast no . 2 waterborne ( dollars per gallon ) $ 1.89 december 29 $ 1.22 june 23 u.s. gulfcoast unleaded 87 waterborne ( dollars per gallon ) $ 2.06 august 31 $ 1.41 june 22 u.s. gulfcoast residual fuel no . 6 3 % ( dollars per barrel ) $ 57.37 november 6 $ 39.42 june 21 nymex crude oil ( dollars per barrel ) $ 60.42 december 29 $ 42.53 june 21 reported in platt 's us marketscan ( gulf coast ) 61 the following table sets forth the high and low spot prices during 2016 for our key benchmarks . 2016 benchmark high date low date u.s. gulfcoast no . 2 waterborne ( dollars per gallon ) $ 1.55 december 30 $ 0.78 january 20 u.s. gulfcoast unleaded 87 waterborne ( dollars per gallon ) $ 1.73 december 29 $ 0.89 february 9 u.s. gulfcoast residual fuel no . 6 3 % ( dollars per barrel ) $ 47.50 december 30 $ 16.24 january 19 nymex crude oil ( dollars per barrel ) $ 54.06 december 28 $ 26.21 february 9 reported in platt 's us marketscan ( gulf coast ) we saw on average a fairly stable market in each of the benchmark commodities we track during 2017 and 2016 . during the first half of 2016 and 2017 , the commodity markets experienced a steady increase due to overall global economic conditions mostly related to supply and demand for the products we track , and their improvement throughout the second half of 2016. our margins are a function of the difference between what we are able to pay for raw materials and the market prices for the range of products produced . the various petroleum products produced are typically a function of crude oil indices and are quoted on multiple exchanges such as the new york mercantile exchange ( “ nymex ” ) . these prices are determined by a global market and can be influenced by many factors , including but not limited to supply/demand , weather , politics , and global/regional inventory levels . as such , we can not provide any assurances regarding results of operations for any future periods , as numerous factors outside of our control affect the prices paid for raw materials and the prices ( for the most part keyed to the nymex ) that can be charged for such products . additionally , for the near term , results of operations will be subject to further uncertainty , as the global markets and exchanges , including the nymex , continue to experience volatility .
| results of operations description of material financial line items : revenues we generate revenues from three existing operating divisions as follows : black oil - revenues for our black oil division are comprised primarily of product sales from our re-refineries and feedstock sales ( used motor oil ) which are purchased from generators of used motor oil such as oil change shops and garages , as well as a network of local and regional suppliers . volumes are consolidated for efficient delivery and then sold to third-party re-refiners and fuel oil blenders for the export market . in addition , through used oil re-refining , we re-refine used oil into different commodity products . the houston , texas tcep facility finished product is then sold by barge as a fuel oil cutterstock . through the operations at our marrero , louisiana facility , we produce a vacuum gas oil ( vgo ) product from used oil re-refining which is then sold via barge to crude refineries to be utilized as an intermediate feedstock in the refining process . through the operations at our columbus , ohio facility we produce a base oil finished product which is then sold via truck or rail car to end users for blending , packaging and marketing of lubricants . refining and marketing - the refining and marketing division generates revenues relating to the sales of finished products . the refining and marketing division gathers hydrocarbon streams in the form of petroleum distillates , transmix and other chemical products that have become off-specification during the transportation or refining process . these feedstock streams are purchased from pipeline operators , refineries , chemical processing facilities and third-party providers , and then processed at a third-party facility under our direction . the end products are typically three distillate petroleum streams ( gasoline blendstock , pygas and fuel oil cutterstock ) , which are sold to major oil companies or to large petroleum trading and blending companies .
| 7,101 |
exclusive option agreements : under the exclusive option agreements entered into by and among rise king wfoe , each of the prc shareholders irrevocably granted to rise king wfoe or its designated person an exclusive option to purchase , to the extent permitted by prc law , a portion or all of their respective equity interest in any prc operating entities for a purchase price of rmb 10 , or a purchase price to be adjusted to be in compliance with applicable prc laws and regulations . rise king wfoe , or its designated person , has the sole discretion to decide when to exercise the option , whether in part or in full . each of these agreements has a ten-year term , subject to renewal at the election of rise story_separator_special_tag forward-looking statements 40 you should read the following discussion and analysis of our financial condition and results of operations in conjunction with our audited consolidated financial statements and the related notes to the consolidated financial statements included elsewhere in this form 10-k. our audited consolidated financial statements have been prepared in accordance with u.s. gaap . the following discussion and analysis contains forward-looking statements within the meaning of section 27a of the securities act of 1933 and section 21e of the securities exchange act of 1934 , including , without limitation , statements regarding our expectations , beliefs , intentions or future strategies that are signified by the words “ expect , ” “ anticipate , ” “ intend , ” “ believe , ” or similar language . all forward-looking statements included in this document are based on information available to us on the date hereof , and we assume no obligation to update any such forward-looking statements . our business and financial performance are subject to substantial risks and uncertainties . actual results could differ materially from those projected in the forward-looking statements . in evaluating our business , you should carefully consider the information set forth under the heading “ risk factors ” and elsewhere in this form 10-k. readers are cautioned not to place undue reliance on these forward-looking statements . story_separator_special_tag multi-channel advertising and promotion platform primarily consists of internet advertising and marketing portals , including www.28.com ( “ 28.com ” ) , www.liansuo.com ( “ liansuo.com ” ) and www.sooe.cn ( “ sooe.cn ” ) , chinanet tv as our tv production and advertising unit and the bank kiosk advertising unit . we provide varieties of marketing campaigns through this platform by the combination of the internet , mobile , television , bank kiosks and printed-medias to maximize market exposure and effectiveness for our clients . our band management and sales channel building platform consists of our brand consulting and management service and offline sales channel expansion service , which is to physically help small businesses to recruit dealers , wholesalers , partners or franchisees based on their business needs . management tools platform consists of a mobile-based sales and administrative management tools specifically designed for small business in china to match their simplicity . basis of presentation , critical accounting policies and management estimates our consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the united states of america ( “ u.s . gaap ” ) and include the accounts of our company , and all of our subsidiaries and vies . we prepare financial statements in conformity with u.s. gaap , which requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities , disclosure of contingent assets and liabilities on the date of the financial statements and the reported amounts of revenues and expenses during the financial reporting period . we continually evaluate these estimates and assumptions based on the most recently available information , our own historical experience and various other assumptions that we believe to be reasonable under the circumstances . since the use of estimates is an integral component of the financial reporting process , actual results could differ from those estimates . some of our accounting policies require higher degrees of judgment than others in their application . we consider the policies discussed below to be critical to an understanding of our financial statements . 42 foreign currency translation and transactions our functional currency is united states dollars ( “ us $ ” ) , and the functional currency of china net hk is hong kong dollars ( “ hk $ ” ) . the functional currency of our prc operating subsidiary and vies is renminbi ( “ rmb ' ) , and prc is the primary economic environment in which we operate . for financial reporting purposes , the financial statements of our prc operating subsidiary and vies , which are prepared using the rmb , are translated into our reporting currency , the united states dollar ( “ u.s . dollar ” ) . assets and liabilities are translated using the exchange rate at each balance sheet date . revenue and expenses are translated using average rates prevailing during each reporting period , and stockholders ' equity is translated at historical exchange rates . adjustments resulting from the translation are recorded as a separate component of accumulated other comprehensive income in stockholders ' equity . transactions denominated in currencies other than the functional currency are translated into the functional currency at the exchange rates prevailing at the dates of the transactions . the resulting exchange differences are included in the determination of net income/loss of the consolidated financial statements for the respective periods . the exchange rates used to translate amounts in rmb into us $ for the purposes of preparing the consolidated financial statements are as follows : replace_table_token_3_th replace_table_token_4_th no representation is made that the rmb amounts could have been , or could be converted into us $ at the above rates . goodwill goodwill represents the excess of the purchase price over the fair value of the identifiable assets and liabilities acquired as a result of acquisitions of interests in our subsidiaries . story_separator_special_tag the following table presents the quantitative information of the significant unobservable internally-developed inputs utilized in our level 3 fair value measurement : valuation technique ( s ) unobservable inputs ranges intangible assets multi-period excess earning remaining useful life 1.17-5.17 years discount rate 24.4 % -26.2 % decline in ebit without non-compete agreement 10 % annual customer attrition rate 15 % goodwill discounted cash flow projection year 6 years discount rate 24.4 % -26.2 % terminal growth rate 3.5 % revenue recognition our revenue recognition policies are in compliance with asc topic 605. in accordance with asc topic 605 , revenues are recognized when all four of the following criteria are met : ( i ) persuasive evidence of an arrangement exists , ( ii ) the service has been rendered , ( iii ) the fees are fixed or determinable , and ( iv ) collectability is reasonably assured . sales include revenues from selling advertising time purchased from tv stations , internet advertising space on our website portals and effective sales lead information collected , providing online advertising , marketing and other related value added technical services . no revenue from advertising-for-advertising barter transactions was recognized because the transactions did not meet the criteria for recognition in asc topic 605 , subtopic 20. advertising contracts establish the fixed price and advertising services to be provided . pursuant to advertising contracts , we provide advertisement placements in different formats , including but not limited to banners , links , logos , buttons , rich media and content integration in specified locations on the sites and for agreed periods ; and or place the advertisements onto our purchased advertisement time during specific tv programs for agreed periods . revenue is recognized ratably over the period the advertising is provided and , as such , we consider the services to have been delivered . we treat all elements of advertising contracts as a single unit of accounting for revenue recognition purposes . value added technical services are provided based on two types of contracts : ( i ) fixed price and ( ii ) fixed price with minimum performance threshold . for contracts with fixed price term , revenue is recognized on a pro-rata basis over the engaged service period . for fixed price contracts with minimum performance threshold , revenue is recognized when the specified performance criteria is met . revenue from search engine marketing services is recognized on a monthly basis based on the direct cost consumed through search engines for providing such services with a premium . we recognize the revenue on a gross basic , as we believe that we act as the primary obligor of this transaction , which is considered the most important factor for a gross revenue recognition in accordance with asc topic 605 , subtopic 45. revenues from selling effective sales lead information is recognized based on fixed price per sales lead when information is delivered and accepted by clients . based upon our credit assessments of our clients prior to entering into contracts , we determine if collectability is reasonably assured . in situations where collectability is not deemed to be reasonably assured , we recognize revenue upon receipt of cash from clients , only after services have been provided and all other criteria for revenue recognition have been met . 45 taxation 1. income tax we adopt asc topic 740 “ income taxes ” and use liability method to account for income taxes . under this method , deferred tax assets and liabilities are determined based on the difference between the financial reporting and tax bases of assets and liabilities using enacted tax rates that will be in effect in the period in which the differences are expected to reverse . we record a valuation allowance to offset deferred tax assets , if based on the weight of available evidence , it is more-likely-than-not that some portion , or all , of the deferred tax assets will not be realized . the effect on deferred taxes of a change in tax rates is recognized in income statement in the period that includes the enactment date . we adopt asc topic 740-10-25-5 through 740-10-25-7 and 740-10-25-13 , which prescribes a more likely than not threshold for financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return . this interpretation also provides guidance on recognition of income tax assets and liabilities , classification of current and deferred income tax assets and liabilities , accounting for interest and penalties associated with tax positions , accounting for income taxes in interim periods , and income tax disclosures . we did not have any interest and penalties associated with tax positions for the years ended december 31 , 2014 and 2013 and did not have any significant unrecognized uncertain tax positions as of december 31 , 2014 and 2013. i ) . we were incorporated in the state of nevada . under the current laws of nevada we are not subject to state corporate income tax . we became a holding company and do not conduct any substantial operations of our own after the share exchange . no provision for federal corporate income tax has been made in our financial statements as no assessable profits for the years ended december 31 , 2014 and 2013 , or any prior periods . we do not provide for u.s. taxes or foreign withholding taxes on undistributed earnings from non-u.s. subsidiaries and vies because such earnings are intended to be reinvested indefinitely . if undistributed earnings were distributed , foreign tax credits could become available under current law to reduce the resulting u.s. income tax liability . ii ) . china net bvi was incorporated in the british virgin islands ( “ bvi ” ) . under the current laws of the bvi , we are not subject to tax on income or capital gains . additionally , upon payments of dividends by china net bvi to us , no bvi withholding tax will be imposed . iii ) .
| overview our company ( formerly known as emazing interactive , inc. ) was incorporated in the state of texas in april 2006 and re-domiciled to become a nevada corporation in october 2006. from the date of our company 's incorporation until june 26 , 2009 , when our company consummated the share exchange ( as defined below ) , our company 's activities were primarily concentrated in web server access and company branding in hosting web based e-games . on june 26 , 2009 , our company entered into a share exchange agreement ( the “ exchange agreement ” ) , with ( i ) china net online media group limited , a company organized under the laws of british virgin islands ( “ china net bvi ” ) , ( ii ) china net bvi 's shareholders , allglad limited , a british virgin islands company ( “ allglad ” ) , growgain limited , a british virgin islands company ( “ growgain ” ) , rise king investments limited , a british virgin islands company ( “ rise king bvi ” ) , star ( china ) holdings limited , a british virgin islands company ( “ star ” ) , surplus elegant investment limited , a british virgin islands company ( “ surplus ” ) , clear jolly holdings limited , a british virgin islands company ( “ clear ” and together with allglad , growgain , rise king bvi , star and surplus , the “ china net bvi shareholders ” ) , who together owned shares constituting 100 % of the issued and outstanding ordinary shares of china net bvi ( the “ china net bvi shares ” ) and ( iii ) g. edward hancock , our principal stockholder at such time . pursuant to the terms of the exchange agreement , the china net bvi shareholders transferred to us all of the china net bvi shares in exchange for the issuance of 13,790,800 shares ( the “ exchange shares ” ) in the aggregate of our common stock ( the “ share exchange ” ) .
| 7,102 |
construction loans are underwritten based upon a financial analysis of the developers and property owners and construction cost estimates , in addition to independent appraisal valuations . these loans will rely on the value associated with the project upon completion . these cost and valuation estimates may be inaccurate . construction loans generally involve the disbursement of substantial funds over a short period of time with repayment substantially dependent upon the success of the completed project . sources of repayment of these loans would be permanent financing upon completion or sales of developed property . these loans are closely monitored by onsite inspections and are considered to be of a higher risk than other real estate loans due to their ultimate repayment being story_separator_special_tag you should read this management discussion and analysis in conjunction with business executive summary and the bancorp 's consolidated financial statements and related notes for the year ended december 31 , 2013. certain amounts reported in the 2012 and 2011 financial statements have been reclassified to conform to the 2013 presentation . these reclassifications did not significantly impact the bancorp 's financial position or results of operations . critical accounting policies customers bancorp has adopted various accounting policies that govern the application of accounting principles generally accepted in the united states of america ( us gaap ) and that are consistent with general practices within the banking industry in the preparation of its financial statements . the bancorp 's significant accounting policies are described in note 3 - significant accounting policies and basis of presentation to its audited financial statements . certain accounting policies involve significant judgments and assumptions by customers bancorp that have a material impact on the carrying value of certain assets and liabilities . customers bancorp considers these accounting policies to be critical accounting policies . the judgment and assumptions used are based on historical experience and other factors , which are believed to be reasonable under the circumstances . because of the nature of the judgments and assumptions management makes , actual results could differ from these judgments and estimates , which could have a material impact on the carrying values of the bancorp 's assets and liabilities and results of operations . the following is a summary of the policies customers bancorp recognizes as involving critical accounting estimates : allowance for loan losses , stock-based compensation , unrealized gains and losses on available for sale securities , fair value accounting , accounting for purchased-credit-impaired ( pci ) loans , fdic receivable for loss , and deferred income taxes . allowance for loan losses . customers bancorp maintains an allowance for loan losses at a level management believes is sufficient to absorb estimated credit losses incurred as of the report date . management 's determination of the adequacy of the allowance is based on periodic evaluations of the loan portfolio and other relevant factors . however , this evaluation is inherently subjective as it requires significant estimates by management . consideration is given to a variety of factors in establishing these estimates including historical losses , current and anticipated economic conditions , the size and composition of the loan portfolio , delinquency statistics , criticized and classified assets and impaired loans , results of internal loan reviews , borrowers ' perceived financial and management strengths , the adequacy of underlying collateral , the dependence on collateral , or the strength of the present value of future cash flows and other relevant factors . these factors may be susceptible to significant change . to the extent actual outcomes differ from management estimates , additional provisions for loan losses may be required which may adversely affect the bancorp 's results of operations in the future . estimates of cash flows expected to be collected for purchased-credit-impaired loans are updated each reporting period . if the bank has probable decreases in expected cash flows to be collected after acquisition , the bank charges the provision for loan losses and establishes an allowance for loan losses . stock-based compensation . customers bancorp recognizes compensation expense for share-based awards in accordance with fasb accounting standards codification ( asc ) 718 compensation stock compensation . expense related to stock option awards is based on the fair value of the option at the grant date , with compensation expense recognized over the service period , which is usually the vesting period . customers bancorp utilizes the black-scholes option-pricing model to estimate the fair value of each option on the date of grant . the black-scholes model takes into consideration the exercise price of the option , the expected life of the option , the current price of the underlying stock and its expected volatility , expected dividends on our stock , and the current risk-free interest rate for the expected life of the option . the bancorp 's estimate of the fair value of a stock option is based on expectations derived from its limited historical experience and may not necessarily equate to market value when fully vested . unrealized gains and losses on securities available for sale . customers bancorp receives estimated fair values of debt securities from independent valuation services and brokers . in developing these fair values , the valuation services and brokers use estimates of cash flows based on historical performance of similar instruments in similar rate environments . debt securities available for sale are mostly comprised of mortgage backed securities and u.s. government agency securities . customers bancorp uses various indicators in determining whether a security is other-than-temporarily impaired including , for debt securities , when it is probable that the contractual interest and principal will not be collected , or for equity securities , whether the market value is below its cost for an extended period of time with low expectation of recovery . the debt securities are monitored for changes in credit ratings because adverse changes in credit ratings could indicate a change in the estimated cash flows of the underlying collateral or issuer . story_separator_special_tag the majority of the loans and other real estate assets acquired in an fdic-assisted acquisition is covered under loss share agreements with the fdic in which the fdic has agreed to reimburse the bank for 80 % of all losses incurred in connection with those assets . management estimated the amount that the bank will receive from the fdic under the loss share agreements that will result from losses incurred as the bank disposes of covered loans and other real estate assets and records the estimate as a receivable from the fdic . the fdic loss sharing receivable is measured separately from the related covered assets because it is not contractually embedded in the assets and is not transferable if the assets are sold . management estimated the fair value of the fdic loss sharing receivable using the present value of cash flows related to the loss share agreements based on the expected reimbursements for losses and the applicable loss share percentages . management reviews and updates the fair value of the fdic receivable prospectively as loss 41 estimates related to covered loans and other real estate owned change . the ultimate realization of the fdic loss sharing receivable depends on the performance of the underlying covered assets , the passage of time , and claims paid by the fdic . changes in estimated cash flows of the covered assets likewise result in changes in the estimated cash flows to be received pursuant to the reimbursement agreement between the bank and the fdic . an increase in a cash flow estimate for a covered loan will result in a decrease in the indemnification asset , and a decrease in a cash flow estimate for a covered loan will result in an increase in the indemnification asset . increases to the indemnification asset are recorded as a reduction to the provision for loan losses and decreases to the indemnification asset are recorded either as an increase to the provision for loan losses ( to the extent an increase in the fdic receivable balance was previously recorded as a reduction to the provision for loan losses ) or recognized over the life of the loss share agreements . deferred income taxes . the bancorp provides for deferred income taxes on the liability method whereby tax assets are recognized for deductible temporary differences and deferred tax liabilities are recognized for taxable temporary differences . temporary differences are the differences between the reported amounts of assets and liabilities in the financial statements and their tax basis . deferred tax assets are reduced by a valuation allowance when , in the opinion of management , it is more likely than not that some portion or all of the deferred tax assets will not be realized . deferred tax assets and liabilities are adjusted for the effects of changes in tax laws and rates on the date of enactment . accounting changes the fair value option the bank elected the fair value option for mortgage warehouse lending transactions documented under a master repurchase agreement originated after july 1 , 2012 in order to more accurately represent the short-term nature of the transaction and its inherent credit risk . the bank also elected the fair value option for mortgage loans originated with the intent to sell effective october 1 , 2013. these adoptions are in accordance with the parameters established by accounting standards codification ( asc ) 825-10-25 , financial instruments-overall-recognition : the fair value option . the interest income from the warehouse lending transactions and mortgage loans originated with the intent to sell are classified in interest income loans held for sale on the income statement . the unrealized fair value changes related to these loans are classified in mortgage banking income on the consolidated statements of income . an allowance for loan losses is not recorded for loans measured at fair value since under asc 825 as the exit price ( the repurchase price or sales price ) used as the fair value measure considers estimated credit losses . change in accounting estimates estimates of cash flows from purchased-credit-impaired loans were revised during the third quarter of 2012 due to a conversion to a more sophisticated and precise loan valuation system . in accordance with the guidance in asc 310-30 , interest income is based on an acquired loan 's expected cash flows . complex models are needed to calculate loan-level and or pool level expected cash flows in accordance with asc 310-30. the loan data analysis provided by the new software is a more precise quantification of future cash flows than the analysis that was previously calculated manually . upon conversion to the new software , acquisition date loan values were loaded into the system , and the new software calculated their fair values using its complex valuation model . conversion to the new system was completed in september 2012. to adjust the acquisition date loan balances recorded on customers bank 's books to the amounts calculated by the new software , approximately $ 4.5 million was recognized in other non-interest income in the third quarter of 2012. the revised valuation for the purchased-credit-impaired acquisition date loan balances due to the conversion to the new software was accounted for prospectively as a change in accounting estimate . when converting to the new software system , the bank was required to calculate the estimated cash flows from the various acquisition dates of the purchased-credit-impaired loans through the date the software was implemented as it was impracticable to perform these calculations on a monthly or quarterly basis . in the third quarter of 2012 , approximately $ 4.5 million was recognized in interest income related to this change . the impact of the revised valuation of cash flows for the purchased-credit-impaired loan activity due to the conversion to the new software was accounted for prospectively as a change in accounting estimate . also during the third quarter of 2012 , the bank re-estimated the cash flows for the purchased-credit-impaired loans using current data .
| results of operations the following discussion of customers bancorp 's consolidated results of operations should be read in conjunction with its consolidated financial statements , including the accompanying notes . also see critical accounting policies and note 3 - significant accounting policies and basis of presentation for information concerning certain significant accounting policies and estimates applied in determining reported results of operations . for the years ended december 31 , 2013 and 2012 net income available to common shareholders increased $ 8.9 million ( 37.3 % ) to $ 32.7 million for the year ended december 31 , 2013 , compared to $ 23.8 million for the year ended december 31 , 2012. the increased net income resulted from a $ 31.4 million increase in net interest income and a $ 12.0 million decrease in the provision for loan losses , offset by decreases in non-interest income of $ 5.9 million , an increase in non-interest expense of $ 23.4 million and a $ 5.3 million increase in income tax expense . the increased net interest income of $ 31.4 million ( 43.8 % ) for the year ended december 31 , 2013 to $ 103.2 million compared to $ 71.8 million for the year ended december 31 , 2012 resulted principally from an increase in average loan balances ( loans held for sale and loans receivable ) of $ 964.7 million to $ 2.8 billion , offset in part by a 39 basis point decrease in average yields on loans to 4.26 % net with a 22 basis point decrease in the cost of funding . the growth in average loans was principally in loans to mortgage bankers to fund warehouse lines and multi-family and other commercial real estate loans .
| 7,103 |
10.38 second amendment to loan agreement , dated as of september story_separator_special_tag the discussion and analysis of our financial condition and results of operations that follow are based upon our consolidated financial statements , which have been prepared in accordance with gaap . the preparation of our financial statements requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities , revenues and expenses and the related disclosure of contingent assets and liabilities at the date of our financial statements . actual results may differ from these estimates and such differences could be material to the financial statements . this discussion should be read in conjunction with our consolidated financial statements included in this annual report and the accompanying notes , and the information set forth under the caption “ critical accounting policies and estimates ” below . we report our results in five segments : u.s. property , asia property , emea property , latin america property and services . in evaluating financial performance in each business segment , management uses , among other factors , segment gross margin and segment operating profit ( see note 20 to our consolidated financial statements included in this annual report ) . executive overview we are one of the largest global reits and a leading independent owner , operator and developer of multitenant communications real estate . our primary business is the leasing of space on communications sites to wireless service providers , radio and television broadcast companies , wireless data providers , government agencies and municipalities and tenants in a number of other industries . in addition to the communications sites in our portfolio , we manage rooftop and tower sites for property owners under various contractual arrangements . we also hold other telecommunications infrastructure , fiber and property interests that we lease primarily to communications service providers and third-party tower operators . we refer to this business as our property operations , which accounted for 98 % of our total revenues for the year ended december 31 , 2018 and includes our u.s. property segment , asia property segment , emea property segment and latin america property segment . we also offer tower-related services in the united states , including site acquisition , zoning and permitting and structural analysis , which primarily support our site leasing business , including the addition of new tenants and equipment on our sites . 23 the following table details the number of communications sites , excluding managed sites , that we owned or operated as of december 31 , 2018 : replace_table_token_6_th _ ( 1 ) approximately 98 % of the operated towers are held pursuant to long-term capital leases , including those subject to purchase options . ( 2 ) in south africa , we also own fiber . ( 3 ) in argentina and brazil , we also own or operate urban telecommunications assets , fiber and the rights to utilize certain existing utility infrastructure for future telecommunications equipment installation . ( 4 ) in mexico , we also own or operate urban telecommunications assets , including fiber , concrete poles and other infrastructure . in most of our markets , our tenant leases with wireless carriers generally have an initial non-cancellable term of at least ten years , with multiple renewal terms . accordingly , the vast majority of the revenue generated by our property operations during the year ended december 31 , 2018 was recurring revenue that we should continue to receive in future periods . based upon foreign currency exchange rates and the tenant leases in place as of december 31 , 2018 , we expect to generate nearly $ 35 billion of non-cancellable tenant lease revenue over future periods , before the impact of straight-line lease accounting . most of our tenant leases have provisions that periodically increase the rent due under the lease , typically based on an annual fixed escalation ( averaging approximately 3 % in the united states ) or an inflationary index in our international markets , or a combination of both . in addition , certain of our tenant leases provide for additional revenue primarily to cover costs , such as ground rent or power and fuel costs . the revenues generated by our property operations may be affected by cancellations of existing tenant leases . as discussed above , most of our tenant leases with wireless carriers and broadcasters are multiyear contracts , which typically are non-cancellable ; however , in some instances , a lease may be cancelled upon the payment of a termination fee . revenue lost from either cancellations or the non-renewal of leases or rent renegotiations , which we refer to as churn , historically has not had a material adverse effect on the revenues generated by our consolidated property operations . this was again the case during the year ended december 31 , 2018 , in which loss of tenant billings from tenant lease cancellations , non-renewal or renegotiations represented approximately 4 % of our tenant billings . 24 in 2018 , we experienced an increase in revenue lost from cancellations or non-renewals primarily due to carrier consolidation-driven churn in india , which we expect will continue to result in a higher impact on our revenues , including tenant billings , as compared to the historical average , in 2019. we also expect this churn will compress our gross margin and operating profit in 2019 , particularly in our asia property segment , although we expect this to be partially offset by lower expenses due to reduced tenancy on existing sites or the decommissioning of sites . in addition , we expect to periodically evaluate the carrying value of our indian assets , which may result in the realization of additional impairment expense or other similar charges . for more information , please see the information under the caption “ management 's discussion and analysis of financial condition and results of operations—critical accounting policies and estimates. story_separator_special_tag we believe carriers will be compelled to deploy additional equipment on existing networks while also rolling out more advanced wireless networks to address coverage and capacity needs resulting from this increasing mobile data usage . the deployment of advanced mobile technology , such as 4g and 5g , across existing wireless networks will provide higher speed data services and further enable fixed broadband substitution . as a result , we expect that our tenants will continue deploying additional equipment across their existing networks . wireless service providers compete based on the quality of their existing networks , which is driven by capacity and coverage . to maintain or improve their network performance as overall network usage increases , our tenants continue deploying additional equipment across their existing sites while also adding new cell sites . we anticipate increasing network densification over the next several years , as existing network infrastructure is anticipated to be insufficient to account for rapidly increasing levels of wireless data usage . wireless service providers continue to acquire additional spectrum , and as a result are expected to add additional sites and equipment to their networks as they seek to optimize their network configuration and utilize additional spectrum . next generation technologies requiring wireless connectivity have the potential to provide incremental revenue opportunities for us . these technologies may include autonomous vehicle networks and a number of other internet-of-things , or iot , applications , as well as other potential use cases for wireless services . these technologies may create new and complementary use cases for our communications real estate over time , although these use cases are currently in nascent stages . as part of our international expansion initiatives , we have targeted markets in various stages of network development to diversify our international exposure and position us to benefit from a number of different wireless technology deployments over the long term . in addition , we have focused on building relationships with large multinational carriers such as airtel , telefónica s.a. and vodafone group plc , among others . we believe that consistent carrier network investments across our international markets position us to generate meaningful organic revenue growth going forward . in emerging markets , such as ghana , india , kenya , nigeria and uganda , wireless networks tend to be significantly less advanced than those in the united states , and initial voice networks continue to be deployed in certain underdeveloped areas . a majority of consumers in these markets still utilize basic wireless services , predominantly on feature phones , while advanced device penetration remains low . in more developed urban locations within these markets , data network deployments are underway . carriers are focused on completing voice network build-outs while also investing in initial data networks as mobile data usage and smartphone penetration within their customer bases begin to accelerate . in india , the ongoing transition from 2g technology to 4g technology has included a period of carrier consolidation , which we expect to continue through 2019 , whereby the number of carriers operating in the marketplace has been reduced through mergers , acquisitions and select carrier exits from the marketplace . over the long term , this consolidation process is expected to result in a more favorable structural environment for both the wireless carriers as well as communications infrastructure providers . in the shorter term , as described above , the consolidation process continues to result in elevated levels of churn within our india business , as merging carriers rationalize redundant legacy equipment installations and as select carriers exit the marketplace . 26 in markets with rapidly evolving network technology , such as south africa and most of the countries in latin america where we do business , initial voice networks , for the most part , have already been built out , and carriers are focused on 3g and 4g network build outs . consumers in these regions are increasingly adopting smartphones and other advanced devices , in particular as lower cost smartphones become increasingly available . as a result , the usage of bandwidth-intensive mobile applications is growing materially . recent spectrum auctions in these rapidly evolving markets have allowed incumbent carriers to accelerate their data network deployments and have also enabled new entrants to begin initial investments in data networks . smartphone penetration and wireless data usage in these markets are advancing rapidly , which typically requires that carriers continue to invest in their networks to maintain and augment their quality of service . finally , in markets with more mature network technology , such as germany and france , carriers are focused on deploying 4g data networks to account for rapidly increasing wireless data usage among their customer base . with higher smartphone and advanced device penetration and significantly higher per capita data usage , carrier investment in networks is focused on 4g coverage and capacity . we believe that the network technology migration we have seen in the united states , which has led to significantly denser networks and meaningful new business commencements for us over a number of years , will be replicated in our less advanced international markets over time . as a result , we expect to be able to leverage our extensive international portfolio of approximately 129,930 communications sites and the relationships we have built with our carrier tenants to drive sustainable , long - term growth . we have master lease agreements with certain of our tenants that provide for consistent , long-term revenue and reduce the likelihood of churn . certain of those master lease agreements are holistic in nature and further build and augment strong strategic partnerships with our tenants and have significantly reduced colocation cycle times , thereby providing our tenants with the ability to rapidly and efficiently deploy equipment on our sites .
| results of operations years ended december 31 , 2018 , 2017 and 2016 ( in millions , except percentages ) revenue replace_table_token_8_th year ended december 31 , 2018 u.s. property segment revenue growth of $ 216.4 million was attributable to : tenant billings growth of $ 264.0 million , which was driven by : $ 188.5 million due to colocations and amendments ; $ 59.6 million from contractual escalations , net of churn ; and $ 21.0 million generated from newly acquired or constructed sites ; partially offset by a decrease of $ 5.1 million from other tenant billings ; and a decrease of $ 47.6 million in other revenue , which includes an $ 81.3 million decrease due to straight-line accounting . asia property segment revenue growth of $ 376.1 million was attributable to : tenant billings growth of $ 31.0 million , which was driven by : $ 123.7 million generated from newly acquired or constructed sites , including $ 117.7 million from the transactions with vodafone ( the “ vodafone acquisition ” ) and idea ( the “ idea acquisition ” ) ; $ 49.5 million due to colocations and amendments ; and $ 0.6 million from other tenant billings ; partially offset by a decrease of $ 142.8 million resulting from churn in excess of contractual escalations , including $ 128.1 million due to carrier consolidation-driven churn in india ; pass-through revenue growth of $ 59.7 million ; and an increase of $ 349.3 million in other revenue , primarily due to the net impact of our settlement with tata and a decrease in revenue reserves . the settlement with tata contributed $ 333.7 million to other revenue , as a result of the approximately $ 345.5 million cash settlement payment , partially offset by the net impacts of straight-line accounting and other amounts directly related to the settlement .
| 7,104 |
executive overview and business environment phillips 66 is an energy manufacturing and logistics company with midstream , chemicals , refining , and marketing and specialties businesses . at december 31 , 2020 , we had total assets of $ 54.7 billion . executive overview the covid-19 pandemic continues to disrupt economic activities globally . actions taken by governments to prevent the spread of the disease , including travel and business restrictions , have resulted in substantial decreases in the demand for many refined petroleum products , particularly gasoline and jet fuel . the lack of demand for petroleum products has resulted in low crude oil prices and refining margins . accordingly , crude oil producers have shut in high cost production , and refiners have reduced crude oil processing rates . during 2020 , we took the following significant steps to enhance our liquidity in this challenged margin environment : issued $ 3.75 billion of senior unsecured notes and borrowed a net $ 500 million under a term loan facility . temporarily suspended our share repurchase program . reduced consolidated capital spending in 2020 by more than $ 700 million compared with our original budget . exceeded our $ 500 million cost reduction target in 2020. in 2020 , we reported a loss of $ 4.0 billion and generated $ 2.1 billion in cash from operating activities . we used available cash and the debt financing noted above to fund capital expenditures and investments of $ 2.9 billion , pay dividends of $ 1.6 billion , and repurchase $ 0.4 billion of our common stock . we ended 2020 with $ 2.5 billion of cash and cash equivalents and approximately $ 5.3 billion of total committed capacity available under our credit facilities . our results in 2020 reflect the adverse effects of the covid-19 pandemic , including asset and investment impairments . these adverse effects may continue to be significant in the near term . the depth and duration of the economic consequences of the covid-19 pandemic remain unknown . we continuously monitor our asset and investment portfolio for impairments , as well as optimization opportunities , in this challenging business environment . as such , additional impairments may be required in the future . 36 index to financial statements we continue to focus on the following strategic priorities : operating excellence . our commitment to operating excellence guides everything we do . we are committed to protecting the health and safety of everyone who has a role in our operations and the communities in which we operate . continuous improvement in safety , environmental stewardship , reliability and cost efficiency is a fundamental requirement for our company and employees . we employ rigorous training and audit programs to drive ongoing improvement in both personal and process safety as we strive for zero incidents . in 2020 , we achieved a 0.11 total recordable incident rate—the lowest since our inception . since we can not control commodity prices , controlling operating expenses and overhead costs , within the context of our commitment to safety and environmental stewardship , is a high priority . senior management actively monitors these costs . we are committed to protecting the environment and strive to reduce our environmental footprint throughout our operations . optimizing utilization rates at our refineries through reliable and safe operations enables us to capture the value available in the market in terms of prices and margins . during 2020 , our worldwide refining crude oil capacity utilization rate was 76 % , mainly driven by the decrease in market demand for refined petroleum products due to negative impacts from the covid-19 pandemic . growth . a disciplined capital allocation process ensures we invest in projects that are expected to generate competitive returns . our strategy primarily focuses on investing in growth opportunities in the midstream and chemicals segments . in response to the challenging market conditions caused by the covid-19 pandemic , we reduced our 2021 capital budget to $ 1.7 billion . we are prioritizing sustaining capital spending and completion of in-progress growth projects , as well as advancing our investments in renewable fuels . in the third quarter of 2020 , we announced rodeo renewed , a project to reconfigure our san francisco refinery in rodeo , california , to produce renewable fuels . in 2021 , we have budgeted $ 615 million for midstream capital expenditures and investments , including $ 305 million for phillips 66 partners . capital will be used to complete near-term committed and optimization projects and to maintain our integrated logistics infrastructure network . in chemicals , our share of expected self-funded capital spending by cpchem is $ 410 million . cpchem plans to use its growth capital to fund expansion of its normal alpha olefins production , optimization and debottleneck opportunities in the olefins and polyolefins chains , as well as continuing development of petrochemical projects on the u.s. gulf coast and in qatar . we recently formed an emerging energy organization . this group is charged with establishing a lower-carbon business platform that delivers attractive returns . it will focus on opportunities within our portfolio , such as rodeo renewed , as well as commercializing emerging energy technologies for a sustainable future . returns . we plan to enhance refining returns by increasing throughput of advantaged feedstocks , improving yields , portfolio optimization and an ongoing commitment to operating excellence . for 2021 , capital in refining will be directed toward high-return projects to enhance the yield of higher-value products and other high-return , quick-payout projects , as well as investments to competitively position the company for a lower-carbon future . m & s will continue to develop and enhance our retail network and brands in the united states and europe . distributions . we believe shareholder value is enhanced through , among other things , consistent growth of regular dividends , complemented by share repurchases . story_separator_special_tag net gain on dispositions increased $ 88 million in 2020. the increase was mainly due to a gain of $ 84 million associated with a co-venturer 's prior-year acquisition of a 35 % interest in phillips 66 partners ' consolidated holding company that owns an interest in gray oak pipeline , llc . see note 27—phillips 66 partners lp , in the notes to consolidated financial statements , for additional information . operating expenses decreased 10 % in 2020 , primarily driven by our company-wide cost reduction initiatives in response to the covid-19 pandemic , lower utility costs , and decreased refinery turnaround activities . impairments increased $ 3,391 million in 2020. see note 9—impairments , and note 16—fair value measurements , in the notes to consolidated financial statements , for additional information associated with impairments . we had an income tax benefit of $ 1,250 million in 2020 , compared with income tax expense of $ 801 million in 2019 , primarily due to a net loss in 2020 versus net income in 2019. see note 21—income taxes , in the notes to consolidated financial statements , for more information regarding our income taxes . 2019 vs. 2018 sales and other operating revenues and purchased crude oil and products decreased 4 % and 2 % , respectively , in 2019. the decreases were mainly driven by lower prices for refined petroleum products , crude oil and ngl . equity in earnings of affiliates decreased 21 % in 2019. the decrease was mainly due to lower margins at wrb and cpchem , partially offset by improved results from our transportation and ngl joint venture assets . lower equity earnings in 2019 also reflected higher goodwill and other asset impairments at dcp midstream . see the “ segment results ” section for additional information . other income increased $ 58 million in 2019. the increase was mainly driven by trading activities not directly related to our physical business . see note 15—derivatives and financial instruments , in the notes to consolidated financial statements , for additional information associated with our commodity derivatives . impairments increased $ 853 million in 2019. the increase was driven by an $ 853 million before-tax impairment associated with our investment in dcp midstream recognized in the third quarter of 2019. see note 9—impairments , and note 16—fair value measurements , in the notes to consolidated financial statements , for additional information associated with this impairment . income tax expense ( benefit ) decreased 49 % in 2019. the decrease in income tax expense was primarily attributable to lower income before income taxes . see note 21—income taxes , in the notes to consolidated financial statements , for more information regarding our income taxes . 40 index to financial statements story_separator_special_tag style= '' color : # 000000 ; font-family : 'times new roman ' , sans-serif ; font-size:10.5pt ; font-weight:700 ; line-height:120 % '' > refining replace_table_token_11_th * see the “ non-gaap reconciliations ” section for a reconciliation of this non-gaap measure to the most directly comparable measure under generally accepted accounting principles in the united states ( gaap ) , income ( loss ) before income taxes per barrel . 44 index to financial statements replace_table_token_12_th the refining segment refines crude oil and other feedstocks into petroleum products , such as gasoline , distillates and aviation fuels , at 13 refineries in the united states and europe . 2020 vs. 2019 results from the refining segment decreased $ 8,141 million in 2020 , compared with 2019. the decreased results in 2020 were due to : lower realized refining margins and decreased refinery production . a sharp decline in demand for refined petroleum products resulting from global economic disruption caused by the covid-19 pandemic led to lower market crack spreads and reduced refinery production in 2020. in addition , hurricane impacts contributed to the lower refinery production in the gulf coast region in 2020. a before-tax long-lived asset impairment of $ 910 million in the third quarter of 2020 associated with our plan to reconfigure the san francisco refinery into a renewable fuels facility . a before-tax goodwill impairment of $ 1,845 million in the first quarter of 2020 . 45 index to financial statements our worldwide refining crude oil capacity utilization rate was 76 % and 94 % in 2020 and 2019 , respectively . the lower utilization rate in 2020 was primarily due to reduced refining runs driven by lower demand for refined petroleum products as a result of the covid-19 pandemic , as well as hurricane impacts in the gulf coast region . see the “ executive overview and business environment ” section for information on industry crack spreads and other market factors impacting this year 's results . 2019 vs. 2018 before-tax income for the refining segment decreased $ 2,549 million in 2019 , compared with 2018. the decrease was primarily driven by lower realized refining margins and lower refinery production at certain refineries due to turnaround activities and unplanned downtime . in 2019 , the decrease in realized refining margins was primarily due to lower feedstock advantage driven by narrowing heavy crude differentials . our worldwide refining crude oil capacity utilization rate was 94 % and 95 % in 2019 and 2018 , respectively . 46 index to financial statements marketing and specialties replace_table_token_13_th the m & s segment purchases for resale and markets refined petroleum products , such as gasoline , distillates and aviation fuels , mainly in the united states and europe . in addition , this segment includes the manufacturing and marketing of specialty products , such as base oils and lubricants . 2020 vs. 2019 before-tax income from the m & s segment increased $ 13 million in 2020 , compared with 2019. the increase was primarily attributable to higher realized marketing fuel margins , partially offset by lower sales volumes for refined petroleum and specialty products driven by decreased demand . see the “ executive overview and business environment ” section for information on marketing fuel margins and other market factors impacting 2020 results .
| segment results midstream replace_table_token_8_th replace_table_token_9_th * pipelines represent the sum of volumes transported through each separately tariffed consolidated pipeline segment . * * excludes dcp midstream . * * * includes 100 % of dcp midstream 's volumes . dollars per gallon weighted-average ngl price * dcp midstream $ 0.41 0.51 0.75 * based on index prices from the mont belvieu market hub , which are weighted by ngl component mix . the midstream segment provides crude oil and refined petroleum product transportation , terminaling and processing services , as well as natural gas and ngl transportation , storage , fractionation , processing and marketing services , mainly in the united states . this segment includes our mlp , phillips 66 partners , as well as our 50 % equity investment in dcp midstream , which includes the operations of its mlp , dcp partners . 2020 vs. 2019 midstream 's results decreased $ 693 million in 2020 , compared with 2019. results from our transportation business decreased $ 438 million in 2020 , compared with 2019. the decrease was primarily attributable to before-tax impairments of $ 300 million , decreased equity earnings , lower pipeline and terminal throughput volumes , and higher operating costs , partially offset by an $ 84 million before-tax gain recognized in the second quarter of 2020 associated with the gray oak pipeline joint venture . the $ 300 million before-tax impairments consisted of a $ 120 million impairment of the pipeline and terminal assets associated with the planned reconfiguration of our san francisco refinery into a renewable fuels facility , a $ 96 million impairment of phillips 66 partners ' equity investments in two crude oil logistics joint ventures , and an $ 84 million impairment of our equity investment in the canceled red oak pipeline project .
| 7,105 |
the following further describes these business segments : mobile industries serves oem customers that manufacture off-highway equipment for the agricultural , mining and construction markets ; on-highway vehicles including passenger cars , light trucks , and medium- and heavy-duty trucks ; rail cars and locomotives ; outdoor power equipment ; rotorcraft and fixed-wing aircraft ; and other mobile equipment . beyond service parts sold to oems , aftermarket sales and services to individual end users , equipment owners , operators and maintenance shops are handled directly or through the company 's extensive network of authorized automotive and heavy-truck distributors . process industries serves oem and end-user customers in industries that place heavy demands on the fixed operating equipment they make or use in heavy and other general industrial sectors . this includes metals , cement and aggregate production ; coal power generation and renewable energy sources ; oil and gas extraction and refining ; pulp and paper and food processing ; automation and robotics ; and health and critical motion control equipment . other applications include marine equipment , gear drives , cranes , hoists and conveyors . this segment also supports aftermarket sales and service needs through its global network of authorized industrial distributors and through the provision of services directly to end users . timken creates value by understanding customer needs and applying its know-how to serve a broad range of customers in attractive markets and industries across the globe . the company 's business strengths include its product technology , end-market diversity , geographic reach and aftermarket mix . timken collaborates with oems to improve equipment efficiency with its engineered products and captures subsequent equipment replacement cycles by selling largely through independent channels in the aftermarket . timken focuses its international efforts and footprint in regions of the world where strong macroeconomic factors such as urbanization , infrastructure development and sustainability create demand for its products and services . the company 's strategy has three primary elements : outgrowing our markets . the company intends to expand into new and existing markets by leveraging its collective knowledge of metallurgy , friction management and mechanical power transmission to create value for timken customers . using a highly collaborative technical selling approach , the company places particular emphasis on creating unique solutions for challenging and or demanding applications . the company intends to grow in attractive market sectors around the world , emphasizing those spaces that are highly fragmented , demand high service and value the reliability and efficiency offered by timken products . the company also targets those applications that offer significant aftermarket demand , thereby providing product and services revenue throughout the equipment 's lifetime . operating with excellence . timken operates with a relentless drive for exceptional results and a passion for superior execution . the company embraces a continuous improvement culture that is charged with increasing efficiency , lowering costs , eliminating waste , encouraging organizational agility and building greater brand equity to fuel future growth . this requires the company 's ongoing commitment to attract , retain and develop the best talent across the world . deploying capital to drive shareholder value . the company is intently focused on providing the highest returns for shareholders through its capital allocation framework , which includes : ( 1 ) investing in the core business through capital expenditures , research and development and other organic growth initiatives ; ( 2 ) pursuing strategic acquisitions to broaden its portfolio and capabilities across diverse markets , with a focus on bearings , adjacent power transmission products and related services ; ( 3 ) returning capital to shareholders through dividends and share repurchases ; and ( 4 ) maintaining a strong balance sheet and sufficient liquidity . as part of this framework , the company may also restructure , reposition or divest underperforming product lines or assets . 19 the following items highlight certain of the company ' s more significant strategic accomplishments in 2018 : on august 30 , 2018 , the company 's majority-owned subsidiary , timken india limited ( `` timken india '' ) , completed the acquisition of abc bearings limited ( `` abc bearings '' ) , a manufacturer of tapered , cylindrical and spherical roller bearings and slewing rings in india with expected annual sales at the time of acquisition of approximately $ 30 million . the acquisition was funded primarily with timken india stock . on september 1 , 2018 , the company completed the acquisition of apiary investments holdings limited ( `` cone drive '' ) , a leader in precision drives used in diverse markets including solar , automation , aerial platforms and food and beverage . cone drive , located in traverse city , michigan operates in the u.s. and china and had expected annual sales at the time of acquisition of approximately $ 100 million . the acquisition was funded primarily with new debt . on september 18 , 2018 , the company completed the acquisition of rollon s.p.a. ( `` rollon '' ) , a leader in engineered linear motion products , specializing in the design and manufacture of linear guides , telescopic rails and linear actuators used in a wide range of attractive applications such as passenger rail , aerospace , packaging and logistics , medical and automation . rollon , located near milan , italy has manufacturing operations in italy , germany and the u.s and had expected annual sales at the time of acquisition of approximately $ 140 million . the acquisition was primarily funded with new debt . on september 19 , 2018 , the company divested groeneveld information technology holding b.v. ( the `` ict business '' ) , located in gorinchem , netherlands . the company acquired the ict business in july 2017 as part of the groeneveld group ( `` groeneveld '' ) acquisition . the ict business , a non-core telematics business , is separate from the groeneveld lubrications solutions business and employed approximately 70 people . story_separator_special_tag the improvement in business performance reflects higher volume , favorable manufacturing performance , the benefit of acquisitions and the favorable impact of foreign currency exchange rate changes , partially offset by unfavorable price/mix and higher material , logistics and sg & a expenses . the statements of income sales : replace_table_token_18_th net sales increased in 2017 compared with 2016 primarily due to higher organic revenue of $ 186 million , the benefit of acquisitions of $ 131 million and the favorable impact of foreign currency exchange rate changes of $ 17 million . the increase in organic revenue was driven by higher demand across most of the company 's market sectors led by the off-highway , industrial distribution and heavy truck sectors , partially offset by lower demand in the rail sector . gross profit : replace_table_token_19_th gross profit increased in 2017 compared with 2016 primarily due to the impact of higher volume of $ 74 million , the benefit of acquisitions of $ 52 million and favorable manufacturing performance of $ 49 million . these factors were partially offset by higher material and logistics costs of $ 34 million and unfavorable price/mix of $ 34 million . selling , general and administrative expenses : replace_table_token_20_th the increased in sg & a expenses in 2017 compared with 2016 was primarily due to the impact of acquisitions and higher incentive compensation expense . 26 impairment and restructuring charges : replace_table_token_21_th impairment and restructuring charges of $ 4.3 million in 2017 were primarily comprised of severance and related benefit costs associated with initiatives to reduce headcount and right-size the company 's manufacturing footprint , including the planned closure of its bearing plant in pulaski , tennessee ( `` pulaski '' ) . impairment and restructuring charges of $ 21.7 million in 2016 were primarily comprised of severance and related benefit costs associated with initiatives to reduce headcount and right-size the company 's manufacturing footprint , including the planned closures of its bearing plants in altavista , virginia ( `` altavista '' ) , pulaski and benoni , south africa ( `` benoni '' ) . in addition , the company recognized impairment charges of $ 3.9 million during 2016 that were primarily associated with the planned closures of the altavista and benoni bearing plants . interest expense and income : replace_table_token_22_th interest expense increased in 2017 compared to 2016 primarily due to an increase in outstanding debt mostly associated with the groeneveld acquisition . refer to note 9 - financing arrangements in the notes to the consolidated financial statements for further discussion . other income ( expense ) : replace_table_token_23_th cdsoa income , net in 2016 represents income recorded in connection with funds distributed to the company from monies collected by u.s. customs and border protection ( `` u.s. customs '' ) from antidumping cases , net of related professional fees . refer to note 20 - continued dumping and subsidy offset act in the notes to the consolidated financial statements for further discussion . the decrease in non-service pension and other postretirement costs for 2017 compared to 2016 was primarily due to lower mark-to-market charges of $ 47 million . the increase in other income ( expense ) , net for 2017 , compared to 2016 was primarily due to lower foreign currency exchange losses and gains recorded from the sale of the company 's former manufacturing facilities in benoni and altavista during 2017 . 27 income tax expense : replace_table_token_24_th the effective tax rate for 2017 was 22.2 % , which was favorable to the u.s. federal statutory rate of 35 % due to earnings in certain foreign jurisdictions where the effective rate is less than 35 % , u.s. foreign tax credits realized on earnings distributed to the united states , and favorable u.s. permanent deductions and tax credits . the effective tax rate was further impacted favorably by the net reversal of accruals for prior year uncertain tax positions , a valuation allowance release , and other discrete items . these favorable impacts were partially offset by provisional amounts for the one-time net charge related to the taxation of unremitted foreign earnings and the remeasurement of u.s. deferred tax balances to reflect the new u.s. corporate income tax rate enacted under the u.s. tax reform . u.s. tax reform includes a number of changes to existing u.s. tax laws that impact the company , most notably a reduction of the u.s. corporate income tax rate from 35 % to 21 % for tax years beginning after december 31 , 2017. u.s. tax reform also requires companies to pay a one-time net charge related to the taxation of unremitted foreign earnings , creates new taxes on certain foreign sourced earnings and allows for immediate expensing of certain depreciable assets after september 27 , 2017. the effective tax rate for 2016 was favorable relative to the u.s. federal statutory rate primarily due to u.s. foreign tax credits , earnings in certain foreign jurisdictions where the effective tax rate is less than 35 % , the u.s. manufacturing deduction , and certain discrete tax benefits ( net ) . these favorable impacts were partially offset by u.s. taxation of foreign income and losses at certain foreign subsidiaries where no tax benefit could be recorded . the change in the effective rate for 2017 compared with 2016 was primarily due to favorable discrete tax items . refer to the table below for additional detail of the impact of each item on income tax expense . replace_table_token_25_th ( 1 ) u.s. taxation includes the impact of foreign tax credits , u.s. manufacturing deductions , the u.s. research and experimentation credit , u.s. state and local taxation , u.s. taxation of foreign earnings and other u.s. items . ( 2 ) net reversal of accruals for uncertain tax positions were primarily driven by expiration of applicable statutes of limitations . 28 business segments the primary measurement used by management to measure the financial performance of each segment is ebit .
| results of operations 2018 vs. 2017 overview : replace_table_token_7_th the increase in net sales was primarily due to organic revenue growth driven by higher end-market demand , the benefit of acquisitions and the impact of higher pricing . the increase in net income in 2018 compared with 2017 was primarily due to improved performance across the business , driven by the impact of higher volume , favorable price/mix , the net benefit of acquisitions and improved manufacturing performance , as well as lower net actuarial losses ( `` mark-to-market charges '' ) due to the remeasurement of pension and other postretirement assets and obligations , restructuring charges and interest expense . these factors were partially offset by the impact of higher selling , general and administrative ( `` sg & a '' ) expenses , higher income tax expenses and higher material and logistics costs ( including tariffs ) . outlook : the company expects 2019 full-year sales to increase approximately 8 % to 10 % compared with 2018 primarily due to increased demand across most end-market sectors and the benefit of acquisitions , including the recently completed abc bearings , cone drive and rollon acquisitions , offset partially by unfavorable currency . the company 's earnings are expected to be higher in 2019 than 2018 , primarily due to the impact of higher volume , favorable price/mix and the benefit of acquisitions , partially offset by higher material , logistics ( including tariffs ) and sg & a expenses , as well as higher income tax and interest expenses . additionally , depreciation and amortization expense is expected to increase in 2019 , primarily due to incremental depreciation and amortization from acquisitions completed in 2018. the company expects to generate operating cash of approximately $ 450 million in 2019 , an increase from 2018 of approximately $ 118 million , or 35 % , as the company anticipates higher net income and lower working capital requirements .
| 7,106 |
2. revenue , deferred revenue and 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 in item 8 , “ financial statements and supplementary data ” included in this annual report on form 10-k. this discussion and analysis contains forward-looking statements that involve risks , uncertainties and assumptions , such as statements of our plans , objectives , expectations and intentions . the cautionary statements made in this annual report on form 10-k should be read as applying to all related forward-looking statements wherever they appear in this annual report on form 10-k. our actual results may differ materially from those anticipated in these forward-looking statements as a result of many factors , including but not limited to those set forth under item 1a , “ risk factors ” and elsewhere in this annual report on form 10-k. business overview we are a provider of secure , integrated , intelligent communication solutions , focused on empowering mobile workers in healthcare , hospitality , retail , energy , education and other mission-critical mobile work environments , in the united states and internationally . the significant majority of our business is generated from sales of our solutions in the healthcare market to help our customers enhance quality of care , safety , patient and staff experience . as of december 31 , 2019 , care teams at approximately 1,700 healthcare facilities worldwide have selected our solutions . we primarily sell products , software maintenance and professional services directly to end users . total revenue increased 0.5 % to $ 180.5 million in 2019 from $ 179.6 million in 2018 , and our 2018 revenue increased 8.2 % from $ 166.0 million in 2017 . for the year ended december 31 , 2019 , we recorded a net loss of $ 18.0 million compared to a net loss of $ 9.7 million for the year ended december 31 , 2018 . our diverse customer base ranges from large hospital systems to small local hospitals , as well as other healthcare facilities and customers in non-healthcare markets . we do not rely on any one customer for a substantial portion of our revenue . while we have international customers in other english-speaking countries such as canada , the united kingdom , australia , new zealand and parts of the middle east , most of our customers are located in the united states . international customers represented 8.7 % and 10.2 % of our revenue in 2019 and in 2018 , respectively . we believe certain international markets represent attractive growth opportunities . we are exploring plans to expand our presence in other english-speaking markets and enter non-english speaking markets . we outsource the manufacturing of our hardware products . our outsourced manufacturing model allows us to scale our business without the significant capital investment and on-going expenses required to establish and maintain manufacturing operations . we work closely with our contract manufacturers , including sercomm corporation and smtc corporation , and key suppliers to manage the procurement , quality and cost of components . we seek to maintain an optimal level of finished goods inventory to meet our forecast for sales and unanticipated shifts in sales volume and mix . a discussion and analysis of our financial condition and results of operations for the year ended december 31 , 2017 is included in item 7 of part ii , `` management 's discussion and analysis of financial condition and results of operations '' in our annual report on form 10-k for the year ended december 31 , 2018 filed with the sec on february 27 , 2019. convertible senior notes in may 2018 , we issued $ 143.75 million aggregate principal amount of 1.50 % convertible senior notes due 2023 , including $ 18.75 million aggregate principal amount of such notes pursuant to the exercise in full of options granted to the initial purchasers , collectively the “ notes. ” the total net proceeds from the offering , after deducting initial purchase discounts and debt issuance costs , were approximately $ 138.9 million . in connection with the pricing of the notes , we entered into privately negotiated capped call transactions with certain counterparties , the “ capped calls. ” the capped calls each have an initial strike price of approximately $ 32.25 per share , subject to certain adjustments , which correspond to the initial conversion price of the notes . the capped calls have initial cap prices of $ 38.94 per share , subject to certain adjustments . the capped calls cover , subject to anti-dilution adjustments , approximately 4.5 million shares of our common stock . we used proceeds of $ 8.9 million to purchase the capped calls , which were recorded as a reduction to additional paid-in capital . for further discussion on the capped calls , please refer to note 8 of the notes to the consolidated financial statements . we expect to use the remaining net proceeds for general corporate purposes , which may include funding research and development , increasing working capital , acquisitions or investments in complementary businesses , products or technologies and capital expenditures . 34 components of operating results revenue . we generate revenue from the sale of products and services . as discussed further in the section titled “ critical accounting policies and estimates—revenue recognition ” , revenue is recognized utilizing a five-step approach which depicts the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services . revenue is comprised of the following : product . our solutions include both hardware and software . story_separator_special_tag with respect to changes in assets and liabilities , we experienced an increase in accounts receivable of $ 2.4 million , an increase of $ 2.1 million in other receivables , an increase of $ 0.3 million in inventories , an increase of $ 0.9 million in prepaid expenses and other assets , an increase in deferred commissions of $ 0.2 million , an increase of $ 1.5 million in accounts payable , an increase of $ 2.4 million in accrued payroll and other liabilities and a $ 2.8 million increase in deferred revenue . cash provided by operating activities was $ 14.3 million in 2018 , due in part to non-cash items such as stock-based compensation of $ 21.0 million , amortization of debt discount and issuance costs of $ 3.9 million and depreciation and amortization of $ 7.7 million for property and equipment and acquired intangible assets , partially offset by the 2018 net loss of $ 9.7 million . with respect to changes in assets and liabilities , cash was provided through an increase of $ 1.5 million in accounts payable and an increase of $ 3.5 million in deferred revenue . these factors were partially offset by certain cash outflows , including an increase in accounts receivable of $ 5.0 million , an increase in other receivables of $ 2.8 million , an increase in inventory of $ 1.9 million , an increase in prepaid expenses and other assets of $ 0.6 million , a decrease of $ 4.1 million in accrued payroll and other liabilities . 39 investing activities cash used in investing activities was $ 20.5 million in 2019 , which was primarily attributable to $ 137.5 million in purchases of short-term investments , offset by $ 121.5 million in short-term investment maturities . an additional $ 4.6 million of cash was used for the purchase of property and equipment and leasehold improvements . cash used in investing activities was $ 139.5 million in 2018 , which was primarily attributable to $ 206.8 million in purchases of short-term investments , offset by $ 72.2 million in short-term investment maturities . an additional $ 4.9 million of cash was used for the purchase of property and equipment and leasehold improvements . financing activities cash used in financing activities was $ 3.8 million in 2019 , primarily attributable to $ 2.4 million of proceeds from stock option exercises , $ 3.5 million of proceeds from issuance of common stock from the employee stock purchase plan and $ 1.7 million of cash from lease-related performance obligations . these items were offset by a $ 11.5 million decrease for employee taxes paid on net share settlement on the vesting of restricted stock awards . cash provided by financing activities was $ 130.8 million in 2018 , attributable to $ 138.9 million in proceeds from issuance of the notes , net of issuance costs , $ 7.3 million of proceeds from stock option exercises , $ 3.3 million of proceeds from issuance of common stock from the employee stock purchase plan and $ 0.3 million of cash from lease-related performance obligations . these items were partially offset by $ 8.9 million in cash paid for the capped call that we purchased at the time of the issuance of the notes and $ 10.1 million cash paid for employee taxes paid on net share settlement . contractual obligations the following table summarizes our contractual obligations as of december 31 , 2019 : replace_table_token_11_th ( 1 ) for additional information regarding our convertible senior notes , refer to note 8 of the notes to consolidated financial statements included in part ii , item 8 of this annual report on form 10-k. ( 2 ) consists of minimum purchase commitments with our independent contract manufacturers and other vendors . as of december 31 , 2019 , we had $ 0.5 million of net deferred tax liabilities and $ 0.2 million from uncertain tax positions , both recorded within other long-term liabilities . the timing and amounts of any payments that could result from the net deferred tax liabilities and unrecognized tax benefits will depend upon a number of factors . accordingly , the timing and amounts of any eventual payment can not be estimated for inclusion in the table above . we do not expect a significant tax payment related to these obligations to occur within the next 12 months . such tax contingencies are separately disclosed and discussed in note 12 of the notes to our consolidated financial statements . off-balance sheet arrangements during 2019 , we did not have any relationships with unconsolidated organizations or financial partnerships , such as structured finance or special purpose entities that would have been established for the purpose of facilitating off-balance sheet arrangements or other contractually narrow or limited purposes . critical accounting policies and estimates the preparation of our consolidated financial statements requires us to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes . we evaluate our estimates on an ongoing basis , including those related to product warranties , goodwill and intangible assets , revenue recognition , stock-based compensation , accounting for business combinations and the provision for income taxes . we base our estimates and judgments on our historical experience , knowledge of factors affecting our business and our belief as to what could occur in the future considering available information and assumptions that we believe to be reasonable under the circumstances . 40 the accounting estimates we use in the preparation of our consolidated financial statements will change as events occur , more experience is acquired , additional information is obtained and our operating environment changes . changes in estimates are made when circumstances warrant . such changes in estimates and refinements in estimation methodologies are reflected in our reported results of operations and , if material , the effects of changes in estimates are disclosed in the notes to our consolidated financial statements .
| results of operations the following table is a summary of our consolidated statements of operations for the years ended december 31 , 2019 , 2018 and 2017 . replace_table_token_5_th 36 year ended december 31 , 2019 compared to year ended december 31 , 2018 revenue : replace_table_token_6_th total revenue increased $ 0.9 million , or 0.5 % , for the year ended december 31 , 2019 compared to the year ended december 31 , 2018. the increase in total revenue was a result of an increase in services revenue , partially offset by a decrease in product revenue . product revenue decreased $ 4.9 million , or 5.0 % , for the year ended december 31 , 2019 compared to the year ended december 31 , 2018. device revenue increased $ 1.1 million , or 1.8 % , and software revenue decreased $ 6.0 million , or 16.0 % , for the year ended december 31 , 2019 , compared to the year ended december 31 , 2018. the increase in device revenue was driven primarily by an increase in unit sales of badges and related hardware and accessories to new customers making initial purchases and existing customers expanding deployments within their facilities to departments and users . the decrease in software revenue was due to a shift in mix among our various software offerings and the timing of our backlog roll out .
| 7,107 |
accordingly , all balance sheet accounts of these local functional currency branches and story_separator_special_tag executive summary we are a worldwide leader in the design , development , manufacture and support of process control tools that perform macro-defect inspection and metrology , lithography systems , and process control analytical software used by semiconductor and advanced packaging device manufacturers . we deliver comprehensive solutions throughout the semiconductor fabrication process with our families of proprietary products that provide critical yield-enhancing information , enabling microelectronic device manufacturers to drive down costs and time to market of their devices . we provide process and yield management solutions used in both wafer processing facilities , often referred to as “ front-end , ” and in device packaging and test facilities , commonly referred to as “ back-end ” manufacturing . our advanced process control software portfolio includes powerful solutions for standalone tools , groups of tools , or factory-wide suites to enhance productivity and achieve significant cost savings . our principal market is semiconductors , primarily semiconductors packaged as integrated circuits within electronic devices , including consumer electronics , server and enterprise systems , mobile computing ( including smart phones and tablets ) , data storage devices , and embedded automotive and control systems . our core focus is the measurement and control of the structure , composition , and geometry of the devices as they are fabricated on silicon wafers to improve device performance and manufacturing yields . our products and services are used by our customers who manufacture many types of integrated circuits for a multitude of applications , each having unique manufacturing challenges . this includes integrated circuits to enable information processing and management ( logic integrated circuits ) , memory storage ( nand , 3d-nand , nor , and dram ) , analog devices ( wi-fi and 5g radio integrated circuits , power devices ) mems sensor devices ( accelerometers , pressure sensors , microphones ) , image sensors , and other end markets including components for hard disk drives , leds , and power management . the semiconductor and electronics industries have also been characterized by constant technological innovation . we believe that , over the long term , our customers will continue to invest in advanced technologies and new materials to enable smaller design rules and higher density applications that fuel demand for process control equipment . during 2020 , we completed certain integration activities and launched four new metrology systems into the marketplace . these new products were introduced as logic and foundry customers were increasing their capacity while following aggressive plans to transition their manufacturing to smaller nodes . customer interactions centered around satisfying the immediate demand for logic devices with our existing product portfolio , while partnering with r & d groups to prepare for the process controls needed for the next generation of semiconductors that will require the latest systems from us . our strong engineering teams have , and will continue to , deliver new products to our customers , followed by our field engineers providing customer support , while simultaneously achieving and surpassing our cost synergy targets that were established at the onset of the 2019 merger . on february 28 , 2020 , our board of directors determined that it is in the best interests of the company to change its fiscal year end from december 31 to a 52-53 week fiscal year ending on the saturday closest to december 31. the change is intended to align our fiscal periods more closely with industry peers and improve comparability . we made the fiscal year change on a prospective basis and have not adjusted operating results for prior periods . the fiscal year of 2020 began on january 1 , 2020 and ended december 26 , 2020. the following table summarizes certain key financial information for the periods indicated below ( in thousands , except per share and percent data ) : replace_table_token_2_th ( 1 ) on october 25 , 2019 , the merger of nanometrics with rudolph was consummated and resulted in the combined company , which was renamed onto innovation inc. rudolph is treated as the accounting acquirer in the 2019 merger 30 and therefore the financial results include rudolph for all periods presented and the financial results of the former nanometrics for the periods on or after october 26 , 2019. our business is affected by the annual spending patterns of our customers on semiconductor capital equipment . the amount that our customers devote to capital equipment spending depends on a number of factors , including general worldwide economic conditions as well as other economic drivers such as personal computers , mobile devices , data centers , artificial intelligence and automotive sales . current forecasts by industry analysts for the semiconductor device manufacturing industry project capital equipment spending to increase approximately 14 % to 16 % for 2021 as compared to 2020. our revenue and profitability tend to follow the trends of certain segments within the semiconductor market . historically , a significant portion of our revenue in each quarter and year has been derived from sales to relatively few customers , and we expect this trend to continue . for the years ended december 26 , 2020 , december 31 , 2019 and december 31 , 2018 , aggregate sales to customers that individually represented at least five percent of our revenue accounted for 54.6 % , 42.7 % , and 18.3 % of our revenue , respectively . our cash , cash equivalents and marketable securities balance increased to $ 373.7 million at the end of fiscal 2020 compared to $ 320.2 million at the end of the fiscal 2019. this increase was primarily the result of $ 106.0 million of cash generated from operating activities . story_separator_special_tag our future effective income tax rate depends on various factors , such as future impacts of the tax act , possible further tax legislation , the geographic composition of our pre-tax income , the amount of our pre-tax income as business activities fluctuate , non-deductible expenses incurred in connection with acquisitions and research and development credits as a percentage of aggregate pre-tax income . on march 27 , 2020 , the “ coronavirus aid , relief and economic security act ” ( the “ cares act ” ) was enacted . the cares act includes provisions relating to refundable payroll tax credits , deferral of the employer portion of certain payroll taxes , net operating loss carryback periods , alternative minimum tax credit refunds , modifications to the net interest deduction limitations and technical corrections to tax depreciation methods for qualified improvement property . the company filed a claim for a refund of prior years ' income taxes paid under the provisions of the cares act which resulted in a tax benefit of $ 1.1 million as the 2019 net operating loss was carried back to a year with higher tax rates . liquidity and capital resources at december 26 , 2020 , we had $ 373.7 million of cash , cash equivalents and marketable securities and $ 611.6 million in working capital . at december 31 , 2019 , our cash , cash equivalents and marketable securities totaled $ 320.2 million , while working capital amounted to $ 555.9 million . net cash and cash equivalents provided by operating activities for the years ended december 26 , 2020 , december 31 , 2019 and december 31 , 2018 totaled $ 106.0 million , $ 18.1 million and $ 35.1 million , respectively . cash provided by operating activities increased in fiscal 2020 compared to fiscal 2019 primarily due to higher net income , adjusted to exclude the effect of non-cash charges , of $ 81.3 million , an increase in accrued and other liabilities of $ 24.5 million , a decrease in prepaid expenses and other assets of $ 16.5 million and an increase in accounts payable of $ 23.5 million , partially offset by an increase in inventories of $ 33.1 million , an increase in accounts receivable of $ 16.1 million and a decrease in income taxes of $ 8.8 million . net cash and cash equivalents provided by operating activities decreased in fiscal 2019 compared to fiscal 2018 primarily due to lower net income , adjusted to exclude the effect of non-cash charges , of $ 10.8 million , a decrease in accounts payable of $ 15.7 million , an increase in accounts receivable of $ 10.4 million and a decrease in accrued and other liabilities of $ 6.8 million and an increase in prepaid expenses and other assets of $ 2.0 million , which were partially offset by an increase in inventories of $ 22.2 million and a decrease in income taxes of $ 6.6 million . net cash and cash equivalents used in investing activities for the year ended december 26 , 2020 was $ 48.6 million . for the years ended december 31 , 2019 and december 31 , 2018 , investing activities provided net cash and cash equivalents of $ 4.1 million and $ 33.8 million , respectively . during the year ended december 26 , 2020 , net cash used in investing activities included purchases of marketable securities , net of proceeds from sales of marketable securities of $ 47.6 million and purchases of property , plant and equipment of $ 3.8 million , partially offset by cash received from convertible note receivable of $ 2.8 million . during the year ended december 31 , 2019 , net cash provided by investing activities included cash acquired in the 2019 merger of $ 43.9 million , partially offset by purchases of marketable securities , net of proceeds from marketable securities of $ 33.0 million and purchases of property , plant and equipment of $ 6.8 million . during the year ended december 31 , 2018 , net cash provided by investing activities included proceeds from sales of marketable securities , net of purchases of marketable securities of $ 46.3 million , partially offset by purchases of property , plant and equipment of $ 7.5 million and cash advanced on a convertible note receivable of $ 5.0 million . net cash used in financing activities was $ 53.7 million , $ 4.2 million and $ 23.9 million for the years ended december 26 , 2020 , december 31 , 2019 and december 31 , 2018 , respectively . during the year ended december 26 , 2020 , financing activities used cash to primarily purchase shares of our common stock under the share repurchase authorization of $ 52.0 million . during the year ended december 31 , 2019 , financing activities used cash to primarily pay taxes related to shares withheld for share based compensation plans of $ 2.5 million and pay contingent consideration for acquired business of $ 1.8 million . 34 during the year ended december 31 , 2018 , financing activities used cash to primarily purchase shares of our common stock under share repurchase authorizations of $ 21.1 million and pay taxes related to shares withheld for share based compensation plans of $ 1.9 million . from time to time , we evaluate whether to acquire new or complementary businesses , products and or technologies . we may fund all of or a portion of the price of these investments or acquisitions in cash , stock , or a combination of cash and stock . in november 2020 , the company 's board of directors approved a share repurchase authorization , which allows the company to repurchase up to $ 100 million worth of shares of its common stock . this share repurchase authorization replaces the remaining balance of $ 28 million from the prior share repurchase authorization . repurchases may be made through both public market and private transactions from time to time .
| results of operations the following table sets forth , for the periods indicated , our results of operations as percentages of our revenue . our results of operations are reported as one business segment . replace_table_token_3_th results of operations for 2020 , 2019 and 2018 revenue . our revenue is derived from the sale of our systems and software , spare parts , and services . our revenue was $ 556.5 million , $ 305.9 million and $ 273.8 million for the years ended december 26 , 2020 , december 31 , 2019 and december 31 , 2018 , respectively . this represents an increase of 81.9 % from 2019 to 2020 and an increase of 11.7 % from 2018 to 2019. the increase in revenue of 81.9 % in the fiscal year ended december 26 , 2020 compared to the prior year is primarily attributable to revenue from the 2019 merger now including revenue from the legacy nanometrics business for the full fiscal year and increased investments from our foundry and logic customers . the increase in revenue from 2018 to 2019 was primarily due to the inclusion of revenue from legacy nanometrics business for the period from october 25 , 2019 , the effective date of the 2019 merger , through december 31 , 2019 . 31 the following table lists , for the periods indicated , the different sources of our revenue in dollars ( thousands ) and as percentages of our total revenue : replace_table_token_4_th total systems and software revenue increased $ 194.7 million for the year ended december 26 , 2020 as compared to the year ended december 31 , 2019 primarily due to the inclusion of revenue from legacy nanometrics for the period . the year-over-year change in systems revenue was primarily due to an increase of $ 178.6 million of revenue from legacy nanometrics for the period and increased investment from our foundry and logic customers .
| 7,108 |
under the new guidance , inventory is “ measured at the lower of cost and net realizable value , story_separator_special_tag the following discussion and analysis of our financial condition and results of operations should be read in conjunction with the consolidated financial statements and the related notes contained in this annual report on form 10-k ( annual report ) . our consolidated financial statements have been prepared and , unless otherwise stated , the information derived therefrom as presented in this discussion and analysis is presented , in accordance with accounting principles generally accepted in the united states of america ( gaap ) . in addition to historical information , the following discussion contains forward-looking statements based upon our current views , expectations and assumptions that are subject to risks and uncertainties . actual results may differ substantially from those expressed or implied by any forward-looking statements due to a number of factors , including , among others , the risks described in the “ risk factors ” section and elsewhere in this annual report . as used in this discussion and analysis , unless the context indicates otherwise , the terms the “ company ” , “ imprimis ” “ we ” , “ us ” and “ our ” refer to imprimis pharmaceuticals , inc. and its consolidated subsidiaries , consisting of pharmacy creations , llc ( pharmacy creations ) , south coast specialty compounding , inc. d/b/a park compounding ( park ) , imprimisrx tx , inc. ( imprimisrx tx ) and imprimisrx pa , inc. ( imprimisrx pa ) . in this discussion and analysis , we refer to our consolidated subsidiaries collectively as our “ imprimisrx compounding pharmacies. ” except as otherwise noted , all dollar amounts in this discussion and analysis are expressed in thousands . overview we are an ophthalmology-focused pharmaceutical company specializing in the development , production and sale of innovative medications that offer unique competitive advantages and serve unmet needs in the marketplace . we are committed to our mission , vision and values to deliver high-quality novel medications to physicians and patients at affordable prices . the cornerstone of our ophthalmology program consists of our proprietary dropless therapy ® injectable and lessdrops ® topical formulations that compete in the multi-billion dollar u.s. eye drop market . these formulations have been uniquely designed to address patient compliance issues and provide other compelling medical and economic benefits . we also offer a conscious sedation medication , the iv free mko melt , a proprietary alternative to intravenous sedation . the mko melt is administered sublingually to sedate patients undergoing ocular and other surgeries . we plan to expand our ophthalmology program and introduce additional innovative medications for glaucoma , wet age-related macular degeneration ( wet amd ) , diabetic macular edema ( dme ) and chronic dry eye disease ( ded ) . our integrative medicine business includes medications used in several therapeutic areas including oncology , autoimmunity , chronic infectious diseases , and endocrine and metabolic diseases . our urology business includes a series of injectable erectile dysfunction formulations for patients that are refractory to or are otherwise unable to take phosphodiesterase type 5 inhibitors such as sildenafil ( viagra ® ) , tadalafil ( cialis ® ) and vardenafil ( levitra ® ) . we also make pps-dr ® ( pentosan polysulfate sodium delayed-release ) formulations as lower-cost alternatives to elmiron ® for patients diagnosed with interstitial cystitis . we also make and sell low-cost therapeutic alternatives to daraprim ® , thiola ® and calcium disodium versenate , all fda-approved drugs that have experienced significant price increases . approximately 90 percent of our revenue is derived from buy-and-bill customers as a cash pay business and as such , the majority of our commercial transactions do not involve distributors , wholesalers , insurance companies , pharmacy benefit managers or other middle parties . we do not operate using and are not dependent on discount cards , rebates , or other methods and programs that typically eliminate transparency to the consumer . by making ourselves generally independent of third party payments , we are not subject to insurance company formulary inclusion and pharmacy benefit manager payment clawbacks . in this regard , our transactions are simple , involving a patient-in-need , a physician 's diagnosis and a fair price and great service for a quality pharmaceutical product . the efficiency of our business model allows us to quickly innovate and safely deliver novel and clinically relevant products to the market with less complications and at lower costs for our customers than traditional pharmaceutical company competitors . our proprietary drug formulations are born from the clinical experience of a network of inventors , including physician prescribers , clinical researchers and pharmacist formulators , who develop and prescribe personalized medicines for individual patient needs . we work collaboratively with these inventors to identify and evaluate intellectual property related to potential candidates , assess relevant markets , and seek to validate the clinical experience with the objective of investing in commercialization activities . although our business is focused on a pharmaceutical compounding commercialization strategy , we may also consider other commercialization pathways , including pursuing fda approval to market and sell a drug formulation or technology . we have incurred recurring operating losses and have had negative operating cash flows since july 24 , 1998 ( inception ) . in addition , we have an accumulated deficit of approximately $ 76,851 at december 31 , 2016. beginning on april 1 , 2014 , when we acquired our first imprimisrx compounding pharmacy , we began generating revenue from sales of certain of our proprietary drug formulations and other non-proprietary formulations ; however , we expect to incur further losses as we integrate and develop our pharmacy operations , evaluate other programs and continue the development of our formulations . 25 operations we currently produce and dispense our medications directly to customers through our imprimisrx facilities located in ledgewood , new jersey , irvine , california and folcroft , pennsylvania . story_separator_special_tag we estimate that our lessdrops combination eye drops may require the administration by patients of up to 50 percent fewer drops post-surgery and cost up to 75 percent less than other currently available post-surgery eye drop regimens . we plan to expand our lessdrops portfolio to provide additional eye drop choices for our ophthalmologist customers . we believe we are capturing an estimated 10 percent of the u.s. post-surgery cataract eye drop market . over 1,500 ophthalmologist customers have adopted dropless and lessdrops medications and we have serviced over 600,000 cataract and refractive surgeries since april 2014. a growing number of high-volume cataract surgery practices , hospitals and ambulatory surgery centers throughout the u.s. have become customers . glaucoma eye drops during the second quarter of 2017 , we intend to launch a series of preservative-free eye drops and combination eye drops for glaucoma patients . according to the glaucoma research foundation , there are over 3 million americans with glaucoma but only half are aware they have it . glaucoma is incurable , and if not managed can lead to blindness . generally , the first line of treatment consists of a prostaglandin-analogue ( pga ) eye drop regimen . as the disease progresses , non-pga products are generally added as a second line treatment . topical agents , other than pgas , include beta blockers , alpha agonists , miotics and steroids . up to 50 percent of glaucoma patients require more than one drug following a few months of initial treatment , however the fda has yet to approve a pga combination product despite combination products including a pga ( xalacom ® , duotrav ® and ganfort ® ) available outside of the u.s. our glaucoma topical medications will include combinations of active pharmaceutical ingredients ( apis ) that are similar to those formulations marketed and available in countries outside of the u.s. our combination eye drops may require the administration of fewer drops by patients and cost significantly less than currently available glaucoma drop regimens . we believe the use of combination products is rising because of two major advantages ; improved patient compliance by avoiding separate administration of drops and prevention of washout effect by eliminating the need for consecutive dosing intervals . mko melt conscious sedation in may 2016 , we launched our patent-pending iv free mko melt conscious sedation formulation . traditionally , sedation medications for ocular surgery are administered intravenously , which require iv medications and supplies , and the need for additional staff to assist in preparation , administration and monitoring related to this process . our mko melt is administered sublingually and is an option to iv anesthetic to sedate patients undergoing ocular surgeries . the mko melt may have use in numerous other surgical procedures outside of ophthalmology including mri procedures , dental procedures , colonoscopies , vasectomies , biopsies and women 's health . integrative medicine our integrative medicine business includes personalized medications used in several integrative areas including oncology , autoimmunity , chronic infectious diseases , and endocrine and metabolic diseases . the portfolio includes ascorbic acid ( non-corn source ) , patent-pending curcumin emulsion , lyophilized artesunate and other medications used for various integrative therapies . we sponsor the integrative therapies institute ( iti ) conferences that cover a multitude of integrative topics and feature speakers considered thought leaders in their respective fields . urology we offer injectable medications for the treatment of erectile function ( ed ) . according to the american urological association ( aua ) there are 20 to 30 million men in the u.s. with ed . the aua indicates that intracavernous vasoactive injections , including tri-mix ( phentolamine , papaverine and prostaglandin ) , are considered the most effective non-surgical treatment for ed . we are also developing additional formulations associated with ed , including a sublingual formulation . we currently have one managed care provider that consists of the majority of our tri-mix sales . we are currently marketing this large healthcare provider additional formulations , including our ophthalmic medications , and hope to grow our existing sales footprint and expand the relationship into other therapeutic areas . in may 2016 , we introduced our patent-pending customizable delayed-release tiopronin medications that may be prescribed by physicians as a lower-cost alternative to fda-approved thiola ® for cystinuria patients . cystinuria is a chronic genetic disease that causes stones made of the amino acid cystine to form in the kidneys , bladder and or urethra . in addition to the significantly lower cost , our tiopronin medications may allow for a reduction in the number of pills patients are required to consume daily . we also produce and dispense pps-dr ( pentosan polysulfate sodium ) oral medications as a lower-cost option to an off-patent oral drug , elmiron ® , for the treatment of symptoms associated with interstitial cystitis ( ic ) . ic , also referred to as painful bladder syndrome and chronic pelvic pain , is a chronic bladder condition . according the interstitial cystitis association , ic affects an estimated 4 to 12 million men and women in the u.s. there is no known cure for ic and a combination of therapies is recommended for most patients including medication , physical therapy and dietary changes . our low-cost pps-dr oral medications feature delayed-released capsules that may allow for reduced daily dosing requirements . other markets and development programs in october 2015 , we introduced our compounded pyrimethamine and leucovorin formulations , lower-cost therapeutic alternatives to fda-approved daraprim ® for the treatment of toxoplasmosis . toxoplasmosis can be of major concern for patients with weakened immune systems such as patients with hiv/aids , pregnant women and children . our combination pyrimethamine and leucovorin formulations are now offered by express scripts , the largest pharmacy benefit manager in the u.s. , and by many other hospitals and healthcare organizations .
| results of operations the following period-to-period comparisons of our financial results are not necessarily indicative of results for the current period or any future period . as a result of our acquisitions of our imprimisrx compounding pharmacies , and any additional pharmacy acquisitions or other such transactions we may pursue , we may experience large expenditures specific to the transactions that are not incident to our operations . comparison of years ended december 31 , 2016 and 2015 revenues our revenues include amounts recorded from sales of proprietary compounded formulations and revenues received from royalty payments owed to us pursuant to out-license arrangements . 31 the following presents our revenues for the years ended december 31 , 2016 and 2015 : replace_table_token_1_th the increase in revenue between periods was largely attributable to increased sales of our proprietary formulations and introduction of new proprietary formulations throughout calendar 2015 and furtherance of those sales in 2016 , including our lessdrops formulations . our ophthalmology related sales were approximately $ 10,984 the year ended december 31 , 2016 , compared to $ 3,060 during last year , respectively . cost of sales our cost of sales includes direct and indirect costs to manufacture formulations and sell products , including active pharmaceutical ingredients , personnel costs , packaging , storage , royalties , shipping and handling costs , manufacturing equipment and tenant improvements depreciation , the write-off of obsolete inventory and other related expenses . the following presents our cost of sales for the years ended december 31 , 2016 and 2015 : for the year ended december 31 , $ 2016 2015 variance cost of sales $ 9,831 $ 5,206 $ 4,625 the increase in our cost of sales between periods was largely attributable to an increase in the volume of unit sales of our formulations and products and our associated costs of such sales .
| 7,109 |
our product portfolio of pumps , valves , seals , automation and aftermarket services supports global infrastructure industries , including oil and gas , chemical , power generation and water management , as well as general industrial markets where our products and services add value . through our manufacturing platform and global network of quick response centers ( `` qrcs '' ) , we offer a broad array of aftermarket equipment services , such as installation , advanced diagnostics , repair and retrofitting . we currently employ approximately 17,000 employees in more than 50 countries . our business model is significantly influenced by the capital spending of global infrastructure industries for the placement of new products into service and aftermarket services for existing operations . the worldwide installed base of our products is an important source of aftermarket revenue , where products are expected to ensure the maximum operating time of many key industrial processes . over the past several years , we have significantly invested in our aftermarket strategy to provide local support to drive customer investments in our offerings and use of our services to replace or repair installed products . the aftermarket portion of our business also helps provide business stability during various economic periods . the aftermarket business , which is served by our network of 177 qrcs located around the globe , provides a variety of service offerings for our customers including spare parts , service solutions , product life cycle solutions and other value-added services . it is generally a higher margin business compared to our original equipment business and a key component of our profitable growth strategy . our operations are conducted through three business segments that are referenced throughout this management 's discussion and analysis of financial condition and results of operations ( `` md & a '' ) : engineered product division ( `` epd '' ) for long lead time , custom and other highly-engineered pumps and pump systems , mechanical seals , auxiliary systems and replacement parts and related services ; industrial product division ( `` ipd '' ) for pre-configured engineered pumps and pump systems and related products and services ; and flow control division ( `` fcd '' ) for engineered and industrial valves , control valves , actuators and controls and related services . our business segments share a focus on industrial flow control technology and have a high number of common customers . these segments also have complementary product offerings and technologies that are often combined in applications that provide us a net competitive advantage . our segments also benefit from our global footprint and our economies of scale in reducing administrative and overhead costs to serve customers more cost effectively . for example , our segment leadership reports to our chief operating officer ( `` coo '' ) , and the segments share leadership for operational support functions such as research and development , marketing and supply chain . the reputation of our product portfolio is built on more than 50 well-respected brand names such as worthington , idp , valtek , limitorque , durco , edward , anchor/darling and durametallic , which we believe to be one of the most comprehensive in the industry . our products and services are sold either directly or through designated channels to more than 10,000 companies , including some of the world 's leading engineering , procurement and construction ( `` epc '' ) firms , original equipment manufacturers , distributors and end users . we continue to build on our geographic breadth through our qrc network with the goal to be positioned as near to customers as possible for service and support in order to capture valuable aftermarket business . along with ensuring that we have the local capability to sell , install and service our equipment in remote regions , it is equally imperative to continuously improve our global operations . we continue to expand our global supply chain capability to meet global customer demands and ensure the quality and timely delivery of our products . we continue to devote resources to improving the supply chain processes across our business segments to find areas of synergy and cost reduction and to improve our supply chain management capability to ensure it can meet 25 global customer demands . we also remain focused on improving on-time delivery and quality , while managing warranty costs as a percentage of sales across our global operations , through the assistance of a focused continuous improvement process ( `` cip '' ) initiative . the goal of the cip initiative , which includes lean manufacturing , six sigma business management strategy and value engineering , is to maximize service fulfillment to customers through on-time delivery , reduced cycle time and quality at the highest internal productivity . we experienced improved bookings in 2012 despite an environment of continued global macroeconomic uncertainty . the oil and gas industry experienced stable conditions , while the chemical industry saw increased activity . the growth in the chemical industry was driven by asia pacific and middle eastern countries accelerating investment in their chemical processing capabilities and north america producers investing to utilize natural gas as a low-cost feedstock . we experienced a modest decline in bookings into europe , as economic conditions in the region remain challenged . in the power generation industry , we experienced a slowing in the level of investment during 2012 due to uncertainty relating to environmental regulations and potential regulatory impact to the overall civilian nuclear market . in 2012 , continued favorable conditions in our aftermarket business were driven by our customers ' need to maintain continuing operations across several industries and the expansion of our aftermarket capabilities through our integrated solutions offerings . our pursuit of major capital projects globally and our investments in localized customer service remain key components of our long-term growth strategy , and also provide stability during various economic periods . story_separator_special_tag in geographic regions where we are positioned to provide quick response , we believe customers have traditionally relied on us , rather than our competitors , for aftermarket products due to our highly engineered and customized products . however , the aftermarket for standard products is competitive , as the existence of common standards allows for easier replacement of the installed products . as proximity of service centers , timeliness of delivery and quality are important considerations for all aftermarket products and services , we continue to selectively expand our global qrc network to improve our ability to capture this important aftermarket business . oil and gas the oil and gas industry , which represented approximately 41 % and 40 % of our bookings in 2012 and 2011 , respectively , experienced a stable level of capital spending in 2012 compared to the previous year due to the need to continue building infrastructure to bring future capacity on line to meet future demand expectations . the majority of investment by the major oil companies continued to focus on upstream production activities ; however , there were improved levels of spending in both mid-stream pipeline and downstream refining operations , particularly in the developing markets . refining overcapacity remained a concern throughout the year in the mature regions , as overall demand for oil remained volatile throughout the year . aftermarket opportunities in this industry improved throughout the year , with our integrated solutions offering helping to offset a reduction in service-related business , as many refineries performed this work with their own personnel . the outlook for the oil and gas industry is heavily dependent on the demand growth from both mature markets and developing geographies . we believe oil and gas companies will continue with upstream and downstream investment plans that are in line with projections of future demand growth and the production declines of existing operations . a projected decline in demand could cause oil and gas companies to reduce their overall level of spending , which could decrease demand for our products and services . however , we believe the long-term fundamentals for this industry remain solid based on current supply , projected depletion rates of existing fields and forecasted long-term demand growth . with our long-standing reputation in providing successful solutions for upstream , mid-stream and downstream applications , along with the advancements in our portfolio of offerings , we believe that we continue to be well-positioned to pursue the global opportunities in this industry . chemical the chemical industry represented approximately 19 % and 18 % of our bookings in 2012 and 2011 , respectively . capital spending in the chemical industry increased in 2012 with the expansion of existing facilities and the approval of new projects around the world . the middle east and asia have seen significant growth in chemical projects as countries in those regions try to access the higher margins available downstream in the petrochemical markets . additionally , north america has seen a revival in the chemical industry , where shale gas has changed the economics of production allowing for a lower cost abundant feedstock to drive high value chemical projects . the aftermarket opportunities improved for the majority of the year with indications that the improvements will continue into 2013. despite a strong year , the outlook for the chemical industry remains heavily dependent on global economic conditions . as global economies stabilize and unemployment conditions improve , a rise in consumer spending should follow . an increase in spending would drive greater demand for chemical-based products supporting improved levels of capital investment . we believe the chemical industry in the near-term will continue to invest in maintenance and upgrades for optimization of existing assets and that developing regions will continue investing in capital infrastructure to meet current and future indigenous demand . we believe 27 our global presence and our localized aftermarket capabilities are well-positioned to serve the potential growth opportunities in this industry . power generation the power generation industry represented approximately 14 % and 16 % of our bookings in 2012 and 2011 , respectively . in 2012 , the power generation industry continued to experience some softness in capital spending in the mature regions driven by the uncertainty related to environmental regulations , as well as potential regulatory impacts to the overall civilian nuclear market . in the developing regions , capital investment remained in place driven by increased demand forecasts for electricity in countries such as china and india . global concerns about the environment continue to support an increase in desired future capacity from renewable energy sources . the majority of the active and planned construction throughout 2012 continued to utilize designs based on fossil fuels . natural gas increased its percentage of utilization driven by market prices for gas remaining low and relatively stable . with the potential of unconventional sources of gas , such as shale gas , the power generation industry is forecasting an increased use of this form of fuel for power generation plants . we believe the outlook for the power generation industry remains favorable . current legislative efforts to limit the emissions of carbon dioxide may have an adverse effect on investment plans depending on the potential requirements imposed and the timing of compliance by country . however , we believe that proposed methods of limiting carbon dioxide emissions offer business opportunities for our products and services . we believe the long-term fundamentals for the power generation industry remain solid based on projected increases in demand for electricity driven by global population growth , advancements of industrialization and growth of urbanization in developing markets . we also believe that our long-standing reputation in the power generation industry , our portfolio of offerings for the various generating methods , our advancements in serving the renewable energy market and carbon capture methodologies , as well as our global service and support structure , position us well for the future opportunities in this important industry .
| engineered product division segment results our largest business segment is epd , through which we design , manufacture , distribute and service custom and other highly-engineered pumps and pump systems , mechanical seals and auxiliary systems ( collectively referred to as `` original equipment '' ) . epd includes longer lead time , highly-engineered pump products , and shorter cycle engineered pumps and mechanical seals that are generally manufactured much more quickly . epd also manufactures replacement parts and related equipment and provides a full array of replacement parts , repair and support services ( collectively referred to as `` aftermarket '' ) . epd primarily operates in the oil and gas , power generation , chemical , water management and general industries . epd operates in 41 countries with 29 manufacturing facilities worldwide , nine of which are located in europe , 11 in north america , four in asia and five in latin america , and it has 128 qrcs , including those co-located in manufacturing facilities and or shared with fcd . replace_table_token_20_th _ ( 1 ) includes the post-acquisition operating results of lpi , which was acquired in october 2011. bookings in 2012 increased by $ 39.6 million , or 1.7 % , as compared with 2011 . the increase included negative currency effects of approximately $ 105 million . the increase in customer bookings was primarily driven by the chemical , oil and gas and general industries , partially offset by the power generation industry . customer bookings increases of $ 80.1 million into north america , $ 53.0 million into asia pacific and $ 47.1 million into europe were partially offset by a decrease of $ 129.8 million into the middle east . the overall net increase was driven by aftermarket bookings .
| 7,110 |
these average prices used in the december 31 , 2015 impairment review are significantly higher than the actual and currently forecasted prices in 2016. as lower average monthly pricing is reflected in the trailing 12-month average pricing calculation , the present value of the company 's future net revenues is expected to decline and further impairment could be recognized . given the current oil and natural gas pricing environment , the company believes it could have further noncash ceiling test write-downs of its oil and natural gas properties in 2016. the quarterly ceiling test considers many factors including reserves , capital expenditure estimates and trailing story_separator_special_tag the following discussion should be read in conjunction with the `` selected financial data '' in item 6 and the financial statements and accompanying notes appearing elsewhere in this report . story_separator_special_tag quality , btu content and transportation costs to market . we use derivative instruments to hedge future sales prices on a substantial , but varying , portion of our oil production . we expect our derivative activities will help us achieve more predictable cash flows and reduce our exposure to downward price fluctuations . the use of derivative instruments has in the past , and may in the future , prevent us from realizing the full benefit of upward price movements but also mitigates the effects of declining price movements . our average realized price calculations include the effects of the settlement of all derivative contracts regardless of the accounting treatment . principal components of our cost structure · oil price differentials . the price differential between our williston basin well head price and the nymex wti benchmark price is driven by the additional cost to transport oil from the williston basin via train , barge , pipeline or truck to refineries . · gain ( loss ) on derivative instruments , net . we utilize commodity derivative financial instruments to reduce our exposure to fluctuations in the price of oil . gain ( loss ) on derivative instruments , net is comprised of ( i ) cash gains and losses we recognize on settled derivatives during the period , and ( ii ) non-cash mark-to-market gains and losses we incur on derivative instruments outstanding at period end . · production expenses . production expenses are daily costs incurred to bring oil and natural gas out of the ground and to the market , together with the daily costs incurred to maintain our producing properties . such costs also include field personnel compensation , salt water disposal , utilities , maintenance , repairs and servicing expenses related to our oil and natural gas properties . · production taxes . production taxes are paid on produced oil and natural gas based on a percentage of revenues from products sold at market prices ( not hedged prices ) or at fixed rates established by federal , state or local taxing authorities . we seek to take full advantage of all credits and exemptions in our various taxing jurisdictions . in general , the production taxes we pay correlate to the changes in oil and natural gas revenues . · depreciation , depletion , amortization and impairment . depreciation , depletion , amortization and impairment includes the systematic expensing of the capitalized costs incurred to acquire , explore and develop oil and natural gas properties . as a full cost company , we capitalize all costs associated with our development and acquisition efforts and allocate these costs to each unit of production using the units-of-production method . · general and administrative expenses . general and administrative expenses include overhead , including payroll and benefits for our corporate staff , costs of maintaining our headquarters , costs of managing our acquisition and development operations , franchise taxes , audit and other professional fees and legal compliance . · interest expense . we finance a portion of our working capital requirements , capital expenditures and acquisitions with borrowings . as a result , we incur interest expense that is affected by both fluctuations in interest rates and our financing decisions . we capitalize a portion of the interest paid on applicable borrowings into our full cost pool . we include interest expense that is not capitalized into the full cost pool , the amortization of deferred financing costs and bond premiums ( including origination and amendment fees ) , commitment fees and annual agency fees as interest expense . 46 · income tax expense . our provision for taxes includes both federal and state taxes . we record our federal income taxes in accordance with accounting for income taxes under gaap which results in the recognition of deferred tax assets and liabilities for the expected future tax consequences of temporary differences between the book carrying amounts and the tax basis of assets and liabilities . deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences and carryforwards are expected to be recovered or settled . the effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date . a valuation allowance is established to reduce deferred tax assets if it is more likely than not that the related tax benefits will not be realized . selected factors that affect our operating results our revenues , cash flows from operations and future growth depend substantially upon : · the timing and success of drilling and production activities by our operating partners ; · the prices and demand for oil , natural gas and ngls ; · the quantity of oil and natural gas production from the wells in which we participate ; · changes in the fair value of the derivative instruments we use to reduce our exposure to fluctuations in the price of oil ; · our ability to continue to identify and acquire high-quality acreage and drilling opportunities ; and · the level of our operating expenses . story_separator_special_tag production volumes and average sales prices are derived from accrued accounting data for the relevant period indicated . replace_table_token_19_th oil , natural gas and ngl sales our revenues vary from year to year primarily as a result of changes in realized commodity prices and production volumes . in 2015 , oil , natural gas and ngl sales decreased 53 % from 2014 , driven primarily by a 52 % decrease in our average oil sales price , excluding the effect of settled derivatives , but partially offset by a 3 % increase in production . the lower average realized price in 2015 as compared to 2014 was primarily driven by lower average nymex oil and gas prices , which were partially offset by a lower oil price differential . oil price differential during 2015 average $ 9.42 per barrel , as compared to $ 13.67 per barrel in 2014. in 2014 , oil , natural gas and ngl sales increased 17 % from 2013 , driven primarily by a 29 % increase in production and partially offset by a 9 % decrease in our average sales price per boe in 2014 as compared to 2013 due primarily to a $ 4.99 per barrel increase in our average oil price differential in 2014 as compared to 2013 . 49 we add production through drilling success as we place new wells into production and through additions from acquisitions , while we lose production due to the natural decline of oil and natural gas produced from existing wells . in light of the low commodity price environment , our annual capital expenditure budget declined over 76 % in 2015 as compared to 2014. due to lower levels of capital spending in 2015 , our production volumes increased modestly by 3 % as compared to 2014. the net productive wells added to production in 2015 , 2014 and 2013 was 18.6 , 41.6 and 40.0 , respectively . our production for each of the last three years is set forth in the following table : replace_table_token_20_th ( 1 ) natural gas and ngls are converted to boe at the rate of one barrel equals six mcf based upon the approximate relative energy content of oil and natural gas , which is not necessarily indicative of the relationship of oil and natural gas prices . derivative instruments we enter into derivative instruments to manage the price risk attributable to future oil production . our gain ( loss ) on derivative instruments , net was a gain of $ 72.4 million in 2015 , compared to a gain of $ 163.4 million in 2014 , and a loss of $ 33.5 million in 2013. gain ( loss ) on derivative instruments , net is comprised of ( i ) cash gains and losses we recognize on settled derivatives during the period , and ( ii ) non-cash mark-to-market gains and losses we incur on derivative instruments outstanding at period-end . for 2015 , we realized a gain on settled derivatives of $ 161.1 million , compared to a $ 7.9 million loss in 2014 and a $ 12.2 million loss in 2013. our average realized price ( including all cash derivative settlements ) in 2015 was $ 61.19 per boe compared to $ 73.51 per boe in 2014 , and $ 79.77 per boe in 2013. the gain ( loss ) on settled derivatives increased our average realized price per boe by $ 27.10 in 2015 and decreased our average realized price per boe by $ 1.36 in 2014 and $ 2.72 in 2013. mark-to-market derivative gains and losses was a loss of $ 88.7 million in 2015 compared to a gain of $ 171.3 million in 2014 and a $ 21.3 million loss in 2013. our derivatives are not designated for hedge accounting and are accounted for using the mark-to-market accounting method whereby gains and losses from changes in the fair value of derivative instruments are recognized immediately into earnings . mark-to-market accounting treatment creates volatility in our revenues as gains and losses from unsettled derivatives are included in total revenues and are not included in accumulated other comprehensive income in the accompanying balance sheets . as commodity prices increase or decrease , such changes will have an opposite effect on the mark-to-market value of our derivatives . any gains on our derivatives will be offset by lower wellhead revenues in the future or any losses will be offset by higher future wellhead revenues based on the value at the settlement date . at december 31 , 2015 , all of our derivative contracts are recorded at their fair value , which was a net asset of $ 64.6 million , a decrease of $ 88.7 million from the $ 153.3 million net asset recorded as of december 31 , 2014. the decrease in the net asset at december 31 , 2015 as compared to december 31 , 2014 was primarily due to settlements of those derivative instruments that matured during 2015 , as well as changes in oil prices on the open oil derivative contracts . our open oil derivative contracts are summarized in `` item 7a . quantitative and qualitative disclosures about market risk— commodity price risk . '' 50 production expenses production expenses were $ 52.1 million in 2015 compared to $ 55.7 million in 2014 and $ 41.9 million in 2013. we experience increases in operating expenses as we add new wells and maintain production from existing properties . on a per unit basis , production expenses decreased 9 % from $ 9.66 per boe in 2014 to $ 8.77 per boe in 2015. on an absolute dollar basis , our production expenses in 2015 were 6 % lower when compared to 2014 due primarily to lower contract labor and maintenance costs which was partially offset by a 3 % increase in total production and a 10 % increase in the total number of net wells .
| overview of 2015 results during 2015 , we achieved the following financial and operating results : · decreased total capital expenditures by $ 408.2 million or 76 % compared to 2014 , while still growing total production by 3 % year-over-year ; · reduced cash general and administrative expenses by $ 2.1 million or 14 % compared to 2014 ; · participated in the completion of 292 gross ( 18.6 net ) wells ; · despite a 52 % drop in the pre-hedged average sales price per bbl of oil in 2015 as compared to 2014 , the realized price per bbl after the impact of the gain on settled derivative instruments declined only 11 % ; and · ended the year with $ 3.4 million in cash and , including availability under our revolving credit facility , liquidity of approximately $ 403.4 million . operationally , 2015 proved to be a challenging year due to the downturn in commodity prices . north dakota drilling activity declined approximately 65 % during the year with the majority of activity returning to the core areas located in mckenzie , mountrail , williams and dunn counties . since approximately 97,204 net acres or 59 % of northern 's total lease inventory is located in those four counties , we were able to complete approximately 18.6 net wells in 2015 and have an in-process inventory of 9.7 uncompleted wells at december 31 , 2015. in response to lower commodity prices in 2015 we decreased our capital expenditures by $ 408.2 million as compared to 2014. through continued capital discipline , we have realized improved operational efficiency and maintained year-over-year production growth that slightly exceeded 2014 production levels . during the second half of 2015 , our operating cash flows exceeded capital spending amounts , which allowed us to reduce our outstanding credit facility borrowings by $ 38 million since mid-year .
| 7,111 |
m & t bank , with total assets of $ 82.1 billion at december 31 , 2012 , is a new york-chartered commercial bank with 725 domestic banking offices in new york state , pennsylvania , maryland , delaware , virginia , west virginia , and the district of columbia , a full-service commercial banking office in ontario , canada , and an office in the cayman islands . m & t bank and its subsidiaries offer a broad range of financial services to a diverse base of consumers , businesses , professional clients , governmental entities and financial institutions located in their markets . lending is largely focused on consumers residing in new york state , pennsylvania , maryland , virginia , delaware and washington , d.c. , and on small and medium size businesses based in those areas , although loans are originated through lending offices in other states and in ontario , canada . certain lending activities are also conducted in other states through various subsidiaries . trust and other fiduciary services are offered by m & t bank and through its wholly owned subsidiary , wilmington trust company . other subsidiaries of m & t bank include : m & t real estate trust , a commercial mortgage lender ; m & t realty capital corporation , a multifamily commercial mortgage lender ; m & t securities , inc. , which provides brokerage , investment advisory and insurance services ; wilmington trust investment advisors , inc. , which serves as investment advisor to the wilmington funds , a family of proprietary mutual funds , and other funds and institutional clients ; and m & t insurance agency , inc. , an insurance agency . wilmington trust , n.a. , with total assets of $ 1.8 billion at december 31 , 2012 , is a national bank with offices in wilmington , delaware and oakfield , new york . wilmington trust , n.a . and its subsidiaries offer various trust and wealth management services . wilmington trust , n.a . also offered selected deposit and loan products on a nationwide basis , largely through telephone , internet and direct mail marketing techniques . on august 27 , 2012 , m & t announced that it had entered into a definitive agreement with hudson city bancorp , inc. ( hudson city ) , headquartered in paramus , new jersey , under which hudson city will be acquired by m & t . pursuant to the terms of the agreement , hudson city common shareholders will receive consideration for each common share of hudson city in an amount valued at .08403 of an m & t share in the form of either m & t common stock or cash , based on the election of each hudson city shareholder , subject to proration as specified in the merger agreement ( which provides for an aggregate split of total consideration of 60 % common stock of m & t and 40 % cash ) . the estimated purchase price considering the company 's closing price of $ 98.47 on december 31 , 2012 is $ 4.2 billion . as of december 31 , 2012 , hudson city reported $ 40.6 billion of assets , including $ 27.2 billion of loans ( predominantly residential real estate loans ) and $ 11.5 billion of investment securities , and $ 35.9 billion of liabilities , including $ 23.5 billion of deposits . after the merger is completed , m & t expects to repay approximately $ 12 billion of hudson city 's long-term borrowings by liquidating its comparably-sized investment securities portfolio . the merger is subject to a number of conditions , including regulatory approvals and approval by common shareholders of m & t and hudson city , and is expected to be completed by mid-year 2013. m & t participated in the troubled asset relief program capital purchase program ( tarp ) of the u.s. department of treasury ( u.s . treasury ) , which was initiated during 2008 , both by issuing preferred shares ( series a ) in december 2008 and through the 2009 acquisition of provident bankshares corporation ( provident ) by assuming shares ( series c ) that had been issued by that corporation in 39 november 2008. in august 2012 , the u.s. treasury sold its holdings of m & t 's series a ( 230,000 shares ) and series c ( 151,500 shares ) preferred stock to the public which allowed m & t to exit the tarp . m & t modified certain of the terms of the series a and series c preferred stock , subject to m & t common shareholder approval . the modifications related to the dividend rate on the preferred shares at the reset dates , which was originally set to change to 9 % on november 15 , 2013 for the series c preferred shares and on february 15 , 2014 for the series a preferred shares . in each case , the dividend rate will now change to 6.375 % on november 15 , 2013 rather than to the 9 % in the original terms . the other modification related to m & t agreeing to not redeem the series a and series c preferred shares until on or after november 15 , 2018 , except that if an event occurs such that the shares no longer qualify as tier 1 capital , m & t may redeem all of the shares within 90 days following that occurrence . on may 16 , 2011 , m & t acquired all of the outstanding common stock of wilmington trust corporation ( wilmington trust ) , headquartered in wilmington , delaware , in a stock-for-stock transaction . wilmington trust operated 55 banking offices in delaware and pennsylvania at the date of acquisition . the results of operations acquired in the wilmington trust transaction have been included in the company 's financial results since the acquisition date . story_separator_special_tag as a result , many financial institutions , including the company , experienced loan charge-offs at higher than historical levels and unrealized losses related to investment securities backed by residential and commercial real estate due to a lack of liquidity in the financial markets and anticipated credit losses that led to the recognition of other-than-temporary impairment charges . also negatively impacting the financial results of financial institutions during 2011 and 2012 , including the company , has been a series of new regulations , resulting in higher assessments by the fdic and lower fee income . recent legislative developments the dodd-frank wall street reform and consumer protection act ( dodd-frank act ) was signed into law on july 21 , 2010. that law has and will continue to significantly change the bank regulatory structure and affect the lending , deposit , investment , trading and operating activities of financial institutions and their holding companies , and the system of regulatory oversight of the company . the dodd-frank act requires various federal agencies to adopt a broad range of new implementing rules and regulations , and to prepare numerous studies and reports for congress . the dodd-frank act could have a material adverse impact on the financial services industry as a whole , as well as on m & t 's business , results of operations , financial condition and liquidity . the dodd-frank act broadened the base for fdic insurance assessments . beginning in the second quarter of 2011 , assessments are based on average consolidated total assets less average tier 1 capital and certain allowable deductions of a financial institution . the dodd-frank act also permanently increased the maximum amount of deposit insurance for banks , savings institutions and credit unions to $ 250,000 per depositor , retroactive to january 1 , 2009. noninterest-bearing transaction accounts had unlimited deposit insurance through december 31 , 2012 , when that coverage expired . the legislation also requires that publicly traded companies give shareholders a non-binding vote on executive compensation and golden parachute payments , and authorizes the securities and exchange commission to promulgate rules that would allow shareholders to nominate their own candidates using a company 's proxy materials . the dodd-frank act also directs the federal reserve board to promulgate rules prohibiting excessive compensation paid to bank holding company executives , regardless of whether the company is publicly traded . the dodd-frank act established a new bureau of consumer financial protection with broad powers to supervise and enforce consumer protection laws . the bureau of consumer financial protection has broad rule-making authority for a wide range of consumer protection laws that apply to all banks and savings institutions , including the authority to prohibit unfair , deceptive or abusive acts and practices . the bureau of consumer financial protection has examination and enforcement authority over all banks and savings institutions with more than $ 10 billion in assets . in addition , the dodd-frank act , among other things : weakened the federal preemption rules that have been applicable for national banks and gives state attorneys general the ability to enforce federal consumer protection laws ; amended the electronic fund transfer act ( efta ) which resulted in , among other things , the federal reserve board issuing rules aimed at limiting debit-card interchange fees ; applied the same leverage and risk-based capital requirements that apply to insured depository institutions to most bank holding companies which , among other things , will , after a three-year phase-in period which began january 1 , 2013 , remove trust preferred securities as a permitted component of a holding company 's tier 1 capital ; 41 provided for an increase in the fdic assessment for depository institutions with assets of $ 10 billion or more and increased the minimum reserve ratio for the deposit insurance fund from 1.15 % to 1.35 % ; imposed comprehensive regulation of the over-the-counter derivatives market , which would include certain provisions that would effectively prohibit insured depository institutions from conducting certain derivatives businesses in the institution itself ; repealed the federal prohibitions on the payment of interest on demand deposits , thereby permitting depository institutions to pay interest on business transaction and other accounts ; provided mortgage reform provisions regarding a customer 's ability to repay , restricting variable-rate lending by requiring the ability to repay to be determined for variable-rate loans by using the maximum rate that will apply during the first five years of a variable-rate loan term , and making more loans subject to provisions for higher cost loans , new disclosures , and certain other revisions ; and created the financial stability oversight council , which will recommend to the federal reserve board increasingly strict rules for capital , leverage , liquidity , risk management and other requirements as companies grow in size and complexity . many aspects of the dodd-frank act still remain subject to rulemaking and will take effect over several years , making it difficult to anticipate the overall financial impact on m & t , its customers or the financial industry more generally . provisions in the legislation that affect deposit insurance assessments , payment of interest on demand deposits and interchange fees directly impact the net income of financial institutions . provisions in the legislation that revoke the tier 1 capital treatment of trust preferred securities and otherwise require revisions to the capital requirements of m & t and m & t bank could require m & t and m & t bank to further seek other sources of capital in the future . critical accounting estimates the company 's significant accounting policies conform with gaap and are described in note 1 of notes to financial statements . in applying those accounting policies , management of the company is required to exercise judgment in determining many of the methodologies , assumptions and estimates to be utilized .
| fourth quarter results net income during the final quarter of 2012 rose 100 % to $ 296 million from $ 148 million in the year-earlier quarter . diluted and basic earnings per common share were $ 2.16 and $ 2.18 , respectively , in the fourth quarter of 2012 , up 108 % and 110 % from $ 1.04 of diluted and basic earnings per common share in the similar 2011 quarter . on an annualized basis , the rates of return on average assets and average common 90 shareholders ' equity for the recent quarter were 1.45 % and 12.10 % , respectively , compared with .75 % and 6.12 % , respectively , in the fourth quarter of 2011. net operating income totaled $ 305 million in the recently completed quarter , compared with $ 168 million in the year-earlier quarter . diluted net operating earnings per common share were $ 2.23 and $ 1.20 in the fourth quarters of 2012 and 2011 , respectively . the annualized net operating returns on average tangible assets and average tangible common equity in the fourth quarter of 2012 were 1.56 % and 20.46 % , respectively , compared with .89 % and 12.36 % , respectively , in the corresponding quarter of 2011. core deposit and other intangible asset amortization , after tax effect , totaled $ 8 million and $ 10 million in the fourth quarters of 2012 and 2011 ( $ .07 and $ .08 per diluted common share ) , respectively .
| 7,112 |
see “ 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 and “ results of operations , ” below . certain financial data of con edison 's businesses are presented below : replace_table_token_21_th ( a ) net income from the clean energy businesses for the year ended december 31 , 2016 includes $ 56 million of net gain related to the sale of the retail electric supply business ( see note u to the financial statements in item 8 ) and $ 12 million of net loss related to a goodwill impairment charge on two energy services companies ( see note k to the financial statements in item 8 ) . also includes for the year ended december 31 , 2016 , $ 3 million of net after-tax mark-to-market gain . ( b ) other includes parent company and consolidation adjustments . story_separator_special_tag # 8c8272 ; padding-left:2px ; padding-top:2px ; padding-bottom:2px ; '' > cecony o & r clean energy businesses con edison transmission other ( a ) con edison ( b ) ( millions of dollars ) increases ( decreases ) amount increases ( decreases ) percent increases ( decreases ) amount increases ( decreases ) percent increases ( decreases ) amount increases ( decreases ) percent increases ( decreases ) amount increases ( decreases ) percent increases ( decreases ) amount increases ( decreases ) percent increases ( decreases ) amount increases ( decreases ) percent operating revenues $ ( 163 ) ( 1.6 ) % $ ( 24 ) ( 2.8 ) % $ ( 292 ) ( 21.1 ) % $ — — % $ — — $ ( 479 ) ( 3.8 ) % purchased power ( 151 ) ( 8.8 ) ( 13 ) ( 6.2 ) ( 370 ) ( 35.4 ) — — — — ( 534 ) ( 18.0 ) fuel ( 76 ) ( 30.6 ) — — — — — — — — ( 76 ) ( 30.6 ) gas purchased for resale ( 18 ) ( 5.3 ) ( 4 ) ( 7.8 ) 6 5.7 — — ( 2 ) large ( 18 ) ( 3.6 ) other operations and maintenance ( 75 ) ( 2.6 ) ( 32 ) ( 9.6 ) 30 22.4 3 — ( 1 ) ( 25.0 ) % ( 75 ) ( 2.2 ) depreciation and amortization 66 6.3 ( 1 ) ( 1.5 ) 20 90.9 — — 1 — 86 7.6 taxes , other than income taxes 76 4.1 17 27.4 1 5.3 — — — — 94 4.9 gain on sale of retail electric supply business — — — — 104 — — — — — 104 — operating income 15 0.7 9 7.4 125 large ( 3 ) — 2 large 148 6.1 other income less deductions 5 large 5 large ( 12 ) ( 35.3 ) 43 — ( 1 ) large 40 large net interest expense 19 3.3 1 2.9 23 large 6 — ( 6 ) ( 26.1 ) 43 6.6 income before income tax expense 1 0.1 13 15.9 90 large 34 — 7 30.4 145 8.1 income tax expense 29 5.1 6 20.0 31 large 14 — 13 61.9 93 15.4 net income $ ( 28 ) ( 2.6 ) % $ 7 13.5 % $ 59 large $ 20 — % $ ( 6 ) large $ 52 4.4 % ( a ) includes parent company and consolidation adjustments . ( b ) represents the consolidated results of operations of con edison and its businesses . 49 cecony replace_table_token_25_th electric cecony 's results of electric operations for the year ended december 31 , 2016 compared with the year ended december 31 , 2015 is as follows : replace_table_token_26_th cecony 's electric sales and deliveries in 2016 compared with 2015 were : replace_table_token_27_th ( a ) revenues from electric sales are subject to a revenue decoupling mechanism , as a result of which , delivery revenues generally are not affected by changes in delivery volumes from levels assumed when rates were approved . ( b ) “ residential/religious ” generally includes single-family dwellings , individual apartments in multi-family dwellings , religious organizations and certain other not-for-profit organizations . ( c ) other electric operating revenues generally reflect changes in regulatory assets and liabilities in accordance with the revenue decoupling mechanism and other provisions of the company 's rate plans . see note b to the financial statements in item 8 . ( d ) after adjusting for variations , principally weather and billing days , electric delivery volumes in cecony 's service area were the same in 2016 compared with 2015 . operating revenues decreased $ 66 million in 2016 compared with 2015 due primarily to lower purchased power expenses ( $ 151 million ) and lower fuel expenses ( $ 14 million ) , offset in part by higher revenues from the electric rate plan ( $ 122 million ) and changes in regulatory charges ( $ 20 million ) . purchased power expenses decreased $ 151 million in 2016 compared with 2015 due to lower unit costs ( $ 111 million ) and purchased volumes ( $ 40 million ) . 50 fuel expenses decreased $ 14 million in 2016 compared with 2015 due to lower unit costs ( $ 19 million ) , offset by higher sendout volumes from the company 's electric generating facilities ( $ 5 million ) . other operations and maintenance expenses decreased $ 49 million in 2016 compared with 2015 due primarily to a decrease in the surcharges for assessments and fees that are collected in revenues from customers ( $ 52 million ) and lower uncollectible expense ( $ 12 million ) , offset in part by higher costs for municipal infrastructure support ( $ 8 million ) . depreciation and amortization increased $ 45 million in 2016 compared with 2015 due primarily to higher electric utility plant balances . story_separator_special_tag o & r replace_table_token_33_th electric o & r 's results of electric operations for the year ended december 31 , 2016 compared with the year ended december 31 , 2015 is as follows : replace_table_token_34_th 53 o & r 's electric sales and deliveries in 2016 compared with 2015 were : replace_table_token_35_th ( a ) o & r 's new york electric delivery revenues are subject to 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 . o & r 's electric sales in new jersey are not subject to a decoupling mechanism , and as a result , changes in such volumes do impact revenues . ( b ) “ residential/religious ” generally includes single-family dwellings , individual apartments in multi-family dwellings , religious organizations and certain other not-for-profit organizations . ( c ) other electric operating revenues generally reflect changes in regulatory assets and liabilities in accordance with the company 's electric rate plan . see note b to the financial statements in item 8 . ( d ) after adjusting for weather and other variations , electric delivery volumes in o & r 's service area decreased 0.9 percent in 2016 compared with 2015 . operating revenues decreased $ 26 million in 2016 compared with 2015 due primarily to lower purchased power expenses ( $ 13 million ) and lower revenues from the new york electric rate plan ( which includes the reconciliation of certain expenses , see note b to the financial statements in item 8 ) ( $ 7 million ) . purchased power expenses decreased $ 13 million in 2016 compared with 2015 due to a decrease in unit costs ( $ 18 million ) , offset by an increase in purchased volumes ( $ 5 million ) . other operations and maintenance expenses decreased $ 12 million in 2016 compared with 2015 due primarily to regulatory accounting effects of pension costs ( $ 11 million ) and the charge-off of certain regulatory assets in 2015 ( $ 4 million ) , offset by higher operating costs ( $ 3 million ) . depreciation and amortization decreased $ 1 million in 2016 compared with 2015 due primarily to lower average depreciation rates . taxes , other than income taxes increased $ 8 million in 2016 compared with 2015 due primarily to higher property taxes . gas o & r 's results of gas operations for the year ended december 31 , 2016 compared with the year ended december 31 , 2015 is as follows : replace_table_token_36_th 54 o & r 's gas sales and deliveries , excluding off-system sales , in 2016 compared with 2015 were : replace_table_token_37_th ( a ) revenues from new york 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 weather and other variations , total firm sales and transportation volumes increased 2.3 percent in 2016 compared with 2015 . operating revenues increased $ 2 million in 2016 compared with 2015 due primarily to higher revenues from the new york gas rate plan ( $ 9 million ) , offset in part by the decrease in gas purchased for resale ( $ 4 million ) . gas purchased for resale decreased $ 4 million in 2016 compared with 2015 due to a decrease in purchased volumes ( $ 5 million ) , offset by an increase in unit costs ( $ 1 million ) . other operations and maintenance expenses decreased $ 20 million in 2016 compared with 2015 due primarily to the charge-off of certain regulatory assets in 2015 ( $ 14 million ) and regulatory accounting effects of pension costs ( $ 10 million ) , offset by higher operating costs ( $ 4 million ) . taxes , other than income taxes increased $ 9 million in 2016 compared with 2015 due primarily to higher property taxes . taxes , other than income taxes taxes , other than income taxes , increased $ 17 million in 2016 compared with 2015 . the principal components of taxes , other than income taxes , were : replace_table_token_38_th ( a ) including sales tax on customers ' bills , total taxes other than income taxes in 2016 and 2015 were $ 105 million and $ 88 million , respectively . other income ( deductions ) other income ( deductions ) increased $ 5 million in 2016 compared with 2015 due primarily to the impairment of certain assets held for sale in 2015 ( see note u to the financial statements in item 8 ) . income tax expense income taxes increased $ 6 million in 2016 compared with 2015 due primarily to higher income before income tax expense ( $ 5 million ) and plant-related flow through items ( $ 3 million ) , offset in part by lower taxable reimbursement in insurance claims ( $ 1 million ) and a higher tax benefit from a corporate-owned life insurance policy ( $ 1 million ) . 55 clean energy businesses the clean energy businesses ' results of operations for the year ended december 31 , 2016 compared with the year ended december 31 , 2015 is as follows : replace_table_token_39_th operating revenues decreased $ 292 million in 2016 compared with 2015 due primarily to lower electric retail revenues . electric retail revenues decreased $ 389 million in 2016 as compared with 2015 due to the sale of the retail electric supply business ( see note u to the financial statements in item 8 ) . solar revenues increased $ 54 million in 2016 as compared with 2015 due primarily to an increase in solar electric production projects in operation . energy services revenues increased $ 41 million due to an increase in active projects . wholesale revenues increased $ 8 million in 2016 compared with 2015 due primarily to higher sales volumes .
| results of operations net income and earnings per share for the years ended december 31 , 2016 , 2015 and 2014 were as follows : replace_table_token_22_th ( a ) includes $ 3 million or $ 0.01 a share of net loss in 2015 related to the impairment of certain assets held for sale ( see note u to the financial statements in item 8 ) . ( b ) includes $ 56 million or $ 0.19 a share of net gain related to the sale of the retail electric supply business and $ ( 12 ) million or $ ( 0.04 ) a share of net loss related to the goodwill impairment charge on two energy services companies in 2016 ( see notes u and k to the financial statements in item 8 ) . also includes $ 3 million or $ 0.02 a share and $ ( 73 ) million or $ ( 0.25 ) a share of net after-tax mark-to-market gains/ ( losses ) in 2016 and 2014 , respectively . also includes in 2014 , an after-tax gain on sale of solar electric production projects of $ 26 million ( see note u to the financial statements in item 8 ) and an after-tax charge of $ 1 million relating to the lilo transactions that were terminated in 2013 . ( c ) other includes parent company and consolidation adjustments . ( d ) earnings per share on a diluted basis were $ 4.12 a share , $ 4.05 a share and $ 3.71 a share in 2016 , 2015 and 2014 , respectively . the companies ' results of operations for 2016 , as compared with 2015 , and for 2015 , as compared with 2014 , reflect changes in the utilities ' rate plans and regulatory charges and the impact of weather on steam revenues . the results of operations also reflect higher electric retail gross profit and income from renewable investments at the clean energy businesses .
| 7,113 |
goodwill and intangible assets goodwill goodwill represents the excess of amounts paid for acquisitions over the fair value of net identifiable assets acquired less liabilities assumed . the company assigns assets story_separator_special_tag the following discussion and analysis contains forward-looking statements about future revenues , operating results , plans and expectations . forward-looking statements are based on a number of assumptions and estimates that are inherently subject to significant risks and uncertainties and our results could differ materially from the results anticipated by our forward-looking statements as a result of many known or unknown factors , including , but not limited to , those factors discussed in part i , item 1a . risk factors . also , please read the “ cautionary statement regarding forward-looking statements ” set forth at the beginning of this annual report on form 10-k. in addition , read the following discussion in conjunction with part 1 of this annual report on form 10-k as well as our consolidated financial statements and the related notes contained elsewhere in this annual report on form 10-k. overview we provide post-acute health care services primarily to medicare beneficiaries throughout the united states , through our home health agencies , hospice agencies , home and community-based , long-term acute care hospitals , and hci . our net service revenue decreased $ 17.0 million to $ 2.063 billion for the year ending december 31 , 2020 from $ 2.080 billion for the year ending december 31 , 2019 largely due to the impact from the covid-19 pandemic . during 2020 , we acquired 24 39 agencies , such that , as of december 31 , 2020 , we operated 827 locations in 35 states within the continental united states and the district of columbia . on april 1 , 2018 , we completed our merger with almost family , whereby almost family became a wholly owned subsidiary of the company . the accompanying audited results of operations for the years ended december 31 , 2020 and 2019 include the results of almost family for the twelve month periods and operations for the year ended december 31 , 2018 includes the results of operations for almost family for the period april 1 , 2018 to december 31 , 2018. segments our services are classified into five segments : ( 1 ) home health , ( 2 ) hospice , ( 3 ) home and community-based , ( 4 ) facility-based services , offered primarily through our ltachs , and ( 5 ) hci . through our home health services segment we offer a wide range of services , including skilled nursing , medically-oriented social services , and physical , occupational and speech therapy . as of december 31 , 2020 , we operated 537 home health service locations , of which 322 are wholly-owned by us , 211 are majority-owned or controlled by us through equity joint ventures , two are controlled by us through license lease arrangements , and the remaining two are only managed by us . through our hospice services segment , we offer a wide range of services , including pain and symptom management , emotional and spiritual support , inpatient and respite care , homemaker services , and counseling . as of december 31 , 2020 , we operated 120 hospice locations , of which 56 are wholly-owned by us , 62 are majority-owned by us through equity joint ventures and two , are controlled by us through license lease arrangements . through our home and community-based , our services are performed by paraprofessional personnel , and include assistance to elderly , chronically ill , and disabled patients with activities of daily living . as of december 31 , 2020 , we operated 124 community-based services locations , of which 109 are wholly-owned and 15 are majority-owned through an equity joint venture . we provide facility-based services principally through our ltachs . as of december 31 , 2020 , we operated 11 ltachs with 12 locations , of which all but three are located within host hospitals . we also operate two skilled nursing facilities , one pharmacy , a rural health clinic , one physician practice , one family health center , and 16 physical therapy clinics . of these 34 facility-based services locations as of december 31 , 2020 , 23 are wholly-owned by us and 11 are controlled by us through equity joint ventures . our hci segment reports on our developmental activities outside its other business segments . the hci segment includes ( a ) imperium health management , llc , an aco enablement and management company , ( b ) long term solutions , inc. , an in-home assessment company serving the long-term care insurance industry , and ( c ) certain assets operated by advanced care house calls , which provides primary medical care for patients with chronic and acute illnesses who have difficulty traveling to a doctor 's office . these activities are intended ultimately , whether directly or indirectly , to benefit our patients and or payors through the enhanced provision of services in our other segments . the activities all share a common goal of improving patient experiences and quality outcomes , while lowering costs . they include , but are not limited to , items such as : technology , information , population health management , risk-sharing , care-coordination and transitions , clinical advancements , enhanced patient engagement and informed clinical decision and technology enabled in-home clinical assessments . we have 12 hci locations , with 11 being wholly-owned and one controlled by us through an equity joint venture . story_separator_special_tag while during the twelve months ended december 31 , 2020 , we did not experience a material disruption in our ability to continue to provide services to our patients , there is no guarantee that we wo n't experience such service disruption in the future or a decrease in demand for our services as a result of covid-19 . the rapid development and fluidity of this situation makes it difficult to predict the ultimate impact of covid-19 on our business and operations . nevertheless , covid-19 presents a material uncertainty which could materially impact our business and results of operations in the future . home health services on october 29 , 2020 , cms released the final rule for fiscal year 2021 to update base payment rates by a net market basket index of 1.9 % , which is an annual inflation update of 2.3 % , reduced by a 0.3 % productivity adjustment and 0.1 % reduction in the rural add-on percentages mandated by the bipartisan budget act of 2018. the base 30 day payment rate is increased from $ 1,864.03 to $ 1,901.12. the following lists additional fiscal year 2021 reimbursement items : a reduction of payment ( including lupa ) rates by 2 % for home health agencies that do not submit required quality data using wage indexes for the office of management and budget 's core-based statistical areas with a cap of 5 % of wage index decreases and no cap on wage index increases continued phase-out of the rural add-on continued 2020 levels of pdgm case mix weights and lupa thresholds finalization of plan of care requirements regarding telehealth visits . hospice on july 31 , 2020 , cms released the final rule for fiscal year 2021 to update payment rates and the wage index . the hospice payment update is a 2.4 % increase to the payment rates . the final rule will apply a 5 % cap on any decrease in a geographic area 's wage index value from fiscal year 2020. no such cap will be applied in fiscal year 2022. in addition , the final rule increases the aggregate cap value of $ 30,683.93 for fiscal year 2021 , compared to $ 29,964.78 for fiscal year 2020. based on these estimates , the following are the final fiscal year 2021 base payment rates for various levels of care , which began on october 1 , 2020 and will end on september 30 , 2021 and fiscal year 2020 base payment rates for various levels of care , which began on october 1 , 2019 and ended september 30 , 2020 ( payment rates for hospice providers not complying with the hospice quality reporting requirements will be 2 % lower than the values referenced below ) : replace_table_token_5_th 42 $ 58.15 = hourly rate for 2020 $ 59.68 = hourly rate for 2021 inpatient respite care $ 461.09 $ 450.10 general inpatient care $ 1,045.66 $ 1,021.25 facility-based services on august 2 , 2018 , cms posted a display copy of the final rule for the annual update to medicare payment rates and policies for the fiscal year 2019 inpatient hospitals prospective payment system and the ltach pps . the final rule was effective for discharges occurring on or after october 1 , 2018 through september 30 , 2019. cms finalized a 0.9 % overall increase in payments under the ltach pps in fiscal year 2019 based upon a 1 % increase in payments for standard federal payment rate cases and a 0.4 % increase in payments for site neutral payment cases . on october 3 , 2018 , cms published a correction to the final rule revising the fiscal year 2019 ltach pps standard federal payment rate to $ 41,558.68 ( instead of $ 41,579.65 as published in the final rule on august 2 , 2018 ) . cms also finalized elimination of the 25 percent rule , but implemented a one-time budget neutrality adjustment of approximately 0.9 % for fiscal year 2019 to cover the cost of elimination of the rule . cms also finalized ltach policy changes effective for cost reporting periods beginning on or after october 1 , 2019 , permitting ltachs to establish psychiatric and rehabilitation units , and to co-locate with other ipps-exempt hospitals to provide ltach , psychiatric and rehabilitative care on the same campus . cms also increased flexibility for co-located satellite ltach facilities clarifying that such co-located satellites do not need to comply with some of the separateness and control requirements of a co-located hospital . the proposed rule also makes some changes to the ltach quality reporting program by removing three quality measures and refraining from adding additional measures . on august 2 , 2019 , cms issued a final rule for the fiscal year 2020 ltach-pps . overall , cms expected ltach-pps payments to increase by approximately 1.0 % , which reflected the continued statutory implementation of the revised ltach-pps payments . ltach-pps payments for fiscal year 2020 for discharges paid using the standard ltach payment rate were expected to increase by 2.7 % after accounting for the proposed annual standard federal rate update for fiscal year 2020 of 2.5 % , an estimated decrease in outlier payments of 0.2 % , and other factors . ltach-pps payments for cases continuing to transition to the site neutral payment rates are expected to decrease by approximately 5.9 % . this accounts for the ltach site neutral payment rate cases that will continue to be paid a blended payment rate as the rolling statutory transition period ends for ltach discharges occurring in cost reporting periods beginning in fiscal year 2020 , and other changes . on september 2 , 2020 , cms issued a final rule for the fiscal year 2021 ltach-pps . cms expects ltach-pps payments to decrease by 1.1 % , which reflects continued statutory implementation of the revised ltach-pps payment system .
| consolidated results of operations the following table sets forth , for the period indicated , our consolidated results ( amounts in thousands ) : replace_table_token_7_th consolidated net service revenue was negatively impacted due to covid-19 , which affected all percentages of revenue disclosed below . the following table sets forth our consolidated results as a percentage of net service revenue , except income tax expense , which is presented as a percentage of income attributable to lhc group , inc. 's common stockholders : replace_table_token_8_th consolidated net service revenue for the year ended december 31 , 2020 was $ 2.06 billion co mpared to $ 2.08 billion for the same period in 2019 , a decrease o f $ 17.0 million , or 0.8 % . consolidated net service revenue was comprised of the following for the periods ending december 31 : replace_table_token_9_th revenue derived from medicare represented 62.1 % a nd 64.1 % of our consolidated net service revenue for the years ended december 31 , 2020 and 2019 , respectively . 45 the following table sets forth each of our segment 's revenue growth or loss , along with key applicable statistical data , for the twelve months ended december 31 , 2020 and the related change from the same period in 2019 ( amounts in thousands , except statistical data , and revenue excludes implicit price concessions ) : replace_table_token_10_th ( 1 ) organic - combination of same store , a location that has been in service with us for greater than 12 months , and de novo , an internally developed location that has been in service for 12 months or less . ( 2 ) acquired - purchased locations that have been in service with us 12 months or less . the decrease in our consolidated net service revenue in 2020 as compared to 2019 was due to several factors .
| 7,114 |
forward-looking statements include statements preceded by , followed by or that include the words may , could , would , should , believe , expect , anticipate , plan , estimate , target , project , intend and similar words or expressions . in particular , forward-looking statements contained in this discussion include our expectations regarding : the effect of client trading activity on our results of operations ; the effect of changes in interest rates on our net interest spread ; diluted earnings per share ; average commissions and transaction fees per trade ; amounts of commissions and transaction fees , asset-based revenues , net interest revenue , insured deposit account fees , investment product fees and other revenues ; net interest margin ; the average yield earned on insured deposit account assets ; the effect of our migration of client cash balances into the insured deposit account offering ; amounts of total operating expenses , advertising expense and other expenses ; our effective income tax rate ; our capital and liquidity needs and our plans to finance such needs ; and our stock repurchase program . the company 's actual results could differ materially from those anticipated in such forward-looking statements . important factors that may cause such differences include , but are not limited to : general economic and political conditions and other securities industry risks ; fluctuations in interest rates ; stock market fluctuations and changes in client trading activity ; credit risk with clients and counterparties ; increased competition ; systems failures , delays and capacity constraints ; network security risks ; liquidity risk ; new laws and regulations affecting our business ; regulatory and legal matters and uncertainties and the other risks and uncertainties set forth under item 1a . risk factors of this form 10-k. the forward-looking statements contained in this report speak only as of the date on which the statements were made . we undertake no obligation to publicly update or revise these statements , whether as a result of new information , future events or otherwise , except to the extent required by the federal securities laws . glossary of terms in discussing and analyzing our business , we utilize several metrics and other terms that are defined in the following glossary of terms . italics indicate other defined terms that appear elsewhere in the glossary . the term gaap refers to u.s. generally accepted accounting principles . activity rate funded accounts average client trades per day during the period divided by the average number of funded accounts during the period . asset-based revenues revenues consisting of ( 1 ) net interest revenue , ( 2 ) insured deposit account fees and ( 3 ) investment product fees . the primary factors driving our asset-based revenues are average balances and average rates . average balances consist primarily of average client margin balances , average segregated cash balances , average client credit balances , average client insured deposit account balances , average fee-based investment balances and average securities borrowing and securities lending balances . average rates consist of the average interest rates and fees earned and paid on such balances . average client trades per funded account ( annualized ) total trades divided by the average number of funded accounts during the period , annualized based on the number of trading days in the fiscal year . average client trades per day total trades divided by the number of trading days in the period . this metric is also known as daily average revenue trades ( darts ) . average commissions and transaction fees per trade total commissions and transaction fee revenues as reported on the company 's consolidated statements of income ( excluding clearing revenues from td waterhouse uk ) divided by total trades for the period . commissions and transaction fee revenues primarily consist of trading commissions , revenue-sharing arrangements with market destinations ( also referred to as payment for order flow ) and markups on riskless principal transactions in fixed-income securities . basis point when referring to interest rates , one basis point represents one one-hundredth of one percent . 25 beneficiary accounts brokerage accounts managed by a custodian , guardian , conservator or trustee on behalf of one or more beneficiaries . examples include accounts maintained under the uniform gift to minors act ( ugma ) or uniform transfer to minors act ( utma ) , guardianship , conservatorship and trust arrangements and pension or profit plan for small business accounts . brokerage accounts accounts maintained by the company on behalf of clients for securities brokerage activities . the primary types of brokerage accounts are cash accounts , margin accounts , ira accounts and beneficiary accounts . futures accounts are sub-accounts associated with a brokerage account for clients who wish to trade futures and or options on futures . cash accounts brokerage accounts that do not have margin account approval . client assets the total value of cash and securities in brokerage accounts . client cash and money market assets the sum of all client cash balances , including client credit balances and client cash balances swept into insured deposit accounts or money market mutual funds . client credit balances client cash held in brokerage accounts , excluding balances generated by client short sales on which no interest is paid . interest paid on client credit balances is a reduction of net interest revenue . client credit balances are included in payable to clients on our consolidated balance sheets . client margin balances the total amount of cash loaned to clients in margin accounts . such loans are secured by client assets . interest earned on client margin balances is a component of net interest revenue . client margin balances are included in receivable from clients on our consolidated balance sheets . conduit-based assets deposits paid on securities borrowing associated with our conduit-based securities borrowing/lending business . story_separator_special_tag excess capital , as defined under clause ( c ) above , is generally available for dividend from the broker-dealer subsidiaries to the parent company . liquid assets management target is based on more conservative measures of broker-dealer net capital than liquid assets regulatory threshold ( defined below ) because we prefer to maintain significantly more conservative levels of net capital at the broker-dealer subsidiaries than the regulatory thresholds require . we consider liquid assets management target to be a measure that reflects our liquidity that would be readily available for corporate investing and financing activities under normal operating circumstances . liquid assets regulatory threshold is a related metric that reflects our liquidity that would be available for corporate investing and financing activities under unusual operating circumstances , such as the need to provide funding for significant strategic business transactions . our liquid assets metrics should be considered as supplemental measures of liquidity , rather than as substitutes for cash and cash equivalents . liquid assets regulatory threshold liquid assets regulatory threshold is a non-gaap financial measure . we define liquid assets regulatory threshold as the sum of ( a ) corporate cash and cash equivalents , ( b ) corporate short-term investments , ( c ) regulatory net capital of ( i ) our clearing broker-dealer subsidiary in 27 excess of 5 % of aggregate debit items and ( ii ) our introducing broker-dealer subsidiaries in excess of the applicable early warning net capital requirement and ( d ) tier 1 capital of our trust company in excess of the minimum dollar requirement . we include the excess capital of our broker-dealer and trust company subsidiaries in liquid assets regulatory threshold , rather than simply including broker-dealer and trust company cash and cash equivalents , because capital requirements may limit the amount of cash available for dividend from the broker-dealer and trust company subsidiaries to the parent company . excess capital , as defined under clauses ( c ) and ( d ) above , is generally available for dividend from the broker-dealer and trust company subsidiaries to the parent company . we consider liquid assets regulatory threshold to be a measure that reflects our liquidity that would be available for corporate investing and financing activities under unusual operating circumstances , such as the need to provide funding for significant strategic business transactions . liquid assets management target is a related metric that reflects our liquidity that would be readily available for corporate investing and financing activities under normal operating circumstances . our liquid assets metrics should be considered as supplemental measures of liquidity , rather than as substitutes for cash and cash equivalents . liquidation value the net value of a client 's account holdings as of the close of a regular trading session . liquidation value includes client cash and the value of long security positions , less margin balances and the cost to buy back short security positions . it also includes the value of open futures , foreign exchange and options positions . margin accounts brokerage accounts in which clients may borrow from the company to buy securities or for any other purpose , subject to regulatory and company-imposed limitations . market fee-based investment balances client assets invested in mutual funds ( except money market funds ) and company programs such as advisordirect ® and amerivest , tm on which we earn fee revenues that are largely based on a percentage of the market value of the investment . market fee-based investment balances are a component of fee-based investment balances . fee revenues earned on these balances are included in investment product fees on our consolidated statements of income . net interest margin ( nim ) a measure of the net yield on our average spread-based assets . net interest margin is calculated for a given period by dividing the annualized sum of net interest revenue and insured deposit account fees by average spread-based assets . net interest revenue net interest revenue is interest revenues less brokerage interest expense . interest revenues are generated by charges to clients on margin balances maintained in margin accounts , the investment of cash from operations and segregated cash in short-term marketable securities and interest earned on securities borrowing . brokerage interest expense consists of amounts paid or payable to clients based on credit balances maintained in brokerage accounts and interest incurred on securities lending . brokerage interest expense does not include interest on company non-brokerage borrowings . net new assets consists of total client asset inflows , less total client asset outflows , excluding activity from business combinations . client asset inflows include interest and dividend payments and exclude changes in client assets due to market fluctuations . net new assets are measured based on the market value of the assets as of the date of the inflows and outflows . net new asset growth rate ( annualized ) annualized net new assets as a percentage of client assets as of the beginning of the period . new accounts the number of new client accounts ( funded and unfunded ) opened in a specified period . operating expenses excluding advertising operating expenses excluding advertising is a non-gaap financial measure . operating expenses excluding advertising consists of total operating expenses , adjusted to remove advertising expense . we consider operating expenses excluding advertising an important measure of the financial performance of our ongoing business . advertising spending is excluded because it is largely at the discretion of the company , can vary significantly from period to period based on market conditions and generally relates to the acquisition of future revenues through new accounts rather than current revenues from existing accounts . operating expenses excluding advertising should be considered in addition to , rather than as a substitute for , total operating expenses . 28 return on client assets ( roca ) annualized pre-tax income divided by average client assets during the period .
| results of operations conditions in the u.s. equity markets significantly impact the volume of our clients ' trading activity . there is a direct correlation between the volume of our clients ' trading activity and our results of operations . we can not predict future trading volumes in the u.s. equity markets . if client trading activity increases , we expect that it would have a positive impact on our results of operations . if client trading activity declines , we expect that it would have a negative impact on our results of operations . changes in average balances , especially client margin , credit , insured deposit account and mutual fund balances , may significantly impact our results of operations . changes in interest rates also significantly impact our results of operations . we seek to mitigate interest rate risk by aligning the average duration of our interest-earning assets with that of our interest-bearing liabilities . we can not predict the direction of interest rates or the levels of client balances . if interest rates rise , we generally expect to earn a larger net interest spread . conversely , a falling interest rate environment generally would result in our earning a smaller net interest spread . financial performance metrics pre-tax income , net income , earnings per share and ebitda are key metrics we use in evaluating our financial performance . ebitda is a non-gaap financial measure . 31 we consider ebitda to be an important measure of our financial performance and of our ability to generate cash flows to service debt , fund capital expenditures and fund other corporate investing and financing activities . ebitda is used as the denominator in the consolidated leverage ratio calculation for covenant purposes under our holding company 's senior revolving credit facility . ebitda eliminates the non-cash effect of tangible asset depreciation and amortization and intangible asset amortization .
| 7,115 |
intangibles assets are also 79 notes to financial statements accounting policies reviewed for impairment by estimating forecasted cash flows and discounting those cash flows as needed to calculate impairment amounts . during 2019 and 2018 , the company recognized an intangible impairment charge of $ 587,000 and $ 583,000 respectively , related to an indefinite-lived trademark recorded in story_separator_special_tag overview management 's discussion and analysis should be read in conjunction with the consolidated financial statements and accompanying notes that appear elsewhere in this annual report on form 10-k. in the first quarter of 2019 , the company reassessed the alignment of its reporting segments and combined the north america/home medical equipment ( na/hme ) and institutional products group ( ipg ) segments into a single operating segment , referred to as north america . the company believes that this change will better reflect how the company manages the business , allocates resources and assesses performance of the businesses contained in the north america segment . additionally , the company reassessed the activity of the businesses in its former asia pacific segment and began reporting the asia pacific businesses as part of the all other segment , since those businesses , individually and collectively , are not large enough relative to the company 's overall business to merit disclosure as a separate reporting segment . the company believes that these changes provide improved transparency of the company 's business results to its shareholders , and are better aligned with how the company manages its businesses . segment results for 2018 have been reclassified to reflect the realignment of the company 's reporting segments and be comparable to the segment results for 2019. invacare is a multi-national company with integrated capabilities to design , manufacture and distribute durable medical devices . the company makes products that help people move , breathe , rest and perform essential hygiene , and with those products the company supports people with congenital , acquired and degenerative conditions . the company 's products and solutions are important parts of care for people with a range of challenges , from those who are active and involved in work or school each day and may need additional mobility or respiratory support , to those who are cared for in residential care settings , at home and in rehabilitation centers . the company operates in facilities in north america , europe and asia pacific , which are the result of dozens of acquisitions made over the company 's forty-year history . some of these acquisitions have been combined into integrated operating units , while others have remained relatively independent . strategy the company had a strategy to be a leading provider of durable medical equipment to health care providers in global markets by providing the broadest portfolio available . this strategy has not kept pace with certain reimbursement changes , competitive dynamics and company-specific challenges . since 2015 , the company has made a major shift in its strategy . the company has since been aligning its resources to produce products and solutions that assist customers and end-users with their most clinically complex needs . by focusing the company 's efforts to provide the best possible assistance and outcomes to the people and caregivers who use its products , the company aims to improve its financial condition for sustainable profit and growth . to execute this transformation , the company is undertaking a substantial multi-year transformation plan . transformation the company continues to execute a multi-year transformation to return the company to profitability by focusing its resources on products and solutions that provide greater healthcare value in clinically complex rehabilitation and post-acute care . 2019 was a year of tremendous progress in the company 's transformation , despite some external challenges in north america . the company reinvigorated its innovation pipeline with the launch of new products in the mobility and seating , lifestyles and respiratory product categories . these new products offer compelling clinical solutions that benefit customers and end-users . at the same time , the company eliminated some legacy products which no longer met the minimum threshold that aligns with its long-term financial goals . the company also took actions to optimize and resize its infrastructure , as reflected in expanded gross margins and a significant reduction of sg & a expense . in 2019 , europe delivered solid performance with continued growth in constant currency net sales and improved operating income . in north america , sales growth in mobility and seating products were more than offset by declines in sales of respiratory products . sales of respiratory products were negatively impacted by changes in ncb reimbursement effective january 1 , 2019 , and also by the company 's strategic decision to balance sales volume growth with optimizing profitability . asia pacific , which is reported in the all other segment , was impacted by payor process changes which temporarily affected funding availability in new zealand . the introduction of u.s. tariffs on imported goods primarily from china increased cost of goods sold and influenced cost increases of other domestically sourced materials and components . the company believes it has mitigated a substantial majority of the impact of tariffs and continues to actively implement additional mitigation efforts for the remaining exposure . free cash flow usage for 2019 improved significantly from 2018 due to stronger operating results and reduced working capital . 37 part ii management discussion & analysis - overview the company 's transformation and growth plan balances innovative organic growth , product portfolio changes across all regions , and cost improvements in supply chain and administrative functions . story_separator_special_tag however , respiratory product sales declined significantly , in part due to the company 's strategic decision to optimize profitability in this product category . 2018 versus 2017 replace_table_token_8_th consolidated net sales for 2018 increased 0.6 % for the year , to $ 972,347,000 from $ 966,497,000 in 2017. foreign currency translation increased net sales by 2.4 percentage points . constant currency net sales decreased 1.8 % compared to 2017. reported net sales for mobility and seating products increased 10.6 % globally and 8.5 % for north america . europe constant currency net sales for the year declined 0.2 % , as the company strategically reduced sales of less profitable products . constant currency net sales declined in north america due to declines in sales of respiratory and lifestyle products impacted by reimbursement changes . europe - european net sales increased 4.3 % in 2018 compared to 2017 to $ 558,518,000 from $ 535,326,000 as foreign currency translation increased net sales by 4.5 percentage points . constant currency net sales decreased 0.2 % compared to 2017 as the company strategically reduced sales of less profitable products . north america - north america net sales decreased 4.1 % in 2018 versus the prior year to $ 364,590,000 from $ 380,290,000 with foreign currency translation having no material impact on net sales . net sales decreased compared to the prior year due to declines in sales of respiratory and lifestyle products impacted by reimbursement changes . these declines were partially offset by constant currency net sales growth of 8.0 % in north america mobility and seating products . all other - asia pacific net sales decreased 3.2 % in 2018 from the prior year to $ 49,239,000 from $ 50,881,000. foreign currency translation decreased net sales by 2.1 percentage points . constant currency net sales decreased 1.1 % compared to 2017 due to net sales increases in mobility and seating products . 43 part ii md & a - gross profit gross profit 2019 versus 2018 consolidated gross profit as a percentage of net sales was 28.2 % in 2019 as compared to 27.5 % in 2018 . gross profit as a percentage of net sales for 2019 increased by 70 basis points as compared to 2018 . the gross margin improvement reflects the effective mitigation of the previously estimated approximately $ 5,000,000 annual negative impact of tariffs , to an actual negative impact of less than $ 2,000,000 , as well as lower material and freight costs . gross profit as a percentage of net sales improved significantly for north america while europe margins were flat and all other declined . gross profit dollars decreased due to lower net sales and unfavorable foreign currency translation which negatively impacted consolidated gross profit by $ 10,742,000 in 2019. europe - gross profit as a percentage of net sales was unchanged in 2019 compared to the prior year and gross margin dollars decrease d by $ 7,913,000 . the decrease in margin dollars was principally due to unfavorable foreign currency and unfavorable sales mix . north america - gross profit as a percentage of net sales increased by 200 basis points in 2019 from the prior year while gross margin dollars increase d by $ 3,811,000 . the increase in gross profit dollars was primarily due to favorable material costs , improved product mix and also lower freight and warranty costs . the favorable material costs were partially due to mitigating the negative impact of tariffs , which were reduced to a combined negative impact of less than $ 2,000,000. all other - gross profit , which primarily relates to the company 's asia pacific businesses decreased 60 basis points in 2019 from the prior year and gross margin dollars decrease d $ 1,507,000 . the decrease was primarily attributable to reduced sales volumes . sequential gross margin as a percentage of net sales and gross margin dollars increased in 2019. sequential gross profit as a percentage of net sales generally increased for all segments sequentially declined over the last two quarters of 2019. during 2019 , sequential gross margin dollars increased on a consolidated basis . while europe generally improved during the year , north america improved sequentially through q2 2019 but then declined in the second half of 2019 and all other improved after initially declining in q1 2019 . 44 part ii md & a - gross profit research and development the company continued to invest strategically in research and development activities in 2019 . the company dedicated funds to applied research activities to ensure that new and enhanced design concepts are available to its businesses . research and development expenditures , which are included in costs of products sold , decreased to $ 15,836,000 in 2019 from $ 17,377,000 in 2018 . the expenditures , as a percentage of net sales , were 1.7 % and 1.8 % in 2019 and 2018 , respectively . 2018 versus 2017 consolidated gross profit as a percentage of net sales was 27.5 % in 2018 as compared to 27.9 % in 2017. gross profit as a percentage of net sales for 2018 decreased by 40 basis points as compared to 2017. the gross margin decline was principally a result of rising material costs associated with u.s. tariffs , higher freight costs incurred in north america and europe , and unfavorable operational variances in europe associated with production transfers . gross profit as a percentage of net sales increased for asia pacific and declined for north america and slightly for europe . gross profit dollars increased significantly for the europe and all other segments but declined materially in north america principally due to lower net sales . europe - gross profit as a percentage of net sales decreased 10 basis points in 2018 from the prior year and gross margin dollars increased by $ 6,466,000. the increase in margin dollars was principally due to favorable foreign currency partially offset by unfavorable freight , r & d and manufacturing costs .
| results of operations reclassifications & other changes - in the first quarter of 2019 , the company reassessed the alignment of its reporting segments and combined the north america/home medical equipment ( na/hme ) and institutional products group ( ipg ) segments into a single operating segment , referred to as north america . this change better reflects how the company manages , allocates resources and assesses performance of the businesses contained in the north america segment . additionally , the company reassessed the activity of the businesses in its former asia pacific segment and began reporting the asia pacific businesses as part of the all other segment , since those businesses , individually and collectively , are not large enough relative to the company 's overall business to merit disclosure as a separate reporting segment . the company believes that these changes provide improved transparency of the company 's business results to its shareholders , and are better aligned with how the company manages its businesses . segment results for 2018 and 2017 have been reclassified to reflect the realignment of the company 's reporting segments and be comparable to the segment results for 2019 . 39 part ii md & a - net sales net sales 2019 versus 2018 replace_table_token_4_th the table above provides net sales change as reported and as adjusted to exclude the impact of foreign exchange translation ( constant currency net sales ) . “ constant currency net sales '' is a non-gaap financial measure , which is defined as net sales excluding the impact of foreign currency translation . the current year 's functional currency net sales are translated using the prior year 's foreign exchange rates . these amounts are then compared to the prior year 's sales to calculate the constant currency net sales change . management believes that this financial measure provides meaningful information for evaluating the core operating performance of the company .
| 7,116 |
our actual results and the timing of certain events could differ materially from those discussed in these forward-looking statements as a result of certain factors , including , but not limited to , those set forth herein and elsewhere in this form 10-k. overview we are focused on the creation of the terra cov-2 immunization product candidate to combat the novel coronavirus pandemic and the further development of novel antibiotics against infectious disease . our sars-cov-2 vaccine product candidate — terra cov-2 as a result of our acquisition of one hundred percent ( 100 % ) of the total issued and outstanding common stock of noachis terra , inc. ( “ noachis terra ” ) we are now focused on the development and commercialization of a vaccine product candidate to provide long lasting immunity from the novel severe acute respiratory syndrome coronavirus ( “ sars-cov-2 ” ) , which causes the coronavirus disease 2019 ( “ covid-19 ” ) . noachis terra is a party to a worldwide , nonexclusive intellectual property and biological materials license agreement with the national institute of allergy and infectious diseases ( “ niaid ” ) , an institute within the national institutes of health ( “ nih ” ) , relating to certain research , patent applications and biological materials involving pre-fusion stabilized coronavirus spike proteins and their use in the development and commercialization of a vaccine to provide specific , long lasting immunity from sars-cov-2 . coronaviruses are a family of viruses that can lead to upper-respiratory infections in humans . recent clinical reports also suggest that the sars-cov-2 virus can affect other body-systems , including the nervous , cardiovascular , gastrointestinal and renal systems . among the recent iterations of coronaviruses to move from animal to human carriers is sars-cov-2 ( often referred to as covid-19 ) , which , beginning in wuhan , china , in late 2019 , caused a global pandemic due to its rapid spread and the relatively high mortality rate ( as compared to the seasonal influenza ) . in late january of 2021 , the world health organization 's estimates indicate the number of worldwide covid-19 infections have exceeded 100,000,000 and the number of deaths directly attributed to covid-19 have exceeded 2,000,000. both pfizer and moderna have announced preliminary safety and efficacy data from their phase 3 covid-19 vaccine studies and recent emergency use authorization by the fda . we believe given the size of the worldwide pandemic that even with multiple vaccines projected to be available in the coming months , there will be demand for the terra cov-2 vaccine , once development is successfully completed . we intend to combine the research , patent applications and biological materials covered by our niaid license with our existing clinical research and manufacturing capabilities to respond rapidly to this ongoing , global , public health crisis . we believe our terra cov-2 vaccine holds the possibility of playing an important role in addressing this crisis . coronaviruses , such as sars -cov-2 , possess signature protein spikes on their outer capsule . the niaid license covers patents and data on a vaccine candidate that were created based on a stabilized pre-fusion spike trimeric protein . by stabilizing the spike protein in the pre-fusion state , the number of immunogenic centers is increased thereby allowing for a greater likelihood of successful antibody binding , resulting in an improved immunogenic response . the genetic code , acquired from the nih , for the stabilized pre-fusion spike protein was provided to aragen bioscience , inc. ( “ aragen ” ) for the purpose of insertion of the spike protein gene sequence into a chinese hamster ovary ( “ cho ” ) cell line . aragen is a leading contract research organization focused on accelerating preclinical biologics product development , has extensive experience building cho cell lines for recombinant proteins , such as monoclonal antibodies . aragen has successfully inserted the nih pre-fusion spike protein gene sequence into a cho cell line and is currently developing both the analytical tests and identifying preliminary cell line growth conditions to optimize the spike protein titers . currently , “ mini-pool ” production and analytical development is underway . the process to transfer to full-scale manufacture has begun . the nih 's preclinical study shows that this spike protein , adjuvanted with the mouse specific tlr-4-agonist sigma adjuvant system ( “ sas ” , a tlr-4 agonists ) that induces t cell activation ) , generates neutralizing antibody titers in both a pseudovirus neutralization assay and a plaque reduction neutralization titer ( prnt ) assay . recently released information indicated that pretreatment of mice with the nih-created covid-19 spike protein in combination with an adjuvant ( tlr-4 agonist sigma adjuvant system ) completely inhibited viral growth in the nasal cavities and lungs of infected animals compared to unvaccinated control animals . in october 2020 , we received feedback to our type b pre-ind meeting request from the fda . the response indicated that the fda broadly supported our planned approach to the pre-clinical program that will support the clinical development of the terra cov-2 , vaccine . as a result , we anticipate filing the investigational new drug ( “ ind ” ) application in the fourth quarter of 2021 and immediately upon the receipt of approval from the fda , commencing the phase 1 clinical study , the protocol for which is currently under development . 77 we recently announced we had entered into an agreement with adjuvance technologies inc. for the use of tql1055 , a novel , rationally designed semi-synthetic analogue of the saponin adjuvant qs-21 with potential improved attributes , including stability and manufacturing efficiency . we also anticipate that our terra cov-2 vaccine will provide long lasting protection from the sars-cov-2 virus with only one or two doses , with a more rapid immune response compared to vaccines developed without the inclusion of an adjuvant . story_separator_special_tag we will continue to advance the og716 program to the ind filing based on the availability of both human and financial capital . based upon the current funding available we will continue to conduct some of the requisite studies . while we commenced certain of these studies at the end of 2019 , we expect to focus on efficient and cost-effective improvements in the manufacturing process of the product as we move to complete the pre-clinical studies required to support our first in man phase 1 clinical study . product candidates . through our wholly-owned subsidiary , noachis terra , we began the research and development stage for our new terra cov-2 vaccine product candidate . we hold a nonexclusive , worldwide intellectual property license agreement for certain research , patent applications and biological materials relating to the use of pre-fusion coronavirus spike proteins for the development and commercialization of a vaccine against sars-cov-2 . additionally , we are developing our lead lantibiotic candidate , og716 , to treat clostridium difficile while also creating semi-synthetic lantibiotic analogs that may be effective against systemic gram ( + ) multidrug infections , and analogs that may be effective in treating gram ( - ) infections . we seek to protect our product candidates through patents and patent applications pursuant to the terms of our license agreements . product/candidate description application status terra cov-2 vaccine candidate ( plasmid + adjuvant ) to provide long lasting immunity against sars-cov-2 broad , community-based vaccine immunity against sars-cov-2 pre-clinical og716 a homolog of mu1140 : member of lantibiotic class of antibiotics clostridium difficile associated diarrhea pre-clinical our business development strategy success in the biopharmaceutical and product development industry relies on the continuous development of novel product candidates . the large majority of product candidates do not make it past all clinical trials which forces companies to look externally for innovation . accordingly , we expect from , time to time , to seek strategic opportunities through various forms of business development , which can include strategic alliances , licensing deals , joint ventures , collaborations , equity-or debt-based investments , dispositions , mergers and acquisitions . we view these business development activities as a necessary component of our strategies , and we seek to enhance shareholder value by evaluating business development opportunities both within and complementary to our current business as well as opportunities that may be new and separate from the development of our existing product candidates . recent developments atm offering-sales agreement . on february 1 , 2021 , the company entered into a sales agreement ( the “ sales agreement ” ) with a.g.p./alliance global partners , as sales agent ( the “ sales agent ” ) , pursuant to which the company may offer and sell through or to the sales agent ( the “ offering ” ) up to $ 20.0 million in shares of its common stock ( the “ shares ” ) at-the-market . through february 12 , 2021 , the company sold an aggregate of 15,406,618 shares of its common stock at-the-market pursuant to the sales agreement for aggregate net proceeds to the company of approximately $ 19.3 million . shares offered and sold in the offering were issued pursuant to the company 's universal shelf registration statement on form s-3 ( the “ shelf registration statement ” ) and the prospectus supplement relating to the offering filed with the securities and exchange commission ( the “ sec ” ) on february 1 , 2021. the offering will terminate upon ( a ) the election of the agent upon the occurrence of certain adverse events , ( b ) 10 days ' advance notice from one party to the other , or ( c ) the sale of the shares equating to $ 20 million . under the terms of the sales agreement , the sales agent is entitled to a commission at a fixed rate of 3.0 % of the gross proceeds from each sale of shares under the sales agreement . series c preferred stock redemption . on february 11 , 2021 , we provided a notice of redemption , for approximately $ 5.6 million , to the holder of our series c preferred stock , with a redemption date of march 13 , 2021 ( which included the dividend of 26.697 shares paid on january 28 , 2021 and any accrued dividends due through the redemption date ) , after which time the series c preferred stock will be cancelled and no further dividends will accrue . the applicable portion of the net proceeds received from the above referenced atm offering are being utilized for the redemption . warrant exercises . between february 9 , 2021 and february 25 , 2021 the company issued an additional 2,472,573 shares of common stock as a result of the exercise of certain outstanding warrants as follows : ( i ) warrants to acquire 360,000 shares of common stock at an exercise price of $ 1.00 per share issued in connection with its july 2018 public offering were exercised and ( ii ) warrants to acquire 2,112,573 shares of common stock at an exercise price of $ 0.90 per share issued in connection with its march 2019 public offering were exercised ( the “ warrant exercises ” ) . the warrant exercises provided aggregate gross proceeds to the company of $ 2,261,315. additional consideration payment – noachis terra acquisition . as a result of the warrant exercises , the company paid $ 542,263 of additional consideration to the sole former shareholder of noachis terra . the additional consideration payment will be included in operating expenses . financial overview net revenues we did not generate any revenue for the years ended december 31 , 2020 and 2019 , respectively from the sales or licensing of our product candidates . 79 research and development expenses research and development consist of expenses incurred in connection with the discovery and development of our product candidates .
| results of operations : replace_table_token_0_th for the years ended december 31 , 2020 and 2019 research and development . research and development expenses were $ 22,107,563 for the year ended december 31 , 2020 compared to $ 12,120,318 for the year ended december 31 , 2019 ; an increase of $ 9,987,245 , or 82.4 % . this increase was primarily due to the acquisition of noachis terra , inc. which was accounted for as in-process research and development expenses and an increase in costs associated with the advancement of our terra cov-2 vaccine program , employee stock-based compensation , and salaries costs of $ 11,176,479 , $ 4,122,963 , $ 194,088 , and $ 63,333 , respectively . these increases were partially offset by decreases in costs associated with our clinical trial work related to our oral mucositis product candidate under our lantibiotic ecc and a reduction in costs associated with our lantibiotic ecc of $ 4,461,809 , and $ 1,130,103 , respectively . general and administrative . general and administrative expenses were $ 4,533,893 for the year ended december 31 , 2020 compared to $ 3,757,251 for the year ended december 31 , 2019 ; an increase of $ 776,642 , or 20.7 % . this increase was primarily due to increases in non-employee stock-based compensation , employee stock-based compensation , insurance , and legal costs of $ 448,231 , $ 295,851 , $ 116,160 , and $ 61,434 , respectively . these increases were partially offset by decreases in travel and entertainment , conferences , and consulting costs of $ 102,554 , $ 27,474 , and $ 25,393 , respectively . other income ( expense ) .
| 7,117 |
( b ) the balance sheets include the funded status of each of the company 's story_separator_special_tag forward-looking and cautionary statements some of the information contained in this form 10-k may constitute “ forward-looking statements ” within the meaning of the “ safe harbor ” provisions of the private securities litigation reform act of 1995. when using the words “ believe , ” “ estimate , ” “ anticipate , ” “ expect , ” “ project , ” “ likely , ” “ may ” and similar expressions , tredegar does so to identify forward-looking statements . such statements are based on then current expectations and are subject to a number of risks and uncertainties that could cause actual results to differ materially from those addressed in the forward-looking statements . it is possible that actual results and financial condition may differ , possibly materially , from the anticipated results and financial condition indicated in or implied by these forward-looking statements . accordingly , you should not place undue reliance on these forward-looking statements . for risks and important factors that could cause actual results to differ from expectations , refer to the reports that tredegar files with or furnishes the sec from time-to-time , including the risks and important factors set forth in “ risk factors ” in part i , item 1a of this form 10-k. readers are urged to review and consider carefully the disclosures tredegar makes in the reports tredegar files with or furnishes to the sec . tredegar does not undertake , and expressly disclaims any duty , to update any forward-looking statement to reflect any change in management 's expectations or any change in conditions , assumptions or circumstances on which such statements are based , except as required by applicable law . executive summary general tredegar is a manufacturer of polyethylene ( “ pe ” ) plastic films , polyester films , and aluminum extrusions . descriptions of all of the company 's businesses are provided in the business section . sales from continuing operations were $ 828.3 million in 2016 compared to $ 896.2 million in 2015 . net income from continuing operations was $ 24.5 million ( $ 0.75 per diluted share ) in 2016 , compared with net loss from continuing operations of $ 32.1 million ( $ 0.99 per diluted share ) in 2015 . the net loss from continuing operations in 2015 included the following : the write-off of all goodwill associated with flexible packaging films ( $ 44.5 million ) ; and an unrealized loss on the company 's investment in kaléo ( $ 20.5 million ) , which is accounted for under the fair value method . other losses associated with plant shutdowns , asset impairments and restructurings and gains and losses on the sale of assets , gains or losses on investments accounted for under the fair value method and other items are described in note 18 of the notes to financial statements . pe films a summary of operating results for pe films is provided below : replace_table_token_7_th 20 net sales in 2016 decreased by $ 54.4 million versus 2015 primarily due to : the loss of business with pe films ' largest customer related to various products in personal care materials ( $ 22.0 million ) and other personal care materials customers ( $ 7.6 million ) ; lower volume in personal care materials primarily due to the timing of product transitions and lower customer demand ( $ 10.8 million ) ; a decline in volume in surface protection films ( $ 6.2 million ) that the company believes is primarily the result of lower consumer demand for products with flat panel display screens ; and lower volume of low margin overwrap films ( $ 9.1 million ) primarily due to the loss of business with a large customer , partially offset by sales growth for components used in led lighting products ( $ 1.3 million ) . as noted above , current year sales volume has declined in part due to the wind down of shipments for certain personal care materials related to previously announced known lost business , primarily with pe films ' largest customer . the restructuring project to consolidate domestic manufacturing facilities in pe films , which commenced in the third quarter of 2015 ( “ north american facility consolidation ” ) , is expected to be completed in the second half of 2017. once complete , annual pre-tax cash cost savings are expected to be approximately $ 5-6 million on cash-related expenditures . exit costs are expected to be approximately $ 17 million . the table below summarizes the pro forma operating profit from ongoing operations for 2016 and 2015 , had the impact of the events noted above been fully realized : year ended december 31 , ( in thousands ) 2016 2015 operating profit from ongoing operations , as reported $ 26,312 $ 48,275 contribution to operating profit from ongoing operations associated with known lost business before restructurings & fixed costs reduction 2,995 13,349 operating profit from ongoing operations net of the impact of known business that will be fully eliminated in future periods 23,317 34,926 estimated future benefit of north american facility consolidation 5,200 5,200 pro forma estimated operating profit from ongoing operations $ 28,517 $ 40,126 net sales associated with known lost business that have yet to be fully eliminated were $ 8.9 million and $ 38.5 million in 2016 and 2015 , respectively . story_separator_special_tag total estimated cash expenditures of $ 16-17 million over the project period include the following : cash outlays associated with previously discussed exit and disposal expenses of approximately $ 5 million , including additional operating expenses of approximately $ 1 million associated with customer product qualifications on upgraded and transferred production lines ; capital expenditures associated with equipment upgrades at other pe films manufacturing facilities in the u.s. of approximately $ 11 million ; and cash incentives of approximately $ 1 million in connection with meeting safety and quality standards while production ramps down at the lake zurich manufacturing facility . cash expenditures for the north american facility consolidation project were $ 10.2 million in 2016 , which includes capital expenditures of $ 8.2 million . as of december 31 , 2016 , total cash expenditures since the project began in the third quarter of 2015 were $ 13.8 million , which includes $ 11.1 million for capital expenditures . 22 capital expenditures and depreciation & amortization capital expenditures in pe films were $ 25.8 million in 2016 compared to $ 21.2 million in 2015 . capital expenditures are projected to be $ 36 million in 2017 , including capacity expansion for elastics and acquisition distribution layer materials , other growth and strategic projects and approximately $ 10 million for routine capital expenditures required to support operations . depreciation expense was $ 13.5 million in 2016 and $ 15.4 million in 2015 . depreciation expense is projected to be $ 16 million in 2017 . amortization expense was $ 0.1 million in 2016 and $ 0.1 million in 2015 , and is projected to be $ 0.1 million in 2017 . flexible packaging films a summary of operating results for flexible packaging films , which excludes the 2015 goodwill impairment charge , is provided below : replace_table_token_8_th net sales in 2016 increased 2.6 % versus 2015 primarily due to a 8.9 % increase in sales volume partially offset by competitive pricing pressures and the pass-through to customers of lower raw material costs . sales volume improved from 2015 to 2016 partially due to the increase of end-use applications for flexible packaging films in the latin american market . operating profit from ongoing operations decreased by $ 3.7 million in 2016 versus 2015 primarily due to : foreign currency transaction losses of $ 3.5 million in 2016 versus foreign currency transaction gains of $ 3.5 million in 2015 , associated with u.s. dollar denominated export sales in brazil ; higher volume ( $ 3.0 million ) and operating efficiencies ( $ 0.7 million ) ; net refunds of $ 1.6 million in 2015 received as a result of the reinstatement by the u.s. of the generalized system of preferences ( gsp ) program for allowing duty-free shipments of terphane products into the u.s. ( none in 2016 ) ; the favorable settlement of certain loss contingencies of $ 0.6 million in 2015 ( none in 2016 ) ; the estimated lag in the pass through of lower raw material costs of $ 1.2 million in 2016 versus $ 1.0 million in 2015 ; and lower depreciation and amortization costs ( $ 0.2 million ) and other costs and expenses ( $ 1.4 million ) . capital expenditures , depreciation & amortization and goodwill impairment charge capital expenditures were $ 3.4 million in 2016 compared to $ 3.5 million in 2015 . capital expenditures are projected to be $ 4 million in 2017 , including approximately $ 3 million for routine items required to support operations . depreciation expense was $ 6.7 million in 2016 and $ 6.8 million in 2015 . depreciation expense is projected to be $ 7 million in 2017 . amortization expense was $ 2.8 million in 2016 and $ 2.9 million in 2015 , and is projected to be $ 3 million in 2017 . during the third quarter of 2015 , the company performed a goodwill impairment assessment related to terphane . this review was undertaken as a result of the continued competitive pressures related to ongoing unfavorable economic conditions in terphane 's primary market of brazil , and excess global industry capacity . the assessment resulted in a full write-off of the goodwill of $ 44.5 million associated with the acquisition of terphane . 23 aluminum extrusions a summary of operating results for aluminum extrusions is provided below : replace_table_token_9_th net sales in 2016 decreased versus 2015 primarily due to a decrease in average selling prices , partially offset by higher sales volume . higher sales volume , primarily in the automotive market , had a favorable impact of $ 4.7 million on sales in 2016 versus 2015. lower average selling prices , which had an unfavorable impact on net sales of $ 20.8 million , can be primarily attributed to a decrease in average aluminum market prices . operating profit from ongoing operations in 2016 increased in comparison to 2015 by $ 7.4 million , as a result of : higher volume ( $ 0.9 million ) and lower materials , supply and other net costs ( $ 2.6 million , including $ 0.7 million of construction-related costs incurred in 2015 for the anodizing upgrade project ) ; and improved management of freight logistics and lower utility costs ( $ 2.2 million ) and other efficiencies ( $ 1.8 million ) . cast house explosion as previously disclosed , on june 29 , 2016 , the bonnell aluminum plant in newnan , georgia suffered an explosion in the casting department , resulting in injuries to five employees , one seriously . the explosion caused significant damage to the cast house and related equipment .
| executive summary been fully realized in each period : replace_table_token_14_th net sales associated with lost business and product transitions that have yet to be fully eliminated were approximately $ 38.5 million and $ 84.5 million in 2015 and 2014 , respectively . net of the impact of product transitions and lost business , pro forma estimated operating profit from ongoing operations in 2015 decreased by $ 1.3 million versus 2014 due to the following : an increase in volume of over 6 % and a favorable mix for surface protection films ( $ 4.2 million ) ; a decrease in volume for polyethylene overwrap films and other personal care materials ( $ 2.4 million ) ; the favorable lag in the pass-through of average resin costs of $ 1.3 million in 2015 versus a negative $ 0.1 million in 2014 ; an increase in foreign currency translation and transaction losses ( $ 3.7 million ) ; and other factors including higher research and development costs partially offset by lower depreciation . capital expenditures and depreciation & amortization 31 capital expenditures in pe films were $ 21.2 million in 2015 compared to $ 17.0 million in 2014. depreciation expense was $ 15.4 million in 2015 and $ 21.1 million in 2014 as certain assets became fully depreciated . amortization expense was $ 0.1 million in 2015 and $ 0.3 million in 2014. flexible packaging films a summary of operating results for flexible packaging films , which excludes the goodwill impairment charge discussed below , is provided below : replace_table_token_15_th net sales in 2015 decreased 7.9 % versus 2014 primarily due to competitive pricing pressures and the pass-through to customers of lower raw material costs , partially offset by a 14.3 % increase in sales volume . operating profit ( loss ) from ongoing operations improved from a loss of $ 2.9 million in 2014 to income of $ 5.5 million in 2015 ( $ 8.4
| 7,118 |
as of december 31 , 2018 , investments we hold for which we did not receive a fair value from a pricing service or broker accounted for less than 1 % of our investment portfolio . the actual value at which these securities could actually be sold or settled with a willing buyer or seller may differ from our estimated fair values depending on a number of factors including , but not limited to , current and future economic conditions , quantity sold or settled , presence of an active market and availability of a willing buyer or seller . the cost of securities sold is based on the specific identification method . our investments in equity securities are carried at fair value . beginning with the adoption of accounting standards update ( `` asu `` story_separator_special_tag the following discussion should be read in conjunction with the consolidated financial statements and related notes beginning on page f-1 . this discussion contains forward-looking statements that involve risks and uncertainties . our future results may differ materially from those disclosed herein as a result of significant risks and uncertainties and various factors described in this report . consolidated results of operations for the year ended december 31 , 2018 , we reported net income of $ 63.6 million , or $ 1.83 per fully diluted share . for the year ended december 31 , 2017 , we reported net income of $ 50.3 million , or $ 1.42 per fully diluted share . for the year ended december 31 , 2016 we reported net income of $ 146.7 million , or $ 4.13 per fully diluted share . the following is a comparison of selected data from our results of operations : replace_table_token_5_th 46 in presenting our results in the following discussion and analysis of our results of operations , we have included certain non-generally accepted accounting principles ( `` non-gaap '' ) financial measures within the meaning of regulation g as promulgated by the sec . we believe that these non-gaap measures , specifically the current accident year non-catastrophe loss , expense and combined ratios , which may be defined differently by other companies , better explain our results of operations in a manner that allows for a more complete understanding of the underlying trends in our business . however , these measures should not be viewed as a substitute for those determined in accordance with united states generally accepted accounting principles ( `` gaap '' ) . reconciliations of these financial measures to their most directly comparable gaap measures are included in the table below . replace_table_token_6_th ( 1 ) for purposes of calculating the percentage points impact on the loss , expense and combined ratios , earned premiums were adjusted to exclude outward reinstatement and other catastrophe-related premium adjustments of $ 9.0 million and $ 17.9 million for the years ended december 31 , 2018 and 2017 , respectively , and $ 2.2 million inward reinstatement and other catastrophe-related premium adjustments for the year ended december 31 , 2016 . ( 2 ) catastrophe losses ' percentage point impact are calculated as the difference between the reported combined ratio and the combined ratio excluding incurred catastrophe losses and associated reinstatement and other catastrophe-related premium adjustments . impact of recently adopted accounting standard effective january 1 , 2018 , the company adopted asu no . 2016-01 , financial instruments : recognition and measurement of financial assets and liabilities , using a cumulative effect adjustment . this adjustment transferred the unrealized gains and losses as of december 31 , 2017 , net of tax , on equity securities from accumulated other comprehensive income to retained earnings , resulting in no overall impact to shareholders ' equity . in accordance with this accounting standard , for the year ended december 31 , 2018 , we recognized the change in the fair value of our equity securities as a pre-tax loss of $ 105.1 million . this amount is included as a component of net realized investment losses in our consolidated statements of income . amounts for the years ended december 31 , 2017 and 2016 are not presented as a component of net income , as asu 2016-01 was required to be adopted on a prospective basis . 47 gross written and earned premiums consolidated gross written and earned premiums by our four primary insurance lines were as follows : replace_table_token_7_th gross written and earned premiums increased for the year ended december 31 , 2018 as compared to the same period ended 2017 , driven by the growth in all major lines of our u.s. operations , led by our liability and professional lines . international operations experienced increases in both gross written and earned premiums during 2018 as compared to 2017 , primarily due to growth in our property , liability and professional lines , as well as the timing of the ariel re acquisition . ariel re has a significant property contract that is subject to renewal in january of each year . the ariel re transaction closed in february 2017 ; as such the january 2017 gross written premiums for ariel re is not included while the 2018 renewal is included in our gross written premiums . as part of the full integration of the reinsurance business of ariel re , beginning in 2018 we changed the capital structure supporting that business by introducing certain third party trade capital to participate in the exposures we underwrite . this trade capital receives a corresponding proportion of the gross written premiums . as such , this structure has the effect of reducing the gross written premiums reported in our financial statements . in exchange , we receive certain remuneration for generating this business and for the underlying underwriting performance . there was no such structure for our ariel re business in 2017. during 2018 , all product lines have experienced increased competition and pressure on rates due to market conditions . story_separator_special_tag the consolidated loss ratio for the year ended december 31 , 2018 was 60.1 % , compared to 66.8 % for the same period in 2017. this 6.7 percentage point decrease in the loss ratio was primarily due to a 5.4 percentage point favorable impact related to lower catastrophe losses . the current accident year non-catastrophe loss ratio improved 0.8 percentage points during the year ended december 31 , 2018 , compared to the same period in 2017. in connection with the acquisition and integration of ariel re , we made a number of one-time catastrophe and risk management reinsurance purchases in 2017. these 2017 purchases reduced earned premiums by $ 20.8 million , resulting in a 0.7 percentage point increase in the 2017 loss ratio . partially offsetting this improvement to the current accident year non-catastrophe loss ratio were a number of discrete marine and energy losses within our international operations segment , concentrated in the fourth quarter of 2018. we also experienced a 0.5 percentage point favorable impact from the increase in net favorable prior-year reserve development for the year ended december 31 , 2018 , compared to the same period in 2017. included in losses and loss adjustment expense for the year ended december 31 , 2018 was $ 52.9 million in catastrophe losses , primarily attributable to hurricanes florence and michael , the woolsey and camp california wildfires , and other storms . losses and loss adjustment expenses also included $ 18.0 million of net favorable loss reserve development on prior accident years , concentrated in the liability and specialty lines . included in losses and loss adjustment expense for the year ended december 31 , 2017 were $ 127.2 million in catastrophe losses resulting from hurricanes harvey , irma and maria , the california wildfires , other storm losses primarily in the united states and the mexican earthquakes . partially offsetting these catastrophe losses was $ 8.2 million of net favorable development on prior accident year loss reserves , which is presented in the table below . we also experienced higher than anticipated non-catastrophe current accident year property losses in 2017. included in losses and loss adjustment expenses for the year ended december 31 , 2016 were $ 63.9 million in catastrophe losses resulting from storm activity in the united states , including hurricane matthew and the louisiana floods , the alberta wildfires and the taiwan and new zealand earthquakes . partially offsetting these current accident year losses was $ 33.3 million of net favorable development on 49 prior accident year loss reserves , primarily attributable to favorable development in our commercial automobile , property reinsurance , surety and commercial multiple peril lines , partially offset by unfavorable development in our general liability line . the following table summarizes the above referenced loss reserve development as respects prior year loss reserves by line of business for the year ended december 31 , 2018 : replace_table_token_8_th in determining appropriate reserve levels for the year ended december 31 , 2018 , we maintained the same general processes and disciplines that were used to set reserves at prior reporting dates . no significant changes in methodologies were made to estimate the reserves since the last reporting date ; however , at each reporting date we reassess the actuarial estimate of the reserve for loss and loss adjustment expenses and record our best estimate . consistent with prior reserve valuations , as claims data becomes more mature for prior accident years , actuarial estimates were refined to weigh certain actuarial methods more heavily in order to respond to any emerging trends in the paid and reported loss data . while prior accident years ' net reserves for losses and loss adjustment expenses for some lines of business have developed favorably in recent years , this does not imply that more recent accident years ' reserves also will develop favorably ; pricing , reinsurance costs , legal environment , general economic conditions including changes in inflation and many other factors impact our ultimate loss estimates . consolidated gross reserves for loss and loss adjustment expenses were $ 4,654.6 million ( including $ 226.2 million of reserves attributable to our syndicate 1200 and 1910 trade capital providers ) , $ 4,201.0 million ( including $ 226.8 million of reserves attributable to syndicate 1200 's trade capital providers ) and $ 3,350.8 million ( including $ 156.1 million of reserves attributable to syndicate 1200 's trade capital providers ) as of december 31 , 2018 , 2017 and 2016 , respectively . management has recorded its best estimate of loss reserves at each date based on current known facts and circumstances . due to the significant uncertainties inherent in the estimation of loss reserves , there can be no assurance that future loss development , favorable or unfavorable , will not occur . underwriting , acquisition and insurance expenses consolidated underwriting , acquisition and insurance expenses were $ 654.7 million , $ 635.4 million and $ 547.0 million for the years ended december 31 , 2018 , 2017 and 2016 , respectively . the consolidated expense ratios were 37.8 % , 40.4 % and 38.8 % for the years ended december 31 , 2018 , 2017 and 2016 , respectively . the improvement in 2018 compared to 2017 reflects the benefits of scale due to increased net earned premiums , including the favorable year-over-year impact of the aforementioned $ 20.8 million reduction in net earned premiums in 2017 related to one-time catastrophe and risk management reinsurance purchases , as well as lower operating costs within the reinsurance business unit of our international operations due to expenses attributable to third party capital providers . partially offsetting these lower operating costs were the continued investments in people and technology in strategic growth areas of our business .
| segment results we are primarily engaged in writing property and casualty insurance and reinsurance . we have two ongoing reporting segments : u.s. operations and international operations . additionally , we have a run-off lines segment for products that we no longer underwrite . we consider many factors , including the nature of each segment 's insurance and reinsurance products , production sources , distribution strategies and regulatory environment , in determining how to aggregate reporting segments . 51 our reportable segments include four primary insurance and reinsurance services and offerings as follows : property includes both property insurance and reinsurance products . insurance products cover commercial properties primarily in north america with some international covers . reinsurance covers underlying exposures that are located throughout the world , including the united states . these offerings include coverages for man-made and natural disasters . liability includes a broad range of primary and excess casualty products for risks on both an admitted and non-admitted basis in the united states . internationally , argo underwrites worldwide casualty risks primarily exposed in the united kingdom , canada , and australia . professional includes various professional lines products including errors & omissions , management liability ( including directors and officers ) and cyber liability coverages . specialty includes niche insurance coverages including marine & energy , accident & health and surety product offerings . in evaluating the operating performance of our segments , we focus on core underwriting and investing results before consideration of realized gains or losses from the sales of investments . intersegment transactions are allocated to the segment that initiated the transaction . realized investment gains and losses are reported as a component of the corporate and other segment , as decisions regarding the acquisition and disposal of securities reside with the corporate investment function and are not under the control of the individual business segments .
| 7,119 |
currently , we have five b-cell targeted drug candidates in clinical development , with the lead two therapies , ublituximab ( tg-1101 ) and umbralisib ( tgr-1202 ) , in pivotal trials for cll , nhl and ms. ublituximab is a novel anti-cd20 monoclonal antibody ( mab ) that has been glycoengineered for enhanced potency over first generation antibodies . umbralisib is an oral , once daily inhibitor of pi3k delta . umbralisib also uniquely inhibits ck1-epsilon , which may allow it to overcome certain tolerability issues associated with first generation pi3k delta inhibitors . when used together in combination therapy , ublituximab and umbralisib are referred to as ( `` u2 '' ) , or `` 1303 '' . additionally , in early clinical development we have an anti-pd-l1 monoclonal antibody referred to as tg-1501 , an oral bruton 's tyrosine kinase ( “ btk ” ) inhibitor referred to as tg-1701 , and an anti-cd47/cd19 bispecific antibody referred to as tg-1801 . we also actively evaluate complementary products , technologies and companies for in-licensing , partnership , acquisition and or investment opportunities . to date , we have not received approval for the sale of any of our drug candidates in any market and , therefore , have not generated any product sales from our drug candidates . our license revenues currently consist of license fees arising from our agreement with ildong . we recognize upfront license fee revenues ratably over the estimated period in which we will have certain significant ongoing responsibilities under the sublicense agreement , with unamortized amounts recorded as deferred revenue . we have not earned any revenues from the commercial sale of any of our drug candidates . our research and development expenses consist primarily of expenses related to in-licensing of new product candidates , fees paid to consultants and outside service providers for clinical and laboratory development , facilities-related and other expenses relating to the design , development , manufacture , testing and enhancement of our drug candidates and technologies . we expense our research and development costs as they are incurred . research and development expenses for the years ended december 31 , 2018 , 2017 and 2016 were approximately $ 153.8 million , $ 96.9 million and $ 66.5 million , respectively , excluding non-cash compensation expenses related to research and development . the following table sets forth the research and development expenses per project , exclusive of non-cash compensation expenses , for the periods presented . replace_table_token_3_th our general and administrative expenses consist primarily of salaries and related expenses for executive , finance and other administrative personnel , recruitment expenses , professional fees and other corporate expenses , including investor relations , legal activities and facilities-related expenses . 61 our results of operations include non-cash compensation expenses as a result of the grants of restricted stock . compensation expense for awards of restricted stock granted to employees and directors represents the fair value of the award recorded over the respective vesting periods of the individual awards . the expense is included in the respective categories of expense in the condensed consolidated statements of operations . we expect to continue to incur significant non-cash compensation expenses . for awards of options and restricted stock to consultants and other third-parties , compensation expense is determined at the “ measurement date. ” the expense is recognized over the vesting period of the award . until the measurement date is reached , the total amount of compensation expense remains uncertain . we record compensation expense based on the fair value of the award at the reporting date . the awards to consultants and other third-parties are then revalued , or the total compensation is recalculated based on the then current fair value , at each subsequent reporting date . this results in a change to the amount previously recorded in respect of the equity award grant , and additional expense or a reversal of expense may be recorded in subsequent periods based on changes in the assumptions used to calculate fair value , such as changes in market price , until the measurement date is reached and the compensation expense is finalized . in addition , certain restricted stock issued to employees vest upon the achievement of certain milestones ; therefore , the total expense is uncertain until the milestone is probable . our clinical trials will be lengthy and expensive . even if these trials show that our drug candidates are effective in treating certain indications , there is no guarantee that we will be able to record commercial sales of any of our drug candidates in the near future , or at all . in addition , we expect losses to continue as we fund in-licensing and development of new drug candidates . as we further our development efforts , we may enter into additional third-party collaborative agreements and incur additional expenses , such as licensing fees and milestone payments . in addition , we may need to establish a commercial infrastructure required to manufacture , market and sell our drug candidates following approval , if any , by the fda or a foreign health authority , which would result in incurring additional expenses . as a result , our quarterly results may fluctuate and a quarter-by-quarter comparison of our operating results may not be a meaningful indication of our future performance . story_separator_special_tag # 000000 ; font-family : times new roman ; font-size : 13px '' > other research and development expenses . other research and development expenses increased by $ 30.4 million from $ 66.5 million for the year ended december 31 , 2016 to $ 96.9 million for the year ended december 31 , 2017. the increase in other research and development expenses was due primarily to new and ongoing clinical development programs and related manufacturing costs for ublituximab and umbralisib during the year ended december 31 , 2017. noncash compensation expense ( general and administrative ) . story_separator_special_tag in december 2014 , we filed a shelf registration statement on form s-3 ( the `` 2015 s-3 '' ) , which was declared effective in january 2015. under the 2015 s-3 , the company may sell up to a total of $ 250 million of its securities . in connection with the 2015 s-3 , we amended our 2013 at-the-market issuance sales agreement ( the `` 2015 atm '' ) with mlv & co. llc ( “ mlv ” ) such that we may issue and sell additional shares of our common stock , having an aggregate offering price of up to $ 175.0 million , from time to time through mlv and fbr capital markets & co. ( `` fbr '' , each of mlv and fbr individually an `` agent '' and collectively the `` agents '' ) , acting as the sales agents . under the 2015 atm we pay the agents a commission rate of up to 3.0 % of the gross proceeds from the sale of any shares of common stock sold through the agents . during the year ended december 31 , 2017 , we sold a total of 3,104,253 shares of common stock under the 2015 atm for aggregate total gross proceeds of approximately $ 31.6 million at an average selling price of $ 10.18 per share , resulting in net proceeds of approximately $ 31.0 million after deducting commissions and other transaction costs . in may 2017 , we filed a shelf registration statement on form s-3 ( the `` 2017 s-3 '' ) , which was declared effective in june 2017 , replacing the 2015 s-3 . under the 2017 s-3 , the company may sell up to a total of $ 300 million of its securities . in connection with the 2017 s-3 , we entered into an at-the-market issuance sales agreement ( the `` 2017 atm '' ) with jefferies llc , cantor fitzgerald & co. , fbr capital markets & co. , suntrust robinson humphrey , inc. , raymond james & associates , inc. , ladenburg thalmann & co. inc. and h.c. wainwright & co. , llc ( each a `` 2017 agent '' and collectively , the `` 2017 agents '' ) , relating to the sale of shares of our common stock . under the 2017 atm we pay the 2017 agents a commission rate of up to 3.0 % of the gross proceeds from the sale of any shares of common stock . 64 during the year ended december 31 , 2017 , we sold a total of 4,689,418 shares of common stock under the 2017 atm for aggregate total gross proceeds of approximately $ 47.7 million at an average selling price of $ 10.18 per share , resulting in net proceeds of approximately $ 46.9 million after deducting commissions and other transactions costs . during the year ended december 31 , 2018 , we sold a total of 9,025,222 shares of common stock under the 2017 atm for aggregate total gross proceeds of approximately $ 115.8 million at an average selling price of $ 12.83 per share , resulting in net proceeds of approximately $ 113.7 million after deducting commissions and other transactions costs . equity financings in march 2017 , we completed an underwritten public offering of 5,128,206 shares of our common stock ( plus a 30-day underwriter overallotment option to purchase up to an additional 769,230 shares of common stock , which was exercised ) at a price of $ 9.75 per share . net proceeds from this offering , including the overallotment option , were approximately $ 54 million , net of underwriting discounts and offering expenses of approximately $ 3.6 million . on march 1 , 2019 , we announced the pricing of a public offering of 4,100,000 shares of our common stock ( plus a 30-day underwriter overallotment option to purchase up to an additional 615,000 shares of common stock ) with expected gross proceeds to the company of $ 25.2 million , less underwriting discounts and commissions . the shares were sold under a shelf registration statement form s-3 ( file no . 333-218293 ) that was previously filed and declared effective by the sec in june 2017. the offering is expected to close on march 5 , 2019. debt financings on february 28 , 2019 ( the “ closing date ” ) , the company ( “ borrower ” ) entered into a term loan facility of up to $ 60.0 million ( “ term loan ” ) with hercules capital , inc. , ( “ hercules ” ) , the proceeds of which will be used for its ongoing research and development programs and for general corporate purposes . the term loan is governed by a loan and security agreement , dated february 28 , 2019 ( the “ loan agreement ” ) , which provides for up to four separate advances . the first advance of $ 30.0 million was drawn on the closing date . two additional advances of $ 10.0 million may be drawn at the borrower 's option but subject to the clinical trial milestones , and the fourth advance of $ 10.0 million , available in minimum increments of $ 5.0 million , is available through december 15 , 2020 subject to the approval of hercules ' investment committee . the term loan will mature on march 1 , 2022 ( the “ loan maturity date ” ) . each advance accrues interest at a per annum rate of interest equal to the greater of either ( i ) the “ prime rate ” as reported in the wall street journal plus 4.75 % , and ( ii ) 10.25 % .
| results of operations years ended december 31 , 2018 , 2017 and 2016 replace_table_token_4_th 62 years ended december 31 , 2018 and 2017 license revenue . license revenue was approximately $ 152,000 for each of the years ended december 31 , 2018 and 2017. license revenue is related to the amortization of an upfront payment of $ 2.0 million associated with our license agreement with ildong . the upfront payment from ildong will be recognized as license revenue on a straight-line basis through december 2025 , which represents the estimated period over which the company will have certain ongoing responsibilities under the sublicense agreement . noncash stock expense associated with in-licensing agreement ( research and development ) . noncash stock expense associated with in-licensing agreement ( research and development ) amounted to $ 4.0 million for the year ended december 31 , 2018 , as compared to zero during the comparable period in 2017. the expense during the year ended december 31 , 2018 was recorded in conjunction with the 333,868 total shares of common stock issued to novimmune and jiangsu hengrui as upfront payments for the licenses to the cd47/cd19 and btk programs , respectively . noncash compensation expense ( research and development ) . noncash compensation expense ( research and development ) related to equity incentive grants remained consistent between the two periods totaling $ 5.6 million for both years ended december 31 , 2018 and 2017. other research and development expenses .
| 7,120 |
our actual results and the timing of certain events could differ materially from those anticipated in these forward-looking statements as a result of several factors , including those discussed in the section titled risk factors included under part i , item 1a and elsewhere in this annual report . see special note regarding forward-looking statements in this annual report . overview yelp connects people with great local businesses . our users have contributed a total of approximately 36.0 million reviews of almost every type of local business , from restaurants , boutiques and salons to dentists , mechanics , plumbers and more . these reviews are written by people using yelp to share their everyday local business experiences , giving voice to consumers and bringing word of mouth online . the information these reviews provide is valuable for consumers and businesses alike . approximately 86.3 million unique visitors used our website , and our mobile application was used on approximately 9.2 million unique mobile devices , on a monthly average basis during the quarter ended december 31 , 2012. businesses of all sizes use our platform to engage with consumers at the critical moment when they are deciding where to spend their money . our business revolves around three key constituencies : the contributors who write reviews , the consumers who read them and the local businesses that they describe . as of december 31 , 2012 , we are active in 53 yelp markets in the united states and 44 yelp markets internationally . this footprint represents a small fraction of the potential domestic and international markets that we are currently targeting for expansion . our domestic expansion plans include growth in our existing markets as well as expansion into new markets , many of which are smaller than our current markets , as we look to expand our breadth of coverage . internationally , as we are in the early stages of establishing our footprint , we are targeting a mix of both large and small markets . on october 23 , 2012 , we and yelp ireland ltd. , our wholly-owned subsidiary , entered into a share purchase agreement with qype and its shareholders pursuant to which yelp ireland ltd. acquired all the outstanding equity interests in qype for 18.6 million ( approximately $ 24.3 million at the time of closing ) in cash and 968,919 shares of our class a common stock with an estimated fair value of approximately $ 23.3 million . the transaction closed upon the execution of the share purchase agreement and qype became our indirect wholly-owned subsidiary . we expect the addition of qype to contribute approximately $ 6 million to our revenue and increase our operating expense by approximately $ 6 million in the year ending december 31 , 2013. we believe the acquisition of qype will accelerate the expansion of our international footprint as its largest markets germany and the united kingdom are key markets for us , and together we will have a substantially increased presence in these markets . we have not yet made any substantive effort to monetize the international markets we have developed organically and have not generated significant revenue from international markets to date . we plan to continue investing in additional domestic and international markets as we seek to emulate our growth to date . we develop each market in the following stages : identification . we select new markets based on a number of different city- or country-specific criteria , including but not limited to population size , local gross domestic product , pre-existing base of reviews on our platform , internet and wireless penetration , proximity to existing markets , number of local businesses and local ad market growth rate . preparation and launch . before launching a market in any country , we license business listing information from third-party data providers and create individual pages for each business location in the entire country . we sometimes hire temporary local employees , called scouts , to provide additional rich content , such as reviews , photos and hours of operation . at launch , consumers can read and write reviews about any business on our platform and contribute information about businesses that are not already listed . we have active yelp markets in australia , austria , belgium , canada , denmark , finland , france , germany , ireland , italy , the netherlands , norway , poland , singapore , spain , sweden , switzerland , turkey , the united kingdom and the united states . 36 growth . after launch , we focus on attracting contributors , consumers and local businesses to our platform . in each yelp market , we hire a community manager , a local resident who helps increase awareness of our platform and who fosters a local community of contributors . the primary responsibilities of a community manager include : planning and executing fun and engaging events for the community , such as parties , outings and activities at restaurants , museums , hotels and other local places of interest ; getting to know our users and helping them get to know one another as a way to foster an offline community experience that can be transferred online ; promoting yelp , including guest appearances on local television and radio and at local events like concerts and street fairs ; and writing weekly e-mail newsletters to share information with the community about local businesses , events and activities . through these activities , we believe community managers help increase the frequency of use of our platform that drives a network effect , whereby contributed reviews expand the breadth and depth of our review base and this expansion draws an increasing number of consumers to access the content on our platform , thus inspiring new and existing contributors to create additional reviews that can be shared with this growing audience . scale . story_separator_special_tag specifically , we have made significant investments in our business and expect to continue investing in marketing and product development to improve both the consumer and local business experience on our online and mobile platforms . in addition , we expect to continue to grow our sales organization both domestically and abroad . we believe that our entry into new markets and expansion in existing markets provides our largest opportunity for future growth . accordingly , we have determined to forgo the achievement of near-term profitability in return for long-term growth . we also expect to invest between $ 6 million and $ 8 million annually for the next two years in capital expenditures as we continue to grow our business , the majority of which we expect to use to upgrade our technology and infrastructure to improve the ability of our platform to handle the projected increase in usage and enable the release of new features and solutions . in addition to the expenditures noted above , we also expect to invest approximately $ 7 million in capital expenditures in 2013 for the build out of our san francisco headquarters as we move to a new facility in october 2013. factors affecting our performance ability to attract and retain local businesses . our revenue growth is driven by our ability to acquire and retain local business advertisers that purchase our advertising solutions . our largest sales and marketing expenses consist of the costs associated with acquiring local business advertisers . we spent a majority of our $ 85.9 million sales and marketing expense for 2012 on initiatives relating to local business advertiser acquisition and expect to continue to expend significant amounts to attract additional local business advertisers . failure to effectively attract and retain paying local business advertisers would adversely affect our revenue and operating results . new market development . our long-term growth depends on our ability to successfully develop new and existing domestic and international markets . we expanded into 26 new markets during 2012 , increasing our total market reach to 97 domestic and international markets . it can take years for our platform to achieve a critical mass of consumers and reviews to drive meaningful traction of our advertising solutions and begin to generate revenue in a particular market . as a result , we may continue to generate losses in new markets for an extended period , and different markets can be expected to grow at different rates and generate varying levels of revenue . as with most businesses , we expect our revenue growth to slow as our business matures over time . local advertising revenue for our oldest cohort of u.s. markets , which launched in 2005-2006 , grew at a 59 % year-over-year rate for the year ended december 31 , 2012 , compared to the year ended december 31 , 2011. this rate is lower than the growth rate of local advertising revenue for the 2007-2008 cohort , which grew at 86 % in the same period , and the 2009-2010 cohort , which grew at 177 % in the same period . we believe this is indicative of continued revenue growth , but slowing revenue growth for more mature markets . we opened a sales office in london in the third quarter of 2012 and plan to continue to grow our sales force , including our international sales force , so we can reach more businesses internationally . in the fourth quarter of 2012 , we expanded our european sales operations through our acquisition of qype and its established european sales force . increasing mobile usage . although we currently deliver advertising on our mobile app and mobile website , we have limited experience with mobile advertising and have prioritized the quality of user experience with our mobile products over short-term monetization . the increasing use of our platform on mobile devices may also affect our performance , particularly if mobile use substitutes for use of our website on personal computers . for example , we believe use of our mobile app and mobile website are complementary to the use of our website ; however , if mobile device usage is substituting for , rather than incremental to , usage of our website on personal computers and our mobile advertising solutions prove ineffective , this trend could adversely impact our business . 39 investment in growth . we have aggressively invested in the growth of our platform and intend to continue to invest to support this growth as we expand our platform , grow our contributor and local business base , hire additional employees and further develop our technology . we also plan to invest in product development as we continue to innovate and introduce new products for our website and mobile app , explore new platforms and distribution channels and grow and develop advertising and e-commerce products and partner arrangements that provide incremental value to our advertisers and business partners to encourage them to increase their advertising budgets allocated towards our platform . we expect that these investments will increase our operating expenses , and that any increase in revenue resulting from product innovations will likely trail the increase in expenses . user engagement . changes in user engagement , as reflected in consumer traffic and the quality and quantity of contributed content , will also affect our revenue and financial performance . as more people use our platform , more of them write reviews , add photos and tips . each review , photo or tip that a user contributes helps expand the breadth and depth of the content on our platform , drawing in more consumers and more prospective contributors . this virtuous cycle , which increases consumer traffic and content , improves our value proposition to local businesses as they seek low-cost , easy-to-use and effective advertising solutions to target a large number of intent-driven consumers . accordingly , increased user engagement will enhance the usefulness of our platform for users and local businesses alike , benefiting our business in the long term .
| results of operations the following tables set forth our results of operations for the periods presented as a percentage of net revenue for those periods ( certain items may not foot due to rounding ) . the period-to-period comparison of financial results is not necessarily indicative of future results . replace_table_token_11_th years ended december 31 , 2012 , 2011 and 2010 net revenue replace_table_token_12_th during 2010 , 2011 and 2012 , we focused on revenue growth related to our local advertiser customer base as well as the development of relationships with brand advertising agencies . additionally , during the second half of 2010 , we began selling yelp deals through our platform , and in the second half of 2012 , we began selling gift certificates through our platform . 2012 compared to 2011. total net revenue increased $ 54.3 million , or 65 % , from 2011 to 2012. our local advertising revenue increased by $ 50.7 million , or 87 % , primarily due to a significant increase in the number of customers purchasing local advertising plans as we expanded our sales force to reach more prospective local businesses , as well as an increase in average sales per customer . in 2012 , the number of customers purchasing local advertising plans increased 64 % from 2011. our brand advertising revenue also increased by $ 2.9 million , or 16 % , due primarily to an increase in brand advertisers of 19 % year over year . in addition , our other services revenue increased $ 0.7 million or 10 % , from 2011 to 2012 , primarily due to additional remnant advertising inventory and from increases in revenue from existing partnership arrangements related to online reservations , partially offset by not selling yelp deals via email in 2012 .
| 7,121 |
passenger revenues for 2018 included an estimated $ 130 million negative impact to revenue due to temporarily lower passenger yields from an aggressive may 2018 fare sale for june through october 2018 travel , which was offered in conjunction with the company 's broad marketing efforts following the flight 1380 accident . on april 17 , 2018 , southwest airlines flight 1380 from new york-laguardia to dallas love field suffered an uncontained failure of its port cfm56-7b engine , resulting in a customer fatality . on a unit basis , passenger revenues decrease d 0.4 percent , year-over-year , driven by a slight decrease in load factor to 83.4 percent , partially offset by a 0.1 percent increase in passenger revenue yield . the increase in yield was largely due to the successful deployment of several revenue management enhancements enabled by the company 's new reservation system , an improved fare environment in second half 2018 , and strong passenger demand for low fares . freight revenues for 2018 increase d by $ 2 million , or 1.2 percent , compared with 2017 , primarily due to increased capacity . based on current trends , the company currently expects freight revenues in first quarter 2019 to increase , compared with first quarter 2018 . other revenues for 2018 increase d by $ 125 million , or 10.3 percent , compared with 2017 , primarily due to an increase in revenues associated with cardholder spend on the company 's co-branded chase® visa credit card . the company currently expects other revenues in first quarter 2019 to increase , compared with first quarter 2018 . operating unit revenues for 2018 were flat compared with 2017 . based on revenue and booking trends thus far in first quarter 2019 , and assuming no further significant impact on bookings from the recent government shutdown , the company currently estimates first quarter 2019 operating unit revenues to increase in the four to five percent range , compared with first quarter 2018 . operating expenses operating expenses for 2018 increase d by $ 1.0 billion , or 5.8 percent , compared with 2017 , while capacity increased 3.9 percent over the same period . historically , except for changes in the price of fuel , changes in operating expenses for airlines have been largely driven by changes in capacity , or asms . the following table presents the company 's operating expenses per asm for 2018 and 2017 , followed by explanations of these changes on a per asm basis and dollar basis : replace_table_token_7_th operating expenses per asm for 2018 increase d by 1.8 percent , compared with 2017 , primarily due to increases in market jet fuel prices . operating expenses per asm for 2018 , excluding fuel and oil expense and special items ( a non-gaap financial measure ) , increase d 0.6 percent year-over-year , primarily due to wage rate increases . see note 41 regarding use of non-gaap financial measures and the reconciliation of reported amounts to non-gaap financial measures for additional detail regarding non-gaap financial measures . based on current trends and excluding fuel and oil expense and profitsharing expense , the company expects its first quarter 2019 unit costs to increase approximately six percent , compared with first quarter 2018 's unit costs of 8.65 , which excluded fuel and oil expense , profitsharing expense , and special items . salaries , wages , and benefits expense for 2018 increase d by $ 344 million , or 4.7 percent , compared with 2017 . salaries , wages , and benefits expense per asm for 2018 increased 1.1 percent , compared with 2017 . on both a dollar and per asm basis , the majority of the increases were the result of higher salaries expense , primarily driven by contractual wage rate increases . these increases more than offset the impact in 2017 of the $ 1,000 per employee bonus awarded as a result of tax reform , which totaled $ 70 million in the 2017 results . based on current cost trends and anticipated capacity , the company expects first quarter 2019 salaries , wages , and benefits expense per asm , excluding profitsharing expense , to increase , compared with first quarter 2018 . during 2018 , the company conducted negotiations with various unionized employee groups . the following table sets forth the company 's unionized employee groups that are currently in negotiations on collective-bargaining agreements : employee group approximate number of employees representatives amendable date southwest flight attendants 15,200 transportation workers of america , afl-cio , local 556 ( `` twu 556 '' ) november 2018 southwest customer service agents , customer representatives , and source of support representatives 7,400 international association of machinists and aerospace workers , afl-cio ( `` iam 142 '' ) december 2018 southwest material specialists ( formerly known as stock clerks ) 300 international brotherhood of teamsters , local 19 ( `` ibt 19 '' ) august 2013. the company reached a tentative agreement with ibt 19 in january 2019. if ratified by the company 's material specialists , the contract will become amendable in 2024. southwest mechanics 2,400 aircraft mechanics fraternal association ( `` amfa '' ) august 2012 southwest flight simulator technicians 50 international brotherhood of teamsters ( `` ibt '' ) may 2019. the company reached a tentative agreement with ibt in february 2019. if ratified by the company 's flight simulator technicians , the contract will become amendable in 2024. fuel and oil expense for 2018 increase d by $ 540 million , or 13.2 percent , compared with 2017 . on a per asm basis , fuel and oil expense for 2018 increase d 9.1 percent , compared with 2017 . story_separator_special_tag on both a dollar and per asm basis , the majority of the increases were due to the timing of regular airframe maintenance checks . the remainder of the increases were due to engine maintenance and repairs . the company currently expects maintenance materials and repairs expense per asm for first quarter 2019 to increase , compared with first quarter 2018 . landing fees and airport rentals expense for 2018 increase d by $ 42 million , or 3.3 percent , compared with 2017 . on a per asm basis , landing fees and airport rentals expense for 2018 decrease d 1.2 percent , compared with 2017 , as the dollar increases were more than offset by the 3.9 percent increase in capacity . on a dollar basis , the majority of the increase was due to an increase in rental rates at various stations throughout the network . the company currently expects landing fees and airport rentals expense per asm for first quarter 2019 to increase , compared with first quarter 2018 . depreciation and amortization expense for 2018 decrease d by $ 17 million , or 1.4 percent , compared with 2017 . on a per asm basis , depreciation and amortization expense decrease d 5.1 percent , compared with 2017 . on both a dollar and per asm basis , the majority of the decreases were associated with the reduction in depreciation expense associated with the accelerated retirement of the company 's classic fleet in third quarter 2017 , as this exceeded the additional depreciation associated with purchases of new owned aircraft and pre-owned aircraft on capital leases . the company currently expects depreciation and amortization expense per asm for first quarter 2019 to increase , compared with first quarter 2018 . other operating expenses for 2018 increase d by $ 5 million , or 0.2 percent , compared with 2017 . on a per asm basis , other operating expenses for 2018 decrease d 3.8 percent , compared with 2017 , as the dollar increases were more than offset by the 3.9 percent increase in capacity . other operating expenses in 2017 included charges totaling $ 96 million , 44 associated with the grounding of the company 's remaining classic aircraft . these charges included a $ 63 million aircraft grounding charge related to the leased portion of the classic fleet and $ 33 million of lease termination expenses associated with eight classic aircraft that were acquired during 2017 prior to their grounding . during first quarter 2018 , the company also recognized $ 25 million of gains from the sale of 39 owned classic aircraft and a number of spare engines to a third party which reduced other operating expenses . the charges related to the grounding of the classic fleet , as well as the gain on sale of grounded aircraft , were considered special items and thus excluded from the company 's non-gaap results . see note regarding use of non-gaap financial measures and the reconciliation of reported amounts to non-gaap financial measures for additional detail regarding non-gaap financial measures . excluding these items , approximately 50 percent of the year-over-year dollar increase was due to technology-related expenses associated with various projects , 30 percent due to revenue related costs as a result of the 3.6 percent increase in revenue passengers carried , and the remainder was due to higher property taxes assessed in 2018. the company currently expects other operating expenses per asm for first quarter 2019 to increase , compared with first quarter 2018 . other other expenses ( income ) include interest expense , capitalized interest , interest income , and other gains and losses . interest expense for 2018 increase d by $ 17 million , or 14.9 percent , compared with 2017 , primarily due to the issuance of two debt facilities in november 2017 , including $ 300 million of 2.75 % senior unsecured notes and $ 300 million of 3.45 % senior unsecured notes . capitalized interest for 2018 decrease d by $ 11 million , or 22.4 percent , compared with 2017 , primarily due to timing of aircraft deliveries and progress payments associated with future orders . interest income for 2018 increase d by $ 34 million , or 97.1 percent , compared with 2017 , primarily due to higher interest rates . other ( gains ) losses , net , primarily includes amounts recorded as a result of the company 's hedging activities . with the adoption of the new hedging standard , the elimination of the requirement to separately measure and record ineffectiveness for all future cash flow hedges in a hedging relationship , as well as a change in classification of premium expense associated with option contracts from other ( gains ) losses , net , in the consolidated statement of income , to fuel and oil expense , has significantly reduced amounts reflected for hedging activities in other ( gains ) losses , net . with the adoption of the new retirement standard , the company is required to include all components of its net periodic benefit cost ( income ) , with the exception of service cost , in other ( gains ) losses , net , versus previously having been classified and reported as operating expenses in salaries , wages , and benefits . for 2018 , this periodic benefit cost was $ 12 million . see note 2 to the consolidated financial statements for further information on both new standards . also , see note 10 to the consolidated financial statements for further information on the company 's hedging activities . the following table displays the components of other ( gains ) losses , net , for the years ended december 31 , 2018 , and 2017 : replace_table_token_10_th ( a ) with the adoption of the new hedging standard , the separate measurement and recording of ineffectiveness has been eliminated for all cash flow hedges in a hedging relationship effective january 1 , 2018. see note 2 to the consolidated financial statements for further information .
| year in review for the 46 th consecutive year , the company was profitable , recording gaap and non-gaap results for 2018 and 2017 as noted in the following tables . see note regarding use of non-gaap financial measures and the reconciliation of reported amounts to non-gaap financial measures for additional detail regarding non-gaap financial measures . the fiscal years ended december 31 , 2017 and 2016 reflect recast financial information related to the company 's january 1 , 2018 , adoption of the new revenue standard , the new retirement standard , and the new hedging standard , as detailed in note 2 to the consolidated financial statements . replace_table_token_6_th net income for the year ended december 31 , 2018 , was $ 2.47 billion , a 26.6 percent decrease year-over-year , as compared to the 2017 record net income of $ 3.36 billion . diluted earnings per share for 2018 was $ 4.29 , as compared to the 2017 record diluted earnings per share of $ 5.57 . non-gaap net income was a record of $ 2.44 billion , a 15.1 percent increase year-over-year . non-gaap diluted earnings per share for 2018 was a record of $ 4.24 . the decrease in gaap net income was primarily driven by a prior year $ 1.3 billion adjustment to reduce the company 's provision for income taxes related to the tax cuts and jobs act legislation enacted in december 2017 ( `` tax reform '' ) , which resulted in a re-measurement of the company 's deferred tax assets and liabilities at the new federal corporate tax rate of 21 percent . this non-cash item is excluded from the company 's non-gaap results . operating income for the year ended december 31 , 2018 , was $ 3.2 billion , a decrease of 5.9 percent year-over-year , and non-gaap operating income was also $ 3.2 billion .
| 7,122 |
our residential segment experienced a $ 2.3 million , or 5.2 % , decrease in selling , general and administrative expenses during the year ended september 30 , 2018 , compared to the year ended september 30 , 2017 , driven by decreased compensation expense , primarily as a result of a decrease of $ 1.2 million in variable compensation and incentive costs associated with decreased profitability , partly offset by an increase in salary and travel costs . selling , general and administrative expenses as a percentage of revenues in the residential segment decreased by 1.5 % to 14.5 % of segment revenue during the year ended september 30 , 2018. interest and other expense , net replace_table_token_14_th interest expense during the year ended september 30 , 2019 , we incurred interest expense of $ 1.9 million primarily comprised of interest expense from our revolving credit facility with wells fargo bank , n.a . ( “ wells fargo ” ) , an average letter of credit balance of $ 6.6 million under our revolving credit facility and an average unused line of credit balance of $ 73.7 million . this compares to interest expense of $ 1.9 million 29 for the year ended september 30 , 2018 , primarily comprised of interest expense from our revolving credit facility with wells fargo , an average letter of credit balance of $ 6.6 million under our revolving credit facility and an average unused line of credit balance of $ 63.2 million . for the year ended september 30 , 2017 , we incurred interest expense of $ 1.7 million on a debt balance primarily comprised of our revolving credit facility with wells fargo , an average letter of credit balance of $ 6.6 million under our revolving credit facility , and an average unused line of credit balance of $ 47.5 million . provision for income taxes for the year ended september 30 , 2019 , we recorded income tax expense of $ 6.7 million . income tax expense was partly offset by a $ 4.0 million benefit related to the recognition of previously unrecognized tax benefits . for the year ended september 30 , 2018 , we recorded income tax expense of $ 38.2 million . income tax expense was partly offset by a $ 1.9 million benefit related to the recognition of previously unrecognized tax benefits . our income tax expense included a charge of $ 31.3 million to re-measure our deferred tax assets and liabilities to reflect the impact from the enactment of the tax cuts and jobs act on december 22 , 2017. for the year ended september 30 , 2017 , we recorded income tax expense of $ 5.2 million . income tax expense was partly offset by a $ 3.7 million benefit related to the recognition of previously unrecognized tax benefits . working capital during the year ended september 30 , 2019 , working capital exclusive of cash increased by $ 12.0 million from september 30 , 2018 , reflecting a $ 41.1 million increase in current assets excluding cash and a $ 29.1 million increase in current liabilities during the period , reflecting a continued investment in growing our business . during the year ended september 30 , 2019 , our current assets exclusive of cash increased to $ 277.5 million , as compared to $ 236.4 million as of september 30 , 2018 . the increase primarily relates to a $ 34.7 million increase in accounts receivable , in connection with growth in our business . days sales outstanding was 62 as of each of september 30 , 2019 and 2018 . while the rate of collections may vary , our typically secured position , resulting from our ability in general to secure liens against our customers ' overdue receivables , offers some protection that collection will occur eventually to the extent that our security retains value . during the year ended september 30 , 2019 , our total current liabilities increase d by $ 29.1 million to $ 193.5 million , compared to $ 164.4 million as of september 30 , 2018 , primarily related to an increase in accounts payable and accrued liabilities in connection with the growth of our business . surety many customers , particularly in connection with new construction , require us to post performance and payment bonds issued by a surety . these bonds provide a guarantee to the customer that we will perform under the terms of our contract and that we will pay our subcontractors and vendors . if we fail to perform under the terms of our contract or to pay subcontractors and vendors , the customer may demand that the surety make payments or provide services under the bond . we must reimburse the sureties for any expenses or outlays they incur on our behalf . to date , we have not been required to make any reimbursements to our sureties for bond-related costs . as is common in the surety industry , sureties issue bonds on a project-by-project basis and can decline to issue bonds at any time . we believe that our relationships with our sureties will allow us to provide surety bonds as they are required . however , current market conditions , as well as changes in our sureties ' assessment of our operating and financial risk , could cause our sureties to decline to issue bonds for our work . if our sureties decline to issue bonds for our work , our alternatives would include posting other forms of collateral for project performance , such as letters of credit or cash , seeking bonding capacity from other sureties , or engaging in more projects that do not require surety bonds . in addition , if we are awarded a project for which a surety bond is required but we are unable to obtain a surety bond , the result could be a claim for damages by the customer story_separator_special_tag our residential segment experienced a $ 2.3 million , or 5.2 % , decrease in selling , general and administrative expenses during the year ended september 30 , 2018 , compared to the year ended september 30 , 2017 , driven by decreased compensation expense , primarily as a result of a decrease of $ 1.2 million in variable compensation and incentive costs associated with decreased profitability , partly offset by an increase in salary and travel costs . selling , general and administrative expenses as a percentage of revenues in the residential segment decreased by 1.5 % to 14.5 % of segment revenue during the year ended september 30 , 2018. interest and other expense , net replace_table_token_14_th interest expense during the year ended september 30 , 2019 , we incurred interest expense of $ 1.9 million primarily comprised of interest expense from our revolving credit facility with wells fargo bank , n.a . ( “ wells fargo ” ) , an average letter of credit balance of $ 6.6 million under our revolving credit facility and an average unused line of credit balance of $ 73.7 million . this compares to interest expense of $ 1.9 million 29 for the year ended september 30 , 2018 , primarily comprised of interest expense from our revolving credit facility with wells fargo , an average letter of credit balance of $ 6.6 million under our revolving credit facility and an average unused line of credit balance of $ 63.2 million . for the year ended september 30 , 2017 , we incurred interest expense of $ 1.7 million on a debt balance primarily comprised of our revolving credit facility with wells fargo , an average letter of credit balance of $ 6.6 million under our revolving credit facility , and an average unused line of credit balance of $ 47.5 million . provision for income taxes for the year ended september 30 , 2019 , we recorded income tax expense of $ 6.7 million . income tax expense was partly offset by a $ 4.0 million benefit related to the recognition of previously unrecognized tax benefits . for the year ended september 30 , 2018 , we recorded income tax expense of $ 38.2 million . income tax expense was partly offset by a $ 1.9 million benefit related to the recognition of previously unrecognized tax benefits . our income tax expense included a charge of $ 31.3 million to re-measure our deferred tax assets and liabilities to reflect the impact from the enactment of the tax cuts and jobs act on december 22 , 2017. for the year ended september 30 , 2017 , we recorded income tax expense of $ 5.2 million . income tax expense was partly offset by a $ 3.7 million benefit related to the recognition of previously unrecognized tax benefits . working capital during the year ended september 30 , 2019 , working capital exclusive of cash increased by $ 12.0 million from september 30 , 2018 , reflecting a $ 41.1 million increase in current assets excluding cash and a $ 29.1 million increase in current liabilities during the period , reflecting a continued investment in growing our business . during the year ended september 30 , 2019 , our current assets exclusive of cash increased to $ 277.5 million , as compared to $ 236.4 million as of september 30 , 2018 . the increase primarily relates to a $ 34.7 million increase in accounts receivable , in connection with growth in our business . days sales outstanding was 62 as of each of september 30 , 2019 and 2018 . while the rate of collections may vary , our typically secured position , resulting from our ability in general to secure liens against our customers ' overdue receivables , offers some protection that collection will occur eventually to the extent that our security retains value . during the year ended september 30 , 2019 , our total current liabilities increase d by $ 29.1 million to $ 193.5 million , compared to $ 164.4 million as of september 30 , 2018 , primarily related to an increase in accounts payable and accrued liabilities in connection with the growth of our business . surety many customers , particularly in connection with new construction , require us to post performance and payment bonds issued by a surety . these bonds provide a guarantee to the customer that we will perform under the terms of our contract and that we will pay our subcontractors and vendors . if we fail to perform under the terms of our contract or to pay subcontractors and vendors , the customer may demand that the surety make payments or provide services under the bond . we must reimburse the sureties for any expenses or outlays they incur on our behalf . to date , we have not been required to make any reimbursements to our sureties for bond-related costs . as is common in the surety industry , sureties issue bonds on a project-by-project basis and can decline to issue bonds at any time . we believe that our relationships with our sureties will allow us to provide surety bonds as they are required . however , current market conditions , as well as changes in our sureties ' assessment of our operating and financial risk , could cause our sureties to decline to issue bonds for our work . if our sureties decline to issue bonds for our work , our alternatives would include posting other forms of collateral for project performance , such as letters of credit or cash , seeking bonding capacity from other sureties , or engaging in more projects that do not require surety bonds . in addition , if we are awarded a project for which a surety bond is required but we are unable to obtain a surety bond , the result could be a claim for damages by the customer
| results of operations we report our operating results across our four operating segments : commercial & industrial , communications , infrastructure solutions and residential . expenses associated with our corporate office are classified separately . the following table presents selected historical results of operations of ies , as well as the results of acquired businesses from the dates acquired . replace_table_token_4_th ( 1 ) the year ended september 30 , 2018 includes a charge of $ 31.3 million to re-measure our net deferred taxes in connection with the tax cuts and jobs act . 2019 compared to 2018 consolidated revenues for the year ended september 30 , 2019 , were $ 200.2 million higher than for the year ended september 30 , 2018 , an increase of 22.8 % , with increases at all of our operating segments , driven by strong demand . our overall gross profit percentage decreased slightly to 16.9 % during the year ended september 30 , 2019 , as compared to 17.1 % during the year ended september 30 , 2018 . gross profit as a percentage of revenue increased at our infrastructure solutions and residential segments but decreased at our commercial & industrial and communications segments , as discussed in further detail for each segment below . selling , general and administrative expenses include costs not directly associated with performing work for our customers . these costs consist primarily of compensation and benefits related to corporate , segment and branch management ( including incentive-based compensation ) , occupancy and utilities , training , professional services , information technology costs , consulting fees , travel and certain types of depreciation and amortization . we allocate certain corporate selling , general and administrative costs across our segments as we believe this more accurately reflects the costs associated with operating each segment .
| 7,123 |
these cash tax payments do not include the impact of approximately $ 28 million of cares act tax refunds expected to be received in 2021. story_separator_special_tag style= '' color : # 000000 ; font-family : 'arial ' , sans-serif ; font-size:10pt ; font-weight:400 ; line-height:120 % '' > for the year ended december 31 , 2019 , our manufactured products operating results decreased , on higher revenue as compared to 2018 , as a result of an increase in subsea umbilical and hardware awards and related throughput , partially offset by lower revenue and operating results from our mobility solutions businesses . operating results in 2019 and 2018 were partially offset by $ 3.3 million and $ 1.5 million , respectively , of charges for write-offs of certain equipment and inventory , and other expenses . we expect our manufactured products segment operating results in 2021 to decline , primarily as a result of the decreased order intake in our energy businesses during 2020. we continue to closely monitor the impact of the covid-19 pandemic on our mobility solutions businesses , and currently expect to see marginally higher activity and contribution from these businesses in 2021. our manufactured products backlog was $ 266 million as of december 31 , 2020 , a $ 282 million , or 51 % , decrease over december 31 , 2019. offshore projects group . our opg operating results for the year ended december 31 , 2020 increased as compared to 2019 primarily due to decreased charges in 2020 of $ 100 million for vessel and other asset impairments and write-offs , goodwill impairment , and other charges as compared to 2019 charges of $ 168 million for vessel and intangible impairments , write-downs and write-offs of certain equipment and inventory , and other 36 expenses . exclusive of those charges , our opg operating results were lower for the year ended december 31 , 2020 , as compared to the prior year , on lower revenue due to reduced activity levels in the areas of imr , decommissioning and intervention services . our opg operating results for the year ended december 31 , 2019 decreased on lower revenue as compared to 2018 primarily due to 2019 charges of $ 168 million for vessel and intangible impairments , write-downs and write-offs of certain equipment and inventory , and other expenses . this segment 's 2018 results included charges of $ 23 million related to goodwill impairment and write-offs of obsolete equipment and intangible assets associated with exiting the land survey business . in 2021 , we expect operating results for our opg segment to improve , on generally stable offshore activity and margins as compared to the last half of 2020. operating results are expected to improve largely due to the efficiency and cost improvement measures implemented in 2020 and improved year-over-year contribution from our angola riserless light well intervention campaign . vessel day rates remain competitive but stable , and we expect to see opportunities for pricing improvements during periods of higher activity . we also anticipate reduced charter obligations and increased flexibility on third-party vessels combined with an overall improvement in fleet utilization . integrity management & digital solutions . for the year ended december 31 , 2020 , compared to 2019 , our imds operating results were lower primarily due to 2020 charges of $ 128 million for goodwill impairment , asset impairment and write-offs , and other expenses as compared to 2019 charges of $ 49 million for goodwill and asset impairments , write-downs and write-offs of certain equipment , intangible assets and inventory , and other expenses . exclusive of those charges , operating results for the year ended december 31 , 2020 were higher , as compared to the prior year , due to improved operating efficiencies instituted in the fourth quarter of 2019 and in the first three quarters of 2020. for the year ended december 31 , 2019 , compared to 2018 , our imds operating results were lower , primarily due to 2019 charges of $ 49 million for goodwill and asset impairments , write-downs and write-offs of certain equipment , intangible assets and inventory , and other expenses . 2018 operating income included charges of $ 7.5 million for write-down of intangible assets . we anticipate our 2021 operating results for imds to improve on higher revenue , with operating income margins averaging in the high-single digit range for the year as compared to 2020. good order intake at the end of 2020 is expected to begin benefiting the business in the second quarter of 2021. aerospace and defense technologies . revenue , gross margin and operating income information for our adtech segment are as follows : replace_table_token_14_th for the year ended december 31 , 2020 , compared to 2019 , our adtech segment operating results were higher on higher levels of revenue due to increased activity in both defense subsea technologies and space systems . for the year ended december 31 , 2019 , compared to 2018 , our adtech segment operating results were higher on higher levels of revenue . we project our adtech 2021 revenue to be higher , producing improved results with operating income margins consistent with those achieved in 2020. growth in this segment is expected to be broad-based , with revenue growth in our government-focused businesses . unallocated expenses . our unallocated expenses , ( i.e . , those not associated with a specific business segment ) , within gross margin consist of expenses related to our incentive and deferred compensation plans , including 37 restricted stock units , performance units and bonuses , as well as other general expenses . our unallocated expenses within operating expenses consist of those expenses within gross margin plus general and administrative expenses related to corporate functions . the following table sets forth our unallocated expenses for the periods indicated : replace_table_token_15_th our unallocated expenses for the year ended december 31 , 2020 story_separator_special_tag these cash tax payments do not include the impact of approximately $ 28 million of cares act tax refunds expected to be received in 2021. story_separator_special_tag style= '' color : # 000000 ; font-family : 'arial ' , sans-serif ; font-size:10pt ; font-weight:400 ; line-height:120 % '' > for the year ended december 31 , 2019 , our manufactured products operating results decreased , on higher revenue as compared to 2018 , as a result of an increase in subsea umbilical and hardware awards and related throughput , partially offset by lower revenue and operating results from our mobility solutions businesses . operating results in 2019 and 2018 were partially offset by $ 3.3 million and $ 1.5 million , respectively , of charges for write-offs of certain equipment and inventory , and other expenses . we expect our manufactured products segment operating results in 2021 to decline , primarily as a result of the decreased order intake in our energy businesses during 2020. we continue to closely monitor the impact of the covid-19 pandemic on our mobility solutions businesses , and currently expect to see marginally higher activity and contribution from these businesses in 2021. our manufactured products backlog was $ 266 million as of december 31 , 2020 , a $ 282 million , or 51 % , decrease over december 31 , 2019. offshore projects group . our opg operating results for the year ended december 31 , 2020 increased as compared to 2019 primarily due to decreased charges in 2020 of $ 100 million for vessel and other asset impairments and write-offs , goodwill impairment , and other charges as compared to 2019 charges of $ 168 million for vessel and intangible impairments , write-downs and write-offs of certain equipment and inventory , and other 36 expenses . exclusive of those charges , our opg operating results were lower for the year ended december 31 , 2020 , as compared to the prior year , on lower revenue due to reduced activity levels in the areas of imr , decommissioning and intervention services . our opg operating results for the year ended december 31 , 2019 decreased on lower revenue as compared to 2018 primarily due to 2019 charges of $ 168 million for vessel and intangible impairments , write-downs and write-offs of certain equipment and inventory , and other expenses . this segment 's 2018 results included charges of $ 23 million related to goodwill impairment and write-offs of obsolete equipment and intangible assets associated with exiting the land survey business . in 2021 , we expect operating results for our opg segment to improve , on generally stable offshore activity and margins as compared to the last half of 2020. operating results are expected to improve largely due to the efficiency and cost improvement measures implemented in 2020 and improved year-over-year contribution from our angola riserless light well intervention campaign . vessel day rates remain competitive but stable , and we expect to see opportunities for pricing improvements during periods of higher activity . we also anticipate reduced charter obligations and increased flexibility on third-party vessels combined with an overall improvement in fleet utilization . integrity management & digital solutions . for the year ended december 31 , 2020 , compared to 2019 , our imds operating results were lower primarily due to 2020 charges of $ 128 million for goodwill impairment , asset impairment and write-offs , and other expenses as compared to 2019 charges of $ 49 million for goodwill and asset impairments , write-downs and write-offs of certain equipment , intangible assets and inventory , and other expenses . exclusive of those charges , operating results for the year ended december 31 , 2020 were higher , as compared to the prior year , due to improved operating efficiencies instituted in the fourth quarter of 2019 and in the first three quarters of 2020. for the year ended december 31 , 2019 , compared to 2018 , our imds operating results were lower , primarily due to 2019 charges of $ 49 million for goodwill and asset impairments , write-downs and write-offs of certain equipment , intangible assets and inventory , and other expenses . 2018 operating income included charges of $ 7.5 million for write-down of intangible assets . we anticipate our 2021 operating results for imds to improve on higher revenue , with operating income margins averaging in the high-single digit range for the year as compared to 2020. good order intake at the end of 2020 is expected to begin benefiting the business in the second quarter of 2021. aerospace and defense technologies . revenue , gross margin and operating income information for our adtech segment are as follows : replace_table_token_14_th for the year ended december 31 , 2020 , compared to 2019 , our adtech segment operating results were higher on higher levels of revenue due to increased activity in both defense subsea technologies and space systems . for the year ended december 31 , 2019 , compared to 2018 , our adtech segment operating results were higher on higher levels of revenue . we project our adtech 2021 revenue to be higher , producing improved results with operating income margins consistent with those achieved in 2020. growth in this segment is expected to be broad-based , with revenue growth in our government-focused businesses . unallocated expenses . our unallocated expenses , ( i.e . , those not associated with a specific business segment ) , within gross margin consist of expenses related to our incentive and deferred compensation plans , including 37 restricted stock units , performance units and bonuses , as well as other general expenses . our unallocated expenses within operating expenses consist of those expenses within gross margin plus general and administrative expenses related to corporate functions . the following table sets forth our unallocated expenses for the periods indicated : replace_table_token_15_th our unallocated expenses for the year ended december 31 , 2020
| results of operations realignment of reportable segments . in the third quarter of 2020 , we changed our organizational structure as part of the transformation to realign our businesses to achieve greater cost efficiencies and to bring together business units that frequently work together and promote increased synergies in bidding , project management and the use of offshore technicians . as a result , information that our chief operating decision maker regularly reviews for purposes of allocating resources and assessing performance changed . therefore , for the year ended december 31 , 2020 , we are reporting our financial results consistent with our newly realigned operating segments and have recast certain prior period amounts to conform to the way we internally manage our businesses and monitor segment performance . our new structure aligns our company around five reportable segments : ( 1 ) subsea robotics ; ( 2 ) manufactured products ; ( 3 ) offshore projects group ; ( 4 ) integrity management & digital solutions ; and ( 5 ) aerospace and defense technologies . additional information on our business segments is shown in note 11— “ operations by business segment and geographic area ” in the notes to consolidated financial statements included in this report . energy services and products . the table that follows sets out revenue and profitability for the business segments within our energy services and products business . in the subsea robotics section of the table that follows , “ rov days available ” includes all days from the first day that an rov is placed in service until the rov is retired . all days in this period are considered available days , including periods when an rov is undergoing maintenance or repairs . our rovs do not have scheduled maintenance or repair that requires significant time when the rovs are not available for utilization . 34 replace_table_token_12_th subsea robotics .
| 7,124 |
at december 31 , 2016 , the $ 600 million aggregate principal amount of eog 's 5.875 % senior notes due 2017 were reclassified as long-term debt based upon its intent and ability to ultimately replace such amount with other long-term debt . on february 1 , 2016 , eog repaid upon maturity the $ 400 million aggregate principal amount of its 2.500 % senior notes due 2016 ( 2016 notes ) . on january 14 , 2016 , eog closed its sale of $ 750 million aggregate principal amount of its 4.15 % senior notes due 2026 and $ 250 million aggregate principal amount of its 5.10 % senior notes due 2036 ( collectively , the notes ) . interest on the notes is payable semi-annually in arrears on january 15 and july 15 of each year , beginning on july 15 , 2016. net proceeds from the notes offering totaled approximately $ 991 million and were used to repay the 2016 notes when they matured on february 1 , 2016 , and for general corporate purposes , including repayment of outstanding commercial paper borrowings and funding of capital expenditures . during 2016 , eog funded $ 6.6 billion ( $ 3.9 billion of which was related to the aforementioned yates transaction ) in exploration and development and other property , plant and equipment expenditures ( excluding asset retirement obligations ) , repaid $ 564 million aggregate principal amount of long-term debt , paid $ 373 million in dividends to common stockholders , repaid $ 260 million of outstanding commercial paper borrowings and purchased $ 82 million of treasury stock in connection with stock compensation plans , primarily by utilizing net cash provided from its operating activities , net proceeds of $ 1,119 million from the sale of assets , net proceeds from the sale of the notes and $ 29 million of excess tax benefits from stock compensation . total anticipated 2017 capital expenditures are estimated to range from approximately $ 3.7 billion to $ 4.1 billion , excluding acquisitions . the majority of 2017 expenditures will be focused on united states crude oil drilling activities . eog has significant flexibility with respect to financing alternatives , including borrowings under its commercial paper program and other uncommitted credit facilities , bank borrowings , borrowings under its $ 2.0 billion senior unsecured revolving credit facility and equity and debt offerings . when it fits eog 's strategy , eog will make acquisitions that bolster existing drilling programs or offer incremental exploration and or production opportunities . management continues to believe eog has one of the strongest prospect inventories in eog 's history . 31 story_separator_special_tag financial commodity derivative contracts of $ 100 million , which included net cash paid for settlements of crude oil and natural gas financial derivative contracts of $ 22 million . during 2015 , eog recognized net gains on the mark-to-market of financial commodity derivative contracts of $ 62 million , which included net cash received from settlements of crude oil and natural gas financial derivative contracts of $ 730 million . gathering , processing and marketing revenues are revenues generated from sales of third-party crude oil , ngls , and natural gas as well as gathering fees associated with gathering third-party natural gas and revenues from sales of eog-owned sand . purchases and sales of third-party crude oil and natural gas are utilized in order to balance firm transportation capacity with production in certain areas and to utilize excess capacity at eog-owned facilities . marketing costs represent the costs of purchasing third-party crude oil and natural gas and the associated transportation costs as well as costs associated with eog-owned sand sold to third parties . gathering , processing and marketing revenues less marketing costs in 2016 increased $ 91 million compared to 2015 , primarily due to higher margins on crude oil marketing activities and on sand sales . 2015 compared to 2014. wellhead crude oil and condensate revenues in 2015 decreased $ 4,807 million , or 49 % , to $ 4,935 million from $ 9,742 million in 2014 , due to a lower composite average wellhead crude oil and condensate price ( $ 4,677 million ) and a decrease of 5 mbbld , or 2 % , in wellhead crude oil and condensate deliveries ( $ 131 million ) . the decrease in deliveries primarily reflects decreased production in the north dakota bakken , the fort worth barnett shale area and other international , partially offset by increased production in the permian basin and eagle ford . the decrease in other international is due to the sale of the canadian assets . eog 's composite wellhead crude oil and condensate price for 2015 decreased 49 % to $ 47.53 per barrel compared to $ 92.58 per barrel in 2014. ngl revenues in 2015 decreased $ 526 million , or 56 % , to $ 408 million from $ 934 million in 2014 , due to a lower composite average price ( $ 490 million ) and a decrease of 3 mbbld , or 4 % , in ngl deliveries ( $ 36 million ) . eog 's composite ngl price in 2015 decreased 55 % to $ 14.49 per barrel compared to $ 31.91 per barrel in 2014. wellhead natural gas revenues in 2015 decreased $ 855 million , or 45 % , to $ 1,061 million from $ 1,916 million in 2014 , primarily due to a lower composite wellhead natural gas price ( $ 730 million ) and a decrease in wellhead natural gas deliveries ( $ 125 million ) . story_separator_special_tag dd & a of the cost of other property , plant and equipment is generally calculated using the straight-line depreciation method over the useful lives of the assets . dd & a expenses in 2016 increased $ 239 million to $ 3,553 million from $ 3,314 million in 2015. dd & a expenses associated with oil and gas properties in 2016 were $ 247 million higher than in 2015 primarily due to higher unit rates in the united states ( $ 300 million ) and china ( $ 3 million ) and commencement of crude oil production from the conwy field in the united kingdom ( $ 22 million ) , partially offset by a decrease in production in the united states ( $ 68 million ) and trinidad ( $ 4 million ) and lower unit rates in trinidad ( $ 6 million ) . unit rates in the united states increased primarily due to downward reserve revisions at december 31 , 2015 , as a result of lower commodity prices . g & a expenses of $ 395 million in 2016 increased $ 28 million from $ 367 million in 2015 primarily due to employee-related expenses in connection with certain voluntary retirements and costs related to the yates transaction . net interest expense of $ 282 million in 2016 was $ 45 million higher than 2015 primarily due to interest incurred on the notes issued in january 2016 ( $ 43 million ) , as well as a decrease in capitalized interest ( $ 10 million ) . this was partially offset by the reduction of interest expense related to the debt repaid in february 2016 and june 2015 ( $ 16 million ) . gathering and processing costs represent operating and maintenance expenses and administrative expenses associated with operating eog 's gathering and processing assets . gathering and processing costs decreased $ 23 million to $ 123 million in 2016 compared to $ 146 million in 2015 due to decreased activities in the eagle ford ( $ 16 million ) and the barnett shale ( $ 7 million ) . exploration costs of $ 125 million in 2016 decreased $ 24 million from $ 149 million in 2015 primarily due to decreased geological and geophysical expenditures ( $ 15 million ) and lower exploration administrative expenses ( $ 14 million ) , partially offset by higher delay rentals ( $ 5 million ) , all in the united states . impairments include amortization of unproved oil and gas property costs as well as impairments of proved oil and gas properties ; other property , plant and equipment ; and other assets . unproved properties with acquisition costs that are not individually significant are aggregated , and the portion of such costs estimated to be nonproductive is amortized over the remaining lease term . when circumstances indicate that a proved property may be impaired , eog compares expected undiscounted future cash flows at a dd & a group level to the unamortized capitalized cost of the asset . if the expected undiscounted future cash flows are lower than the unamortized capitalized cost , the capitalized cost is reduced to fair value . fair value is generally calculated by using the income approach described in the fair value measurement topic of the financial accounting standards board 's accounting standards codification ( asc ) . in certain instances , eog utilizes accepted offers from third-party purchasers as the basis for determining fair value . the following table represents impairments of $ 620 million and $ 6,614 million for the years ended december 31 , 2016 and 2015 ( in millions ) : replace_table_token_16_th 36 impairments of proved properties were primarily due to the write-down to fair value of divested legacy natural gas assets in 2016 and primarily due to commodity price declines in 2015. impairments of unproved properties were primarily due to higher amortization rates being applied to undeveloped leasehold costs in response to the significant decrease in commodity prices and an increase in eog 's estimates of undeveloped properties not expected to be developed before lease expiration in 2016 and 2015. eog recognized additional impairment charges in 2016 of $ 61 million related to obsolete inventory and $ 138 million related to firm commitment contracts related to divested haynesville natural gas assets . taxes other than income include severance/production taxes , ad valorem/property taxes , payroll taxes , franchise taxes and other miscellaneous taxes . severance/production taxes are generally determined based on wellhead revenues , and ad valorem/property taxes are generally determined based on the valuation of the underlying assets . taxes other than income in 2016 decreased $ 72 million to $ 350 million ( 6.4 % of wellhead revenues ) from $ 422 million ( 6.6 % of wellhead revenues ) in 2015. the decrease in taxes other than income was primarily due to decreases in ad valorem/property taxes ( $ 49 million ) and in severance/production taxes ( $ 34 million ) , primarily as a result of decreased wellhead revenues , both in the united states . these decreases were partially offset by a decrease in credits available to eog in 2016 for texas high-cost gas severance tax rate reductions ( $ 12 million ) . other expense , net , was $ 51 million in 2016 compared to other income , net , of $ 2 million in 2015. the increase of $ 53 million was primarily due to an increase in foreign currency transaction losses and increased deferred compensation expense . eog recognized an income tax benefit of $ 461 million in 2016 compared to an income tax benefit of $ 2,397 million in 2015 , primarily due to a decrease in pretax loss resulting from the absence of certain 2015 impairments . the net effective tax rate for 2016 decreased to 30 % from 35 % in the prior year primarily due to additional trinidad taxes resulting from a tax settlement reached
| results of operations the following review of operations for each of the three years in the period ended december 31 , 2016 , should be read in conjunction with the consolidated financial statements of eog and notes thereto beginning on page f-1 . net operating revenues during 2016 , net operating revenues decreased $ 1,106 million , or 13 % , to $ 7,651 million from $ 8,757 million in 2015. total wellhead revenues , which are revenues generated from sales of eog 's production of crude oil and condensate , ngls and natural gas , decreased $ 907 million , or 14 % , to $ 5,497 million in 2016 from $ 6,404 million in 2015. revenues from the sales of crude oil and condensate and ngls in 2016 were approximately 86 % of total wellhead revenues compared to 83 % in 2015. during 2016 , eog recognized net losses on the mark-to-market of financial commodity derivative contracts of $ 100 million compared to net gains of $ 62 million in 2015. gathering , processing and marketing revenues decreased $ 287 million during 2016 , to $ 1,966 million from $ 2,253 million in 2015. net gains on asset dispositions of $ 206 million in 2016 were primarily as a result of sales of producing properties and acreage in texas , louisiana , the rocky mountain area and oklahoma compared to net losses on asset dispositions of $ 9 million in 2015 . 32 wellhead volume and price statistics for the years ended december 31 , 2016 , 2015 and 2014 were as follows : replace_table_token_14_th ( 1 ) thousand barrels per day or million cubic feet per day , as applicable . ( 2 ) other international includes eog 's united kingdom , china , canada and argentina operations . the argentina operations were sold in the third quarter of 2016 . ( 3 ) dollars per barrel or per thousand cubic feet , as applicable .
| 7,125 |
these contracts primarily relate to ( i ) the company 's by-laws , under which it must indemnify directors and executive officers , and may indemnify other officers and employees , for liabilities arising out of their relationship , ( ii ) contracts under which the company must indemnify directors and certain officers for liabilities arising out of their relationship , and ( iii ) contracts under which the company may be required to indemnify customers or resellers from certain liabilities arising from potential infringement of intellectual property rights , as well as story_separator_special_tag you should read the following discussion in conjunction with the section titled `` selected consolidated financial data '' and our consolidated financial statements and the related notes included elsewhere in this annual report on form 10-k. in addition to historical information , this discussion contains forward-looking statements that involve risks and uncertainties that could cause our actual results to differ materially from our expectations , as discussed in `` forward-looking statements '' in part i of this annual report on form 10-k. factors that could cause such differences include , but are not limited to , those described in the section titled `` risk factors '' and elsewhere in this annual report on form 10-k. overview we are a pioneer and leading provider of cloud-based security and compliance solutions that enable organizations to identify security risks to their it infrastructures , help protect their it systems and applications from ever-evolving cyber-attacks and achieve compliance with internal policies and external regulations . our cloud solutions address the growing security and compliance complexities and risks that are amplified by the dissolving boundaries between internal and external it infrastructures and web environments , the rapid adoption of cloud computing and the proliferation of geographically dispersed it assets . our integrated suite of security and compliance solutions delivered on our qualys cloud platform enables our customers to identify their it assets , collect and analyze large amounts of it security data , discover and prioritize vulnerabilities , recommend remediation actions and verify the implementation of such actions . organizations use our integrated suite of solutions delivered on our qualys cloud platform to cost-effectively obtain a unified view of their security and compliance posture across globally-distributed it infrastructures . we were founded and incorporated in december 1999 with a vision of transforming the way organizations secure and protect their it infrastructure and applications and initially launched our first cloud solution , qualys vulnerability management ( vm ) , in 2000. our core vm solution has provided a substantial majority of our revenues to date , representing 79 % , 82 % and 84 % of total revenues in 2015 , 2014 and 2013 , respectively . as this solution gained acceptance , we introduced new solutions to help customers manage increasing it security and compliance requirements . in 2006 , we added our pci compliance solution , and in 2008 , we added our policy compliance solution . in 2009 , we broadened the scope of our cloud services by adding web application scanning and continued our expansion in 2010 , launching malware detection service and qualys secure seal for automated protection of websites . in 2012 , we introduced our virtualized private cloud platform as an additional deployment option of our solutions for customers and partners . in 2014 , we released continuous monitoring ( cm ) for internet-facing systems , which allows customers to continuously monitor their mission-critical assets and to be alerted to security vulnerabilities or misconfigurations that may make them more susceptible to a cyber-attack . in 2015 , we introduced our cloud agent platform ( cap ) , which provides customers with the ability to secure it assets on a continuous basis regardless of where they reside , inside the enterprise , in the cloud or mobile endpoints . we expect that the sales of our qualys suite of solutions , along with the newer capabilities of cm and cap , will contribute to the continuing trend of revenue growth we provide our solutions through a software-as-a-service model , primarily with renewable annual subscriptions . these subscriptions require customers to pay a fee in order to access our cloud solutions . we invoice our customers for the entire subscription amount at the start of the subscription term , and the invoiced amounts are treated as deferred revenues and are recognized ratably over the term of each subscription . we continue to experience significant revenue growth from existing customers as they renew and purchase additional subscriptions . revenues from customers existing at or prior to december 31 , 2014 grew by $ 18.9 million to $ 152.5 million during 2015 , representing 114 % of total revenues in 2014. we expect this trend of revenue growth from existing customers to continue . we market and sell our solutions to enterprises , government entities and to small and medium-sized businesses across a broad range of industries , including education , financial services , government , healthcare , insurance , manufacturing , media , retail , technology and utilities . as of december 31 , 2015 , we had over 8,800 customers in more than 100 countries , including a majority of each of the forbes global 100 and fortune 100. in 2015 , 2014 and 2013 , approximately 70 % of our revenues were derived from customers in the united states . we sell our solutions to enterprises and government entities primarily through our field sales force and to small and medium-sized businesses through our inside sales force . we generate a significant portion of sales through our 39 channel partners , including managed service providers , value-added resellers and consulting firms in the united states and internationally . we have had continued revenue growth over the past three years . story_separator_special_tag our physical and virtual scanner appliances are requested by certain customers as part of their subscriptions in order to scan it infrastructures within their firewalls and do not function without , and are not sold separately from , subscriptions for our solutions . in some limited cases , we also provide certain computer equipment used to extend our qualys cloud platform into our customers ' private cloud environment . customers are required to return physical scanner appliances and computer equipment if they do not renew their subscriptions . we typically invoice our customers for the entire subscription amount at the start of the subscription term . invoiced amounts are reflected on our consolidated balance sheets as accounts receivable or as cash when collected , and as deferred revenues until earned and recognized ratably over the subscription period . accordingly , deferred revenues represents the amount billed to customers that has not yet been earned or recognized as revenues , pursuant to subscriptions entered into in current and prior periods . cost of revenues cost of revenues consists primarily of personnel expenses , comprised of salaries , benefits , performance-based compensation and stock-based compensation , for employees who operate our data centers and provide support services to our customers . other expenses include depreciation of data center equipment and physical scanner appliances and computer hardware provided to certain customers as part of their subscriptions , expenses related to the use of third-party data centers , amortization of third-party technology licensing fees and related maintenance support , fees paid to contractors who supplement or support our operations center personnel and overhead allocations . we expect to continue to make capital investments to expand and support our data center operations , which will increase the cost of revenues in absolute dollars . 42 operating expenses research and development research and development expenses consist primarily of personnel expenses , comprised of salaries , benefits , performance-based compensation and stock-based compensation , for our research and development teams . other expenses include third-party contractor fees , amortization of intangibles related to prior acquisitions and overhead allocations . all research and development costs are expensed as incurred . we expect to continue to devote substantial resources to research and development in an effort to continuously improve our existing solutions as well as develop new solutions and capabilities and expect that research and development expenses will increase in absolute dollars . sales and marketing sales and marketing expenses consist primarily of personnel expenses , comprised of salaries , benefits , sales commissions , performance-based compensation and stock-based compensation for our worldwide sales and marketing teams . other expenses include marketing and promotional events , lead-generation marketing programs , public relations , travel and overhead allocations . all costs are expensed as incurred , including sales commissions . sales commissions are expensed in the quarter in which the related order is received and are paid in the month subsequent to the end of that quarter , which results in increased expenses prior to the recognition of related revenues . our new sales personnel are typically not immediately productive , and the resulting increase in sales and marketing expenses we incur when we add new personnel may not result in increased revenues if these new sales personnel fail to become productive . the timing of our hiring of sales personnel , or the participation in new marketing events or programs , and the rate at which these generate incremental revenues , may affect our future operating results . we expect to continue to significantly invest in additional sales personnel worldwide and also in more marketing programs to support new solutions on our platform , which will increase sales and marketing expenses in absolute dollars . general and administrative general and administrative expenses consist primarily of personnel expenses , comprised of salaries , benefits , performance-based compensation and stock-based compensation , for our executive , finance and accounting , legal , human resources and internal information technology support teams , as well as professional services , insurance , fees , and overhead allocations . we expect that general and administrative expenses will increase in absolute dollars , as we continue to add personnel and incur professional services to support our growth and compliance with legal requirements . other income ( expense ) , net our other income ( expense ) , net consists primarily of interest and investment income from our short-term and long-term investments ; foreign exchange gains and losses , the majority of which result from fluctuations between the u.s. dollar and the euro , british pound and indian rupee ; losses on disposal of property and equipment ; and impairment of long-lived assets . provision for income taxes we are subject to federal , state and foreign income taxes for jurisdictions in which we operate , and we use estimates in determining our provision for these income taxes and deferred tax assets . earnings from our non-u.s. activities are subject to income taxes in the local country which are generally lower than u.s. tax rates , and may be subject to u.s. income taxes . our effective rates differ from the u.s. statutory rate primarily due to foreign income subject to different tax rates than the u.s. , research and development tax credits , non-deductible stock-based compensation expense and other adjustments . income taxes are accounted for under the asset and liability method . deferred tax assets and liabilities are recognized for the tax impact of timing differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and operating loss and tax credit carry-forwards . deferred tax assets and liabilities are measured using statutory tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled . the effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period when the statutory rate change is enacted into law .
| results of operations the following tables set forth selected consolidated statements of operations data for each of the periods presented . replace_table_token_8_th ( 1 ) includes stock-based compensation as follows : replace_table_token_9_th 44 the following table sets forth selected consolidated statements of operations data for each of the periods presented as a percentage of revenues . replace_table_token_10_th comparison of years ended december 31 , 2015 and 2014 revenues year ended december 31 , change 2015 2014 $ % ( in thousands , except percentages ) revenues $ 164,284 $ 133,579 $ 30,705 23 % revenues increased $ 30.7 million in 2015 compared to 2014 . revenues from customers existing at or prior to december 31 , 2014 grew by $ 18.9 million to $ 152.5 million in 2015 , representing 114 % of total revenues in 2014 , primarily due to increased subscriptions and purchases of additional solutions . subscriptions from new customers added in 2015 contributed $ 11.8 million to the increase in revenues . of the total increase of $ 30.7 million , $ 22.0 million was from customers in the united states and the remaining $ 8.7 million was from customers in foreign countries . the growth in revenues reflects the continued demand for our solutions . cost of revenues replace_table_token_11_th cost of revenues increased $ 4.9 million in 2015 compared to 2014 , primarily due to a $ 2.3 million increase in depreciation expense related to additional computer hardware and software ; increased third-party software license maintenance expense of $ 1.6 million ; increased stock-based compensation of $ 0.5 million ; and increased data center costs of $ 0.3 million to support the continued growth of our business .
| 7,126 |
forward-looking statements , which are based on certain assumptions and describe our future plans , strategies , beliefs and expectations , are generally identifiable by use of the words `` believe '' , `` expect '' , `` intend '' , `` anticipate '' , `` estimate '' , `` project '' , or similar expressions . such forward-looking statements include , but are not limited to , statements regarding our : ability to raise additional capital , including via future issuances of equity and debt , and the use of proceeds from such issuances ; results of operations and financial condition ; capital expenditure and working capital needs and the funding thereof ; repurchase of the company 's common shares , including the potential use of a 10b5-1 plan to facilitate repurchases ; potential developments , expansions , renovations , acquisitions or dispositions of outlet centers ; compliance with debt covenants ; renewal and re - lease of leased space ; outcome of legal proceedings arising in the normal course of business ; and real estate joint ventures . you should not rely on forward-looking statements since they involve known and unknown risks , uncertainties and other important factors which are , in some cases , beyond our control and which could materially affect our actual results , performance or achievements . important factors which may cause actual results to differ materially from current expectations include , but are not limited to : our inability to develop new outlet centers or expand existing outlet centers successfully ; risks related to the economic performance and market value of our outlet centers ; the relative illiquidity of real property investments ; impairment charges affecting our properties ; competition for the acquisition and development of outlet centers , and our inability to complete outlet centers we have identified ; environmental regulations affecting our business ; risk associated with a possible terrorist activity or other acts or threats of violence and threats to public safety ; our dependence on rental income from real property ; our dependence on the results of operations of our retailers ; the fact that certain of our properties are subject to ownership interests held by third parties , whose interests may conflict with ours ; risks related to uninsured losses ; risks related to changes in consumer spending habits ; risks associated with our canadian investments ; risks associated with attracting and retaining key personnel ; risks associated with debt financing ; risk associated with our guarantees of debt for , or other support we may provide to , joint venture properties ; risk associated with our interest rate hedging arrangements ; risk associated to uncertainty related to determination of libor ; our potential failure to qualify as a reit ; our legal obligation to make distributions to our shareholders ; legislative or regulatory actions that could adversely affect our shareholders , including the recent changes in the u.s. federal income taxation of u.s. businesses ; our dependence on distributions from the operating partnership to meet our financial obligations , including dividends ; the risk of a cyber-attack or an act of cyber-terrorism and other important factors which may cause actual results to differ materially from current expectations include , but are not limited to , those set forth under item 1a - risk factors . we qualify all of our forward-looking statements by these cautionary statements . the forward-looking statements in this annual report on form 10-k are only predictions . we have based these forward-looking statements largely on our current expectations and projections about future events and financial trends that we believe may affect our business , financial condition and results of operations . because forward-looking statements are inherently subject to risks and uncertainties , some of which can not be predicted or quantified , you should not rely on these forward-looking statements as predictions of future events . the events and circumstances reflected in our forward-looking statements may not be achieved or occur and actual results could differ materially from those projected in the forward-looking statements . except as required by applicable law , we do not plan to publicly update or revise any forward-looking statements contained herein , whether as a result of any new information , future events , changed circumstances or otherwise . for a further discussion of the risks relating to our business , see “ item 1a-risk factors ” in part i of this annual report on form 10-k. the following discussion should be read in conjunction with the consolidated financial statements appearing elsewhere in this report . historical results and percentage relationships set forth in the consolidated statements of operations , including trends which might appear , are not necessarily indicative of future operations . 35 general overview as of december 31 , 2018 , we had 36 consolidated outlet centers in 22 states totaling 12.9 million square feet . we also had 8 unconsolidated outlet centers totaling 2.4 million square feet , including 4 outlet centers in canada . the table below details our acquisitions , new developments , expansions and dispositions of consolidated and unconsolidated outlet centers that significantly impacted our results of operations and liquidity from january 1 , 2016 to december 31 , 2018 : replace_table_token_16_th 36 leasing activity the following table provides information for our consolidated outlet centers related to leases for new stores that opened or renewals that started during the years ended december 31 , 2018 and 2017 , respectively : replace_table_token_17_th ( 1 ) excludes license agreements , seasonal tenants , and month-to-month leases . ( 2 ) net average straight-line rent is calculated by dividing the average tenant allowance costs per square foot by the average initial term and subtracting this calculated number from the average straight-line rent per year amount . the average annual straight-line rent disclosed in the table above includes both minimum base rent and common area maintenance rents and also includes all concessions , abatements and reimbursements of rent to tenants . the average tenant allowance disclosed in the table above includes landlord costs . story_separator_special_tag the following table sets forth the changes in various components of depreciation and amortization ( in thousands ) : replace_table_token_30_th depreciation and amortization decreased at our existing properties primarily due to due to tenant improvements and lease related intangibles recorded as part of the acquisition price of acquired properties , which are amortized over shorter lives , becoming fully depreciated during the reporting periods . interest expense and loss on early extinguishment of debt interest expense increased $ 4.2 million in the 2017 period compared to the 2016 period , primarily due to ( 1 ) the impact of converting throughout 2016 $ 525.0 million of debt with floating interest rates to higher fixed interest rates , ( 2 ) the 30-day libor , which impacts the interest rate associated with our floating rate debt , increasing relative to its level in the 2016 period and ( 3 ) the additional debt incurred related to the 2016 acquisitions of westgate and savannah . 43 in july 2017 , we completed an underwritten public offering of $ 300.0 million of 3.875 % senior notes due 2027 ( the `` 2027 notes '' ) . in august 2017 , we used the net proceeds from the sale of the 2027 notes , together with borrowings under our unsecured lines of credit , to redeem all of our 6.125 % senior notes due 2020 ( the `` 2020 notes '' ) ( approximately $ 300.0 million in aggregate principal amount outstanding ) . the 2020 notes were redeemed at par plus a make-whole premium of approximately $ 34.1 million . the loss on early extinguishment of debt includes the make-whole premium and the write off of approximately $ 1.5 million of unamortized debt discount and debt origination costs related to the 2020 notes . gain on sale of assets and interests in unconsolidated entities in may 2017 , we sold our westbrook outlet center for approximately $ 40.0 million , which resulted in a gain of $ 6.9 million . in september 2016 , we sold an outparcel at our outlet center in myrtle beach , south carolina located on highway 501 for approximately $ 2.9 million and recognized a gain of approximately $ 1.4 million . also , in the first quarter of 2016 , we sold our fort myers outlet center for approximately $ 25.8 million , which resulted in a gain of $ 4.9 million . gain on previously held interest in acquired joint venture on june 30 , 2016 , we completed the purchase of our venture partner 's interest in the westgate joint venture , which owned the outlet center in glendale , arizona , for a total cash price of approximately $ 40.9 million . the purchase was funded with borrowings under our unsecured lines of credit . prior to the transaction , we owned a 58 % interest in the westgate joint venture since its formation in 2012 and accounted for it under the equity method of accounting . the joint venture is now wholly-owned by us and is consolidated in our financial results as of june 30 , 2016. as a result of acquiring the remaining interest in the westgate joint venture , we recorded a gain of $ 49.3 million , which represented the difference between the carrying book value and the fair value of our previously held equity method investment in the joint venture , as a result of the significant appreciation in the property 's value since the completion of its original development and opening . in august 2016 , the savannah joint venture , which owned the outlet center in pooler , georgia distributed all outparcels along with $ 15.0 million in cash consideration to our joint venture partner in exchange for the partner 's ownership interest . we contributed the $ 15.0 million in cash consideration to the joint venture , which we funded with borrowings under our unsecured lines of credit . the joint venture is now wholly-owned by us and has been consolidated in our financial results since the acquisition date . as a result of acquiring the remaining interest in the savannah joint venture , we recorded a gain of $ 46.3 million , which represented the difference between the carrying book value and the fair value of our previously held equity method investment in the savannah joint venture , as a result of the significant appreciation in the property 's value since the completion of its original development and opening in april 2015. equity in earnings of unconsolidated joint ventures equity in earnings of unconsolidated joint ventures decreased approximately $ 8.9 million in the 2017 period compared to the 2016 period . the following table sets forth the changes in various components of equity in earnings of unconsolidated joint ventures ( in thousands ) : replace_table_token_31_th equity in earnings from existing properties includes our share of impairment charges totaling $ 9.0 million in the 2017 period related to the bromont and saint-sauveur outlet centers in canada , and totaling $ 2.9 million in the 2016 period related to the bromont outlet center . the increase in equity in earnings of unconsolidated joint ventures from new development is due to the incremental earnings from the columbus outlet center , which opened in june 2016. the decrease in equity in earnings from properties previously held in unconsolidated joint ventures in 2016 is related to the westgate and savannah joint ventures . we acquired our venture partners ' interest in each of these joint ventures in june 2016 and august 2016 , respectively , and have consolidated the results of operations of these centers since the respective acquisition date . 44 liquidity and capital resources of the company in this “ liquidity and capital resources of the company ” section , the term , the company , refers only to tanger factory outlet centers , inc. on an unconsolidated basis , excluding the operating partnership . the company 's business is operated primarily through the operating partnership .
| results of operations 2018 compared to 2017 net income net income decreased $ 26.3 million in 2018 compared to 2017 . the 2018 period included a $ 49.7 million impairment charge related to our jeffersonville outlet center and equity in earnings includes our share of impairment charges totaling $ 7.2 million related to the bromont and saint-sauveur outlet centers in canada . the 2017 period included a loss on the early extinguishment of debt of $ 35.6 million and equity in earnings includes our share of impairment charges totaling $ 9.0 million related to the bromont and saint-sauveur outlet centers in canada . in the tables below , information set forth for new developments and expansions represent our fort worth outlet center , which opened in october 2017 and our lancaster expansion , which opened in september 2017. properties disposed include our westbrook outlet center sold in may 2017. base rentals base rentals increased $ 4.0 million in the 2018 period compared to the 2017 period . the following table sets forth the changes in various components of base rentals ( in thousands ) : replace_table_token_18_th base rentals from existing properties decreased due the portfolio 's overall average occupancy decreasing , partially offset by increases in cash rental rates from existing leases that contain fixed periodic increases . the decrease in lease termination fees is due to fewer store closings in 2018 , other than through bankruptcy proceedings , prior to natural expiration of the lease . percentage rentals percentage rentals increased $ 187,000 in the 2018 period compared to the 2017 period . the following table sets forth the changes in various components of percentage rentals ( in thousands ) : replace_table_token_19_th percentage rentals represents revenues based on a percentage of tenants ' sales volume above their contractual breakpoints .
| 7,127 |
the leased space is being used by us for pedestrian and vehicle access to the atlantis , and we may use a portion of the parking spaces at the shopping center . the total cost of the improvements was $ 2.0 million of which $ 1.35 million was paid by the company . the cost of the driveway improvements is being depreciated over the initial 15-year lease term ; some components of the driveway are being depreciated over a shorter period of time . the company accounts for its rental expense using the straight-line method over the original lease term . rental increases based on the change in the cpi are contingent and accounted for story_separator_special_tag the following discussion is intended to assist in the understanding of our results of operations and our present financial condition . the consolidated financial statements and the accompanying notes contain additional detailed information that should be referred to when reviewing this material . statements in this discussion may be forward-looking . such forward-looking statements involve risks and uncertainties that could cause actual results to differ significantly from those expressed . see forward looking statements section preceding item 1 , business . overview of our business monarch casino & resort , inc. , through its direct and indirect wholly-owned subsidiaries , golden road motor inn , inc. ( golden road ) , monarch growth inc. ( monarch growth ) , monarch black hawk , inc. ( monarch black hawk ) , high desert sunshine , inc. ( high desert ) , golden north , inc. ( golden north ) and golden east , inc. ( golden east ) owns and operates the atlantis casino resort spa , a hotel/casino facility in reno , nevada ( the atlantis ) , the monarch casino black hawk in black hawk , colorado ( the monarch casino black hawk ) , and real estate proximate to the atlantis and monarch casino black hawk . monarch 's wholly owned subsidiary monarch interactive , inc. ( monarch interactive ) received approval from the nevada gaming commission on august 23 , 2012 , which approval was extended three times , each for an additional six-month period , for a license as an operator of interactive gaming . the company decided to allow the approval to lapse pending a change in market conditions that would support the company 's investment in this line of business . monarch interactive is not currently engaged in any operating activities . in nevada , legal interactive gaming is currently limited to intrastate poker . our operating assets are the atlantis and the monarch casino black hawk . our business strategy is to maximize revenues , operating income and cash flow primarily through our casino , food and beverage operations and at the atlantis , our hotel operations . the monarch casino black hawk does not have a hotel ; however , we are in the process of renovations that will include a hotel . see item 1 , business - the monarch casino black hawk. we focus on delivering exceptional service and value to our guests . our hands-on management style focuses on customer service and cost efficiencies . unless otherwise indicated , monarch , company , we , our and us refer to monarch casino & resort , inc. and its subsidiaries . 33 operating results summary our operating results may be affected by , among other things , competitive factors , gaming tax increases , the commencement of new gaming operations , construction at our facilities , general public sentiment regarding travel , overall economic conditions and governmental policies affecting the disposable income of our patrons and weather conditions affecting our properties , as well as those matters discussed in item 1a . risk factors above . the following significant factors and trends should be considered in analyzing our operating performance : atlantis : aggressive marketing programs by our competitors have posed challenges to us . for the year ended december 31 , 2013 , statistics released by the nevada gaming control board showed growth in northern nevada and in the reno/sparks gaming market . for the year ended december 31 , 2014 , compared to the same period ended december 31 , 2013 , the market was flat . we anticipate that the unstable macroeconomic climate nationally and in the northern nevada , combined with the aggressive marketing programs of our competitors , will continue to apply pressure on atlantis revenue . monarch black hawk : since the acquisition of monarch black hawk in april 2012 , our focus has been to maximize casino and food and beverage revenues . there is currently no hotel on the property . in september 2013 , we opened a new buffet , which was an important step in our ongoing process of redesigning and upgrading the existing monarch casino black hawk facility . in december 2013 , we began a project to remodel and upgrade the casino . to minimize disruption , we staged the work in three equal phases . the first phase of the remodel was completed and opened in august 2014. work on the second phase is currently underway and is expected to be complete in the first quarter of 2015. we estimate all phases of the redesign and upgrade work to be completed by the end of the third quarter 2015. the excavation and foundation work for the facility 's new parking structure has been completed and the new parking is anticipated to open in late 2015. monarch expects to begin construction of its new hotel tower and casino expansion in the second quarter of 2016. once completed , the monarch black hawk expansion will nearly double the casino space and will add a 23-story hotel tower with approximately 500 guest rooms and suites , an upscale spa and pool facility , three additional restaurants , additional bars , a new parking structure and associated support facilities . the planned nine story parking structure will increase total parking on site from approximately 500 spaces to approximately 1,500 spaces . story_separator_special_tag no such expenses were incurred in 2013. during 2013 , the company paid down the principal balance on its credit facility by $ 27.3 million , which decreased the outstanding balance of the credit facility to $ 53.8 million at december 31 , 2013 from $ 81.1 million at december 31 , 2012. interest expense decreased to $ 1.9 million in the year 2013 from $ 2.0 million in the year 2012 as a result of a lower loan balance combined with lower interest rates on our credit facility driven by our lower leverage ratio . see further discussion of our credit facility in the liquidity and capital resources section below . 37 capital spending and development we seek to continuously upgrade and maintain our facilities in order to present a fresh , high quality product to our guests . capital expenditures during the years ended december 31 , 2014 and 2013 were as follows ( in thousands ) : capital expenditures : replace_table_token_6_th during the twelve months ended december 31 , 2014 and 2013 , capital expenditures related primarily to the redesign and upgrade of the monarch casino black hawk property as well as acquisition of gaming equipment to upgrade and replace existing equipment in the monarch casino black hawk and the atlantis . in 2013 at monarch casino black hawk capital expenditures were made for the new buffet , remodeling of restrooms and temporary casino area . in december 2013 , we started a three-phase casino floor remodel and upgrade project . the first phase of the remodel was completed and opened in august 2014. master planned expansion of the monarch casino black hawk the company has completed a master plan to expand and convert the monarch casino black hawk into a full-scale casino resort . the project will feature an approximately 500-room hotel tower and will nearly double the size of the existing casino while adding three new restaurants and a new parking structure that will increase on-site parking from approximately 500 spaces to 1,500 spaces . in october 2012 , the company began an extensive renovation and upgrade of monarch casino black hawk . to-date , the company has upgraded the property 's food and beverage operations ( including an all-new buffet ) and completed the first phase of a three-phase renovation and upgrade of the existing casino floor ( including a new front entrance and cabaret lounge ) . monarch expects to complete phase two of the renovation next month and phase three in the third quarter of 2015. the company 's plans also call for the exterior of the existing facilities to be refinished to match the master planned expansion . the remaining cost of the upgrade and renovation is expected to be approximately $ 17- $ 19 million , all of which is expected to be funded from operating cash flow . the excavation and foundation work for the facility 's new parking structure has been completed . the 9-story parking structure will increase on-site parking from approximately 500 spaces to approximately 1,500 spaces and is anticipated to open in late 2015. upon completion of the new parking structure , the existing parking structure will be razed to make room for the hotel tower . the remaining cost of the parking structure-related work is expected to be approximately $ 33- $ 36 million , which the company expects to fund primarily from operating cash flow and , to a lesser extent , from its credit facility . monarch expects to begin construction of the new hotel tower and casino expansion in the second quarter of 2016. the new 23-story tower will nearly double the existing casino space and will include approximately 500 hotel rooms , an upscale spa and pool facility , three additional restaurants and additional bars . tower floors will be opened as they are finished beginning with the casino expansion and additional restaurants , with the expected opening of the entire tower in late 2017 at a total cost of approximately $ 229- $ 234 million . the cost is expected to be financed through a combination of operating cash flow and an expansion or replacement of the company 's credit facility . the company 's current credit facility will mature in november 2016 , and before that time , the company expects to negotiate a new or amended credit facility with sufficient borrowing capacity to complete the expansion . 38 liquidity and capital resources for the year ended december 31 , 2014 , net cash provided by operating activities totaled $ 31.2 million , a decrease of approximately $ 4.9 million , or 13.6 % , compared to the same period of the prior year . this decrease was primarily the result of a decrease in net income of $ 3.8 million combined with changes in ordinary working capital accounts , partially offset by an increase in depreciation expense . net cash used in investing activities totaled $ 19.8 million and $ 12.4 million in the years ended december 31 , 2014 and december 31 , 2013 , respectively . net cash used in investing activities during 2014 and 2013 consisted primarily of net cash used for redesigning and upgrading the monarch casino black hawk property and for acquisition of gaming equipment and general upgrades at the atlantis property . net cash used in financing activities during the year ended december 31 , 2014 of $ 9.1 million represented $ 7.5 million of payments made on our credit facility ( see below ) and $ 0.8 million in proceeds from the exercise of stock options net of $ 3.5 million in income taxes paid to satisfy minimum tax withholdings . net cash used in financing activities during the year 2013 of $ 23.4 million represented $ 27.3 million of payments made on our credit facility , partially offset by $ 3.4 million in proceeds from the exercise of stock options . as of december 31 , 2014 , our credit facility ( credit facility ) had total availability of $ 89.5 million of which $ 46.3 million was outstanding .
| results of operations comparison of operating results for the twelve-month periods ended december 31 , 2014 and 2013 for the year ended december 31 , 2014 , our net income totaled $ 14.2 million , or $ 0.83 per diluted share , compared to net income of $ 18.0 million , or $ 1.06 per diluted share for the same period of 2013 , reflecting a 21.1 % decline in net income and a 21.7 % decline in diluted earnings per share . net revenues totaled $ 187.8 million in the current year , reflecting a $ 1.0 million , or 0.5 % decline in net revenues compared to the same period in 2013. income from operations for the year ended december 31 , 2014 totaled $ 22.2 million compared to $ 30.5 million for the same period in 2013 , representing a 27.2 % decline in income from operations . 34 casino revenues decreased 3.2 % in the year ended december 31 , 2014 compared to the same period of 2013 driven by lower casino revenues at both the monarch casino black hawk and the atlantis . the decrease in monarch casino black hawk revenues is primarily due to disruption from the ongoing upgrade and remodel construction work combined with the effect of the substitution of cash voucher promotions for free play credits at the monarch casino black hawk . to accommodate construction at black hawk , we have had to reduce the number of slot machines on the gaming floor by approximately 13 % . during a portion of the prior year we offered certain patrons cash voucher promotions which were recognized as promotional allowance while free play credits are recognized as a reduction of casino revenues . in august 2013 , the company discontinued the issuance of cash vouchers in favor of free play credits which were legalized in colorado at that time .
| 7,128 |
if business with this key account were lost , it could have a material adverse effect on our business , financial condition and results of operations . the majority of our international sales in each of the last three years were sales to domestic distributors that were resold to end users outside the united states . our sales to foreign customers and distributors were less than 5 % of our total sales in 2014 , 2013 and 2012. we have no material assets outside the united states . our total international sales , including sales to domestic distributors for resale outside the united states , aggregated 13 % , 12 % and 11 % , of overall sales in 2014 , 2013 and 2012 , respectively . 6. distribution agreement as of october 2 , 2014 , we entered into the distribution agreement with baxter , pursuant to which baxter became the company 's exclusive agent for sales , marketing and distribution activities for the company 's hemodialysis concentrate and ancillary products in the united states and various foreign countries for an initial term of 10 years . the distribution agreement does not include any of the company 's drug products . the company will retain sales , marketing and distribution rights for its hemodialysis concentrate products in specified foreign countries in which the company has an established commercial presence . during the term of the distribution agreement , baxter has agreed not to manufacture or sell any competitive concentrate products in the united states hemodialysis market , other than specified products . pursuant to the distribution agreement , baxter paid the company $ 20 million in cash in early october ( the `` upfront fee `` ) . the upfront fee has been deferred and will be recognized as revenue based on the proportion of product shipments to baxter in each period to total expected sales volume over the term of the distribution agreement . the company recognized revenue associated with the upfront fee totaling $ 507,480 for the year ended december 31 , 2014. under the distribution agreement , baxter will purchase products from the company at established gross margin-based prices per unit , adjusted each year during the term . the company will continue to manage customer service , transportation and certain other functions for its current customers on baxter 's behalf through at least december 31 , 2017 , in exchange for which baxter will pay the company an amount equal to the company 's related costs to provide such functions plus a slight mark-up . the distribution agreement also requires baxter to meet minimum annual gallon-equivalent purchase levels , subject to a cure period and certain other relief , in order to maintain its exclusive distribution rights . the minimum purchase levels increase each year over the term of the distribution agreement . orders in any contract year that exceed the minimum will be carried forward and applied to future years ' minimum requirements . the distribution agreement also contains provisions governing the operating relationship between the parties , the company 's obligations to maintain specified manufacturing capacity and quality levels , remedies , as well as representations , warranties and indemnification obligations of the parties . f-16 rockwell medical , inc. and subsidiary notes to consolidated financial statements ( continued ) 6. distribution agreement ( continued ) either party may terminate the distribution agreement upon the insolvency or material breach of the other party or in the event of a force majeure . in addition , baxter may also terminate the distribution agreement at any time upon 270 days ' prior written notice to the company or if ( 1 ) prices increase beyond certain thresholds and notice is provided within 45 days after the true up payment is due for the year in which the price threshold is exceeded , ( 2 ) a change of control of the company occurs and 270 days ' notice is provided , or ( 3 ) upon written notice that baxter has been enjoined by a court of competent jurisdiction from selling in the united states any product covered by the distribution agreement due to a claim of intellectual property infringement or misappropriation relating to such product . if baxter terminates the distribution agreement under the discretionary termination or the price increase provisions , it would be subject to a limited non-compete obligation in the united states with respect to certain products for a period of two years . if a `` refund trigger event `` occurs , the company would be obligated to repay a portion of the upfront fee and facility fee ( described below ) as follows : 50 % if the event occurs prior to december 31 , 2016 , 33 % if the event occurs in 2017 or 2018 , and story_separator_special_tag overview and recent developments rockwell is a fully-integrated pharmaceutical company targeting end-stage renal disease and chronic kidney disease with innovative products and services for the treatment of iron deficiency , secondary hyperparathyroidism and hemodialysis . we are also an established manufacturer and leader in delivering high-quality hemodialysis concentrates/dialysates to dialysis providers and distributors in the united states and abroad . we are currently developing unique , proprietary renal drug therapies . these novel renal drug therapies support disease management initiatives to improve the quality of life and care of dialysis patients and are designed to deliver safe and effective therapy , while decreasing drug administration costs and improving patient convenience and outcome . our strategy is to develop high potential drugs while expanding our dialysis products business . in january 2015 , we received fda approval to market triferic our lead branded drug . story_separator_special_tag we review outstanding trade account receivable balances and based on our assessment of expected collections , we estimate the portion , if any , of the balance that may not be collected as well as a general valuation allowance for other accounts receivable based primarily on historical experience . all accounts or portions thereof deemed to be uncollectible are written off to the allowance for doubtful accounts . if we underestimate the allowance , we would incur a current period expense which could have a material adverse effect on earnings . impairments of long-lived assets we account for impairment of long-lived assets , which include property and equipment , amortizable and non-amortizable intangible assets and goodwill , in accordance with authoritative accounting pronouncements . an impairment review is performed annually or whenever a change in 36 condition occurs which indicates that the carrying amounts of assets may not be recoverable . such changes may include changes in our business strategies and plans , changes to our customer contracts , changes to our product lines and changes in our operating practices . we use a variety of factors to assess the realizable value of long-lived assets depending on their nature and use . goodwill is not amortized ; however , it must be tested for impairment at least annually . the goodwill impairment analysis is based on the fair market value of our common shares . amortization continues to be recorded for other intangible assets with definite lives over the estimated useful lives . intangible assets subject to amortization are reviewed for potential impairment whenever events or circumstances indicate that carrying amounts may not be recoverable based on future cash flows . if we determine that goodwill has been impaired , the change in value will be accounted for as a current period expense and could have a material adverse effect on earnings . accounting for income taxes we estimate our income tax provision to recognize our tax expense and our deferred tax liabilities and assets for future tax consequences of events that have been recognized in our financial statements using current enacted tax laws . deferred tax assets must be assessed based upon the likelihood of recoverability from future taxable income and to the extent that recovery is not likely , a valuation allowance is established . the allowance is regularly reviewed and updated for changes in circumstances that would cause a change in judgment about whether the related deferred tax asset may be realized . these calculations and assessments involve complex estimates and judgments because the ultimate tax outcome can be uncertain and future events unpredictable . if we determine that the deferred tax asset will be realized in the future , it may result in a material beneficial effect on earnings . new accounting pronouncements in may 2014 , the financial accounting standards board issued accounting standards update no . 2014-09 , revenue from contracts with customers ( topic 606 ) , which will supersede the current revenue recognition requirements in topic 605 , revenue recognition . the asu is based on the principle that revenue is recognized to depict the transfer of goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services . the asu also requires additional disclosure about the nature , amount , timing and uncertainty of revenue and cash flows arising from customer contracts , including significant judgments and changes in judgments and assets recognized from costs incurred to obtain or fulfill a contract . the new guidance will be effective for the company 's year ending december 31 , 2017 , including interim periods within that reporting period . the asu permits the new revenue recognition guidance to be applied using one of two retrospective application methods . the company has not yet determined which application method it will use or the potential effects of the new standard on the financial statements , if any . liquidity and capital resources we have adequate capital resources and substantial liquidity to pursue our business strategy . our strategy is centered on developing and licensing high potential drug candidates including triferic , for which we received fda approval to market in late january 2015. we intend to commercialize triferic using rockwell 's sales and marketing infrastructure with minor additional resources added to support commercialization . as of december 31 , 2014 , we had current assets of $ 94.7 million and net working capital of $ 84.9 million . we have over $ 85.7 million in cash and investments with over $ 65 million of that total in cash . our cash resources include cash generated from our business operations , $ 55 million we raised from an equity offering , $ 20 million from baxter related to the distribution agreement , and 37 $ 15 million from a private placement of common shares to baxter . we also received $ 8.4 million from the exercise of expiring warrants during 2014. we expect cash flow from operations to be positive following the launch of our drug products in 2015. cash flow from operations improved to $ 4.3 million in 2014 from ( $ 50.7 million ) in 2013 due largely to the decrease in research and development expense and the $ 20 million upfront payment from baxter . we have no long term debt as of december 31 , 2014 and do not expect to incur interest expense in 2015 , the sum of which aggregated $ 4.2 million of interest expense in 2014. we intend to expand our plant operations during 2015. under the terms of our distribution agreement , capital spending related to such an expansion will be funded through payments by baxter of $ 5 million upon commencement of construction and up to $ 5 million following completion . other capital expenditures on our current facilities are not expected to materially exceed depreciation expense . we
| results of operations for the year ended december 31 , 2014 compared to the year ended december 31 , 2013 sales in 2014 , our sales were $ 54.2 million compared to $ 52.4 million in 2013 an increase of $ 1.8 million or 3.5 % . domestic sales increased $ 1.1 million or 2.5 % and international sales increased $ 0.7 million or 10.4 % . the growth in and conversion to our higher margin citrapure dry acid concentrate product line contributed to improving gross profit margin while moderating the sales increase . citrapure products represented 63.5 % of gallons sold in 2014 compared to 32.5 % in 2013. international sales and domestic sales shipped internationally increased due to increased demand in international markets for dialysis products . gross profit our gross profit was $ 8.5 million in 2014 , an increase of $ 1.9 million or 28.3 % compared to 2013. gross profit margins were 15.8 % in 2014 compared to 12.7 % in 2013. the increase in gross profit was primarily due to the favorable impact of higher sales of our higher margin citrapure product lines , strong sales of other higher margin products , a more favorable customer profile and our efforts to reduce operating and distribution costs . we also realized approximately $ 0.3 million in additional gross profit as a result of the execution of the distribution agreement with baxter in the fourth quarter of 2014. selling , general and administrative expenses selling , general and administrative expenses were $ 18.3 million in 2014 compared to $ 14.3 million in 2013. the increase of $ 4.0 million was primarily due to an increase of $ 2.4 million in non-cash equity compensation expenses , increased cash compensation of $ 0.6 million and increased marketing , legal and regulatory expenses related to triferic of $ 0.6 million .
| 7,129 |
minimum rental commitments for non-cancelable leases in effect at december 31 , 2015 are as follows : replace_table_token_44_th other than the above commitments to recipharm and for operating leases story_separator_special_tag management 's discussion and analysis ( in thousands , except per share data ) you should read the discussion and analysis of our financial condition and results of operations set forth in this item 7 together with our consolidated financial statements and the related notes appearing elsewhere in this annual report on form 10-k. some of the information contained in this discussion and analysis or set forth elsewhere in this annual report on form 10-k , including information with respect to our plans and strategy for our business and related financing , includes forward-looking statements that involve risks and uncertainties , and reference is made to the “ cautionary disclosure regarding forward-looking statements ” set forth immediately following the table of content of this annual report on form 10-k for further information on the forward looking statements herein . in addition , you should read the “ risk factors ” section of this annual report on form 10-k for a discussion of important factors that could cause actual results to differ materially from the results described in or implied by the forward-looking statements contained in the following discussion and analysis and elsewhere in this annual report on form 10-k. overview we are a specialty pharmaceutical company utilizing core competencies in drug delivery and formulation to develop safer and more efficacious pharmaceutical products to address unmet medical needs and or reduce overall healthcare costs . flamel has a balanced business model consisting of a successful previously unapproved marketed drugs ( “ umds ” ) business with two marketed products in the usa , bloxiverz and vazculep , and a branded development business , focusing on the development of products utilizing flamel 's proprietary drug delivery platforms . the branded products are based on proprietary drug delivery platforms and target high-value solid oral and alternative dosage forms using 505 ( b ) ( 2 ) and biosimilar pathways where the company can develop strong intellectual property positions and deliver meaningful patient benefits . flamel 's business model allows the company to select , develop , seek approval for , and commercialize niche branded and generic products , initially targeted for the u.s. market . the company is able to self-fund the development of most product development opportunities . strategy the company 's business strategy is designed to drive overall sales and earnings growth while maintaining a return on invested capital at an appropriate premium above the company 's cost of capital . our key areas of focus address the most significant opportunities and challenges facing the company , including : · unapproved marketed drug development : the company now derives cash flow and profitability from the sales of two of its umd products . during 2015 the company generated $ 172,488 of sales from the umd products compared to $ 11,993 in 2014. the first umd product , bloxiverz , which had sales of $ 150,283 in 2015 was approved by the fda on may 31 , 2013 , and is currently being marketed in the u.s. the second umd product , vazculep , which had sales of $ 20,251 in 2015 , was approved by the fda on june 27 , 2014 and launched in october , 2014 in the usa . both products are commercialized in the usa by flamel 's subsidiary éclat . these sales were derived from the acquisition of éclat , which has focused on pursuing fda approvals through the 505 ( b ) ( 2 ) regulatory pathway . through our acquisition of éclat we obtained marketing and licensing knowledge of the commercial and regulatory process in the u.s. and eu . we believe this knowledge has enhanced our ability to identify product candidates for development , leverage new opportunities for the application of our drug delivery platforms , and license and market products in the u.s and eu . the revenues from these umd products are now generating cash flow which we can use to fund our second strategy , the development and commercialization of our drug delivery products . · development and commercialization of the company 's drug delivery pipeline products : in addition to the umd strategy , the company is continuing to advance the commercialization of its innovative drug delivery platforms . we have now enhanced our ability to identify new product candidates and to pursue commercial opportunities associated with our drug delivery platforms . the company 's drug delivery platforms allow the creation of competitive and differentiated drug product profiles ( e.g. , with improved pharmacokinetics , efficacy and or safety ) . flamel owns and develops drug delivery platforms that address key formulation challenges , leading to the development of differentiated drug products for administration in various forms ( e.g. , capsules , tablets , sachets or liquid suspensions for oral use ; or injectables for subcutaneous administration ) and can be applied to a broad range of drugs ( novel , already-marketed , or off-patent ) . these product development opportunities allow us to protect our products through patent protection and product differentiation . as a result of developing its own drug delivery platforms the company 's business is now less dependent on the development activities performed by partners , and relies more on the development of its own , self-funded , products . our proprietary drug delivery platforms include : o micropump ® is a microparticulate system that allows the development and marketing of modified and or controlled release of solid , oral dosage formulations of drugs ( micropump®-carvedilol and micropump®-aspirin formulations have been approved in the u.s. and in the e.u. , respectively . o liquitime ® allows development of modified/controlled release oral products in a liquid suspension formulation particularly suited to children or for patients having issues swallowing tablets or capsules . - 39 - o trigger lock allows development of abuse-resistant modified/controlled release formulations of narcotic/opioid analgesics and other drugs susceptible to abuse . story_separator_special_tag the estimate for chargebacks is determined when product is shipped from the wholesalers to their customers . the return allowance , when estimable , is based on an analysis of the historical returns of the product or similar products . for generic products and branded products sold in mature and stable markets where changes in selling price are rare , the company recognizes revenues upon shipment . for products where market conditions remain volatile and selling price is subject to changes , which is the company 's situation in 2015 , 2014 and 2013 , the company delays revenue recognition until the wholesaler sells the product to its customers . for new product launches the company recognizes revenue once sufficient data is available to determine product acceptance in the marketplace such that product returns may be estimated based on historical data and there is evidence of reorders and consideration is made of wholesaler inventory levels . net product sales of wholesalers to their customers are determined using sales data from an independent , renowned wholesaler inventory tracking service . net sales of wholesalers to their customers are calculated by deducting estimates for returns for wholesaler customers , chargebacks , payment discounts and other sales or discounts offered from the applicable gross sales value . estimates for product returns are adjusted periodically based upon historical rates of returns , inventory levels in the distribution channel and other related factors . license and research revenue where agreements have more than one deliverable , a determination is made as to whether the license and r & d elements should be recognized separately or combined into a single unit of account in accordance with asu 2009-13 , revenue with multiple deliverables . the company uses a multiple attribution model , referred to as the milestone-based method : · as milestones relate to discrete development steps ( i.e. , can be used by the partners to decide whether to continue the development under the agreement ) , the company views that milestone events have substance and represent the achievement of defined goals worthy of the payments . therefore , milestone payments based on performance are recognized when the performance criteria are met and there are no further performance obligations . · non-refundable technology access fees received from collaboration agreements that require the company 's continuing involvement in the form of development efforts are recognized as revenue ratably over the development period . · r & d work is compensated at a non-refundable hourly rate for a projected number of hours . revenue on such agreements is recognized at the hourly rate for the number of hours worked as the r & d work is performed . costs incurred under these contracts are considered costs in the period incurred . payments received in advance of performance are recorded as deferred revenue and recognized in revenue as services are rendered . when flamel receives revenue under signed feasibility study agreements , revenue is then recognized over the term of the agreement as services are performed . r & d . research and development expenses consist primarily of costs related to clinical studies and outside services , personnel expenses , and other research and development costs . clinical study and outside services costs relate primarily to services performed by clinical research organizations and related clinical or development manufacturing costs , materials and supplies , filing fees , regulatory support , and other third party fees . personnel expenses relate primarily to salaries , benefits and stock-based compensation . other research and development expenses primarily include overhead allocations consisting of various support and facilities-related costs . r & d expenditures are charged to operations as incurred . the company recognizes r & d tax credits received from the french government for spending on innovative r & d as an offset of r & d expenses . the company does not track fully-burdened research and development expenses on a project-by-project basis . we manage our r & d expense by identifying the research and development activities we anticipate will be performed during a given period and then prioritizing efforts based on scientific data , probability of successful development , market potential , available human and capital resources and other similar considerations . we continually review our pipeline and the development status of product candidates and , as necessary , reallocate resources among the research and development portfolio that we believe will best support the future growth of our business . long-lived assets . long-lived assets include fixed assets and intangible assets . intangible assets consist primarily of purchased licenses and intangible assets corresponding to acquired , in progress r & d recognized as part of the éclat acquisition purchase price allocation . acquired ipr & d has an indefinite life and is not amortized until completion and development of the project , at which time the ipr & d becomes an amortizable asset . amortization of acquired ipr & d is computed using the straight-line method over estimated useful life of the assets . - 41 - long-lived assets are reviewed for impairment whenever conditions indicate that the carrying value of the assets may not be fully recoverable . such impairment tests are based on a comparison of the pretax undiscounted cash flows expected to be generated by the asset to the recorded value of the asset . if impairment is indicated , the asset value is written down to its market value if readily determinable or its estimated fair value based on discounted cash flows . any significant unanticipated changes in business or market conditions that vary from current expectations could have an impact on the fair value of these assets and any potential associated impairment . there were no indications of impairment as of december 31 , 2015 or 2014. contingent consideration . the acquisition-related contingent consideration payable arising from the acquisition of éclat pharmaceuticals are accounted at fair-value ( see note 8 : long-term contingent consideration payable ) .
| results of operations the following is a summary of our financial results ( in thousands , except per share amounts ) : replace_table_token_6_th revenues the revenues for each of the company 's significant products were as follows : replace_table_token_7_th 2015 compared to 2014 product sales and services revenues were $ 172,488 for the year ended december 31 , 2015 , compared to $ 11,993 for the prior year . this represents a $ 160,495 increase in 2015 from 2014. the primary driver of growth was higher sales of bloxiverz ® of $ 140,072 resulting from volume increases due to market share gains and , to a lesser degree , higher net selling prices . bloxiverz ® was launched in 2014. additional sales volume resulting from the 2015 launch of vazculep ® also contributed to the sales increase and generated $ 20,151 of higher sales when compared to the same period last year . license and research revenues were $ 721 for the year ended december 31 , 2015 , compared to $ 2,782 for the prior year . this represents a $ 2,061 decrease in 2015 from 2014 , largely driven by the termination of remaining development partnership contracts as the company continues to pursue its strategy of depending less on the development activities performed by partners , and more on the development of its own , self-funded , products . - 43 - 2014 compared to 2013 product sales and services revenues were $ 11,993 for the year ended december 31 , 2014 , compared to $ 1,153 for the prior year . this represents a $ 10,840 increase in 2014 from 2013. the primary driver of growth was additional sales volume of $ 10,211 resulting from the 2014 launch of bloxiverz ® .
| 7,130 |
our actual results and the timing of events could differ materially from those anticipated in these forward looking statements as a result of a variety of factors , including those discussed in “ risk factors ” and elsewhere in this annual report . see the discussion under “ forward looking statements ” beginning on page 3 of this annual report . overview we are engaged in the design , manufacture , marketing and sale of wearable display devices that are worn like eyeglasses and feature built-in video screens that enable the user to view video and digital content , such as movies , computer data , the internet or video games . our wearable display products , known commercially as video eyewear ( also referred to as head mounted displays or hmds ) , smart glasses , wearable displays , video glasses , personal viewers , near-eye virtual displays , and near-eye displays ( neds ) contain micro video displays that offer users a portable high-quality viewing experience . our video eyewear products provide virtual large high-resolution screens , fit in a user 's pocket or purse and can be viewed practically anywhere , anytime . they can also be used for virtual and augmented reality applications , in which the wearer is either immersed in a computer generated world or has their real world view augmented with computer generated information or graphics . in the 4th quarter of 2014 , we started shipping smart glasses , a new category of video eyewear that has much of the capabilities of a smartphone including wireless internet access but that is worn like glasses . we produce both monocular and binocular video eyewear devices . video eyewear are designed to work with mobile electronic devices , such as cell phones , laptop computers , tablets , portable media players and gaming systems . our video eyewear products feature high performance miniature display modules , low power electronics and related optical systems . we produce both monocular and binocular video eyewear devices that we believe are excellent solutions for many mobile computer or video viewing requirements . with respect to our video eyewear products , we focus on the consumer markets for gaming and mobile video while our virtual and augmented reality products are also sold in the consumer , industrial , commercial , academic and medical markets . the consumer electronics and mobile phone accessory markets in which we compete has been subject to rapid technological change including the rapid adoption of tablets and most recently larger screen sizes and display resolutions along with declining prices on mobile phones , and as a result we must continue to improve our products ' performance and lower our costs . today , we believe our intellectual property portfolio gives us a leadership position in microdisplay electronics , waveguides , ergonomics , packaging , motion tracking and optical systems . 36 critical accounting policies and significant developments and estimates the discussion and analysis of our financial condition and results of operations are based on our consolidated financial statements and related notes appearing elsewhere in this annual report . the preparation of these statements in conformity with generally accepted accounting principles requires the appropriate application of certain accounting policies , many of which require us to make estimates and assumptions about future events and their impact on amounts reported in our consolidated financial statements , including the statement of operations , balance sheet , cash flow and related notes . we continually evaluate our estimates used in the preparation of our consolidated financial statements , including those related to revenue recognition , bad debts , inventories , warranty reserves , product warranty , carrying value of long-lived assets , derivatives , valuation of stock compensation awards , and income taxes . 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 carrying values of assets and liabilities that are not apparent from other sources . since future events and their impact can not be determined with certainty , the actual results will inevitably differ from our estimates . such differences could be material to the consolidated financial statements . we believe that our application of accounting policies , and the estimates inherently required therein , are reasonable . these accounting policies and estimates are periodically reevaluated , and adjustments are made when facts and circumstances dictate a change . historically , we have found our application of accounting policies to be appropriate , and actual results have not differed materially from those determined using necessary estimates . our accounting policies are more fully described in the notes to our consolidated financial statements included in this annual report on form 10-k. the critical accounting policies , judgments and estimates that we believe have the most significant effect on our financial statements are : · valuation of inventories ; · carrying value of long-lived assets ; · software development costs · revenue recognition ; · product warranty ; · fair value measurement of financial instruments and embedded derivatives ; · stock-based compensation ; and · income taxes . valuation of inventories inventory is stated at the lower of cost or market , with cost determined on a weighted average first-in , first-out method . inventory includes purchased parts and components , work in process and finished goods . provisions for excess , obsolete or slow moving inventory are recorded after periodic evaluation of historical sales , current economic trends , forecasted sales , estimated product lifecycles and estimated inventory levels . purchasing practices , electronic component obsolescence , accuracy of sales and production forecasts , introduction of new products , product lifecycles , product support and foreign regulations governing hazardous materials are the factors that contribute to inventory valuation risks . story_separator_special_tag amendments to asc 605-25 , which became effective january 1 , 2011 , establish a hierarchy to determine the stand-alone selling price as follows : · vendor specific objective evidence of the fair value ( vsoe ) , · third party evidence ( tpe ) · best estimate of the selling price ( esp ) sales which constitute a mea are accounted for by determining if the elements can be accounted for as separate accounting units , and if so , by applying values to those units , per the hierarchy above . if vsoe is not available , management estimates the fair selling price using historical pricing for similar items , in conjunction with current pricing and discount policies . 38 revenue from licensed software is recognized upon shipment and in accordance with industry-specific software recognition accounting guidance . software updates that will be provided free of charge are evaluated on a case-by-case basis to determine whether they meet the definition of an upgrade and create a multiple element arrangement . fees charged to customers for post-contract technical support are recognized ratably over the term of the contract . costs related to maintenance obligations are expensed as incurred . product warranty warranty obligations are generally incurred in connection with the sale of our products . the warranty period for these products is generally one year except in european countries where it is two years . warranty costs are accrued , to the extent that they are not recoverable from third party manufacturers , for the estimated cost to repair or replace products for the balance of the warranty periods . we provide for the costs of expected future warranty claims at the time of product shipment or over-builds to cover replacements . the adequacy of the provision is assessed at each quarter end and is based on historical experience of warranty claims and costs . the costs incurred to provide for these warranty obligations are estimated and recorded as an accrued liability at the time of sale . future warranty costs are estimated based on historical performance rates and related costs to repair given products . the accounting estimate related to product warranty is considered a “ critical accounting estimate ” because judgment is exercised in determining future estimated warranty costs . should actual performance rates or repair costs differ from estimates , revision to the estimated warranty liability would be required . derivatives and fair value measurements fasb asc topic 820 , “ fair value measurements and disclosures ” ( asc 820 ) defines fair value , establishes a framework for measuring fair value in generally accepted accounting principles , and expands disclosures about fair value measurements . asc 820 clarifies that fair value is an exit price , representing the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants . asc 820 permits an entity to measure certain financial assets and financial liabilities at fair value with changes in fair value recognized in earnings each period . in accordance with asc 815-10-25 , we measured the derivative liability using a lattice pricing model at their issuance date and subsequently they are remeasured . accordingly , at the end of each quarterly reporting date the derivative fair market value is remeasured and adjusted to current market value . derivatives that have more than one year remaining in their life are shown as long term derivative liabilities . significant unobservable inputs are used in the fair value measurement of the company 's derivative liability . the primary input factors driving the economic or fair value of the derivatives warrants and convertible notes are the stock price of the company 's shares ; the price volatility of the shares , reset events , and exercise behavior . an important valuation input factor used in determining fair value was the expected volatility of observed share prices and the probability of projected resets in warrant exercise and note conversion prices from financing before each security 's maturity . for exercise behavior the company assumed that without a target price of 2 times the projected reset price or higher that the holders of the warrants and convertible notes would hold to maturity . in determining the fair value of the derivatives it was assumed that the company 's business would be conducted as a going concern and that holding to maturity was reasonable . further the january 2 , 2015 series a preferred financing reduced the expected probably to near zero for price resets from financing events . asc 820 establishes a fair value hierarchy which prioritizes the inputs to valuation techniques used to measure fair value . level 1 inputs are quoted prices in active markets for identical assets or liabilities . level 2 inputs are inputs other than quoted prices included in level 1 that are directly or indirectly observable for the asset or liability . such inputs include quoted prices in active markets for similar assets and liabilities , quoted prices for identical or similar assets or liabilities in markets that are not active , inputs other than quoted prices that are observable for the asset or liability , or inputs derived principally from or corroborated by observable market data by correlation or other means . level 3 inputs are unobservable inputs for the asset or liability . such inputs are used to measure fair value when observable inputs are not available . 39 stock-based compensation our board of directors approves grants of stock options to employees to purchase our common stock . a stock compensation expense is recorded based upon the estimated fair value of the stock option at the date of grant . the accounting estimate related to stock-based compensation is considered a “ critical accounting estimate ” because estimates are made in calculating compensation expense including expected option lives , forfeiture rates and expected volatility .
| general and administrative . general and administrative costs include professional fees , investor relations ( ir ) costs including shares and warrants issued for ir services , salaries and related stock compensation , travel costs , office and rental costs . investor relations costs totaled $ 513,700 for the year ended december 31 , 2014 , an increase of $ 259,092 over the 2013 costs of $ 254,608 for the same period . the company increased its level of ir activities with its consultants and attended more investor conferences . travel costs totaled $ 166,706 for the year ended december 31 , 2014 , an increase of $ 43,886 over the same period 's spending in 2013. these costs increased due to expanded international travel to asia and within the us to investor conferences . consulting costs totaled $ 57,374 for the year ended december 31 , 2014 , an increase of $ 45,520 over the same period 's spending in 2013. computer and it related costs totaled $ 77,651 for the year ended december 31 , 2014 , an increase of $ 32,629 over the same period 's spending in 2013. a large portion of this increase was the result of making the it function a full-time position in 2014 whereas in 2013 it was part-time function of a given staff member . and finally salaries , external director fees and stock compensation expenses increased to $ 978,709 for the year ended december 31 , 2014 as compared to $ 919,796 for the same period in 2013 , an increase of $ 58,913. for the year ending december 31 , 2014 , total external director fees were $ 31,600 versus $ -0- for the 2013 year . depreciation and amortization . the reduction in depreciation and amortization expense is due to assets that have become fully depreciated and lower capital expenditures over the last 2 fiscal years . other income ( expense ) .
| 7,131 |
on march 20 , 2013 , the company granted options to purchase 37,000 shares to certain employees under the 2011 equity incentive plan . these options vest in equal six monthly installments over three years from the date of grant , and expire three years after the vesting dates . the exercise prices are $ 2.35 for options vesting in the first year , $ 3.35 for options vesting in the second year , and $ 4.35 for options vesting in the third year . f-18 item 9. changes in and disagreements with accountants on accounting and financial disclosure . on november 29 , 2011 , sadler , gibb & associates , llc ( sg & a ) was engaged as the registered independent public accountant for the company and madsen & associates , cpa 's inc. ( m & a ) was dismissed as the registered independent public accountant for the company . the decisions to appoint sg & a and dismiss m & a were approved by the board of directors of the company on november 23 , 2011. other than the disclosure of uncertainty regarding the ability for us to continue as a going concern which was included in our accountant 's report on the financial statements for the years ended august 31 , 2011 and 2010 , m & a 's reports on the financial statements of the company for the years ended august 31 , 2011 and 2010 did not contain an adverse opinion or a disclaimer of opinion , nor were they qualified or modified as to uncertainty , audit scope , or accounting principles . for the two most recent fiscal years and any subsequent interim period through m & a 's termination on november 29 , 2011 , m & a disclosed the uncertainty regarding the ability of the company to continue as a going concern in its accountant 's report on the financial statements . in connection with the audit and review of the financial statements of the company through november 29 , 2011 , there were no disagreements on any matter of accounting principles or practices , financial statement disclosures , or auditing scope or procedures , which disagreements if not resolved to their satisfaction would have caused them to make reference in connection with m & a 's opinion to the subject matter of the disagreement . in connection with the audited financial statements of the company for the years ended august 31 , 2011 and 2010 and interim unaudited financial statements through november 29 , 2011 , there have story_separator_special_tag this annual report on form 10-k contains forward-looking statements . these forward-looking statements are not historical facts but rather are based on current expectations , estimates and projections . we may use words such as anticipate , expect , intend , plan , believe , foresee , estimate and variations of these words and similar expressions to identify forward-looking statements . these statements are not guarantees of future performance and are subject to certain risks , uncertainties and other factors , some of which are beyond our control , are difficult to predict and could cause actual results to differ materially from those expressed or forecasted . you should read this report completely and with the understanding that actual future results may be materially different from what we expect . the forward-looking statements included in this report are made as of the date of this report and should be evaluated with consideration of any changes occurring after the date of this report . we will not update forward-looking statements even though our situation may change in the future and we assume no obligation to update any forward-looking statements , whether as a result of new information , future events or otherwise . 23 liquidity and capital resources as of december 31 , 2012 , the company had cash of $ 376,421 and other current assets of $ 67,688 , excluding non-cash prepaid expenses of $ 250,833. the company had current liabilities of $ 747,770. this represents a working capital deficit of $ 303,461. during 2013 to date the company has received subscriptions for 235,500 new shares totaling $ 471,000 , in connection with a private placement . as part of the same placement , consultants and directors have agreed to convert $ 18,583 due for services into 9,292 common shares on the same terms as the foregoing cash subscriptions . the shares were issued on march 25 , 2013. in addition , the company believes it is entitled to grant funds from the walloon region government in belgium totaling approximately $ 600,000 , in respect of expenditure incurred over the period april 2010 to september 2012. the processing of the claims for these funds has been delayed , but based on the information available funds should be received within the next few months , though this is not assured . as of the date of filing this report , the company 's cash reserves are only adequate to fund operations for a limited period of time . we intend to use our cash reserves to fund further research and development activities . we do not currently have any substantial source of revenues and expect to rely on additional financing . we are pursuing plans to seek further capital through the sale of additional stock by way of private placement , but there is no assurance that we will be successful in raising further funds . in the event that additional financing is delayed , the company will prioritize the maintenance of its research and development personnel and facilities , primarily in belgium , and the maintenance of its patent rights . however the completion of development of the current pipeline of intended products for the ruo market would be delayed , as would clinical validation studies and regulatory approval processes for the purpose of bringing products to the ivd market . in story_separator_special_tag on march 20 , 2013 , the company granted options to purchase 37,000 shares to certain employees under the 2011 equity incentive plan . these options vest in equal six monthly installments over three years from the date of grant , and expire three years after the vesting dates . the exercise prices are $ 2.35 for options vesting in the first year , $ 3.35 for options vesting in the second year , and $ 4.35 for options vesting in the third year . f-18 item 9. changes in and disagreements with accountants on accounting and financial disclosure . on november 29 , 2011 , sadler , gibb & associates , llc ( sg & a ) was engaged as the registered independent public accountant for the company and madsen & associates , cpa 's inc. ( m & a ) was dismissed as the registered independent public accountant for the company . the decisions to appoint sg & a and dismiss m & a were approved by the board of directors of the company on november 23 , 2011. other than the disclosure of uncertainty regarding the ability for us to continue as a going concern which was included in our accountant 's report on the financial statements for the years ended august 31 , 2011 and 2010 , m & a 's reports on the financial statements of the company for the years ended august 31 , 2011 and 2010 did not contain an adverse opinion or a disclaimer of opinion , nor were they qualified or modified as to uncertainty , audit scope , or accounting principles . for the two most recent fiscal years and any subsequent interim period through m & a 's termination on november 29 , 2011 , m & a disclosed the uncertainty regarding the ability of the company to continue as a going concern in its accountant 's report on the financial statements . in connection with the audit and review of the financial statements of the company through november 29 , 2011 , there were no disagreements on any matter of accounting principles or practices , financial statement disclosures , or auditing scope or procedures , which disagreements if not resolved to their satisfaction would have caused them to make reference in connection with m & a 's opinion to the subject matter of the disagreement . in connection with the audited financial statements of the company for the years ended august 31 , 2011 and 2010 and interim unaudited financial statements through november 29 , 2011 , there have story_separator_special_tag this annual report on form 10-k contains forward-looking statements . these forward-looking statements are not historical facts but rather are based on current expectations , estimates and projections . we may use words such as anticipate , expect , intend , plan , believe , foresee , estimate and variations of these words and similar expressions to identify forward-looking statements . these statements are not guarantees of future performance and are subject to certain risks , uncertainties and other factors , some of which are beyond our control , are difficult to predict and could cause actual results to differ materially from those expressed or forecasted . you should read this report completely and with the understanding that actual future results may be materially different from what we expect . the forward-looking statements included in this report are made as of the date of this report and should be evaluated with consideration of any changes occurring after the date of this report . we will not update forward-looking statements even though our situation may change in the future and we assume no obligation to update any forward-looking statements , whether as a result of new information , future events or otherwise . 23 liquidity and capital resources as of december 31 , 2012 , the company had cash of $ 376,421 and other current assets of $ 67,688 , excluding non-cash prepaid expenses of $ 250,833. the company had current liabilities of $ 747,770. this represents a working capital deficit of $ 303,461. during 2013 to date the company has received subscriptions for 235,500 new shares totaling $ 471,000 , in connection with a private placement . as part of the same placement , consultants and directors have agreed to convert $ 18,583 due for services into 9,292 common shares on the same terms as the foregoing cash subscriptions . the shares were issued on march 25 , 2013. in addition , the company believes it is entitled to grant funds from the walloon region government in belgium totaling approximately $ 600,000 , in respect of expenditure incurred over the period april 2010 to september 2012. the processing of the claims for these funds has been delayed , but based on the information available funds should be received within the next few months , though this is not assured . as of the date of filing this report , the company 's cash reserves are only adequate to fund operations for a limited period of time . we intend to use our cash reserves to fund further research and development activities . we do not currently have any substantial source of revenues and expect to rely on additional financing . we are pursuing plans to seek further capital through the sale of additional stock by way of private placement , but there is no assurance that we will be successful in raising further funds . in the event that additional financing is delayed , the company will prioritize the maintenance of its research and development personnel and facilities , primarily in belgium , and the maintenance of its patent rights . however the completion of development of the current pipeline of intended products for the ruo market would be delayed , as would clinical validation studies and regulatory approval processes for the purpose of bringing products to the ivd market . in
| results of operations year ended december 31 , 2012 the following table sets forth the company 's results of operations for the year ended on december 31 , 2012 and the comparative period for the year ended december 31 , 2011. replace_table_token_2_th revenues the company had revenues of $ 54,968 from operations in the year ended december 31 , 2012 , compared to revenues of nil in the comparative period for the year ended december 31 , 2011. the company 's operations are in the development stage . operating expenses for the year ended december 31 , 2012 , the company 's operating expenses increased by $ 1,529,555 , or 59 % . operating expenses are comprised of salaries and office administrative fees , research and development expenses , professional fees , and other general and administrative expenses . salaries and office administrative fees decreased by $ 75,260 due principally to a reduction in share option expense . research and development expenses increased by $ 1,321,544 due to increased r & d activity in terms of staff and related costs , materials and patent costs . professional fees increased by $ 82,639 due to additional fees for corporate services related to becoming a listed company . general and administrative expenses increased by $ 200,632 due to the issue of warrants as compensation for fundraising services . net loss for the year ended december 31 , 2012 , our net loss was $ 4,083,050 , an increase of $ 1,474,587 or 57 % over the comparative period for the year ended december 31 , 2011. the change is a result of the changes described above . going concern we have not attained profitable operations and are dependent upon obtaining financing to pursue any extensive activities .
| 7,132 |
for our assurant solutions reporting unit we performed step 1 and concluded that the estimated fair value of the reporting unit exceeded its respective book value and therefore goodwill was not impaired . for 2011 , the assurant employee benefits and assurant health reporting units did not have goodwill . value of businesses acquired voba is an identifiable intangible asset representing the value of the insurance businesses acquired . the amount is determined using best estimates for mortality , lapse , maintenance expenses and investment returns at date of purchase . the amount determined represents the purchase price paid to the seller for producing the business . similar to the amortization of dac , the 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 accompanying notes which appear elsewhere in this report . it contains forward-looking statements that involve risks and uncertainties . our actual results may differ materially from those anticipated in these forward-looking statements as a result of various factors , including those discussed below and elsewhere in this report , particularly under the headings item 1arisk factors and forward-looking statements. general we report our results through five segments : assurant solutions , assurant specialty property , assurant health , assurant employee benefits , and corporate and other . the corporate and other segment includes activities of the holding company , financing and interest expenses , net realized gains ( losses ) on investments and interest income earned from short-term investments held . the corporate and other segment also includes the amortization of deferred gains associated with the sales of ffg and ltc , through reinsurance agreements as described below . the following discussion covers the twelve months ended december 31 , 2012 ( twelve months 2012 ) , twelve months ended december 31 , 2011 ( twelve months 2011 ) and twelve months ended december 31 , 2010 ( twelve months 2010 ) . please see the discussion that follows , for each of these segments , for a more detailed analysis of the fluctuations . 42 executive summary consolidated net income decreased $ 55,251 , or 10 % , to $ 483,705 for twelve months 2012 from $ 538,956 for twelve months 2011. the decrease is primarily due to an $ 80,000 release of a capital loss valuation allowance related to deferred tax assets during twelve months 2011. partially offsetting this item was improved net income in our assurant health and assurant employee benefits segments and an increase of $ 20,652 ( after-tax ) in net realized gains on investments . twelve months 2012 includes $ 162,634 ( after-tax ) of assurant specialty property reportable catastrophe losses , primarily due to superstorm sandy , compared to $ 102,469 ( after-tax ) of reportable catastrophe losses in twelve months 2011. higher catastrophe losses in twelve months 2012 were offset by growth in lender-placed homeowners net earned premiums and lower non-catastrophe losses . assurant solutions net income decreased $ 12,297 , or 9 % , to $ 123,753 for twelve months 2012 from $ 136,050 for twelve months 2011. this decrease was largely due to a fourth quarter charge of $ 20,373 ( after-tax ) for the impairment of certain other intangible assets established primarily in connection with acquisitions of two u.k. mortgage insurance brokers in 2007 , and a fourth quarter workforce restructuring charge of $ 7,724 ( after-tax ) primarily relating to our domestic credit and european operations . twelve months 2012 also included $ 6,362 ( after-tax ) of income from client related settlements . absent these items , international results improved primarily from continued growth and favorable experience in latin america . overall , assurant solutions ' international combined ratio was 104.8 % . in 2013 , we expect this combined ratio to continue to improve primarily from expected profitable growth in latin america and additional expense initiatives in europe . domestic results declined primarily from the previously disclosed loss of a mobile client , effective october 2012 , increased expenses in our mobile and vehicle services businesses to enhance our technology platform and support new business growth , and less favorable underwriting experience in our service contract business . these factors increased our domestic combined ratio to 98.9 % . we expect the domestic combined ratio to remain near our target of 98.0 % in 2013. fee income and sales from our preneed business also improved during twelve months 2012 , primarily due to our strong relationship with sci . overall , we expect modest premium growth at assurant solutions in 2013. we also expect to continue our expense management initiatives in this segment . assurant specialty property net income increased $ 1,228 , or less than 1 % , to $ 304,951 for twelve months 2012 from $ 303,723 for twelve months 2011. the increase is due to increased lender-placed homeowners net earned premiums , growth in our multifamily housing business and lower non-catastrophe losses , mainly offset by an increase in reportable catastrophe losses of $ 60,165 ( after-tax ) . the growth in net earned premiums was driven by lender-placed loan portfolio additions and increased placement rates . our placement rate for twelve months 2012 was 2.87 % compared to 2.75 % in twelve months 2011. the 2.87 % placement rate is high , compared to historical standards , due to the impact of the new loan portfolios added throughout 2012. we expect placement rates in the near term to fluctuate , reflecting the state of the housing market and the changing composition of our tracked loan portfolios , but we expect placement rates to ultimately decline as the housing market stabilizes . in late 2012 , we began a multi-phased roll-out of our new next generation product to respond to the changed environment following the housing crisis . features of the product include : expanded geographic rating , added premium rating flexibility and continued enhancements to our customer notification process . story_separator_special_tag the fair market value generally increases or decreases in an inverse relationship with fluctuations in interest rates , while net investment income realized by us from future investments in fixed maturity securities will generally increase or decrease with interest rates . we also have investments that carry pre-payment risk , such as mortgage-backed and asset-backed securities . interest rate fluctuations may cause actual net investment income and or cash flows from such investments to differ from estimates made at the time of investment . in periods of declining interest rates , mortgage prepayments generally increase and mortgage-backed securities , commercial mortgage obligations and bonds are more likely to be prepaid or redeemed as borrowers seek to borrow at lower interest rates . therefore , in these circumstances we may be required to reinvest those funds in lower-interest earning investments . expenses our expenses are primarily policyholder benefits , selling , underwriting and general expenses and interest expense . policyholder benefits are affected by our claims management programs , reinsurance coverage , contractual terms and conditions , regulatory requirements , economic conditions , and numerous other factors . benefits paid or reserves required for future benefits could substantially exceed our expectations , causing a material adverse effect on our business , results of operations and financial condition . selling , underwriting and general expenses consist primarily of commissions , premium taxes , licenses , fees , amortization of deferred costs , general operating expenses and income taxes . we incur interest expense related to our debt . critical accounting estimates certain items in our consolidated financial statements are based on estimates and judgment . differences between actual results and these estimates could in some cases have material impacts on our consolidated financial statements . on january 1 , 2012 , the company adopted the amendments to existing guidance on accounting for costs associated with acquiring or renewing insurance contracts . this guidance was adopted retrospectively and has been applied to all prior period financial information contained in these consolidated financial statements . see note 2 to the notes to consolidated financial statements for more information . 45 the following critical accounting policies require significant estimates . the actual amounts realized in these areas could ultimately be materially different from the amounts currently provided for in our consolidated financial statements . health insurance premium rebate liability the affordable care act was signed into law in march 2010. one provision of the act , effective january 1 , 2011 , established a minimum medical loss ratio ( mlr ) designed to ensure that a minimum percentage of premiums is paid for clinical services or health care quality improvement activities . the affordable care act established an mlr of 80 % for individual and small group business and 85 % for large group business . if the actual loss ratios , calculated in a manner prescribed by the department of health and human services ( hhs ) , are less than the required mlr , premium rebates are payable to the policyholders by august 1 of the subsequent year . the assurant health loss ratio reported on page 66 ( the gaap loss ratio ) differs from the loss ratio calculated under the mlr rules . the most significant differences include the fact that the mlr is calculated separately by state , legal entity and type of coverage ( individual or group ) ; the mlr calculation includes credibility adjustments for each state/entity/coverage cell , which are not applicable to the gaap loss ratio ; the mlr calculation applies only to some of our health insurance products , while the gaap loss ratio applies to the entire portfolio , including products not governed by the affordable care act ; the mlr includes quality improvement expenses , taxes and fees ; changes in reserves are treated differently in the mlr calculation ; and the mlr premium rebate amounts are considered adjustments to premiums for gaap reporting whereas they are reported as additions to incurred claims in the mlr rebate estimate calculations . assurant health has estimated the 2012 impact of this regulation based on definitions and calculation methodologies outlined in the interim final regulation from hhs released december 1 , 2010 with technical corrections released december 29 , 2010 and the hhs final regulation released december 7 , 2011. an estimate was based on separate projection models for individual medical and small group business using projections of expected premiums , claims , and enrollment by state , legal entity and market for medical business subject to mlr requirements for the mlr reporting year . in addition , the projection models include quality improvement expenses , state assessments and taxes . reserves reserves are established in accordance with gaap using generally accepted actuarial methods and reflect judgments about expected future claim payments . calculations incorporate assumptions about inflation rates , the incidence of incurred claims , the extent to which all claims have been reported , future claims processing , lags and expenses and future investment earnings , and numerous other factors . while the methods of making such estimates and establishing the related liabilities are periodically reviewed and updated , the calculation of reserves is not an exact process . reserves do not represent precise calculations of expected future claims , but instead represent our best estimates at a point in time of the ultimate costs of settlement and administration of a claim or group of claims , based upon actuarial assumptions and projections using facts and circumstances known at the time of calculation . many of the factors affecting reserve adequacy are not directly quantifiable and not all future events can be anticipated when reserves are established . reserve estimates are refined as experience develops . adjustments to reserves , both positive and negative , are reflected in the consolidated statement of operations in the period in which such estimates are updated . 46 because establishment of reserves is an inherently complex process involving significant judgment and estimates , there can be no certainty that ultimate losses will not exceed existing claim reserves .
| results of operations assurant consolidated overview the table below presents information regarding our consolidated results of operations : replace_table_token_16_th ( 1 ) includes amortization of dac and voba and underwriting , general and administrative expenses . year ended december 31 , 2012 compared to the year ended december 31 , 2011 net income decreased $ 55,251 , or 10 % , to $ 483,705 for twelve months 2012 from $ 538,956 for twelve months 2011. the decrease is primarily due to an $ 80,000 release of a capital loss valuation allowance related to deferred tax assets during twelve months 2011. partially offsetting this item was improved net income in our assurant health and assurant employee benefits segments and an increase of $ 20,652 ( after-tax ) in net realized gains on investments . twelve months 2012 includes $ 162,634 ( after-tax ) of assurant specialty property reportable catastrophe losses , primarily due to superstorm sandy , compared to $ 102,469 ( after-tax ) of reportable catastrophe losses in twelve months 2011. higher catastrophe losses in twelve months 2012 were offset by growth in lender-placed homeowners net earned premiums and lower non-catastrophe losses . 58 year ended december 31 , 2011 compared to the year ended december 31 , 2010 net income increased $ 260,349 , or 93 % , to $ 538,956 for twelve months 2011 from $ 278,607 for twelve months 2010. twelve months 2010 included a $ 306,381 non-cash goodwill impairment charge . absent this charge , net income decreased $ 46,032 or 8 % . the decline is primarily attributable to decreased net income in our assurant specialty property segment mainly due to an increase in reportable catastrophe losses of $ 87,673 ( after-tax ) in twelve months 2011 and declines in net income at our assurant health and assurant employee benefits segments .
| 7,133 |
2016-15 , statement of cash flows : classification of certain cash receipts and cash payments ( “ asu 2016-15 ” ) , to address diversity in practice in how certain cash receipts and cash payments are presented and classified in the statement of cash flows . the standard is effective for annual periods beginning after december 15 , 2017 , including interim periods within those fiscal years . the company 's adoption 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 consolidated financial statements and related notes appearing elsewhere in this annual report on form 10-k. some of the information contained in this discussion and analysis or set forth elsewhere in this annual report on form 10-k , including information with respect to our plans and strategy for our business , includes forward-looking statements that involve risks and uncertainties . as a result of many factors , including those factors set forth in the “ risk factors ” section of this annual report on form 10-k , our actual results could differ materially from the results described in , or implied by , the forward-looking statements contained in the following discussion and analysis . overview we are a multi-asset , clinical-stage biopharmaceutical company focused on identifying , developing and commercializing novel treatments for multi-drug resistant bacterial infections . our most advanced product candidate , spr994 ( also called tebipenem pivoxil hydrobromide ) , is designed to be the first broad-spectrum oral carbapenem-class antibiotic for use in adults to treat mdr gram-negative infections . treatment with effective orally administrable antibiotics may prevent hospitalizations for serious infections and enable earlier , more convenient and cost-effective treatment of patients after hospitalization . we also have a platform technology known as our potentiator platform , which includes two iv-administered agents , spr206 and spr741 , that are active either alone or in combination with other standard of care agents and are designed to treat mdr gram-negative bacteria in the hospital . in addition , we are developing spr720 , an oral antibiotic designed for the treatment of pulmonary ntm infections . we believe that our novel product candidates , if successfully developed and approved , would have a meaningful patient impact and significant commercial applications for the treatment of mdr infections in both the community and hospital settings . since our inception in 2013 , we have focused substantially all of our efforts and financial resources on organizing and staffing our company , business planning , raising capital , acquiring and developing product and technology rights , building our intellectual property portfolio and conducting research and development activities for our product candidates . we do not have any products approved for sale and have not generated any revenue from product sales . on november 6 , 2017 , we completed our ipo and issued and sold 5,500,000 shares of common stock at a public offering price of $ 14.00 per share , resulting in net proceeds of $ 71.6 million after deducting underwriting discounts and commissions but before deducting offering costs . on november 14 , 2017 , we issued and sold an additional 471,498 shares of our common stock at the ipo price of $ 14.00 per share pursuant to the underwriters ' partial exercise of their option to purchase additional shares of common stock , resulting in additional net proceeds of $ 6.1 million after deducting underwriting discounts . aggregate net proceeds from the ipo totaled $ 74.2 million after deducting underwriting discounts , commissions and offering costs . on july 17 , 2018 , we completed an underwritten public offering of 3,780,000 shares of our common stock at a price of $ 12.50 per share , and 2,220 shares of our series a convertible preferred stock at a price of $ 12,500 per share . we received net proceeds from the offering of approximately $ 70.5 million after deducting underwriting discounts and commissions but before deducting $ 1.0 million of offering expenses payable by us . on november 15 , 2018 , we entered into an exchange agreement , or the exchange agreement , with biotechnology value fund , l.p. , biotechnology value fund ii , l.p. , biotechnology value trading fund os , l.p. and msi bvf spv llc ( collectively , “ bvf ” ) pursuant to which bvf agreed to exchange an aggregate of 1,000,000 shares of our common stock , par value $ 0.001 , owned by bvf for an aggregate of 1,000 shares of our newly designated series b convertible preferred stock , par value $ 0.001 per share , or the series b preferred stock . on november 16 , 2018 , we designated 1,000 shares of our authorized and unissued preferred stock as series b convertible preferred stock . each share of the series a and series b convertible preferred stock is convertible into 1,000 shares of our common stock at any time at the option of the holder , provided that the holder will be prohibited from converting the series a and series b convertible preferred stock into shares of our common stock if , as a result of such conversion , the holder , together with its affiliates , would own more than 9.99 % of the total number of shares of our common stock then issued and outstanding . in the event of our liquidation , dissolution , or winding up , holders of our series a and series b convertible preferred stock will receive a payment equal to $ 0.001 per share of series a and series b convertible preferred stock before any proceeds are distributed to the holders of our common stock . story_separator_special_tag upon consummation of the reorganization , the historical consolidated financial statements of spero therapeutics , llc became the historical consolidated financial statements of spero therapeutics , inc. 74 recent developments spr994 phase 1 final results and dose selection data supporting planned single pivotal phase 3 clinical trial in september 2018 , we announced positive results from the final analysis of our phase 1 clinical trial of spr994 in healthy volunteers . the final data support the advancement of spr994 at a dose of 600 mg administered tid into our adapt-po pivotal phase 3 clinical trial . following positive feedback from the fda from our pre-phase 3 meeting , we believe that positive results from a single pivotal phase 3 clinical trial of spr994 in cuti demonstrating a 10 % non-inferiority margin would support the approval of spr994 for the treatment of cuti . as a result of the meeting , we submitted an ind application for spr994 in cuti with the fda , which was accepted by the fda i n february 2019. we have begun start-up activities for the adapt-po clinical trial and anticipate opening trial sites around the end of march 2019 to support study enrollment . the single planned pivotal phase 3 clinical trial of spr994 , adapt-po , is designed as a double-blind , double-dummy trial to compare oral spr994 with an existing standard of care iv antibiotic , ertapenem , in approximately 1,200 patients randomized 1:1 in each arm . the primary endpoint of the pivotal trial will be the combined clinical and microbiological response at the test of cure with a 10 % non-inferiority margin versus iv ertapenem . the trial will also incorporate a lead-in cohort of 70 patients with intensive pharmacokinetics assessment to confirm the dose and exposure in the cuti patient population and we anticipate receiving interim pharmacokinetic and safety data from this lead-in cohort in the second half of 2019. we also plan to conduct routine ancillary clinical pharmacology studies in parallel with the phase 3 trial as required by the fda for the approval of spr994 , including a renal insufficiency study , a thorough qt prolongation study and a drug-drug interaction study . spr720 preclinical data supports advancement into phase 1 clinical trials in november 2018 , we announced positive results from preclinical ind-enabling studies of spr720 , our oral antimicrobial agent being developed for the treatment of ntm infections . spr720 was assessed in a series of non-clinical studies , including ind-enabling 28- and 31-day glp toxicology studies in non-human primates and rats , respectively , and safety pharmacology studies . results from in vitro mic studies demonstrated potent activity for spr720 against prevalent ntm pathogens , including mycobacterium avium complex and mycobacterium abscessus . furthermore , in vivo studies in murine models of pneumonia demonstrated favorable efficacy relative to standard-of-care comparator agents . the data suggest that spr720 has an acceptable safety profile , encouraging target pathogen efficacy , and a wide therapeutic margin . we believe these results , in conjunction with recent regulatory interactions , support the further development of spr720 . in january 2019 , we initiated a phase 1 clinical trial of spr720 , designed as a double-blind , placebo-controlled , ascending dose , multi-cohort study in healthy subjects . we expect to receive top-line data from this trial in the second half of 2019. spr206 license agreement with everest medicines on january 4 , 2019 , the company , through our wholly owned subsidiary nplh , entered into a license agreement with everest medicines ii limited whereby we granted everest an exclusive license to develop , manufacture and commercialize spr206 , or products containing spr206 , in greater china , south korea and certain southeast asian countries . we retained development , manufacturing and commercialization rights with respect to spr206 and licensed products in the rest of the world and also retained the right to develop or manufacture spr206 and licensed products in the territory for use outside the territory . in addition to the license grant with respect to spr206 , we also granted to everest a 12-month exclusive option to negotiate with us for an exclusive license to develop , manufacture or commercialize spr741 in the same territories . we received from everest an upfront payment of $ 3.0 million and are eligible to receive milestone payments of up to an additional $ 59.5 million upon everest 's achievement of specified clinical , regulatory and commercial milestones related to spr206 , of which we anticipate receiving at least $ 2.0 million in near-term milestones during 2019. furthermore , we are eligible to receive high single-digit to low double-digit royalties on net sales of products containing spr206 in the covered territories following regulatory approval of spr206 . components of our results of operations grant revenue to date , we have not generated any revenue from product sales and do not expect to generate any revenue from the sale of products in the foreseeable future . if our development efforts for our product candidates are successful and result in regulatory approval , we may generate revenue in the future from product sales . we can not predict if , when , or to what extent we will generate revenue from the commercialization and sale of our product candidates . we may never succeed in obtaining regulatory approval for any of our product candidates . 75 to date , all of our revenue has been derived from government awards . we expect that our revenue for the next several years will be derived primarily from payments under our government awards that we may enter into in the future . barda in july 2018 , we were awarded a contract from barda of up to $ 44.2 million to develop spr994 for the treatment of cutis caused by antibiotic resistant gram-negative bacteria and for assessment against biodefense pathogens . the award commits initial funding of $ 15.7 million over a three-year base period from july 1 , 2018 to june 30 , 2021 for cuti development activities .
| results of operations comparison of the years ended december 31 , 2018 and 2017 the following table summarizes our results of operations for the years ended december 31 , 2018 and 2017 : replace_table_token_7_th grant revenue replace_table_token_8_th grant revenue recognized during 2018 and 2017 consisted of the reimbursement of qualifying expenses incurred in connection with our various government awards . the increase in revenue during 2018 was primarily due to funding received under our barda contract , which was awarded to us in july 2018 , and for which we began incurring qualified expenses in the second half of 2018 , as well as the niaid contract , which provides funding for spr206 , which was novated to us from cai in december 2017. offsetting these increases , were decreases in funding received under our dod agreement , as well as our carb-x award , which had a performance period through march 31 , 2018 . 83 research and development expenses replace_table_token_9_th direct costs related to our spr994 program increased during 2018 compared to 2017 primarily due to clinical trial costs , including expenses related to our phase 1 clinical trial , which commenced in october 2017 and which was completed in august 2018 , costs related to our pivotal phase 3 clinical trial , as well as higher expenses related to formulation development , manufacturing process and manufacturing of clinical trial material . these increases were partially offset by a decrease in preclinical costs for this program related to costs incurred in 2017 in connection with the initiation our phase 1 clinical trial , as well as $ 1.6 million of upfront and milestones payments incurred and paid in 2017 under our agreement with meiji .
| 7,134 |
loss contingencies , including claims and legal actions arising in the ordinary course of business are recorded as liabilities when the likelihood of loss is probable and an amount or range of loss can be reasonably estimated . trust assets . assets of our trust department , other than cash on deposit at southside bank , are not included in the accompanying financial statements because they are not our assets . accounting pronouncements : in may 2014 , the fasb issued asu 2014-09 , “ revenue from contracts with customers ( topic 606 ) . ” this update states that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services . this update affects entities that enter into contracts with customers to transfer goods or services or enter into contracts for the transfer of nonfinancial assets , unless those contracts are within the scope of other standards . in august 2015 , fasb issued asu 2015-14 , “ revenue from contracts with story_separator_special_tag of operations the following discussion and analysis provides a comparison of our results of operations for the years ended december 31 , 2016 , 2015 , and 2014 and financial condition as of december 31 , 2016 and 2015 . this discussion should be read in conjunction with the financial statements and related notes included elsewhere in this report . all share data has been adjusted to give retroactive recognition to stock splits and stock dividends . cautionary notice regarding forward-looking statements certain statements of other than historical fact that are contained in this document and in written material , press releases and oral statements issued by or on behalf of southside bancshares , inc. , a bank holding company , may be considered to be “ forward-looking statements ” within the meaning of and subject to the protections of the private securities litigation reform act of 1995. these forward-looking statements are not guarantees of future performance , nor should they be relied upon as representing management 's views as of any subsequent date . these statements may include words such as “ expect , ” “ estimate , ” “ project , ” “ anticipate , ” “ appear , ” “ believe , ” “ could , ” “ should , ” “ may , ” “ might , ” “ will , ” “ would , ” “ seek , ” “ intend , ” “ probability , ” “ risk , ” “ goal , ” “ target , ” “ objective , ” “ plans , ” “ potential , ” and similar expressions . forward-looking statements are statements with respect to our beliefs , plans , expectations , objectives , goals , anticipations , assumptions , estimates , intentions and future performance , and are subject to significant known and unknown risks and uncertainties , which could cause our actual results to differ materially from the results discussed in the forward-looking statements . for example , discussions of the effect of our expansion , trends in asset quality and earnings from growth , and certain market risk disclosures are based upon information presently available to management and are dependent on choices about key model characteristics and assumptions and are subject to various limitations . see “ item 1. business ” and this “ item 7. management 's discussion and analysis of financial condition and results of operations. ” by their nature , certain of the market risk disclosures are only estimates and could be materially different from what actually occurs in the future . as a result , actual income gains and losses could materially differ from those that have been estimated . other factors that could cause actual results to differ materially from forward-looking statements include , but are not limited to , the following : general economic conditions , either globally , nationally , in the state of texas , or in the specific markets in which we operate , including , without limitation , the deterioration of the commercial real estate , residential real estate , construction and development , energy , oil and gas , credit and liquidity markets , which could cause an adverse change in our net interest margin , or a decline in the value of our assets , which could result in realized losses ; current or future legislation , regulatory changes or changes in monetary or fiscal policy that adversely affect the businesses in which we are engaged , including the impact of the dodd-frank wall street reform and consumer protection act of 2010 ( “ dodd-frank act ” ) , the federal reserve 's actions with respect to interest rates , the capital requirements promulgated by the basel committee on banking supervision ( “ basel committee ” ) and other regulatory responses to current economic conditions ; adverse changes in the status or financial condition of the government-sponsored enterprises ( the “ gses ” ) impacting the gses ' guarantees or ability to pay or issue debt ; adverse changes in the credit portfolio of other u.s. financial institutions relative to the performance of certain of our investment securities ; economic or other disruptions caused by acts of terrorism in the united states , europe or other areas ; changes in the interest rate yield curve such as flat , inverted or steep yield curves , or changes in the interest rate environment that impact interest margins and may impact prepayments on the mortgage-backed securities ( “ mbs ” ) portfolio ; increases in our nonperforming assets ; our ability to maintain adequate liquidity to fund operations and growth ; the failure of our assumptions underlying allowance for loan losses and other estimates ; the effectiveness of our derivative financial instruments and hedging activities to manage risk ; unexpected outcomes of , and the costs associated with , existing or new litigation involving us ; changes impacting our balance sheet and leverage strategy ; risks related story_separator_special_tag for acquired loans that are not deemed credit impaired at acquisition , credit discounts representing the principal losses expected over the life of the loan are a component of the initial fair value . subsequent to the purchase date , the methods utilized to estimate the required allowance for loan losses for these loan is similar to originated loans . the remaining differences between the purchase price and the unpaid principal balance at the date of acquisition are recorded in interest income over the economic life of the loan . as of december 31 , 2016 , our review of the loan portfolio indicated that a loan loss allowance of $ 17.9 million was appropriate to cover probable losses in the portfolio . refer to “ part ii - item 7. management 's discussion and analysis of financial condition and results of operations - loan loss experience and allowance for loan losses ” and “ note 6 – loans and allowance for probable loan losses ” to our consolidated financial statements included in this report for a detailed description of our estimation process and methodology related to the allowance for loan losses . estimation of fair value . the estimation of fair value is significant to a number of our assets and liabilities . in addition , gaap requires disclosure of the fair value of financial instruments as a part of the notes to the consolidated financial statements . fair values for securities are volatile and may be influenced by a number of factors , including market interest rates , prepayment speeds , discount rates and the shape of yield curves . fair values for most investment securities and mbs are based on quoted market prices , where available . if quoted market prices are not available , fair values are based on the quoted prices of similar instruments or estimates from independent pricing services . where there are price variances outside certain ranges from different pricing services for specific securities , those pricing variances are reviewed with other market data to determine which of the price estimates is appropriate for that period . impairment of investment securities and mortgage-backed securities . investment securities and mbs classified as available for sale ( “ afs ” ) are carried at fair value and the impact of changes in fair value are recorded on our consolidated balance sheet as an unrealized gain or loss in “ accumulated other comprehensive ( loss ) income , ” a separate component of shareholders ' equity . securities classified as afs or held to maturity ( “ htm ” ) are subject to our review to identify when a decline in value is other-than-temporary . when it is determined that a decline in value is other-than-temporary , the carrying value of the security is reduced to its estimated fair value , with a corresponding charge to earnings for the credit portion and to other comprehensive income for the noncredit portion unless there is no ability or intent to hold to recovery . factors considered in determining whether a decline in value is other-than-temporary include : ( 1 ) whether the decline is substantial , the duration of the decline and the reasons for the decline in value ; ( 2 ) whether the decline is related to a credit event , a change in interest rate or a change in the market discount rate ; ( 3 ) the financial condition and near-term prospects of the issuer ; and ( 4 ) whether we have a current intent to sell the security and whether it is not more likely than not that we will be required to sell the security before the anticipated recovery of its amortized cost basis . for certain assets , we consider expected cash flows of the investment in determining if impairment exists . defined benefit pension plan . the plan obligations and related assets of our defined benefit pension plan ( the “ plan ” ) and the omniamerican bank defined benefit plan ( the “ acquired plan ” ) are presented in “ note 11 - employee benefits ” to our consolidated financial statements included in this report . effective december 31 , 2005 , entry into the plan by new employees was frozen . effective december 31 , 2006 , employee benefits under the acquired plan were frozen . in addition , no new participants may be added to the acquired plan . assets in both plans , consist primarily of marketable equity and debt instruments , and are valued using observable market quotations . obligations and annual pension expense of both plans are determined by independent actuaries and through the use of a number of assumptions that are reviewed by management . key assumptions in measuring the obligations of both plans include the discount rate and the estimated future return on the assets in both plans . the rate of salary increases is another key assumption used in measuring the plan obligation . the rate of salary increases is not required to measure the obligations of the acquired plan since the benefits are frozen . in determining the discount rate , we utilized a cash flow matching analysis to determine a range of appropriate discount rates for our defined benefit pension and restoration plans . in developing the cash flow matching analysis , we had our actuaries construct a portfolio of high quality noncallable bonds to match as closely as possible the timing of future benefit payments of the plans at december 31 , 2016. we utilized a bond selection-settlement approach that selects a portfolio of bonds from a universe of high quality corporate bonds rated aa by at least half of the rating agencies available . based on this cash flow matching analysis , we were able to determine an appropriate discount rate . 31 the expected long-term rate of return assumption reflects the average return expected based on the investment strategies and asset allocation of the assets invested to provide for the liabilities of both plans .
| operating results during the year ended december 31 , 2016 , our net income increase d $ 5.4 million , or 12.2 % , to $ 49.3 million , from $ 44.0 million for the same period in 2015 . the increase was primarily the result of a $ 14.4 million increase in interest income , a $ 3.4 million decrease in noninterest expense , and a $ 1.5 million increase in noninterest income , partially offset by a $ 9.5 million increase in interest expense , a $ 3.0 million increase in income tax expense and a $ 1.4 million increase in provision for loan losses . noninterest expense decrease d primarily due to cost containment efforts and cost synergies as omni was fully integrated in 2016. earnings per diluted share increase d $ 0.21 , or 12.7 % , to $ 1.86 for the year ended december 31 , 2016 , from $ 1.65 for the same period in 2015 . during the year ended december 31 , 2015 , our net income increase d $ 23.2 million , or 111.2 % , to $ 44.0 million , from $ 20.8 million for the same period in 2014 . the increase in net income was primarily attributable to an increase in net interest income of $ 27.9 million and an increase in noninterest income of $ 13.4 million , combined with a decrease in the provision for loan losses . these items were partially offset by an increase in noninterest expense and income tax expense . noninterest expense increased primarily due to expenses associated with the acquisition of omni which are reflected primarily in salaries and employee benefits as well as occupancy expense . earnings per diluted share increase d to $ 1.65 for the year ended december 31 , 2015 , from $ 0.99 for the same period in 2014 .
| 7,135 |
additionally , the flight support group is a leading supplier , distributor , and integrator of military aircraft parts and support services primarily to foreign military organizations allied with the united states . the electronic technologies group consists of heico electronic technologies corp. ( “ heico electronic ” ) and its subsidiaries , which primarily : · designs and manufactures electronic , microwave and electro-optical equipment , high-speed interface products , high voltage interconnection devices and high voltage advanced power electronics . the electronic technologies group designs , manufactures and sells various types of electronic , microwave and electro-optical equipment and components , including power supplies , laser rangefinder receivers , infrared simulation , calibration and testing equipment ; power conversion products serving the high-reliability military , space and commercial avionics end-markets ; underwater locator beacons used to locate data and voice recorders utilized on aircraft and marine vessels ; electromagnetic interference shielding for commercial and military aircraft operators , traveling wave tube amplifiers and microwave power modules used in radar , electronic warfare , on-board jamming and countermeasure systems , electronics companies and telecommunication equipment suppliers ; advanced high-technology interface products that link devices such as telemetry receivers , digital cameras , high resolution scanners , simulation systems and test systems to computers ; high voltage energy generators interconnection devices , cable assemblies and wire for the medical equipment , defense and other industrial markets ; high frequency power delivery systems for the commercial sign industry ; high voltage power supplies found in satellite communications , ct scanners and in medical and industrial x-ray systems ; and three-dimensional microelectronic and stacked memory products that are principally integrated into larger subsystems equipping satellites and spacecraft . our results of operations during each of the past three fiscal years have been affected by a number of transactions . this discussion of our financial condition and results of operations should be read in conjunction with the consolidated financial statements and notes thereto included herein . all per share information has been adjusted retrospectively to reflect the 5-for-4 stock splits effected in april 2011 and 2010. see note 1 , summary of significant accounting policies – stock splits , of the notes to consolidated financial statements for additional information regarding these stock splits . for further information regarding the acquisitions discussed below , see note 2 , acquisitions , of the notes to consolidated financial statements . acquisitions are included in our results of operations from the effective dates of acquisition . 25 in may 2009 , we acquired , through heico electronic , 82.5 % of the stock of vpt , inc. ( “ vpt ” ) . vpt is a designer and provider of power conversion products principally serving the defense , space and aviation industries . the remaining 17.5 % continues to be owned by an existing vpt shareholder which is also a supplier to the acquired company . in october 2009 , we acquired , through heico electronic , the business , assets and certain liabilities of the seacom division of privately-held dukane corp. and formed a new subsidiary , dukane seacom , inc. ( “ seacom ” ) . seacom is a designer and manufacturer of underwater locator beacons used to locate aircraft cockpit voice recorders , flight data recorders , marine ship voyage recorders and various other devices which have been submerged under water . in february 2010 , we acquired , through heico electronic , substantially all of the assets and assumed certain liabilities of db control . db control produces high-power devices used in both defense and commercial applications . in december 2010 , we acquired , through heico aerospace , 80.1 % of the assets and assumed certain liabilities of blue aerospace llc ( “ blue aerospace ” ) . blue aerospace is a supplier , distributor , and integrator of military aircraft parts and support services primarily to foreign military organizations allied with the united states . the remaining 19.9 % interest continues to be owned by certain members of blue aerospace 's management team . in september 2011 , we acquired , through heico electronic , all of the outstanding capital stock of 3d plus sa ( “ 3d ” ) . 3d is a leading designer and manufacturer of three-dimensional microelectronic and stacked memory products used predominately in satellites and also utilized in medical equipment . the purchase price of each of the above referenced acquisitions was paid in cash using proceeds from our revolving credit facility and is not material or significant to our consolidated financial statements . the aggregate cost paid in cash for acquisitions , including additional purchase consideration payments , was $ 94.7 million , $ 39.1 million and $ 59.8 million in fiscal 2011 , 2010 and 2009 , respectively . in december 2008 , we acquired , through heico aerospace , an additional 14 % equity interest in one of our subsidiaries , which increased our ownership interest to 72 % . in february 2011 , we acquired an additional 8 % equity interest in the subsidiary , which increased our ownership interest to 80 % . critical accounting policies we believe that the following are our most critical accounting policies , some of which require management to make judgments about matters that are inherently uncertain . revenue recognition revenue from the sale of products and the rendering of services is recognized when title and risk of loss passes to the customer , which is generally at the time of shipment . revenue from certain fixed price contracts for which costs can be dependably estimated is recognized on the percentage-of-completion method , measured by the percentage of costs incurred to date to estimated total costs for each contract . this method is used because management considers costs incurred to be the best available measure of progress on these contracts . variations in actual labor performance , changes to estimated profitability and final contract settlements may result in revisions to cost estimates . story_separator_special_tag the determination of fair value requires us to make a number of estimates , assumptions and judgments of such factors as projected revenues and earnings and discount rates . based on the intangible impairment tests conducted , we recognized pre-tax impairment losses related to the write-down of certain customer relationships of $ 4.3 million , $ 1.1 million and $ .2 million during fiscal 2011 , 2010 and 2009 , respectively , the write-down of certain trade names of $ .2 million , $ .3 million and $ .1 million during fiscal 2011 , 2010 and 2009 , respectively , and the write-down of certain intellectual property of $ .5 million during fiscal 2011 , within the etg to their estimated fair values . the impairment losses pertaining to certain customer relationships and trade names were recorded as a component of selling , general and administrative expenses in the company 's consolidated statements of operations and the impairment losses pertaining to intellectual property were recorded as a component of costs of goods sold . assumptions utilized to determine fair value in the goodwill and intangible assets impairment tests are highly judgmental . if there is a material change in such assumptions or if there is a material change in the conditions or circumstances influencing fair value , we could be required to recognize a material impairment charge . see item 1a. , risk factors , for a list of factors of which any may cause our actual results to differ materially from anticipated results . 28 story_separator_special_tag style= '' width : 100 % '' > interest expense interest expense in fiscal 2011 and 2010 was not material . other income other income in fiscal 2011 and 2010 was not material . income tax expense our effective tax rate for fiscal 2011 decreased to 31.0 % from 33.7 % in fiscal 2010. the effective tax rate for fiscal 2011 reflects the aggregate benefit from tax related items , which increased net income attributable to heico by approximately $ 2.8 million , or $ .07 per diluted share , net of expenses , principally from higher research and development tax credits ( $ 1.7 million ) , state income apportionment updates ( $ .9 million ) and other prior year tax return to accrual adjustments ( $ .2 million ) . during the first quarter of fiscal 2011 , we recognized the benefit of an income tax credit for qualified research and development activities resulting from the retroactive extension in december 2010 of section 41 of the internal revenue code , “ credit for increasing research activities , ” to cover the period from january 1 , 2010 to december 31 , 2011 and recognized such tax credit for the last ten months of fiscal 2010 in the first quarter of fiscal 2011 , which , net of expenses , increased net income attributable to heico by approximately $ .8 million in fiscal 2011. during the third quarter of fiscal 2011 , the finalization of a study of qualifying fiscal 2010 research and development activities used to prepare our fiscal 2010 u.s. federal and state income tax returns and reduction in the liability for gross unrecognized research and development related tax positions due to both lapses of statutes of limitations and the conclusion of a foreign research and development tax credit audit resulted in an aggregate increase in net income attributable to heico of approximately $ .8 million , net of expenses , in fiscal 2011. during the third quarter of fiscal 2011 , we filed our fiscal 2010 state tax returns and amended certain prior year state tax returns reflecting a change to the applicable methodology for apportioning income to certain states , which resulted in an increase in net income attributable to heico of approximately $ .9 million , net of expenses , in fiscal 2011. for a detailed analysis of the provision for income taxes , see note 6 , income taxes , of the notes to consolidated financial statements . net income attributable to noncontrolling interests net income attributable to noncontrolling interests relates to the 20 % noncontrolling interest held in the fsg and the noncontrolling interests held in certain subsidiaries of the fsg and etg . net income attributable to noncontrolling interests was $ 22.6 million in fiscal 2011 compared to $ 17.4 million in fiscal 2010. the increase in net income attributable to noncontrolling interests in fiscal 2011 compared to fiscal 2010 is principally related to higher earnings of the fsg in which the 20 % noncontrolling interest is held as well as the 19.9 % noncontrolling interest in the earnings contributed by blue aerospace , which was acquired in the first quarter of fiscal 2011. net income attributable to heico net income attributable to heico was a record $ 72.8 million , or $ 1.71 per diluted share , in fiscal 2011 compared to $ 54.9 million , or $ 1.30 per diluted share , in fiscal 2010 principally reflecting the increased operating income referenced above . 31 outlook during fiscal 2012 , we will continue our focus on developing new products and services , further market penetration , additional acquisition opportunities and maintaining our financial strength . the general overall economic uncertainty may moderate growth in our commercial aviation markets , while we expect overall stable markets for the products of our etg . overall , we are targeting growth in fiscal 2012 full year net sales and net income over fiscal 2011 levels . comparison of fiscal 2010 to fiscal 2009 net sales net sales in fiscal 2010 increased by 14.6 % to a record $ 617.0 million , as compared to net sales of $ 538.3 million in fiscal 2009. the increase in net sales reflects an increase of $ 62.3 million ( a 43.4 % increase ) to a record $ 205.6 million in net sales within the etg and an increase of $ 16.9 million ( a 4.3 % increase ) to $ 412.3 million in net sales within the fsg .
| results of operations the following table sets forth the results of our operations , net sales and operating income by segment and the percentage of net sales represented by the respective items in our consolidated statements of operations : replace_table_token_9_th comparison of fiscal 2011 to fiscal 2010 net sales our net sales in fiscal 2011 increased by 24 % to a record $ 764.9 million , as compared to net sales of $ 617.0 million in fiscal 2010. the increase in net sales reflects an increase of $ 127.2 million ( a 31 % increase ) to a record $ 539.6 million in net sales within the fsg as well as an increase of $ 22.1 million ( an 11 % increase ) to a record $ 227.8 million in net sales within the etg . the net sales increase in the fsg reflects organic growth of approximately 21 % , as well as additional net sales of approximately $ 37 million contributed by the first quarter of fiscal 2011 acquisition of blue aerospace . the organic growth principally reflects higher sales of new products and services and an increase in demand for the fsg 's 29 aftermarket replacement parts and repair and overhaul services as a result of increased airline capacity and also reflects higher sales of and demand for the fsg 's industrial products . the net sales increase in the etg principally reflects organic growth of approximately 10 % . the organic growth in the etg reflects continued strength in demand for certain of our defense , aerospace , medical and electronic products . our net sales in fiscal 2011 and 2010 by market approximated 60 % and 62 % , respectively , from the commercial aviation industry , 24 % and 23 % , respectively , from the defense and space industries , and 16 % and 15 % , respectively , from other industrial markets including medical , electronics and telecommunications .
| 7,136 |
63 back to both the senior secured debt and the convertible notes contain representations , warranties and covenants that are typical for agreements of this type , including restrictions that would limit the company 's ability to incur additional indebtedness , incur liens , pay dividends or make restricted payments , dispose of assets , make investments and merge or consolidate with another person . however , while there are affirmative covenants , there are no financial maintenance covenants and no restrictions on the company 's ability to issue additional common stock to fund future working capital needs . the debt covenants story_separator_special_tag in connection with the `` safe harbor '' provisions of the private securities litigation reform act of 1995 , the following discussion contains trend analysis and other forward-looking statements . forward-looking statements can be identified by the use of words such as `` intends '' , `` anticipates '' , `` believes '' , `` estimates '' , `` projects '' , `` forecasts '' , `` expects '' , `` plans '' and `` proposes '' . although we believe that the expectations reflected in these forward-looking statements are based on reasonable assumptions , there are a number of risks and uncertainties that could cause actual results to differ materially from these forward-looking statements . these include , among others , our ability to maximize value from our land and water resources and our ability to obtain new financings as needed to meet our ongoing working capital needs . see additional discussion under the heading `` risk factors ” above . overview we are a land and water resource development company with 45,000 acres of land in three areas of eastern san bernardino county , california . virtually all of this land is underlain by high-quality , naturally recharging groundwater resources , and is situated in proximity to the colorado river and the colorado river aqueduct ( “ cra ” ) , a major source of imported water for southern california . our main objective is to realize the highest and best use of these land and water resources in an environmentally responsible way . for more than 20 years , we have maintained an agricultural development at our 34,000-acre property in the cadiz and fenner valleys of eastern san bernardino county ( the “ cadiz/fenner property ” ) , relying upon groundwater from the underlying aquifer system for irrigation . in 1993 , we secured permits to develop agriculture on up to 9,600 acres of the cadiz/fenner property and withdraw more than one million acre-feet of groundwater from the underlying aquifer system . since that time , we have maintained various levels of agriculture at the property and this operation has provided our principal source of revenue . in addition to our sustainable agricultural operations , we believe that the long-term value of our land assets can best be derived through the development of a combination of water supply and storage projects at our properties . the primary factor driving the value of such projects is continuing pressure on water supplies throughout california , which has led southern california water providers to actively seek new , reliable supply solutions to plan for both short and long-term water needs . this includes environmental and regulatory restrictions on each of the state 's three main water sources : the state water project , which provides water supplies from northern california to the central and southern parts of the state , the cra and the los angeles aqueduct . southern california 's water providers rely on imports from these systems for a majority of their water supplies , but deliveries from all three in the region have been below capacity over the last several years . availability of supplies in california also differs greatly from year to year due to natural hydrological variability . at present , our water development efforts are primarily focused on the cadiz valley water conservation , recovery and storage project ( “ water project ” or “ project ” ) , which will capture and conserve millions of acre-feet of native groundwater currently being lost to evaporation from the aquifer system beneath our cadiz/fenner property and deliver it to water providers throughout southern california ( see “ water resource development ” below ) . we believe that the ultimate implementation of this water project will create the primary source of our future cash flow and , accordingly , our working capital requirements relate largely to the development activities associated with this water project . 23 back to we also continue to explore additional uses of our land and water resource assets , including new agricultural opportunities , the development of a land conservation bank on our properties outside the water project area and other long-term legacy uses of our properties , such as habitat conservation and cultural uses . in addition to these development efforts , we will also pursue strategic investments in complementary business or infrastructure to meet our objectives . we can not predict with certainty when or if these objectives will be realized . w ater resource development the water project is designed to supply , capture and conserve billions of gallons of renewable native groundwater currently being lost annually to evaporation from the aquifer system underlying our cadiz/fenner property , and provide a reliable water supply to water users in southern california . by implementing established groundwater management practices , the water project will create a new , sustainable water supply for project participants without adversely impacting the aquifer system or the desert environment . the total quantity of groundwater to be recovered and conveyed to water project participants will not exceed a long-term annual average of 50,000 acre-feet per year for 50 years . the project also offers participants the ability to carry-over their annual supply and store it in the groundwater basin from year to year . a second phase of the water project , phase ii , will offer approximately one million acre-feet of storage capacity that can be used to hold imported water supplies at the water project area . story_separator_special_tag the six water providers serve more than one million customers in cities throughout california 's san bernardino , riverside , los angeles , orange , imperial and ventura counties . following ceqa certification , smwd was the first participant to convert its option agreement and adopt resolutions approving a water purchase and sale agreement for 5,000 acre-fee of water . the structure of the smwd purchase agreement calls for an annually adjusted water supply payment , plus a pro rata portion of the capital recovery charge and operating and maintenance costs . the capital recovery charge is calculated by amortizing the total capital investment by the company over a 30 year term . under the terms of the option agreements with the other five water providers named above , each agency has the right to acquire an annual supply of 5,000 acre-feet of water at $ 775 per acre foot ( “ af ” ) ( 2010 dollars ) , which is competitive with their incremental cost of new water . in addition , these agencies have options to acquire storage rights in the water project to allow for the management of their water project supplies in complement with their other water resources . we are currently working with these water providers to convert their option agreements to definitive economic agreements . in 2014 , we also executed letters of intent ( “ lois ” ) with two california water providers and two california agricultural entities reserving up to 20,000 acre-feet of water per year from the water project at $ 960/acre-foot ( 2014 dollars ) delivered to the colorado river aqueduct . in december 2014 , we converted one of these lois with san luis water district ( “ san luis ” ) to a water purchase and sale agreement ( “ psa ” ) for 10,000 acre-feet per year . under the terms of the psa , san luis will pay an initial price of $ 960 per acre-foot ( 2014 dollars ) for water made available to it by the project . the payment will be adjusted annually in accordance with the bureau of labor statistics water and sewer maintenance index up to a maximum of five percent ( 5 % ) per year . san luis also secured the right to acquire specified carry-over storage rights in the water project to achieve year to year flexibility in its use of water for $ 1,500 per af and an annual management fee of $ 20 per af of acquired storage capacity . any delivery of the water from the project to san luis will be subject to an exchange with the metropolitan water district of southern california or another eligible state water project contractor and terms of which will be finalized prior to commencement of project construction . we have executed lois , option agreements and purchase agreements that are in excess of water project capacity and are working collaboratively with the remaining water providers to account for any oversubscription as we progress final definitive psas . 26 back to ( 3 ) environmental/regulatory permits in order to properly develop and quantify the sustainability of the water project , and prior to initiating the formal permitting process for the water project , we commissioned environmental consulting firm ch2m hill to complete a comprehensive study of the water resources at the project area . following a year of analysis , ch2m hill released its study of the aquifer system in february 2010. utilizing new models produced by the u.s. geological survey in 2006 and 2008 , the study estimated the total groundwater in storage in the aquifer system to be between 17 and 34 million acre-feet , a quantity on par with lake mead , the nation 's largest surface reservoir . the study also identified a renewable annual supply of native groundwater in the aquifer system currently being lost to evaporation . ch2m hill 's findings , which were peer reviewed by leading groundwater experts , confirmed that the aquifer system could sustainably support the water project . further , and also prior to beginning the formal environmental permitting process , we entered into a memorandum of understanding ( “ mou ” ) with the natural heritage institute ( “ nhi ” ) , a leading global environmental organization committed to protecting aquatic ecosystems , to assist with our efforts to sustainably manage the development of our cadiz/fenner property . as part of this “ green compact ” , we will follow stringent plans for groundwater management and habitat conservation . as discussed in ( 2 ) , above , we entered into environmental cost-sharing agreements with all participating water providers creating a framework for funds to be committed by each participant to share in the costs associated with the ceqa review work . smwd served as the lead agency for the review process , which began in february 2011 with smwd 's issuance of a notice of preparation ( “ nop ” ) of a draft environmental impact report ( “ draft eri ” ) . following two nop public scoping meetings , smwd released the draft eir in december 2011. the draft eir analyzed potential impacts to environmental resources at the water project area , including critical resources of the desert environment such as vegetation , mountain springs , and water and air quality . the analysis of the water project considered peer-reviewed technical reports , independently collected data , existing reports and the project 's state of the art groundwater management , monitoring and mitigation plan ( “ gmmmp ” ) . smwd held a 100-day public comment period for the draft eir , during which smwd hosted two public comment meetings and an informational workshop . in may 2012 , smwd , cadiz and the county of san bernardino also entered into a memorandum of understanding creating the framework for finalizing the gmmmp in accordance with the county 's desert groundwater ordinance . in july 2012 , smwd released the final eir and responses to public comments .
| results of operations ( a ) year ended december 31 , 2014 compared to year ended december 31 , 2013 we have not received significant revenues from our water resource and real estate development activity to date . our revenues have been limited to our agricultural operations . as a result , we continue to incur a net loss from operations . we had revenues of $ 336 thousand for the year ended december 31 , 2014 , and $ 301 thousand for the year ended december 31 , 2013. the net loss totaled $ 18.9 million for the year ended december 31 , 2014 , compared with a net loss of $ 22.7 million for the year ended december 31 , 2013. our primary expenses are our ongoing overhead costs associated with the development of the water project ( i.e. , general and administrative expense ) and our interest expense . we will continue to incur non-cash expense in connection with our management and director equity incentive plans . revenues . revenue totaled $ 336 thousand during the year ended december 31 , 2014 , compared to $ 301 thousand during the year ended december 31 , 2013. cost of sales . cost of sales totaled $ 357 thousand during the year ended december 31 , 2014 , compared with $ 555 thousand during the year ended december 31 , 2013. the lower cost of sales for the year ended december 31 , 2014 , related largely to the lower lemon harvest related to the smaller size of the 2014 lemon crop . general and administrative expenses . general and administrative expenses during the year ended december 31 , 2014 , totaled $ 10.1 million compared with $ 13.5 million for the year ended december 31 , 2013. non-cash compensation costs related to stock and option awards are included in general and administrative expenses .
| 7,137 |
fee and other income includes management fees recorded in the period earned based on a percentage of collected revenue at the properties under management . fee income derived from the company 's unconsolidated joint venture investments is recognized to the extent attributable to the unaffiliated ownership interest . ancillary and other property-related income , primarily composed of leasing vacant space to temporary story_separator_special_tag executive summary the company is a self-administered and self-managed real estate investment trust ( reit ) in the business of acquiring , owning , developing , redeveloping , expanding , leasing and managing shopping centers . in addition , the company engages in the origination and acquisition of loans and debt securities collateralized directly or indirectly by shopping centers . as of december 31 , 2013 , the company 's portfolio consisted of 416 shopping centers ( including 173 shopping centers owned through joint ventures ) in which the company had an economic interest . these properties consist of shopping centers and enclosed malls owned in the united states , puerto rico and brazil . at december 31 , 2013 , the company owned and managed more than 115 million total square feet of gross leasable area ( gla ) , which includes all of the aforementioned properties . these amounts do not include 25 assets that the company has a nominal interest in and has not managed since january 1 , 2012. the company also owns more than 1,300 acres of undeveloped land , including an interest in land in canada and russia . at december 31 , 2013 , the aggregate occupancy of the company 's operating shopping center portfolio in which the company has an economic interest was 92.2 % , as compared to 91.5 % at december 31 , 2012. the company owned 452 shopping centers ( including 209 shopping centers owned through joint ventures ) at december 31 , 2012. the average annualized base rent per occupied square foot was $ 14.18 at december 31 , 2013 , as compared to $ 13.66 at december 31 , 2012. current strategy the company has positioned itself for growth after considerable progress in recent years recycling capital , enhancing the quality of the portfolio and improving the balance sheet . the company issued $ 827.3 million of common equity in 2013 to selectively acquire prime assets ( i.e. , market-dominant shopping centers with high-quality tenants located in attractive markets with strong demographic profiles , which are referred to as prime portfolio or prime assets ) . the company seeks to acquire prime assets that will improve portfolio quality , credit quality of cash flows and property-level operating results . the company will also seek to simplify its structure by selectively acquiring its partners ' economic interest in prime power centers currently held in joint ventures . to advance these initiatives and further upgrade portfolio quality , the company recently created a portfolio management department to identify asset-level opportunities , risks , competition and trends . in addition to transactional activity , growth opportunities include continued lease-up of the portfolio , selective ground-up development and a redevelopment pipeline with over $ 500 million of identified strategic opportunities . these strategic opportunities include small shop consolidation to accommodate high credit quality national and regional tenants , as well as downsizing of junior anchors in order to enhance the merchandising mix of the assets , provide retailers with the preferred footprint and generate higher blended rents . the following set of core competencies is expected to continue to benefit the company : strong tenant relationships with the nation 's leading retailers , maintained through a national tenant account program ; an internal anchor store leasing department solely dedicated to aggressively identifying opportunities to re-tenant vacant anchor space ; a retail partnership group to optimize portfolio management by enhancing communication between retailers , the leasing department and other areas of the company ; an investment group focused on selectively acquiring well-located , quality shopping centers that have leases at below-market rental rates or other cash flow growth or capital appreciation 43 potential where the company 's financial strength , relationships with retailers and management capabilities can enhance value and sourcing these acquisitions through identifying buyers for non-core assets ; a portfolio management department tasked with constructing the optimal portfolio to achieve long-term growth and value creation after capital expenditures ; a redevelopment department focused on identifying viable projects with attractive returns ; a capital markets department with broad and diverse relationships with capital providers to facilitate access to secured and unsecured , public and private capital ; an experienced funds management team dedicated to generating consistent returns and disclosure for institutional partners ; a development department adhering to disciplined standards for development and redevelopment and a focus on growth and value creation within the prime portfolio , from which approximately 92 % of the company 's net operating income ( defined as property-level revenues less property-level operating expenses ) is generated . story_separator_special_tag style= '' font-family : arial '' > ( 3 ) includes bed bath & beyond , cost plus world market , buybuy baby and christmas tree shops ( 4 ) includes office depot and officemax ( 5 ) includes dick 's sporting goods and golf galaxy ( 6 ) includes ross dress for less and dd 's discounts ( 7 ) includes kroger , harris teeter and king soopers occupancy was 92.2 % at december 31 , 2013 , an improvement of 70 basis points from the end of 2012. during 2013 , the company continued to sign a large number of new leases with over 10 million square feet leased as reflected below : 46 the company leased approximately 10.3 million square feet , including 778 new leases and 941 renewals , for a total of 1,719 leases . the company continued to execute both new leases and renewals at positive rental spreads . story_separator_special_tag the company defers loan origination and commitment fees , net of origination costs , and amortizes them over the term of the related loan . the company evaluates the collectability of both principal and interest on each loan based on an assessment of the underlying collateral value to determine whether it is impaired , and not by the use of internal risk ratings . a loan is considered to be impaired when , based upon current information and events , it is probable that the company will be unable to collect all amounts due according to the existing contractual terms , and the amount of loss can be reasonably estimated . when a loan is considered to be impaired , the amount of loss is calculated by comparing the recorded investment to the value of the underlying collateral . as the underlying collateral for a majority of the notes receivable is real estate-related investments , the same valuation techniques are used to value the collateral as those used to determine the fair value of real estate investments for impairment purposes . given the small number of loans outstanding , the company does not provide for an additional allowance for loan losses based on the grouping of loans , as the company believes the characteristics of the loans are not sufficiently similar to allow an evaluation of these loans as a group . as such , all of the company 's loans are evaluated individually for this 48 purpose . interest income on performing loans is accrued as earned . a loan is placed on non-accrual status when , based upon current information and events , it is probable that the company will not be able to collect all amounts due according to the existing contractual terms . interest income on non-performing loans is generally recognized on a cash basis . recognition of interest income on an accrual basis on non-performing loans is resumed when it is probable that the company will be able to collect amounts due according to the contractual terms . consolidation the company has a number of joint venture arrangements with varying structures . the company consolidates entities in which it owns less than a 100 % equity interest if it is determined that it is a variable interest entity ( vie ) and the company has a controlling financial interest in that vie , or is the controlling general partner . the analysis to identify whether the company is the primary beneficiary of a vie is based upon which party has ( a ) the power to direct activities of the vie that most significantly affect the vie 's economic performance and ( b ) the obligation to absorb losses or the right to receive benefits that could potentially be significant to the vie . in determining whether it has the power to direct the activities of the vie that most significantly affect the vie 's performance , the company is required to assess whether it has an implicit financial responsibility to ensure that a vie operates as designed . this qualitative assessment has a direct impact on the company 's financial statements , as the detailed activity of off-balance sheet joint ventures is not presented within the company 's consolidated financial statements . real estate and long-lived assets properties are depreciated using the straight-line method over the estimated useful lives of the assets . the company is required to make subjective assessments as to the useful lives of its properties to determine the amount of depreciation to reflect on an annual basis with respect to those properties . these assessments have a direct impact on the company 's net income . if the company were to extend the expected useful life of a particular asset , it would be depreciated over more years and result in less depreciation expense and higher annual net income . on a periodic basis , management assesses whether there are any indicators that the value of real estate assets , including land held for development and construction in progress , and intangibles may be impaired . a property 's value is impaired only if management 's estimate of the aggregate future cash flows ( undiscounted and without interest charges ) to be generated by the property are less than the carrying value of the property . the determination of undiscounted cash flows requires significant estimates by management . in management 's estimate of cash flows , it considers factors such as expected future operating income ( loss ) , trends and prospects , the effects of demand , competition and other factors . if the company is evaluating the potential sale of an asset or development alternatives , the undiscounted future cash flows analysis is probability-weighted based upon management 's best estimate of the likelihood of the alternative courses of action . subsequent changes in estimated undiscounted cash flows arising from changes in anticipated actions could affect the determination of whether an impairment exists and whether the effects could have a material impact on the company 's net income . to the extent an impairment has occurred , the loss will be measured as the excess of the carrying amount of the property over the fair value of the property . the company is required to make subjective assessments as to whether there are impairments in the value of its real estate properties and other investments . these assessments have a direct impact on the company 's net income because recording an impairment charge results in an immediate negative adjustment to net income . 49 the company allocates the purchase price to assets acquired and liabilities assumed at the date of acquisition . in estimating the fair value of the tangible and intangible assets and liabilities acquired , the company considers information obtained about each property as a result of its due diligence , marketing and leasing activities . it applies various valuation methods , such as estimated cash flow projections using appropriate discount and capitalization rates , estimates of replacement costs net of depreciation and available market information .
| transaction and capital markets highlights during 2013 , the company completed approximately $ 2.8 billion of transactions and financing activity , including the following : completed $ 2.33 billion of prime shopping center acquisitions and $ 433.2 million of non-prime asset dispositions . ddr 's share of these acquisitions and dispositions was $ 1.92 billion and $ 296.0 million , respectively ; acquired the remaining 95 % interest in 30 prime assets from its existing joint venture with affiliates of the blackstone group l.p. ( collectively blackstone ) for $ 1.46 billion , not including working capital , ( the blackstone acquisition ) , included in the acquisition amounts above ; issued $ 827.3 million of common equity at an average price of $ 18.76 per share to fund the net investment in prime assets ; issued $ 150 million , 6.25 % class k cumulative redeemable preferred shares to redeem $ 150 million , 7.375 % class h cumulative redeemable preferred shares ; issued $ 300 million , 10-year , 3.375 % senior unsecured notes , with net proceeds used to fund the blackstone acquisition ; issued $ 300 million , 7-year , 3.50 % senior unsecured notes , with net proceeds used to repay debt under its unsecured revolving credit facility ; opportunistically accessed attractively priced long-term debt with the proactive refinancing of the company 's credit facilities and secured term loan in advance of maturity .
| 7,138 |
actual results could differ materially from those discussed in or implied by forward-looking statements as a result of various factors , including those discussed below and elsewhere in this annual report on form 10-k , particularly in the section entitled “ risk factors. ” overview we are a specialty pharmaceutical company that focuses primarily on developing , manufacturing , marketing and selling technically-challenging generic and proprietary injectable , inhalation , and intranasal products . additionally , in 2014 , we commenced sales of insulin api products . we currently manufacture and sell 18 products including amphadase ® , which we re-launched in the fourth quarter of 2015. additionally , we are developing a portfolio of 12 generic abbreviated new drug applications , or andas , three generic biosimilar and six proprietary injectable and inhalation product candidates . our largest product by net revenues is currently enoxaparin sodium injection , the generic equivalent of sanofi s.a. 's lovenox ® . enoxaparin is a difficult to manufacture injectable form of low molecular weight heparin that is used as an anticoagulant and is indicated for multiple indications , including the prevention and treatment of deep vein thrombosis . w e have agreements with established group purchasing organizations and wholesaler network s to distribute enoxaparin , which is marketed under our own label for the hospital and clinic market . for the u.s. retail market , we have an agreement with allergan plc , or a llergan , to distribute enoxaparin , which is marketed under actavis ' label . in june 2015 , we received approval of our new drug application , or nda , supplement for amphadase ® . this marks the first approved starting material from anp and signifies that our facility located in nanjing , china has been qualified by the u.s. food and drug administration , or fda . we re-launched amphadase ® in the fourth quarter of 2015. amphadase ® is competing in the hyaluronidase market and is used for the dispersion and absorption of other injected drugs . our pipeline of 21 generic and proprietary product candidates is in various stages of development and target s a variety of indications . with respect to these product candidates , we have three andas and one nda on file with the fda . in march 2016 , we acquired fourteen andas , representing eleven different injectable chemical entities from hikma pharmaceuticals plc . we plan to transfer the product candidates to our facilities in california , which will require fda approval before the product candidates can be launched . to complement our internal growth and expertise , we have made several strategic acquisitions of companies , products and technologies . these acquisitions collectively have strengthened our core injectable and inhalation product technology infrastructure by providing additional manufacturing , marketing and research and development capabilities including the ability to manufacture raw materials , apis and other components for our products . business segments our performance will be assessed and resources will be allocated based on the following two reportable segments : ( 1 ) finished pharmaceutical products and ( 2 ) active pharmaceutical ingredients , or api products . the finished pharmaceutical products segment currently manufactures , markets and distributes enoxaparin , cortrosyn ® , amphadase ® , naloxone , lidocaine jelly as well as various other critic al and non-critical care drugs . the api segment currently manufactures and distributes recombinant human insulin and porcine insulin . information reported herein is consistent with how it is reviewed and evaluated by our chief operating decision maker . factors used to identify our segments include markets , customers and products . 71 for more information regarding our segments , see `` part ii – item 8. financial statements and supplementary data – notes to consolidated financial statements – segment reporting information . '' story_separator_special_tag style= '' margin:0pt ; text-align : center ; line-height:100 % ; font-family : times new roman , times , serif ; font-size : 10pt ; '' > 2015 2014 dollars % ( in thousands ) research and development $ 37,065 $ 28,427 $ 8,638 30 % research and development expenses were $ 37.1 million and $ 28.4 million for the years ended december 31 , 2015 and 2014 , respectively , representing an increase of $ 8 . 6 million , or 30 % . this increase was primarily due to an increase of $ 3.5 million in clinical trial expense , related to our intranasal naloxone product candidate and to our generic pipeline , as well as an increase of $ 2 . 9 million for pre-launch inventory and purchases of materials and other research and development supplies , relating to the approval of amphadase ® , which we re-launched in october 2015 , as well as other costs relating to the development of our intranasal naloxone product candidate . research and development costs consist primarily of costs associated with the research and development of our product candidates , such as salaries and other personnel ‑related expenses for employees involved with research and development activities , manufacturing pre ‑launch inventory , clinical trials , fda fees , testing , operating and lab suppl ies , depreciation and amortization and other related expenses . we expense research and development costs as incurred . we have made , and expect to continue to make , substantial investments in research and development to expand our product portfolio and grow our business . these costs will fluctuate significantly from quarter to quarter based on the timing of various clinical trials , the pre-launch costs associated with new products , and fda filing fees . as we undertake new and challenging research and development projects , we anticipate that the associated annual expenses will increase significantly over the next several years . 73 the following table sets forth our research and development expenses for the years ended december 31 , 201 5 and 201 4 : replace_table_token_9_th provision for income tax benefit replace_table_token_10_th provision for income tax benefit was $ 7 . story_separator_special_tag 4 million to $ 11 6.0 million at december 31 , 2015 compared to $ 135.4 million at december 31 , 2014. the decrease in working capital was primarily due to an accounting standard update , whereby , all deferred tax asset and liabilities are classified as long-term on the balance sheet . we have elected early adoption and have applied the guidance prospectively , therefore prior periods were not adjusted . additionally , the decrease in working capital was due to the payments on long-term debt of $ 9.0 million and capital expenditures of $ 16.0 million , which was partially offset by cash in-flows from operations of $ 1 0 . 7 million and cash provided by option exercises of $ 13 . 5 million . 76 cash flows from operations the following table summarizes our cash flows used in operating , investing , and financing activities for the years ended december 31 , 201 5 , 201 4 and 201 3 . replace_table_token_15_th sources and use of cash operating activities net cash provided by operating activities was $ 1 0 . 7 million for the year ended december 31 , 2015 , which included a net loss of $ 2.8 million . non-cash items are comprised of $ 13.3 million of depreciation and amortization , and $ 12.8 million of share-based compensation expense . this was partially offset by a change of $ 5 . 1 million in operating assets and liabilities and a n $ 8 .0 million change in deferred taxes and other tax related items . investing activities net cash used in investing activities of $ 16.9 million for the year ended december 31 , 2015 was primarily related to $ 16.0 million in purchases of property , machinery , and equipment , including the associated capitalized labor and interest on self-constructed assets . additionally , $ 1.1 million in deposits were made for machinery and equipment . financing activitie s net cash provided by financing activities of $ 2.2 million for the year ended december 31 , 2015 was primarily related to $ 6.8 million in additional borrowings and $ 13 . 5 million from proceeds of stock options exercised . this was partially offset by $ 10 . 5 million relating to the repurchase of our common stock and $ 9.0 million in principal payments on our long-term debt . debt and borrowing capacity our outstanding debt obligations are summarized as follows : replace_table_token_16_th as of december 31 , 2015 , we had $ 30.0 million in unused borrowing capacity under revolving lines of credit with cathay bank and east west bank . 77 indebtedness line of credit facility — due march 2016 in march 2012 , we entered into a $ 10.0 million line of credit facility with east west bank . borrowings under the facility are secured by inventory and accounts receivable . borrowings under the facility bear interest at the prime rate as published by the wall street journal . this facility was to mature in july 2014. in april 2014 , we extended the maturity date to march 2016 . as of december 31 , 2015 , we did not have any amounts outstanding under this facility . revolving l ine of credit — due may 2016 in april 2012 , we entered into a $ 20.0 million revolving line of credit facility with cathay bank . borrowings under the facility are secured by inventory , accounts receivables , and intangibles held by us . the facility bears interest at the prime rate as published by the wall street journal with a minimum interest rate of 4.00 % . this revolving line of credit was to mature in may 2014. in april 2014 , we modified the facility to extend the maturity date to may 2016. as of december 31 , 2015 , we did not have any amounts outstanding under this facility . f inancial covenants u nder lines of credit at december 31 , 2015 , we were in compliance with our debt covenants , which include a minimum current ratio , minimum debt service coverage , minimum tangible net worth , and maximum debt-to-effective-tangible-net-worth ratio , computed on a consolidated basis in some instances and on a separate-company basis in others . at december 31 , 2014 , we were not in compliance with two of our financial covenants with cathay bank . the first one requiring a fixed charge coverage ratio of 1.2 to 1.0 , or greater , and the second one required a minimum debt service coverage ratio of 1.5 to 1.0 , or greater . on march 13 , 2015 , we obtained waivers of these debt covenants for the period ending december 31 , 2014. weighted ‑average interest rates under lines of credit the weighted ‑average interest rates on lines of credit as of december 31 , 2015 and 2014 were 3.8 % and 3.6 % , respectively . acquisition loan with cathay bank — due april 2019 on april 22 , 2014 , in conjunction with our acquisition of merck 's api manufacturing business in é ragny ‑sur ‑epte , france , we entered into a secured term loan with cathay bank as lender . the principal amount of the loan is $ 21.9 million and bears a variable interest rate at the prime rate as published by the wall street journal , with a minimum interest rate of 4.00 % . beginning on june 1 , 2014 and through the maturity date , april 22 , 2019 , we must make monthly payments of principal and interest equal to the then outstanding amount of the loan amortized over a 120 ‑month period . on april 22 , 2019 , all amounts outstanding under the loan become due and payable , which would be approximately $ 12.0 million based upon an interest rate of 4.00 % . the loan is secured by 65 % of the issued and outstanding shares of stock in amphastar france pharmaceuticals s . a . s .
| results of operations year ended december 31 , 201 5 c ompared to year ended december 31 , 201 4 net revenues replace_table_token_7_th net revenues were $ 2 51.5 million and $ 210.5 million for the years ended december 31 , 2015 and 2014 , respectively , representing an increase of $ 41.1 million , or 20 % . the increase was primarily due to an increase in sales of other finished pharmaceutical products largely due to an increase in sales of naloxone to $ 38.6 million from $ 19.2 million , as a result of increased unit volumes at higher average prices . additionally , we increased sales of phytonadione , epinephrine , lidocaine , and atropine , as a result of higher average prices . o ur insulin api business , which we acqu ired from merck in april 2014 , had increase d sales of recombinant human insulin , or rhi and porcine insulin by $ 1 4 . 6 million due to sales of rhi to mannkind . this was partially offset by a decrease of s ales of enoxaparin , which decreased $ 23.0 million to $ 84.5 million on higher unit volumes at lower average selling prices . we expect that the declines in the average selling price of enoxaparin will continue and that unit volume will decline in the near term as an additional competitor , teva , launched a competing enoxaparin product in february 2015. we believe this trend will be partially offset by pricing increases on several other finished pharmaceutical products . net revenues would also be impacted if sales of our products were affected by any manufacturing or production issues , supply chain interruptions or unexpected regulatory issues . although quarterly sales may fluctuate , we anticipate that sales of insulin api will de crease due to reduced sales of rhi to mannkind .
| 7,139 |
as of december 31 , 2017 , we considered the declines in market value of our investment portfolio to be temporary in nature and did not consider any of our investments to be other-than-temporarily impaired . we typically invest in highly-rated securities with a minimum credit rating of a- and a weighted average maturity of five months , and our investment policy generally limits the amount of credit exposure to any one issuer . the policy requires investments generally to be investment grade 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 related notes included in part ii , item 8 , “ consolidated financial statements and supplementary data ” of this annual report on form 10-k . in addition to historical consolidated financial information , the following discussion contains forward-looking statements that reflect our plans , estimates , and beliefs . our actual results could differ materially from those discussed in the forward-looking statements . see the “ note about forward-looking statements ” for additional information . factors that could cause or contribute to these differences include those discussed below and elsewhere in this annual report on form 10-k , particularly in part i , item 1a , “ risk factors. ” overview chegg is the smarter way to student . as the leading direct-to-student learning platform , we strive to improve educational outcomes by putting the student first in all our decisions . we support students on their journey from high school to college and into their career with tools designed to help them pass their test , pass their class , and save money on required materials . our services are available online , anytime and anywhere , so we can reach students when they need us most . students subscribe to our digital products and services , which we collectively refer to as chegg services . these include chegg study , chegg writing , chegg tutors , brand partnership , test prep and internships . our chegg study service provides step-by-step textbook solutions and expert answers , helping students with their course work . when students need help creating citations for their papers , they can use one of our chegg writing properties , including easybib , citation machine , bibme , citethisforme , and normasapa . when students need additional help on a subject , they can reach a live tutor online , anytime , anywhere through chegg tutors . we work with leading brands to provide students with discounts , promotions , and other products . we provide access to internships to help students gain skills and experiences that are critical to securing their first job . we provide students with an online adaptive test preparation service currently covering the act and sat exams and , in august 2017 , we entered into a partnership with kaplan test prep ( kaplan ) to provide their test prep courses , practice products , and books through our website . additionally , chegg and kaplan recently launched co-branded new test prep programs starting as low as $ 99. through our strategic partnership with ingram content group ( ingram ) , we offer required materials , which includes an extensive print textbook and etextbook library for rent and sale , helping students save money compared to the cost of buying new . to deliver services to students , we partner with a variety of third parties . we source print textbooks , etextbooks , and supplemental materials directly or indirectly from thousands of publishers in the united states , including pearson , cengage learning , mcgraw hill , wiley , and macmillan . we have a large network of students and professionals who leverage our platform to tutor in their spare time and employers who leverage our platform to post their internships and jobs . in addition , because we have a large student user base , local and national brands partner with us to reach the college and high school demographics . during the years ended december 31 , 2017 , 2016 and 2015 , we generated net revenues of $ 255.1 million , $ 254.1 million and $ 301.4 million , respectively , and in the same periods had net losses of $ 20.3 million , $ 42.2 million and $ 59.2 million , respectively . we plan to continue to invest in our long-term growth , particularly further investment in the technology that powers our learning platform and the development of additional products and services that serve students . our strategy for achieving and maintaining profitability is centered upon our ability to utilize chegg services to increase student engagement with our learning platform . we plan to continue to invest in the expansion of our chegg services to provide a more compelling and personalized solution and deepen engagement with students . in october 2017 , we acquired cogeon gmbh , a privately held online learning company based in berlin , germany that provides adaptive math technology , primarily through its application , math 42. we anticipate this acquisition to increase value to existing subscribers and deepen our reach into the high school market which will allow us to drive further growth in our existing chegg services . in addition , we believe that the investments we have made to achieve our current scale will allow us to drive increased operating margins over time that , together with increased contributions of chegg services products , will enable us to accomplish profitability and become cash-flow positive in the long-term . our ability to achieve these long-term objectives is subject to numerous risks and uncertainties , including our ability to attract , retain , and increasingly engage the student population , intense competition in our markets , the ability to achieve sufficient contributions to revenue from chegg services and other factors described in greater detail in part i , item 1a , “ risk factors. story_separator_special_tag our strategic partnership with ingram has shifted peak revenues in the periods that a student rents a textbook as a result of the immediate revenue recognition as well as our revenue sharing agreement such that we believe our revenues will provide more meaningful insight on a sequential basis going forward . further , while our expenses associated with the print textbook rental business have decreased , our variable expenses related to marketing activities continue to remain highest in the first and third quarter such that our profitability may not provide meaningful insight on a sequential basis . components of results of operations net revenues we derive our revenues from our chegg services , the rental or sale of print textbooks and etextbooks , commissions earned from ingram and other partners from the rental or sale of their textbooks , net of allowances for refunds or charge backs from our payment processors who process payments from credit cards , debit cards and paypal . as of december 2016 , we no longer rent or sell our print textbooks and therefore all revenues from print textbook rental and sale orders from this date forward are commission-based . our chegg services product line includes our chegg study service , our chegg writing service , our chegg tutors service , test prep , through our partnership with kaplan , internship services , brand partnership services that we offer to brands and enrollment marketing services to colleges , through our strategic partnership with nrccua . chegg services are offered to students through weekly , monthly or annual subscriptions , and we recognize revenues ratably over the respective subscription period . enrollment marketing services and brand partnership services are offered either on a subscription or on an a la carte basis . revenues are recognized ratably or as earned over the subscription service period , generally one year . revenues from enrollment marketing services or brand partnership services delivered on an a la carte basis , without a subscription , are recognized when delivery of the respective lead or service has occurred . for these services , we bill the customer at the inception , over the term of the customer arrangement or as the services are performed . upon satisfactory assessment of creditworthiness , we generally grant credit to our enrollment marketing and brand partnership customers with normal credit terms , typically 30 days . we historically generated revenues from the rental of print textbooks and to a lesser extent , through the sales of print textbooks through our website on a just-in-time basis . rental revenues for textbooks that we owned were previously recognized ratably over the term of the rental period , generally two to five months . commissions earned on rental textbooks owned by ingram and other partners are recognized immediately when a book ships to the student . during the year ended december 31 , 2017 , revenues from selling textbooks on a just-in-time basis are commission based as a result of the transition to ingram and other partners . our customers pay for the rental and sale of print textbooks on our website primarily by credit card , resulting in immediate settlement of our accounts receivable . we did not recognize any revenues from the rental or sale of our own print textbooks during the year ended december 31 , 2017 and net revenues from the rental or sale of print textbooks represented 27 % and 54 % of our net revenues in the years ended december 31 , 2016 and 2015 , respectively , reflecting our transition of print textbook rentals to ingram and the increasing growth in our chegg services . revenues from the rental or sale of etextbooks is recognized ratably over the contractual period , generally two to five months or at time of the sale , respectively , and our customers pay for these services through payment processors , resulting in immediate settlement of our accounts receivable . as a result of our strategic partnership with ingram and other partners , we no longer recognize rental revenues or sales revenues from the rental or sale of a print textbook . instead , our services revenues includes a commission on the total transaction amount that we earn from ingram and other partners upon ingram 's fulfillment of a rental transaction using books for which ingram or other partner has title and risk of loss , as opposed to the total rental transaction amount . when deciding the most appropriate basis for presenting revenues or costs of revenues , both the legal form and substance of the agreement between us and our business partners are reviewed to determine each party 's respective role in the 41 transaction . where our role in a transaction is that of principal , revenues are recognized on a gross basis . this requires revenue to comprise the gross value of the transaction billed to the customer , after trade discounts , with any related expenditure charged as a cost of revenues . where our role in a transaction is that of an agent , revenues are recognized on a net basis with revenues representing the margin earned . in relation to our partnership with ingram and other partners and the rental and sale of print textbooks , we recognize revenues on a net basis based on our role in the transaction as an agent . deferred revenue primarily consists of advance payments from students and customers related to rentals and subscriptions that have not been recognized and marketing services that have yet to be performed . deferred revenue is recognized as revenues ratably over the term or when the services are provided and all other revenue recognition criteria have been met . cost of revenues our cost of revenues consists primarily of expenses associated with the delivery and distribution of our products and services .
| results of operations the following table summarizes our historical consolidated statements of operations ( in thousands , except percentage of total net revenues ) : replace_table_token_4_th 44 years ended december 31 , 2017 , 2016 and 2015 net revenues net revenues in the year ended december 31 , 2017 increased $ 1.0 million , remaining relatively flat , compared to the same period in 2016 . rental revenues decreased $ 39.8 million , or 100 % , while services revenues increased $ 72.7 million , or 40 % , and sales revenues decreased $ 31.9 million , or 100 % . net revenues in the year ended december 31 , 2016 decreased $ 47.3 million , or 16 % , compared to the same period in 2015. rental revenues decreased $ 80.5 million or 67 % , while services revenues increased $ 49.3 million , or 37 % , and sales revenues decreased $ 16.1 million , or 34 % . the decrease in rental revenues and sales revenues during the years ended december 31 , 2017 and 2016 was due to our strategic partnership with ingram . as a result of our strategic partnership , our rental revenues and sales revenues are classified as services revenues to represent the commission on the total transaction amount that we earn from ingram upon their fulfillment of a rental transaction using books for which ingram has title and risk of loss rather than recognizing the total rental or sales revenues from transactions using our print textbooks . the increase in services revenues during the years ended december 31 , 2017 and 2016 was driven primarily from growth across our other offerings for students which included increased revenues from chegg study and chegg writing services as well as an increase in the commissions earned from ingram .
| 7,140 |
we operate the most extensive intermodal network in the east and are a major transporter of coal , automotive and industrial products . our 2016 results reflect our progress and commitment to achieving the goals set forth in our strategic plan . through a disciplined cost-control focus , we achieved a record-setting railway operating ratio ( a measure of the amount of operating revenues consumed by operating expenses ) of 68.9 % and delivered approximately $ 250 million of productivity savings , despite the economic challenges that continue to affect our industry . operational improvements allowed us to maintain near all-time best service levels and achieve high levels of network fluidity , which improved train performance and asset utilization . in addition to these improvements , the implementation of multiple cost-control initiatives drove savings in operating expenses across all categories . in 2017 , we expect to maintain high levels of service and see continued improvement in our operating ratio . railway operating revenues are expected to increase , driven by volume growth in our coal and intermodal markets , in addition to higher average revenue per unit , a result of pricing gains and fuel surcharge revenue increases largely driven by higher expected fuel prices . railway operating expenses are expected to increase next year , driven in large part by medical and wage inflation as well as volume-related expenses , offset in part by the continuation of targeted expense reductions as we balance resources with the demand for our high-quality rail service . we continue to focus on executing our strategic plan and remain committed to maintaining our strong levels of rail service , generating higher returns on capital , and increasing the efficiency of our resources . story_separator_special_tag style= '' page-break-after : always '' / > one of our chemical customers , sunbelt chlor alkali partnership ( sunbelt ) , filed a rate reasonableness complaint before the stb alleging that our tariff rates for transportation of regulated movements are unreasonable . since april 1 , 2011 , we have been billing and collecting amounts based on the challenged tariff rates . in 2014 , the stb resolved this rate reasonableness complaint in our favor . in june 2016 , the stb resolved petitions for reconsideration . the matter remains decided in our favor ; however , the findings are still subject to appeal . we believe the estimate of any reasonably possible loss will not have a material effect on our financial position , results of operations , or liquidity . with regard to rate cases , we record adjustments to revenues in the periods if and when such adjustments are probable and reasonably estimable . agriculture , consumer products , and government revenues increased for both years , compared with the years before . the improvement in 2016 was driven by higher average revenue per unit primarily the result of pricing gains , offset in part by lower fuel surcharge revenues . volumes decreased for the year driven by weaker demand for feed shipments and the effects of customer sourcing changes on corn volumes , offset in part by an increase in soybean export shipments and higher food oil volumes driven by service improvements . the increase in 2015 was the result of more ethanol shipments due to higher gasoline consumption , offset in part by lower fuel surcharge revenues and fewer revenue shipments of empty rail cars as part of the conclusion of a hopper re-body program . for 2017 , agriculture , consumer products , and government revenues are expected to increase , driven by more shipments of corn and feed products , and by increased average revenue per unit , primarily a result of pricing gains . metals and construction revenues were up slightly in 2016 after falling in 2015 , compared with the prior years . the increase in 2016 was driven by higher demand for aggregates and iron and steel shipments , and more coil steel traffic due to customer sourcing changes . these increases were offset in part by lower demand for materials used in natural gas and oil drilling as a result of depressed commodity prices . average revenue per unit declined for the year , driven by lower fuel surcharge revenues and changes in traffic mix . in 2015 , the decline was driven by a drop in average revenue per unit , largely the result of lower fuel surcharge revenues partially offset by pricing gains , and a decrease in carloads . the volume decline was the result of lower demand for materials used in the construction of pipe for drilling activity , fewer shipments of fractionating sand and ceramic proppant used in natural gas drilling , and declines in scrap metal and coil shipments , resulting from declines in steel production due to global over-supply . these decreases were offset in part by increased shipments of aggregates as a result of higher demand in the southeast for project work and strong highway and construction related markets . for 2017 , metals and construction revenues are expected to increase , as average revenue per unit is expected to be higher , primarily due to changes in the mix of traffic . we also expect volumes to increase next year , driven by growth in steel related products , in addition to higher cement shipments driven by increased construction activity . automotive revenues rose in 2016 after falling in 2015 , compared with the prior years . for 2016 , volumes increased as a result of higher automotive parts shipments and growth in the production of north american light vehicles . average revenue per unit declined for the year , driven by lower fuel surcharge revenues offset in part by pricing gains . the decline in 2015 reflected a drop in average revenue per unit primarily due to lower fuel surcharge revenues , offset in part by pricing gains . volumes increased for the year , driven by gains in production of north american light vehicles . story_separator_special_tag the 2015 decrease reflected volume losses related to plant curtailments and sourcing shifts resulting from steel producers looking for opportunities to reduce costs that were offset in part by market share gains . for 2017 , domestic metallurgical coal tonnage is expected to remain relatively flat as customer-specific gains will offset losses from sourcing shifts and supply issues driven by increased demand in export markets . industrial coal tonnage dropped in both years , compared with the prior periods . both years reflected volume losses related to natural gas conversions and decreased coal burn , both of which accelerated in 2016. in addition , 2016 volumes were further affected by a partial plant closure that took place in the first half of the year . for 2017 , industrial coal tonnage is expected to decrease driven by continued pressure from natural gas conversions and customer sourcing changes . railway operating expenses railway operating expenses summarized by major classifications were as follows : replace_table_token_18_th in 2016 , we experienced decreases across all categories driven largely from cost-control initiatives , lower fuel expense , the absence of restructuring costs incurred in 2015 , and service improvements . in 2015 , decreases in fuel costs and incentive compensation were offset in part by costs associated with the tcs restructuring and closure of our roanoke , virginia corporate office , in addition to higher wage rates . k 25 compensation and benefits decreased in 2016 , compared to 2015 , reflecting changes in : employee levels , including decreased overtime and trainees ( down $ 184 million ) , pension costs ( down $ 38 million ) payroll taxes ( down $ 27 million ) , labor agreement payments in 2015 ( $ 24 million ) , pay rates ( up $ 34 million ) , health and welfare benefit costs for agreement employees ( up $ 35 million ) , which reflected higher rates , offset in part by favorability from reduced headcount , and bonus accruals ( up $ 59 million ) . in 2015 , compensation and benefits increased slightly , a result of changes in : pay rates ( up $ 83 million ) , payroll taxes ( up $ 37 million ) , labor agreement payments ( $ 24 million ) , employee levels , including overtime and increased trainees ( up $ 21 million ) , and incentive compensation ( down $ 151 million ) . our employment averaged 28,044 in 2016 , compared with 30,456 in 2015 , and 29,482 in 2014 . looking forward to 2017 , we expect higher compensation and benefit expenses , a result of wage increases , medical cost inflation and higher levels of incentive compensation . we anticipate that cost-control initiatives will keep employment levels flat notwithstanding expected volume increases . purchased services and rents includes the costs of services purchased from outside contractors , including the net costs of operating joint ( or leased ) facilities with other railroads and the net cost of equipment rentals . replace_table_token_19_th the 2016 decrease in purchased services expense reflected lower tcs operational costs , reduced repair and maintenance expenses , and decreased transportation activity costs , offset in part by higher volume-related costs in intermodal operations . the increase in 2015 reflected higher costs associated with intermodal operations , information technology , maintenance and repair , and the roanoke , virginia corporate office closure , partially offset by tcs restructuring-related savings . equipment rents , which includes our cost of using equipment ( mostly freight cars ) owned by other railroads or private owners less the rent paid to us for the use of our equipment , decreased in 2016 largely from improved network velocity , offset in part by higher rates and conventional intermodal volumes . the 2015 increase was principally due to higher automotive and intermodal rates and volumes . fuel expense , which includes the cost of locomotive fuel as well as other fuel used in railway operations , decreased in both 2016 and 2015 compared with the prior years . both declines were principally the result of lower locomotive fuel prices ( down 18 % in 2016 and 40 % in 2015 ) . locomotive fuel consumption decreased 5 % in 2016 and 1 % in 2015. we consumed approximately 462 million gallons of diesel fuel in 2016 , compared with 487 million gallons in 2015 and 494 million gallons in 2014. k 26 depreciation expense decreased in 2016 , but increased in 2015 , compared to prior years , a result of the effects of the tcs restructuring . in 2015 we recognized $ 63 million in accelerated depreciation on tcs assets as a result of the restructuring . both periods also reflect growth in our roadway and equipment capital base as we continue to invest in our infrastructure and rolling stock . materials and other expenses decreased in 2016 but increased in 2015 , as shown in the following table . replace_table_token_20_th in 2016 , lower materials and other expenses more than offset higher costs for casualties and other claims . material usage costs declined for the year primarily driven by lower locomotive , roadway and freight car repair costs associated with cost-control initiatives and improved asset utilization . casualties and other claims expenses include the estimates of costs related to personal injury , property damage , and environmental matters . the increase in 2016 was primarily driven by higher derailment expenses . the small rise in 2015 reflected less favorable personal injury reserve adjustments for prior years ' claim amounts , offset in part by reduced environmental remediation costs as a result of less unfavorable development for our environmental liability . other expense this year reflected $ 37 million of gains from the sale of operating land . both year-over-year variances were affected by higher than normal expenses in 2015 relocating employees in connection with the closure of our roanoke , virginia office . the 2015 increase also included higher travel costs for train service employees and higher property taxes .
| summarized results of operations replace_table_token_11_th the increase in net income for 2016 , compared to 2015 , was driven by higher income from railway operations , as railway operating expense decreases ( down $ 813 million , or 11 % ) more than offset declines in railway operating revenues ( down $ 623 million , or 6 % ) . the decrease in net income for 2015 , compared to 2014 , reflected lower income from railway operations , driven by a sharp decline in railway operating revenues ( down $ 1.1 billion , or 10 % ) offset in part by lower railway operating expenses ( down $ 422 million , or 5 % ) . the 2015 results include $ 93 million of costs associated with the restructuring of our triple crown services ( tcs ) subsidiary and the closure of our roanoke , virginia corporate office , which reduced net income by $ 58 million , or $ 0.19 per diluted share . k 19 detailed results of operations railway operating revenues the following tables present a three-year comparison of revenues , volumes ( units ) , and average revenue per unit by market group . replace_table_token_12_th replace_table_token_13_th replace_table_token_14_th k 20 revenues decrease d $ 623 million in 2016 and $ 1.1 billion in 2015 . as reflected in the table below , both declines resulted from lower average revenue per unit and reduced volume . in 2016 , the effects of reduced fuel surcharges and changes in traffic mix more than offset price increases . volume decreases were primarily driven by reductions in energy-related markets and the restructuring of our tcs subsidiary . for 2015 , a large drop in fuel surcharge revenues more than offset pricing gains to drive average revenue per unit lower . the volume decline was driven by continued weakness in the coal markets .
| 7,141 |
the increase in the valuation allowance of $ 24 . 2 million , $ 1 8 . 3 million and story_separator_special_tag you should read the following discussion and analysis of our financial condition and results of operations together with our consolidated financial statements and related notes appearing elsewhere in this annual report on form 10 ‑k . the following discussion contains forward ‑looking statements that involve risks and uncertainties . our actual results and the timing of certain events could differ materially from those anticipated in these forward ‑looking statements as a result of certain factors , including those discussed below and as set forth under “ risk factors. ” please also refer to the section under heading “ forward ‑looking statement s . ” overview we are a biopharmaceutical company focused on discovering and developing drugs to improve outcomes for patients with cancer . our product candidates utilize a multi-faceted approach to treat cancer by reducing cancer stem cells , enhancing anti-tumor immunity , and modulating the local tumor microenvironment . our most advanced product candidates are vs-6063 , vs-4718 , and vs-5584 . we are currently evaluating these compounds in both preclinical and clinical studies as potential therapies for certain cancers , including lung , ovarian , lymphoma , and pancreatic . we believe that these compounds may be especially beneficial as therapeutics when used in combination with immuno-oncology agents , as well as other current and emerging standard of care treatments in aggressive cancers that have a poorer prognosis and lower overall survival rates when compared to other types of cancer . our most advanced programs target the focal adhesion kinase , or fak , and the pi3k/mtor signaling pathways . fak is a non-receptor tyrosine kinase encoded by the ptk-2 gene that is involved in cellular adhesion and , in cancer , metastatic capability . vs-6063 , which has been assigned the united states adopted name defactinib , and vs-4718 are orally available compounds designed to target cancers through the potent inhibition of fak . the pi3k/mtor signaling pathway plays a central role in cancer proliferation and survival . vs-5584 is an orally available compound that has demonstrated in preclinical studies potent and highly selective activity against class 1 pi3k enzymes ( pan pi3k inhibition ) and dual inhibitory actions against mtorc1 and mtorc2 . vs-6063 is currently being evaluated in a phase 1 study in combination with merck & co. 's pd-1 inhibitor pembrolizumab and gemcitabine in patients with advanced pancreatic cancer , a phase 1/ 1b trial in combination with weekly paclitaxel for patients with ovarian cancer , a phase 2 study in patients with non-small cell lung cancer , a phase 2 trial preceding surgery in mesothelioma , a combination trial of vs - 6063 and vs - 5584 in patients with relapsed mesothelioma , and a recently announced a new phase 1/1b clinical collaboration with pfizer inc. and merck kgaa to evaluate vs-6063 in combination with avelumab , an anti-pd-l1 antibody , in patients with ovarian cancer . vs-6063 has received orphan drug designation for use in mesothelioma and ovarian cancer in the united states , the european union and australia . in addition to vs - 6063 , both our fak inhibitor vs - 4718 and our dual mtorc1/2 and pi3k inhibitor vs - 5584 are in phase 1 clinical trials in patients with advanced cancers either as single agents or in combination with other anti-cancer treatments . our operations to date have been organizing and staffing our company , business planning , raising capital , acquiring and developing our technology , identifying potential product candidates and undertaking preclinical studies and clinical trials for our product candidates . to date , we have not generated any revenues and have financed our operations with net proceeds from the private placement of our preferred stock , our initial public offering in february 2012 , our follow ‑on offerings in july 2013 and january 2015 and sales of our common stock under our at ‑the ‑market equity offering program . as of december 31 , 2015 , we had an accumulated deficit of $ 198.9 million . our net loss was $ 57.9 million , $ 53.4 million and $ 41.2 million for the years ended december 31 , 2015 , 2014 and 2013 , respectively . we expect to incur significant expenses and increasing operating losses for the foreseeable future . we expect our expenses to increase in connection with our ongoing activities , particularly as we continue the research and development and clinical trials of , and seek marketing approval for , our product candidates . in addition , if we obtain marketing approval for any of our product candidates , we expect to incur significant commercialization expenses related to product sales , marketing , manufacturing and distribution . accordingly , we will need to obtain substantial additional funding in connection with our continuing operations . adequate additional financing may not be available to us on acceptable terms , or at all . if we are unable to raise capital when needed or on attractive terms , we would be 74 forced to delay , reduce or eliminate our research and development programs or any future commercialization efforts . we will need to generate significant revenues to achieve profitability , and we may never do so . financial operations overview revenue to date , we have not generated any revenues . our ability to generate product revenues , which we do not expect will occur for several years , if ever , will depend heavily on the successful development and eventual commercialization of our product candidates . research and development expenses research and development expenses consist of costs associated with our research activities , including our drug discovery efforts , and the development of our product candidates . story_separator_special_tag accrued research and development expenses as part of the process of preparing our consolidated financial statements , we are required to estimate our accrued expenses . this process involves reviewing quotations and contracts , identifying services that have been performed on our behalf and estimating the level of service performed and the associated cost incurred when we have not yet been invoiced or otherwise notified of the actual cost . the majority of our service providers invoice us monthly in arrears for services performed or when contractual milestones are met . we make estimates of our accrued expenses as of each balance sheet date in our financial statements based on facts and circumstances known to us at that time . we periodically confirm the accuracy of our estimates with the service providers and make adjustments if necessary . the significant estimates in our accrued research and development expenses include fees paid to cros in connection with research and development activities for which we have not yet been invoiced . we base our expenses related to cros on our estimates of the services received and efforts expended pursuant to quotes and contracts with cros that conduct research and development on our behalf . the financial terms of these agreements are subject to negotiation , vary from contract to contract and may result in uneven payment flows . there may be instances in which payments made to our vendors will exceed the level of services provided and result in a prepayment of the research and development expense . in accruing service fees , we estimate the time period over which services will be performed and the level of effort to be expended in each period . if the actual timing of the performance of services or the level of effort varies from our estimate , we adjust the accrual or prepaid accordingly . although we do not expect our estimates to be materially different from amounts actually incurred , our understanding of the status and timing of services performed relative to the actual status and timing of services performed may vary and could result in us reporting amounts that are too high or too low in any particular period . to date , there have been no material differences between our estimates of such expenses and the amounts actually incurred . stock ‑based compensation we recognize stock ‑based compensation expense for stock options issued to employees based on the grant date fair value of the awards on a straight ‑line basis over the requisite service period . we record stock ‑based compensation expense for stock options issued to non ‑employees based on the estimated fair value of the services received or of the equity instruments issued , whichever is more reliably measured , based on the vesting date fair value of the awards on a straight ‑line basis over the vesting period . we estimate the fair value of stock option awards using the black ‑scholes option ‑pricing model . determining the fair value of share ‑based awards requires the use of subjective assumptions , including the expected term of the award and expected stock price volatility . the assumptions used in determining the fair value of share ‑based awards represent management 's best estimates , which involve inherent uncertainties and the application of management judgment . as a result , if factors change , and we use different assumptions , our share ‑based 77 compensation could be materially different in the future . the risk ‑free interest rate used for each grant is based on a u.s. treasury instrument whose term is consistent with the expected term of the stock option . because we do not have a sufficient history to estimate the expected term , we use the simplified method as described in sab topic 14.d.2 for estimating the expected term . the simplified method is based on the average of the vesting tranches and the contractual life of each grant . because there was no public market for our common stock prior to our initial public offering , we lacked company ‑specific historical and implied volatility information . therefore , we used the historical volatility of a representative group of public biotechnology and life sciences companies with similar characteristics to us . in 2012 , subsequent to our initial public offering , we began to consider including our own historical volatility , based on future expectations . we have not paid and do not anticipate paying cash dividends on our shares of common stock ; therefore , the expected dividend yield is assumed to be zero . we also recognize compensation expense for only the portion of options that are expected to vest . accordingly , we have estimated expected forfeitures of stock options based on our historical forfeiture rate , adjusted for known trends , and used these rates in developing a future forfeiture rate . we have also granted performance ‑based restricted stock units ( rsus ) with terms that allow the recipients to vest in a specific number of shares based upon the achievement of performance ‑based milestones as specified in the grants . share ‑based compensation expense associated with these performance ‑based rsus is recognized if the performance condition is considered probable of achievement using management 's best estimates of the time to vesting for the achievement of the performance ‑based milestones . if the actual achievement of the performance ‑based milestones varies from our estimates , share ‑based compensation expense could be materially different than what is recorded in the period . the cumulative effect on current and prior periods of a change in the estimated time to vesting for performance ‑based rsus will be recognized as compensation cost in the period of the revision , and recorded as a change in estimate . while the assumptions used to calculate and account for share ‑based compensation awards represent management 's best estimates , these estimates involve inherent uncertainties and the application of management 's judgment .
| results of operations in december 2012 , verastem securities company , our wholly owned subsidiary , was incorporated . all financial information presented has been consolidated and includes the accounts of our wholly owned subsidiary . all intercompany balances and transactions have been eliminated in consolidation . comparison of the year ended december 31 , 2015 to the year ended december 31 , 2014 research and development expense . research and development expense for the year ended december 31 , 2015 ( 2015 period ) was $ 40.6 million compared to $ 35.4 for the year ended december 31 , 2014 ( 2014 period ) . the $ 5.2 million increase from the 2014 period to the 2015 period was primarily related to an increase of approximately $ 5.8. million in external cro expense for outsourced biology , chemistry , development and clinical services , which includes our clinical trial costs , a $ 1.4 million increase in personnel related costs , primarily due to increased headcount and salaries ( before our restructuring ) and to restructuring costs associated with the reduction in workforce in october 2015 , and an increase of approximately $ 558,000 in consulting expense . these increases were partially offset by a decrease of $ 1.3 million in stock-based compensation expense , $ 1.2 million in license fees related to the encarta asset purchase in the 2014 period and $ 126,000 in lab supplies . general and administrative expense . general and administrative expense for the 2015 period was 78 $ 17.6 million compared to $ 18.2 million for the 2014 period . the approximate $ 525,000 decrease from the 2014 period to the 2015 period primarily resulted from a decrease of approximately $ 1.1 million in stock-based compensation expense and a decrease in professional fees of approximately $ 446,000 , primarily related to lower ip and general legal costs .
| 7,142 |
the following discussion and analysis of our financial condition and results of operations should be read in conjunction with our “ selected consolidated financial data ” and our consolidated financial statements , related notes and other financial information included elsewhere in this annual report on form 10-k. this discussion contains forward-looking statements that involve risks and uncertainties such as our plans , objectives , expectations and intentions . as a result of many important factors , including those set forth in the section captioned “ risk factors ” and elsewhere in this annual report on form 10-k , our actual results could differ materially from the results described in , or implied by , these forward-looking statements . overview we are a genetic medicines company dedicated to transforming the lives of patients suffering from rare genetic diseases with significant unmet medical needs by curing the underlying cause of the disease . our proprietary platform is designed to utilize our aavhscs to precisely and efficiently deliver single administration genetic medicines in vivo either through a gene therapy or nuclease-free gene editing modality across a broad range of genetic disorders . the unique properties of our proprietary suite of 15 novel aavhscs enable us to focus on a method of gene editing called gene correction , either through the replacement of an entire diseased gene in the genome with a whole functional copy or the precise repair of individual mutated nucleotides , by harnessing the naturally occurring dna repair process of hr . we believe our hr-driven gene editing approach will allow us to efficiently perform gene correction at therapeutic levels without unwanted on- and off-target modifications , and to directly measure and confirm those modifications in an unbiased manner to ensure only the intended changes are made . by utilizing the body 's natural mechanism of correcting gene defects , we also avoid the need for exogenous nucleases , or bacteria-derived enzymes used in other gene editing approaches to cut dna , that are known to significantly increase the risk of unwanted modifications . our diverse set of aavhscs allows us to precisely target , via a single injection , a wide range of disease-relevant tissues , including the liver , cns , bone marrow , lung , muscle and eye , across both modalities—gene editing and gene therapy . we believe these advantages will allow us to safely provide transformative cures using either modality . we have generated compelling preclinical data for our first and lead product candidate , hmi-102 , a gene therapy for the treatment of pku , and expect to advance hmi-102 into a phase 1/2 clinical trial in adult pku patients and report initial clinical data in 2019. we continue to advance our gene editing modality and have generated in vivo preclinical data demonstrating achievement of gene correction efficiencies in the liver that are significantly greater than both nuclease-based and other aav-based approaches and are at a therapeutic level . we have nominated a lead gene editing product development candidate , hmi-103 , for the treatment of pku in pediatric patients . we have also nominated a lead gene therapy cns product development candidate , hmi-202 , for the treatment of mld . we have initiated ind-enabling studies for both programs . we will require additional capital in order to advance hmi-102 and our other product candidates through clinical development and commercialization . our management team has a successful track record of discovering , developing and commercializing therapeutics with a particular focus on rare diseases . our genetic medicines platform is based on gene editing and gene therapy technologies resulting from the pioneering work conducted on aavhscs in the laboratory of coh . we have a robust intellectual property portfolio with issued composition of matter patents in the united states for our suite of 15 aavhscs and we believe the breadth and depth of our intellectual property is a strategic asset that has the potential to provide us with a significant competitive advantage . we continue to build on our intellectual property estate through our ongoing product and platform development efforts . we have internal process development and gmp manufacturing capabilities and recently completed the build-out of a cgmp manufacturing facility to support our clinical development programs in both gene therapy and gene editing expect to commence manufacturing in the first half of 2019. in november 2017 , we entered into a collaboration with novartis to develop new genetic medicines using our hr-based gene correction approach in ophthalmology , which leverages our platform technology into a new therapeutic area . on february 6 , 2019 , novartis elected to discontinue our collaboration on the sickle cell disease program under our agreement effective in august 2019. since our inception in 2015 , we have raised approximately $ 288 million in net proceeds through our initial public offering in april 2018 and preferred stock financings . we believe that our compelling preclinical data , scientific expertise , product development strategy , manufacturing capabilities , and robust intellectual property position us as a leader in the development of genetic medicines . we were incorporated and commenced operations in 2015. since our incorporation , we have devoted substantially all of our resources to organizing and staffing our company , business planning , raising capital , developing our technology platform , advancing our lead product candidate , hmi-102 for the treatment of pku , researching and identifying additional product candidates , developing manufacturing processes , building out our manufacturing and research and development space , 82 enhancing our intellectual property portfolio , and providing general and administrative support for these operations . to date , we have financed our operations primarily through the sale of common stock in our initial public offering , or the ipo , through the sales of preferred stock , and through funding from our collaboration partner . we are a development stage company and our lead product candidate and our research initiatives are all at a preclinical stage of development . story_separator_special_tag if we are unable to raise additional funds through equity or debt financings when needed , we may be required to delay , limit , reduce , or terminate our product development programs or any future commercialization efforts or grant rights to develop and market product candidates that we would otherwise prefer to develop and market ourselves . because of the numerous risks and uncertainties associated with drug development , we are unable to predict when or if we will be able to achieve or maintain profitability . even if we are able to generate revenue from product sales , we may not become profitable . if we fail to become profitable or are unable to sustain profitability on a continuing basis , then we may be unable to continue our operations at planned levels and be forced to reduce or terminate our operations . components of our results of operations revenue to date , we have not generated any revenue from product sales and do not expect to generate any revenue from the sale of products in the foreseeable future . we recorded $ 3.7 million in collaboration revenue for the year ended december 31 , 2018 ( see note 16 to our financial statements for additional information regarding novartis revenue recognition discussion ) . operating expenses our operating expenses since inception have consisted solely of research and development costs and general and administrative costs . research and development expenses research and development expenses consist primarily of costs incurred for our research activities , including our discovery efforts , and the development of our product candidates , and include : salaries , benefits and other related costs , including stock-based compensation expense , for personnel engaged in research and development functions ; expenses incurred under agreements with third parties , including cros and other third parties that conduct research , preclinical activities and clinical trials on our behalf as well as cmos and our internal technical operations team that manufacture our product candidates for use in our preclinical and potential future clinical trials ; costs of outside consultants , including their fees and related travel expenses ; the costs of laboratory supplies and acquiring , developing and manufacturing preclinical study and clinical trial materials ; and facility-related expenses , which include direct depreciation costs and other operating costs . we expense research and development costs as incurred . we typically use our employee and infrastructure resources across our development programs . we track outsourced development costs by product candidate or development program , but we do not allocate personnel costs , license payments made under our licensing arrangements or other internal costs to specific development programs or product candidates . these costs are included in other research and development expenses in the table below . 84 the following table summarizes our research and development expenses by product candidate or development program : replace_table_token_3_th research and development activities are central to our business model . we expect that our research and development expenses will continue to increase substantially for the foreseeable future as we initiate clinical trials of hmi-102 , including our phase 1/2 clinical trial , continue to advance both hmi-103 and hmi-202 through ind-enabling studies and into clinical trials and continue to discover and develop additional product candidates . we can not determine with certainty the duration and costs of future clinical trials of hmi-102 and ind-enabling studies and future clinical trials of our other product candidates in development or any other future product candidate we may develop or if , when , or to what extent we will generate revenue from the commercialization and sale of any product candidate for which we obtain marketing approval . we may never succeed in obtaining marketing approval for any product candidate . the duration , costs and timing of clinical trials and development of hmi-102 , our other product candidates in development and any other future product candidate we may develop will depend on a variety of factors , including : the scope , rate of progress , expense and results of clinical trials of hmi-102 , hmi-103 , hmi-202 , as well as of any future clinical trials of other product candidates and other research and development activities that we may conduct ; uncertainties in clinical trial design and patient enrollment rates ; the actual probability of success for our product candidates , including the safety and efficacy results , early clinical data , competition , manufacturing capability and commercial viability ; significant and changing government regulation and regulatory guidance ; the timing and receipt of any marketing approvals ; and the expense of filing , prosecuting , defending and enforcing any patent claims and other intellectual property rights . a change in the outcome of any of these variables with respect to the development of a product candidate could mean a significant change in the costs and timing associated with the development of that product candidate . for example , if the fda or another regulatory authority were to require us to conduct clinical trials beyond those that we anticipate will be required for the completion of clinical development of a product candidate , or if we experience significant delays in our clinical trials due to patient enrollment or other reasons , we would be required to expend significant additional financial resources and time on the completion of clinical development . general and administrative expenses general and administrative expenses consist primarily of salaries and other related costs , including stock-based compensation , for personnel in our executive , finance , human resources , business development and administrative functions . general and administrative expenses also include legal fees relating to intellectual property and corporate matters ; professional fees for accounting , auditing , tax and consulting services ; insurance costs ; travel expenses ; and facility-related expenses , which include direct depreciation costs , rent expense , maintenance of facilities and other operating costs .
| results of operations comparison of years ended december 31 , 2018 and 2017 the following table summarizes our results of operations for the years ended december 31 , 2018 and 2017 , respectively : replace_table_token_4_th collaboration revenue revenues for the year ended december 31 , 2018 were $ 3.7 million and consisted solely of collaboration revenue under our collaboration agreement with novartis that we entered into in november 2017 , representing the portion of the $ 35.0 million upfront payment and research funding payments that were recognized in the year ended december 31 , 2018. we recognize revenues based on a straight-line basis over the estimated period of performance taking into consideration all upfront payments and research funding payments , under this arrangement , together as a single unit . we did not recognize any revenue in the year ended december 31 , 2017. research and development expenses replace_table_token_5_th research and development expenses for the year ended december 31 , 2018 were $ 47.9 million , compared to $ 21.4 million for the year ended december 31 , 2017. the increase of $ 26.6 million was primarily due to an increase of $ 13.6 million in direct research expenses , primarily cmo costs , related to our hmi-102 program , a $ 9.4 million increase in employee-related costs due to an increase in employee headcount to support our ongoing development programs , research initiatives , technology platform and manufacturing capabilities and a $ 3.6 million increase in other research and development costs related to laboratory supplies , research materials and outside services for the further advancement of our research and development programs .
| 7,143 |
asu 2014-09 is effective for annual reporting periods beginning after december 15 , 2016. the guidance permits companies to either apply the requirements retrospectively to all prior periods presented , or apply the requirements in the year of adoption , through a cumulative adjustment . in july 2015 , the fasb voted to amend asu 2014-09 by approving a one-year deferral of the effective date as well as providing the option to early adopt the standard on the original effective date . the company is in the process of evaluating the timing of its adoption and the impact of adoption on its consolidated financial statements . in august 2014 , the fasb issued amended standards no . 2014-15 , presentation of financial statements - going concern story_separator_special_tag you should read the following discussion of the financial condition and results of our operations in conjunction with our consolidated financial statements and the notes to those statements included elsewhere in this annual report . our consolidated financial statements contained in this annual report are prepared in accordance with u.s. gaap . overview we are a designer , developer and global supplier of a broad portfolio of power semiconductors . our portfolio of power semiconductors includes approximately 1,500 products , and has grown significantly with the introduction of over 100 new products during each of the fiscal years ended june 30 , 2015 , 2014 and 2013 . our teams of scientists and engineers have developed extensive intellectual properties and technical knowledge that encompass major aspects of power semiconductors , which we believe it enables us to introduce and develop innovative products to address the increasingly complex power requirements of advanced electronics . we have an extensive patent portfolio that consists of 517 patents and 193 patent applications in the united states as of june 30 , 2015 . we differentiate ourselves by integrating our expertise in technology , design and advanced manufacturing and packaging to optimize product performance and cost . our portfolio of products targets high-volume applications , including personal computers , flat panel tvs , led lighting , smart phones , battery packs , consumer and industrial motor controls and power supplies for tvs , computers , servers and telecommunications equipment . during the fiscal year ended june 30 , 2015 , we continued our diversification program by developing new silicon and packaging platforms to expand our serviceable available market , or sam and offer higher performance products . our metal-oxide-semiconductor field-effect transistors , or mosfet , portfolio expanded significantly across a full range of voltage applications . for example , during the three months ended june 30 , 2015 , we introduced the new 1200v/1350v e-series igbts optimized for soft-switching applications which delivers high performance by lower switching loss . we also expanded our igbt product portfolio with the release of the 650v m-series . this platform optimizes for superior performance with higher robustness in addition to fast and soft turn-off switching in motor drives . during the three months ended march 31 , 2015 , we released two new mosfets optimized for battery protection applications which are the latest additions to our state-of-the-art alphadfn package portfolio . these devices are specifically targeting one and two cells portable battery pack applications . during the three months ended december 31 , 2014 , we launched new generation ezbuck ( tm ) regulator in a thermally enhanced package . the device offers a low on-resistance power stage in a thermally enhanced 3mm x 3mm dfn package , allowing cooler power conversion for a variety of consumer electronics applications such as lcd tvs , set-top-boxes , as well as dvd players and recorders . we also introduced new 40v 0.99mohm mosfet in a dfn5x6 package during the three months ended december 31 , 2014. the device is to address a wide range of applications including primary-side and secondary-side switching in telecom and industrial dc/dc converters , secondary-side synchronous rectification in dc/dc and ac/dc converters , as well as pol modules for telecom systems . during the three months ended september 30 , 2014 , we rolled out new family of 25-v and 30-v high performance mosfets in compact 3 x 3mm dfn packages . these devices are ideally suited for a variety of dc/dc step-down conversion solutions for personal computing , gaming , servers , and telecom/datacom applications . we also enhanced the ezpower ( tm ) smart load switch portfolio with rapid turn-off fault protection and current monitoring . the device has an operating input voltage range from 5-v to 16-v and is capable of supplying up to 6a of continuous current . a low on-resistance of 23mω in a thermally enhanced 3mm x 3mm dfn package makes the aoz1363 optimal for space-constrained applications that require circuit protection such as the latest notebook pcs , hot swap supplies and micro servers . our business model leverages global resources , including research and development and manufacturing in the united states and asia . our sales and technical support teams are localized in several growing markets . we operate a 200mm wafer fabrication facility located in hillsboro , oregon , or the oregon fab , which is critical for us to accelerate proprietary technology development , new product introduction and improve our financial performance in the long run . to meet the market demand for the more mature high volume products , we also utilize the wafer manufacturing capacity of selected third party foundries . for assembly and test , we primarily rely upon our in-house facilities in china . in addition , we utilize subcontracting partners for industry standard packages . we believe our in-house packaging and testing capability provides us with a competitive advantage in proprietary packaging technology , product quality , cost and sales cycle time . story_separator_special_tag principal line items of statements of income the following describes the principal line items set forth in our consolidated statements of operations : revenue 37 we generate revenue primarily from the sale of power semiconductors , consisting of power discretes and power ics . historically , a majority of our revenue was derived from power discrete products and a smaller amount was derived from power ic products . because our products typically have three-year to five-year life cycles , the rate of new product introduction is an important driver of revenue growth over time . we believe that expanding the breadth of our product portfolio is important to our business prospects , because it provides us with an opportunity to increase our total bill-of-materials within an electronic system and to address the power requirements of additional electronic systems . in addition , a small percentage of our total revenue is generated by providing packaging and testing services to third-parties through one of our subsidiaries . our product revenue includes the effect of the estimated stock rotation returns and price adjustments that we expect to provide to our distributors . stock rotation returns are governed by contract and are limited to a specified percentage of the monetary value of products purchased by the distributor during a specified period . at our discretion or upon our direct negotiations with the original design manufacturers ( `` odms '' ) or original equipment manufacturers ( `` oems '' ) , we may elect to grant special pricing that is below the prices at which we sold our products to the distributors . in these situations , we will grant price adjustments to the distributors reflecting such special pricing . we estimate the price adjustments for inventory at the distributors based on factors such as distributor inventory levels , pre-approved future distributor selling prices , distributor margins and demand for our products . cost of goods sold our cost of goods sold primarily consists of costs associated with semiconductor wafers , packaging and testing , personnel , including share-based compensation expense , overhead attributable to manufacturing , operations and procurement , and cost associated with yield improvements , capacity utilization , warranty and inventory reserves . as the volume of sales increases , we expect cost of goods sold to increase . we implemented a process to improve our factory capacity utilization rates by transferring more wafer production to our oregon fab and reducing our reliance on outside foundries . while our utilization rates can not be immune to the market conditions , our goal is to make them less vulnerable to market fluctuations . we believe our market diversification strategy and product growth will drive higher volume of manufacturing which will improve our factory utilization rates and gross margin in the long run . operating expenses our operating expenses consist of research and development , selling , general and administrative expenses and impairment of long-lived assets . we expect that our total operating expenses will generally increase over time due to our belief that our business will continue to grow . however , our operating expenses as a percentage of revenue may fluctuate from period to period . research and development expenses . our research and development expenses consist primarily of salaries , bonuses , benefits , share-based compensation expense , expenses associated with new product prototypes , travel expenses , fees for engineering services provided by outside contractors and consultants , amortization of software and design tools , depreciation of equipment and overhead costs for research and development personnel . as we continue to invest significant resources in developing new technologies and products , we expect our research and development expenses to increase . selling , general and administrative expenses . our selling , general and administrative expenses consist primarily of salaries , bonuses , benefits , share-based compensation expense , product promotion costs , occupancy costs , travel expenses , expenses related to sales and marketing activities , amortization of software , depreciation of equipment , maintenance costs and other expenses for general and administrative functions as well as costs for outside professional services , including legal , audit and accounting services . we expect our selling , general and administrative expenses to increase as we expand our business . impairment of long-lived assets : long-lived assets or asset groups are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset might not be recoverable . the recoverability of an asset or asset group is assessed by determining if the carrying value of the asset or asset group exceeds the sum of the projected undiscounted cash flows expected to result from the use and eventual disposition of the assets over the remaining economic life . the impairment loss is measured based on the difference between the carrying amount and estimated fair value . income tax expense we are subject to income taxes in various jurisdictions . significant judgment and estimates are required in determining our worldwide income tax expense . the calculation of tax liabilities involves dealing with uncertainties in the application of complex tax regulations of different jurisdictions globally . we establish accruals for potential liabilities and contingencies based on a more likely than not threshold to the recognition and de-recognition of uncertain tax positions . if the recognition 38 threshold is met , the applicable accounting guidance permits us to recognize a tax benefit measured at the largest amount of tax benefit that is more than likely to be realized upon settlement . if the actual tax outcome of such exposures is different from the amounts that were initially recorded , the differences will impact the income tax and deferred tax provisions in the period in which such determination is made . changes in the location of taxable income ( loss ) could result in significant changes in our income tax expense .
| operating results the following tables set forth our results of operations and as a percentage of revenue for the fiscal years ended june 30 , 2015 , 2014 and 2013 . our historical results of operations are not necessarily indicative of the results for any future period . replace_table_token_3_th ( 1 ) includes share-based compensation expense allocated as follows : replace_table_token_4_th revenue the following is a summary of revenue by product type : 39 replace_table_token_5_th fiscal 2015 vs 2014 total revenue was $ 327.9 million for fiscal year 2015 , an increase of $ 9.8 million , or 3.1 % , as compared to $ 318.1 million for fiscal year 2014 . the increase consisted of $ 2.7 million and $ 9.5 million in sales of power discrete products and sales of power ic products , respectively , partially offset by a $ 2.4 million decrease in sales of packaging and testing services . the increase in power discrete and power ic products was primarily due to an 11.0 % increase in unit shipments , partially offset by a 6.3 % decrease in average selling price as compared to the same period of last year mainly due to selling price erosion in the computing and consumer markets and to a lesser extent , a shift in product mix . the decrease in revenue of packaging and testing services as compared to last year was primarily due to reduced demand as a result of the declining pc market . in response to the declining pc market , we have been executing and are continuing to execute strategies to diversify our product portfolio and penetrate into other market segments , which we believe would mitigate and eventually overcome the reduced demand resulting from the declining pc market .
| 7,144 |
this buy-back option is considered a conditional option until the delinquency criteria are met , at which time the option becomes unconditional . when a financial institution is deemed to have regained effective control over these loans under the unconditional buy-back option , the loans can no longer be reported as sold and must be included in the balance sheet as mortgage loans held for sale , regardless of whether the story_separator_special_tag the following discussion and analysis presents our financial condition and results of operations on a consolidated basis . however , we conduct all of our material business operations through our wholly owned bank subsidiary , origin bank , and the discussion and analysis that follows primarily relates to activities conducted at the bank level . the following discussion and analysis should be read in conjunction with our consolidated financial statements and related notes contained in item 8 of this report . to the extent that this discussion describes prior performance , the descriptions relate only to the periods listed , which may not be indicative of our future financial outcomes . in addition to historical information , this discussion contains forward-looking statements that involve risks , uncertainties and assumptions that could cause results to differ materially from management 's expectations . factors that could cause such differences are discussed in the sections titled `` cautionary note regarding forward-looking statements '' and `` item 1a . risk factors . '' we assume no obligation to update any of these forward-looking statements . discussion in this form 10-k includes results of operations and financial condition for 2020 and 2019 and year-over-year comparisons between 2020 and 2019. for discussion on results of operations and financial condition pertaining to 2019 and 2018 and year-over-year comparisons between 2019 and 2018 , please refer to “ management 's discussion and analysis of financial condition and results of operations ” in part ii , item 7 of our annual report on form 10-k for the year ended december 31 , 2019 filed with the sec on february 28 , 2020. critical accounting policies and estimates our consolidated financial statements are prepared in accordance with u.s. gaap and with general practices within the financial services industry . application of these principles requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes . we base our estimates on historical experience and on various other assumptions that we believe to be reasonable under current circumstances . these assumptions form the basis for our judgments about the carrying values of assets and liabilities that are not readily available from independent , objective sources . we evaluate our estimates on an ongoing basis . use of alternative assumptions may have resulted in significantly different estimates . actual results may differ from these estimates . please refer to note 1 - significant accounting policies to our consolidated financial statements contained in item 8 of this report for a full discussion of our accounting policies , including estimates . we have identified the following accounting estimates that , due to the difficult , subjective or complex judgments and assumptions inherent in those estimates and the potential sensitivity of the financial statements to those judgments and assumptions , are critical to an understanding of our financial condition and results of operations . we believe that the judgments , estimates and assumptions used in the preparation of the financial statements are appropriate . allowance for credit losses . effective january 1 , 2020 , we adopted cecl , resulting in a change to the our reporting of credit losses for assets held at amortized cost basis and available for sale debt securities . as a result , we recognized a one-time , after tax cumulative effect adjustment of $ 760,000 to retained earnings at the beginning of the first quarter of 2020 , increasing the allowance for credit losses by approximately $ 1.2 million and decreasing the off-balance sheet reserve by $ 381,000. the allowance for loan credit losses represents the estimated losses for loans accounted for on an amortized cost basis . expected losses are calculated using relevant information about past events , including historical experience , current conditions , and reasonable and supportable forecasts that affect the collectability of the reported amount . we evaluate loans held for investment on a pool basis with pools of loans characterized by loan type , collateral , industry , internal credit risk rating and fico score . the amount of the allowance for loan credit losses is affected by loan charge-offs , which decrease the allowance , recoveries on loans previously charged off , which increase the allowance , as well as the provision for loan credit losses charged to income , which increases the allowance . in determining the provision for loan credit losses , management monitors fluctuations in the allowance resulting from actual charge-offs and recoveries and periodically reviews the size and composition of the loan portfolio in light of current and forecasted economic conditions . if actual losses exceed the amount of allowance for loan credit losses , it could materially and adversely affect our earnings . this evaluation is inherently subjective as it requires estimates that are susceptible to significant revision as more information becomes available . credit losses are charged against the allowance for credit losses when management believes the loss is confirmed . 48 in the first quarter of 2020 , u.s. federal regulatory authorities issued an interim final rule that provides banking organizations that adopt cecl during the 2020 calendar year with the option to delay the regulatory capital impact for up to two years ( beginning january 1 , 2020 ) , followed by a three-year transition period . we have elected to use the two-year delay of cecl 's impact on our regulatory capital ( from january 1 , 2020 through december 31 , 2021 ) followed by the three-year transition period of cecl 's initial impact on our regulatory capital ( from january 1 , 2022 through december 31 , 2024 ) . goodwill . story_separator_special_tag 27.2 million during the current year , compared to $ 44.7 million during the year ended december 31 , 2019 , primarily due to a reduction in deposit rates during the year . the average rate on interest-bearing deposit accounts was 0.52 % for the current year , down from 1.30 % for the year ended december 31 , 2019 , accounting for $ 22.6 million of the decrease in interest expense from the year ended december 31 , 2019. the average rate on time deposits decreased to 1.62 % for the current year ended december 31 , 2020 , down from 2.10 % for the year ended december 31 , 2019 , providing an additional decrease of $ 3.5 million in interest expense . these two rate-driven interest expense declines were offset by a $ 10.5 million increase in interest expense due to an increase in the average balances of savings and interest-bearing transaction accounts when comparing the year ended december 31 , 2020 , to december 31 , 2019. interest income on mortgage warehouse lines of credit increased by $ 11.6 million during the year ended december 31 , 2020 , compared to the year ended december 31 , 2019 , due to higher mortgage activity driven by the low interest rate environment , coupled with additional mortgage warehouse clients being onboarded and funding loans during 2020. there was a 57.7 % increase in mortgage warehouse clients at december 31 , 2020 , when compared to december 31 , 2019. interest income earned on commercial and industrial loans , excluding paycheck protection program ( `` ppp '' ) loans , decreased by $ 14.1 million during the year ended december 31 , 2020 , compared to december 31 , 2019 , primarily due to the impact of lower interest rates . the lower interest rates contributed a $ 24.5 million decrease , which was partially offset by a $ 10.4 million increase due to higher average commercial and industrial loan balances . ppp loans , which were funded beginning in the second quarter of the 2020 year as part of the cares act , contributed an additional $ 9.8 million in interest income during the year ended december 31 , 2020. please see item 1 - lending activities in the business section of the this report for more information on the cares act . 50 the following table presents average balance sheet information , interest income , interest expense and the corresponding average yields earned and rates paid for the years ended december 31 , 2020 , 2019 and 2018. replace_table_token_4_th 51 ( 1 ) nonaccrual loans are included in their respective loan category for the purpose of calculating the yield earned . all average balances are daily average balances . ( 2 ) includes government national mortgage association ( `` gnma '' ) repurchase average balances of $ 37.7 million , $ 26.0 million and $ 30.1 million for the years ended december 31 , 2020 , 2019 and 2018 , respectively . the gnma repurchase asset and liability are recorded as equal offsetting amounts in the consolidated balance sheets , with the asset included in loans held for sale and the liability included in fhlb advances and other borrowings . for more information on the gnma repurchase option , see note 9 - mortgage banking in the notes to our consolidated financial statements . ( 3 ) in order to present pre-tax income and resulting yields on tax-exempt investments comparable to those on taxable investments , a tax-equivalent adjustment has been computed . this adjustment also includes income tax credits received on qualified school construction bonds and income from tax-exempt investments and tax credits were computed using a federal income tax rate of 21 % . 52 rate/volume analysis the following tables present the dollar amount of changes in interest income and interest expense for major components of interest-earning assets and interest-bearing liabilities . it distinguishes between the changes related to outstanding balances and those due to changes in interest rates . the change in interest attributable to rate changes has been determined by applying the change in rate between periods to average balances outstanding in the earlier period . the change in interest due to volume has been determined by applying the rate from the earlier period to the change in average balances outstanding between periods . for purposes of this table , changes attributable to both rate and volume that can not be segregated , including the difference in day count , have been allocated to rate . replace_table_token_5_th 53 replace_table_token_6_th provision for credit losses the provision for credit losses , which includes the provisions for loan losses , off-balance sheet commitments and security credit losses , is based on management 's assessment of the adequacy of our allowance for credit losses ( `` acl '' ) for loans , securities and our reserve for off-balance sheet lending commitments . factors impacting the provision include inherent risk characteristics in our loan portfolio , the level of nonperforming loans and net charge-offs , both current and historic , local economic and credit conditions , the direction of the change in collateral values , reasonable and supportable forecasts , and the funding probability on unfunded lending commitments . the provision for credit losses is charged against earnings in order to maintain our acl , which reflects management 's best estimate of life of loan credit losses inherent in our loan portfolio at the balance sheet date , and our reserve for off-balance sheet lending commitments , which reflects management 's best estimate of losses inherent in our legally binding lending-related commitments . the allowance is increased by the provision for loan credit losses and decreased by charge-offs , net of recoveries . year ended december 31 , 2020 , compared to year ended december 31 , 2019 on january 1 , 2020 , we adopted cecl and recognized a one-time cumulative effect adjustment to the allowance for loan credit losses of $ 1.2 million .
| general total assets increased by $ 2.30 billion , or 43.3 % , to $ 7.63 billion at december 31 , 2020 , from $ 5.32 billion at december 31 , 2019. the increase was primarily attributable to $ 1.58 billion increase in lhfi and $ 503.6 million increase in securities available for sale . loan portfolio our loan portfolio is our largest category of interest-earning assets and interest income earned on our loan portfolio is our primary source of income . at december 31 , 2020 , 74.9 % of the loan portfolio held for investment was comprised of commercial and industrial loans , including ppp loans , mortgage warehouse lines of credit and commercial real estate loans , which were primarily originated within our market areas of texas , north louisiana , and mississippi . 58 the following table presents the ending balance of our loan portfolio held for investment at the dates indicated . replace_table_token_9_th replace_table_token_10_th at december 31 , 2020 , total lhfi were $ 5.72 billion , an increase of $ 1.58 billion , or 38.2 % , compared to $ 4.14 billion at december 31 , 2019. the increase reflected growth in all significant loan categories except for commercial and industrial loans . the largest increases are primarily reflected in mortgage warehouse lines of credit and ppp loans , which increased $ 809.3 million and $ 546.5 million , respectively . the increase in mortgage warehouse lines of credit is primarily due to increased mortgage activity driven by the continued low interest rate environment , coupled with additional mortgage warehouse clients being onboarded and funding loans during 2020. this increased mortgage related activity , as well as market disruption following merger activity by our peers and competitors , has allowed us to add new customers in the warehouse lines of credit portfolio , and caused us to increase limits to support the record volume of loan purchase and refinance activity .
| 7,145 |
our actual results may differ materially from those currently anticipated and expressed in such forward-looking statements as a result of a number of factors , including those we discuss under “ risk factors ” and elsewhere in this report on form 10-k. general overview we are the leading provider of postsecondary education for students seeking careers as professional automotive , diesel , collision repair , motorcycle and marine technicians as measured by total average undergraduate full-time enrollment and graduates . we offer certificate , diploma or undergraduate degree programs at 12 campuses across the united states . we also offer manufacturer specific advanced training programs , including student-paid electives , at our campuses and manufacturer or dealer sponsored training at certain campuses and dedicated training centers . we have provided technical education for 52 years . our revenues consist principally of student tuition and fees derived from the programs we provide and are presented after reductions related to discounts and scholarships we sponsor , refunds for students who withdraw from our programs prior to specified dates and the portion of tuition students have funded through our proprietary loan program . we generally recognize tuition revenue and fees ratably over the terms of the various programs we offer . we supplement our tuition revenues with additional revenues from sales of textbooks and program supplies and other revenues , such as those from brokenmyth studios or other non-title iv sources , all of which are recognized as sales occur or services are performed . in aggregate , these additional revenues represented approximately 2 % or less of our total revenues in each year for the three-year period ended september 30 , 2017 . tuition revenue and fees generally vary based on the average number of students enrolled and average tuition charged per program . average undergraduate full-time student enrollments vary depending on , among other factors , the number of continuing students at the beginning of a period , new student enrollments during the period , students who have previously withdrawn but decide to re-enroll during the period , graduations and withdrawals during the period . our average undergraduate full-time student enrollments are influenced by : the attractiveness of our program offerings to high school graduates and potential adult students ; the effectiveness of our marketing efforts ; the depth of our industry relationships ; the strength of employment markets and long term career prospects ; the quality of our instructors and student services professionals ; the persistence of our students ; the length of our education programs ; the availability of federal and alternative funding for our programs ; the number of graduates of our programs who elect to attend the advanced training programs we offer and general economic conditions . our introduction of additional program offerings at existing campuses and opening additional campuses is expected to influence our average undergraduate full-time student enrollment . we currently offer start dates at our campuses that range from every three to six weeks throughout the year in our undergraduate programs . the number of start dates of advanced training programs varies by the duration of those programs and the needs of the manufacturers which sponsor them . our tuition charges vary by type and length of our programs and the program level , such as undergraduate or advanced training . we implemented tuition rate increases of up to 3 % for each of the years ended september 30 , 2017 , 2016 and 2015 . we regularly evaluate our tuition pricing based on individual campus markets , the competitive environment and ed regulations . most students at our campuses rely on funds received under various government-sponsored student 71 financial aid programs , predominantly title iv programs and various veterans benefits programs , to pay a substantial portion of their tuition and other education-related expenses . approximately 65 % of our revenues , on a cash basis , were collected from funds distributed under title iv programs for the year ended september 30 , 2017 . this percentage differs from our title iv percentage as calculated under the 90/10 rule due to the prescribed treatment of certain title iv stipends under the rule . additionally , approximately 19 % of our revenues , on a cash basis , were collected from funds distributed under various veterans benefits programs for the year ended september 30 , 2017 . we extend credit for tuition and fees , for a limited period of time , to the majority of our students . our credit risk is mitigated through the students ' participation in federally funded financial aid and veterans benefit programs unless students withdraw prior to the receipt by us of title iv or veterans benefit funds for those students . the financial aid and veterans benefits programs are subject to political and budgetary considerations . there is no assurance that such funding will be maintained at current levels . extensive and complex regulations govern the financial assistance programs in which our students participate . our administration of these programs is periodically reviewed by various regulatory agencies . any regulatory violation could be the basis for the initiation of potential adverse actions , including a suspension , limitation , placement on reimbursement status or termination proceeding , which could have a material adverse effect on our business . if any of our institutions were to lose its eligibility to participate in federal student financial aid or veterans benefit programs , the students at that institution , and other locations of that institution , would lose access to funds derived from those programs and would have to seek alternative sources of funds to pay their tuition and fees . the receipt of financial aid and veterans benefit funds reduces the students ' amounts due to us and has no impact on revenue recognition , as the transfer relates to the source of funding for the costs of education which may occur through title iv , veterans benefit or other funds and resources available to the student . story_separator_special_tag please see further discussion in “ business - regulatory environment - regulation of federal student financial aid programs - incentive compensation ” included elsewhere in this report on form 10-k. we have made adjustments to the compensation practices for our admissions representatives which we believe will be compliant with ed 's november 2015 guidance . the transition period for the new compensation structure will 73 continue through calendar year 2018. we will continue to evaluate other compensation options under these regulations and guidance . our revenues for the year ended september 30 , 2017 were $ 324.3 million , a decline of $ 22.8 million , or 6.6 % , from the prior year . we had an operating loss of $ 1.8 million compared to $ 18.6 million for the same period in the prior year . the improvement in our operating results was due to decreases in compensation , advertising , contract services , supplies and maintenance and depreciation and amortization expense . these declines were partially offset by the decline in revenues , which were negatively impacted by the decline in our average undergraduate full-time student enrollment . we incurred a net loss of $ 8.1 million compared to $ 47.7 million in the prior year . during 2016 , we determined that a valuation allowance on our deferred tax assets was necessary . during the year ended september 30 , 2017 , we determined that an additional valuation allowance on our deferred tax assets was necessary , which resulted in income tax expense of $ 6.2 million . veterans ' benefits the percentage of our revenues , on a cash basis , which were collected from funds distributed under various veterans ' benefits programs was approximately 19 % , 19 % , and 20 % for the years ended september 30 , 2017 , 2016 and 2015 , respectively . there continues to be congressional activity around the requirements of the 90/10 rule , such as reducing the 90 % maximum under the rule to 85 % or including military and veteran funding in the 90 % portion of the calculation . potential changes to the 90/10 rule could negatively impact our eligibility to participate in title iv programs . a loss of eligibility would adversely affect our students ' access to title iv program funds they need to pay their educational expenses . as described in “ business - regulatory environment - other federal and state programs - veterans ' benefits ” included elsewhere in this report on form 10-k , we are subject to limitations on the percentage of students per program receiving benefits under certain veterans ' benefits programs , unless the program qualifies for certain exemptions . if the va determines that an institution is out of compliance with the applicable limit , the va will continue to provide benefits to current students but will not provide benefits to newly enrolled students until the institution demonstrates compliance . our access to military installations for student recruitment has become more limited due to recent changes in the transition assistance program ( transition goals , plans , success ) and increased enforcement of the requirement to possess an mou with certain individual military installations . each of our institutions has an mou with the u.s. dod . we have mous with certain key individual installations and are pursuing mous at additional locations . we continue to strengthen and develop relationships with our existing contacts and with new contacts in order to maintain and rebuild our access to military installations . automotive technology and diesel technology ii integration we currently offer the automotive technology and diesel technology ii curricula at our avondale , arizona ; dallas/ft . worth , texas ; long beach , california ; orlando , florida ; rancho cucamonga , california and sacramento , california campuses . we will prioritize implementation of the automotive and diesel technology ii curricula at new campus locations . graduate employment identifying employment opportunities and preparing our graduates for these careers is critical to our ability to help our graduates benefit from their education . accordingly , we dedicate significant resources to maintaining an effective employment team , as described in `` business - graduate employment '' included in part i , item 1 of this report on form 10-k. we believe that our graduate employment services provide our students with a compelling 74 value proposition and enhance the employment opportunities for our graduates . the rate has remained consistent for our collision repair program , while the rate has declined for our automotive and diesel technology , marine and motorcycle programs . there are multiple factors contributing to the declines , including graduates who receive higher compensating jobs outside their field of study , changing regulatory standards and guidance on employment classification and availability for employment and fewer internal resources dedicated to employment verification following our reductions in force during 2016. our employment rate for 2016 graduates was 86 % , compared to 88 % for 2015 graduates . the employment calculation is based on all graduates , including those that completed manufacturer specific advanced training programs , from october 1 , 2015 to september 30 , 2016 and october 1 , 2014 to september 30 , 2015 , respectively , excluding graduates not available for employment because of continuing education , military service , health , incarceration , death or international student status . graduates are counted as employed based on a verified understanding of the graduate 's job duties to assess and confirm that the graduates primary job responsibilities are in his or her field of study . see business - graduate employment '' in this report on form 10-k for further discussion of our graduate employment activities . for 2016 , we had approximately 9,200 total graduates , of which approximately 8,600 were available for employment . of those graduates available for employment , approximately 7,400 were employed within one year of their graduation date , for a total of 86 % .
| results of operations the following table sets forth selected statements of operations data as a percentage of revenues for each of the periods indicated . replace_table_token_8_th year ended september 30 , 2017 compared to year ended september 30 , 2016 revenues . our revenues for the year ended september 30 , 2017 were $ 324.3 million , a decrease of $ 22.8 million , or 6.6 % , as compared to revenues of $ 347.1 million for the year ended september 30 , 2016 . the 9.2 % decrease in our average undergraduate full-time student enrollment resulted in a decrease in revenues of approximately $ 32.6 million . additionally , there were two fewer earning days in 2017 , which resulted in a decline of approximately $ 2.5 million in revenue . the decrease was partially offset by tuition rate increases of up to 3 % , depending on the program . our revenues for the years ended september 30 , 2017 and 2016 excluded $ 16.3 million and $ 18.7 million , respectively , of tuition related to students participating in our proprietary loan program . we recognized $ 8.0 million and $ 7.2 million of revenues and interest under the proprietary loan program for the years ended september 30 , 2017 and 2016 , respectively . revenues for our long beach , california campus , which opened in august 2015 , were $ 18.3 million for the year ended september 30 , 2017 as compared to $ 12.2 million for the year ended september 30 , 2016 . additionally , industry training revenue increased by $ 2.4 million compared to the prior year primarily due to increased dealer training . educational services and facilities expenses .
| 7,146 |
our systems are designed to provide clinically superior performance for many types of dental procedures with less pain and faster recovery times than are generally achieved with drills , scalpels , and other dental instruments . we have clearance from the fda to market our laser systems in the united states and also have the necessary approvals to sell our laser systems in canada , the european union and various other international markets . our licensed dental imaging equipment and other related products are designed to improve applications and procedures in dentistry and medicine . we offer two categories of laser system products : waterlase systems and diode systems . our flagship product category , the waterlase system , uses a patented combination of water and laser energy to perform most procedures currently performed using dental drills , scalpels , and other traditional dental instruments for cutting soft and hard tissue . we also offer our diode laser systems to perform soft tissue , pain therapy , and cosmetic procedures , including teeth whitening . we currently have approximately 160 issued and 150 pending u.s. and international patents , the majority of which are related to our core waterlase technology and dental and medical lasers . since 1998 , we have sold over 9,500 waterlase systems , including more than 5,500 waterlase md and iplus systems , and more than 21,600 laser systems in over 60 countries . we have suffered recurring losses from operations and have not generated cash from operations for the three years ended december 31 , 2012. in order for us to continue operations and discharge our liabilities and commitments in the normal course of business , we must sell our products directly to end-users and through multiple distributors ; establish profitable operations through increased sales and reduced operating expenses ; and potentially raise additional funds , principally through the additional sales of our securities or debt financings to meet our working capital needs . we intend to increase sales by increasing our product offerings , by expanding our direct sales force and our distributor relationships both domestically and internationally . accordingly , we have taken steps during fiscal 2012 , which we believe will improve our financial condition and ultimately improve our financial results , including increasing our product offerings with the launch of the new epic diode laser system , for which we received the ce mark in late september 2012 and fda clearance in october 2012 , executing a definitive five- 46 year agreement with copenhagen-based 3shape corporation ( 3shape ) , making the company a distributor of 3shape 's trios ® intra-oral scanning technologies for digital impression-taking solutions in the u.s. and canada , expanding our direct sales force and certain distributor relationships , and establishing two revolving credit facilities to meet our quarterly working capital needs . credit facilities established on may 24 , 2012 , we entered into two revolving credit facility agreements with comerica bank ( the credit agreements ) , as amended on august 6 , 2012 , ( amendment no . 1 ) , which provide for borrowings against certain domestic accounts receivable and inventory , as set forth in the $ 4.0 million revolving credit facility agreement ( the domestic revolver ) , and borrowings against certain export related accounts receivable and inventory , as set forth in the $ 4.0 million revolving credit facility agreement ( the ex-im revolver ) , for a combined aggregate commitment of borrowings up to $ 8.0 million . the credit agreements mature on may 1 , 2014 and are secured by substantially all assets now owned or hereinafter acquired . the credit agreements require compliance with certain financial and non-financial covenants , as defined therein . if a default occurs , comerica bank may declare the amounts outstanding under the credit agreements immediately due and payable . as of december 31 , 2012 , we were in compliance with these covenants . as additional consideration for the lines of credit , we also issued warrants to comerica bank ( the comerica warrants ) to purchase up to 80,000 shares of our common stock at an exercise price of $ 2.83 per share . the comerica warrants vest in four equal quarterly tranches beginning on may 24 , 2012 and are exercisable once vested . the comerica warrants may be exercised with a cash payment from comerica bank , or , in lieu of a cash payment , comerica bank may convert the warrants into a number of shares , in whole or in part . in february 2013 , comerica bank exercised 60,000 of the 80,000 warrants pursuant to the notice of exercise resulting in a net issuance of 30,515 shares of common stock . the remaining warrants to purchase 20,000 shares of common stock have an expiration date of may 24 , 2017. the $ 135,000 estimated fair value of the warrants was recorded as equity , resulting in a discount to the credit facilities at issuance . the discount is being amortized to interest expense over the term of the lines of credit . in connection with amendment no . 1 , we reduced the exercise price of the comerica warrants from $ 2.83 to $ 2.00 per share . the modification to the comerica warrants resulted in an incremental expense of $ 7,000 which was added to the discount and is being amortized on a straight-line basis over the remaining term of the credit agreements . termination of master distribution agreement in august 2006 , we entered into a license and distribution agreement with hsic , a large distributor of healthcare products to office-based practitioners , pursuant to which we granted hsic the exclusive right to distribute our complete line of dental laser systems , accessories and services in the united states and canada . on september 23 , 2010 , we entered into a distribution and supply agreement with hsic , effective august 30 , 2010 , ( the d & s agreement ) , which terminated all prior agreements with hsic . story_separator_special_tag we record revenue based on four basic criteria that must be met before revenue can be recognized : ( i ) persuasive evidence of an arrangement exists ; ( ii ) delivery has occurred and title and the risks and rewards of ownership have been transferred to our customer , or services have been rendered ; ( iii ) the price is fixed or determinable ; and ( iv ) collectability is reasonably assured . 48 sales of our laser systems include separate deliverables consisting of the product , disposables used with the laser systems , installation , and training . for these sales , effective january 1 , 2011 , we apply the relative selling price method , which requires that arrangement consideration be allocated at the inception of the arrangement to all deliverables using the relative selling price method . this requires us to use estimated selling prices of each of the deliverables in the total arrangement . the sum of those prices is then compared to the arrangement , and any difference is applied to the separate deliverable ratably . this method also establishes a selling price hierarchy for determining the selling price of a deliverable , which includes : ( i ) vendor-specific objective evidence ( vsoe ) , if available , ( ii ) third-party evidence if vendor-specific objective evidence is not available , and ( iii ) estimated selling price if neither vendor-specific nor third-party evidence is available . vsoe is determined based on the value we sell the undelivered element to a customer as a stand-alone product . revenue attributable to the undelivered elements is included in deferred revenue when the product is shipped and is recognized when the related service is performed . disposables not shipped at time of sale and installation services are typically shipped or installed within 30 days . training is included in deferred revenue when the product is shipped and is recognized when the related service is performed or upon expiration of time offered under the agreement , typically within six months from date of sale . the adoption of the relative selling price method does not significantly change the value of revenue recognized . the key judgments related to our revenue recognition include the collectability of payment from the customer , the satisfaction of all elements of the arrangement having been delivered , and that no additional customer credits and discounts are needed . we evaluate a customer 's credit worthiness prior to the shipment of the product . based on our assessment of the available credit information , we may determine the credit risk is higher than normally acceptable , and we will either decline the purchase or defer the revenue until payment is reasonably assured . future obligations required at the time of sale may also cause us to defer the revenue until the obligation is satisfied . although all sales are final , we accept returns of products in certain , limited circumstances and record a provision for sales returns based on historical experience concurrent with the recognition of revenue . the sales returns allowance is recorded as a reduction of accounts receivable and revenue . extended warranty contracts , which are sold to our non-distributor customers , are recorded as revenue on a straight-line basis over the period of the contract , which is typically one year . for sales transactions involving used laser trade-ins , we record the purchased trade-ins as inventory at the fair value of the asset surrendered with the offset to accounts receivable . in determining the estimated fair value of used laser trade-ins , we make an assessment of usable parts , key components , and consider the ultimate resale value of the certified pre-owned ( or cpo ) laser with applicable margins . we sell these cpo laser trade-ins as refurbished lasers following our laser system revenue recognition policy . trade-in rights are not established nor negotiated with customers during the initial sales transaction of the original lasers . trade-in rights are promotional events used at our discretion to encourage existing laser customers to purchase new lasers by offering perceived discounts in exchange for customers trading in original lasers . a customer is not required to trade-in a laser nor are we required to accept a trade-in , however , the promotional value offered in exchange for the trade-in laser is not offered without a laser trade-in . the transaction is treated as a monetary transaction as each sale transaction involving a customer trade-in includes significant boot of greater than 25 % of the fair value of the exchange . as a monetary transaction , the sale is recognized following our laser system revenue recognition policy . there have been no sales transactions in which the cash consideration was less than 25 % of the total transaction value . we recognize revenue for royalties under licensing agreements for our patented technology when the product using our technology is sold . we estimate and recognize the amount earned based on historical performance and current knowledge about the business operations of our licensees . historically , our estimates have been consistent with amounts historically reported by the licensees . licensing revenue related to exclusive licensing arrangements is recognized concurrent with the related exclusivity period . 49 from time to time , we may offer sales incentives and promotions on our products . we recognize the cost of sales incentives at the date at which the related revenue is recognized as a reduction in revenue , increase in cost of revenue , or as a selling expense , as applicable , or later , in the case of incentives offered after the initial sale has occurred . accounting for stock-based payments . we recognize compensation cost related to all stock-based payments based on the grant-date fair value . valuation of accounts receivable . we maintain an allowance for uncollectible accounts receivable to estimate the risk of extending credit to customers . we evaluate our allowance for doubtful accounts based upon our knowledge of customers and their compliance with credit terms .
| results of operations the following table sets forth certain data from our operating results for each of the years ended december 31 , 2012 , 2011 , and 2010 , expressed as percentages of revenue : replace_table_token_8_th the following table summarizes our net revenues by category for the years ended december 31 , 2012 , 2011 , and 2010 ( dollars in thousands ) : replace_table_token_9_th ( 1 ) the summary of net revenue includes the non-recurring event of approximately $ 1.1 million , which if excluded would result in waterlase systems revenue of $ 37.2m and 64 % , total laser systems revenue of $ 43.5m and 74 % , and net revenue of $ 58.5m and 100 % for the year ended december 31 , 2012 , and the remaining categorical percentages would decrease correspondingly . ( 2 ) certain amounts have been reclassified to conform to the current year presentation . 52 year ended december 31 , 2012 compared with year ended december 31 , 2011 net revenue . net revenue for the year ended december 31 , 2012 ( fiscal 2012 ) was $ 57.4 million , an increase of $ 8.5 million , or 17 % , as compared with net revenue of $ 48.9 million for the year ended december 31 , 2011 ( fiscal 2011 ) . excluding the non-recurring event resulting from the 2012 termination agreement with hsic , net revenue for fiscal 2012 was $ 58.5 million , an increase of $ 9.6 million , or 20 % , as compared to net revenue of $ 48.9 million for fiscal 2011. the increase in net revenue , excluding the non-recurring event , was primarily attributed to continued demand for our all-tissue waterlase systems and increased sales of imaging systems . these increases , fueled by increased sales and marketing efforts , were offset by decreased sales of diode laser systems and lower royalty revenues .
| 7,147 |
lamar advertising company the following is a discussion of the consolidated financial condition and results of operations of the company for the years ended december 31 , 2011 , 2010 and 2009. this discussion should be read in conjunction with the consolidated financial statements of the company and the related notes . overview the company 's net revenues are derived primarily from the sale of advertising on outdoor advertising displays owned and operated by the company . the company relies on sales of advertising space for its revenues . revenue growth is based on many factors that include the company 's ability to increase occupancy of its existing advertising displays ; raise advertising rates ; and acquire new advertising displays and its operating results are therefore affected by general economic conditions , as well as trends in the advertising industry . advertising spending is particularly sensitive to changes in general economic conditions , which affect the rates that the company is able to charge for advertising on its displays and its ability to maximize advertising sales or occupancy on its displays . historically , the company has increased the number of outdoor advertising displays it operates by completing strategic acquisitions of outdoor advertising assets . since december 31 , 2006 , the company completed acquisitions for an aggregate purchase price of approximately $ 440.1 million . however , during 2009 and 2010 , the company reduced its acquisition activity significantly by completing acquisitions of outdoor advertising assets for a total purchase price of $ 11.2 million , which was a reduction of approximately $ 392 million over the comparable two-year period ended 2008 and 2007. during the year ended 2011 , the company increased its spending on acquisitions slightly by completing 22 acquisitions for a cash purchase price of approximately $ 23.5 million . the company has financed its historical acquisitions and intends to finance any of its future acquisition activity from available cash , borrowings under its senior credit facility and the issuance of class a common stock . see liquidity and capital resources below . the company 's business requires expenditures for maintenance and capitalized costs associated with the construction of new billboard displays , the entrance into and renewal of logo sign and transit contracts , and the purchase of real estate and operating equipment . the following table presents a breakdown of capitalized expenditures for the past three years : replace_table_token_4_th we expect our capital expenditures to be approximately $ 100 million in 2012 . 16 story_separator_special_tag increase due to new transit contracts and an increase in internal growth of $ 4.9 million . net revenues for the year ended december 31 , 2010 , as compared to acquisition-adjusted net revenue for the year ended december 31 , 2009 , increased $ 32.8 million or 3.1 % primarily as a result of increased rate and occupancy , as compared to the same period in 2009. see reconciliations below . operating expenses , exclusive of depreciation and amortization and gain on sale of assets , increased $ 17.8 million , or 2.8 % , to $ 644.9 million for the year ended december 31 , 2010 from $ 627.1 million for the same period in 2009. there was a $ 5.4 million increase in non-cash compensation expense related to equity based compensation , as well as an $ 11.0 million increase in operating expenses related to the cost of operating the company 's core assets and a $ 1.4 million increase in corporate expenses . depreciation and amortization expense decreased $ 24.0 million for the year ended december 31 , 2010 as compared to the year ended december 31 , 2009. the decrease is primarily a result of the reduction in the number of non performing structures dismantled during 2010 as compared to the same period in 2009. due to the above factors , operating income increased $ 41.9 million to $ 139.5 million for year ended december 31 , 2010 compared to $ 97.6 million for the same period in 2009 . 18 interest expense decreased $ 11.0 million from $ 197.0 million for the year ended december 31 , 2009 to $ 186.0 million for the year ended december 31 , 2010 primarily resulting from debt refinancing efforts during 2010 , as well as the reduction in amortized debt issuance fees during 2010 due to the early extinguishment of debt . during the year ended december 31 , 2010 , the company recognized a $ 17.4 million loss on the early extinguishment of debt resulting from its refinancing transactions . approximately $ 12.6 million is a non-cash expense attributable to the write off of unamortized debt issuance fees related to the tender offer to repurchase lamar media 's 7 1/4 % notes and the refinancing of its senior credit facility . the remaining $ 4.8 million represents the net cash loss related to the tender offer and extinguishment of the 7 1/4 % notes . the increase in operating income and decrease in interest expense offset by the increase in the loss on extinguishment of debt resulted in a $ 30.6 million decrease in loss before income taxes . the decrease in net loss for the period resulted in a decrease in income tax benefit as compared to the same period during 2009. the effective tax rate for the year ended december 31 , 2010 was 36.9 % , which is higher than the statutory rate due to permanent differences resulting from non-deductible compensation expense related to stock options in accordance with asc 718 and other non-deductible expenses and amortization . story_separator_special_tag the company used the proceeds of this offering , after the payment of fees and expenses together with approximately $ 99 million of net proceeds from its term loan a-3 facility to repurchase $ 583.1 million of its outstanding 6 5/8 % notes , as described below under the heading uses of cash tender offers . on april 22 , 2010 , lamar media completed an institutional private placement of $ 400 million aggregate principal amount of 7 7/8 % senior subordinated notes due 2018 the ( 7 7/8 % notes ) . the institutional private placement resulted in net proceeds to lamar media of approximately $ 392 million . the company used the proceeds of the offering , after the payment of fees and expenses , to repurchase all of its outstanding 7 1/4 % senior subordinated notes due 2013 ( the 7 1/4 % notes ) , as described below under the heading uses of cash tender offers . on march 27 , 2009 , lamar media completed an institutional private placement of $ 350 million in aggregate principal amount ( approximately $ 314.9 million in gross proceeds ) of 9 3/4 % senior notes due 2014 ( the 9 3/4 % senior notes ) . the 9 3/4 % senior notes are unsecured obligations that rank senior to all of lamar media 's existing and future debt that is expressly subordinated in right of payment to the senior notes , including lamar media 's 5 7/8 % senior subordinated notes due 2022 , 7 1/4 % senior subordinated notes due 2013 ( all of which were repurchased in 2010 ) and 6 5/8 % notes ( $ 582.9 million of which were repurchased in february 2012 ) . the senior notes rank equally with all of lamar media 's existing and future liabilities that are not so subordinated and are effectively subordinated to all of its secured debt ( to the extent of the value of the collateral securing such debt ) , including the senior credit facility , and structurally subordinated to all of the liabilities of any of lamar media 's subsidiaries that do not guarantee the senior notes . lamar media distributed the proceeds of the offering , after the payment of fees and expenses , to lamar advertising to repurchase $ 284.1 million in principal amount of 2 7/8 % convertible notes due 2010 series b and to fund repayment of the remaining convertible notes at maturity on december 31 , 2010. factors affecting sources of liquidity internally generated funds . the key factors affecting internally generated cash flow are general economic conditions , specific economic conditions in the markets where the company conducts its business and overall spending on advertising by advertisers . credit facilities and other debt securities . lamar must comply with certain covenants and restrictions related to the senior credit facility and its outstanding debt securities . 20 restrictions under debt securities . lamar must comply with certain covenants and restrictions related to its outstanding debt securities . currently lamar media has outstanding approximately $ 122.8 million 6 5/8 % senior subordinated notes due 2015 issued august 2005 , $ 36.1 million 6 5/8 % senior subordinated notes due 2015 series b issued in august 2006 and $ 101.1 million 6 5/8 % senior subordinated notes due 2015 series c issued in october 2007 ( collectively , the 6 5/8 % notes ) , $ 350 million 9 3/4 % senior notes due 2014 issued in march 2009 ( the 9 3/4 % notes ) , $ 400 million 7 7/8 % senior subordinated notes due 2018 ( the 7 7/8 % notes ) and $ 500 million 5 7/8 % senior subordinated notes due 2022 ( the 5 7/8 % notes ) . the indentures relating to lamar media 's outstanding notes restrict its ability to incur additional indebtedness but permit the incurrence of indebtedness ( including indebtedness under the senior credit facility ) , ( i ) if no default or event of default would result from such incurrence and ( ii ) if after giving effect to any such incurrence , the leverage ratio ( defined as total consolidated debt to trailing four fiscal quarter ebitda ( as defined in the indentures ) ) would be less than ( a ) 6.5 to 1 , pursuant to the 9 3/4 % notes indenture , and ( b ) 7.0 to 1 , pursuant to the 6 5/8 % notes and 7 7/8 % notes and 5 7/8 % notes indentures . in addition to debt incurred under the provisions described in the preceding sentence , the indentures relating to lamar media 's outstanding notes permit lamar media to incur indebtedness pursuant to the following baskets : up to $ 1.3 billion of indebtedness under the senior credit facility allowable under the 6 5/8 % notes ( up to $ 1.4 billion of indebtedness under the senior credit facility allowable under the 9 3/4 % notes and up to $ 1.5 billion of indebtedness under the senior credit facility allowable under the 7 7/8 % notes and 5 7/8 % notes indentures ) ; currently outstanding indebtedness or debt incurred to refinance outstanding debt ; inter-company debt between lamar media and its subsidiaries or between subsidiaries ; certain purchase money indebtedness and capitalized lease obligations to acquire or lease property in the ordinary course of business that can not exceed the greater of $ 50 million or 5 % of lamar media 's net tangible assets ; and additional debt not to exceed $ 50 million ( $ 75 million under the 7 7/8 % notes and 5 7/8 % notes indentures ) . restrictions under senior credit facility . lamar media is required to comply with certain covenants and restrictions under the senior credit facility . if the company fails to comply with these tests , the long term debt payments may be accelerated .
| results of operations the following table presents certain items in the consolidated statements of operations as a percentage of net revenues for the years ended december 31 , 2011 , 2010 and 2009 : replace_table_token_5_th year ended december 31 , 2011 compared to year ended december 31 , 2010 net revenues increased $ 41.2 million or 3.8 % to $ 1.13 billion for the year ended december 31 , 2011 from $ 1.09 billion for the same period in 2010. this increase was attributable primarily to an increase in billboard net revenues of $ 31.0 million , or 3.1 % , over the prior period , a $ 2.4 million increase in transit revenue , or 4.2 % , over the prior period and a $ 7.9 million increase in logo revenue , or 15.9 % , over the prior period . of the $ 31.0 million increase in billboard net revenue $ 8.2 million was generated by adding approximately 240 new digital display panels and approximately $ 22.8 million was a result of increased rate and occupancy , over the comparable period in 2010. the $ 7.9 million increase in logo revenue consists of a $ 4.0 million increase due to changes in logo contracts and an increase in internal growth of $ 3.9 million . net revenues for the year ended december 31 , 2011 , as compared to acquisition-adjusted net revenue for the year ended december 31 , 2010 , increased $ 36.4 million or 3.3 % primarily as a result of increased rate and occupancy , as compared to the same period in 2010. see reconciliations below .
| 7,148 |
these statements may be preceded by , followed by or include the words “ may , ” “ might , ” “ will , ” “ will likely result , ” “ should , ” “ estimate , ” “ plan , ” “ project , ” “ forecast , ” “ intend , ” “ expect , ” “ anticipate , ” “ believe , ” “ seek , ” “ continue , ” “ target ” or similar expressions . these forward-looking statements are based on information available to us as of the date of this annual report and on our current expectations , forecasts and assumptions , and involve substantial risks and uncertainties . actual results may vary materially from those expressed or implied by the forward-looking statements herein due to a variety of factors , including : our ability to integrate our acquired businesses , the ability of the combined business to grow , including through acquisitions which we are able to successfully integrate , and the ability of our executive officers to manage growth profitably ; the outcome ( s ) of any legal proceedings pending or that may be instituted against us , our subsidiaries , or third parties to whom we owe indemnification obligations ; changes in laws or regulations that apply to us or our industry ; our ability to recognize and timely implement future technologies in the music and live streaming space ; our ability to capitalize on investments in developing our service offerings , including slacker and livexlive apps to deliver and develop upon current and future technologies ; significant product development expenses associated with our technology initiatives ; our ability to deliver end-to-end network performance sufficient to meet increasing customer demands ; our ability to timely and economically obtain necessary approval ( s ) , releases and or licenses on a timely basis for the use of our music content on our service platform ; our ability to obtain and maintain international authorizations to operate our service over the proper foreign jurisdictions our customers utilize ; our ability to expand our service offerings and deliver on our service roadmap ; our ability to timely and cost-effectively produce , identify and or deliver compelling content that brands will advertise on and or customers will purchase and or subscribe to across our platform ; general economic and technological circumstances in the music and live streaming digital markets ; our ability to obtain and maintain licenses for content used on legacy music platforms ; the loss of , or failure to realize benefits from , agreements with our music labels , publishers and partners ; unfavorable economic conditions in the airline industry and economy as a whole ; our ability to expand our domestic or international operations , including our ability to grow our business with current and potential future music labels , festivals , publishers , or partners ; the effects of service interruptions or delays , technology failures , material defects or errors in our software , damage to our equipment or geopolitical restrictions ; costs associated with defending pending or future intellectual property infringement actions and other litigation or claims ; increases in our projected capital expenditures due to , among other things , unexpected costs incurred in connection with the roll out of our technology roadmap or our plans of expansion in north america and internationally ; fluctuation in our operating results ; the demand for live and music streaming services and market acceptance for our products and services ; our ability to generate sufficient cash flow to make payments on our indebtedness ; our incurrence of additional indebtedness in the future ; our ability to repay the convertible notes at maturing or to repurchase the convertible nets upon a fundamental chance or at specific repurchase dates ; the effect of the conditional conversion feature of the convertible notes ; our compliance with the covenants in our credit agreement ; and other risks and uncertainties set forth herein . we do not undertake any obligation to update forward-looking statements as a result of as a result of new information , future events or developments or otherwise . 43 the following discussion and analysis of our business and results of operations for the twelve months ended march 31 , 2018 , and our financial conditions at that date , should be read in conjunction with the financial statements and the notes thereto included elsewhere in this annual report . as used herein , “ livexlive , ” “ lxl , ” the “ company , ” “ our , ” “ we , ” or “ us ” and similar terms include livexlive media , inc. and its subsidiaries , unless the context indicates otherwise . overview of the company we are a pioneer in the acquisition , distribution and monetization of live music , internet radio and music-related streaming and video content . our principal operations and decision-making functions are located in north america . we manage and report our businesses as a single operating segment . our chief operating decision maker regularly reviews our operating results , principally to make decisions about how we allocate our resources and to measure our segment and consolidated operating performance . we currently generate a majority of our revenue through subscription services from our streaming radio and music services , and to a lesser extent through advertising and licensing across our music platform . for the years ended march 31 , 2018 and 2017 , we reported revenue of $ 7.2 million and $ 0.2 million , respectively . for the years ended march 31 , 2018 and 2017 , one customer accounted for 24 % and 0 % of our consolidated revenues , respectively . 2018 transactions during the year ended march 31 , 2018 , we issued an aggregate 0.8 million shares of our common stock in exchange for the surrender of warrants exercisable for approximately 0.8 million shares of our common stock . story_separator_special_tag in the near term , we intend on aggregating digital traffic across these festivals to begin monetizing the live broadcasting of these events through advertising , brand sponsorships and licensing of certain broadcasting rights outside of north america . in the long term , we also plan to package , produce and broadcast our live music content on a 24/7/365 basis across our music platform and grow our paid subscribers . the long-term economics of any future agreement involving festivals , programming , production , broadcasting , streaming , advertising , sponsorships , and licensing could positively or negatively impact our liquidity , growth , margins , relationships , and ability to deploy and grow our future services with current or future customers . we believe our operating results and performance are , and will continue to be , driven by various factors that affect the music industry . our ability to attract , grow and retain users to our platform is highly sensitive to rapidly changing public music preferences and technology and is dependent on our ability to maintain the attractiveness of our platform , content and reputation to our customers . beyond 2018 , the future revenue and operating growth across our music platform will rely heavily on our ability to grow our subscriber base , continue to develop quality music services , provide unique and attractive content to our customers , continue to grow the number of listeners on our platform and live music festivals we stream , grow and retain customers and secure sponsorships to facilitate future revenue growth from advertising and e-commerce across our platform . as our music platform continues to evolve , we believe that there are opportunities to expand our services by adding more content in a greater variety of formats , deploying new services for our subscribers such as artist merchandise and live music event ticket sales , and licensing user data across our platform . currently , our slacker audio and livexlive video services operate on separate platforms ; however , we believe there is a significant opportunity to combine these services into a single platform , including offering a greater variety of exclusive and unique music content across our platform . for example , we acquired slacker in december 2017 to accelerate our paid subscription platform , and secondarily to gain synergies across product development initiatives . in 2018 , we integrated resources and launched our live music streaming app across apple tv , roku and amazon fire platforms . conversely , the evolution of technology presents an inherent risk to our business . today , we see large opportunities to expand our music services within north america and other parts of the world where we will need to make substantial investments to improve our current service offerings . as a result and during the fiscal year ending march 31 , 2019 , we will continue to invest in product and engineering to develop our future music apps and services , and we expect to continue making significant product development investments to our existing technology solutions over the next 12 to 18 months to address these opportunities . growth in our music services is also dependent upon the number of customers that use and pay for our services , the attractiveness of our music platform to sponsors and advertisers and our ability to negotiate favorable economic terms with music labels , publishers , artists and or festival owners , and the number of passengers who use our services . growth in our margins is heavily dependent on our ability to grow , coupled with the managing the costs associated with implementing and operating our services , including the costs of licensing music with the music labels , and producing , streaming and distributing video and audio content . our ability to attract and retain new and existing customers will be highly dependent on our abilities to implement and continually improve upon our technology and services on a timely basis and continually improve our network and operations as technology changes and as we experience increased network capacity constraints as we continue to grow . for the majority of our agreements with festival owners , we acquire the global broadcast rights . moreover , the digital rights we acquire principally include any format and screen , and future rights to vr and ar . for the years ended march 31 , 2018 and 2017 , all material amounts of our revenue was derived from customers located in the united states . while our revenue is primarily generated through music subscription services based in the united states today , we believe that there is a substantial opportunity in the longer term for us to significantly expand our operating segment 's service offerings to customers based in countries outside of the united states . historically , we have sold certain licensing rights to stream live music in latin america and china to third parties . in the long term , we plan to expand our business further internationally in places such as europe , asia pacific and latin america , and as a result will continue to incur significant incremental upfront expenses associated with these growth opportunities . 45 key components of consolidated statements of operations the following briefly describes certain key components of revenue and expenses as presented in our consolidated statements of operations . revenue we currently generate our revenue through advertising and paid subscriptions across our music platform , and secondarily through the licensing of non-us broadcasting rights for our live events . our advertising revenue is based upon the number of impressions or active listeners we deliver across our music platform . our subscription revenue is driven by the number of paid subscribers across our music platform , who pay up to $ 9.99 per month for a premium music subscription . licensing revenue is driven by certain broadcasting rights we own and license to third parties .
| consolidated results of operations the following tables set forth our results of operations for the periods presented . the period-to-period comparison of financial results is not necessarily indicative of future results ( in thousands ) : replace_table_token_6_th 53 the following table provides the depreciation expense included in the above line items ( in thousands ) : replace_table_token_7_th the following table provides the stock-based compensation expense included in the above line items ( in thousands ) : replace_table_token_8_th the following table provides our results of operations , as a percentage of revenue , for the periods presented : replace_table_token_9_th revenue revenue was as follows ( in thousands ) : replace_table_token_10_th 54 advertising and licensing revenue fiscal year 2018 compared to fiscal year 2017. advertising and licensing revenue increased $ 0.5 million or 227 % to $ 0.7 million for the year ended march 31 , 2018 , as compared to $ 0.2 million for the year ended march 31 , 2017. the increase was due to the acquisition of slacker , $ 0.7 million , in the third quarter of fiscal year 2018 , which did not exist in fiscal year 2017. the increase was partially offset by $ 0.2 million lower licensing revenue in fiscal year 2018 due to a licensing agreement in fiscal year 2017 that was not present in fiscal year 2018. subscription revenue fiscal year 2018 compared to fiscal year 2017. subscription revenue increased $ 6.5 million or 100 % to $ 6.5 million for the year ended march 31 , 2018 , as compared to $ 0 million for the year ended march 31 , 2017. the increase was due to the acquisition of slacker in the third quarter of fiscal year 2018 , which did not exist in fiscal year 2017. cost of sales cost of sales was as follows ( in thousands ) : replace_table_token_11_th production fiscal year 2018 compared to fiscal year 2017. production cost of sales increased $ 0.6 million or 77
| 7,149 |
mr. lien 's employment is at will and may be terminated at any time , with or without cause , subject to the severance obligations described below . wister walcott . we entered into an offer letter agreement with mr. walcott , story_separator_special_tag financial condition and results of operations the following discussion and analysis of our financial condition , results of operations and cash flows should be read in conjunction with the consolidated financial statements and related notes thereto included elsewhere in this annual report on form 10-k for the fiscal year ended december 31 , 2019. this discussion contains forward-looking statements that involve risks and uncertainties . our actual results could differ materially from those forward-looking statements below . factors that could cause or contribute to those differences include , but are not limited to , those identified below and those discussed in the section entitled “ risk factors ” included elsewhere in this annual report on form 10-k. this annual report on form 10-k contains “ forward-looking statements ” within the meaning of section 21e of the securities exchange act of 1934 , as amended , or the exchange act . these statements are often identified by the use of words such as “ believe , ” “ may , ” “ potentially , ” “ will , ” “ estimate , ” “ continue , ” “ anticipate , ” “ intend , ” “ could , ” “ should , ” “ would , ” “ project , ” “ plan , ” “ predict , ” “ expect , ” “ seek ” and similar expressions or variations . such forward-looking statements are subject to risks , uncertainties and other factors that could cause actual results and the timing of certain events to differ materially from future results expressed or implied by such forward-looking statements . factors that could cause or contribute to such differences include , but are not limited to , those identified herein , and those discussed in the section titled “ risk factors ” , set forth in part i , item 1a of this annual report on form 10-k. except as required by law , we disclaim any obligation to update any forward-looking statements to reflect events or circumstances after the date of such statements . references to “ 2019 ” and “ 2018 ” refer to the year ended december 31 , 2019 and the year ended december 31 , 2018 , respectively . overview we are a leading provider of digital marketing solutions for search , social and ecommerce advertising channels , offered as a unified software-as-a-service , or saas , advertising management platform for performance-driven advertisers and agencies . our platform is an analytics , workflow and optimization solution for marketing professionals , enabling them to effectively manage their digital advertising spend . we market and sell our solutions to advertisers directly and through leading advertising agencies , and our customers collectively manage billions of dollars in advertising spend on our platform globally across a wide range of industries . we believe this makes us one of the largest providers of independent advertising cloud solutions . our software solution is designed to help our customers : measure the effectiveness of their advertising campaigns through our proprietary reporting and analytics capabilities ; manage and execute campaigns through our intuitive user interface and underlying technology that streamlines and automates key functions , such as advertisement creation and bidding , across multiple publishers and channels ; and optimize campaigns across multiple publishers and channels based on market and business data to achieve desired revenue outcomes using our predictive bid management technology . our current product lineup consists of marinone , and our two legacy products , marin search and marin social . marinone . our next-generation solution brings search , social and ecommerce advertising into a single-platform that helps advertisers maximize a customer journey that spans google , facebook and amazon by combining the power of marin search and marin social with new channels like amazon , apple search ads and youtube ; marin search . our original solution for large advertisers and agencies , marin search is designed to provide search advertisers with the power , scale and flexibility required to manage large-scale advertising campaigns ; and marin social . helps advertisers manage their facebook , instagram and twitter advertising spend at scale . advertisers use our platform to create , target and convert precise audiences based on recent buying signals from users ' search , social and ecommerce interactions . our platform is integrated with leading publishers such as amazon , apple , baidu , bing , facebook , google , instagram , pinterest , twitter , verizon media , yahoo ! japan and yandex . additionally , we have integrations with more than 50 leading web analytics and advertisement-serving solutions and key enterprise applications , enabling our customers to more accurately measure the return on investment of their marketing programs . our software platform serves as an integration point for advertising performance , sales and revenue data , allowing advertisers to connect the dots between advertising spend and revenue outcomes . through an intuitive interface , we enable our customers to simultaneously run large-scale digital advertising campaigns across multiple publishers and channels , making it easy for marketers to create , publish , modify and optimize campaigns . our predictive bid management and optimization technology also allows advertisers to forecast outcomes and optimize campaigns across multiple publishers and channels to achieve their business goals . our optimization technology can help advertisers increase advertisement spend on those campaigns , publishers and channels that are performing well while reducing investment in those that are not . this category of solutions , which we refer to as cross-channel bid and campaign optimization , helps businesses intelligently and efficiently measure , manage , and optimize their digital advertising spend to achieve desired business results . 30 we have also entered into lon g-term strategic agreements with certain leading search publishers . story_separator_special_tag our commission plans provide that commission payments to our sales representatives are paid based on the key components of the applicable customer contract , including the minimum or fixed monthly platform fee during the initial contract term . in the near term , we expect sales and marketing expenses to decrease year-over-year in absolute dollars as we continue to realign our cost structure with our revenues . research and development research and development expenses consist primarily of personnel costs for our product development and engineering employees and executives , including salaries , benefits , stock-based compensation expense and bonuses . also included are non-personnel costs such as professional fees payable to third-party development resources , amortization of intangible assets and allocated overhead . our research and development efforts are focused on enhancing our software architecture , adding new features and functionality to our platform and improving the efficiency with which we deliver these services to our customers , including the development of marinone . in the near term , we expect research and development expenses to decrease year-over-year in absolute dollars as we continue to realign our cost structure with our revenues . general and administrative general and administrative expenses consist primarily of personnel costs , including salaries , benefits , stock-based compensation expense and bonuses for our administrative , legal , human resources , finance and accounting employees and executives . also included are non-personnel costs , such as audit fees , tax services and legal fees , as well as professional fees , insurance and other corporate expenses , including allocated overhead . in the near term , we expect our general and administrative expenses to decrease year-over-year in absolute dollars as we continue to realign our cost structure with our revenues . impairment of goodwill impairment of goodwill is calculated using the simplified method , whereby we compare the fair value of our single reporting unit to its carrying value . if the fair value of the reporting unit exceeds the carrying value of our net assets , goodwill is not considered impaired . if the carrying value of our net assets exceeds the fair value of the reporting unit , then goodwill is considered impaired and an impairment charge equal to that difference is recorded . gain on divestiture the gain on divestiture relates to the divestiture of the assets and liabilities of our perfect audience business to unrelated third party sharpspring , inc. in november 2019. it represents the difference between net proceeds received and the net liabilities of perfect audience that were transferred to sharpspring , inc. other income , net other income , net , primarily consists of sublease income and foreign currency transaction gains and losses , as well as interest income earned on our cash equivalents offset by the interest expense related to our finance lease liabilities . ( benefit from ) provision for income taxes the ( benefit from ) provision for income taxes consists of federal , state and foreign income taxes . due to recent losses , we maintain a valuation allowance against our u.s. deferred tax assets as of december 31 , 2019. we consider all available evidence , both positive and negative , in assessing the extent to which a valuation allowance should be applied against our deferred tax assets . 32 results of operations the following table is a summary of our consolidated statements of operations for the specified periods and results of operations as a percentage of revenues for those periods . the period-to-period comparisons of results are not necessarily indicative of results for future periods . percentage of revenues figures are rounded and therefore may not subtotal exactly . a discussion regarding our consolidated statements of operations and results of operations as a percentage of revenue for 2019 compared to 2018 is presented below . a discussion regarding our financial condition and results of operations for 2018 compared to 2017 can be found under item 7 in our annual report on form 10-k for the fiscal year ended december 31 , 2018 , filed with the sec on march 14 , 2019 , which is available free of charge on the sec 's website at www.sec.gov . replace_table_token_6_th ( 1 ) stock-based compensation expense included in the consolidated statements of operations data above was as follows : replace_table_token_7_th ( 2 ) amortization of intangible assets included in the consolidated statements of operations data above was as follows : replace_table_token_8_th 33 ( 3 ) restructuring-related expenses included in the consolidated statements of operations data above was as follows : replace_table_token_9_th the following table sets forth our consolidated revenues by geographic area , as well as the related percentages of total revenues , for the specified periods . replace_table_token_10_th adjusted ebitda adjusted ebitda is a financial measure not calculated in accordance with generally accepted accounting principles in the united states , or gaap . we define adjusted ebitda as net loss , adjusted for stock-based compensation expense , depreciation , the amortization of internally developed software , intangible assets , the capitalization of internally developed software , the impairment of goodwill and long-lived assets , interest expense , net , the benefit from or provision for income taxes , other income or expenses , net and the non-recurring costs or gains associated with acquisitions , divestitures and restructurings . prior to 2019 , we also included deferred costs associated with contracts and the related amortization as an adjustment to net loss for the purposes of calculating adjusted ebitda , but we have updated our definition to no longer include those items in our calculation of adjusted ebitda . adjusted ebitda for prior periods has been adjusted to conform to the current period presentation . adjusted ebitda should not be considered as an alternative to net loss , operating loss or any other measure of financial performance calculated and presented in accordance with gaap . we prepare adjusted ebitda to eliminate the impact of items that we do not consider indicative of our core operating performance .
| summary of cash flows the following table sets forth a summary of our cash flows for the periods indicated : replace_table_token_24_th operating activities cash used in operating activities is primarily influenced by the amount of cash we invest in personnel and infrastructure to support the operation of our business and the fluctuations in the number of advertisers using our platform . cash used in operating activities has typically been affected by net losses and further increased by changes in our operating assets and liabilities , particularly in the areas of accounts receivable , prepaid expenses and other assets , accounts payable and accrued expenses and other current liabilities , adjusted for non-cash expense items such as depreciation , amortization , stock-based compensation expense and deferred income tax benefits . cash used in operating activities in 2019 of $ 1.2 million was primarily the result of a net loss of $ 12.4 million , which was not fully offset by non-cash expenses of $ 7.6 million , primarily consisting of impairment of goodwill , depreciation , amortization , gain on divestiture of perfect audience , stock-based compensation expense , provision for bad debts and net changes in operating leases , and a $ 3.6 million net change in working capital items . these items consisted most notably of ( 1 ) a decrease in accounts receivable of $ 4.2 million due to the decrease in revenues and the timing of related collections ; ( 2 ) a decrease in prepaid expenses and other assets ( both current and non-current ) of $ 0.2 million due to the timing of related disbursements ; and ( 3 ) a decrease in accounts payable and accrued expenses and other liabilities ( both current and non-current ) of $ 0.8 million due to the timing of related disbursements .
| 7,150 |
none of mr. byrnes , dr. gardner story_separator_special_tag the following management 's discussion and analysis of financial condition and results of operations ( 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 consolidated financial statements and the accompanying notes to the consolidated financial statements and other disclosures included in this annual report on this form 10-k ( including the disclosures under “ item 1a . risk factors ” ) . our consolidated financial statements have been prepared in accordance with u.s. generally accepted accounting principles and are presented in u.s. dollars . overview revance therapeutics , inc. is a clinical-stage specialty biopharmaceutical company focused on the development , manufacturing and commercialization of novel botulinum toxin products for multiple aesthetic and therapeutic indications . we 52 are leveraging our proprietary portfolio of botulinum toxin type a compounds combined with our patented transmts® peptide delivery system to address unmet needs in large and growing neurotoxin markets . our proprietary transmts technology enables delivery of botulinum toxin type a through two novel dose formulations , topical product candidate rt001 and injectable product candidate rt002 . we are pursuing clinical development for rt001 and rt002 in a broad spectrum of aesthetic and therapeutic indications . we hold worldwide rights for all indications of rt001 , rt002 and our transmts technology platform . rt001 has the potential to be the first commercially available non-injectable dose form . we are studying topical rt001 for aesthetic indications , such as crow 's feet lines ( wrinkles around the eyes , also known as lateral canthal lines ) and therapeutic indications such as hyperhidrosis ( excessive sweating ) . rt002 is a novel , injectable formulation of botulinum toxin designed to be more targeted and longer lasting than currently available injectable botulinum toxin type products . we are studying injectable rt002 for aesthetic indications , such as glabellar ( frown ) lines and therapeutic uses , such as muscle movement disorders . both products would have the potential to expand into additional aesthetic and therapeutic indications in the future . we are developing and plan to commercialize rt001 for indications where topical application provides a meaningful advantage over injectable administration . we are evaluating rt001 in a broad clinical program that includes aesthetic indications such as lateral canthal lines and therapeutic indications such as hyperhidrosis and chronic migraine headache . rt001 has the potential to be the first approved non-injectable botulinum toxin product for the treatment of crow 's feet lines . rt001 's primary advantages include painless topical administration , ease of use and limited dependence on administration technique by physicians and medical staff . we believe these advantages should improve the experience of patients undergoing botulinum toxin procedures and make rt001 more suitable for many more indications than currently approved injectable botulinum toxin products . the first indications we are pursuing are in the field of dermatology . if approved , we believe rt001 can expand the overall botulinum toxin aesthetic market by appealing to new patients who would prefer a needle-free approach to treatment . the aesthetic dermatology market is attractive because we believe that patients in this market tend to be open to trying new products and are willing to pay for aesthetic procedures out of pocket , reducing reliance on reimbursement . we are focused on this market not only because of its size and growth potential but also because , in the united states and europe , this market can be easily accessed by a specialty sales force and distributor network . we are in a phase 3 development program of rt001 in north america for the treatment of crow 's feet lines . following the successful completion of an open label clinical trial designed to test the efficacy of our rt001 drug product in the first half of 2015 , we expect to commence a pivotal phase 3 clinical trial of rt001 and report efficacy data from this phase 3 study in the second half of 2015. to date , we have conducted sixteen clinical trials with rt001 for the treatment of crow 's feet lines , with a total of over 1,500 subjects . we are also developing rt001 for therapeutic applications where botulinum toxin has shown efficacy and that are particularly well suited for needle-free treatments . we have successfully completed initial phase 2 clinical trials for the treatment of primary axillary , or underarm , hyperhidrosis , and for the prevention of chronic migraine headache . we expect to initiate and report results of an additional clinical trial for the treatment of hyperhidrosis in the second half of 2015. we are developing rt002 , an injectable formulation of botulinum toxin type a , for indications where deeper delivery of the botulinum toxin is required and a longer lasting effect is desired . we believe rt002 can provide more targeted delivery of botulinum toxin to intended treatment sites while reducing the unwanted spread of botulinum toxin to adjacent areas . we believe , and our preclinical and clinical studies indicate , that this targeted delivery , enabled by our proprietary peptide technology , may permit safe administration of higher doses of botulinum toxin and can result in longer lasting effect . we have demonstrated these properties in preclinical studies and have tested rt002 in a four-cohort , dose escalating , open-label phase 1/2 clinical trial outside of the united states for the treatment of glabellar lines , the vertical lines between the eyebrows and above the nose . data from this clinical trial indicated that rt002 is well-tolerated and efficacious at all four doses . we also reported duration of effect of seven months from the last cohort of this trial , the only one where duration of effect was measured . story_separator_special_tag we recognized royalty revenue during the years ended december 31 , 2014 , 2013 , and 2012 related to the relastin asset purchase and royalty agreement . the relastin royalty agreement provides for minimum royalty payment of $ 0.3 million per year , to be paid quarterly for up to 15 years from the execution date . the royalty agreement also provided for one-time payments upon achievement of certain milestones . in the year ended december 31 , 2013 , we received a one-time milestone payment of $ 150,000. the acquirer may terminate the royalty agreement with 90 days ' notice with the rights to the relastin product line reverting back to us . we do not currently have any plans for the future of relastin as our focus has been primarily on the development of rt001 and rt002 . our license revenue has historically been derived through nonrefundable technology license fees for our rt001 and rt002 product candidates . in the years ended december 31 , 2014 and 2013 , we recognized license revenue of $ 0.1 million and $ 0.2 million , respectively , pursuant to an exclusive technology evaluation agreement , whereby we received an upfront payment in the amount of $ 0.3 million , which was initially recorded as deferred revenue and recognized over the estimated performance period . during the year ended december 31 , 2012 , our license revenue was derived from an arrangement with medicis whereby , prior to our settlement with them , we had granted them specified rights to rt002 in return for an upfront payment . medicis was acquired by valeant pharmaceuticals international , inc. in december 2012. the upfront payment was deferred and recognized over the estimated performance period ; however , we did not recognize any license revenue from the agreement with medicis during the year ended december 31 , 2013 as the prior license agreement was discontinued in connection with the medicis legal settlement in october 2012. costs and operating expenses our cost and operating expenses consist of research and development expenses and sales , general and administrative expenses . the largest component of our operating expenses is our personnel costs , which consist primarily of wages , benefits and bonuses as well as related stock-based compensation . we expect our cash expenditures to increase in the near term to initiate and complete clinical trials and other associated programs relating to rt001 for the treatment of crow 's feet lines , initiate and complete clinical trials using rt001 for the treatment of hyperhidrosis , and to initiate and complete additional clinical trials and associated programs related to rt002 for the treatment of glabellar lines and indications in muscle movement and other disorders . research and development expenses we recognize research and development expenses as they are incurred . since our inception , we have focused on our clinical development programs and the related research and development . we have been developing rt001 and rt002 since 2002 and we typically use our employees , consultants and infrastructure resources across both programs . our research and development expenses consist primarily of : salaries and related expenses for personnel in research and development functions , including expenses related to stock-based compensation granted to such personnel ; expenses related to the initiation and completion of clinical trials for rt001 and rt002 , including expenses related to production of clinical supplies ; fees paid to clinical consultants , clinical trial sites and vendors , including cros in conjunction with implementing and monitoring our preclinical and clinical trials and acquiring and evaluating preclinical and clinical trial data , including all related fees , such as for investigator grants , patient screening fees , laboratory work and statistical compilation and analysis ; the fair value of technology rights reacquired as part of our settlement with medicis ; other consulting fees paid to third parties ; expenses related to production of clinical supplies , including fees paid to contract manufacturers ; expenses related to establishment of our own manufacturing facilities ; expenses related to license fees and milestone payments under in-licensing agreements ; expenses related to compliance with drug development regulatory requirements in the united states , the european union and other foreign jurisdictions ; and depreciation and other allocated expenses . 55 for the years ended december 31 , 2014 , 2013 , and 2012 , costs associated with our manufacturing , quality and regulatory efforts for both rt001 and rt002 development have been our largest research and development related expenses , totaling $ 28.0 million , or 83.7 % , $ 20.3 million , or 73.0 % , and $ 30.3 million , or 92.6 % , of research and development expenses in 2014 , 2013 , and 2012 , respectively . these costs do not include clinical costs associated with the development of rt001 and rt002 . we believe that the strict allocation of costs by product candidate would not be meaningful . as such , we generally do not track these costs by product candidate . clinical costs associated with the development of rt001 and rt002 , including clinical trials of rt001 for the treatment of crow 's feet lines and clinical trials of rt002 for the improvement of glabellar lines , totaled $ 5.4 million , or 16.3 % , $ 7.5 million , or 27.0 % , and $ 2.4 million , or 7.33 % of research and development expenses in 2014 , 2013 , and 2012 , respectively . our research and development expenditures are subject to numerous uncertainties primarily related to the timing and cost needed to complete our respective projects . further , the development timelines , the probability of success and development expenses can differ materially from expectations and the completion of clinical trials may take several years or more depending on the type , complexity , novelty and intended use of a product candidate . accordingly , the cost of clinical trials may vary significantly over the life of a project as a result of differences arising during clinical development .
| results of operations for the years ended december 31 , 2014 , 2013 , and 2012 the following table presents our revenue for the periods indicated and related changes from the prior period : 58 revenue replace_table_token_6_th our total revenue for the year ended december 31 , 2014 decreased by 38 % , compared to the same period in 2013 , due to a decrease in license revenue and the relastin product milestone revenue . our total revenue for the year ended december 31 , 2013 decreased by 14 % , compared to the same period in 2012 , due to a decrease in license revenue offset by an increase in royalty revenue . our license revenue decreased to $ 0.2 million for the year ended december 31 , 2013 from $ 0.4 million for the year ended december 31 , 2012. the decrease was due to the termination of a license agreement for rt002 as a result of the medicis settlement in october 2012. prior to the termination of the medicis license agreement , we were recognizing license revenue of $ 0.5 million per year through the amortization of an upfront payment made by medicis during the year ended december 31 , 2009 , which was initially recorded as deferred revenue . as a result of the termination of the medicis license agreement , we no longer recognize any license revenue from the 2009 medicis license agreement for rt002 . this decrease was partially offset by $ 0.2 million of revenue recognized pursuant to an exclusive technology evaluation agreement whereby we received an upfront payment of $ 0.3 million which was initially recorded as deferred revenue and recognized over the estimated performance period . during the year ended december 31 , 2014 , the remaining $ 0.1 million of the upfront payment related to the exclusive technology evaluation agreement was recognized .
| 7,151 |
” overview we are a commercial stage company that develops and markets products and services based on a proprietary technology that facilitates the routine use of targeted molecular profiling . molecular profiling is the collection of information about multiple molecular targets , such as dna and rna , also called biomarkers , in a biological sample . molecular profiling information has many important applications , from basic research to molecular diagnostics in personalized medicine . our technology can be used throughout that range of applications , which is just one of its many benefits . our focus is on clinical applications . our primary customer segments include biopharmaceutical companies , academic research centers and molecular testing laboratories . as part of our business model , we seek to leverage key business drivers in molecular profiling , including the acceleration of precision medicine , the migration of molecular testing to next generation sequencing , the movement to less invasive biopsies , the need for greater diagnostic sensitivity , the need to conform to changing healthcare economics and the need for automation and an easily deployable workflow . our products include instrumentation ( or platforms ) , consumables , including assay kits , and software analytics that , as an integrated system , automate sample processing and can quickly , robustly and simultaneously profile tens , hundreds or thousands of molecular targets from samples a fraction of the size required by prevailing technologies . our objective is to establish our solutions as the standard in molecular profiling , and to make their benefits accessible to all molecular labs from research to the clinic . we believe that our target customers desire high quality molecular profiling information in a multiplexed panel format from increasingly smaller and less invasive samples , with the ability to collect such information locally to minimize turnaround time and cost . in 2014 , we launched our htg edgeseq technology , which generates a molecular profiling library for detection of rna using ngs . our htg edgeseq assays are automated on either our htg edge or htg edgeseq platform . our htg edge platform is capable of running both our original , plate-based assays and our ngs-based htg edgeseq assays . we continue to support a small number of customers interested in utilizing our plate-based assays ( on a custom manufacturing basis ) ; however , in 2016 , based on market trends and customer feedback , we shifted our product focus fully to our ngs-based htg edgeseq system . our innovative platforms and menu of molecular profiling panels are being utilized by a wide range of customers including biopharmaceutical companies , academic institutions and molecular labs to simultaneously analyze a comprehensive set of molecular information from valuable clinical samples and improve the lab 's workflow efficiency . customers can also obtain the advantages of our proprietary technologies by engaging our veri/o laboratory for pre-clinical and clinical research-related services . we currently market several proprietary molecular profiling panels that address the needs of customers in translational research , biomarker discovery and potentially companion diagnostics . in addition , we have a focused development pipeline that includes planned panels for translational research , drug development and molecular diagnostics . our product strategy is to develop a suite of profiling panels with initial focus in immuno-oncology and next generation pathology . we have incurred significant losses since our inception , and we have never been profitable . we incurred net losses of $ 26.0 million and $ 21.4 million for the years ended december 31 , 2016 and 2015 , respectively , and had an accumulated deficit of $ 115.6 million as of december 31 , 2016. as of december 31 , 2016 , we had available cash and cash equivalents totaling approximately $ 7.5 million and investments in highly liquid corporate and government debt securities totaling $ 4.3 million and had current liabilities of approximately $ 10.0 million plus an additional $ 14.0 million in long-term liabilities primarily attributable to our growth term loan and nuvogen obligation . we believe that these factors raise substantial doubt about our ability to continue as a going concern . while we believe that our existing cash resources are sufficient to fund our operations until mid-way through the second quarter of 2017 , we can not provide assurances that changed circumstances will not result in the depletion of our capital resources more rapidly than we currently anticipate . we will need to raise additional capital in the near future to fund our continued operations . additional capital may not be available in amounts needed by us . even if sufficient capital is available to us , it might be available only on unfavorable terms . if we are unable to raise additional capital in sufficient amounts or on terms acceptable to us , we may have to significantly reduce expenses , sell assets ( potentially at a discount to their fair value or carrying value ) , enter into relationships with third parties to develop or commercialize products or technologies that we otherwise would have sought to develop or commercialize independently , cease operations altogether , pursue an acquisition of our company at a price that may result in up to a total loss on investment to our stockholders , file for bankruptcy , seek other protection from creditors , or liquidate all of our assets . in addition , if we default under our term loan agreement , our lenders could foreclose on our assets , including substantially all of our cash which is held in accounts with our lenders . 70 factors affecting our performance our business model has evolved and expanded since our ipo was completed in may 2015 primarily due to our success in the development of a biopharmaceutical customer base , entry into collaboration agreements with certain biopharmaceutical customers and changing customer demand from product sales to service offerings in our veri/o laboratory . story_separator_special_tag cost of revenue increased by $ 800,000 , or 24 % for the year ended december 31 , 2016 compared with the year ended december 31 , 2015. since 2014 , we have directed most of our commercial and marketing efforts to our htg edgeseq products that do not utilize our chemiluminescent reader technology . based on market demand , we discontinued the active marketing of our original htg edge technology in december 2016 ; provided that we will continue to support htg edge consumable needs for a limited 73 number of customers on an as-requested custom manufacturing basis for some period of time . the increased cost of revenue in 2016 was primarily due to the write off of the remaining $ 360,000 value of our htg edge reader inventory , the recording of a $ 133,000 excess inventory reserve for our original htg edge system and additional inventory write offs to cost of product revenue of approximately $ 167,000 relating to our htg edge and plate-based consumables technology during the year ended december 31 , 2016. despite these non-cash charges , gross margin as a percentage of total revenue improved from 17 % for the year ended december 31 , 2015 to 19 % for the year ended december 31 , 2016. this percent improvement reflects an increase in product and service revenues , allowing us to further absorb our largely fixed manufacturing costs and an overall the reduction of manufacturing costs resulting from a change to internally manufactured instruments , which began early in 2016. research and development expenses research and development expenses represent costs to develop new proprietary panels and corresponding assays , to obtain fda approval for our first u.s. ivd assay and to continue to develop and improve our htg edgeseq platform . these expenses include payroll and related expenses , consulting expenses , laboratory supplies and equipment and amounts incurred under collaborative supply or development agreements . research and development costs are expensed as incurred . research and development expenses increased by $ 3.3 million , or 72 % , for the year ended december 31 , 2016 compared with the year ended december 31 , 2015. we expect research and development costs to continue to increase in 2017 due to the ongoing development of our v2 chemistry and the possible resumption of our project janus development efforts in the second half of 2017. in addition , we expect higher costs from collaboration projects under agreements with our biopharmaceutical customers and costs associated with the fourth and final submission for our first pma . selling , general and administrative expenses selling , general and administrative expenses consist primarily of personnel costs for our sales and marketing , regulatory , legal , executive management and finance and accounting functions . the expenses also include third-party professional and consulting fees incurred by these functions , promotional expenses and facility and overhead costs for our administrative offices . selling , general and administrative expenses increased by $ 2.4 million , or 16 % , for the year ended december 31 , 2016 , compared with the year ended december 31 , 2015. this year over year increase was primarily a result of operating as a public company for a full year , including expenses related to compliance with the rules and regulations of the securities and exchange commission and the nasdaq global market , non-cash stock-based compensation expense , additional director and officer insurance costs , investor relations activities and other administrative and professional services . this increase also included higher sales and marketing costs related to a reorganization of our us-based commercial sales team , increased commercial sales activities in europe , expansion of marketing efforts to accelerate market adoption of our products and commissions on overall increased revenue generated in 2016. loss from change in stock warrant valuation loss from the change in stock warrant valuation for the year ended december 31 , 2015 was a result of an increase in the fair value of our preferred stock warrants just prior to the exercise of series d preferred stock warrants , and the conversion to common stock warrants of our series c-2 preferred stock warrants , convertible note warrants and growth term loan warrants at the time of our initial public offering . the increase in the fair value of our preferred stock warrants until their conversion to common stock warrants was primarily attributable to the proximity to and increased likelihood of completing an initial public offering . there was no loss from change in stock warrant valuation for the year ended december 31 , 2016. interest expense as of december 31 , 2016 , we had an obligation due to nuvogen research , llc , or nuvogen , in the amount of $ 8.6 million under an asset purchase agreement and an obligation due to a syndicate of two lending institutions of $ 11.8 million , net of discount and deferred financing costs under a growth term loan entered into in august 2014 and amended in august 2015 and june 2016. interest expense relating to borrowings under our term loan agreements and non-cash interest expense related to our obligation to nuvogen increased by $ 148,000 for the year ended december 31 , 2016 as compared with the year ended december 31 , 2015. the year over year increase was primarily the result of interest , discount and final fee premium recognized in 2016 on the $ 5.0 million growth term loan borrowed in march 2016 , partially offset by reduced interest on the original growth term loan and the nuvogen obligation as principal payments were made on both liabilities in 2016 . 74 loss on settlement of convertible debt with completion of our initial public offering in may 2015 , our remaining convertible note debt discount and deferred financing costs relating to the convertible notes totaling $ 0.7 million were charged to loss on settlement of convertible debt with the issuance of common stock in settlement of the convertible notes and related accrued interest .
| financial operations overview and results of operations comparison of the years ended december 31 , 2016 and 2015 replace_table_token_2_th revenue we generate revenue from the sale of our htg edge and htg edgeseq platforms and our consumables , which consist primarily of our proprietary molecular profiling panels and other assay components . together , all such consumables may be referred to as assays , assay kits or kits . we also generate revenue through the sale of services related to our proprietary technology , such as sample processing , custom research-use-only assay development and , pursuant to collaboration agreements with our biopharmaceutical customers , development of ivd assays . because of increased demand for sample processing by our biopharmaceutical customers , a trend that we expect to continue in future reporting periods , we announced and branded of our veri/o laboratory service in the second quarter of 2016. total revenue for the year ended december 31 , 2016 increased by 27 % to $ 5.1 million compared with total revenue of $ 4.0 million for the year ended december 31 , 2015. product revenue product revenue includes revenue from the sale of our htg edge and htg edgeseq instruments and related consumables , and was $ 2.8 million compared with $ 3.5 million for the year ended december 31 , 2015 , and was comprised of the following : replace_table_token_3_th revenue from the sale of our instruments for the year ended december 31 , 2016 was $ 523,000 compared with $ 789,000 for the year ended december 31 , 2015 , and represented 10 % and 20 % of our total revenue for the years ended december 31 , 2016 and 2015 , respectively . the decrease in instrument revenue from 2016 to 2015 is primarily attributable to our focus on biopharmaceutical 72 customers whose preference has been to access our technology via services through our veri/o laboratory .
| 7,152 |
we conduct and manage our business as one operating segment , rather than multiple operating segments , for internal reporting and internal decision making purposes . in 2012 , senior housing and long term care properties , which include skilled nursing properties , assisted living properties , independent living properties , memory care properties and combinations thereof comprised approximately 98.7 % of our investment portfolio . the following table summarizes our real estate investment portfolio as of december 31 , 2012 ( dollar amounts in thousands ) : replace_table_token_12_th ( 1 ) includes interest income from mortgage loans . ( 2 ) includes rental income and interest income from mortgage loans . ( 3 ) we have investments in 29 states leased or mortgaged to 43 different operators . ( 4 ) see item 2. properties for discussion of bed/unit count . ( 5 ) includes a new mc development with 60 units and two new alf developments with a total of 158 units , a new 143-bed snf development and a 120-bed snf redevelopment project . as of december 31 , 2012 we had $ 740.8 million in carrying value of net real estate investment , consisting of $ 701.5 million or 94.7 % invested in owned and leased properties and $ 39.3 million or 5.3 % invested in mortgage loans secured by first mortgages . for the year ended december 31 , 2012 , rental income and interest income from mortgage loans represented 93.1 % and 5.8 % , respectively , of total gross revenues . in most instances , our lease structure contains fixed or estimable annual rental escalations , which are generally recognized on a straight-line basis over the minimum lease period . certain leases have annual rental escalations that are contingent upon changes in the consumer price index and or changes in the gross operating revenues of the property . this revenue is not recognized until the appropriate contingencies have been resolved . for the years ended december 31 , 2012 , 2011 and 2010 we recorded $ 3.3 million , $ 3.7 million , and $ 3.8 million , respectively , in straight-line rental income . also during 2012 , 2011 and 2010 we recorded $ 38,000 , $ 46,000 and $ 0.8 million , respectively , of straight-line rent receivable reserve . assuming no new leased investments with fixed annual rental escalations are added to our portfolio , the year 2013 straight-line rental income for leases in place at december 31 , 2012 are projected to remain at the 2012 amount of $ 3.3 million . the straight-line rental income remains constant due to the new master lease entered into during the fourth quarter of 2012. our cash rental income is projected to increase from $ 85.0 million in 2012 to $ 95.4 million in 2013 assuming no modification , replacement or extension of existing leases and no new leased investments are added to our portfolio . during the year ended december 31 , 2012 , we received $ 85.0 million of cash rental revenue and recorded $ 0.7 million of lease inducement costs . at december 31 , 2012 and 2011 , the straight-line rent receivable balance , net of 33 reserves , for continuing and discontinued operations on the consolidated balance sheet was $ 27.0 million and $ 23.8 million , respectively . many of our existing leases contain renewal options that could , in the future , renew above or below current rent rates . for the year ended december 31 , 2012 we renewed three leases at rates similar to the existing rate by 1 ) replacing one expired lease with a new lease and 2 ) combined two other leases into one master lease . the operators of these renewed leases remained the same . our primary objectives are to create , sustain and enhance stockholder equity value and provide current income for distribution to stockholders through real estate investments in senior housing and long term care properties managed by experienced operators . to meet these objectives , we attempt to invest in properties that provide opportunity for additional value and current returns to our stockholders and diversify our investment portfolio by geographic location , operator , property type and form of investment . we opportunistically consider investments in health care facilities in related businesses where the business model is similar to our existing model and the opportunity provides an attractive expected return . consistent with this strategy , we pursue , from time to time , opportunities for potential acquisitions and investments , with due diligence and negotiations often at different stages of development at any particular time . with respect to skilled nursing properties , we attempt to invest in properties that do not have to rely on a high percentage of private-pay patients . we prefer to invest in a property that has significant market presence in its community and where state certificate of need and or licensing procedures limit the entry of competing properties . for assisted living and independent living investments we have attempted to diversify our portfolio both geographically and across product levels . memory care facilities offer specialized options for seniors with alzheimer 's disease and other forms of dementia . purpose built , free-standing memory care facilities offer an attractive alternative for private-pay residents affected by memory loss in comparison to other accommodations that typically have been provided within a secured unit of an assisted living or skilled nursing facility . these facilities offer dedicated care and specialized programming for various conditions relating to memory loss in a secured environment that is typically smaller in scale and more residential in nature than traditional assisted living facilities . residents require a higher level of care and more assistance with activities of daily living than in assisted living facilities . therefore , these facilities have staff available 24 hours a day to respond to the unique needs of their residents . story_separator_special_tag the agreement gives us the right to purchase the replacement facility for $ 13.5 million during an 18 month period beginning on the first anniversary of the issuance of the certificate of occupancy . if the purchase option is exercised , the replacement facility will be added to an existing master lease at a lease rate equivalent to the interest rate in effect on the loan at the time the purchase option is exercised . as of december 31 , 2012 , we funded $ 2.6 million of loan proceeds and we have a remaining commitment of $ 8.0 million on this mortgage and construction loan . subsequent to december 31 , 2012 , we funded $ 0.9 million under this mortgage and construction loan and we have a remaining commitment of $ 7.1 million . bank borrowings . during 2012 , we amended our unsecured credit agreement increasing the commitment to $ 240.0 million with the opportunity to increase the credit amount up to a total of $ 350.0 million . additionally , the drawn pricing was decreased by 25 basis points , the undrawn pricing was decreased by 10 basis points and the maturity of the facility was extended for one additional year to may 25 , 2016. the amendment also provides for a one-year extension option at our discretion , subject to customary conditions . based on our leverage ratios during 2012 , the amended facility provides for interest annually at libor plus 125 basis points and the unused commitment fee was 25 basis points . subsequent to december 31 , 2012 , we anticipate that the annual interest will increase to libor plus 150 basis points and 30 basis points for the unused commitment fee based on our leverage ratios at december 31 , 2012. financial covenants contained in the unsecured credit agreement , which are measured quarterly , require us to maintain , among other things : ( i ) a ratio of total indebtedness to total asset value not greater than 0.5 to 1.0 ; ( ii ) a ratio of secured debt to total asset value not greater than 0.35 to 1.0 ; ( iii ) a ratio of unsecured debt to the value of the unencumbered asset pool not greater than 0.6 to 1.0 ; and ( iv ) a ratio of ebitda , as calculated in the unsecured credit agreement , to fixed charges not less than 1.50 to 1.0 . 36 senior unsecured notes . during the 2012 , we sold 12-year senior unsecured notes in the aggregate amount of $ 85.8 million to a group of institutional investors in a private placement transaction . the notes bear interest at 5.0 % , mature on july 19 , 2024 and have scheduled annual principal pay downs of $ 17.2 million in years 8 through 12. we used a portion of the proceeds to pay down our unsecured credit agreement and used the remaining proceeds to fund acquisitions . key performance indicators , trends and uncertainties we utilize several key performance indicators to evaluate the various aspects of our business . these indicators are discussed below and relate to concentration risk and credit strength . management uses these key performance indicators to facilitate internal and external comparisons to our historical operating results in making operating decisions and for budget planning purposes . concentration risk . we evaluate by gross investment our concentration risk in terms of asset mix , investment mix , operator mix and geographic mix . concentration risk is valuable to understand what portion of our investments could be at risk if certain sectors were to experience downturns . asset mix measures the portion of our investments that are real property or mortgage loans . in order to qualify as an equity reit , at least 75 percent of our total assets must be represented by real estate assets , cash , cash items and government securities . investment mix measures the portion of our investments that relate to our various property types . operator mix measures the portion of our investments that relate to our top five operators . geographic mix measures the portion of our investment that relate to our top five states . 37 the following table reflects our recent historical trends of concentration risk ( gross investment , in thousands ) : replace_table_token_15_th ( 1 ) preferred care , inc. ( or preferred care ) leases 22 skilled nursing and two range of care properties under two master leases and one skilled nursing property under a separate lease agreement . in addition , they operate four skilled nursing properties securing four mortgage loans receivable that we have with unrelated third parties . they also operate one skilled nursing facility under a sub-lease with another lessee we have which is not included in the preferred care operator mix . ( 2 ) senior care centers , llc ( or senior care ) also operates four skilled nursing properties under a sub-lease with another lessee which is not include in the senior care operator mix . credit strength . we measure our credit strength both in terms of leverage ratios and coverage ratios . our leverage ratios include debt to gross asset value and debt to market capitalization . the leverage ratios indicate how much of our consolidated balance sheet capitalization is related to long term obligations . our coverage ratios include interest coverage ratio and fixed charge coverage ratio . the coverage ratios indicate our ability to service interest and fixed charges ( interest plus preferred dividends ) . the coverage ratios are based on adjusted earnings before gain on sale of real estate , interest , taxes , depreciation and amortization ( or adjusted ebitda ) . leverage ratios and coverage ratios are widely used by investors , analysts and rating agencies in the valuation , comparison , rating and 38 investment recommendations of companies .
| operating results year ended december 31 , 2012 compared to year ended december 31 , 2011 ( in thousands ) replace_table_token_18_th ( 1 ) increased due to acquisitions . ( 2 ) decreased primarily due to payoffs and normal amortization of existing mortgage loans partially offset by origination of two mortgage loans totaling $ 7,719 . ( 3 ) decreased primarily due to the redemption of the skilled healthcare group bond . ( 4 ) increased primarily due to an increase in bank borrowing and the sale of senior unsecured notes to fund investments . ( 5 ) increased due to acquisitions , developments and capital improvement investments . ( 6 ) increased primarily due to $ 166,750 of acquisitions during 2012 as compared to $ 106,135 during 2011 . ( 7 ) increased primarily due to higher expense related to vesting of restricted stock granted , increased salaries and benefits reflective of increasing staffing levels , and bonuses related to the increased volume of transactions completed during 2012 . ( 8 ) includes the financial results from properties sold during 2012. no properties were sold in 2011 . ( 9 ) decreased due to the conversion of all 112,588 limited partnership units during 2012 . ( 10 ) increased due the grant of 90,500 shares of restricted common stock during 2012 . ( 11 ) decreased due to the redemption of all of our series f preferred stock . 41 year ended december 31 , 2011 compared to year ended december 31 , 2010 ( in thousands ) replace_table_token_19_th ( 1 ) increased due to acquisitions . ( 2 ) decreased primarily due to payoffs , normal amortization of existing mortgage loans and the conversion of a mortgage loan to an owned property . during 2010 , we acquired a school property via deed-in-lieu of foreclosure as a result of the borrower filing for chapter 7 bankruptcy .
| 7,153 |
management believes these strategic objectives will guide its efforts to achieving its vision , to deliver the unparalleled customer experience , all the while maintaining a focus to improve net income and strengthen the balance sheet . the first strategic objective is to grow the company 's fee-based businesses . as the industry continues to experience economic uncertainty , the company has continued to emphasize its fee-based operations . with a 23 diverse source of revenues , this strategy has helped reduce the company 's exposure to sustained low interest rates . during 2014 , noninterest income increased $ 6.9 million , or 1.4 percent , to $ 498.7 million for the year ended december 31 , 2014 , compared to the same period in 2013. trust and securities processing income increased $ 22.1 million , or 8.3 percent , and bankcard fee income increased $ 5.2 million , or 8.4 percent , for year-to-date december 31 , 2014 compared to the same period in 2013. these increases in noninterest income were offset by decreases in equity earnings on alternative investments and gains on sales of securities available for sale . equity earnings on alternative investments had unrealized gains of $ 4.0 million for the year-ended december 31 , 2014 compared to unrealized gains of $ 19.0 million for the same period in 2013. gains of $ 4.1 million on securities available for sale were recognized during the year ended december 31 , 2014 compared to $ 8.5 million during the same period in 2013. the second strategic objective is a focus on net interest income through loan and deposit growth . during 2014 , continued progress on this strategy was illustrated by an increase in net interest income of $ 16.8 million , or 5.0 percent , from the previous year . the company has continued to show increased net interest income in a historically low rate environment through the effects of increased volume of average earning assets and a low cost of funds in its balance sheet . average earning assets increased by $ 964.9 million , or 6.9 percent , from 2013. average loan balances increased $ 754.0 million , or 12.1 percent , for year-to-date december 31 , 2014 compared to the same period in 2013. earning asset growth was primarily funded with a $ 486.9 million increase in average non-interest-bearing deposits , or 10.3 percent . net interest margin and net interest spread , on a tax-equivalent basis , decreased six basis points , compared to 2013. the third strategic objective is a focus on improving operating efficiencies . at december 31 , 2014 , the company had 105 banking centers and two wealth management offices . the company continues to emphasize increasing its primary retail customer base by providing a broad offering of services through our existing branch network . these efforts have resulted in the total loans and deposits growth previously discussed . the company continues to invest in technological advances that will help management drive operating efficiencies in the future through improved data analysis and automation . during 2014 , systems infrastructure enhancements have been implemented , and these will continue into 2015. the company continues to evaluate core systems and will invest in enhancements that will yield operating efficiencies . the company evaluates its cost structure for opportunities to moderate expense growth without sacrificing growth initiatives . the fourth strategic objective is a focus on capital management . the company places a significant emphasis on the maintenance of a strong capital position , which management believes promotes investor confidence , provides access to funding sources under favorable terms , and enhances the company 's ability to capitalize on business growth and acquisition opportunities . the company continues to maximize shareholder value through a mix of reinvesting in organic growth , evaluating acquisition opportunities that complement the strategies , increasing dividends over time , and properly utilizing a share buy-back strategy . at december 31 , 2014 , the company had $ 1.6 billion in total shareholders ' equity . this is an increase of $ 137.7 million , or 9.1 percent , compared to total shareholders ' equity at december 31 , 2013. in 2013 , the company completed the issuance of 4.5 million shares of common stock with net proceeds of $ 231.4 million to be used for strategic growth purposes . at december 31 , 2014 , the company had a total risk-based capital ratio of 14.04 percent . the company repurchased 97,609 shares at an average price of $ 58.81 per share during 2014. further , the company paid $ 41.4 million in dividends during 2014 , which represents a 13.8 percent increase compared to 2013. earnings summary the company recorded consolidated net income of $ 120.7 million for the year-ended december 31 , 2014. this represents a 9.9 percent decrease over 2013. net income for 2013 was $ 134.0 million , or an increase of 9.2 percent compared to 2012. basic earnings per share for the year-ended december 31 , 2014 , were $ 2.69 per share compared to $ 3.25 per share in 2013 and $ 3.07 per share in 2012. basic earnings per share for 2014 decreased 17.2 percent over 2013 , which increased 5.9 percent over 2012. fully diluted earnings per share for the year-ended december 31 , 2014 , were $ 2.65 per share compared to $ 3.20 per share in 2013 and $ 3.04 per share in 2012 . story_separator_special_tag table 1 three year average balance sheets/yields and rates ( tax-equivalent basis ) ( in millions ) replace_table_token_6_th ( 1 ) interest income and yields are stated on a fully tax-equivalent ( fte ) basis , using a marginal tax rate of 35 % . the tax-equivalent interest income and yields give effect to disallowance of interest expense , for federal income tax purposes related to certain tax-free assets . rates earned/paid may not compute to the rates shown due to presentation in millions . the tax-equivalent interest income totaled $ 21.2 million , $ 22.2 million , and $ 19.9 million in 2014 , 2013 , and 2012 , respectively . 26 ( 2 ) loan fees are included in interest income . such fees totaled $ 9.9 million , $ 10.9 million , and $ 11.0 million in 2014 , 2013 , and 2012 , respectively . ( 3 ) loans on non-accrual are included in the computation of average balances . interest income on these loans is also included in loan income . ( 4 ) amount includes loans held for sale . three year average balance sheets/yields and rates ( tax-equivalent basis ) ( in millions ) replace_table_token_7_th 27 table 2 rate-volume analysis ( in thousands ) this analysis attributes changes in net interest income either to changes in average balances or to changes in average rates for earning assets and interest-bearing liabilities . the change in net interest income due jointly to both volume and rate has been allocated to volume and rate in proportion to the relationship of the absolute dollar amount of the change in each . all rates are presented on a tax-equivalent basis and give effect to the disallowance of interest expense for federal income tax purposes , related to certain tax-free assets . the loan average balances and rates include nonaccrual loans . replace_table_token_8_th replace_table_token_9_th 28 table 3 analysis of net interest margin ( in thousands ) replace_table_token_10_th the company experienced an increase in net interest income of $ 16.8 million , or 5.0 percent , for the year 2014 , compared to 2013. this follows an increase of $ 13.2 million , or 4.1 percent , for the year 2013 , compared to 2012. as illustrated in table 2 , the 2014 and 2013 increases are due to the favorable volume variances in earning assets , which were partially offset by the rate variances . the decrease in the cost of funds has led to a declining beneficial impact from interest-free funds . however , the company still maintains a significant portion of its deposit funding with noninterest-bearing demand deposits . noninterest-bearing demand deposits represented 41.4 percent , 38.0 percent and 42.2 percent of total outstanding deposits at december 31 , 2014 , 2013 and 2012 , respectively . as illustrated in table 3 , the impact from these interest-free funds was six basis points in 2014 and 2013 , compared to ten basis points in 2012. the company has experienced a repricing of its earning assets and interest-bearing liabilities during the 2014 interest rate cycle . the average rate on earning assets during 2014 has decreased by eight basis points , while the average rate on interest-bearing liabilities decreased by two basis points , resulting in a six basis point decline in spread . the volume of loans has increased from an average of $ 6.2 billion in 2013 to an average of $ 7.0 billion in 2014. loan-related earning assets tend to generate a higher spread than those earned in the company 's investment portfolio . by design , the company 's investment portfolio is moderate in duration and liquid in its composition of assets . if the federal reserve 's open market committee maintains rates at current levels , the company anticipates a negative impact to interest income as a result . the magnitude of this impact will be largely dependent upon the federal reserve 's policy decisions , market movements and the duration of this rate environment . during 2015 , approximately $ 1.2 billion of available for sale securities are expected to have principal repayments . this includes approximately $ 335 million which will have principal repayments during the first quarter of 2015. the total investment portfolio had an average life of 43.6 months , 47.6 months , and 40.0 months as of december 31 , 2014 , 2013 , and 2012 , respectively . provision and allowance for loan losses the allowance for loan losses ( all ) represents management 's judgment of the losses inherent in the company 's loan portfolio as of the balance sheet date . an analysis is performed quarterly to determine the appropriate balance of the all . the analysis reflects loan quality trends , including the levels of and trends related to non-accrual loans , past due loans , potential problem loans , criticized loans and net charge-offs or recoveries , among other factors . after the balance sheet analysis is performed for the all , the provision for loan losses is computed as the amount required to adjust the all to the appropriate level . 29 table 4 presents the components of the allowance by loan portfolio segment . the company manages the all against the risk in the entire loan portfolio and therefore , the allocation of the all to a particular loan segment may change in the future . management of the company believes the present all is adequate considering the company 's loss experience , delinquency trends and current economic conditions . future economic conditions and borrowers ' ability to meet their obligations , however , there are uncertainties which could affect the company 's all and or need to change its current level of provision . for more information on loan portfolio segments and all methodology refer to note 3 , loans and allowance for loan losses , to the consolidated financial statements . table 4 allocation of allowance for loan
| bank operating results replace_table_token_15_th bank net income decreased by $ 32.4 million , or 38.0 percent , to $ 52.9 million for the year ended december 31 , 2014 , compared to the same period in 2013. net interest income increased $ 7.2 million , or 2.5 percent , for the year ended december 31 , 2014 , compared to the same period in 2013 , driven by commercial , commercial real estate , and real estate construction loan growth , while being slightly offset by interest rate margin compression . provision for loan losses increased by $ 3.6 million , due to characteristics of the loan portfolio driving an increased allowance for loan loss reserve for this segment . noninterest income decreased $ 16.3 million , or 7.8 percent , over the same period in 2013 driven by the following decreases : unrealized gains on pcm equity method investments of $ 15.1 million , bond trading income of $ 1.5 million , securities gains of $ 4.4 million , card services income of $ 1.6 million , and deposit service charges of $ 1.8 million compared to the 34 same period last year . these decreases are offset by an increase in trust and securities processing income of $ 7.8 million and an increase in other noninterest income of $ 2.3 million . the increase in trust and securities processing income is due to an increase in asset values and new business generated during the current year compared to the same period last year .
| 7,154 |
consistent story_separator_special_tag forward-looking statements the forward-looking comments contained in the following discussion involve risks and uncertainties . our actual results may differ materially from those discussed here due to factors such as , among others , limited operating history , difficulty in developing , exploiting and protecting proprietary technologies , intense competition and substantial regulation in the healthcare industry . additional factors that could cause or contribute to such differences can be found in the following discussion , as well as under item 1a , “ risks factors. ” overview general we are a healthcare services company , providing specialized health services designed to assist health plans , employers and unions to manage and treat their substance dependence members through a network of licensed healthcare providers and our employees . the catasys substance dependence program was designed to address substance dependence as a chronic disease . the program seeks to lower costs and improve member health through the delivery of integrated medical and psychosocial interventions in combination with long term “ care coaching. ” catasys also offers the prometa treatment program for alcoholism and stimulant dependence on a private-pay basis through licensed treatment providers and a company managed treatment center that offers the prometa treatment program , as well as other treatments for substance dependencies . our strategy our business strategy is to provide a quality integrated medical and behavioral program to help organizations treat and manage substance dependent populations to impact total healthcare costs associated with members with a substance dependence diagnosis . we intend to grow our business through increased adoption of our on trak integrated substance dependence solutions by managed care health plans , employers , unions and other third-party payors . key elements of our business strategy include : ● demonstrating the potential for improved clinical outcomes and reduced cost associated with using our catasys programs with key managed care and other third-party payors ; ● educating third-party payors on the disproportionately high cost of their substance dependent population ; ● providing our catasys integrated substance dependence solutions to third-payors for reimbursement on a case rate or monthly fee ; and ● generate outcomes data from our on trak program to demonstrate cost reductions and utilization of this outcomes data to facilitate broader adoption . as of march 29 , 2012 , we are in contact with organizations representing 10.3 million covered lives . we consider the process to have moved to a second stage when we are asked to perform data analysis for the prospect organization . we are currently in the data analysis phase or further with organizations representing 5.2 million covered lives . as noted in more detail below , the fact that we have moved into the second phase or beyond with a prospect organization provides no assurance that we will ultimately enter into a contract with such prospect . even if contracts are entered into with such organizations , there is no assurance that a substantial number , or even a significant number , of their covered lives would enroll in our programs the sales cycle with respect to the execution of such contracts is a fairly long one and organizations may decide to not move forward at any time and we may remove an organization from the pipeline if we feel that we are not making continued significant progress towards a contract or that our limited sales resources are better employed on other prospects . even if we advance to what we may consider to be the final stages , including contract negotiations , things may happen to prevent the execution of such contracts . 30 we currently have contracts with organizations covering approximately 580,000 lives . we estimate that in order for us to break even on a cash flow basis , we will need to have contracts with organizations covering approximately 1,500,000 lives . based on projected enrollment rates this would be expected to result in having approximately 1,500 enrollees at full projected enrollment which is expected no less than a year after enrollment commences . this assumption is based on our generating our current standard pricing of $ 8,500 in annual fees per enrollee in the form of monthly fees or combination of fees and share of savings , which is consistent with current contracted arrangements . one of our programs with a customer who never fully implemented our program will be discontinued in the second quarter of 2012. we will continue to provide services to and be paid for enrolled members . our assumptions on costs are based largely on our historical costs to date . however , due to the limited amount of history that we have had with enrollees ( less than a full year ) it is uncertain whether our experience to date will necessarily be predictive of the actual costs in the future . accordingly , any reduction in fees , the inability to generate incentive fees based on reducing members ' overall costs , or increase in the cost of services could adversely impact these break-even projections . in addition , should our overhead unrelated to the cost of servicing enrollees increase , our break-even point would also be adversely impacted . for example , an increase in our marketing and promotional budget in an effort to accelerate the contract enrollment process or higher than expected costs to build our provider networks and such similar expenses could adversely impact the break-even projections . there is no assurance that we will ever generate enough fees to generate a positive cash flow . see “ risks related to our business ” under the “ risk factors ” section for more information . reporting we manage and report our operations through two business segments : healthcare services and license and management services . the healthcare services segment includes on trak and its integrated substance dependence solutions marketed to health plans , employers and unions through a network of licensed and company managed healthcare providers . story_separator_special_tag if we do not immediately obtain additional capital , there is a significant doubt as to whether we can continue to operate as a going concern and we will need to curtail or cease operations or seek bankruptcy relief . if we discontinue operations , we may not have sufficient funds to pay any amounts to stockholders . we have received a loan from one of our large shareholders to fund operations for the last month while we seek additional capital , but there is no assurance that he or anyone else will continue to provide additional capital . in july 2010 , we closed on $ 2 million of a registered direct financing with certain institutional investors which represented $ 1.7 million in net proceeds to our company . in october 2010 , we entered into securities purchase agreements with certain accredited investors , including socius , pursuant to which such investors purchased $ 500,000 of 12 % senior secured convertible notes ( the “ october 2010 bridge notes ” ) and the october 2010 bridge warrants . the october 2010 bridge notes and the october 2010 bridge warrants were exchanged in november 2010 . 37 in november 2010 , we completed a private placement with certain accredited investors , including socius and jay wolf , the lead director of the company , for gross proceeds of $ 6.9 million ( the “ november 2010 offering ” ) . of the gross proceeds , $ 503,000 represented the exchange of the october 2010 bridge notes and accrued interest and $ 215,000 represented the cancellation of an accrued compensation liability to our chairman and ceo . the company incurred approximately $ 364,000 in financial advisory , legal and other fees in relation to the november 2010 offering . in addition , the company issued warrants to purchase 141,750 shares of common stock at an exercise price $ 0.40 per share to the financial advisors . the company issued 2,500,000 shares of common stock at a price of $ 0.40 per share and sold $ 5.9 million in aggregate principal of 12 % senior secured convertible notes ( the “ november 2010 notes ” ) to the investors on a pro rata basis . the november 2010 notes were to mature on the second anniversary of the closing . the november 2010 notes were secured by a first priority security interest in all of the company 's assets . pursuant to the terms , the november 2010 notes and any accrued interest converted automatically into common stock either ( a ) if and when sufficient shares become authorized or ( b ) upon a reverse stock split at a conversion price of $ 0.40 per share , subject to certain adjustments , including certain share issuances below $ 0.40 per share . the company agreed to use its best efforts to file a proxy statement seeking shareholder approval to increase the number of authorized shares or effect a reverse stock split within 30 days of closing . the company filed a proxy statement in january 2011 and the stockholders approved both proposals listed above and the board of directors decided to implement the increase in authorized shares of common stock . the company filed an amendment to its certificate of incorporation , effective march 17 , 2011 , which increased the authorized shares of common stock and , at such time , the outstanding principal under the november 2010 notes plus accrued interest automatically converted to 15,514,364 shares of common stock . in addition , each non-affiliated investor in the november 2010 offering investing $ 2,000,000 or more received five-year warrants . one non-affiliated investor received 549,000 warrants to purchase shares of the company 's common stock at an exercise price of $ 0.40 per share . the net cash proceeds to the company from the november 2010 offering were estimated to be $ 6.4 million inclusive of the october 2010 transaction and after offering expenses . in august 2011 , we entered into a securities purchase agreement with socius , pursuant to which we received $ 650,000 and issued the august 2011 bridge note and the august 2011 bridge warrant . the august 2011 bridge warrant expires on august 17 , 2016. the august 2011 bridge warrant contains anti-dilution provisions . as a result , if we , in the future , issue or grant any rights to purchase any of our common stock , or other security convertible into our common stock , for a per share price less than the exercise price of the august 2011 bridge warrant , the exercise price of the august 2011 bridge warrant will be reduced to such lower price , subject to customary exceptions . the august 2011 bridge note had an original maturity in november 2011 and bears interest at an annual rate of 12 % payable in cash at maturity , prepayment , or conversion . the august 2011 bridge note and any accrued interest are convertible at the holders ' option into common stock or the securities issued in the next qualified financing . the conversion price for the august 2011 bridge note , if converted at the holder 's option , is equal to the lowest of ( i ) $ 0.26 per share of common stock , ( ii ) the lowest price per share of common stock into which any security is convertible in any qualified financing , and ( iii ) the volume weighted average price per share for the 10 days following the effective date of the reverse split . the august 2011 bridge note is secured by a first priority security interest in all assets of the company . as described below , the august 2011 bridge note was subsequently amended and on december 27 , 2011 , converted into common stock . in october 2011 , we entered into a securities purchase agreement with david smith , pursuant to which we received $ 680,000 and issued the october 2011 bridge note and the october 2011 bridge warrant .
| summary of consolidated operating results loss from operations before provision for taxes for the twelve months ended december 31 , 2011 amounted to $ 8.1 million compared to $ 20.0 million for the twelve months ended december 31 , 2010. overall , the loss from operations decreased by $ 11.9 million . the decrease was primarily due to gains on change in fair value of warrant liabilities amounting to $ 13.5 million and a decrease in general and administrative expenses by $ 1.6 million due to the streamlining of operations during 2010 and 2011. however , these improvements were offset by an increase interest expense by $ 2.0 million related to the socius and david smith bridge notes entered into during 2011. additionally , cost of healthcare services increased by $ 316,000 due to an increase in activities in our new managed care services , where we have a total of 4 signed contracts with health plans in 2011 compared to 2 in 2010. we recorded impairment charges totaling $ 267,000 related to intellectual property for additional indications for the use of the prometa treatment program that is currently non-revenue generating . in 2011 , we continued streamlining our license and management services operations as we continued to increase our focus on managed care opportunities and reposition ourselves in the marketplace . as a result , our revenues declined by $ 181,000 mostly from the elimination of field and regional sales personnel related to our license and management services segment . 32 included in the loss from operations before provision for taxes , were consolidated non-cash charges for depreciation and amortization expense of $ 349,000 and $ 882,000 , and share-based compensation expense of $ 4.4 million and $ 5.0 million , for the year ended december 31 , 2011 and 2010 , respectively . in 2011 , our loss before provision for income taxes included a $ 7.2
| 7,155 |
we anticipate that these costs may be in the range of $ 10,000 to $ 20,000 , and that we will be able to meet these costs as necessary , to be loaned to or invested in us by our stockholders , management or other investors . as of the filing of this annual report , the company has not received loans from its management or investors . however , for the year ended december 31 , 2017 , it has received $ 74,114 in advances from related parties . americatowne will continue providing advances to the company to cover operational costs while the company develops its business operations . the company and americatowne have not entered into a written agreement regarding americatowne 's future advances . -10- table of contents the company may consider a business which has recently commenced operations , is a developing company in need of additional funds for expansion into new products or markets , is seeking to develop a new product or service , or is an established business which may be experiencing financial or operating difficulties and is in need of additional capital . in the alternative , a business combination may involve the acquisition of , or merger with , a company which does not need substantial additional capital , but which desires to establish a public trading market for its shares , while avoiding , among other things , the time delays , significant expense , and loss of voting control which may occur in a public offering . our management has not had any preliminary contact or discussions with any representative of any other entity regarding a business combination with us . any target business that is selected may be a financially unstable company or an entity in its early stages of development or growth , including entities without established records of sales or earnings . in that event , we will be subject to numerous risks inherent in the business and operations of financially unstable and early stage or potential emerging growth companies . in addition , we may effect a business combination with an entity in an industry characterized by a high level of risk , and , although our management will endeavor to evaluate the risks inherent in a particular target business , there can be no assurance that we will properly ascertain or assess all significant risks . our management anticipates that it will likely be able to effect only one business combination , due primarily to our limited financing , and the dilution of interest for present and prospective stockholders , which is likely to occur as a result of our management 's plan to offer a controlling interest to a target business in order to achieve a tax-free reorganization . this lack of diversification should be considered a substantial risk in investing in us , because it will not permit us to offset potential losses from one venture against gains from another . the company anticipates that the selection of a business combination will be complex and extremely risky . because of general economic conditions , rapid technological advances being made in some industries and shortages of available capital , our management believes that there are numerous firms seeking even the limited additional capital that we will have and or the perceived benefits of becoming a publicly traded corporation . such perceived benefits of becoming a publicly traded corporation include , among other things , facilitating or improving the terms on which additional equity financing may be obtained , providing liquidity for the principals of and investors in a business , creating a means for providing incentive stock options or similar benefits to key employees , and offering greater flexibility in structuring acquisitions , joint ventures and the like through the issuance of stock . potentially available business combinations may occur in many different industries and at various stages of development , all of which will make the task of comparative investigation and analysis of such business opportunities extremely difficult and complex . fiscal year our fiscal year ends on december 31. story_separator_special_tag -0.5pt '' > our other administrative expenses for the year will consist primarily of transfer agent fees , bank and interest charges and general office expenses . the professional fees are related to our regulatory filings throughout the year and include legal , accounting and auditing fees . the equipment purchases and plant set-up are related to the materially definitive agreement with jiangnan . based on our planned expenditures , we will require approximately $ 5,000,000 to proceed with our business plan over the next twelve months . if we secure less than the full amount of financing that we require , we will not be able to carry out our complete business plan and we will be forced to proceed with a scaled back business plan based on our available financial resources . we intend to raise the balance of our cash requirements for the next twelve months by relying on related parties , including americatowne . additionally , we may have private placements , shareholder loans or possibly a registered public offering ( either self-underwritten or through a broker-dealer ) . if we are unsuccessful in raising enough money through such efforts , we may review other financing possibilities such as bank loans . at this time , we do not have a commitment from any third-party to provide us with financing . there is no assurance that any financing will be available to us or if available , on terms that will be acceptable to us . even though we plan to raise capital through equity or debt financing , we believe that the latter may not be a viable alternative for funding our operations , as we do not have sufficient tangible assets to secure any such financing . we anticipate that any additional funding will be in the form of equity financing from the sale of story_separator_special_tag we anticipate that these costs may be in the range of $ 10,000 to $ 20,000 , and that we will be able to meet these costs as necessary , to be loaned to or invested in us by our stockholders , management or other investors . as of the filing of this annual report , the company has not received loans from its management or investors . however , for the year ended december 31 , 2017 , it has received $ 74,114 in advances from related parties . americatowne will continue providing advances to the company to cover operational costs while the company develops its business operations . the company and americatowne have not entered into a written agreement regarding americatowne 's future advances . -10- table of contents the company may consider a business which has recently commenced operations , is a developing company in need of additional funds for expansion into new products or markets , is seeking to develop a new product or service , or is an established business which may be experiencing financial or operating difficulties and is in need of additional capital . in the alternative , a business combination may involve the acquisition of , or merger with , a company which does not need substantial additional capital , but which desires to establish a public trading market for its shares , while avoiding , among other things , the time delays , significant expense , and loss of voting control which may occur in a public offering . our management has not had any preliminary contact or discussions with any representative of any other entity regarding a business combination with us . any target business that is selected may be a financially unstable company or an entity in its early stages of development or growth , including entities without established records of sales or earnings . in that event , we will be subject to numerous risks inherent in the business and operations of financially unstable and early stage or potential emerging growth companies . in addition , we may effect a business combination with an entity in an industry characterized by a high level of risk , and , although our management will endeavor to evaluate the risks inherent in a particular target business , there can be no assurance that we will properly ascertain or assess all significant risks . our management anticipates that it will likely be able to effect only one business combination , due primarily to our limited financing , and the dilution of interest for present and prospective stockholders , which is likely to occur as a result of our management 's plan to offer a controlling interest to a target business in order to achieve a tax-free reorganization . this lack of diversification should be considered a substantial risk in investing in us , because it will not permit us to offset potential losses from one venture against gains from another . the company anticipates that the selection of a business combination will be complex and extremely risky . because of general economic conditions , rapid technological advances being made in some industries and shortages of available capital , our management believes that there are numerous firms seeking even the limited additional capital that we will have and or the perceived benefits of becoming a publicly traded corporation . such perceived benefits of becoming a publicly traded corporation include , among other things , facilitating or improving the terms on which additional equity financing may be obtained , providing liquidity for the principals of and investors in a business , creating a means for providing incentive stock options or similar benefits to key employees , and offering greater flexibility in structuring acquisitions , joint ventures and the like through the issuance of stock . potentially available business combinations may occur in many different industries and at various stages of development , all of which will make the task of comparative investigation and analysis of such business opportunities extremely difficult and complex . fiscal year our fiscal year ends on december 31. story_separator_special_tag -0.5pt '' > our other administrative expenses for the year will consist primarily of transfer agent fees , bank and interest charges and general office expenses . the professional fees are related to our regulatory filings throughout the year and include legal , accounting and auditing fees . the equipment purchases and plant set-up are related to the materially definitive agreement with jiangnan . based on our planned expenditures , we will require approximately $ 5,000,000 to proceed with our business plan over the next twelve months . if we secure less than the full amount of financing that we require , we will not be able to carry out our complete business plan and we will be forced to proceed with a scaled back business plan based on our available financial resources . we intend to raise the balance of our cash requirements for the next twelve months by relying on related parties , including americatowne . additionally , we may have private placements , shareholder loans or possibly a registered public offering ( either self-underwritten or through a broker-dealer ) . if we are unsuccessful in raising enough money through such efforts , we may review other financing possibilities such as bank loans . at this time , we do not have a commitment from any third-party to provide us with financing . there is no assurance that any financing will be available to us or if available , on terms that will be acceptable to us . even though we plan to raise capital through equity or debt financing , we believe that the latter may not be a viable alternative for funding our operations , as we do not have sufficient tangible assets to secure any such financing . we anticipate that any additional funding will be in the form of equity financing from the sale of
| results of operations we plan to raise capital following our recent change in status to an operating entity through the offering of shares of common stock or preferred stock to investors . we anticipate we will need to pursue capital to fund our operations over the next twelve months . we believe we will be able to raise the necessary capital to carry out our business plan , but there is no assurance that we will be able to do so . overview in fiscal year 2017 , the company achieved $ nil in revenue . we can make no assurances that we will find commercial success in any of our products . we also rely upon related parties , including americatowne , for financing and revenue . we are a new company and thus have very limited experience in sales expectations and forecasting . we also have not fully discovered any seasonality to our business as we began operations for the third quarter of 2017. we intend on relying on americatowne for operational support . if we can not achieve independent commercial success , we may need to continue to rely on americatowne for support . if americatowne at any time decides to alter or change materially our arrangement , we could experience a material adverse effect on the company . -11- table of contents results of operations through december 31 , 2017 our operating results are summarized as follows : replace_table_token_2_th revenues in 2017 , we did not receive any revenue , as compared to the $ 3,438 in revenue achieved in 2016. the lack of revenue is attributable to the company 's lack of operations , pending the completion of the obligations under the joint venture agreement discussed above . we can make no assurances that we will find commercial success in any of our revenue producing contracts .
| 7,156 |
recent accounting pronouncements in january 2016 , the fasb issued story_separator_special_tag the following information should be read in conjunction with our selected combined financial and operating data and the accompanying consolidated financial statements and related notes . see “ index to consolidated financial statements of hamilton lane incorporated. ” the historical consolidated financial data discussed below reflect the historical results of operations and financial position of hla prior to our ipo in february 2017. the consolidated financial statements of hla , our predecessor for accounting purposes , are our historical financial statements for this form 10-k. the following discussion may contain forward-looking statements that reflect our plans , estimates and beliefs . our actual results could differ materially from those discussed in these forward-looking statements . factors that could cause or contribute to these differences include , but are not limited to , those discussed below and elsewhere in this form 10-k , particularly in “ risk factors ” and the “ cautionary note regarding forward-looking information. ” unless otherwise indicated , references in this annual report on form 10-k to fiscal 2019 , fiscal 2018 and fiscal 2017 are to our fiscal years ended march 31 , 2019 , 2018 and 2017 , respectively . business overview we are a global private markets investment solutions provider . we offer a variety of investment solutions to address our clients ' needs across a range of private markets , including private equity , private credit , real estate , infrastructure , natural resources , growth equity and venture capital . these solutions are constructed from a range of investment types , including primary investments in funds managed by third-party managers , direct/co-investments alongside such funds and acquisitions of secondary stakes in such funds , with a number of our clients utilizing multiple investment types . these solutions are offered in a variety of formats covering some or all phases of private markets investment programs : customized separate accounts : we design and build customized portfolios of private markets funds and direct investments to meet our clients ' specific portfolio objectives with regard to return , risk tolerance , diversification and liquidity . we generally have discretionary investment authority over our customized separate accounts , which comprised approximately $ 50 billion of our aum as of march 31 , 2019 . specialized funds : we organize , invest and manage specialized primary , secondary and direct/co-investment funds . our specialized funds invest across a variety of private markets and include equity , equity-linked and credit funds offered on standard terms as well as shorter duration , opportunistically oriented funds . we launched our first specialized fund in 1997 , and our product offerings have grown steadily , comprising approximately $ 11 billion of our aum as of march 31 , 2019 . advisory services : we offer investment advisory services to assist clients in developing and implementing their private markets investment programs . our investment advisory services include asset allocation , strategic plan creation , development of investment policies and guidelines , the screening and recommending of investments , legal negotiations , the monitoring of and reporting on investments and investment manager review and due diligence . our advisory clients include some of the largest and most sophisticated private markets investors in the world . we had approximately $ 422 billion of aua as of march 31 , 2019 . distribution management : we offer distribution management services to our clients through active portfolio management to enhance the realized value of publicly traded stock they receive as distributions from private equity funds . 67 reporting , monitoring , data and analytics : we provide our clients with comprehensive reporting and investment monitoring services , usually bundled into our broader investment solutions offerings , but occasionally on a stand-alone , fee-for-service basis . private markets investments are unusually difficult to monitor , report on and administer , and our clients are able to benefit from our sophisticated infrastructure , which provides clients with real time access to reliable and transparent investment data , and our high-touch service approach , which allows for timely and informed responses to the multiplicity of issues that can arise . we also provide comprehensive research and analytical services as part of our investment solutions , leveraging our large , global , proprietary and high-quality database of private markets investment performance and our suite of proprietary analytical investment tools . our client base primarily comprises institutional investors that range from those seeking to make an initial investment in alternative assets to some of the largest and most sophisticated private markets investors . as a highly customized , flexible outsourcing partner , we are equipped to provide investment services to institutional clients of all sizes and with different needs , internal resources and investment objectives . our clients include prominent institutional investors in the united states , europe , the middle east , asia , australia and latin america . we believe we are a leading provider of private markets solutions for u.s. labor union pension plans , and we serve numerous smaller public and corporate pension plans , sovereign wealth funds , financial institutions and insurance companies , endowments and foundations , as well as family offices and selected high-net-worth individuals . trends affecting our business our results of operations are affected by a variety of factors , including conditions in the global financial markets and the economic and political environments , particularly in the united states , western europe and asia . as interest rates remain near historic lows and public equities are not able to meet expected returns , we see increasing investor demand for alternative investments to achieve higher yields . as a result , some investors have increased their allocation to private markets relative to other asset classes . in addition , the opportunities in private markets have expanded as firms have created new vehicles and products in which to access private markets across different geographies and opportunity sets . story_separator_special_tag operating segments we operate our business in a single segment , which is how our chief operating decision maker ( who is our chief executive officer ) reviews financial performance and allocates resources . key financial and operating measures our key financial measures are discussed below . revenues on april 1 , 2018 , we adopted the new accounting standards codification 606 , revenue from contracts with customers ( “ asc 606 ” ) , using the modified retrospective method . as a result , prior period amounts continue to be reported under legacy gaap . the adoption did not change the historical pattern of recognizing revenue for management and advisory fees and incentive fees . see note 2 to our consolidated financial statements for more information on our adoption of asc 606. we generate revenues primarily from management and advisory fees , and to a lesser extent , incentive fees . see “ —critical accounting policies—revenue recognition of incentive fees ” and note 2 of the consolidated financial statements included in part ii , item 8 of this form 10-k for additional information regarding the manner in which management and advisory fees and incentive fees are generated . management and advisory fees comprise specialized fund and customized separate account management fees , advisory and reporting fees and distribution management fees . revenues from customized separate accounts are generally based on a contractual rate applied to committed capital or net invested capital under management . these fees often decrease over the life of the contract due to built-in declines in contractual rates and or as a result of lower net invested capital balances as capital is returned to clients . in certain cases , we also provide advisory and or reporting services , and therefore we also receive fees for services such as monitoring and reporting on a client 's existing private markets investments . in addition , we may provide for investments in our specialized funds as part of our customized separate accounts . in these cases , we reduce the management fees on customized separate accounts to the extent that assets in the accounts are invested in our specialized funds so that our clients do not pay duplicate fees . revenues from specialized funds are based on a percentage of limited partners ' capital commitments to , or net invested capital in , our specialized funds . the management fee during the commitment period is generally charged on capital commitments and after the commitment period ( or a defined anniversary of the fund 's initial closing ) is reduced by a percentage of the management fee for the preceding year or 70 charged on net invested capital . in the case of certain funds , we charge management fees on capital commitments , with the management fee increasing during the early years of the fund 's term and declining in the later years . management fees for certain funds are discounted based on the amount of the limited partners ' commitments or if the limited partners are investors in our other funds . revenues from advisory and reporting services are generally annual fixed fees , which vary depending on the services we provide . in limited cases , advisory service clients are charged basis point fees annually based on the amounts they have committed to invest pursuant to their agreements with us . in other cases where our services are limited to monitoring and reporting on investment portfolios , clients are charged a fee based on the number of investments in their portfolio . distribution management fees are generally earned by applying a percentage to aum or proceeds received . certain active management clients may elect a fee structure under which they are charged an asset-based fee plus a fee based on net realized and unrealized gains and income net of realized and unrealized losses . incentive fees comprise carried interest earned from our specialized funds and certain customized separate accounts structured as single-client funds in which we have a general partner commitment , and performance fees earned on certain other customized separate accounts . for each of our secondary funds , direct/co-investment funds and credit funds , we earn carried interest equal to a fixed percentage of net profits , usually 10.0 % to 12.5 % , subject to a compounded annual preferred return that is generally 6.0 % to 8.0 % . to the extent that our primary funds also directly make secondary investments and direct/co-investments , they generally earn carried interest on a similar basis . furthermore , certain of our primary funds earn carried interest on their investments in other private markets funds on a primary basis that is generally 5.0 % of net profits , subject to the fund 's compounded annual preferred return . we recognize carried interest when it is probable that a significant reversal will not occur . in the event that a payment is made before it can be recognized as revenue , this amount would be included as deferred incentive fee revenue on our consolidated balance sheet and recognized as income in accordance with our revenue recognition policy . the primary contingency regarding incentive fees is the “ clawback , ” or the obligation to return distributions in excess of the amount prescribed by the applicable fund or separate account documents . performance fees , which are a component of incentive fees , are based on the aggregate amount of realized gains earned by the applicable customized separate account , subject to the achievement of defined minimum returns to the clients . performance fees range from 5.0 % to 12.5 % of net profits , subject to a compounded annual preferred return that varies by account but is generally 6.0 % to 8.0 % . performance fees are recognized when the risk of clawback or reversal is not probable .
| annual consolidated results of operations the following is a discussion of our consolidated results of operations for each of the years in the three-year period ended march 31 , 2019 . this information is derived from our accompanying consolidated financial statements prepared in accordance with gaap . replace_table_token_5_th 74 revenues replace_table_token_6_th year ended march 31 , 2019 compared to year ended march 31 , 2018 total revenues increased $ 8.1 million , or 3 % , to $ 252.2 million , for fiscal 2019 compared to fiscal 2018 , due to an increase in management and advisory fees . management and advisory fees increased $ 22.7 million , or 12 % , to $ 217.8 million for fiscal 2019 compared to fiscal 2018 . specialized funds revenue increased by $ 9.9 million compared to the prior year , due primarily to a $ 14.2 million increase in revenue from our latest co-investment fund , which added $ 0.8 billion in fee-earning aum in fiscal 2019 , offset by $ 5.8 million in retroactive fees from our latest secondary fund in fiscal 2018. included in our latest co-investment fund 's revenue for the year was $ 1.7 million in retroactive fees . retroactive fees are management fees earned in the current period from investors that commit to a specialized fund towards the end of the fundraising period and are required to pay a catch-up management fee as if they had committed to the fund at the first closing in a prior period . customized separate accounts revenue increased $ 6.1 million in fiscal 2019 due to a $ 1.2 billion increase in fee-earning aum from the addition of several new accounts and additional allocations from existing accounts during the fiscal year .
| 7,157 |
net interest income increased by $ 3.7 million , or 9.1 % , to $ 43.8 million for fiscal year 2015 from $ 40.1 million for fiscal year 2014 , primarily due to the increase in interest income from loans and investment securities . interest income . interest income increased $ 3.4 million , or 6.7 % , to $ 54.2 million for fiscal year 2015 from $ 50.8 million for fiscal year 2014. the increase resulted from a $ 128.4 million increase in average interest earning assets which had the effect of increasing interest income by $ 4.8 million offset in part by a decrease of 8 basis points in the overall yield on earning assets to 3.69 % from 3.77 % which had the effect of decreasing interest income by $ 1.4 million . the increase in average interest earning assets during 2015 compared to 2014 included increases in average loans of $ 92.6 million , average investments of $ 13.4 million , average mortgage backed securities of $ 26.8 million and average regulatory stock of $ 1.9 million . these increases were partially offset by a decrease in average other assets of $ 6.3 million . the average yield on loans decreased to 4.16 % for the fiscal year 2015 , from 4.38 % for the fiscal year 2014. the average yields on investment securities increased to 2.77 % from 2.34 % and the average yields on mortgage backed securities increased to 2.04 % for 2015 from 2.01 % for the 2014 period . 41 interest expense . interest expense decreased $ 237,000 , or 2.2 % , to $ 10.4 million for fiscal year 2015 from $ 10.6 million for fiscal year 2014 , while average interest bearing liabilities increased by $ 97.4 million year over year . the decrease resulted from an 8 basis point decrease in the overall cost of interest bearing liabilities to 0.80 % for fiscal 2015 from 0.88 % for fiscal 2014 which had the effect of decreasing interest expense by $ 447,000 offset in part by an increase in average interest liabilities which had the effect of increasing interest expense by $ 210,000 for a net increased interest expense of $ 237,000. average savings and club accounts increased by $ 7.7 million , average interest bearing demand deposit accounts decreased $ 1.8 million , average money market accounts increased $ 30.3 million and average certificates of deposit decreased $ 38.6 million . for fiscal 2015 , average borrowed funds increased $ 99.9 million compared to fiscal 2014. the cost of money market accounts increased to 0.25 % for fiscal year 2015 from 0.20 % for fiscal year 2014. the cost of savings and club accounts remained unchanged at 0.05 % for fiscal 2015. the cost of certificates of deposit decreased to 1.16 % from 1.20 % and the cost of borrowed funds decreased to 0.99 % from 1.36 % for fiscal years 2015 and 2014 , respectively . provision for loan losses . the company establishes provisions for loan losses , which are charged to earnings , at a level necessary to absorb known and inherent losses that are both probable and reasonably estimable at the date of the financial statements . in evaluating the level of the allowance for loan losses , management considers historical loss experience , the types of loans and the amount of loans in the loan portfolio , adverse situations that may affect the borrower 's ability to repay , the estimated value of any underlying collateral , peer group information and prevailing economic conditions . this evaluation is inherently subjective as it requires estimates that are susceptible to significant revision as more information becomes available or as future events occur . after an evaluation of these factors , the company made a provision of $ 2.1 million for fiscal year 2015 compared to a $ 2.4 million provision for the 2014 fiscal year . the allowance for loan losses was $ 8.9 million , or 0.80 % , of loans outstanding at september 30 , 2015 , compared to $ 8.6 million , or 0.81 % , of loans outstanding at september 30 , 2014. determining the amount of the allowance for loan losses necessarily involves a high degree of judgment . management reviews the level of the allowance on a quarterly basis , and establishes the provision for loan losses based on the factors set forth in the preceding paragraph . historically , the bank 's loan portfolio has consisted primarily of one- to four-family residential mortgage loans . however , our current business plan calls for increases in commercial real estate loan originations . as management evaluates the allowance for loan losses , the increased risk associated with larger non-homogenous commercial real estate may result in large additions to the allowance for loan losses in future periods . loans secured by commercial real estate generally expose a lender to greater risk of non-payment and loss than one- to four-family residential mortgage loans because repayment of the loans often depends on the successful operation of the property and the income stream of the underlying property . additionally , such loans typically involve larger loan balances to single borrowers or groups of related borrowers compared to one- to four-family residential mortgage loans . accordingly , an adverse development with respect to one loan or one credit relationship can expose us to greater risk of loss compared to an adverse development with respect to a one- to four-family residential mortgage loan . although we believe that we use the best information available to establish the allowance for loan losses , future additions to the allowance may be necessary , based on estimates that are susceptible to change as a result of changes in economic conditions and other factors . in addition , the federal reserve board , as an integral part of its examination process , will periodically review our allowance for loan losses . story_separator_special_tag net interest income increased by $ 3.7 million , or 9.1 % , to $ 43.8 million for fiscal year 2015 from $ 40.1 million for fiscal year 2014 , primarily due to the increase in interest income from loans and investment securities . interest income . interest income increased $ 3.4 million , or 6.7 % , to $ 54.2 million for fiscal year 2015 from $ 50.8 million for fiscal year 2014. the increase resulted from a $ 128.4 million increase in average interest earning assets which had the effect of increasing interest income by $ 4.8 million offset in part by a decrease of 8 basis points in the overall yield on earning assets to 3.69 % from 3.77 % which had the effect of decreasing interest income by $ 1.4 million . the increase in average interest earning assets during 2015 compared to 2014 included increases in average loans of $ 92.6 million , average investments of $ 13.4 million , average mortgage backed securities of $ 26.8 million and average regulatory stock of $ 1.9 million . these increases were partially offset by a decrease in average other assets of $ 6.3 million . the average yield on loans decreased to 4.16 % for the fiscal year 2015 , from 4.38 % for the fiscal year 2014. the average yields on investment securities increased to 2.77 % from 2.34 % and the average yields on mortgage backed securities increased to 2.04 % for 2015 from 2.01 % for the 2014 period . 41 interest expense . interest expense decreased $ 237,000 , or 2.2 % , to $ 10.4 million for fiscal year 2015 from $ 10.6 million for fiscal year 2014 , while average interest bearing liabilities increased by $ 97.4 million year over year . the decrease resulted from an 8 basis point decrease in the overall cost of interest bearing liabilities to 0.80 % for fiscal 2015 from 0.88 % for fiscal 2014 which had the effect of decreasing interest expense by $ 447,000 offset in part by an increase in average interest liabilities which had the effect of increasing interest expense by $ 210,000 for a net increased interest expense of $ 237,000. average savings and club accounts increased by $ 7.7 million , average interest bearing demand deposit accounts decreased $ 1.8 million , average money market accounts increased $ 30.3 million and average certificates of deposit decreased $ 38.6 million . for fiscal 2015 , average borrowed funds increased $ 99.9 million compared to fiscal 2014. the cost of money market accounts increased to 0.25 % for fiscal year 2015 from 0.20 % for fiscal year 2014. the cost of savings and club accounts remained unchanged at 0.05 % for fiscal 2015. the cost of certificates of deposit decreased to 1.16 % from 1.20 % and the cost of borrowed funds decreased to 0.99 % from 1.36 % for fiscal years 2015 and 2014 , respectively . provision for loan losses . the company establishes provisions for loan losses , which are charged to earnings , at a level necessary to absorb known and inherent losses that are both probable and reasonably estimable at the date of the financial statements . in evaluating the level of the allowance for loan losses , management considers historical loss experience , the types of loans and the amount of loans in the loan portfolio , adverse situations that may affect the borrower 's ability to repay , the estimated value of any underlying collateral , peer group information and prevailing economic conditions . this evaluation is inherently subjective as it requires estimates that are susceptible to significant revision as more information becomes available or as future events occur . after an evaluation of these factors , the company made a provision of $ 2.1 million for fiscal year 2015 compared to a $ 2.4 million provision for the 2014 fiscal year . the allowance for loan losses was $ 8.9 million , or 0.80 % , of loans outstanding at september 30 , 2015 , compared to $ 8.6 million , or 0.81 % , of loans outstanding at september 30 , 2014. determining the amount of the allowance for loan losses necessarily involves a high degree of judgment . management reviews the level of the allowance on a quarterly basis , and establishes the provision for loan losses based on the factors set forth in the preceding paragraph . historically , the bank 's loan portfolio has consisted primarily of one- to four-family residential mortgage loans . however , our current business plan calls for increases in commercial real estate loan originations . as management evaluates the allowance for loan losses , the increased risk associated with larger non-homogenous commercial real estate may result in large additions to the allowance for loan losses in future periods . loans secured by commercial real estate generally expose a lender to greater risk of non-payment and loss than one- to four-family residential mortgage loans because repayment of the loans often depends on the successful operation of the property and the income stream of the underlying property . additionally , such loans typically involve larger loan balances to single borrowers or groups of related borrowers compared to one- to four-family residential mortgage loans . accordingly , an adverse development with respect to one loan or one credit relationship can expose us to greater risk of loss compared to an adverse development with respect to a one- to four-family residential mortgage loan . although we believe that we use the best information available to establish the allowance for loan losses , future additions to the allowance may be necessary , based on estimates that are susceptible to change as a result of changes in economic conditions and other factors . in addition , the federal reserve board , as an integral part of its examination process , will periodically review our allowance for loan losses .
| general . the majority of our assets and liabilities are monetary in nature . consequently , our most significant form of market risk is interest rate risk . our assets , consisting primarily of mortgage loans , have longer maturities than our liabilities , consisting primarily of deposits and borrowings . as a result , a principal part of our business strategy is to manage interest rate risk and reduce the exposure of our net interest income to changes in market interest rates . accordingly , our board of directors has approved guidelines for managing the interest rate risk inherent in our assets and liabilities , given our business strategy , operating environment , capital , liquidity and performance objectives . senior management monitors the level of interest rate risk on a regular basis and the asset/liability committee meets quarterly to review our asset/liability policies and interest rate risk position . we have sought to manage our interest rate risk in order to minimize the exposure of our earnings and capital to changes in interest rates . net interest income , which is the primary source of the company 's earnings , is impacted by changes in interest rates and the relationship of different interest rates . to manage the impact of the rate changes , the balance sheet should be structured so that repricing opportunities exist for both assets and liabilities at approximately the same time intervals . the company uses net interest simulation to assist in interest rate risk management . the process includes simulating various interest rate environments and their impact on net interest income . as of september 30 , 2015 , the level of net interest income at risk in a 200 basis points increase was within the company 's policy limit of a decline less than 10 % of net interest income .
| 7,158 |
the amendments in this asu are effective for fiscal years beginning after december 15 , 2018 , and the company will adopt this asu in the first quarter of 2019. in july 2018 , the story_separator_special_tag you should read the following discussion and analysis of our financial condition and results of operations in conjunction with our consolidated financial statements and the related notes and other financial information included elsewhere in this annual report on form 10-k. some of the information contained in this discussion and analysis or set forth elsewhere in this report , including information with respect to our plans and strategy for our business , includes forward-looking statements that involve risks and uncertainties . you should review item 1a “ risk factors ” and “ special note regarding forward-looking statements ” in this report for a discussion of important factors that could cause actual results to differ materially from the results described in or implied by the forward-looking statements contained in the following discussion and analysis . overview we are a leading education technology company that well-recognized nonprofit colleges and universities trust to bring them into the digital age . our comprehensive platform of tightly integrated technology and services provides the digital infrastructure universities need to attract , enroll , educate and support students at scale . with our platform , students can pursue their education anytime , anywhere , without quitting their jobs or moving ; and university clients can improve educational outcomes , skills attainment and career prospects for a greater number of students . we have two reportable segments : the graduate program segment and the short course segment . our graduate program segment provides services to well-recognized nonprofit colleges and universities primarily in the united states to enable the online delivery of graduate programs . we target students seeking a full graduate degree of the same quality they would receive on-campus . our short course segment provides premium online short courses to working professionals around the world through relationships with leading universities in the united states , the united kingdom and south africa . we target working professionals seeking career advancement through skills attainment . our core strategy is to launch graduate programs and short courses with new and existing university clients and to increase student enrollments across our portfolio of offerings . we are also committed to continuously improving our platform to deliver high-quality university and student experiences and outcomes at scale . we are focused on rapidly growing our business and plan to continue to invest for long-term growth , including investments in our marketing activities as we continue to scale current offerings while adding new graduate programs and short courses , investments in our technology platform and infrastructure to deliver new functionality to meet the needs of our university clients and students , and investments in developing content to meet the needs of our accelerating program and offering launch schedules . to support our anticipated growth , we expect to continue to hire new employees ( which will increase both our cash and non-cash compensation and benefit costs , including stock-based compensation ) . as a result , we expect our costs to increase in absolute dollars , but to decrease as a percentage of revenue over time as we achieve economies of scale through the expansion of our business . non-cash stock-based compensation expense is a component of compensation cost . under our current framework for granting equity awards under our 2014 equity incentive plan , the majority of our equity awards are made on or around april 1 of each year and typically have four-year vesting periods . non-cash stock based compensation expense also includes charges associated with providing our 2017 employee stock purchase plan . certain trends and uncertainties the following represents a summary of certain trends and uncertainties , which could have a significant impact on our financial condition and results of operations . this summary is not intended to be a complete list of potential trends and uncertainties and should be considered along with the factors identified in the section titled “ risk factors ” of this annual report on form 10-k and elsewhere in this report . the risk of a data security breach or service disruption has increased as the frequency , intensity and sophistication of attempted attacks and intrusions from around the world have increased . while we make significant efforts to maintain the security and integrity of our services and computer systems , our cybersecurity measures and the cybersecurity measures taken by our third-party data center facilities may be unable to anticipate , detect or prevent all attempts to compromise our systems . we and our university clients are subject to certain education regulations , such as the hea , which are frequently revised , repealed or expanded . the re-authorization of the hea is currently in process and the outcome could alter the 40 regulatory landscape of the higher education industry , and thereby impact the manner in which we conduct business and serve our university clients . our university clients have regular turnover in leadership positions . these changes can have a positive or negative impact on our business . if new leaders do not support online delivery of educational offerings , we may not be able to add additional offerings with the university client or the university client may not renew their relationship with us . new leaders may also make changes in university policies , which could result in changes to admissions standards or application of admissions standards and negatively impact student enrollment in a university client 's 2u-powered graduate programs . our business model and components of operating results the key elements of our business model and components of our operating results are described below . revenue our graduate program segment derives revenue primarily from contractually specified percentages of the amounts our university clients receive from their students for tuition and fees , less credit card fees and other agreed-upon charges . story_separator_special_tag short course segment we typically begin incurring marketing and sales costs approximately three months prior to each short course presentation , and our short courses run between six and 16 weeks . as our short courses often have a course length that straddles two fiscal quarters based on the timing of the course start , the marketing and sales expense in any period is a combination of investments we make to generate revenue in the current and subsequent periods . likewise , revenue generated in any period is attributable to investments made in student acquisition activities in the prior and current periods . as the majority of our short course student enrollments are attributable to discrete marketing efforts for each short course presentation , we expect that we will need to continue to incur significant marketing and sales expense for each new and recurring short course presentation going forward to generate a continuous pipeline of new enrollments . other costs and expenses our other costs and expenses consist of the following : curriculum and teaching . curriculum and teaching costs are associated with our short course segment and primarily relate to amounts due to our university clients , which are based on contractually specified percentages of the gross proceeds associated with our short course offerings for providing content and certifying courses . this also includes costs to compensate short course facilitators . servicing and support . servicing and support costs consist primarily of cash and non-cash compensation and benefit costs ( including stock-based compensation ) related to the management and operations of our graduate programs and short courses , providing support for our saas technology , as well as supporting students enrolled in our offerings and faculty members . it also includes software licensing , telecommunications , technical support and other costs related to providing access to and support for our platform for our university clients and students . in addition , servicing and support includes costs to 42 facilitate in-program field placements , student immersions and other student enrichment experiences , as well as costs to assist our university clients with their state compliance requirements . technology and content development . technology and content development costs consist primarily of cash and non-cash compensation and benefit costs ( including stock-based compensation ) and outsourced services costs related to the ongoing improvement and maintenance of our platform , and the developed content for our graduate programs and short courses . it also includes the associated amortization expense related to capitalized technology and content development , as well as hosting and licensing and other costs associated with maintaining our platform in a cloud environment and support for our internal infrastructure . general and administrative . general and administrative costs consist primarily of cash and non-cash compensation and benefit costs ( including stock-based compensation ) for employees in our executive , administrative , finance and accounting , legal , communications and human resources functions . it also includes external legal , accounting and other professional fees , and other corporate costs such as insurance and travel that are not related to another function . net interest income ( expense ) interest income is derived from interest received on our cash and cash equivalents . interest expense consists primarily of the amortization of deferred financing costs associated with our line of credit . net interest income ( expense ) reflects the aggregation of interest income and interest expense . other income ( expense ) , net other income ( expense ) , net primarily consists of foreign currency gains and losses . income tax benefit income tax benefit consists of u.s. federal , state and foreign income taxes . our effective tax rate for the period is based on a mix of higher-taxed and lower-taxed jurisdictions . to date , we have not been required to pay u.s. federal income taxes because of our current and accumulated net operating losses . period-to-period fluctuations our revenue , cash position , accounts receivable , deferred revenue , and sales and marketing expense can fluctuate significantly from quarter to quarter due to variations driven by the academic schedules of our graduate programs and short courses . our graduate programs generally start classes for new and returning students an average of four times per year and our short courses have multiple course starts per year . graduate program courses and short course presentations are not necessarily evenly spaced throughout the year , do not necessarily correspond to the traditional academic calendar and may vary from year to year . as a result , the number of courses our graduate programs and short courses have in session , and therefore the number of students enrolled , will vary from quarter to quarter , leading to variability in our revenue . our graduate programs and short courses often have academic terms that straddle two fiscal quarters . our graduate program university clients generally pay us when they have billed tuition and specified fees to their students , which is typically early in the academic term , and once the drop/add period has passed . we recognize the related revenue ratably over the course of the academic term , beginning on the first day of classes through the last . our short course students typically pay either in full upon registration of the short course or in full before the end of the short course based on a payment plan . because we generally receive payments from our graduate program university clients and short course students prior to our ability to recognize the majority of those amounts as revenue , we record deferred revenue at each balance sheet date equal to the excess of the amounts we have billed or received from our graduate program university clients and short course students over the amounts we have recognized as revenue as of that date . for these reasons , our cash flows typically vary considerably from quarter to quarter and our cash position , accounts receivable and deferred revenue typically fluctuate between quarterly balance sheet dates .
| consolidated operating results comparison of years ended december 31 , 2018 and 2017 the following table sets forth selected consolidated statement of operations data for each of the periods indicated . replace_table_token_4_th * not meaningful for comparative purposes . our results of operations for the year ended december 31 , 2018 included a full year of operations related to our short course segment , whereas the same period of 2017 included only six months of such operations as the acquisition of getsmarter occurred on july 1 , 2017. the following table sets forth the revenue by segment for each of the periods indicated . 44 replace_table_token_5_th * approximately $ 44,000 of intersegment revenues have been excluded from the year ended december 31 , 2018 . revenue . revenue for the year ended december 31 , 2018 was $ 411.8 million , an increase of $ 125.0 million , or 43.6 % , from $ 286.8 million for the same period of 2017 . graduate program segment revenue increased by $ 77.9 million , or 28.8 % . this increase was primarily due to growth in full course equivalent enrollments of 28,774 , or 29.1 % . short course segment revenue increased by $ 47.1 million , or 288.5 % . this increase was driven by both a growth in full course equivalent enrollments of 21,372 , or 197.3 % , and an increase in the average revenue per full course equivalent enrollment , from $ 1,507 to $ 1,969 . fluctuations in foreign currency exchange rates from those prevailing in the same period of 2017 did not have a material impact on revenue . curriculum and teaching . curriculum and teaching costs for the year ended december 31 , 2018 were $ 23.3 million , an increase of $ 16.7 million , or 252.4 % , from $ 6.6 million for the same period of 2017 .
| 7,159 |
ellington is a registered investment adviser with a 24-year history of investing in the credit markets . we conduct all of our operations and business activities through the operating partnership . as of december 31 , 2018 , we have an ownership interest of approximately 97.6 % in the operating partnership . the remaining interest of approximately 2.4 % interest in the operating partnership represents the interests in the operating partnership that are owned by an affiliate of our manager , our directors , and certain current and former ellington employees and related parties , and is reflected in our financial statements as a non-controlling interest . our primary objective is to generate attractive , risk-adjusted total returns for our stockholders . 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 . however , at any particular point in time , depending on how we perceive the market 's pricing of risk both generally and across sectors , we may favor higher-risk assets or we may favor lower-risk assets , or a combination of the two , in the interests of portfolio diversification or other considerations . through december 31 , 2018 , our credit portfolio , which includes all of our investments other than rmbs for which the principal and interest payments are guaranteed by a u.s. government agency or a u.s. government-sponsored entity , or `` agency rmbs , '' has been the primary driver of our risk and return , and we expect that this will continue in the near- to medium-term . for more information on our targeted assets , see `` —our targeted asset classes '' below . we believe that ellington 's capabilities allow our manager to identify attractive assets in these classes , value these assets , monitor and forecast the performance of these assets , and opportunistically hedge our risk with respect to these assets . we continue to maintain a highly leveraged portfolio of agency rmbs to take advantage of opportunities in that market sector and to maintain our exclusion from registration as an investment company under the investment company act . unless we acquire very substantial amounts of whole mortgage loans or there are changes to the rules and regulations applicable to us under the investment company act , we expect that we will always maintain some amount of agency rmbs . the strategies that we employ are intended to capitalize on opportunities in the current market environment . we intend to adjust our strategies to changing market conditions by shifting our asset allocations across various asset classes as credit and liquidity trends evolve over time . we believe that this flexibility , combined with ellington 's experience , will help us generate more consistent returns on our capital throughout changing market cycles . subject to qualifying and maintaining our qualification as a reit , we opportunistically hedge our credit risk , interest rate risk , and foreign currency risk ; however , at any point in time we may choose not to hedge all or a portion of these risks , and we will generally not hedge those risks that we believe are appropriate for us to take at such time , or that we believe would be impractical or prohibitively expensive to hedge . we also use leverage in our credit strategy , albeit significantly less leverage than that used in our agency rmbs strategy . through december 31 , 2018 , we financed the vast majority of our agency rmbs assets , and the majority of our credit assets , through reverse repurchase agreements , or `` reverse repos , '' which we account for as collateralized borrowings . we expect to continue to finance the vast majority of our agency rmbs through the use of reverse repos . in addition to financing assets through reverse repos , we also enter into other secured borrowing transactions , which are accounted for as collateralized borrowings , to finance certain of our loan assets . in addition , we have obtained term financing for certain of our non-qualified mortgage , or `` non-qm , '' loans , certain of our consumer loans , and certain of our leveraged corporate loans through the securitization markets . we have also issued unsecured long-term debt . as of december 31 , 2018 , outstanding borrowings under reverse repos and total other secured borrowings ( which include other secured borrowings and other secured borrowings , at fair value , as presented on our consolidated statement of 53 assets , liabilities , and equity ) were $ 1.9 billion . of our total borrowings outstanding under reverse repos and total other secured borrowings , approximately 48 % , or $ 917.3 million , relates to our agency rmbs holdings , as of december 31 , 2018 . the remaining outstanding borrowings relate to our credit portfolio and u.s. treasury securities . as of december 31 , 2018 , we also had $ 86.0 million outstanding of unsecured long-term debt , maturing in september of 2022 , or the `` existing senior notes . '' the existing senior notes bore interest at a rate of 5.25 % , subject to adjustment based on changes , if any , in the ratings of the existing senior notes . inclusive of debt issuance costs , the effective interest rate on the existing senior notes was 5.55 % . story_separator_special_tag agency collateralized mortgage obligations , or `` cmos , '' including interest only securities , or `` ios , '' principal only securities , or `` pos , '' inverse interest only securities , or `` iios '' ; and . to-be-announced mortgage pass-through certificates , or `` tbas . '' clos . retained tranches from clo securitizations , including participating in the accumulation of the underlying assets for such securitization by providing capital to the vehicle accumulating assets . cmbs and commercial mortgage loans . cmbs ; and . commercial mortgages and other commercial real estate debt . consumer loans and abs . consumer loans ; . abs backed by consumer loans ; and . retained tranches from securitizations to which we have contributed assets . mortgage-related derivatives . credit default swaps , or `` cds , '' on individual rmbs , on the abx , cmbx and primex indices and on other mortgage-related indices ; and . other mortgage-related derivatives . non-agency rmbs . rmbs backed by prime jumbo , alt-a , manufactured housing , and subprime mortgages ; . rmbs backed by fixed rate mortgages , adjustable rate mortgages , or `` arms , '' option-arms , and hybrid arms ; . rmbs backed by first lien and second lien mortgages ; . investment grade and non-investment grade securities ; . senior and subordinated securities ; . ios , pos , iios , and inverse floaters ; and . collateralized debt obligations , or `` cdos . '' residential mortgage loans . residential non-performing mortgage loans , or `` npls '' ; . re-performing loans , or `` rpls , '' which generally are loans that were modified and or formerly npls where the borrower has resumed making payments in some form or amount ; . residential transition loans ; . non-qm loans ; and . retained tranches from securitizations to which we have contributed assets . 55 other . real estate , including commercial and residential real property ; . strategic debt and or equity investments in loan originators and mortgage-related entities ; . mortgage servicing rights , or `` msrs '' ; . credit risk transfer securities , or `` crts '' ; and . other non-mortgage-related derivatives . agency rmbs our agency rmbs assets consist primarily of whole pool ( and to a lesser extent , partial pool ) pass-through certificates , the principal and interest of which are guaranteed by a federally chartered corporation , such as the federal national mortgage association , or `` fannie mae , '' the federal home loan mortgage corporation , or `` freddie mac , '' or the government national mortgage association , within the u.s. department of housing and urban development , or `` ginnie mae , '' and which are backed by arms , hybrid arms , or fixed-rate mortgages . in addition to investing in pass-through certificates which are backed by traditional mortgages , we have also invested in agency rmbs backed by reverse mortgages . reverse mortgages are mortgage loans for which neither principal nor interest is due until the borrower dies , the home is sold , or other trigger events occur . mortgage pass-through certificates are securities representing undivided interests in pools of mortgage loans secured by real property where payments of both interest and principal , plus prepaid principal , on the securities are made monthly to holders of the security , in effect `` passing through '' monthly payments made by the individual borrowers on the mortgage loans that underlie the securities , net of fees paid to the issuer/guarantor and servicers of the securities . whole pool pass-through certificates are mortgage pass-through certificates that represent the entire ownership of ( as opposed to merely a partial undivided interest in ) a pool of mortgage loans . our agency rmbs assets are typically concentrated in specified pools . specified pools are fixed-rate agency pools consisting of mortgages with special characteristics , such as mortgages with low loan balances , mortgages backed by investor properties , mortgages originated through the government-sponsored `` making homes affordable '' refinancing programs , and mortgages with various other characteristics . our agency strategy also includes rmbs that are backed by arms or hybrid arms and reverse mortgages , and cmos , including ios , pos , and iios . tbas in addition to investing in specific pools of agency rmbs , we utilize forward-settling purchases and sales of agency rmbs where the underlying pools of mortgage loans are tbas . pursuant to these tba transactions , we agree to purchase or sell , for future delivery , agency rmbs with certain principal and interest terms and certain types of underlying collateral , but the particular agency rmbs to be delivered is not identified until shortly before the tba settlement date . tbas are liquid and have quoted market prices and represent the most actively traded class of mortgage-backed securities , or `` mbs . '' tba trading is based on the assumption that mortgage pools that are eligible to be delivered at tba settlement are fungible and thus the specific mortgage pools to be delivered do not need to be explicitly identified at the time a trade is initiated . we engage in tba transactions for purposes of managing certain risks associated with our investment strategies . the principal risks that we use tbas to mitigate are interest rate and yield spread risks . for example , we may hedge the interest rate and or yield spread risk inherent in our long agency rmbs by taking short positions in tbas that are similar in character . alternatively , we may engage in tba transactions because we find them attractive in their own right , from a relative value perspective or otherwise . clos clos are a form of asset-backed security collateralized by syndicated corporate loans . we have retained , and may retain in the future , tranches from clo securitizations for which we have participated in the accumulation of the underlying assets , typically by providing capital to a vehicle accumulating assets for such clo securitization .
| agency rmbs summary replace_table_token_2_th ( 1 ) long tba positions , with a fair value of $ 474.9 million and $ 123.7 million , as of december 31 , 2018 and 2017 , respectively , are included in net short tbas , and are not included in long agency rmbs . agency rmbs prices declined during the year and our long portfolio had significant realized and unrealized losses . partially offsetting these losses were significant gains on our interest rate hedges as interest rates rose . portfolio turnover for our agency strategy was approximately 32 % for the year ( as measured by sales and excluding paydowns ) . we continued to concentrate our long investments in specified pools and hold net short positions in tbas as a significant component of our interest rate hedging strategy . average pay-ups on our specified pools were 0.64 % as of december 31 , 2018 , down slightly from 0.74 % as of december 31 , 2017. pay-ups are price premiums for specified pools relative to their tba counterparts . as of december 31 , 2018 , the weighted average coupon on our fixed-rate specified pools was 4.2 % , as compared to 4.0 % as of december 31 , 2017. during 2018 we continued to hedge interest rate risk in our agency strategy , primarily through the use of short positions in tbas , interest rate swaps , u.s. treasury securities , and futures . for the year , we had total net gains from our interest rate hedges as interest rates generally increased over the course of the year . in our interest rate hedging portfolio , the relative proportion ( based on 10-year equivalents 1 ) of short positions in tbas decreased year over year relative to other hedging instruments .
| 7,160 |
our actual results could differ materially from those anticipated in these forward-looking statements as a result of various factors , including those discussed below and elsewhere in this report , particularly those under `` risk factors . '' dollars in tabular format are presented in thousands , except per share data , or otherwise indicated . overview growgeneration 's mission is to become one of the largest retail hydroponic and organic specialty gardening retail outlets in the industry . today , growgeneration owns and operates a chain of fifteen ( 15 ) retail hydroponic/gardening stores , with eight ( 8 ) located in the state of colorado , three ( 3 ) in the state of california , two ( 2 ) in the state of nevada , one ( 1 ) in the state of washington and one ( 1 ) in the state of rhode island . our plan is to own and operate hydroponic/gardening stores throughout the united states . our primary strategic plan is to grow by acquisition of hydroponic/garden stores and rely on organic growth . as noted in footnote 15 to our consolidated financial statements we acquired two hydroponic/gardening stores in january 2018. in addition , we closed on a private placement in january 2018 that provides us additional capital to continue our acquisition strategy . our stores sell thousands of products , such as organic nutrients and soils , advanced lighting technology , state of the art hydroponic and aquaponic equipment , and other products needed to grow indoors and outdoors . our strategy is to target two distinct verticals ; namely ( i ) commercial growers , and ( ii ) smaller growers who require a local store to fulfill their daily and weekly growing needs . growgeneration serves a new , yet sophisticated community of commercial and urban cultivators growing specialty crops including organics , greens and plant-based medicines . unlike the traditional agricultural industry , these cultivators use innovative indoor and outdoor growing techniques to produce specialty crops in highly controlled environments . this enables them to produce crops at higher yields without having to compromise quality , regardless of the season or weather and drought conditions . our target market segments include the commercial growers in the cannabis market , the home cannabis grower and to businesses and individuals who grow organically grown herbs and leafy green vegetables . 17 sales at our same stores have grown since we organized the business . our growth has been fueled by frequent and higher dollar transactions from commercial growers , individual home growers and gardeners who grow their own organic foods . we expect to continue to experience significant growth over the next few years , primarily from existing and new stores that we open or acquire . our growth is likely to come from four distinct channels : establishing new stores in high-value markets , internal growths at existing stores , acquiring existing stores with strong customer bases and strong operating histories and the creation of a business to business e-commerce portal at www.growgeneration.com . on march 1 , 2016 , we signed a 3-year lease for 4,498 square feet , located in denver , colorado . on july 15 , 2016 , the company entered into a new lease agreement for its canon city , colorado location . the canon city store completed its move to its new location on july 25 , 2016. the new store is approximately 4,427 square feet . on july 19 , 2016 the company entered into a 2-year lease agreement for its tenth retail store in fairplay , colorado . the store began operations in fairplay , colorado on august 1 , 2016. in december 2016 , the lease was terminated , and the company consolidated all the operations and business of the store in fairplay , colorado into the store in conifer , colorado . on september 27 , 2016 , the company entered into a commercial lease to rent certain premises located in castle rock , colorado . this store commenced operations on october 1 , 2016 but the store was closed in august 2017 because the store was under-performing . on october 6 , 2016 , the company closed on the 2106 private placement , pursuant to which it sold 1,000,000 units to 8 accredited investors at a price of $ .70 per unit , with each unit consisting of one share of common stock and one warrant to purchase one share of common stock at an exercise price of $ .70 per share . the warrants have a five-year life for gross proceeds of $ 700,000. on october 19 , 2016 , the company was approved to start trading its common stock on the otcqb marketplace under the ticker symbol of “ grwg ” . the company entered into a new lease for its new store in las vegas , nevada which commenced on november 15 , 2016 and continues through february 28 , 2022. on january 30 , 2017 , the company entered into a commercial lease to rent certain premises located in trinidad , colorado , to be effective from march 1 , 2017 to february 28 , 2022. this 7,383 square feet premises is used by the company to open a new store to replace and consolidate its existing 3,000 square feet store in trinidad as part of the company 's expansion plan . on february 1 , 2017 , the company entered into a commercial lease to rent certain 12,837 square feet premises located in denver , colorado , to be effective from february 1 , 2017 to february 1 , 2022. the premises is used by the company for a new retail store , warehouse space and as the company 's principal offices . on february 1 , 2017 , the company 's wholly-owned subsidiary , growgeneration california corp. ( “ growgeneration california ” ) entered into an asset purchase agreement with an individual to purchase certain assets in connection with a retail hydroponic and garden supply business located in santa rosa , ca . story_separator_special_tag 19 story_separator_special_tag addition of five locations that were not open in 2016. store operating costs as a percentage of sales were 21 % for the year ended december 31 , 2017 , compared to 19 % for the year ended december 31 , 2016. a previously noted above , we opened five locations in 2017 that were not open at all in 2016 and as such , store operating costs will be higher as the stores ramp up in sales which can take several months . corporate overhead is comprised of , share based compensation , depreciation and amortization , general and administrative costs and corporate salaries and related expenses and were approximately $ 3.2 for the year ended december 31 , 2017 , compared to approximately $ 1.1 million for the year ended december 31 , 2016. the increase in salaries and related expense from 2016 to 2017 was due to the increase in corporate staff , primarily , accounting and finance , inventory management , sales and information technology , to support both current and future operations and to increase outside sales . corporate salaries as a percentage of sales were 6.3 % for the year ended december 31 , 2017 and 5.8 % for the year ended december 31 , 2016. the slight increase in this percentage is because corporate staff costs do not rise directly commensurate with the increase in revenues . in addition , current corporate staff levels will not rise commensurate with increase in revenues in the future and the percentage of salaries to sales will decline . general and administrative expenses , comprised mainly of advertising and promotions , travel & entertainment , professional fees and insurance , were approximately $ 1 million for the year ended december 31 , 2017 , and approximately $ 386,000 for the year ended december 31 , 2016 with a majority of the increase in advertising and promotion and travel and entertainment . general and administrative costs as a percentage of revenue was 7.1 % for the year ended december 31 , 2017 compared to 4.8 % for the year ended december 31 , 2016. the slight increase in the percentage comparing 2016 to 2017 was primarily due to an increase in advertising and promotion expenses from approximately $ 108,000 in 2016 to approximately $ 265,000 for 2017 , which was mainly due to new store promotional costs in 2017 and increase in professional fees from approximately $ 58,000 for the year ended december 31 , 2016 to approximately $ 630,000 for the year ended december 31 , 2017. professional fees for 2017 included $ 184,000 in noncash share-based compensation . corporate overhead includes non-cash expenses , consisting primarily of depreciation and share-based compensation , which was approximately $ 1.1 million for the year ended december 31 , 2017 , compared to approximately $ 219,000 for the year ended december 31 , 2016. corporate overhead costs were 22 % of revenue for the year ended december 31 , 2017 , compare to 14 % for the year ended december 31 , 2016 , due to the reason noted above . 21 net income ( loss ) the net loss for the year ended december 31 , 2017 was approximately $ 2.5 million , compared to approximately $ 431,000 for the year ended december 31 , 2016 , an increase in the net loss of $ 2.1 million . the increase in the net loss was primarily due to 1 ) an increase in non-cash shares-based compensation of approximately $ 636,000 , 2 ) increases in other operating costs such as general and administrative costs and salaries , 3 ) the opening of our operations in denver and boulder , co , las vegas and las vegas north , nv , and san bernardino , ca , 4 ) costs related to the seattle hydro purchase and pre-opening store costs , and 5 ) a decrease in the gross profit percentage as noted above , offset somewhat by the increase on gross profit . operating activities net cash used in operating activities for the year ended december 31 , 2017 was $ 3,406,175 compared to $ 1,419,210 for the year ended december 31 , 2016. cash provided by operating activities is driven by our net loss and adjusted by non-cash items as well as changes in operating assets and liabilities . non-cash adjustments primarily include depreciation , amortization of intangible assets , share based compensation expense and changes in valuation allowances . non-cash adjustment totaled $ 1,353,141 and $ 307,821 for the year ended december 31 , 2017 and 2016 , respectively , so non-cash adjustments had a greater impact on net cash provided by operating activities for the year ended december 31 , 2017 than the same period in 2016. the net cash used in operating activities was primarily related to the increase in the net loss of approximately $ 2.1 million , an increase in inventory of $ 2,084,551 , an increase in accounts receivable of $ 312,333 , an increase in prepaids , primarily vendor prepaids , of $ 551,718 , offset by an increase in accounts payable and other current liabilities of $ 731,868. the increase in inventory and a corresponding increase in trade payables was attributable to both and increase in revenues and an increase in the number of operating stores between december 31 , 2016 and december 31 , 2017. net cash used in operating activities for the year ended december 31 , 2016 was $ 1,419,210. this amount was primarily related to increases of inventory of $ 1,256,799 , accounts receivable of $ 395,208 , partially offset by an increase in accounts payable and other current liabilities of $ 386,786. the increase in inventory and a corresponding increase in trade payables was attributable to both an increase in revenues and an increase in the number of operating stores between december 31 , 2015 and december 31 , 2016. net cash used in investing activities was $ 1,179,008 for the year ended december 31 , 2017 and $ 264,140 for the year ended december 31 , 2016. the increase
| results of operations the following table sets forth information from our statements of operations for the years ended december 31 , 2017 and 2016 : replace_table_token_3_th revenue net revenue for the year ended december 31 , 2017 were approximately $ 14.4 million , compared to approximately $ 8 million for the year ended december 31 , 2016 , an increase of $ 6.4 million , or 80 % . the increase in revenues was not only due to an increase in same store sales , as noted in the table below , but also due to the addition of 5 retail stores in 2017 for which there were no sales for the year ended december 31 , 2016 and one retail store which was open for all of 2017 but only for a portion of 2016. sales in these stores for the year ended december 31 , 2017 were approximately $ 5.6 million compared to approximately $ 1.1 million for the year ended december 31 , 2016. the company also had store closures and store consolidations in early 2017 that had sales of approximately $ 117,777 for the year ended december 31 , 2017 and approximately $ 456,746 for the year ended december 31 , 2016. in october 2017 , our santa rosa store was forced to close for 17 days due to wildfires in the santa rosa area . we estimate that the company 's loss of revenue for that period was approximately $ 120,000. in addition , revenue subsequent to when the store reopened on october 26 , 2017 , were lower than the months prior to the fire by approximately $ 100,000 a month .
| 7,161 |
it also eliminates the concept of other- than-temporary impairment and requires credit losses related to available-for-sale debt securities to be recorded through an allowance for credit losses rather than as a reduction in the amortized cost basis of the securities . these changes may result in earlier recognition of credit losses . in november 2018 , story_separator_special_tag the following discussion and analysis of our financial condition and results of operations should be read in conjunction with our consolidated financial statements and related notes appearing at the end of this annual report on form 10-k. some of the information contained in this discussion and analysis or set forth elsewhere in this annual report on form 10-k , including information with respect to our plans and strategy for our business , includes forward-looking statements that involve risks and uncertainties . as a result of many factors , including those factors set forth in the risk factors section of this annual report on form 10-k , our actual results could differ materially from the results described in , or implied by , the forward-looking statements contained in the following discussion and analysis . overview we are a clinical stage biopharmaceutical company focused on the discovery and development of innovative , disease-modifying therapies for neurodegenerative diseases . neurodegenerative diseases cause a progressive loss of structure and function in the brain , leaving patients with devastating damage to their nervous system and widespread functional impairment . although treatments may help relieve some of the physical or mental symptoms associated with neurodegenerative diseases , few of the currently available therapies slow or stop the continued loss of neurons , resulting in a critical unmet need . we are specifically focused on developing novel disease-modifying therapies to treat devastating conditions , either with large or orphan disease markets , including parkinson 's disease , dementia with lewy bodies , multiple system atrophy ( msa ) , amyotrophic lateral sclerosis ( als ( also known as lou gehrig 's disease ) ) , frontotemporal lobar degeneration ( ftld ) , and alzheimer 's disease . our goal is to advance one new program into the clinic every year . our lead program , ytx-7739 , is now in phase 1 clinical trials for the potential treatment and disease modification of parkinson 's disease . ytx-7739 targets an enzyme known as stearoyl-coa desaturase ( scd ) . inhibition of scd in multiple cellular systems , including patient-derived neurons , as well as in a novel mouse model of parkinson 's disease , has been demonstrated to reverse the toxicity of misfolded alpha-synuclein or α-synuclein , a protein strongly associated with parkinson 's disease . we recently completed a phase 1 single ascending dose ( sad ) study of ytx-7739 in healthy volunteers , which evaluated a broad range of doses of ytx-7739 . we completed enrolment in a phase 1a multiple ascending dose ( mad ) study in healthy volunteers with results anticipated in the beginning of the second quarter of 2021. a phase 1b clinical study of ytx-7739 in patients with parkinson 's disease has commenced and initiated dosing as a continuation of the mad study . a phase 1b part of the study will assess safety , tolerability and pharmacokinetics of ytx-7739 as well as proof of biology by exploring biomarkers of target engagement and potential correlative clinical parameters such as neuroimaging measurements to monitor for early effects of ytx-7739 . early results from the phase 1b part are anticipated in mid-2021 . our second program , ytx-9184 , also inhibits scd but is chemically distinct from ytx-7739 . good laboratory practice ( glp ) safety pharmacology and toxicological studies for ytx-9184 were initiated in the second quarter of 2020. we anticipate commencing the first in human studies of ytx-9184 in 2021 and intend to develop ytx-9184 for the potential treatment of dementia with lewy bodies , which is another devasting neurodegenerative disease characterized by the abnormal accumulation of aggregates of α-synuclein . at the center of our scientific foundation is our drug discovery engine , which is based on technology licensed from the whitehead institute , an affiliate of the massachusetts institute of technology . this core technology , combined with investments and advancements by us , is designed to enable rapid screening to identify drugs with the potential to modify disease by overcoming toxicity in disease-causing gene networks . toxicity in many neurodegenerative diseases results from an aberrant accumulation of misfolded proteins in the brain . we leverage our proprietary discovery engine to identify and screen novel drug targets and drug molecules 99 for their ability to protect nerve cells from toxicity arising from misfolded proteins . to date , we have identified over one dozen targets , most of which have not previously been linked to neurodegenerative diseases . we believe this discovery platform will allow us to replenish our pipeline as programs graduate towards the clinic . we have incurred significant operating losses since inception . our ability to generate product revenue sufficient to achieve profitability will depend on the successful development and eventual commercialization of one or more of our current or future product candidates . our net losses were $ 57.5 million and $ 31.2 million , respectively , for the years ended december 31 , 2020 and 2019. as of december 31 , 2020 , we had an accumulated deficit of $ 147.8 million . we expect to continue to incur significant expenses and increasing operating losses for at least the next several years . story_separator_special_tag if we fail to become profitable or are unable to sustain profitability on a continuing basis , we may be unable to continue our operations at planned levels and be forced to reduce or terminate our operations . as of december 31 , 2020 , we had cash , cash equivalents and short-term investments of $ 85.3 million . we believe that our existing cash , cash equivalents and short-term investments will enable us to fund our operating expenses and capital expenditure requirements into the third quarter of 2022 from the date of issuance of the consolidated financial statements included in this annual report . we have based this estimate on assumptions that may prove to be wrong , and we could exhaust our available capital resources sooner than we expect . see liquidity and capital resources. our future viability beyond that point is dependent on our ability to raise additional capital to finance our operations . covid-19 in march 2020 , covid-19 was declared a global pandemic by the world health organization and to date , the covid-19 pandemic continues to present a substantial public health and economic challenge around the 101 world . the length of time and full extent to which the covid-19 pandemic will directly or indirectly impact our business , results of operations and financial condition will depend on future developments that are highly uncertain , subject to change and difficult to predict . while we continue to conduct our research and development activities , the covid-19 pandemic may cause disruptions that affect our ability to initiate and complete preclinical studies and clinical trials or to procure items that are essential for our research and development activities . the pandemic has already caused significant disruptions in the financial markets , and may continue to cause such disruptions , which could impact our ability to raise additional funds to support our operations . moreover , the pandemic has significantly impacted economies worldwide and could result in adverse effects on our business and operations . to date , we have not experienced material business disruptions or incurred impairment losses in the carrying values of our assets as a result of the pandemic . we plan to continue to closely monitor the ongoing impact of the covid-19 pandemic on our employees and our business operations . in an effort to provide a safe work environment for our employees , we have , among other things , implemented measures to enable remote work whenever possible . we expect to continue to take actions as may be required or recommended by government authorities or as we determine are in the best interests of our employees and other business partners in light of the pandemic . merger with proteostasis on august 22 , 2020 , proteostasis therapeutics , inc , a delaware corporation ( proteostasis ) , pangolin merger sub , inc. ( merger sub ) , yumanity , inc. ( formerly yumanity therapeutics , inc. ) , and yumanity holdings , llc ( holdings ) , entered into the merger agreement , as amended on november 6 , 2020 , pursuant to which merger sub merged with and into yumanity , inc. immediately prior to the closing of the transaction , holdings merged with and into yumanity , inc. with yumanity , inc. surviving the merger ( the yumanity reorganization ) and , upon the closing of the merger , yumanity , inc. became a wholly owned subsidiary of proteostasis . the merger was completed on december 22 , 2020 pursuant to the terms of the merger agreement . in connection with the completion of the merger , proteostasis changed its name to yumanity therapeutics , inc. , and the trading symbol changed from pti to ymtx. we refer to the historical operations of holdings and yumanity , inc. as yumanity and following the merger , the business conducted by yumanity became our primary business . pursuant to the terms of the merger agreement , upon closing of the merger , all of yumanity , inc. 's outstanding common stock was exchanged for common stock of proteostasis and all outstanding options and warrants to purchase common stock of yumanity , inc. were exchanged for options and warrants to purchase common stock of proteostasis . the transaction was accounted for as a reverse merger and as an asset acquisition in accordance with generally accepted accounting principles in the united states , or gaap . under this method of accounting , yumanity was deemed to be the accounting acquirer for financial reporting purposes . this determination was primarily based on the facts that , immediately following the merger : ( i ) yumanity 's equityholders owned a substantial majority of the voting rights in the combined organization , ( ii ) yumanity designated a majority of the members ( 7 of 9 ) of the initial board of directors of the combined organization and ( iii ) yumanity 's senior management held all key positions in the senior management of the combined organization . accordingly , for accounting purposes , the transaction was treated as the equivalent of yumanity issuing stock to acquire the net assets of proteostasis . as a result , as of the closing date of the merger , the net assets of proteostasis were recorded at their acquisition-date fair values in the financial statements of the company and the reported operating results prior to the merger are those of yumanity . private placement on december 14 , 2020 , we entered into a subscription agreement with certain accredited investors for the sale by us in a private placement of 1,460,861 shares of our common stock for a price of $ 23.00 per share . we 102 refer to this sale herein as the private placement . the private placement closed on december 22 , 2020. the aggregate gross proceeds for the issuance and sale of the common stock were $ 33.6 million and , after deducting certain of our expenses , the net proceeds we received in the private placement were $ 31.6 million .
| results of operations comparison of the years ended december 31 , 2020 and 2019 the following table summarizes our results of operations for the years ended december 31 , 2020 and 2019 : replace_table_token_1_th collaboration revenue collaboration revenue recognized during the year ended december 31 , 2020 of $ 6.9 million was related to our collaboration agreement with merck . the upfront payment of $ 15.0 million was initially recorded as deferred revenue and is being recognized as revenue under the cost-to-cost method as research and development is being performed . research and development expenses replace_table_token_2_th research and development expenses were $ 22.3 million for the year ended december 31 , 2020 , a decrease of $ 0.7 million from $ 23.0 million for the year ended december 31 , 2019. direct expenses of our ytx-7739 program increased by $ 0.9 million in the year ended december 31 , 2020 , compared to the year ended december 31 , 2019. the change was due primarily to an increase in clinical and consultant costs as ytx-7739 progressed from glp toxicology studies in 2019 to our sad and mad clinical studies during 2020 , partially 107 offset by a decrease in preclinical and manufacturing costs . direct expenses of our ytx-9184 program in 2020 increased by $ 1.3 million primarily due to preclinical and manufacturing costs for glp toxicology studies . ytx-9184 was designated as a product candidate in mid-2019 . we do not track external costs to programs prior to designation of a product candidate . platform and other early stage research external costs decreased by $ 2.4 million due to decreased laboratory activities as a result of covid-19 and the move to new office and laboratory space in the second quarter of 2020. personnel related costs decreased by $ 0.4 million primarily due to employee turnover in the research and development function .
| 7,162 |
10.37 amendment to office building lease dated june 11 , 1997 between miller & paine and union bank and trust company , filed as exhibit 10.4 to the registrant 's current report on form 8-k story_separator_special_tag december 31 , 2011 , 2010 and 2009 . all dollars are in thousands , except per share amounts , unless otherwise noted . ) the following discussion and analysis provides information that the company 's management believes is relevant to an assessment and understanding of the consolidated results of operations and financial condition of the company . the discussion should be read in conjunction with the company 's consolidated financial statements included in this annual report on form 10-k for the year ended december 31 , 2011 . reclassifications certain amounts previously reported within the company 's consolidated statements of income have been reclassified to conform to the current period presentation . these reclassifications include : reclassifying `` software services revenue '' to `` loan and guaranty servicing revenue . '' reclassifying “ professional and other services , ” “ occupancy and communications , ” “ postage and distribution , ” “ advertising and marketing , ” and “ trustee and other debt related fees ” to “ other ” operating expenses . reclassifying student list amortization , which was previously included in “ advertising and marketing ” to “ depreciation and amortization. ” the reclassifications had no effect on consolidated net income or consolidated assets and liabilities . overview the company is an education services company focused primarily on providing fee-based processing services and quality education-related products and services in four core areas : loan financing , loan servicing , payment processing , and enrollment services ( education planning ) . these products and services help students and families plan , prepare , and pay for their education and make the administrative and financial processes more efficient for schools and financial organizations . in addition , the company earns interest income on a portfolio of federally insured student loans . 30 the company has certain business objectives in place that include : continue to grow and diversify fee-based revenue manage operating costs maximize the value of existing portfolio use liquidity to capitalize on market opportunities achieving these business objectives has impacted and will continue to impact the financial condition and operating results of the company . continue to grow and diversify fee-based revenue the company has expanded products and services generated from businesses that are not dependent upon the ffel program . the company focuses primarily on expanding its fee-based products and services related to loan servicing , payment processing , and enrollment services . a summary of revenue from the company 's fee-based operating segments is shown below . replace_table_token_8_th ( a ) enrollment services revenue has been negatively affected by the current regulatory uncertainty in the for-profit college industry , which has caused schools to decrease spending on marketing efforts as further discussed in this item 7 under `` enrollment services operating segment – results of operations . '' 31 as shown below , the company 's revenue and income before taxes related to its fee-based operating segments continues to increase . the table below includes the consolidated operating results of the company excluding the asset generation and management operating segment . thus , the below table reflects the operating results of the company as if it was not generating any earnings from its student loan portfolio . income ( loss ) before taxes ( a ) ( $ 5 million ) $ 67 million $ 80 million $ 91 million ( a ) excludes restructure , impairment , and litigation charges . additional information on total operating expenses by segment and these adjustments thereto are further discussed in this item 7 under `` management 's discussion and analysis of financial condition and results of operations . '' manage operating costs excluding the cost to provide enrollment services ; impairment , restructure , and litigation charges ; and collection costs related to loan rehabilitation revenue , operating expenses in 2011 remained flat as compared to 2010 , as further discussed in this item 7 under `` results of operations - operating expenses . '' maximize the value of existing portfolio fixed rate floor income loans originated prior to april 1 , 2006 generally earn interest at the higher of a floating rate based on the special allowance payment formula set by the department and the borrower rate , which is fixed over a period of time . the sap formula is based on an applicable indice plus a fixed spread that is dependent upon when the loan was originated , the loan 's repayment status , and funding sources for the loan . the company generally finances its student loan portfolio with variable rate debt . in low and or declining interest rate environments , when the fixed borrower rate is higher than the rate produced by the sap formula , the company 's student loans earn at a fixed rate while the interest on the variable rate debt typically continues to decline . in these interest rate environments , the company earns additional spread income that it refers to as floor income . for loans where the borrower rate is fixed to term , the company earns floor income for an extended period of time , which the company refers to as fixed rate floor income . 32 the company has earned fixed rate floor income as summarized below : replace_table_token_9_th ( a ) includes settlement payments on derivatives used to hedge student loans earning fixed rate floor income . the high levels of fixed rate floor income earned during 2011 and 2010 are due to historically low interest rates . in addition , the 2011 amount increased due to the purchase of the residual interest in $ 1.9 billion of consolidation loans in july 2011. if interest rates remain low , the company anticipates continuing to earn significant fixed rate floor income in future periods . story_separator_special_tag the company places a non-federally insured loan on nonaccrual status when the collection of principal and interest is 30 days past due and charges off the loan and accrued interest when the collection of principal and interest is 120 days past due . other income the company also earns fees and generates revenue from other sources as summarized below . student loan and guaranty servicing revenue – student loan and guaranty servicing revenue consists of the the following items : loan and guaranty servicing fees – loan servicing fees are determined according to individual agreements with customers and are calculated based on the dollar value of loans , number of loans , or number of borrowers serviced for each customer . guaranty servicing fees , generally , are calculated based on the number of loans serviced , volume of loans serviced , or amounts collected . revenue is recognized when earned pursuant to applicable agreements , and when ultimate collection is assured . 34 software services revenue – software services revenue is determined from individual agreements with customers and includes license and maintenance fees associated with student loan software products . computer and software consulting and remote hosting revenues are recognized over the period in which services are provided to customers . tuition payment processing and campus commerce revenue – tuition payment processing and campus commerce revenue primarily includes actively managed tuition payment solutions and online payment processing . fees for these services are recognized over the period in which services are provided to customers . enrollment services revenue – enrollment services revenue primarily consists of the following items : interactive marketing – interactive marketing revenue is derived primarily from fees which are earned through the delivery of qualified inquiries or clicks . the company recognizes revenue when persuasive evidence of an arrangement exists , delivery has occurred , the fee is fixed or determinable , and collectability is reasonably assured . delivery is deemed to have occurred at the time a qualified inquiry or click is delivered to the customer provided that no significant obligations remain . from time to time , the company may agree to credit certain inquiries or clicks if they fail to meet the contractual or other guidelines of a particular client . the company has established a sales reserve based on historical experience . to date , such credits have been immaterial and within management 's expectations . for a portion of its interactive marketing revenue , the company has agreements with providers of online media or traffic ( “ publishers ” ) used in the generation of inquiries or clicks . the company receives a fee from its customers and pays a fee to publishers either on a cost per inquiry , cost per click , or cost per number of impressions basis . the company is the primary obligor in the transaction . as a result , the fees paid by the company 's customers are recognized as revenue and the fees paid to its publishers are included in “ cost to provide enrollment services ” in the company 's consolidated statements of income . list marketing – revenue from the sale of lists is generally earned and recognized , net of estimated returns , upon delivery . publishing services – revenue from the sale of print products is generally earned and recognized , net of estimated returns , upon shipment or delivery . resource centers – resource centers services include online courses , scholarship search and selection data , career planning , and online information about colleges and universities . the majority of these services are sold based on subscriptions and or are performance based . revenues from sales of subscription and performance based services are recognized ratably over the term of the contract as earned . subscription and performance based revenues received or receivable in advance of the delivery of services is included in deferred revenue . other income – other income primarily includes borrower late fee income , which is earned by the education lending subsidiaries and is recognized when payments are collected from the borrower . operating expenses operating expenses includes indirect costs incurred to acquire student loans ; costs incurred to manage and administer the company 's student loan portfolio and its financing transactions ; costs incurred to service the company 's student loan portfolio and the portfolios of third parties ; collection costs related to rehabilitation revenue ; the cost to provide enrollment services ; costs incurred to provide tuition payment processing , campus commerce , resource center and list marketing services , and software and technical services to third parties ; the depreciation and amortization of capital assets and intangible assets ; investments in products , services , and technology to meet customer needs and support continued revenue growth ; and other general and administrative expenses . the cost to provide enrollment services , as discussed previously , consists of costs incurred to provide interactive marketing and publishing services in the company 's enrollment services operating segment . operating expenses also includes impairment charges related to the impairment of goodwill and certain intangible assets and employee termination benefits , lease termination costs , and the write-down of certain assets related to the company 's restructuring initiatives . operating expenses in 2010 also includes a litigation settlement charge . 35 net interest income ( net of settlements on derivatives ) replace_table_token_10_th ( a ) the company maintains an overall risk management strategy that incorporates the use of derivative instruments to reduce the economic effect of interest rate volatility . management has structured the majority of the company 's derivative transactions with the intent that each is economically effective ; however , the company 's derivative instruments do not qualify for hedge accounting . derivative settlements for each applicable period should be evaluated with the company 's net interest income .
| segment summary of results significant items impacting 2011 operating results include a decrease in revenue and operating margin due to the effects from current regulatory uncertainty in the for-profit college industry , which has caused schools to decrease spending on marketing efforts . 54 summary and comparison of operating results replace_table_token_26_th enrollment services revenue , cost to provide enrollment services , and gross profit replace_table_token_27_th replace_table_token_28_th 55 replace_table_token_29_th enrollment services revenue , cost to provide enrollment services , and gross profit . year ended december 31 , 2011 compared to december 31 , 2010 ( a ) interactive marketing revenue decreased $ 6.9 million ( 5.9 % ) for the year ended december 31 , 2011 compared with 2010 as a result of a decrease in interactive marketing services volume . the gross profit margin for the year ended december 31 , 2011 compared to 2010 decreased as a result of more competitive pricing . revenue and profit margin have been affected by the current regulatory uncertainty in the for-profit college industry , which has caused schools to decrease spending on marketing efforts . ( b ) publishing services revenue decreased $ 1.4 million ( 12.9 % ) for the year ended december 31 , 2011 compared with 2010 due to competition related to online delivery of similar products and the timing of book releases and types of products sold . the gross profit margin for publishing increased for the year ended december 31 , 2011 compared to the same period in 2010 as a result of a shift in the mix of products sold . ( c ) resource centers and list marketing revenue decreased $ 1.1 million ( 8.7 % ) for year ended december 31 , 2011 compared with 2010 due to decreases in customer spending in both resource center products and list sales .
| 7,163 |
our revenues increased $ 1,745.8 million , primarily due to revenues related to our acquisitions of intralinks and eze in the fourth quarter of 2018 , caceis and dst in the second quarter of 2018 and commonwealth fund services in the fourth quarter of 2017 , which contributed $ 1,709.9 million in revenues . additionally , revenues increased due to increased demand for our software-enabled services and the favorable impact from foreign currency translation , which added $ 1.2 million . software-enabled services revenues increased $ 1,684.9 million or 151.2 % , primarily due to the acquisitions , which added revenues of $ 1,629.6 million , as well as from a continued increase in demand for our fund administration services and services for advisory and wealth managers . the favorable impact from foreign currency translation was $ 1.6 million . license , maintenance and related revenues increased $ 60.9 million , or 10.8 % , primarily due to the acquisitions , which added revenues of $ 80.3 million . the unfavorable impact from foreign currency translation was $ 0.4 million and the remaining decrease in license , maintenance and related 36 revenues was primarily due to a decline in professional services revenues and the impact on term licenses as a result o f the adoption of a new revenue recognition standard , asc 606 , on january 1 , 2018 . fiscal 2017 versus fiscal 2016 . our revenues increased $ 193.9 million , primarily due to revenues related to our acquisitions of commonwealth fund services in the fourth quarter of 2017 , gfs and conifer in the fourth quarter of 2016 and citigroup ais in the first quarter of 2016 , which contributed $ 117.7 million in revenues , net of a reduction of $ 2.7 million in revenues related to the loss of sales to these businesses . the increase in revenues also reflects a reduction of $ 19.0 million related to fund administration service clients that were acquired through the citigroup ais acquisition who had indicated they were terminating their contracts prior to the acquisition closing . the final purchase price of the citigroup ais business acquisition included an adjustment for these terminated clients . the remaining increases in revenues were primarily due to an increase in term license revenues and a continued increase in demand for our fund administration services . these increases were also impacted favorably from foreign currency translation by $ 1.1 million . software-enabled services revenues increased $ 157.2 million , primarily due to the acquisitions , which added revenues of $ 114.4 million , as well as from an increase in software-enabled services revenues within our fund administration business . these increases were also impacted favorably from foreign currency translation by $ 0.5 million . license , maintenance and related revenues increased $ 36.7 million , primarily due to an increase in revenues for advisory and wealth managers , as well as an increase resulting from the large prior period impact of the fair value adjustment of acquired deferred revenue and by our acquisitions , which contributed $ 3.3 million . these increases were also impacted favorably from foreign currency translation by $ 0.6 million . license , maintenance and related revenues were partially offset by declines in revenues for institutional and investment management customers . cost of revenues cost of software-enabled services revenues consists primarily of costs related to personnel utilized in servicing our software-enabled services and amortization of intangible assets . cost of license , maintenance and other related revenues consists primarily of the costs related to personnel utilized in servicing our maintenance contracts and to provide implementation , conversion and training services to our software licensees , as well as system integration and custom programming consulting services and amortization of intangible assets . the following tables set forth each of the following cost of revenues as a percentage of their respective revenue source for the periods indicated : replace_table_token_5_th the following table sets forth cost of revenues ( dollars in millions ) and percent change in cost of revenues for the periods indicated : replace_table_token_6_th fiscal 2018 versus fiscal 2017 . our total cost of revenues increased $ 1,164.7 million , or 131.4 % , primarily due to our acquisitions , which contributed $ 1,136.7 million to the increase . included in these costs are severance charges of $ 38.8 million in 2018 related to the elimination of redundant positions within the acquired businesses . the unfavorable impact from foreign currency translation added $ 0.7 million in costs . cost of software-enabled services revenues increased $ 1,124.9 million , or 179.1 % , primarily due to our acquisitions , which added $ 1,088.6 million in costs , as well as increased costs to support the growth in software-enabled services revenues . the unfavorable impact from foreign currency translation added $ 0.2 million in costs . costs of license , maintenance and related revenues increased $ 39.8 million or 15.4 % , primarily due to our acquisitions , which added $ 48.0 million in costs , partially offset by decreases in personnel-related costs and independent contractors . the unfavorable impact from foreign currency translation added $ 0.5 million in costs . 37 fiscal 201 7 versus fiscal 201 6 . our total cost of revenues increased $ 85.9 million , primarily due to our acquisitions , which included commonwealth , gfs , conifer and citigroup ais , which added costs of $ 87.4 million for the twelve months ended december 31 , 2017. this increase was partially offset by a decrease of $ 1.2 million in costs of revenues , primarily related to cost synergies from acquisitions as well as by the favorable impact from foreign currency translation of $ 0.3 million . cost of software-enabled services revenues in creased $ 8 3 . 7 million , primarily due to the acquisitions , which added costs of $ 85.3 million . cost of license , maintenance and related revenues in creased $ 2.2 million , primarily due the acquisitions . story_separator_special_tag the following table sets forth the provision ( benefit ) for income taxes ( dollars in millions ) and effective tax rates for the periods indicated : replace_table_token_9_th our 2018 , 2017 and 2016 effective tax rates differ from the statutory rate primarily due to the effect of our foreign operations and permanent book to tax differences , and in 2017 and 2018 , the effect of the tax act . the increase in the effective tax rate from 2017 to 2018 is due primarily to the unfavorable impact of certain provisions in the tax act as well as the absence of the net favorable impact of the tax act in 2017. these increases were partially offset by the relative favorable impact of excess tax benefits from stock-based awards compared to the prior year and the favorable impact of a revaluation on existing state deferred tax liabilities due to acquisitions . the decrease in the effective tax rate from 2016 to 2017 was primarily due to the overall favorable net impact of the tax act and the favorable impact of excess tax benefits from stock-based awards . in 2017 , we recorded a provisional tax benefit for the impact of the tax act of $ 88.0 million . we made reasonable estimates to determine the impact of the tax act in 2017 and completed our accounting of the tax act in the fourth quarter of 2018. we did not make any material adjustments as a result of completing our accounting related to the tax act . see notes 2 and 15 to the consolidated financial statements for additional information . the favorable impact of excess tax benefits from stock-based awards in 2017 and 2018 is due to the prospective adoption of asu 2016-09 , compensation – stock compensation ( topic 718 ) : improvements to employee share-based payment accounting . we had $ 1,347.8 million and $ 347.8 million of deferred tax liabilities and $ 150.9 million and $ 66.6 million of deferred tax assets at december 31 , 2018 and 2017 , respectively . 39 our effective tax rate includes the effect of operations outside the u.s. , which historically have been taxed at rates lower than the u.s. statutory rate . while we have income fro m multiple foreign sources , the majority of our non-u.s. operations are in india and the u . k . , where th e statutory rates were 30.5 % and 19.0 % , respectively , in 2018 , 34.6 % and 19.3 % , respectively , in 2017 , and 34 . 6 % and 2 0 . 0 % , respectively , in 2016 . a future proportionate change in the composition of income before income taxes from foreign and domestic tax jurisdictions could impact our periodic effective tax rate . liquidity and capital resources our principal cash requirements are to finance the costs of our operations pending the billing and collection of client receivables , to fund payments with respect to our indebtedness , to invest in research and development , to acquire complementary businesses or assets and to pay dividends on our common stock . we expect our cash on hand , cash flows from operations , and cash available under our credit agreement to provide sufficient liquidity to fund our current obligations , projected working capital requirements and capital spending for at least the next twelve months . in april 2018 , we purchased all of the outstanding stock of dst for approximately $ 5.1 billion , plus the costs of effecting the transaction . we funded the acquisition and refinanced our existing debt with $ 7.4 billion of debt financing ( of which approximately $ 524.5 million was rolled over from our prior credit agreement ) and a portion of the net proceeds from the issuance and sale of approximately $ 1.4 billion of our common stock . we funded our acquisition of eze in october 2018 with a combination of cash on-hand and $ 875.0 million in incremental term loan debt . we funded our acquisition of intralinks in november 2018 with a combination of $ 1.0 billion in incremental term loan debt and 9.9 million shares of our common stock . in 2018 , we paid quarterly cash dividends totaling $ 70.9 million . our cash , cash equivalents and restricted cash and cash equivalents , including amounts held on behalf of clients , at december 31 , 2018 were $ 1,113.3 million , an increase of $ 1,048.6 million from $ 64.7 million at december 31 , 2017. the increase in cash was primarily due to the inclusion of cash and cash equivalents associated with funds held on behalf of clients of $ 940.2 million . see notes 7 , 9 and 10 to our consolidated financial statements for further discussion of acquisitions , debt and equity , respectively . client funds obligations represent our contractual obligations within the dst business to remit funds to satisfy client pharmacy claim obligations and are recorded on the consolidated balance sheet when incurred , generally after a claim has been processed by us . in addition , client funds obligations include transfer agency client balances invested overnight . our contractual obligations to remit funds to satisfy client obligations are primarily sourced by funds held on behalf of clients . we had $ 1,014.7 million of client funds obligations at december 31 , 2018. cash flows from operating , investing and financing activities , as reflected in our consolidated statements of cash flows , are summarized in the following table ( in millions ) : replace_table_token_10_th operating activities : cash provided by operating activities primarily resulted from net income of $ 103.2 million adjusted for non-cash items of $ 572.0 million , slightly offset by changes in our working capital accounts ( excluding the effect of acquisitions ) totaling $ 35.1 million .
| financial condition and results of operations overview business . we are a leading provider of mission-critical , sophisticated software-enabled services that allow financial services providers to automate complex business processes . our portfolio of software products and rapidly deployable software-enabled services allows our clients to automate and integrate front-office functions such as trading and modeling , middle-office functions such as portfolio management and reporting , and back-office functions such as accounting , transfer agency , compliance , regulatory services , performance measurement , reconciliation , reporting , processing and clearing . we provide our solutions globally to thousands of clients , principally within the institutional asset and wealth management , alternative investment management , brokerage , retirement , financial advisory and financial institutions vertical markets . in addition , we provide solutions to the healthcare industry including pharmacy , healthcare administration and health outcomes optimization solutions to satisfy their information processing , quality of care , cost management and payment integrity needs . our healthcare solutions include claims adjudication , benefit management , care management , and business intelligence services . acquisitions . to supplement our growth , we evaluate and execute acquisitions that provide complementary products or services , add proven technology and an established client base and expand our intellectual property portfolio or address a highly specialized problem or a market niche . since the beginning of 2016 , we have spent approximately $ 8.7 billion to acquire eight businesses in the financial services and healthcare industries , using a combination of cash on hand , equity and debt financing ( as discussed in notes 7 , 9 and 10 to our consolidated financial statements ) .
| 7,164 |
our actual results may differ materially from those currently anticipated and expressed in such forward-looking statements as a result of a number of factors , including those we discuss under “ risk factors ” and “ forward-looking statements ” and elsewhere in this annual report on form 10-k. general lincoln educational services corporation and its subsidiaries ( collectively , the “ company ” , “ we ” “ our ” and “ us ” , as applicable ) provide diversified career-oriented post-secondary education to recent high school graduates and working adults . in the first quarter of 2015 , we reorganized our operations into three reportable segments : ( a ) transportation and skilled trades , ( b ) healthcare and other professions , and ( c ) transitional which refers to business that are currently being phased out . i n november , 2015 , the board of directors of the company approved a plan for the company to divest 17 of 18 of the schools included in its healthcare and other professions business segment . implementation of the plan would result in the company 's operations focused solely on the transportation and skilled trades segment . then , in december , 2015 , our board of directors approved a plan to cease operations of the remaining school in this segment in hartford , connecticut school which is scheduled to close in the fourth quarter of 2016. this divestiture marks a shift in our business strategy will enable us to focus energy and resources predominantly on transportation and skilled trades though some other programs will continue to be available at some campuses . the results of operations of the 17 campuses slated for divestiture are reflected as discontinued operations in the consolidated financial statements . the company currently operates 31 schools in 15 states across the united states and offer programs in automotive technology , skilled trades ( which include hvac , welding and computerized numerical control and electronic systems technology , among other programs ) , healthcare services ( which include nursing , dental assistant , medical administrative assistant and pharmacy technician , among other programs ) , hospitality services ( which include culinary , therapeutic massage , cosmetology and aesthetics ) and business and information technology ( which includes information technology and criminal justice programs ) . our schools operate under the lincoln technical institute , lincoln college of technology , lincoln college of new england , lincoln culinary institute , and euphoria institute of beauty arts and sciences brand names . most of our campuses serve major metropolitan markets and each typically offers courses in multiple areas of study . five of our campuses are destination schools , which attract students from across the united states and , in some cases , from abroad . our other campuses primarily attract students from their local communities and surrounding areas . all of our campuses are nationally or regionally accredited and are eligible to participate in federal financial aid programs by the u.s. department of education ( the “ doe ” ) and applicable state education agencies and accrediting commissions which allow students to apply for and access federal student loans as well as other forms of financial aid . as of december 31 , 2015 , we enrolled 6,811 students at our 14 campuses included in continuing operations . our campuses , a majority of which serve major metropolitan markets , are located throughout the united states . five of our campuses are destination schools , which attract students from across the united states and , in some cases , from abroad . our other campuses primarily attract students from their local communities and surrounding areas . all of our schools are either nationally or regionally accredited and are eligible to participate in federal financial aid programs . our revenues consist primarily of student tuition and fees derived from the programs we offer . our revenues are reduced by scholarships granted to our students . we recognize revenues from tuition and one-time fees , such as application fees , ratably over the length of a program , including internships or externships that take place prior to graduation . we also earn revenues from our bookstores , dormitories , cafeterias and contract training services . these non-tuition revenues are recognized upon delivery of goods or as services are performed and represent less than 10 % of our revenues . from both continuing and discontinued operations , our revenues are directly dependent on the average number of students enrolled in our schools and the courses in which they are enrolled . our average enrollment is impacted by the number of new students starting , re-entering , graduating and withdrawing from our schools . in addition , our diploma/certificate programs range from 22 to 136 weeks , our associate 's degree programs range from 48 to 208 weeks , and our bachelor 's degree programs range from 104 to 208 weeks , and students attend classes for different amounts of time per week depending on the school and program in which they are enrolled . because we start new students every month , our total student population changes monthly . the number of students enrolling or re-entering our programs each month is driven by the demand for our programs , the effectiveness of our marketing and advertising , the availability of financial aid and other sources of funding , the number of recent high school graduates , the job market and seasonality . our retention and graduation rates are influenced by the quality and commitment of our teachers and student services personnel , the effectiveness of our programs , the placement rate and success of our graduates and the availability of financial aid . although similar courses have comparable tuition rates , the tuition rates vary among our numerous programs . 38 index the majority of students enrolled at our schools rely on funds received under various government-sponsored student financial aid programs to pay a substantial portion of their tuition and other education-related expenses . story_separator_special_tag 2013 event in june , 2013 , our board of directors approved a plan to cease operations at four campuses in ohio and one campus in kentucky consisting of our dayton institution and its branch campuses . federal legislation implemented on july 1 , 2012 that prohibits “ ability to benefit ” students from participating in federal student financial aid programs led to a dramatic decrease in the number of students attending these five campuses . accordingly , the company ceased operations at these campuses as of december 31 , 2013. the results of operations of these campuses are reflected as discontinued operations in the consolidated financial statements . the results of operations at these five campuses for the year ended december 31 , 2013 was as follows ( in thousands ) : year ended december 31 , 2013 revenue $ 7,724 loss before income tax ( 17,287 ) income tax expense ( benefit ) 239 net loss from discontinued operations $ ( 17,526 ) amount include impairment of goodwill and long-lived assets for these campuses of $ 2.3 million for the year ended december 31 , 2013. critical accounting policies and estimates our discussions of our financial condition and results of operations are based upon our consolidated financial statements , which have been prepared in accordance with accounting principles generally accepted in the united states of america , or gaap . the preparation of financial statements in conformity with gaap requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the period . on an ongoing basis , we evaluate our estimates and assumptions , including those related to revenue recognition , bad debts , fixed assets , goodwill and other intangible assets , income taxes and certain accruals . actual results could differ from those estimates . the critical accounting policies discussed herein are not intended to be a comprehensive list of all of our accounting policies . in many cases , the accounting treatment of a particular transaction is specifically dictated by gaap and does not result in significant management judgment in the application of such principles . we believe that the following accounting policies are most critical to us in that they represent the primary areas where financial information is subject to the application of management 's estimates , assumptions and judgment in the preparation of our consolidated financial statements . 40 index revenue recognition . revenues are derived primarily from programs taught at our schools . tuition revenues , textbook sales and one-time fees , such as nonrefundable application fees and course material fees , are recognized on a straight-line basis over the length of the applicable program as the student proceeds through the program , which is the period of time from a student 's start date through his or her graduation date , including internships or externships that take place prior to graduation , and we complete the performance of teaching the student which entitles us to the revenue . other revenues , such as tool sales and contract training revenues are recognized as services are performed or goods are delivered . on an individual student basis , tuition earned in excess of cash received is recorded as accounts receivable , and cash received in excess of tuition earned is recorded as unearned tuition . we evaluate whether collectability of revenue is reasonably assured prior to the student attending class and reassess collectability of tuition and fees when a student withdraws from a course . we calculate the amount to be returned under title iv and its stated refund policy to determine eligible charges and , if there is a balance due from the student after this calculation , we expect payment from the student and we have a process to pursue uncollected accounts whereby , based upon the student 's financial means and ability to pay , a payment plan is established with the student to ensure that collectability is reasonable . we continuously monitor our historical collections to identify potential trends that may impact our determination that collectability of receivables for withdrawn students is realizable . if a student withdraws from a program prior to a specified date , any paid but unearned tuition is refunded . refunds are calculated and paid in accordance with federal , state and accrediting agency standards . generally , the amount to be refunded to a student is calculated based upon the period of time the student has attended classes and the amount of tuition and fees paid by the student as of his or her withdrawal date . these refunds typically reduce deferred tuition revenue and cash on our consolidated balance sheets as we generally do not recognize tuition revenue in our consolidated statements of income ( loss ) until the related refund provisions have lapsed . based on the application of our refund policies , we may be entitled to incremental revenue on the day the student withdraws from one of our schools . prior to the year-ended december 31 , 2015 , we recorded this incremental revenue , any related student receivable and any estimate of the amount we did not expect to collect as bad debt expense during the quarter a student withdrew based on our analysis of the collectability of such amounts on an aggregate student portfolio basis , for which we had significant historical experience . beginning in the three months ended december 31 2015 , we record revenue for students who withdraw from one of our schools when payment is received because collectability on an individual student basis is not reasonably assured .
| consolidated results of operations revenue . revenue decreased by $ 9.7 million , or 4.8 % , to $ 193.2 million for the year ended december 31 , 2015 from $ 202.9 million for the year ended december 31 , 2014. the decrease was a result of lower student population levels of approximately 100 , or 1 % , as we began 2015 coupled with fewer new student starts of 759 which decreased to 8,018 for the year ended december 31 , 2015 from 8,777 for the year ended december 31 , 2014. these two factors led to a decline of 7.1 % in average student population to approximately 7,600 students from 8,100 students in the comparable period of 2014. offsetting the revenue decline from lower student population was a 2.5 % increase in average revenue per student due to improved student retention and a shift in program mix . in addition , revenue was lower in 2015 due to higher scholarship recognition in comparison to 2014. scholarships are recognized ratably over the term of the student 's program . scholarship discounts increased by $ 0.6 million for the year ended december 31 , 2015 as compared to the prior year . while scholarships have negatively impacted revenue , we believe we provide more students with the opportunity to pursue their educational goals by assisting in their affordability challenge . we continue to face several challenges in sustaining our student population levels including the impact doe incentive compensation regulations have on compensation practices for our admissions representatives , a low national unemployment rate and increased competition from peers and community colleges . we remain focused on our strategy to expand corporate training and form partnership relationships to increase student population . for a general discussion of trends in our student enrollment , see “ seasonality and outlook ” below . educational services and facilities expense . our educational services and facilities expense decreased by $ 8.2 million , or 8.1 % , to $ 92.2
| 7,165 |
prior to story_separator_special_tag you should read the following discussion and analysis of our financial condition and results of operations together with the consolidated financial statements and related notes that are included elsewhere in this annual report . this discussion contains forward-looking statements based upon current expectations that involve risks and uncertainties . our actual results may differ materially from those anticipated in these forward-looking statements as a result of various factors , including those set forth under “ risk factors , ” set forth in part i , item 1a of this annual report . see “ special note regarding forward-looking statements ” above . overview we are improving business through data science and analytics by enabling analytic producers , regardless of technical acumen , to quickly and easily transform data into actionable insights and deliver improved data-driven business outcomes . every day , our users leverage our end-to-end analytic platform to quickly and easily discover , access , prepare , and analyze data from a multitude of sources , then deploy and share analytics at scale . the ease-of-use , speed , and sophistication that our platform provides is enhanced through intuitive and highly repeatable visual workflows . our platform includes alteryx designer , our data profiling , preparation , blending , and analytics product deployable to the cloud and on premise , alteryx server , our secure and scalable server-based product for scheduling , sharing and running analytic processes and applications in a web-based environment , alteryx connect , our collaborative data exploration platform for discovering information assets and sharing recommendations across the enterprise , and alteryx promote , our advanced analytics model management product for data scientists and analytics teams to build , manage , monitor and deploy predictive models into real-time production applications . in addition , alteryx analytics gallery , our cloud-based collaboration offering , is a key feature of our platform allowing users to share workflows in a centralized repository , and alteryx community allows users to gain valuable insights from one another , collaborate and share their experiences and ideas , and innovate around our platform . our platform has been adopted by organizations across a wide variety of industries and sizes . as of december 31 , 2018 , we had approximately 4,700 customers in more than 70 countries , including over 500 of the global 2,000 companies . we derive a large portion of our revenue from subscriptions for use of our platform . our software can be licensed for use on a desktop or server , or it can be deployed in the cloud . subscription periods for our platform generally range from one to three years and the subscription fees are typically billed annually in advance . in accordance with asc 606 , which became effective for us as of january 1 , 2018 , we recognize a portion of the revenue from customers upfront on the date which the platform is first made available to the customer , or the beginning of the subscription term , if later , and a portion ratably over the subscription term . revenue from subscriptions represented over 95 % of revenue for each of the years ended december 31 , 2018 , 2017 , and 2016. we also generate revenue from professional services , including training and consulting services . we employ a “ land and expand ” business model . our go-to-market approach often begins with a free trial of alteryx designer and is followed by an initial purchase of our platform offerings . as organizations realize the benefits derived from our platform , use frequently spreads across departments , divisions , and geographies through word-of-mouth , collaboration , and standardization of business processes . over time , many of our customers find that the use of our platform is more strategic and collaborative in nature and our platform becomes a fundamental element of their operational business processes . we sell our platform primarily through direct sales and marketing channels utilizing a wide range of online and offline sales and marketing activities . in addition , we have cultivated strong relationships with channel partners to help us extend the reach of our sales and marketing efforts , especially internationally . our channel partners include technology alliances , system integrators , management consulting firms , and value-added resellers . these channel partners also provide solution-based selling , services , and training internationally . key factors affecting our performance we believe that our future performance will depend on many factors , including those described below . while these areas present significant opportunity , they also present risks that we must manage to achieve successful results . for more information about these risks , see the section titled “ risk factors ” included elsewhere in this annual report . if we are unable to address these risks , our business and operating results could be adversely affected . expansion and further penetration of our customer base . we employ a “ land and expand ” business model that focuses on efficiently acquiring new customers and growing our relationships with existing customers over time . our future revenue growth and our ability to maintain profitability is dependent upon our ability to continue landing new customers and expanding the adoption of our platform by additional users within their organizations . we believe significant opportunity exists for us to acquire new customers , as well as expand existing customers ' use of our platform by identifying additional use cases , departments , and divisions for our platform and increasing the number of users within our existing customers ' organizations . we believe this expansion would provide us with substantial operating leverage because the costs to expand sales within existing customers are significantly less than the costs to acquire new customers . international expansion . we have recently increased our focus on international markets . story_separator_special_tag we then divide the acv in the same quarter of the subsequent year attributable to the base customers , or the comparison quarter , including base customers from which we no longer derive acv in the comparison quarter , by the acv attributable to those base customers in the base quarter . our dollar-based net expansion rate in a particular quarter is then obtained by averaging the result from that particular quarter by the corresponding result from each of the prior three quarters . the dollar-based net expansion rate excludes contract value relating to professional services from that cohort . the following table summarizes our dollar-based net expansion rate for each quarter for the periods indicated : replace_table_token_5_th components of our results of operations revenue we derive our revenue primarily from the sale of software subscriptions . revenue from subscriptions reflects the revenue recognized from sales of licenses to our platform to new customers and additional licenses to existing customers . subscription fees are based primarily on the number of users of our platform . prior to the adoption of asc 606 effective january 1 , 2018 , we recognized subscription revenue ratably over the term of the contract , commencing with the date on which the platform was first made available to the customer , and when all other revenue recognition criteria were met . following the adoption of asc 606 , we recognize a portion of subscription revenue upfront on the date which the platform is first made available to the customer , or the beginning of the subscription term , if later , and a portion of revenue ratably over the subscription term . our subscription agreements generally have terms ranging from one to three years and are billed annually in advance . subscriptions are generally non-cancelable during the subscription term and subscription fees are non-refundable . our subscription agreements provide for unspecified future updates , upgrades , enhancements , technical product support , and access to hosted services and support . we also generate revenue from selling subscriptions to third-party syndicated data , which we recognize ratably over the subscription period , as well as revenue from professional services fees earned for consulting engagements related to training customers and channel partners , and consulting services . revenue from professional services relating to training results from contracts to provide educational services to customers and channel partners regarding the use of our technologies and is recognized as the services are provided . revenue from professional services represented 5 % or less of revenue for each of the years ended december 31 , 2018 , 2017 , and 2016 . over the long term , we expect our revenue from professional services to continue to decrease as a percentage of our revenue . in addition , due to our “ land and expand ” business model , a large portion of our revenue in any given period is attributable to our existing customers compared to new customers . for a description of our revenue recognition policies , see the section titled “ critical accounting estimates ” within this management 's discussion and analysis of financial condition and result of operations . cost of revenue cost of revenue consists primarily of employee-related costs , including salaries and bonuses , stock-based compensation expense , and employee benefit costs associated with our customer support and professional services organizations . it also includes expenses related to hosting and operating our cloud infrastructure in a third-party data center , licenses of third-party syndicated data , amortization of intangible assets , and related overhead expenses . the majority of our cost of revenue does not fluctuate directly with increases in revenue . we allocate shared overhead costs such as information technology infrastructure , rent , and occupancy charges in each expense category based on headcount in that category . as such , certain general overhead expenses are reflected in cost of revenue . we intend to continue to invest additional resources in our cloud infrastructure . we expect that the cost of third-party data center hosting fees will increase over time as we continue to expand our cloud-based offering . gross profit and gross margin gross profit is revenue less cost of revenue . gross margin is gross profit expressed as a percentage of revenue . our gross margin has fluctuated and may fluctuate from period to period based on a number of factors , including the timing and mix of products and services we sell , the channel through which we sell our products and services , and , to a lesser degree , the utilization of customer support and professional services resources , as well as third-party hosting and syndicated data fees in any given period . our gross margin may fluctuate from period to period depending on the interplay of the factors discussed above . operating expenses our operating expenses are classified as research and development , sales and marketing , and general and administrative . for each of these categories , the largest component is employee-related costs , which include salaries and bonuses , stock-based compensation expense , and employee benefit costs . we allocate shared overhead costs such as information technology infrastructure , rent , and occupancy charges to each expense category based on headcount in that category . research and development . research and development expense consists primarily of employee-related costs , including salaries and bonuses , stock-based compensation expense , and employee benefit costs , for our research and development employees , depreciation of equipment used in research and development , third-party contractors , and related allocated overhead costs . we expect research and development expenses to continue to increase in absolute dollars for the foreseeable future as we continue to increase the functionality and otherwise enhance our platform and develop new products and services .
| results of operations for the years ended december 31 , 2018 , 2017 , and 2016 revenue replace_table_token_6_th the increase in revenue is attributable primarily to the adoption of asc 606 , increases in sales to existing customers and , to a lesser extent , the increase in our total number of customers . under asc 606 , we now recognize a portion of our revenue at a point in time when the platform is first made available to the customer , or the beginning of the subscription term , if later . we adopted the provisions of this standard under the modified retrospective method of adoption , and , as a result , revenue reported for the years ended december 31 , 2017 and 2016 are not reflective of the new accounting standard . therefore , a portion of the increase in revenue from the year ended december 31 , 2017 to december 31 , 2018 is directly attributable to the adoption of asc 606 effective january 1 , 2018. as shown in note 3 , revenue , of the notes to our consolidated financial statements included elsewhere in this annual report , revenue recognized under asc 605 would have been $ 204.3 million for the year ended december 31 , 2018 , or an increase of $ 72.7 million or 55.2 % as compared to the year ended december 31 , 2017. see note 3 , revenue , for additional information regarding the impact to revenue due to the adoption of asc 606. the increase in revenue for the year ended december 31 , 2017 as compared to the year ended december 31 , 2016 was attributable primarily to additional sales to existing customers and , to a lesser extent , the increase in our total number of customers .
| 7,166 |
the company records uncertain tax positions in accordance with asc 740 on the basis of a two-step process whereby ( 1 ) the company determines whether it is more likely than not that the tax positions will be sustained on the basis of the technical merits of the position and ( 2 ) for those tax positions that meet the more-likely-than-not recognition threshold , the company recognizes the largest amount of tax benefit that is more than 50 percent likely to story_separator_special_tag overview we are a holding company that , through our operating subsidiaries , ( i ) provides wireless and wireline telecommunications services in north america , bermuda and the caribbean , ( ii ) owns and operates commercial distributed generation solar power systems in the united states , and ( iii ) owns and operates terrestrial and submarine fiber optic transport systems in the united states and the caribbean , respectively . we were incorporated in delaware in 1987 and began trading publicly in 1991. since that time , we have engaged in strategic acquisitions and investments to grow our operations . we continue to actively evaluate additional domestic and international acquisition , divesture , and investment opportunities and other strategic transactions in the telecommunications , energy-related and other industries that meet our return-on-investment and other acquisition criteria . for a discussion of our investment strategy and risks involved , see `` risk factorswe are actively evaluating investment , acquisition and other strategic opportunities , which may affect our long-term growth prospects . '' we offer the following principal services : wireless . in the united states , we offer wholesale wireless voice and data roaming services to national , regional , local and selected international wireless carriers in rural markets located principally in the southwest and midwest united states . we also offer wireless voice and data services to retail customers in guyana , bermuda , and in other smaller markets in the caribbean and the united states . wireline . our local telephone and data services include our operations in guyana and the mainland united states . we are the exclusive licensed provider of domestic wireline local and long-distance telephone services in guyana and international voice and data communications into and out of guyana . we also offer facilities-based integrated voice and data communications services and wholesale transport services to enterprise and residential customers in new england , primarily in vermont and new york state . in addition , we offer wholesale long-distance voice services to telecommunications carriers . renewable energy . in the united states , we provide distributed generation solar power to corporate , utility and municipal customers in massachusetts , california and new jersey . the following chart summarizes the operating activities of our principal subsidiaries , the segments in which we report our revenue and the markets we served as of december 31 , 2014 : services segment markets tradenames wireless u.s. wireless united states ( rural markets ) commnet , choice island wireless aruba , bermuda , turks and caicos , u.s. virgin islands mio , cellone , islandcom , choice international integrated telephony guyana cellink wireline international integrated telephony guyana gt & t u.s. wireline united states ( new england and new york state ) sovernet , ion , essextel renewable energy renewable energy united states ( massachusetts , california and new jersey ) ahana renewables we provide management , technical , financial , regulatory , and marketing services to our subsidiaries and typically receive a management fee equal to a percentage of their respective revenue . management fees from our subsidiaries are eliminated in consolidation . 37 discontinued operationssale of u.s. retail wireless business on september 20 , 2013 , the federal communications commission announced its approval of our previously announced proposed sale of our u.s. retail wireless business operated under the alltel name to at & t mobility llc for approximately $ 796.8 million in cash that included a sale price adjustment for the working capital of the business of $ 16.8 million ( the `` alltel sale '' ) . as a result of that approval , we completed the sale of certain u.s. retail wireless assets on that date . the operations of the alltel business , which were previously included in our u.s. wireless segment , have been classified as discontinued operations in all periods presented . unless indicated otherwise , the information in this management 's discussion and analysis relates only to our continuing operations . stimulus grants we were awarded several federal stimulus grants in 2009 and 2010 by the u.s. government under provisions of the american recovery and reinvestment act of 2009 intended to stimulate the deployment of broadband infrastructure and services to rural , unserved and underserved areas . as of december 31 , 2014 , we have spent ( i ) $ 35.8 million in capital expenditures ( of which $ 27.5 million has been funded by the federal stimulus grant ) in connection with our build of ten new segments of fiber-optic , middle-mile broadband infrastructure in upstate new york and parts of pennsylvania and vermont ; ( ii ) $ 7.6 million in capital expenditures ( of which $ 5.3 million has been funded by the federal stimulus grant ) in connection with our last-mile broadband infrastructure buildout in the navajo nation across arizona , new mexico and utah ; and ( iii ) $ 47.9 million in capital expenditures ( of which $ 33.0 million has been or will be funded by the federal stimulus grant ) in connection with our fiber-optic middle mile network buildout to provide broadband and transport services to over 340 community anchor institutions in vermont . the results of our new york and vermont stimulus projects are included in our `` u.s. wireline '' segment and the results of our navajo stimulus project are included in our `` u.s. wireless '' segment . story_separator_special_tag we currently have one buildout arrangement of approximately 100 newly built cell sites , which provides the carrier with a call option to purchase such sites exercisable beginning no earlier than 2018. at this time , we can not predict the level of roaming traffic that will develop on this newly built network or whether the call option will be exercised . our u.s. wireless revenue increased to $ 153.0 million for the year ended december 31 , 2014 from $ 107.9 million for the year ended december 31 , 2013 , an increase of $ 45.1 million or 41.8 % . the revenue growth was a result of an increase in the demand for data services and an increase in our base stations from approximately 600 as of december 31 , 2013 to approximately 760 as of december 31 , 2014. revenue growth was also enhanced as we upgraded our network capacities and data speeds at many of our cell sites , enabling higher data volumes as compared to 2013. while we will continue to expand our coverage with additional and upgraded base stations in 2015 , it will be at a slower rate than our 2014 expansion . as a result , we expect that data volumes will continue to increase during 2015. however , we expect to experience a decline in revenues as we agreed in the first quarter of 2015 to significantly reduce the rates we offer to a major customer in exchange for a longer-term contract . our u.s. wireless revenues may also be impacted by our expanded network capabilities , reach and capacity , continued declines in overall voice traffic on our networks or decisions by our roaming partners to no longer roam on our networks or to continue to expand their networks in areas where we operate . we believe that this new model has much lower risk in that the extended term and reduced pricing create a long-lived shared infrastructure solution that increases the ultimate value of our wholesale business . international wireless revenue . international wireless revenue includes retail and wholesale voice and data wireless revenue from our operations in bermuda and the caribbean , including the u.s. virgin islands . international wireless revenue decreased by $ 2.8 million , or 3.0 % , to $ 88.6 million for the year ended december 31 , 2014 , from $ 91.4 million for the year ended december 31 , 2013. this decrease was mainly due to a decrease in market share within our international integrated telephony segment which resulted in a $ 3.5 million decrease in wireless revenue as well as a decline in roaming revenue in 41 bermuda and the caribbean . this decrease was partially offset by a $ 0.7 million increase in our island wireless segment as a result of increased subscribers . in total , our international wireless subscribers decreased slightly from approximately 325,000 as of december 31 , 2013 to 324,000 as of december 31 , 2014. however , while lower revenue generating subscribers in our international integrated telephony segment decreased by 1.9 % from december 31 , 2013 to december 31 , 2014 , our higher revenue generating subscribers in our island wireless segment increased 6.4 % from december 31 , 2013 to december 31 , 2014 , respectively . while we have experienced subscriber growth in a number of our international markets , competition remains strong , and the high proportion of prepaid subscribers means that subscribers and revenue could shift relatively quickly in future periods . we expect international wireless revenues from our retail operations to continue to grow in future periods as a result of continued subscriber growth . however , we anticipate that wholesale roaming revenues in bermuda and the caribbean will continue to decline in future periods because certain carriers in these markets continue to charge their customers unusually high rates for roaming services , resulting in lowered overall roaming traffic in these markets . wholesale roaming revenues in these markets are also subject to seasonality and can fluctuate between quarters . additionally , international wireless revenue from our wireless voice and data services in bermuda may be negatively impacted , principally through the loss of market share , if the bermuda regulatory authority implements its decision to reallocate to our competitors a portion of existing spectrum held by our bermuda subsidiary reserved for the launch of next generation wireless and data services . we currently can not predict when or if the bermuda regulatory authority will implement such decision . see `` businesscaribbean and bermuda regulation '' . wireline revenue . wireline revenue is generated by our wireline operations in guyana , including international telephone calls into and out of that country , our integrated voice and data operations in new england , our wholesale transport operations in new york state and our wholesale long-distance voice services to telecommunications carriers . this revenue includes basic service fees , measured service revenue , and internet access fees , as well as installation charges for new lines , monthly line rental charges , long-distance or toll charges , and maintenance and equipment sales . wireline revenue increased by $ 0.7 million , or 0.8 % , to $ 85.3 million for the year ended december 31 , 2014 from $ 84.6 million for the year ended december 31 , 2013. this increase was primarily the result of increases from both our fiber network expansion in new york state and in our wholesale transport operations , both of which operate within our u.s. wireline segment which accounted for an increase of $ 3.1 million . this increase , however , was partially offset by a $ 2.4 million decline in wireline revenues in guyana where increases in high speed data services were more than offset by decreases in local landline telephone revenue and international calls into guyana .
| results of operations years ended december 31 , 2012 and 2013 replace_table_token_11_th u.s. wireless revenue . our u.s. wireless revenue increased to $ 107.9 million for the year ended december 31 , 2013 from $ 102.8 million for the year ended december 31 , 2012 , an increase of 47 $ 5.1 million or 5.0 % . the revenue growth was a result of an increase in the demand for data services and an increase in our base stations from 569 as of december 31 , 2012 to 598 as of december 31 , 2013. revenue growth was also enhanced as we upgraded our network capacities and data speeds at many of our cell sites , generating higher data volumes as compared to 2012. international wireless revenue . international wireless revenue increased by $ 9.9 million , or 12.0 % , to $ 91.4 million for the year ended december 31 , 2013 , from $ 81.5 million for the year ended december 31 , 2012. this increase was mainly due to subscriber growth in our island wireless segment as well as increased roaming revenues in bermuda and the caribbean . wireline revenue . wireline revenue decreased by $ 1.0 million , or 1.1 % , to $ 84.5 million for the year ended december 31 , 2013 , from $ 85.5 million during the year ended december 31 , 2012. declines in local landline revenue and international calls into guyana resulted in a decrease of $ 3.5 million in wireline revenue within our international integrated telephony segment . these decreases were partially offset by a $ 2.6 million increase in revenue from our wholesale long-distance voice service business in the united states . equipment and other revenue .
| 7,167 |
at december 31 , 2012 , the company gave consideration to events or changes in circumstances that could indicate that the carrying amounts of the vessels in the company 's international flag fleet may not be recoverable , including factors such as the impact of the chapter 11 cases discussed in note 2 , “ bankruptcy filing and going concern ” above , as well as the fact that average spot rates achieved in the company story_separator_special_tag bankruptcy on november 14 , 2012 , we filed the chapter 11 cases . the matters described herein , to the extent that they relate to future events or expectations , may be significantly affected by the chapter 11 cases . the chapter 11 cases involve various restrictions on our activities , limitations on our financing , the need to obtain bankruptcy court approval for various matters and uncertainty as to relationships with others with whom we may conduct or seek to conduct business . as a result of the risks and uncertainties associated with chapter 11 cases , the value of our securities and how our liabilities will ultimately be treated is highly speculative . see “ item 1 , business reorganization under chapter 11 ” for a further description of the chapter 11 cases , the impact of the chapter 11 cases , the plan of reorganization , the proceedings in bankruptcy court and our status as a going concern . in addition , see “ item 1a , risk factors. ” general the company 's operating fleet as of december 31 , 2013 , consisted of 89 vessels aggregating 8.7 million dwt and 864,800 cbm , including 22 vessels that have been chartered-in under operating leases . in addition to its operating fleet of 89 vessels , one newbuild is scheduled for delivery in the second quarter of 2014 , bringing the total operating and newbuild fleet to 90 vessels . the following is a discussion and analysis of ( i ) industry operations that have an impact on the company 's financial position and results of operations , ( ii ) critical accounting policies used in the preparation of the company 's consolidated financial statements , and ( iii ) the company 's financial condition at december 31 , 2013 and 2012 and its results of operations comparing the years ended december 31 , 2013 and 2012 and the years ended december 31 , 2012 and 2011. this section should be read together with the accompanying consolidated financial statements including the notes thereto . all dollar amounts are in thousands , except daily dollar amounts and per share amounts . operations and oil tanker markets the company 's revenues are highly sensitive to patterns of supply and demand for vessels of the size and design configurations owned and operated by the company and the trades in which those vessels operate . rates for the transportation of crude oil and refined petroleum products from which the company earns a substantial majority of its revenues are determined by market forces such as the supply and demand for oil , the distance that cargoes must be transported , and the number of vessels expected to be available at the time such cargoes need to be transported . the demand for oil shipments is significantly affected by the state of the global economy and level of opec exports . the number of vessels is affected by newbuilding deliveries and by the removal of existing vessels from service , principally because of storage , scrappings or conversions . the company 's revenues are also affected by the mix of charters between spot ( voyage charter ) and long-term ( time or bareboat charter ) . because shipping revenues and voyage expenses are significantly affected by the mix between voyage charters and time charters , the company manages its vessels based on tce revenues . management makes economic decisions based on anticipated tce rates and evaluates financial performance based on tce rates achieved . 52 overseas shipholding group , inc. the international energy agency ( “ iea ” ) estimates global oil consumption for the fourth quarter at 92.1 million barrels per day ( “ b/d ” ) an increase of 1 million b/d or 1.1 % over the same quarter in 2012. the increase was mainly caused by high deliveries in the u.s. , partially offset by a small decline in china . the estimate for global oil consumption for all of 2013 is 91.2 million b/d , an increase of 1.3 % . oecd demand in 2013 reversed the declining trend of the prior years with an increase of 0.1 million b/d on the strong growth in the americas offset by declines in europe and oecd asia and oceania . global oil production in the fourth quarter of 2013 reached 92.1 million b/d , an increase of 0.7 million b/d over the fourth quarter of 2012. opec crude oil production continued to decline and production averaged 29.8 million b/d in the fourth quarter of 2013 down from 30.6 million b/d in the third quarter of 2013 and 30.9 million b/d in the fourth quarter of 2012. opec production for the year declined by 0.9 million b/d to 30.4 million b/d , partially due to production and political issues in libya and iran and to offset production increases in non-opec areas . non opec production growth was largely driven by the u.s. , which increased production by 1.4 million b/d in the fourth quarter of 2013 compared with the fourth quarter of 2012 to reach 10.94 million b/d . annual oil production in the u.s. increased by 1.2 million b/d in 2013 to 10.3 million b/d , making the u.s. the second largest oil producer in the world , after russia . u.s. refinery throughput increased by about 0.4 million b/d in the fourth quarter compared with the comparable quarter in 2012. crude oil imports , however , decreased by about 0.5 million b/d as local production growth more than offset the change in crude runs . story_separator_special_tag since , at the time of discharge , management generally knows the next load port and expected discharge port , the discharge-to-discharge calculation of voyage revenues can be estimated with a greater degree of accuracy . osg does not begin recognizing voyage revenue until a charter has been agreed to by both the company and the customer , even if the vessel has discharged its cargo and is sailing to the anticipated load port on its next voyage , because it is at this time the charter rate is determinable for the specified load and discharge ports and collectability is reasonably assured . revenues from time charters and bareboat charters are accounted for as operating leases and are thus recognized ratably over the rental periods of such charters , as service is performed . the company does not recognize time charter revenues during periods that vessels are off hire . for the company 's vessels operating in commercial pools , revenues and voyage expenses are pooled and allocated to each pool 's participants on a time charter equivalent basis in accordance with an agreed-upon formula . the formulas in the pool agreements for allocating gross shipping revenues net of voyage expenses are based on points allocated to participants ' vessels based on cargo carrying capacity and other technical characteristics , such as speed and fuel consumption . the selection of charterers , negotiation of rates and collection of related receivables and the payment of voyage expenses are the responsibility of the pools . the pools may enter into contracts that earn either voyage charter revenue or time charter revenue . each of the pools follows the same revenue recognition principles , as applied by the company , in determining shipping revenues and voyage expenses , including recognizing revenue only after a charter has been agreed to by both the pool and the customer , even if the vessel has discharged its cargo and is sailing to the anticipated load port on its next voyage . for the pools in which the company participates , management monitors , among other things , the relative proportion of the company 's vessels operating in each of the pools to the total number of vessels in each of the respective pools , and assesses whether or not osg 's participation interest in each of the pools is sufficiently significant so as to determine that osg has effective control of the pool . management determined that as of june 30 , 2013 , it had effective control of one of the pools in which the company participates . such pool is not a legal entity but operates under a contractual agreement . therefore , effective july 1 , 2013 , the company 's consolidated statement of operations reports its allocated tce revenues for such pool on a gross basis as voyage charter revenues and voyage expenses . the impact of this method of presenting earnings for this pool was an increase in both voyage charter revenues and voyage expenses of $ 70,817 for the year ended december 31 , 2013 . 54 overseas shipholding group , inc. vessel lives and salvage values the carrying value of each of the company 's vessels represents its original cost at the time it was delivered or purchased less depreciation calculated using an estimated useful life of 25 years ( except for fso service vessels and new atbs for which estimated useful lives of 30 years are used and lng carriers for which estimated useful lives of 35 years are used ) from the date such vessel was originally delivered from the shipyard or 20 years from the date the company 's atbs were rebuilt . a vessel 's carrying value is reduced to its new cost basis ( i.e . its current fair value ) , if a vessel impairment charge is recorded . if the estimated economic lives assigned to the company 's vessels prove to be too long because of new regulations , the continuation of weak markets , the broad imposition of age restrictions by the company 's customers , or other future events , it could result in higher depreciation expense and impairment losses in future periods related to a reduction in the useful lives of any affected vessels . the company estimates the scrap value of all of its international flag vessels to be $ 300 per lightweight ton . the company 's assumptions used in the determination of estimated salvage value take into account current scrap prices , which currently average $ 400 per lightweight ton , the historic pattern of scrap rates over the five years ended december 31 , 2013 , which ranged from $ 220 to over $ 540 per lightweight ton , estimated changes in future market demand for scrap steel and estimated future demand for vessels . scrap prices in the indian subcontinent ranged from $ 370 per lightweight ton to $ 445 per lightweight ton during 2013. the company believes that scrapping levels are likely to remain steady during 2014. owners , faced with the challenges of a market where the combination of age restrictions imposed by oil majors and scheduled newbuild deliveries are expected to further exacerbate the current oversupply of international flag tonnage and low charter rate expectations , could accelerate the disposal of older vessels , especially those with upcoming special surveys . management believes that $ 300 per lightweight ton is a reasonable estimate of future scrap prices , taking into consideration the cyclicality of the nature of future demand for scrap steel . although management believes that the assumptions used to determine the scrap rate are reasonable and appropriate , such assumptions are highly subjective , in part , because of the cyclicality of the nature of future demand for scrap steel . the u.s. has not adopted the hong kong international convention for the safe and environmentally sound recycling of ships ( the “ convention ” ) . while the convention is not in effect in the u.s. , the u.s. environmental protection agency and the maritime administration of the u.s.
| results from vessel operations during 2013 , results from vessel operations improved by $ 12,035 to a loss of $ 367,198 from a loss of $ 379,233 in 2012. this improvement reflects the impact of significant decreases in charter hire and vessel expenses and depreciation , partially offset by period-over-period reductions in tce and larger impairment charges recorded in 2013. decreases in charter hire and vessel expenses in 2013 compared with 2012 were principally the result of the company 's rejection of leases and redelivery of 17 time and bareboat chartered-in international flag vessels between late-december 2012 and mid-april 2013. such rejections were executed as part of the company 's chapter 11 restructuring process . in addition , the company entered into new lease agreements at lower rates on eight other chartered-in vessels , including one redelivered by the company in january 2013 that delivered back to the company in may 2013 after completion of its scheduled drydocking , which was for the account of the vessel 's owner . the lower depreciation expense in 2013 was primarily the result of reductions in vessel bases that resulted from impairment charges aggregating $ 278,345 recorded by the company on fifteen international flag vessels in the fourth quarter of 2012. partially offsetting these favorable variances were decreases in tce revenues compared with the 2012 period . these decreases were due to ( i ) a significant decrease in revenue days reflecting the vessel redeliveries discussed above , ( ii ) $ 40,400 being recognized in shipping revenues during 2012 in relation to the termination , settlement and replacement agreement with sunoco , which is discussed in the u.s. flag section below and ( iii ) lower rates in 2013 in the suezmax fleet .
| 7,168 |
all of the preferred stock must be redeemed by april 1 , 2011. note 10. related party transactions at the time of the merger , and in accordance with the sw acquisition limited partnership agreement , tnp and laurel hill entered into a management services agreement under which tnp engaged laurel hill as its agent to provide certain management and financial advisory services to tnp . for the each of the years ended december 31 , 2003 , 2002 and 2001 , tnp paid laurel hill $ 1.2 million under the agreement . in 2002 , tnmp paid laurel hill a transaction fee of $ 1.3 million for acting as tnmp 's financial advisor in connection with the sale of tnp one . laurel hill received the fee pursuant to provisions of the sw acquisition limited partnership agreement . tnp paid fees of $ 1 million in 2003 and $ 1 million in 2004 , for advisory services in 2002 and 2003 by the original limited partners of sw acquisition , pursuant to provisions of the sw acquisition limited partnership agreement . -52- index to financial statements note 11. segment and related information tnp has story_separator_special_tag significant events and known trends affecting tnp competitive conditions first choice energy supply a discussion of the competitive position of tnp with regard to energy supply is included in item 7a , quantitative and qualitative disclosures about market risk. first choice customer operations as discussed in note 2 , the texas electricity market has been open to retail competition since january 1 , 2002. first choice has addressed , and continues to address , a number of issues related to the development of retail competition . price-to-beat . first choice must offer customers that reside in tnmp 's service area , and whose loads are less than 1 megawatt a regulated price , commonly called the price-to-beat . the price-to-beat will be offered through december 31 , 2006 , and first choice can not offer those customers any other rate before the loss of 40 percent of the energy consumed by its price-to-beat customers , or january 1 , 2005 , whichever occurs first . in january 2004 , the puct approved a stipulation among tnmp and other parties , which found that first choice had lost more than 40 percent of the energy consumed by its small commercial price-to-beat customers . as a result of puct 's action , first choice may offer small commercial customers who reside in tnmp 's service area rates other than the price-to-beat . first choice remains below the 40 percent loss threshold with respect to residential price-to-beat customers . accordingly , first choice continues to be prohibited from offering rates other than the price-to-beat to residential customers in tnmp 's service area . customer retention and acquisition . at december 31 , 2003 , first choice served approximately 176,000 customers at price-to-beat rates and approximately 72,000 customers at competitive rates . at december 31 , 2002 , first choice served approximately 186,000 and 38,000 price-to-beat and competitive customers , respectively . in response to the factors discussed in bad debt and delinquency , below , first choice is not actively pursuing mass market customers . mass market customers who choose first choice as their retail electric provider are required to make a deposit before first choice begins service . bad debt and delinquency . first choice has the right to disconnect customers that reside in tnmp 's transmission and distribution service territory for nonpayment . first choice is prohibited from disconnecting customers who reside outside tnmp 's transmission and distribution service territory for nonpayment , but may transfer such a customer to the affiliated retail electric provider of the transmission and distribution service provider that serves the transferred customer . the structure described above limits first choice 's collection activities , and affects both bad debt expense and the level of delinquent accounts receivable . bad debt expense as a percentage of operating revenues for first choice was approximately 1.9 percent for the year ended december 31 , 2003 , compared with 1.3 percent during 2002. on average , delinquent accounts receivable were approximately 6.0 percent of monthly operating revenue for the year ended december 31 , 2003 , compared with the 2002 delinquency rate of 9.7 percent . first choice expects that its bad debt and delinquency rate will decrease during 2004 due to a number of internal and external factors that are discussed in the remainder of this section . switching and billing issues . since retail competition began , transactions and data have not flowed between the market participants as accurately or in the volumes that ercot 's system was designed to accommodate . the impaired data flow limits the ability of retail electric providers to switch customers from one retailer to another , and causes billing inaccuracies at first choice . retail electric providers , transmission and distribution service providers and ercot are all working together to address these problems in order to improve the infrastructure and processes that support the competitive electric market . the efforts of the various market participants have resulted in improvements in the switching process , correcting errors that occurred shortly after the market opened and improving data flows between the market participants . first choice expects these improvements to continue . under retail competition , first choice must bill its customers using data not only from tnmp , but also from the other transmission and distribution utilities that serve first choice 's customers . the wider range of sources providing billing data to first choice has also contributed to billing inaccuracies since the beginning of retail competition . the frequency of these issues has decreased as first choice and other market participants have gained experience under retail competition . however , first choice expects it will experience some level of billing issues in the competitive market related to multiple sources of billing data . story_separator_special_tag changes in the fair values of the contracts would be recognized in earnings . recoverable stranded costs sale of tnp one . tnmp sold tnp one in october 2002. based on tnmp 's true-up filing , as discussed in note 2 , the fair value of tnp one , less cost to sell , was approximately $ 117.6 million . the book value included in the true-up filing was approximately $ 425.1 million . tnmp believes that the difference between the fair value of tnp one , net of selling costs , and its book value is recoverable from tnmp 's texas transmission and distribution customers under the provisions of senate bill 7. under the provisions of senate bill 7 , the amount and manner of stranded cost recovery is subject to review and approval by the puct as part of the true-up proceeding . in addition to the sale of tnp one , other issues will affect the amount of stranded costs that tnmp will recover from its customers . those other issues include , among others , the final fuel reconciliation , as discussed in note 2. action taken by the puct in the true-up proceeding could affect the ultimate recovery of the amounts requested as recoverable stranded costs . puct action that limits the recovery of requested stranded costs could have a material impact on tnp 's and tnmp 's financial position and cash flows . results of operations 2003 compared with 2002 story_separator_special_tag size= '' 1 '' / > tnmp consolidated earnings decrease $ ( 10.8 ) tnmp gross profit the following table summarizes the components of tnmp 's gross profit ( in thousands ) . replace_table_token_7_th transmission expense is included in the other operating and maintenance line of tnmp 's consolidated income statement . the following table summarizes the components of the change in tnmp 's gross profit for the year ended december 31 , 2003 , compared with the same period in 2002 ( in thousands ) . replace_table_token_8_th gross profit for the year ended december 31 , 2003 , decreased $ 23.7 million compared with the corresponding 2002 period . the decrease is attributable to the loss of revenue from the sale of tnp one output , which tnmp sold in october 2002 , and a disallowance of fuel and energy-related purchased power costs that occurred in the final fuel reconciliation in texas . the final fuel reconciliation is discussed in note 2. in addition , 2002 gross profit included revenues from the billing of bundled rates in january 2002 that were not present in 2003 . -19- index to financial statements although retail competition began on january 1 , 2002 , tnmp 's former customers were transferred to first choice following their january 2002 meter reading . as a result , tnmp 's january 2002 revenues include charges for service rendered through january 2002 meter reading dates at prices that reflect its integrated operations prior to competition . beginning in february 2002 , tnmp 's revenues reflected rates designed to recover its cost of providing transmission and distribution service under the provisions of senate bill 7. those rates are lower than the rates tnmp charged prior to the beginning of competition , and resulted in decreased gross profit in the twelve months ended december 31 , 2003. the table above quantifies the impact of changing tnmp 's rates to recover its cost of providing only transmission and distribution service . in the first quarter of 2002 , tnmp sold the output of tnp one to first choice at cost , which was 2.5 cents per kilowatt-hour ( kwh ) . first choice used the power to serve its customers ' load . beginning in april 2002 , tnmp sold the output of tnp one to third parties at prices that averaged 2.8 cents per kwh , until the sale of tnp one in october 2002. tnmp realized pre-tax income of $ 4.3 million related to third party sales for the year ended december 31 , 2002. electric service revenues increased because tnmp provided a greater number of fee-based services to retail electric providers in the year ended december 31 , 2003 , compared with the same period in 2002. the fee-based services included account initiation charges , service call charges , disconnect/reconnect charges and various metering charges , among others . some of the charges for fee-based services that tnmp provided to retail electric providers were included in the bundled rates tnmp charged its customers prior to competition . the $ 3.2 million gross profit increase described as price/sales mix and other for the year ended december 31 , 2003 , compared to the corresponding 2002 period , is primarily attributable to increased revenues from commercial and industrial customers in texas . a significant portion of those customers ' revenues are calculated based upon those customers ' highest peak demand for electricity in the twelve month period ending in the month that the customers are billed . customers ' bills during 2003 were based upon a full twelve months of demand data , but customers ' bills during 2002 were based upon less than twelve months of demand data due to the beginning of retail competition in january 2002. as a result , some 2002 bills were lower than they normally would be , because the demand data for the summer months of 2001 , during which these customers typically have their highest demand , could not be included in the calculation of the customers ' bills .
| overall results for the year ended december 31 , 2003 , tnp had a loss applicable to common stock of $ 40.3 million compared with income applicable to common stock of $ 13.0 million for the year ended december 31 , 2002. the changes in tnp 's earnings for 2003 compared with 2002 are attributable to the factors listed below ( in millions ) : earnings increase ( decrease ) 2003 v. 2002 change in first choice net income ( loss ) $ ( 39.3 ) change in tnmp net income ( 10.8 ) change in tnp preferred stock dividends ( 2.8 ) all other and intercompany eliminations ( 0.4 ) tnp consolidated earnings decrease $ ( 53.3 ) -16- index to financial statements first choice results for the year ended december 31 , 2003 , first choice had a net loss of $ 13.3 million , compared with net income of $ 26.0 million for the year ended december 31 , 2002. the changes in first choice 's earnings for 2003 compared with 2002 are attributable to the factors listed below ( in millions ) : earnings increase ( decrease ) 2003 v. 2002 changes in gross profit $ ( 49.5 ) other operating and maintenance ( 14.4 ) all other ( including income tax effects on the items above ) 24.6 change in first choice net income ( loss ) $ ( 39.3 ) first choice gross profit the following table summarizes the components of first choice gross profit ( in thousands ) . replace_table_token_6_th transmission and distribution costs are included in the other operating and maintenance line of tnp 's consolidated income statement . the clawback accrual is shown on the income statement as accrual for payment to tnmp. the following table summarizes the components of the change in first choice 's gross profit for , 2003 , compared with 2002 ( in thousands ) .
| 7,169 |
the following discussion of our financial condition and results of operations should be read in conjunction with our audited financial statements and the related notes thereto included elsewhere in this annual report on form 10-k. in addition to historical information , the following discussion contains forward-looking statements that involve risks , uncertainties and assumptions . our actual results could differ materially from those anticipated by the forward-looking statements due to important factors and risks including , but not limited to , those set forth in the “ risk factors ” in part i , item 1a of this report . company overview we are a clinical-stage biopharmaceutical company developing novel medicines for autoimmune and inflammatory diseases with unmet medical needs , including drug candidates for celiac disease , nonalcoholic steatohepatitis ( nash ) , alcoholic steatohepatitis ( ash ) , crohn 's disease and ulcerative colitis ( uc ) . our lead drug candidate , larazotide acetate or larazotide ( inn-202 ) for the treatment of celiac disease ( ced ) is entering phase 3 clinical trials , targeted for the first half of 2019 , subject to the receipt of financing , and has the potential to be the first-to-market therapeutic for celiac disease , an unmet medical need , which affects an estimated 1 % of the north american population or approximately 3 million individuals . celiac patients have no treatment alternative other than a strict lifelong adherence to a gluten-free diet , which is difficult to maintain and can be deficient in key nutrients . in celiac disease , larazotide is the only drug which has successfully met its primary endpoint with statistical significance in a phase 2b efficacy trial , which was comprised of 342 patients . innovate completed the end of phase 2 meeting with the fda for the treatment of celiac disease with larazotide and received fast track designation . larazotide has been shown to be safe and effective after being tested in several clinical trials involving more than 600 patients , most recently in the phase 2b trial for celiac disease . we are also developing larazotide for the treatment of nash ( inn-217 ) , a smaller subset of liver disease stemming from the most common liver disease in the world , fatty liver disease . nash is an unmet medical need affecting approximately 5 % to 6 % of the u.s. adult population . we are developing a proprietary formulation of larazotide for nash for efficient delivery to the intestine . inn-217 has the potential to reduce the transport of bacterial toxins and immunogenic antigens , including lipopolysaccharide ( lps ) . there are currently a number of drugs in development for nash ; however , to our knowledge , no others have larazotide 's mechanism of action . inn-108 is a novel oral small molecule therapeutic for uc , which plagues up to 1.4 million individuals in the u.s. alone . with the combination of an immunomodulator , inn-108 could lead to a more efficacious drug than the current 5-asa/mesalamine formations being used to treat uc today . we successfully completed a phase 1 trial in the u.s. with 24 subjects . we expect to enter phase 2 trials for mild to moderate uc and an adult orphan indication , subject to the receipt of financing . building on previous research that showed a type of permeability known as “ leaky gut ” that may cause microbial translocation of toxic products into circulation of the bloodstream , we are expanding our work in liver disease . initial in-vitro data suggests the potential use of larazotide in alcoholic liver diseases . we recently entered into a research collaboration with massachusetts general hospital to explore larazotide in animal models for the treatment of ash . merger on january 29 , 2018 , monster digital , inc. ( “ monster ” ) and privately held innovate biopharmaceuticals inc. ( “ private innovate ” ) completed a reverse recapitalization in accordance with the terms of the agreement and plan of merger and reorganization , dated july 3 , 2017 , as amended ( the “ merger agreement ” ) , by and among monster , monster merger sub , inc. ( “ merger sub ” ) and private innovate . in connection with the transaction , private innovate changed its name to ib pharmaceuticals inc. ( “ ib pharmaceuticals ” ) . pursuant to the merger agreement , merger sub merged with and into ib pharmaceuticals with ib pharmaceuticals surviving as the wholly owned subsidiary of monster ( the “ merger ” ) . immediately following the merger , monster changed its name to innovate biopharmaceuticals , inc. ( “ innovate ” ) . on march 29 , 2018 , ib pharmaceuticals was merged into innovate and ceased to exist . the merger is further described in “ note 1—summary of significant accounting policies ” and “ note 3—merger and financing ” to the accompanying financial statements included in this annual report on form 10-k. financial overview 68 since our inception , we have focused our efforts and resources on identifying and developing our research and development programs . we have not had any products approved for commercial sale and have incurred operating losses in each year since inception . substantially all of our operating losses resulted from expenses incurred in connection with our research and development programs and from general and administrative costs associated with our operations . as of december 31 , 2018 , we had an accumulated deficit of $ 43.5 million . we incurred net losses of $ 24.2 million and $ 11.6 million for the years ended december 31 , 2018 and 2017 , respectively . we expect to continue to incur significant expenses and increase our operating losses for the foreseeable future , which may fluctuate significantly between periods . story_separator_special_tag the short-term warrants are exercisable as of the closing date , have an expiration date of march 18 , 2020 and have an exercise price of $ 4.00 , provided that the exercise price may be higher under certain circumstances to conform to nasdaq capital market rules . if at any time after march 18 , 2019 , the weighted-average price of our common stock exceeds $ 5.25 for ten consecutive trading days , we may call the outstanding short-term warrants and require that they be exercised in cash , except to the extent that such exercise would surpass the beneficial ownership limitations , as specified in the spa . if we sell all of the shares offered in the prospectus supplement filed with the sec on march 18 , 2019 ( the “ march 2019 offering ” ) , the gross proceeds received prior to deduction of offering expenses would be $ 10.0 million . however , there can be no assurance that we will sell all or any of the securities being offered . amendment to the 2012 omnibus incentive plan on december 4 , 2018 , our stockholders approved an amendment to the 2012 omnibus incentive plan ( the “ amended omnibus plan ” ) to provide for an additional 3,000,000 shares of common stock to be issued pursuant to the amended omnibus plan and an evergreen provision to automatically increase the number of shares issuable pursuant to the plan on an annual basis for the period commencing january 1 , 2019 and ending on january 1 , 2022. the plan will automatically terminate on april 30 , 2022 . 70 senior convertible note on october 4 , 2018 , we entered into an amendment and exchange agreement and senior convertible note ( “ new note ” ) . the new note is convertible into shares of our common stock at certain conversion prices depending on certain factors , which include the volume weighted average price ( “ vwap ” ) of our common stock for a period of time prior to conversion . in addition , the new note is redeemable by the noteholder or by us under certain qualifying conditions . the principal balance of the new note is $ 5.2 million with a stated interest rate of 8.0 % per annum and a maturity date of october 4 , 2020. in january 2019 , the noteholder issued a redemption notice and the company repaid the noteholder $ 1.1 million of principal and accrued interest . the principal balance of the new note after this redemption was $ 4.1 million . during january 2019 , we entered into an option to purchase senior convertible note ( “ option agreement ” ) with the noteholder . the option agreement provides us with the ability to repay the new note prior to march 31 , 2019 and prevents the noteholder from exercising certain redemption options from the new note until after march 31 , 2019. during march 2019 , the company exercised its repurchase rights from the option agreement and paid the noteholder of the new note approximately $ 5,260,000 , which was the full purchase amount , including interest , of the new note pursuant to the terms of the option agreement . there are no further amounts outstanding under the new note and the new note has been canceled . see “ note 6—debt ” and “ note 12—subsequent events ” to the accompanying financial statements included in this annual report on form 10-k. unsecured convertible promissory note on march 8 , 2019 , we entered into a securities purchase agreement and an unsecured convertible promissory note , or the convertible note , in the principal amount of $ 5.5 million . the holder of the convertible note , or the convertible noteholder , may elect to convert all or a portion of the convertible note at any time and from time to time into our common stock at a conversion price of $ 3.25 per share , subject to adjustment for stock splits , dividends , combinations and similar events . we may prepay all or a portion of the convertible note at any time for an amount equal to 115 % of then outstanding obligations or the portion of the obligations we are prepaying . the purchase price of the convertible note was $ 5.0 million and the convertible note carries an original issuance discount of $ 0.5 million , which is included in the principal amount of the convertible note . see “ liquidity and capital resources ” below and “ note 12—subsequent events ” to the accompanying financial statements included in this annual report on form 10-k for further details regarding the terms of the convertible note . research and development in preparation for the phase 3 clinical trials for inn-202 , we are performing key study start-up activities , including study site identification and study of adult patients with celiac disease who have persistent abdominal symptoms while on a gluten free diet . we anticipate that our first phase 3 trial will have approximately 900 subjects , with three treatment groups ( two different doses of larazotide and a placebo group ) . recent research and development milestones include : completion of an initial feasibility review of over 200 potential investigative sites and pre-selected 122 potential investigational sites to participate in the upcoming phase 3 clinical trials for celiac disease ; execution of agreement with clinical research organization to facilitate completion of start-up activities for our phase 3 clinical trials for celiac disease ; execution of agreement with amarex clinical research to provide data management and biostatistics in our phase 3 clinical trials for celiac disease ; continuation of pre-clinical work in nash by studying larazotide in both ex-vivo and animal models ; continued research collaboration with dr. anthony blikslager of north carolina state university to explore life-cycle extension of our lead molecule larazotide acetate ; initiation of research collaboration with dr. o. colin stine of university of maryland at baltimore to study larazotide 's corrective effect on the dysfunctional intestinal barrier and the dysfunctional microbiome in
| results of operations comparison of the years ended december 31 , 2018 and 2017 the following table sets forth the key components of our results of operations for the years ended december 31 , 2018 and 2017 : replace_table_token_3_th research and development expense research and development expense for the year ended december 31 , 2018 increased approximately $ 3.6 million , or 89 % , as compared to the year ended december 31 , 2017 . the increase was driven primarily by : ( i ) an increase of approximately $ 2.3 million associated with preparation for our phase 3 clinical trials in inn-202 ; ( ii ) an increase of approximately $ 0.8 million in compensation costs related to an increase in research and development personnel , ( iii ) an increase of approximately $ 0.4 million in non-cash share-based compensation expense primarily due to an increase in stock option awards granted to our research and development personnel during the year ended december 31 , 2018 ; and ( iv ) an increase of approximately $ 0.1 million related to manufacturing , consulting and further development of our product candidate pipeline . general and administrative expense general and administrative expense for the year ended december 31 , 2018 increased approximately $ 3.5 million , or 49 % , as compared to the year ended december 31 , 2017 .
| 7,170 |
actual results may differ materially from those anticipated in these forward-looking statements as a result of many factors , including those set forth under item 1a “ risk factors ” and “ forward looking statements ” immediately preceding part i of this annual report on form 10-k. critical accounting policies the company follows accounting and reporting policies and procedures that conform , in all material respects , to gaap and to practices generally applicable to the financial services industry , the most significant of which are described in note 1 to the consolidated financial statements included in item 8 of this annual report on form 10-k. the preparation of consolidated financial statements in conformity with gaap requires management to make judgments and accounting estimates that affect the amounts reported for assets , liabilities , revenues and expenses on the consolidated financial statements and accompanying notes , and amounts disclosed as contingent assets and liabilities . while the company bases estimates on historical experience , current information and other factors deemed to be relevant , actual results could differ from those estimates . accounting estimates are necessary in the application of certain accounting policies and procedures that are particularly susceptible to significant change . critical accounting policies are defined as those that require the most complex or subjective judgment and are reflective of significant uncertainties , and could potentially result in materially different results under different assumptions and conditions the following is a summary of the more subjective and complex accounting estimates and principles affecting the financial condition and results reported in financial statements . in each area , the company has identified the variables that management believes to be the most important in the estimation process . the company uses the best information available to make the estimations necessary to value the related assets and liabilities in each of these areas . allowance for loan losses allowance for loan losses is a valuation allowance for probable incurred credit losses . loan losses are charged against the allowance for loan losses when management believes the uncollectability of a loan balance is confirmed . subsequent recoveries , if any , are credited to the allowance for loan losses . the company estimates the allowance for loan losses required using past loan loss experience , the nature and volume of the portfolio , information about specific borrower situations and estimated collateral values , economic conditions , and other factors . allocations of the allowance for loan losses may be made for specific loans , but the entire allowance for loan losses is available for any loan that , in management 's judgment , should be charged-off . amounts are charged-off when available information confirms that specific loans or portions thereof , are uncollectible . this methodology for determining charge-offs is consistently applied to each segment . the company determines a separate allowance for loan losses for each portfolio segment . the allowance for loan losses consists of specific and general reserves . specific reserves relate to loans that are individually classified as impaired . a loan is impaired when , based on current information and events , it is probable that the company will be unable to collect all amounts due according to the contractual terms of the loan agreement . factors considered in determining impairment include payment status , collateral value and the probability of collecting all amounts when due . measurement of impairment is based on the expected future cash flows of an impaired loan , which are to be discounted at the loan 's effective interest rate , or measured by reference to an observable market value , if one exists , or the fair value of the collateral for a collateral-dependent loan . the company selects the measurement method on a loan-by-loan basis except that collateral-dependent loans for which foreclosure is probable are measured at the fair value of the collateral . the company recognizes interest income on impaired loans based on its existing methods of recognizing interest income on nonaccrual loans . loans , for which the terms have been modified resulting in a concession , and for which the borrower is experiencing financial difficulties , are considered tdrs and classified as impaired with measurement of impairment as described above . if a loan is impaired , a portion of the allowance is allocated so that the loan is reported , net , at the present value of estimated future cash flows using the loan 's existing rate or at the fair value of collateral if repayment is expected solely from the collateral . general reserves cover non-impaired loans and are based on the company 's historical loss rates for each portfolio segment , adjusted for the effects of qualitative factors that are likely to cause estimated credit losses as of the evaluation date to differ from the portfolio segment 's historical loss experience . 45 qualitative factors include consideration of the following : changes in lending policies and procedures ; changes in economic conditions , changes in the nature and volume of the portfolio ; changes in the experience , ability and depth of lending management and other relevant staff ; changes in the volume and severity of past due , nonaccrual and other adversely graded loans ; changes in the loan review system ; changes in the value of the underlying collateral for collateral-dependent loans ; concentrations of credit and the effect of other external factors such as competition and legal and regulatory requirements . executive summary net income was $ 16.2 million for the year ended december 31 , 2020 , a decrease of $ 7.9 million , or 32.9 % , from $ 24.1 million for the year ended december 31 , 2019. the decrease was primarily due to an increase in provision for loan losses and a decrease in net interest income . story_separator_special_tag provision for loan losses provision for loan losses was $ 13.2 million , $ 4.2 million and $ 1.2 million for the years ended december 31 , 2020 , 2019 and 2018. the increase in provision for loan losses was primarily due to the increase in risks associated with economic and business conditions and uncertainty , as well as the increases in special mention and classified loans , as a result of the covid-19 pandemic for the year ended december 31 , 2020. see further discussion in “ loans held-for-investment and allowance for loan losses. ” 51 noninterest income year ended december 31 , 2020 compared to year ended december 31 , 2019 the following table presents the components of noninterest income for the periods indicated : replace_table_token_9_th service charges and fees on deposits decreased primarily due to a decrease in fee-based transactions . loan servicing income represents fees received on loans that the company services , net of amortization of servicing assets . the increase was primarily due to a decrease in amortization of servicing assets from decreased prepayments of loans being serviced . gain on sale of loans increased primarily due to increases in sales volume and premium . the increase in premium on sba loans was primarily due to the market condition and the increase in sale volume of residential property loans was primarily due to increased refinancing activities during the year ended december 31 , 2020. the company sold sba loans of $ 89.8 million with a gain of $ 6.0 million and residential property loans of $ 51.9 million with a gain of $ 489 thousand during the year ended december 31 , 2020. during the year ended december 31 , 2019 , the company sold sba loans of $ 99.6 million with a gain of $ 5.9 million and residential property loans of $ 10.1 million with a gain of $ 81 thousand . the company sold securities available-for-sale of $ 32.8 million during the year ended december 31 , 2019 , while the company did not sell any securities for the year ended december 31 , 2020. other income included wire and remittance fees of $ 529 thousand and $ 515 thousand , respectively , and debit card interchange fees of $ 252 thousand and $ 272 thousand , respectively , for the years ended december 31 , 2020 and 2019. year ended december 31 , 2019 compared to year ended december 31 , 2018 the following table presents the components of noninterest income for the periods indicated : replace_table_token_10_th service charges and fees on deposits increased primarily due to an increase in the level of transactional based deposit accounts . loan servicing income increased primarily due to a decreased amortization of servicing assets from decreased prepayments of loans being serviced , partially offset by a decrease in servicing income . servicing income decreased due to a decrease in the average balance of servicing portfolio . gain on sale of loans increased primarily due to an increase in sales volume . the company sold sba loans of $ 99.6 million with a gain of $ 5.9 million and residential property loans of $ 10.1 million with a gain of $ 81 thousand during the year ended december 31 , 2019. during the year ended december 31 , 2018 , the company sold sba loans of $ 91.7 million with a gain of $ 5.3 million , residential property loans of $ 11.6 million with a gain of $ 220 thousand , and other loans of $ 1.9 million with a gain of $ 62 thousand . the company sold securities available-for-sale of $ 32.8 million during the year ended december 31 , 2019 , while the company did not sell any securities for the year ended december 31 , 2018. other income included wire and remittance fees of $ 515 thousand and $ 472 thousand , respectively , and debit card interchange fees of $ 272 thousand and $ 221 thousand , respectively , for the years ended december 31 , 2019 and 2018 . 52 noninterest expense year ended december 31 , 2020 compared to year ended december 31 , 2019 the following table presents the components of noninterest expense for the periods indicated : replace_table_token_11_th salaries and employee benefits increased primarily due to increases in wages , other employee benefits and vacation accrual , partially offset by a direct loan origination cost of $ 1.1 million related to sba ppp loan production and a decrease in bonus accrual . the number of full-time equivalent employees averaged 251.8 for the year ended december 31 , 2020 compared to 250.2 for the year ended december 31 , 2019. occupancy and equipment expense increased primarily due to increases in rent and equipment maintenance expenses . professional fees decreased primarily due to a decrease in expense related to enhancement of the bank 's controls and processes on bsa/aml compliance programs . the consent order with the fdic and cdfpi related to the bsa/aml compliance was terminated on september 30 , 2020. marketing and business promotion expense decreased primarily due to fewer marketing activities related to the covid-19 pandemic for the year ended december 31 , 2020. data processing expense increased primarily due to an increase in processing costs from a greater number of accounts and transactions . director fees and expenses decreased primarily due to the company 's board of directors decision to temporarily decrease director fees from the second quarter of 2020 , partially offset by a severance payment of $ 45 thousand for a former director during the three months end march 31 , 2020. regulatory assessment expense increased primarily due to a small bank credit of $ 345 thousand received from the fdic during the year ended december 31 , 2019 , as well as an increase in balance sheet . other expense decreased primarily due to decreases in office expenses , provision for unfunded loan commitments , other loan related legal expenses , and armed guard expenses .
| financial highlights net income was $ 16.2 million for the year ended december 31 , 2020 , a decrease of $ 7.9 million , or 32.9 % , from $ 24.1 million for the year ended december 31 , 2019 ; ◦ the company recorded a provision for loan losses of $ 13.2 million primarily due to an increase in the economic uncertainty , as well as increases in special mention and substandard loans , as a result of the covid-19 pandemic for the year ended december 31 , 2020 . ◦ diluted earnings per common share was $ 1.04 , $ 1.49 and $ 1.65 for the years ended december 31 , 2020 , 2019 and 2018 , respectively . ◦ net interest margin was 3.53 % , 4.11 % and 4.23 % for the years ended december 31 , 2020 , 2019 and 2018 , respectively . total assets were $ 1.92 billion at december 31 , 2020 , an increase of $ 176.5 million , or 10.1 % , from $ 1.75 billion at december 31 , 2019 ; loans held-for-investment , net of deferred costs ( fees ) , were $ 1.58 billion at december 31 , 2020 , an increase of $ 132.7 million , or 9.1 % , from $ 1.45 billion at december 31 , 2019 ; ◦ sba ppp loans totaled $ 135.7 million at december 31 , 2020 . ◦ loans with modifications related to covid-19 totaled $ 36.1 million at december 31 , 2020 compared with $ 484.0 million at june 30 , 2020 .
| 7,171 |
and accompanying notes included elsewhere herein . overview we began operations in 1997 , and we believe that we are one of the largest operators of both specialty hospitals and outpatient rehabilitation clinics in the united states based on number of facilities . on june 1 , 2015 , a joint venture created by select and wcas consummated the acquisition of concentra , which provides occupational medicine , consumer health , physical therapy , and veteran 's healthcare services throughout the united states . as of december 31 , 2015 , we operated 127 specialty hospitals in 27 states , and 1,038 outpatient rehabilitation clinics in 31 states and the district of columbia . through our contract therapy business we provide medical rehabilitation services on a contracted basis to nursing homes , hospitals , assisted living and senior care centers , schools , and work sites . as of december 31 , 2015 , concentra operated 300 medical centers in 38 states . concentra also provides contract services at employer worksites and department of veterans affairs cbocs . as of december 31 , 2015 , we had operations in 46 states and the district of columbia . we manage our company through three business segments ; specialty hospitals , outpatient rehabilitation and , as of june 1 , 2015 , our concentra segment . we had net operating revenues of $ 3,742.7 million for the year ended december 31 , 2015. of this total , we earned approximately 63 % of our net operating revenues from our specialty hospitals segment , approximately 22 % from our outpatient rehabilitation segment , and approximately 15 % from our concentra segment . our specialty hospitals segment consists of hospitals designed to serve the needs of long term acute care patients and hospitals designed to serve patients that require intensive medical rehabilitation care . patients are typically admitted to our specialty hospitals from general acute care hospitals . these patients have specialized needs , and serious and often complex medical conditions such as respiratory failure , neuromuscular disorders , traumatic brain and spinal cord injuries , strokes , non-healing wounds , cardiac disorders , renal disorders , and cancer . our outpatient rehabilitation segment consists of clinics and contract therapy that provide physical , occupational , and speech rehabilitation services . our outpatient rehabilitation patients are typically diagnosed with musculoskeletal impairments that restrict their ability to perform normal activities of daily living . our concentra segment consists of medical centers and contract services provided at employer worksites and department of veterans affairs cbocs that deliver occupational medicine , consumer health , physical therapy , and veteran 's healthcare services . the financial and statistical information related to the operation of the concentra segment , and used for calculations in our discussion and analysis of our financial condition and results of operations for the period ended december 31 , 2015 , discussed herein , began as of june 1 , 2015 , which is the date the concentra acquisition was consummated . significant 2015 events concentra transaction on june 1 , 2015 , mj acquisition corporation , a joint venture that select created with wcas , consummated the acquisition of concentra . pursuant to the terms of the stock purchase agreement , mj acquisition corporation acquired 100 % of the issued and outstanding equity securities of concentra from humana , inc. ( `` humana '' ) for $ 1,047.2 million , net of $ 3.8 million of cash acquired . select used borrowings under the select revolving facility to fund its portion of the equity contribution to group holdings in an aggregate amount equal to $ 217.9 million . group holdings contributed those funds along with $ 217.1 million of equity contributions of its other members to mj acquisition corporation , which used the funds , together with the borrowings under the concentra credit facilities to pay the purchase price to humana . 60 group holdings is the parent company of concentra , the surviving entity of the merger between mj acquisition corporation and concentra . select owns 50.1 % of the voting equity interests of group holdings . concentra 's financial results are consolidated with select 's as of june 1 , 2015. our acquisition costs related to the acquisition of concentra were $ 4.7 million and are included in general and administrative expenses for the year ended december 31 , 2015. concentra incurred $ 23.3 million of debt issuance costs related to the concentra credit facilities through december 31 , 2015. the original issue discounts and debt issuance costs associated with the concentra term loans are being amortized in interest expense beginning june 1 , 2015 using the interest method which will continue over the total term of each respective facility . financing transactions select credit facilities on may 20 , 2015 , select entered into an additional credit extension amendment to the select credit facilities . pursuant to the terms and conditions of the additional credit extension amendment , the lenders named therein committed an additional $ 100.0 million in incremental revolving commitments that mature on march 1 , 2018. all other material terms and conditions applicable to the select revolving facility commitments are applicable to incremental revolving commitments created under the additional credit extension amendment . on december 11 , 2015 , select amended the select credit facilities in order to , among other things : ( i ) convert $ 56.2 million of its series d term loan into series e term loan , which have a maturity date of june 1 , 2018 ; ( ii ) increase the interest rate payable on the series e term loan from adjusted libo plus 2.75 % ( subject to an adjusted libo rate floor of 1.00 % ) , or alternative base rate plus 1.75 % , to adjusted libo plus 4.00 % ( subject to an adjusted libo rate floor of 1.00 % ) , or alternative base rate plus 3.00 % ; ( iii ) beginning with the quarter ending december 31 , 2015 , increase the quarterly compliance threshold set forth in the story_separator_special_tag net income attributable to holdings was $ 130.7 million for the year ended december 31 , 2015 , compared to $ 120.6 million for the year ended december 31 , 2014. the increase in holdings ' net income was principally due to increases in our equity in earnings of unconsolidated subsidiaries and a gain on the sale of an equity investment , offset in part by the decrease in our income from operations as discussed above and increases in interest expense associated with concentra indebtedness . 62 cash flow from operations for holdings provided $ 208.4 million and $ 170.6 million of cash for the years ended december 31 , 2015 and 2014 , respectively . year ended december 31 , 2014 for the year ended december 31 , 2014 , our net operating revenues increased 3.0 % to $ 3,065.0 million compared to $ 2,975.6 million for the year ended december 31 , 2013. we experienced increases in net operating revenues in both our specialty hospitals and outpatient rehabilitation segments . we had income from operations for the year ended december 31 , 2014 of $ 284.5 million , compared to $ 301.4 million for the year ended december 31 , 2013. our adjusted ebitda for the year ended december 31 , 2014 was $ 363.9 million , compared to $ 372.9 million for the year ended december 31 , 2013 and our adjusted ebitda margin was 11.9 % for the year ended december 31 , 2014 , compared to 12.5 % for the year ended december 31 , 2013. the decrease in our income from operations , adjusted ebitda and adjusted ebitda margin is principally due to increases in our operating expenses , primarily related to incremental start-up costs associated with new and recently expanded specialty hospitals , the sequestration reduction and the mppr reduction . net income attributable to holdings was $ 120.6 million for the year ended december 31 , 2014 , compared to $ 114.4 million for the year ended december 31 , 2013. the increase in holdings ' net income resulted principally from lower losses related to early retirement of debt , lower interest expense , and increases in equity earnings of unconsolidated subsidiaries , offset in part by a decrease in our income from operations as discussed above . cash flow from operations for holdings provided $ 170.6 million and $ 192.5 million of cash for the years ended december 31 , 2014 and 2013 , respectively . regulatory changes the medicare program reimburses us for services furnished to medicare beneficiaries , which are generally persons age 65 and older , those who are chronically disabled , and those suffering from end stage renal disease . net operating revenues generated directly from the medicare program represented approximately 46 % , 45 % and 37 % of our consolidated net operating revenues for the years ended december 31 , 2013 , 2014 and 2015 , respectively . the medicare program reimburses our ltchs , irfs and outpatient rehabilitation providers , using different payment methodologies . those payment methodologies are complex and are described elsewhere in this report under `` businessgovernment regulations . '' the following is a summary of some of the more significant healthcare regulatory changes that have affected our financial performance in the periods covered by this report or are likely to affect our financial performance and financial condition in the future . the medicare access and chip reauthorization act of 2015 , enacted on april 16 , 2015 , reforms medicare payment policy for services paid under the medicare physician fee schedule , including our outpatient rehabilitation services . the law repeals the sgr formula effective january 1 , 2015 , and establishes a new payment framework consisting of specified updates to the medicare physician fee schedule , a new mips , and incentives for participation in apms . to finance these provisions , the medicare access and chip reauthorization act of 2015 reduces market basket updates for post-acute care providers , including ltchs and irfs , among other medicare payment cuts . as noted below , the law sets the annual prospective payment system update for fiscal year 2018 at 1 % for ltchs and irfs , as well as skilled nursing facilities , home health agencies , and hospices . the law also extends the exceptions process for outpatient therapy caps through december 31 , 2017. the bipartisan budget act of 2015 , enacted on november 2 , 2015 , extends the 2 % reductions to medicare payments through fiscal year 2025. this reduction was originally enacted in the bca of 2011 , 63 which required automatic reductions in federal spending by approximately $ 1.2 trillion split evenly between domestic and defense spending . payments to medicare providers are subject to these automatic spending reductions , subject to a 2 % cap . on april 1 , 2013 a 2 % reduction to medicare payments was implemented . the bba of 2013 extended the automatic spending reductions through 2023 and the bipartisan budget act of 2015 further extended the automatic spending reductions through fiscal year 2025. medicare reimbursement of ltch services there have been significant regulatory changes affecting ltchs that have affected our net operating revenues and , in some cases , caused us to change our operating models and strategies . we have been subject to regulatory changes that occur through the rulemaking procedures of cms . all medicare payments to our ltchs are made in accordance with ltch-pps . proposed rules specifically related to ltchs are generally published in may , finalized in august and effective on october 1st of each year .
| results of operations the following table outlines , for the periods indicated , selected operating data as a percentage of net operating revenues : replace_table_token_12_th 74 replace_table_token_13_th 75 the following tables summarize the company 's selected financial data by business segment , for the periods indicated : replace_table_token_14_th n/mnot meaningful . n/anot applicable 76 ( 1 ) cost of services includes salaries , wages and benefits , operating supplies , lease and rent expense and other operating costs . ( 2 ) concentra 's financial results are consolidated with select 's effective june 1 , 2015 . ( 3 ) other includes our corporate services and certain other non-consolidating joint ventures and minority investments in other healthcare related businesses . ( 4 ) we define adjusted ebitda as net income before interest , income taxes , depreciation and amortization , gain ( loss ) on early retirement of debt , stock compensation expense , concentra acquisition costs , equity in earnings ( losses ) of unconsolidated subsidiaries , and gain on sale of equity investment . we believe that the presentation of adjusted ebitda is important to investors because adjusted ebitda is commonly used as an analytical indicator of performance by investors within the healthcare industry . adjusted ebitda is used by management to evaluate financial performance and determine resource allocation for each of our operating units . adjusted ebitda is not a measure of financial performance under generally accepted accounting principles . items excluded from adjusted ebitda are significant components in understanding and assessing financial performance . adjusted ebitda should not be considered in isolation or as an alternative to , or substitute for , net income , cash flows generated by operations , investing or financing activities , or other financial statement data presented in the consolidated financial statements as indicators of financial performance or liquidity .
| 7,172 |
factors that could cause or contribute to such differences include , but are not limited to , those identified below , and those discussed in the section titled “ risk factors ” included in this annual report on form 10-k. the forward-looking statements in this annual report on form 10-k represent our views as of the date of this annual report on form 10-k. except as may be required by law , we assume no obligation to update these forward-looking statements or the reasons that results could differ from these forward-looking statements . you should , therefore , not rely on these forward-looking statements as representing our views as of any date subsequent to the date of this annual report on form 10-k. overview bridgebio pharma , inc. ( we or the company ) is a team of experienced drug discoverers , developers , and innovators working to create life-altering medicines that target well-characterized genetic diseases at their source . bridgebio was founded in 2015 to identify and advance transformative medicines to treat patients who suffer from mendelian diseases , which are diseases that arise from defects in a single gene , and cancers with clear genetic drivers . our pipeline of over 30 development programs includes product candidates ranging from early discovery to late-stage development . several of our programs target indications that we believe present the potential for our product candidate , if approved , to target portions of market opportunities of at least $ 1.0 billion in annual sales . we focus on genetic diseases because they exist at the intersection of high unmet patient need and tractable biology . our approach is to translate research pioneered at academic laboratories and leading medical institutions into products that we hope will ultimately reach patients . we are able to realize this opportunity through a confluence of scientific advances : ( i ) identification of the genetic underpinnings of disease as more cost-efficient genome and exome sequencing becomes available ; ( ii ) progress in molecular biology ; and ( iii ) the development and maturation of longitudinal data and retrospective studies that enable the linkage of genes to diseases . we believe that this early-stage innovation represents one of the greatest practical sources for new drug creation . since our inception in 2015 , we have focused substantially all of our efforts and financial resources on acquiring and developing product and technology rights , building our intellectual property portfolio and conducting research and development activities for our product candidates within our wholly-owned subsidiaries and controlled entities , including partially-owned subsidiaries and subsidiaries we consolidate based on our deemed majority control of such entities as determined using either the variable interest entity , or vie model , or the voting interest entity , or voe model . to support these activities , we and our wholly-owned subsidiary , bridgebio services , inc. , ( i ) identify and secure new programs , ( ii ) set up new wholly-owned subsidiaries and controlled entities , ( iii ) recruit key management team members , ( iv ) raise and allocate capital across the portfolio and ( v ) provide certain shared services , including accounting , legal , information technology and human resources , as well as workspaces . we do not have any products approved for sale and have not generated any revenue from product sales . to date , we have funded our operations with proceeds from the sale of our equity securities , issuance of convertible notes , debt borrowings and , to a lesser extent , revenue from licensing arrangements . 118 since our inception , we have incurred significant operating losses . for the years ended december 31 , 2020 , 201 9 and 2018 , we incurred net losses of $ 50 5.5 million , $ 28 8 . 6 million and $ 169.5 million , respectively . our ability to generate product revenue sufficient to achieve profitability will depend heavily on the successful development and eventual commercialization of our product candidates at our wholly-owned subsidiaries and controlled entities . we expect to continue to incur significant expenses and increasing operating losses for at least the next several years . due to the inherently unpredictable nature of preclinical and clinical development , and given our novel therapeutic approaches and the stage of development of our product candidates , we can not determine and are unable to estimate with certainty the timelines we will require and the costs we will incur for the development of our product candidates . clinical and preclinical development timelines and costs , and the potential of development success , can differ materially from expectations due to a variety of factors . for example , in light of developments relating to the global outbreak of sars-cov-2 , the novel strain of coronavirus that causes coronavirus disease 19 , or covid-19 , the focus of healthcare providers and hospitals on fighting the virus , and consistent with the u.s. food and drug administration 's updated industry guidance for conducting clinical trials issued on march 18 , 2020 , we have experienced delays in or temporary suspension of the enrollment of patients in our subsidiaries ' ongoing clinical trials . we additionally may experience delays in certain ongoing key program activities , including commencement of planned clinical trials , as well as non-clinical experiments and investigational new drug application-enabling good laboratory practice toxicology studies . the exact duration of delays and their overall impact on our business are currently unknown , and we are continuing to actively monitor the covid-19 pandemic as it continues to rapidly evolve . accordingly , we may take further precautionary and preemptive actions as may be required by federal , state or local authorities or that we determine are in the best interests of public health and safety and that of our patient community , employees , partners , suppliers and stockholders . story_separator_special_tag as of december 31 , 2020 , we had net operating losses of approximately $ 852.5 million and $ 177.9 million for federal and state income tax purposes , respectively , available to reduce future taxable income , if any . the federal net operating losses generated prior to 2018 in the amount of $ 31.8 million will begin to expire in 2036 and losses generated after 2018 in the amount of $ 820.7 million will carry over indefinitely and would be subject to an 80 % taxable income limitation in the year utilized . state net operating losses will generally begin to expire in 2036. as of december 31 , 2020 , we had federal research and development and orphan drug credit carryforwards of $ 41.0 million , which will expire beginning in 2037 if not utilized . as of december 31 , 2020 , we had state research and development credit carryforwards of $ 6.3 million . the state research and development tax credits will expire at various dates while the california research and development tax credits will carry over indefinitely . a valuation allowance is provided for deferred tax assets where the recoverability of the assets is uncertain . the determination to provide a valuation allowance is dependent upon the assessment of whether it is more likely than not that sufficient future taxable income will be generated to utilize the deferred tax assets . based on the weight of the available evidence , which includes our consolidated entities ' historical operating losses and forecast of future losses , we have provided a valuation allowance against the deferred tax assets resulting from the tax loss and credits carried forward . as a result of the issuance of our 2027 notes in 2020 , it was determined that our existing deferred tax assets do not fully offset the deferred tax liabilities when reviewing the reversals of temporary differences . this resulted in a deferred tax liability of $ 1.1 million that was recognized for the year ended december 31 , 2020. the valuation allowance increased by $ 95.5 million and $ 79.2 million for the years ended december 31 , 2020 and 2019 , respectively . utilization of the net operating loss and credit carryforwards may be subject to a substantial annual limitation due to an ownership change limitation as provided by section 382 of the internal revenue code of 1986 , as amended , or the code , and similar state provisions . the annual limitation may result in the expiration of net operating losses and credits before utilization . in the event that we have a change of ownership , utilization of the net operating loss and tax credit carryforwards may be restricted . net loss attributable to redeemable convertible noncontrolling interests and noncontrolling interests net loss attributable to redeemable convertible noncontrolling interests and noncontrolling interests in our consolidated statements of operations consists of the portion of the net loss of those consolidated entities that is not allocated to us . changes in the amount of net loss attributable to noncontrolling interests are directly impacted by changes in the net loss of our consolidated entities and are the result of ownership percentage changes . refer to note 6 to our consolidated financial statements . net loss attributable to redeemable convertible noncontrolling interests and noncontrolling interests was $ 56.8 million in 2020 , compared to $ 28.0 million in 2019 . 123 liquidity and capital resources we have historically financed our operations primarily through the sale of our equity securities , issuance of convertible notes , debt borrowings and revenue from certain licensing arrangements . as of december 31 , 2020 , we had cash , cash equivalents and marketable securities of $ 607.1 million . the funds that were held by our wholly-owned subsidiaries and controlled entities are available for specific entity usage , except in limited circumstances . the cash and cash equivalents of $ 127.7 million as of december 31 , 2020 belonging to eidos may only be used solely by eidos . as of december 31 , 2020 , our outstanding debt was $ 477.3 million , net of debt issuance costs and accretion , or $ 460.4 million excluding eidos . since our inception , we have incurred significant operating losses . for the years ended december 31 , 2020 , 2019 and 2018 , we incurred net losses of $ 505.5 million , $ 288.6 million and $ 169.5 million , respectively . we had an accumulated deficit as of december 31 , 2020 of $ 888.8 million . we expect to continue to incur net losses over the next several years as we continue our drug discovery efforts and incur significant preclinical and clinical development costs related to our current research and development programs as well as costs related to commercial launch readiness for our late-stage programs . in particular , to the extent we advance our programs into and through later-stage clinical studies without a partner , we will incur substantial expenses . our ability to generate product revenue sufficient to achieve profitability will depend heavily on the successful development and eventual commercialization of our product candidates at our wholly-owned subsidiaries and controlled entities . our current business plan is also subject to significant uncertainties and risks as a result of , among other factors , our ability to generate product revenue sufficient to achieve profitability will depend heavily on the successful development and eventual commercialization of our product candidates at our consolidated entities . we expect our cash and cash equivalents and marketable securities will fund our operations for at least the next 12 months based on current operating plans and financial forecasts . if our current operating plans or financial forecasts change , including the effects of the covid-19 pandemic on our research and development activities , we may require additional funding sooner in the form of public or private equity offerings , debt financings or additional collaborations and licensing arrangements .
| results of operations comparison of the years ended december 31 , 2020 and 2019 we have included our financial results for 2020 compared to 2019. additional information required by item 7 for the year ended december 31 , 2018 can be found in item 7 in our annual report on form 10-k for the year ended december 31 , 2019 , filed with the u.s. securities and exchange commission , or the sec , on march 3 , 2020 and is incorporated herein by reference . the following table summarizes the results of our operations for the periods indicated : replace_table_token_1_th the results of operations for the years ended december 31 , 2020 and 2019 are not necessarily indicative of the results to be expected for the year ending december 31 , 2021 or for any other future annual or interim period . cash , cash equivalents and marketable securities as of december 31 , 2020 , we had cash , cash equivalents and marketable securities of $ 607.1 million . on march 9 , 2020 , we issued an aggregate principal amount of $ 550.0 million of our 2.50 % convertible senior notes due 2027 , or the 2027 notes , in a private offering , or the 2020 note offering , to qualified institutional buyers . we received net proceeds from the 2020 note offering of approximately $ 537.0 million , after deducting purchasers ' discount and offering expenses . we used approximately $ 49.3 million of the net proceeds from the 2020 note offering to pay for the cost of capped call transactions and approximately $ 75.0 million to pay for the repurchase of shares of our common stock . we also received net proceeds of $ 24.1 million from the at-the-market issuance of shares by eidos therapeutics , inc. , or eidos , in february 2020. during the year ended december 31 , 2020 , we used cash of approximately $ 399.7 million to support our operations .
| 7,173 |
the performance target should not be reflected in estimating the grant-date fair value of the award . compensation cost should be recognized in the period in which it becomes probable that the performance target will be achieved and should represent the compensation cost attributable to the period ( s ) for which the requisite service has already been rendered . if the performance target becomes probable of being achieved before the end of the requisite service period , the remaining unrecognized compensation cost should be recognized prospectively over the remaining requisite service period . f-8 the total amount of compensation cost recognized during and after the requisite service period should reflect the number of awards that are expected to vest and should be adjusted to reflect those awards that ultimately vest . the requisite service period ends when the employee can cease rendering service story_separator_special_tag the following discussion should be read in conjunction with the consolidated financial statements , the related notes and the section “ important notice to investors regarding forward-looking statements ” that appear elsewhere in this report . critical accounting policies and estimates the company 's discussion and analysis of its results of operations , financial condition and liquidity are based upon the company 's consolidated financial statements , which have been prepared in accordance with accounting principles generally accepted in the united states . the preparation of these financial statements requires the company to make estimates and judgments that affect the reported amounts of assets , liabilities , shareholders ' equity , sales and expenses , as well as related disclosures of contingent assets and liabilities . the company bases its estimates on historical experience and on various other assumptions that management believes to be reasonable under the circumstances . actual results may materially differ from these estimates under different assumptions or conditions . on an ongoing basis , the company reviews its estimates to ensure that the estimates appropriately reflect changes in its business and new information as it becomes available . management believes the critical accounting policies discussed below affect its more significant estimates and assumptions used in the preparation of its consolidated financial statements . for a complete discussion of all of the company 's significant accounting policies , see note 2 “ significant accounting policies ” in the notes to consolidated financial statements in this form 10-k. revenue recognition sales are recognized , in general , as products are shipped to customers , net of an allowance for sales returns and accruals for sales programs in accordance with accounting standards codification ( “ asc ” ) topic 605 , “ revenue recognition ” . in certain cases , the company recognizes sales when products are received by customers . the company records a reserve for anticipated returns through a reduction of sales and cost of sales in the period that the related sales are recorded . sales returns are estimated based upon historical returns , current economic trends , changes in customer demands and sell-through of products . in addition , from time to time , the company offers sales programs that allow for specific returns . the company records a reserve for anticipated returns related to these sales programs based on the terms of the sales program . historically , the company 's actual sales returns have not been materially different from management 's original estimates . the company does not believe there is a reasonable likelihood that there will be a material change in the future estimates or assumptions used to calculate the allowance for sales returns . however , if the actual costs of sales returns are significantly different than the recorded estimated allowance , the company may be exposed to losses or gains that could be material . assuming there had been a 10 % increase over the recorded estimated allowance for 2014 sales returns , pre-tax income for the year ended december 31 , 2014 would have decreased by approximately $ 0.9 million . the company also records estimated reductions to revenue for sales programs such as incentive offerings . sales program accruals are estimated based upon the attributes of the sales program , management 's forecast of future product demand , and historical customer participation in similar programs . the company 's primary sales program , “ the preferred retailer program , ” offers longer payment terms during the initial sell-in period , as well as potential rebates and discounts , for participating retailers in exchange for providing certain benefits to the company , including the maintenance of agreed upon inventory levels , prime product placement and retailer staff training . under this program , qualifying retailers can earn either discounts or rebates based upon the amount of product purchased . discounts are applied and recorded at the time of sale . for rebates , the company accrues an estimate of the rebate at the time of sale based on the customer 's estimated qualifying current year product purchases . the estimate is based on the historical level of purchases , adjusted for any factors expected to affect the current year purchase levels . the estimated year-end rebate is adjusted quarterly based on actual purchase levels , as necessary . the preferred retailer program is generally short term in nature and the actual costs of the program are known as of the end of the year and paid to customers shortly after year-end . in addition to the preferred retailer program , the company from time to time offers additional sales program incentive offerings which are also generally short term in nature . historically the company 's actual costs related to its preferred retailer program and other sales programs have not been materially different than its estimates . revenues from gift cards are deferred and recognized when the cards are redeemed . in addition , the company recognizes revenue from unredeemed gift cards when the likelihood of redemption becomes remote and under circumstances that comply with any applicable state escheatment laws . the company 's gift cards have no expiration . story_separator_special_tag in september 2012 , in connection with the company 's cost reduction initiatives that were announced in july 2012 , the company committed to a plan to transition its integrated device business to a third-party licensing model and determined that it would no longer be using or enforcing the trademarks and technology acquired from the uplay llc acquisition . as a result , the company recognized an impairment charge of $ 5.1 million in 2012 to write-off amortizing intangible assets and goodwill associated with the uplay , llc acquisition as these assets were no longer considered recoverable . in addition , the company wrote-off the net carrying value of long lived assets related to upro gps devices , which resulted in a $ 4.0 million charge to property , plant and equipment as these assets were also not considered recoverable . see note 8 “ goodwill and intangible assets ” in the notes to consolidated financial statements in this form 10-k. in the year ended december 31 , 2012 , the company recognized impairment charges of $ 4.6 million in connection with the trade names , trademarks and other intangible assets related to the top-flite and ben hogan brands . the company did not perform an impairment analysis on its top-flite and ben hogan non-amortizing intangibles assets as these assets were sold during the first quarter of 2012. the impairment charge related to the amortizing intangible assets ( i.e . patents ) acquired during the top-flite and ben hogan acquisition . during the fourth quarter of 2012 , the company changed its intellectual property strategy as part of its 2012 restructuring initiatives . as part of this new strategy , the company determined it would no longer be using or enforcing these patents , resulting in a $ 4.6 million impairment charge as the carrying amount of these assets was no longer considered recoverable . see note 8 `` goodwill and intangible assets `` in the notes to consolidated financial statements in this form 10-k. warranty policy the company has a stated two-year warranty policy for its golf clubs . the company 's policy is to accrue the estimated cost of satisfying future warranty claims at the time the sale is recorded . in estimating its future warranty obligations , the company considers various relevant factors , including the company 's stated warranty policies and practices , the historical frequency of claims , and the cost to replace or repair its products under warranty . the company 's estimates for calculating the warranty reserve are principally based on assumptions regarding the warranty costs of each club product line over the expected warranty period . where little or no claims experience may exist , the company 's warranty obligation calculation is based upon long-term historical warranty rates of similar products until sufficient data is available . as actual model-specific rates become available , the company 's estimates are modified to ensure that the forecast is within the range of likely outcomes . historically , the company 's actual warranty claims have not been materially different from management 's original estimated warranty obligation . the company does not believe there is a reasonable likelihood that there will be a material change in the future estimates or assumptions used to calculate the warranty obligation . however , if the number of actual warranty claims or the cost of satisfying warranty claims were to significantly exceed the estimated warranty reserve , the company may be exposed to losses that could be material . assuming there had been a 10 % increase in warranty claims over the 2014 recorded estimated allowance for warranty obligations , pre-tax income for the year ended december 31 , 2014 would have decreased by approximately $ 0.6 million . income taxes current income tax expense or benefit is the amount of income taxes expected to be payable or receivable for the current year . a deferred income tax asset or liability is established for the difference between the tax basis of an asset or liability computed pursuant to asc topic 740 , “ income taxes , ” and its reported amount in the financial statements that will result in taxable or deductible amounts in future years when the reported amount of the asset or liability is recovered or settled , respectively . the company maintains a valuation allowance for a deferred tax asset when it is deemed to be more likely than not that some or all of the deferred tax asset will not be realized . in evaluating whether a valuation allowance is required under such rules , the company considers all available positive and negative evidence , including prior operating results , the nature and reason for any losses , its forecast of future taxable income , and the dates on which any deferred tax assets are expected to expire . these assumptions require a significant amount of judgment , including estimates of future taxable income . these estimates are based on the company 's best judgment at the time made based on current and projected circumstances and conditions . in 2011 , as a result of this evaluation , the company recorded a valuation allowance against its u.s. deferred tax assets . at the end of each interim and annual reporting 25 period , as the u.s. deferred tax assets are adjusted upwards or downwards , the associated valuation allowance and income tax expense are also adjusted . if sufficient positive evidence arises in the future , such as a sustained return to profitability in the u.s. business , the valuation allowance could be reversed as appropriate , decreasing income tax expense in the period that such conclusion is reached . the company has concluded that with respect to non-u.s. entities , there is sufficient positive evidence to conclude that the realization of its deferred tax assets is deemed to be likely , and no allowances have been established .
| executive summary the company 's net sales for 2014 increased by 5 % to $ 886.9 million as compared to $ 842.8 million in 2013. despite softer than expected market conditions , the company continued to gain market share , driven by growth in sales of woods ( 8 % ) , irons ( 12 % ) , golf balls ( 5 % ) and accessories and other ( 2 % ) . additionally , despite the impact of $ 11.1 million of unfavorable fluctuations in foreign currency rates , the company experienced growth in all geographic segments , including the united states ( 5 % ) , japan ( 3 % ) , europe ( 11 % ) , rest of asia ( 7 % ) and other foreign countries ( 1 % ) . the company 's gross profit as a percentage of sales increased 310 basis points in 2014 compared to the prior year . these increases were primarily the result of favorable pricing combined with an increase in sales of higher margin products compared to 2013 , as well as improved manufacturing and distribution efficiencies resulting from the company 's prior cost-reduction initiatives . in addition , there were no charges related to the cost-reduction initiatives in 2014 compared to charges incurred in 2013 of $ 11.1 million ( see note 3 `` restructuring initiatives '' in the notes to consolidated financial statements in this form 10-k ) . during 2014 , the company continued to manage operating expenses while also increasing its investment in its marketing and tour programs . as a result , operating expenses remained flat in 2014 compared to 2013. operating expenses in 2013 included charges of $ 4.7 million related to the company 's cost-reduction initiatives , as well as incremental charges of $ 5.4 million for bad debt .
| 7,174 |
generally , we are paid by the mile for our services . we also derive truckload revenue from fuel surcharges , loading and unloading activities , equipment detention and other ancillary services . the main factors that affect our truckload revenue are the rate per mile we receive from our customers , the percentage of miles for which we are compensated , the number of miles we generate with our equipment and changes in fuel prices . we monitor our revenue production primarily through average truckload revenue , net of fuel surcharges , per tractor per week . we also analyze our average truckload revenue , net of fuel surcharges , per total mile , non-revenue miles percentage , the miles per tractor we generate , our accessorial revenue and our other sources of operating revenue . our operating revenue also includes revenue reported within our logistics segment , which consists of revenue from our internal brokerage and intermodal operations , and through our 45 % interest in mwl , a third-party provider of logistics services to the transportation industry . brokerage services involve arranging for another company to transport freight for our customers while we retain the billing , collection and customer management responsibilities . intermodal services involve the transport of our trailers on railroad flatcars for a portion of a trip , with the balance of the trip using our tractors or , to a lesser extent , contracted carriers . the main factors that affect our logistics revenue are the rate per mile and other charges we receive from our customers . in addition to the factors discussed above , our operating revenue is also affected by , among other things , the united states economy , inventory levels , the level of truck and rail capacity in the transportation market and specific customer demand . our operating revenue increased $ 34.8 million , or 5.8 % , in 2012. our operating revenue , net of fuel surcharges , increased $ 26.7 million , or 5.4 % , compared with 2011. truckload segment revenue , net of fuel surcharges , increased 5.8 % primarily due to an increase in our average truckload revenue , net of fuel surcharges , per tractor per week of 5.6 % . fuel surcharge revenue increased by $ 8.1 million , or 7.2 % . the changes in our operating statistics are primarily the result of the continued growth of our regional temperature-controlled operations , which we have increased from 4.6 % at the end of 2007 to 73.7 % of our truckload fleet as of december 31 , 2012. by focusing on shorter lengths of haul in certain defined areas , we are addressing customer trends toward regional distribution to lower their transportation expense , furthering our own objectives of reducing fuel consumption per load , and matching some of our drivers ' desires to stay closer to home . logistics segment revenue , net of intermodal fuel surcharges , increased 4.6 % compared with 2011. the increase in logistics revenue primarily resulted from volume growth in each of our internal brokerage and intermodal services . logistics revenue represented 24.3 % of our operating revenue in 2012 compared to 24.5 % in 2011 . 17 our profitability on the expense side is impacted by variable costs of transporting freight for our customers , fixed costs , and expenses containing both fixed and variable components . the variable costs include fuel expense , driver-related expenses , such as wages , benefits , training , and recruitment , and independent contractor costs , which are recorded under purchased transportation . expenses that have both fixed and variable components include maintenance and tire expense and our total cost of insurance and claims . these expenses generally vary with the miles we travel , but also have a controllable component based on safety , fleet age , efficiency and other factors . our main fixed costs relate to the acquisition of long-term assets , such as revenue equipment and operating terminals . we expect our annual cost of tractor and trailer ownership will increase in future periods as a result of higher prices of new equipment . although certain factors affecting our expenses are beyond our control , we monitor them closely and attempt to anticipate changes in these factors in managing our business . for example , fuel prices have fluctuated dramatically over the past several years . we manage our exposure to changes in fuel prices primarily through fuel surcharge programs with our customers , as well as through volume fuel purchasing arrangements with national fuel centers and bulk purchases of fuel at our terminals . to help further reduce fuel expense , we installed auxiliary power units in our tractors to provide climate control and electrical power for our drivers without idling the tractor engine . for our logistics segment , our profitability on the expense side is impacted by the percentage of logistics revenue we pay to providers for the transportation services we arrange . our operating expenses as a percentage of operating revenue , or “ operating ratio , ” improved to 92.8 % in 2012 from 92.9 % in 2011. operating expenses as a percentage of operating revenue , with both amounts net of fuel surcharge revenue , improved to 91.1 % for 2012 from 91.2 % for 2011. our net income increased to $ 27.3 million in 2012 from $ 24.3 million in 2011. our business requires substantial , ongoing capital investments , particularly for new tractors and trailers . at december 31 , 2012 , we had approximately $ 3.5 million of cash and cash equivalents , $ 2.7 million of long-term debt outstanding and $ 331.9 million in stockholders ' equity . story_separator_special_tag % of our truckload fleet as of december 31 , 2011 from 51.8 % as of december 31 , 2010. by focusing on shorter lengths of haul in certain defined areas , we are addressing customer trends toward regional distribution to lower their transportation expense , furthering our own objectives of reducing fuel consumption per load , and matching some of our drivers ' desires to stay closer to home . the concentration of a portion of our fleet in these markets is evident in a 4.4 % reduction from 2010 in average length of haul to 626 miles . the improvement in revenue per tractor per week primarily caused the increase in profitability from 2010. logistics segment revenue increased $ 23.7 million , or 19.1 % , to $ 147.8 million in 2011 from $ 124.2 million in 2010. logistics segment revenue , net of intermodal fuel surcharges , increased 15.3 % . the increase in logistics revenue primarily resulted from continued volume growth in each of our internal brokerage and intermodal services . the operating ratio for our logistics segment in 2011 was consistent with 2010. the following table sets forth for the years indicated the dollar and percentage increase or decrease of the items in our consolidated statements of operations , and those items as a percentage of operating revenue : replace_table_token_6_th 25 the increase in salaries , wages and benefits resulted primarily from a 4.9 % increase in the total miles driven by company drivers , an increase in the amount paid to company drivers as a result of a pay increase effective april 1 , 2011 , and an additional $ 1.1 million of layover pay due to a change in our policy to compensate company drivers without an assigned load for a specified period of time . in addition , employees ' health insurance expense increased by $ 1.4 million due to an increase in our self-insured medical claims , and bonus compensation expense for our non-driver employees increased by $ 2.1 million . purchased transportation expense increased $ 9.9 million in total , or 9.0 % , in 2011 from 2010. payments to carriers for transportation services we arranged in our brokerage and intermodal operations increased $ 17.3 million to $ 110.8 million in 2011 from $ 93.5 million in 2010. the portion of purchased transportation expense related to our independent contractors , including fuel surcharges , decreased $ 7.4 million in 2011 , primarily due to a decrease in the number of independent contractor-owned tractors in our fleet . fuel and fuel taxes increased by $ 40.7 million in 2011 from 2010. net fuel expense ( fuel and fuel taxes net of fuel surcharge revenue and surcharges passed through to independent contractors , outside drayage carriers and railroads ) increased $ 7.4 million , or 15.5 % , to $ 55.3 million in 2011 from $ 47.9 million in 2010. fuel surcharges passed through to independent contractors , outside drayage carriers and railroads were $ 12.8 million in 2011 and $ 8.9 million in 2010. we have worked diligently to control fuel usage and costs by improving our volume purchasing arrangements and optimizing our drivers ' fuel purchases with national fuel centers , focusing on shorter lengths of haul , installing and tightly managing the use of auxiliary power units in our tractors to minimize engine idling and improving fuel usage in the temperature-control units on our trailers . the increase in net fuel expense was primarily due to a significant increase in the doe national average cost of fuel to $ 3.83 per gallon in 2011 from $ 2.99 per gallon in 2010. the cost control measures stated above helped to offset the higher price of fuel . net fuel expense represented 13.6 % of truckload and intermodal revenue , net of fuel surcharges , in 2011 , compared with 13.1 % in 2010. our average fleet size increased 3.1 % from 2010 and the costs associated with this larger fleet increased our supplies and maintenance costs . we have also increased the maintenance performed on our revenue equipment as a result of company policy changes in 2011. the extreme heat across much of the united states in the summer of 2011 also adversely impacted maintenance costs specific to our refrigeration and auxiliary power units . in addition , we have experienced higher tire and parts prices and increased toll expense in 2011. the increase in depreciation was primarily due to a 3.1 % increase in our average fleet size , a continued increase in the cost of revenue equipment and an increase in the relative percentage of company-owned tractors to independent contractor-owned tractors in 2011. the $ 1.6 million increase in insurance and claims in 2011 was primarily due to an increase in the cost of physical damage claims related to our tractors and trailers . gain on disposition of revenue equipment increased to $ 3.8 million in 2011 from $ 1.1 million in 2010 primarily due to an increase in the market value of used revenue equipment . as a result of the foregoing factors , our operating expenses as a percentage of operating revenue , or “ operating ratio , ” improved to 92.9 % in 2011 from 93.2 % in 2010. the operating ratio for our truckload segment was 92.3 % and 92.7 % in 2011 and 2010 , respectively . the operating ratio for our logistics segment was 94.8 % and 94.7 % in 2011 and 2010 , respectively . operating expenses as a percentage of operating revenue , with both amounts net of fuel surcharge revenue , improved to 91.2 % for 2011 from 92.0 % for 2010. our effective income tax rate decreased to 42.5 % for 2011 from 43.1 % for 2010. this decrease was primarily due to a decrease in the deferred income tax liability derived from changes in income apportionment for several states , which produced a lower effective state income tax rate , net of federal impact .
| results of operations the following table sets forth for the years indicated certain operating statistics regarding our revenue and operations : replace_table_token_2_th ( 1 ) includes tractors driven by both company-employed drivers and independent contractors . independent contractors provided 36 , 48 and 86 tractors as of december 31 , 2012 , 2011 and 2010 , respectively . 19 comparison of year ended december 31 , 2012 to year ended december 31 , 2011 the following table sets forth for the years indicated our operating revenue , operating income and operating ratio by segment , along with the change for each component : replace_table_token_3_th ( 1 ) logistics revenue is net of $ 9.7 million and $ 9.0 million of inter-segment revenue in 2012 and 2011 , respectively , for loads transported by our tractors and arranged by mwl that have been eliminated in consolidation . ( 2 ) represents operating expenses as a percentage of operating revenue . truckload segment depreciation expense was $ 56.7 million and $ 54.4 million , and logistics segment depreciation expense was $ 4.2 million and $ 3.1 million , in 2012 and 2011 , respectively . our operating revenue increased $ 34.8 million , or 5.8 % , to $ 638.5 million in 2012 from $ 603.7 million in 2011. our operating revenue , net of fuel surcharges , increased $ 26.7 million , or 5.4 % , to $ 517.3 million in 2012 from $ 490.7 million in 2011. the increase in operating revenue , net of fuel surcharges , was due to an increase in truckload revenue , net of fuel surcharges , along with growth in logistics revenue . fuel surcharge revenue increased to $ 121.1 million in 2012 from $ 113.0 million in 2011 .
| 7,175 |
the following discussion should be read in conjunction with “ selected financial data ” and the historical financial statements and the related notes thereto included elsewhere in this annual report on form 10-k. the following discussion contains , in addition to historical information , forward-looking statements that include risks and uncertainties . our actual results may differ materially from those expressed or contemplated in those forward-looking statements as a result of certain factors , including those set forth under the headings “ forward-looking statements ” and “ risk factors ” elsewhere in this annual report on form 10-k. business walker & dunlop , inc. is a holding company , and we conduct the majority of our operations through walker & dunlop , llc , our operating company . we are one of the leading commercial real estate services and finance companies in the united states , with a primary focus on multifamily lending . we originate , sell , and service a range of multifamily and other commercial real estate financing products to owners and developers of commercial real estate across the country , provide multifamily investment sales brokerage services in various regions throughout the united states , and engage in commercial real estate investment management activities . we originate and sell multifamily loans through the programs of fannie mae , freddie mac , ginnie mae , and hud , with which we have licenses and long-established relationships . we retain servicing rights and asset management responsibilities on nearly all loans that we originate for the agencies ' programs . we are approved as a fannie mae dus lender nationally , a freddie mac seller/servicer nationally , a freddie mac targeted affordable housing seller/servicer , a hud map lender nationally , a hud lean lender nationally , and a ginnie mae issuer . we broker and service loans for a number of life insurance companies , cmbs conduits , commercial banks , and other institutional investors , in which cases we do not fund the loan but rather act as a loan broker . we fund loans for the agencies ' programs , generally through warehouse facility financings , and sell them to investors in accordance with the related loan sale commitment , which we obtain at rate lock . proceeds from the sale of the loan are used to pay off the warehouse facility . the sale of the loan is typically completed within 60 days after the loan is closed , and we retain the right to service substantially all of these loans . in cases where we do not fund the loan , we act as a loan broker and service some of the loans . our loan originators who focus on loan brokerage are engaged by borrowers to work with a variety of institutional lenders to find the most appropriate loan . these loans are then funded directly by the institutional lender , a nd for those brokered loans we service , we collect ongoing servicing fees while those loans remain in our servicing portfolio . the servicing fees we typically earn on brokered loan transactions are substantially lower than the servicing fees we earn for servicing agency loans . we recognize gains from mortgage banking activities when we make simultaneous commitments to originate a loan to a borrower and sell that loan to an investor . the gains from mortgage banking activities reflect the fair value attributable to loan origination fees , premiums on the sale of loans , net of any co-broker fees , and the fair value of the expected net cash flows associated with servicing the loans , net of any guaranty obligations retained . we also recognize gains from mortgage banking activities when we receive the origination fee from a brokered loan transaction . other sources of revenue include ( i ) net warehouse interest income we earn while the loan is held for sale through one of our warehouse facilities , ( ii ) net warehouse interest income from loans held for investment while they are outstanding , ( iii ) sales commissions for brokering the sale of multifamily properties , and ( iv ) asset management fees from our investment management activities . we retain servicing rights on substantially all the loans we originate and sell and generate revenues from the fees we receive for servicing the loans , from the interest income on escrow deposits held on behalf of borrowers , from late charges , and from other ancillary fees . servicing fees set at the time an investor agrees to purchase the loan are generally paid monthly for the duration of the loan and are based on the unpaid principal balance of the loan . our fannie mae and 29 freddie mac servicing arrangements generally provide for prepayment fees to us in the event of a voluntary prepayment . for loans serviced outside of fannie mae and freddie mac , we typically do not share in any such payments . we are currently not exposed to unhedged interest rate risk during the loan commitment , closing , and delivery process . the sale or placement of each loan to an investor is negotiated prior to establishing the coupon rate for the loan . we also seek to mitigate the risk of a loan not closing . we have agreements in place with the agencies that specify the cost of a failed loan delivery , also known as a “ pair off fee , ” in the event we fail to deliver the loan to the investor . to protect us against such pair off fees , we require a deposit from the borrower at rate lock that is typically more than the potential fee . the deposit is returned to the borrower only once the loan is closed . any potential loss from a catastrophic change in the property condition while the loan is held for sale using warehouse facility financing is mitigated through property insurance equal to replacement cost . we are also protected contractually from an investor 's failure to purchase the loan . story_separator_special_tag we consolidate the activities of wdis and present the portion of wdis that we do not control as noncontrolling interests in the consolidated balance sheets and net income from noncontrolling interests in the consolidated statements of income . during the second quarter of 2018 , the company acquired jcr , the operator , registered investment adviser , and general partner of private commercial real estate investment funds focused on the management of debt , preferred equity , and mezzanine equity investments in private middle-market commercial real estate funds and separately managed accounts . the acquisition of jcr , a wholly owned subsidiary of the company , is part of our strategy to grow and diversify the company by growing our investment management platform . jcr 's current assets under management ( “ aum ” ) of $ 1.0 billion primarily consist of three sources : fund iii , fund iv , and separate accounts managed for life insurance companies . aum for fund iii and fund iv consist of both unfunded commitments and funded investments . aum for the separate account consist entirely of funded investments . unfunded commitments are highest during the fund raising and investment phases . aum for this purpose may differ from regulatory assets under management disclosed on jcr 's form adv . the following table summarizes jcr 's aum as of december 31 , 2018 : replace_table_token_1_th jcr typically receives management fees based on limited partner capital commitments , unfunded investment commitments , and funded investments . additionally , with respect to fund iii and fund iv , jcr receives a percentage of the profits above the fund expenses and preferred return specified in the fund offering agreements . over the past three years , we have purchased the rights to service hud loans with an aggregate $ 4.3 billion unpaid principal balance from third-party servicers for a total of $ 52.7 million . the acquisition of these servicing rights substantially increased our hud servicing portfolio and led to our being one of the largest servicers of hud commercial real estate loans as of december 31 , 2018. we expect the servicing rights acquisitions to have the following benefits : 31 reduce the average cost to service each loan as we leverage our existing servicing platform , provide new borrower relationships , provide opportunities for additional loan origination volume when these loans mature or prepay , and produce a stable stream of cash revenues over the estimated lives of the portfolios . as of december 31 , 2018 , our servicing portfolio was $ 85.7 billion , up 15 % from december 31 , 2017 , making it the 7 th largest commercial/multifamily primary and master servicing portfolio in the nation according to the mortgage bankers ' association 's ( “ mba ” ) 2018 year-end survey ( the “ survey ” ) . our servicing portfolio includes $ 36.0 billion of loans serviced for fannie mae and $ 30.4 billion for freddie mac , making us the 2 nd and 3 rd largest primary and master servicer of fannie mae and freddie mac loans in the nation , respectively , according to the survey . also included in our servicing portfolio is $ 9.9 billion of hud loans , the 2 nd largest hud primary and master servicing portfolio in the nation according to the survey . the average number of our loan originators increased from 130 during 2017 to 138 during 2018 due to our own organic growth and from acquisitions completed in the current year , resulting in an increase of 2 % in our loan origination volume , from a total of $ 24.9 billion during 2017 to a total of $ 25.3 billion during 2018. fannie mae recently announced that we ranked as its 2 nd largest dus lender in 2018 , by loan deliveries , and freddie mac recently announced that we ranked as its 4 th largest seller/servicer in 2018 , by loan deliveries . additionally , we were the third largest multifamily lender for hud in 2018 based on map initial endorsements . basis of presentation the accompanying consolidated financial statements include all of the accounts of the company and its wholly owned subsidiaries , and all intercompany transactions have been eliminated . critical accounting policies our consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the united states of america ( “ gaap ” ) , which require management to make estimates and assumptions that affect reported amounts . the estimates and assumptions are based on historical experience and other factors management believes to be reasonable . actual results may differ from those estimates and assumptions . we believe the following critical accounting policies represent the areas where more significant judgments and estimates are used in the preparation of our consolidated financial statements . mortgage servicing rights ( “ msrs ” ) . msrs are recorded at fair value at loan sale or upon purchase . the fair value of msrs acquired through a stand-alone servicing portfolio purchase is equal to the purchase price paid . the fair value at loan sale is based on estimates of expected net cash flows associated with the servicing rights and takes into consideration an estimate of loan prepayment . the estimated net cash flows are discounted at a rate that reflects the credit and liquidity risk of the msr over the estimated life of the underlying loan . the discount rates used throughout the periods presented for all msrs recognized at loan sale were between 10-15 % and varied based on the loan type . the life of the underlying loan is estimated giving consideration to the prepayment provisions in the loan . our model for originated msrs assumes no prepayment while the prepayment provisions have not expired and full prepayment of the loan at or near the point where the prepayment provisions have expired . we record an individual msr asset ( or liability ) for each loan at loan sale .
| results of operations following is a discussion of our results of operations for the years ended december 31 , 2018 , 2017 , and 2016. the financial results are not necessarily indicative of future results . our annual results have fluctuated in the past and are expected to fluctuate in the future , reflecting the interest-rate environment , the volume of transactions , business acquisitions , regulatory actions , and general economic conditions . please refer to the table below , which provides supplemental data regarding our financial performance . 40 supplemental operating data replace_table_token_2_th replace_table_token_3_th ( 1 ) brokered transactions for life insurance companies , commercial mortgage backed securities , commercial banks , insurance company separate accounts , and other capital sources . 41 ( 2 ) this is a non-gaap financial measure . for more information on adjusted ebitda , refer to the section below titled “ non-gaap financial measures. ” ( 3 ) as more fully discussed in notes 2 and 12 to the consolidated financial statements , for the years ended december 31 , 2017 and 2016 , diluted eps amounts have been corrected from amounts previously reported in prior annual reports on form 10-k to properly reflect the two-class method . in addition , diluted eps for december 31 , 2018 has been corrected from the previously reported amount in our earnings release on current report on form 8-k dated february 6 , 2019 ( “ 2019 8-k ” ) to properly reflect the two-class method . diluted eps for the year ended december 31 , 2018 as reported on the 2019 8-k was $ 0.08 higher than the amount shown here . the correction of the error had no impact to walker & dunlop net income , total equity , or our cash flows as of and for the years ended december 31 , 2018 , 2017 , and 2016 . ( 4 ) excludes the income and loan origination volume from interim loans .
| 7,176 |
all statements other than statements of historical facts are forward-looking statements for purposes of these provisions , including those relating to future events or our future financial performance and financial guidance . in some cases , you can identify forward-looking statements by terminology such as may , might , will , should , expect , plan , anticipate , project , believe , estimate , predict , potential , intend or continue , the negative of terms like these or other comparable terminology , and other words or terms of similar meaning in connection with any discussion of future operating or financial performance . these statements are only predictions . all forward-looking statements included in this document are based on information available to us on the date hereof , and we assume no obligation to update any such forward-looking statements . any or all of our forward-looking statements in this document may turn out to be wrong . actual events or results may differ materially . our forward-looking statements can be affected by inaccurate assumptions we might make or by known or unknown risks , uncertainties and other factors . we discuss many of these risks , uncertainties and other factors in this annual report on form 10-k in greater detail under the heading item 1arisk factors. we caution investors that our business and financial performance are subject to substantial risks and uncertainties . overview seattle genetics is a biotechnology company focused on the development and commercialization of monoclonal antibody-based therapies for cancer . our lead product adcetris ® , or brentuximab vedotin , received accelerated approval in the united states in 2011 and approval with conditions in canada in 2013 for patients with relapsed hodgkin lymphoma or relapsed systemic anaplastic large cell lymphoma , or salcl . adcetris is an antibody-drug conjugate , or adc , comprising an anti-cd30 monoclonal antibody attached by a protease-cleavable linker to a microtubule disrupting agent , monomethyl auristatin e ( mmae ) , utilizing our proprietary technology . we have a broad development strategy for adcetris evaluating its potential application in earlier lines of therapy for patients with hodgkin lymphoma or mature t-cell lymphoma , or mtcl , and in other cd30-positive malignancies . in addition , we have four clinical-stage adc programs , which consist of sgn-75 , asg-5me , asg-22me and sgn-cd19a , as well as several preclinical product candidates , including sgn-cd33a and sgn-liv1a . we are collaborating with millennium : the takeda oncology company , or millennium , to develop and commercialize adcetris on a global basis . under this collaboration , seattle genetics has retained commercial rights for adcetris in the united states and its territories and in canada , and millennium has commercial rights in the rest of the world . adcetris was granted conditional approval in the european union in 2012 for patients with relapsed hodgkin lymphoma or relapsed salcl . we also have collaborations for our adc technology with a number of biotechnology and pharmaceutical companies , including abbvie biotechnology ltd. ( formerly part of abbott laboratories ) , or abbvie ; bayer pharmaceuticals corporation , or bayer ; celldex therapeutics , inc. , or celldex ; daiichi sankyo co. , ltd. , or daiichi sankyo ; genentech , inc. , a member of the roche group , or genentech ; glaxosmithkline llc , or gsk ; millennium , pfizer , inc. , or pfizer , and psma development company llc , a subsidiary of progenics pharmaceuticals inc. , or progenics ; as well as adc co-development agreements with agensys , inc. , an affiliate of astellas pharma , inc. , or agensys , genmab a/s , or genmab , and oxford biotherapeutics ltd. , or obt . we began commercializing adcetris in august 2011 , and the commercial potential of adcetris and our ability to realize that potential remains uncertain . our success in commercializing adcetris will require , among other things , effective sales , marketing , manufacturing , distribution , information systems and pricing strategies , as well as compliance with applicable laws and regulations . the fda granted accelerated approval of 46 adcetris which means that we are , among other things , obligated to conduct specific post-approval clinical studies to confirm patient benefit as a condition of that approval . in addition , we are exploring the use of adcetris in earlier lines of therapy in patients with hodgkin lymphoma and mtcl , including salcl , and in other cd30-positive malignancies . in order to do this , we are required to conduct additional extensive clinical studies and , if these studies are successful , we intend to seek additional regulatory approvals . we and millennium are conducting three phase iii clinical trials of adcetris , one in relapsed cutaneous t-cell lymphoma , or ctcl , the alcanza trial , one in front-line advanced classical hodgkin lymphoma , the echelon-1 trial , and one in front-line mtcl , including salcl , the echelon-2 trial . the fda has agreed to special protocol assessment , or spa , agreements for all three of these phase iii clinical trials . an spa is an agreement with the fda regarding the design of the clinical trial , including size and clinical endpoints , to support an efficacy claim in a biologics license application submission to the fda if the trial achieves its primary endpoints . the primary end point in the front-line hodgkin lymphoma and front-line mtcl trials is modified progression free survival per independent review facility assessment . the primary endpoint in the ctcl trial is overall response rate , lasting at least 4 months , with adcetris in patients with cd30-positive mycosis fungoides or primary cutaneous anaplastic large cell lymphoma compared to that achieved with therapy in the control arm . story_separator_special_tag we believe the following critical accounting policies describe the more significant judgments and estimates used in the preparation of our financial statements . revenue recognition . our revenues are comprised of adcetris net product sales , amounts earned under our collaboration and licensing agreements and royalties . revenue recognition is predicated upon persuasive evidence of an agreement existing , delivery of products or services being rendered , amounts payable being fixed or determinable , and collectibility being reasonably assured . net product sales we sell adcetris through a limited number of pharmaceutical distributors . healthcare providers order adcetris through these distributors . we receive orders from distributors and ship product directly to the customer . we record product sales when title and risk of loss pass . this generally occurs upon delivery to the customer . product sales are recorded net of estimated government-mandated rebates and chargebacks , distribution fees , product returns and other deductions . reserves are established for these deductions and actual amounts incurred are offset against applicable reserves . we reflect these reserves as either a reduction in the related account receivable from the distributor , or as an accrued liability depending on the nature of the sales deduction . sales reserves are based on management 's estimates that consider payer mix in target markets , industry benchmarks and experience to date . these estimates involve a substantial degree of judgment . government-mandated rebates and chargebacks : we have entered into a medicaid drug rebate agreement , or mdra , with the centers for medicare & medicaid services . this agreement provides for a rebate to participating states based on covered purchases of adcetris . medicaid rebates are invoiced to us by participating states . we estimated medicaid rebates based on a third party study of the payer mix for 48 adcetris , information on utilization by medicaid-eligible patients who received assistance through seagen secure , our patient assistance program and experience to date . we also have completed our interim federal supply schedule , or fss , agreement under which certain u.s. government purchasers receive a discount on their purchases of adcetris . we have entered into a pharmaceutical pricing agreement , or ppa , with the secretary of health and human services which enables certain private entities that qualify for government pricing under the public health services act , or phs , to receive discounts on their qualified purchases of adcetris . under these agreements , distributors process a chargeback to us for the difference between wholesale acquisition cost and the discounted price for healthcare providers entitled to fss discounts or phs pricing . as a result of our direct-ship distribution model , we can identify the entities purchasing adcetris and this information enables us to estimate expected chargebacks for fss and phs purchases based on each entity 's eligibility for the fss and phs programs . we also review actual rebate and chargeback information to further refine these estimates . distribution fees , product returns and other deductions : our distributors charge a fee for distribution services that they perform on our behalf . we are able to calculate the amount due for each distributor based on the amount of sales to each distributor and the negotiated fee . we allow for the return of product that is within 30 days of its expiration date or that is damaged . we estimated product returns based on historical industry information of return rates for other specialty pharmaceutical products . in addition , we considered our direct-ship distribution model , our belief that product is typically not held in the distribution channel , and the expected rapid use of the product by healthcare providers . we provide reimbursement and financial assistance to qualifying patients in the u.s. and its territories who meet various financial need criteria and are underinsured or can not cover the cost of commercial coinsurance amounts through seagen secure . estimated contributions for commercial coinsurance are deducted from gross sales . these contributions are based on an analysis of expected plan utilization . these estimates are adjusted as necessary to reflect our actual experience . collaboration and license agreement revenues we use a time-based proportional performance model to recognize revenue over our performance obligation period and adopted asu 2009-13 entitled multiple-deliverable revenue arrangements , a consensus of the fasb emerging issues task force in 2011. under this standard , payments received by us are recognized as revenue over the performance period of the collaboration . collaboration and license agreements are evaluated to determine whether the multiple elements and associated deliverables can be considered separate units of accounting . to date , the deliverables under our collaboration and license agreements have not qualified as separate units of accounting . accordingly , all amounts received or due , including any upfront payments , maintenance fees , milestone payments and reimbursement payments , are recognized as revenue over the performance obligation periods of each agreement , which range from two to fourteen years for our current agreements . following the completion of the performance obligation period , such amounts received or due will be recognized as revenue when collectibility is reasonably assured . the assessment of multiple element arrangements requires judgment in order to determine the appropriate point in time , or period of time , that revenue should be recognized . our collaboration and license agreements include contractual milestones . generally , the milestone events contained in our collaboration and license agreements coincide with the progression of the collaborators ' product candidates from development , to regulatory approval and then to commercialization and fall into the following categories . development milestones in our collaborations may include the following types of events : designation of the suitability of a product candidate or initiation of preclinical studies . our collaborators must undertake significant preclinical research and studies to make a determination of a product candidate and the time from those studies or designation to initiation of a clinical trial may take several years . initiation of a phase i clinical trial .
| results of operations years ended december 31 , 2012 , 2011 and 2010 net product sales we began selling adcetris following its accelerated approval by the fda in august 2011. our net product sales increased to $ 138.2 million in 2012 compared to $ 43.2 million in 2011. our 2012 net sales include product sold in canada through a special access program , or sap , that allows physicians to request access on a limited basis to drugs that are not yet available for sale in canada . 52 we record product sales net of estimated government-mandated rebates and chargebacks , distribution fees , product returns and other deductions . these are generally referred to as gross-to-net deductions . gross-to-net deductions , net of related payments and credits , are summarized as follows : replace_table_token_6_th deductions from gross sales increased in 2012 compared to 2011 as a result of the timing of government discount programs becoming effective . we expect fluctuations in future gross-to-net discounts primarily as a result of the amount of government mandated discounts and rebates . collaboration and license agreement revenues collaboration and license agreement revenues reflect amounts earned under product collaborations and adc collaboration and co-development agreements . these revenues reflect the earned portion of payments received by us including technology access and maintenance fees , milestone payments and reimbursement payments for research and development support we provide to our collaborators . the increase in collaboration revenues from 2011 to 2012 primarily reflects amounts earned under our collaborations with millennium and abbvie . collaboration and license agreement revenues during 2010 from genentech were primarily comprised of revenues earned under our dacetuzumab collaboration with genentech that ended in june 2010. we continue to have an adc collaboration with genentech .
| 7,177 |
in addition to historical information , this discussion includes forward-looking information that involves risks and assumptions which could cause actual results to differ materially from management 's expectations . see “ forward-looking statements ” included elsewhere in this report . executive overview we are a global digital services and solution company . we operate in three reporting segments : digital data solutions ( dds ) , innodata advanced data solutions ( iads ) and media intelligence solutions ( mis ) . the following table sets forth , for the period indicated , certain financial data expressed for the two years ended december 31 , 2017 : 24 replace_table_token_2_th revenues in our dds segment , we recognize revenues based on the quantity delivered or resources utilized and in the period in which the services are performed and delivery has occurred . revenues for contracts billed on a time-and-materials basis are recognized as services are performed . revenues under fixed-fee contracts , which are not significant to the overall revenues , are recognized on the percentage of completion method of accounting , as services are performed or milestones are achieved . in our iads segment , we recognize revenues primarily based on the quantity delivered , and the period in which services are performed and deliverables are made as per contracts . a portion of our iads segment revenue is derived from licensing our software and providing access to our hosted software platform . revenue from such services are recognized monthly when access to the service is provided to the end user and there are no significant remaining obligations , persuasive evidence of an arrangement exists , the fees are fixed or determinable and collection is reasonably assured . our mis segment derives its revenues primarily from subscription arrangements and provision of enriched media analysis services . revenue from subscriptions are recognized monthly when access to the service is provided to the end user and there are no significant remaining obligations , persuasive evidence of an arrangement exists , the fees are fixed or determinable , and collection is reasonably assured . revenues from enriched media analysis services are recognized when the services are performed and delivered to the client . we consider u.s. gaap standard accounting criteria for determining whether to report revenue gross as a principal versus net as an agent . factors considered include whether we are the primary obligor , have risks and rewards of ownership , and bear the risk that a client may not pay for the services performed . if there are circumstances where the above criteria are not met and therefore we are not the principal in providing services , amounts received from clients are presented net of payments in the consolidated statements of operations and comprehensive loss . revenues include reimbursement of out-of-pocket expenses , with the corresponding out-of-pocket expenses included in direct operating costs . direct operating costs direct operating costs consist of direct payroll , occupancy costs , data center hosting fees , content acquisition costs , depreciation and amortization , travel , telecommunications , computer services and supplies , realized gain ( loss ) on forward contracts , foreign currency revaluation gain ( loss ) , and other direct expenses that are incurred in providing services to our clients . 25 selling and administrative expenses selling and administrative expenses consist of management and administrative salaries , sales and marketing costs including commissions , new services research and related software development , third-party software , advertising and trade conferences , professional fees and consultant costs , and other administrative overhead costs . adjusted ebitda performance metric in addition to measures of financial performance presented in our consolidated financial statements , we monitor “ adjusted ebitda ” to help us evaluate our ongoing operating performance including our ability to operate the business effectively . we define adjusted ebitda as net income ( loss ) attributable to innodata inc. and subsidiaries in accordance with gaap before income taxes , depreciation , amortization of intangible assets , impairment charges , changes in fair value of contingent consideration , stock-based compensation , loss attributable to non-controlling interests and interest income ( expense ) . we believe adjusted ebitda is useful to our management and investors in evaluating our operating performance and for financial and operational decision-making purposes . in particular , it facilitates comparisons of the core operating performance of our company from period to period on a consistent basis and helps us to identify underlying trends in our business . we believe it provides useful information about our operating results , enhances the overall understanding of our past performance and future prospects and allows for greater transparency with respect to key metrics used by the management in our financial and operational decision-making . we use this measure to establish operational goals for managing our business and evaluating our performance . adjusted ebitda has limitations as an analytical tool and should not be considered in isolation or as a substitute for results reported under gaap . some of these limitations are : · adjusted ebitda does not reflect tax payments , and such payments reflect a reduction in cash available to us ; · adjusted ebitda does not reflect changes in , or cash requirements for , our working capital needs and for our cash expenditures or future requirements for capital expenditures or contractual commitments ; · adjusted ebitda excludes the potential dilutive impact of stock-based compensation expense related to our workforce , interest income ( expense ) and net loss attributable to non-controlling interests , and these items may represent a reduction or increase in cash available to us ; · although depreciation and amortization are non-cash charges , the assets being depreciated and amortized may have to be replaced in the future , and adjusted ebitda does not reflect cash capital expenditure requirements for such replacements or for new capital expenditure requirements ; and · other companies , including companies in our own industry , may calculate adjusted ebitda differently from our calculation , limiting its usefulness as a comparative measure . story_separator_special_tag unremitted earnings of foreign subsidiaries amounted to approximately $ 24.8 million at december 31 , 2017. if such earnings are repatriated in the future , or are no longer deemed to be indefinitely reinvested , we would have to accrue the applicable amount of withholding taxes associated with such remittances . in 2017 , the u.s. entity deferred $ 5.2 million in payments due to its asian operating subsidiaries , which resulted in a deemed dividend that is taxable income for u.s. tax purposes under section 956 of the internal revenue code . the taxable income was offset against the net operating loss carryforwards of the u.s. entity . we have a valuation allowance on all of our u.s. deferred tax assets on account of continuing losses incurred by our u.s. entity . in addition , we also have a valuation allowance on deferred tax assets of our canadian subsidiaries . our canadian subsidiaries also have research and development expenditures available to reduce taxable income in future years , which may be carried forward indefinitely . the potential benefits from these balances have not been recognized for financial statement purposes . pursuant to an income tax audit by the indian bureau of taxation in 2009 , our indian subsidiary received a tax assessment approximating $ 356,000 including interest , through december 31 , 2017 for the fiscal year ended march 31 , 2006. we disagree with the basis of this tax assessment , have filed an appeal against the assessment and are contesting it vigorously . in january 2012 , our indian subsidiary received a final tax assessment of approximately $ 1.0 million , including interest , for the fiscal year ended march 31 , 2008 , from the indian bureau of taxation . we disagree with the basis of this tax assessment and have filed an appeal against it . due to this assessment , we recorded a tax provision amounting to $ 371,000 including interest through december 31 , 2017. in april 2015 , we received a favorable judgment whereby the appeal officer reduced the tax assessment to $ 0.3 million . under the indian income tax act , however , the income tax assessing officer has the right to appeal against the judgment passed by the appeal officer . in the third quarter of 2015 , the income tax assessing officer exercised this right and filed an appeal . based on recent experience , we believe that the tax provision of $ 371,000 including interest is adequate . in 2015 , our indian subsidiary was subject to an inquiry by the service tax bureau in india regarding the classification of services provided by this subsidiary , asserting that the services provided by this subsidiary fall under the category of online information and database access or retrieval services ( oid services ) , and not under the category of business support services ( bs services ) that are exempt from service tax as historically indicated in the subsidiary 's service tax filings . in the event the service tax bureau is successful in proving that the services fall under the category of oid services the revenues earned by our indian subsidiary would be subject to a service tax of approximately 14.5 % of the subsidiary 's revenues and this would increase our operating costs by an equivalent amount . the revenues of our indian subsidiary for the year ended december 31 , 2017 were $ 15.6 million . we disagree with the service tax bureau 's position and are vigorously contesting these assertions . from time to time we are subject to various other tax proceedings and claims for our philippines subsidiaries . we have recorded a tax provision amounting to $ 184,000 including interest through december 31 , 2017 , for several ongoing tax proceedings in the philippines . although the ultimate outcome can not be determined at this time , we continue to contest these claims vigorously . net loss we incurred a net loss of $ 5.1 million during the year ended december 31 , 2017 compared to a net loss of $ 5.5 million during the year ended december 31 , 2016 . 31 net loss for the dds segment was $ 1.7 million for the year ended december 31 , 2017 , compared to a net loss of $ 2.6 million for the year ended december 31 , 2016 , net of intersegment profits . the decline in net loss is primarily due to the decline in direct operating costs and selling and administrative expenses offset in part by the decline in revenues . in 2016 , we had a charge to our operations referred to under “ contingent consideration. ” net loss for the iads segment was $ 0.6 million for the year ended december 31 , 2017 compared to a net loss of $ 1.7 million for the year ended december 31 , 2016 , net of intersegment profits . the decline in net loss is primarily due to the increase in revenues and the decline in direct operating costs and selling and administrative expenses . net loss for the mis segment was $ 1.4 million and $ 1.2 million for the years ended december 31 , 2017 and 2016 , respectively . the increased net loss is mainly due to the increase in direct operating costs and selling and administrative expenses partially offset by an increase in revenues . adjusted ebitda adjusted ebitda for the year ended december 31 , 2017 was a loss of $ 0.7 million compared to income of $ 0.7 million for the year ended december 31 , 2016 , a decline of $ 1.4 million . adjusted ebitda for the dds segment was $ 1.2 million and $ 2.8 million for the years ended december 31 , 2017 and 2016 , respectively , a decrease of $ 1.6 million or approximately 57 % . adjusted ebitda for the iads segment was a loss of $ 0.6 million and a loss of $ 1.8 million for the years ended december 31 , 2017 and 2016 , respectively .
| results of operations year ended december 31 , 2017 compared to the year ended december 31 , 2016 revenues total revenues were $ 60.9 million for the year ended december 31 , 2017 , a 3 % decrease from $ 63.1 million for the year ended december 31 , 2016. revenues from the dds segment were $ 46.7 million and $ 50.7 million for the years ended december 31 , 2017 and 2016 , respectively , a decline of $ 4 million or approximately 8 % . the decline was primarily on account of reduced volume from a key e-book client amounting to $ 3.3 million and lower volume from other clients . the decline was partially offset by an increase in revenue for one new client for whom services began in the fourth quarter of 2016. revenues from the iads segment were $ 4.8 million and $ 4.3 million for the years ended december 31 , 2017 and 2016 , respectively , an increase of $ 0.5 million or approximately 12 % . the increase primarily reflects additional volume from synodex clients . revenues from the mis segment were $ 9.4 million and $ 8.1 million for the year ended december 31 , 2017 and 2016 , respectively , an increase of $ 1.3 million or approximately 16 % . the increase is attributable to the acquisition of the agility business in july 2016. two clients in our dds segment generated approximately 30 % and 31 % of our total revenues in the fiscal years ended december 31 , 2017 and 2016 , respectively . no other client accounted for 10 % or more of total revenues during these periods . further , in the years ended december 31 , 2017 and 2016 , revenues from non-us clients accounted for 51 % and 49 % , respectively , of our revenues .
| 7,178 |
sales in the americas were $ 51.3 million in 2014 , accounting for 63 % of total revenue and up 26 % compared with $ 40.6 million in 2013. sales of nfc and rfid products including inlays , inlay-based cards , labels , tags and stickers comprise a significant proportion of our revenues in the americas region . these strong credential segment sales were partially offset by reduced sales of smart card readers and other identity segment products in the americas region . americas sales of rfid and nfc inlays and tags in 2014 rose more than 110 % over the prior year , primarily due to high-volume orders for electronic game toy pieces , transit ticketing , and other internet of things applications . sales of smart card readers , tokens and related products in the americas decreased 48 % in 2014 reflecting a significant decline from 2013 sales levels as many of our u.s. government agency customers increased their spending in anticipation of the government shutdown in october 2013 and our federal and state agency customers have been slow to return to their normal levels of activity . sales of our physical access control solutions in the americas decreased by 4 % in 2014 compared with the previous year . by the third quarter of 2013 , our u.s. government customers had begun to adapt to their reduced budgets brought about as a result of the u.s. government sequester implemented in march 2013 and many increased their spending in anticipation of the october fiscal year-end . however , the government shutdown in the first half of october 2013 reversed these positive effects and our federal and state agency customers have been slow to return to their normal levels of activity . as a general trend , u.s. federal agencies continue to be subject to security improvement mandates under programs such as homeland security presidential directive-12 and reiterated in memoranda from the office of management and budget ( omb m-11-11 ) . we believe that our physical access control solutions remain among the most attractive offerings in the market to help agencies move towards compliance with federal directives and mandates . to expand our sales opportunities beyond the u.s. government market , we have released new products and continue to add sales resources to target customers within the healthcare , education and other commercial markets . sales in europe , the middle east and africa . sales in europe , the middle east and africa ( “ emea ” ) were $ 15.8 million in 2014 , accounting for 20 % of total revenue and down 23 % from $ 20.6 million in 2013. sales of credential products comprise a significant proportion of our revenues in the emea region for 2014 representing 41 % of revenues with identity products representing approximately 33 % of revenues and premises products representing 12 % of revenues . european sales of rfid and nfc products declined 39 % in 2014 compared with the prior year as local production of nfc inlays and tags was transferred to singapore and european sales of credential products for transit and event ticketing and other consumer applications were negatively impacted . sales of smart card readers and related products declined 17 % in 2014 compared with the prior year as the prior period experienced significant demand from a large citizen id project in the middle east . smart card reader sales in europe continues to be weak due to continuing economic uncertainty in the region . premises product sales were up 35 % as several physical access control solution dealer customers have commenced significant projects in the third quarter of 2014 in the middle east for which we provide product . sales in asia/pacific . sales in the asia/pacific region were $ 14.1 million in 2014 , accounting for 17 % of total revenue and up 8 % from $ 13.0 million in 2013. sales of smart card reader products were up 36 % in 2014 compared with the previous year as we migrated to a newer reader chip platform within our distribution channel during the last half of 2013 ; this was partially offset by weaker demand for physical access control solutions in the region throughout 2014. rfid and nfc product sales to asia/pacific customers fell 5 % in 2014 as a result of variability in the volume and timing of large orders particularly in australia . 32 seasonality and other factors . in our business overall , we may experience significant variations in demand for our offerings from quarter to quarter , and overall we typically experience a stronger demand cycle in the second half of our fiscal year . sales of our physical access control solutions to u.s. government agencies are subject to annual government budget cycles and generally are highest in the third quarter of each year ; however the impact on this seasonal trend of overall budget reductions from actions such as government shutdowns , government sequester activity or the enactment of continuing resolutions can result in delays in the completion of certain projects involving our product offerings . sales of our identity reader chips , many of which are sold to government agencies worldwide , are impacted by testing and compliance schedules of government bodies as well as roll-out schedules for application deployments , both of which contribute to variability in demand from quarter to quarter . story_separator_special_tag additionally , this business is typically subject to seasonality based on commercial and government budget cycles , with lower sales in the first half , and in particular the first quarter of the year , and higher sales in the second half of each year . in addition to the general seasonality of demand , overall u.s. government expenditure has a significant impact on demand for our products due to the portion of our revenues that we believe are sourced from u.s. government agencies . therefore , any significant reduction in u.s. government spending could adversely impact our financial results and could cause our operating results to fall below any guidance we provide to the market or below the expectations of investors or security analysts . operating expense trends base operating expenses our base operating expenses ( i.e. , research and development , selling and marketing , and general and administrative spending ) increased $ 1.0 million , or 2 % in 2014 compared with 2013. research and development spending increased $ 0.6 million , or 10 % in 2014 , primarily due to the recognition of a significant research and development tax credit in the fourth quarter of 2013 which was not available in 2014. in 2015 , we expect research and development spending to remain relatively unchanged as a percentage of revenue as we continue to invest in products and solutions to deliver trust solutions to customers in the government , enterprise , consumer and commercial markets . selling and marketing spending increased $ 1.7 million , or 9 % in 2014 from the previous year , due to increased investment in a more robust sales organization and the implementation of a global marketing organization to oversee product management and deliver new marketing programs and resources to support the sales organization . this included the global rebranding of our business to “ identiv ” and a related global training initiative for our sales force . in 2015 , we expect to increase spending on selling and marketing as we continue to invest in a more robust sales organization and put in place a global marketing organization to oversee product management and deliver new marketing programs and resources to support sales . general and administrative spending in 2014 fell $ 1.4 million , or 10 % from the previous year , primarily as a result of actions initiated in the fourth quarter of 2013 and during 2014 to simplify our business structure and streamline our operations . these actions are further discussed under “ simplification and streamlining of our business ” below . in 2015 we expect general and administrative spending to remain relatively unchanged as a percentage of revenue . additionally , to meet increasing customer demand for rfid and nfc inlays , tags , labels and cards , we have added new manufacturing capacity at our production facility in singapore . additionally , we continue to simplify our organizational structure worldwide and invest in enhancements to our erp infrastructure to support the expected growth of our business domestically and in our international markets . impairment of long-lived assets and goodwill in the year ended december 31 , 2013 , developments in our business prompted us to perform an interim impairment assessment of our goodwill and long-lived assets , as required under accounting principles generally accepted in the united states of america ( “ u.s . gaap ” ) to determine if a potential impairment existed . the resulting impairment charges negatively affected our net assets and results of operations for 2013 ; however , the recording of impairment charges had no impact on our day-to-day operations or liquidity and did not result in any outlay of cash . there were no indicators of impairment to our goodwill and long-lived assets in the year ended december 31 , 2014. for more information about impairment charges , see note 6 goodwill and intangible assets in the notes to consolidated financial statements in the accompanying annual report . 33 simplification and streamlining of our business following the appointment of mr. hart as our ceo , we undertook a strategic review of our business and initiated a series of actions to simplify our business structure and streamline our operations . as a consequence of our strategic review in late 2013 and early 2014 , we disposed of non-core or under-performing businesses , including our multicard ag , payment solution ag , multicard nederland bv and multicard u.s. subsidiaries . additionally , we ceased any additional investment in the tagtrail mobile services platform . we believe that these divestitures enhance our ability to focus our resources and investments on higher-growth and more profitable global opportunities in the security market . to further simplify our business and streamline our operations , we have restructured our organization to operate as a single , unified company rather than as a group of individual businesses . this restructuring has included the realignment of our management team and our operational activities by function ( for example engineering , sales , marketing , customer service and information technology ) , which allows us to manage key activities on a global basis . with the centralization of various functions , we have also eliminated several redundant positions . additionally , we completed the process of transferring various functions , such as corporate financial accounting and reporting from germany to the u.s. , in the third quarter of 2014. we will continue to evaluate opportunities to further reduce overhead costs and make more efficient use of our operational resources . to streamline production and operations in our credentials business , we initiated the closure of our german production plant for rfid and nfc inlays , tags , and labels in sauerlach to consolidate production in our facility in singapore . the closure of our sauerlach location was completed in the second quarter of 2014. we have in the past expanded production capacity with the addition of production and assembly lines
| results of operations the following table includes segment net revenues and segment net profit information for our premises , identity , credentials and all other business segments and reconciles gross profit to results of continuing operations before income taxes and noncontrolling interest . the results for 2014 and 2013 have been adjusted for divested businesses as discussed in note 2 discontinued operations , in the accompanying notes to consolidated financial statements in this annual report . replace_table_token_7_th 35 the following table sets forth our statements of operations as a percentage of net revenue for the periods indicated : replace_table_token_8_th fiscal 2014 compared with fiscal 2013 revenue total revenue in 2014 was $ 81.2 million , up 9 % compared with $ 74.3 million in 2013 , reflecting higher sales in our credentials segment , partially offset by lower sales in our premises and identity segments . a more detailed discussion of revenues by segment follows below . we sell our products utilizing indirect sales channels that may include oems , dealers , systems integrators , value added resellers , resellers or internet sales , although we also sell directly to end users in the government , enterprise and commercial markets to address vertical market segments including end customers in the public services administration , military and defense , law enforcement , healthcare , education , banking , industrial , retail and critical infrastructure markets . 36 in our premises segment , we provide solutions and services that enable the issuance , management and use of secure identity credentials in diverse markets . our premises segment includes products to secure buildings via an integrated access control system , and includes mx controllers , velocity management software and ts door readers . our modular utrust mx controllers are designed to be scalable , allowing customers to start with a small system and expand over time . utrust mx controllers can operate autonomously , whether as a single controller or as part of a networked system with velocity software .
| 7,179 |
contributions and company match funds are used to purchase shares of company stock story_separator_special_tag forward-looking statements this discussion contains “ forward-looking statements ” within the meaning of the private securities litigation reform act of 1995. these statements reflect our current views with respect to future events and financial performance . the words “ believe , ” “ expect , ” “ anticipate , ” “ intend , ” “ estimate , ” “ forecast , ” “ project , ” “ should ” and similar expressions are intended to identify “ forward-looking statements ” within the meaning of the private securities litigation reform act of 1995. all forecasts and projections in this document are “ forward-looking statements , ” and are based on management 's current expectations or beliefs of the company 's 17 near-term results , based on current information available pertaining to the company , including the risk factors noted under item 1a in this form 10-k. from time to time , we also may provide oral and written forward-looking statements in other materials we release to the public , such as press releases , presentations to securities analysts or investors , or other communications by the company . any or all of our forward-looking statements in this report and in any public statements we make could be materially different from actual results . accordingly , we wish to caution investors that any forward-looking statements made by or on behalf of the company are subject to uncertainties and other factors that could cause actual results to differ materially from such statements . these uncertainties and other risk factors include , but are not limited to , the risks and uncertainties set forth under item 1a in this form 10-k. we wish to caution investors that other factors might in the future prove to be important in affecting the company 's results of operations . new factors emerge from time to time ; it is not possible for management to predict all such factors , nor can it assess the impact of each such factor on the business or the extent to which any factor , or a combination of factors , may cause actual results to differ materially from those contained in any forward-looking statements . we undertake no obligation to update publicly or revise any forward-looking statements , whether as a result of new information , future events or otherwise . overview we are a leader in certain technologies that provide distinctive solutions for enclosing commercial buildings and framing art . the company 's four reportable segments are : architectural glass , architectural services , architectural framing systems and large-scale optical ( lso ) . architectural glass segment consists of viracon , a fabricator of coated , high-performance architectural glass for global markets . the architectural services segment consists of harmon , one of the largest u.s. full-service building glass installation and renovation companies ; it designs , engineers , fabricates and installs the walls of glass , windows and other curtainwall products making up the outside skin of commercial and institutional buildings . the architectural framing systems segment companies design , engineer , fabricate and finish the aluminum frames used in customized aluminum and glass window , curtainwall , storefront and entrance systems comprising the outside skin and entrances of commercial and institutional buildings . we have aggregated four operating segments into the architectural framing systems reporting segment based upon their similar products , customers , distribution methods , production processes and economic characteristics : wausau window and wall systems , a manufacturer of standard and custom aluminum window systems and curtainwall for the north american commercial construction and historical renovation markets ; tubelite , a fabricator of aluminum storefront , entrance and curtainwall products for the u.s. commercial construction industry ; alumicor , a fabricator of aluminum storefront , entrance , curtainwall and window products for the canadian commercial construction industry ; and linetec , a paint and anodize finisher of architectural aluminum and pvc shutters for u.s. markets . lso segment consists of tru vue , a manufacturer of value-added glass and acrylic for the custom picture framing and fine art markets . the following highlights the results for fiscal 2015 : consolidated revenues increased 21 percent over fiscal 2014 , or 17 percent excluding the impact of alumicor , and operating income was up 58 percent over last year . all four segments grew revenue and earnings . eps was $ 1.72 , including a $ 0.22 per share impact of a 48c tax credit . excluding this item , adjusted eps was $ 1.50 , up 58 percent over the prior year . architectural glass segment revenues improved 18 percent over fiscal 2014 and operating income improved to $ 16.4 million , as compared to $ 3.9 million in the prior year . the architectural services segment revenues increased 13 percent over fiscal 2014 and operating income improved by 66 percent . the architectural framing systems segment net sales improved 38 percent compared to fiscal 2014 , or 24 percent organic growth when adjusting out the impact of alumicor , and operating income was up 46 percent . the lso segment revenues increased by 8 percent over fiscal 2014 while operating income grew slightly over prior-year levels . consolidated backlog was $ 490.8 million at february 28 , 2015 , up 49 percent over the fiscal 2014 level . strategy architectural glass , architectural services and architectural framing systems segments these three segments serve the commercial construction market , which is highly cyclical . they participate in various phases of the value chain to design , engineer , manufacture and install customized aluminum and glass window , curtainwall , and storefront and entrance systems for commercial buildings - each with nationally recognized brands and leading positions in their target market segments . story_separator_special_tag additionally , this is the third fiscal year where we have been executing on our strategy of increasing custom picture framing sales in selected geographies outside the u.s. we now have distributors in over 30 countries , mainly in europe , that are serviced from our warehouse in the netherlands and directly from the u.s. as we leverage our products and distribution network , we will grow at a faster pace internationally than in the u.s. story_separator_special_tag style= '' font-family : inherit ; font-size:10pt ; font-style : italic ; font-weight : bold ; '' > architectural glass replace_table_token_8_th fiscal 2015 compared to fiscal 2014. fiscal 2015 net sales of $ 346.5 million increased $ 52.7 million , or 17.9 percent , over fiscal 2014. the increase for the year was primarily due to increased volume and some improvement in pricing . operating income improved to $ 16.4 million in fiscal 2015 , compared to $ 3.9 million in fiscal 2014 , an improvement of $ 12.6 million . operating margins improved to 4.7 percent in fiscal 2015 compared to 1.3 percent in fiscal 2014. as the commercial construction activity has increased , the architectural glass segment has benefited from operating leverage on volume growth and improved pricing . the segment also demonstrated positive manufacturing productivity that was partially offset by inefficiencies experienced as the business expanded its workforce to meet demand and costs incurred to restart the utah facility . fiscal 2014 compared to fiscal 2013. fiscal 2014 net sales increased $ 27.4 million to $ 293.8 million , or 10.3 percent over fiscal 2013. improved mix and pricing in our u.s. and brazilian businesses accounted for most of the increase . the remainder was due to volume growth in both our u.s. and brazilian businesses , partially offset by a decline in our export volume . operating income of $ 3.9 million in fiscal 2014 was an $ 8.3 million improvement over the fiscal 2013 loss of $ 4.4 million . operating margins improved to 1.3 percent in fiscal 2014 compared to negative 1.6 percent in fiscal 2013. the improvement in operating results was largely due to the impact of a better mix of higher value-added projects and improved pricing . the impact of volume growth and productivity improvements also contributed to the year-on-year increase in operating results . 21 architectural services replace_table_token_9_th fiscal 2015 compared to fiscal 2014. net sales of $ 230.7 million in fiscal 2015 increased $ 27.3 million , or 13.4 percent over fiscal 2014. the increase was due to volume from project timing and a general increase in project activity on stronger end markets . operating income increased $ 3.0 million to $ 7.4 million compared to $ 4.5 million in fiscal 2014. operating margin was 3.2 percent in fiscal 2015 compared to 2.2 percent in fiscal 2014. the improvements in operating results for the year were a result of operating leverage on the increased volume and increasing project margins due to our focus on project selection . fiscal 2014 compared to fiscal 2013. fiscal 2014 net sales increased $ 16.8 million over fiscal 2013 , a 9.0 percent increase . volume growth in existing and expanded geographies was the driver of this growth . fiscal 2014 operating income increased $ 5.5 million to $ 4.5 million compared to a loss of $ 1.0 million in fiscal 2013. operating margin of 2.2 percent in fiscal 2014 was an improvement of 2.7 percentage points over fiscal 2013. the improved operating results were a result of better project margins , as we have worked through lower margin projects that were bid in the bottom of the market cycle , as well as strong execution on projects flowing through revenue . architectural framing systems replace_table_token_10_th fiscal 2015 compared to fiscal 2014. fiscal 2015 net sales of $ 298.4 million increased $ 82.3 million , or 38.1 percent , over fiscal 2014. organic growth , excluding our canadian storefront and entrance business , was 23.7 percent . the organic growth in fiscal 2015 was due to double-digit volume increases at our three u.s. businesses in the segment , with the u.s. storefront and finishing businesses increasing penetration within their target sectors and geographies , the window business recovering from a prior-year gap in the schedule for complex projects , and an increase in volume due to market growth in our finishing business . fiscal 2015 operating income of $ 21.8 million was an increase of $ 6.9 million over the $ 14.9 million reported in fiscal 2014 , and operating margins improved to 7.3 percent in fiscal 2015 from 6.9 percent in fiscal 2014. the increase in operating results was due to the impact of income growth in the u.s. window , finishing and storefront businesses resulting from increased volume and good execution . this improvement was slightly offset by the negative effect of higher aluminum costs in the u.s. and canadian storefront businesses , and the impact of soft canadian markets on the canadian storefront business in the first half of the year . fiscal 2014 compared to fiscal 2013. fiscal 2014 net sales increased $ 24.9 million , or 13.0 percent , over fiscal 2013.the addition of our canadian storefront and entrance business accounted for approximately 8 percentage points of the increase for fiscal 2014. the remainder of the increase was due to improved volumes in the u.s. storefront and finishing businesses , partially offset by volume declines caused by an anticipated gap in the schedule for the window business . fiscal 2014 operating income of $ 14.9 million was up slightly over the $ 14.6 million reported in fiscal 2013 , while operating margins decreased to 6.9 percent in fiscal 2014 from 7.6 percent in fiscal 2013. the favorable impact of increased volumes in the u.s. storefront and finishing businesses was partially offset by lower sales in the window business related to the anticipated gap in the schedule for more complex projects , resulting in lower capacity utilization .
| results of operations net sales replace_table_token_6_th fiscal 2015 compared to fiscal 2014 sales increased to $ 933.9 million , up 21.1 percent over fiscal 2014 sales of $ 771.4 million . organic growth was 16.9 percent , or $ 127.5 million , when excluding the sales generated by our canadian storefront and entrance business , which was acquired in the third quarter of fiscal 2014. organic growth came primarily from increased sales volume in our architectural-based segments due to increased commercial construction activity in the u.s. the architectural glass segment accounted for approximately 32 percent of the organic growth due to increased volumes and improved pricing . increased volume in the u.s. window , storefront and finishing businesses in the architectural framing systems segment accounted for approximately 30 percent of the growth . the remaining organic growth was attributable to volume growth in the architectural services business and an improved mix of value-added products in the lso segment . fiscal 2014 compared to fiscal 2013 sales grew 10.2 percent in fiscal 2014 to $ 771.4 million compared to $ 700.2 million in fiscal 2013. the inclusion of alumicor sales since the date of acquisition accounted for 2 percentage points of this increase . improved product mix and pricing in the architectural glass segment drove approximately 4 percentage points of the increase . volume growth in the architectural services segment favorably impacted fiscal 2014 by about 2 percentage points and the remainder of the increase resulted from improved volume in our architectural framing segment 's u.s. storefront and finishing businesses . performance the relationship between various components of operations , as a percentage of net sales , is illustrated below for the past three fiscal years .
| 7,180 |
the company will accrue a liability for legal proceedings when it is probable that a liability has been incurred and the amount can story_separator_special_tag the following management 's discussion and analysis should be read in conjunction with the financial statements and the related notes thereto contained in this annual report . in addition to historical information , this discussion and analysis contains forward-looking statements within the meaning of section 27a of the securities act of 1933 , as amended , or the securities act , and section 21e of the securities exchange act of 1934 , as amended , or the exchange act . these forward-looking statements are subject to risks and uncertainties , including those under “ risk factors ” in this annual report that could cause actual results or events to differ materially from those expressed or implied by the forward-looking statements . see “ cautionary note regarding forward-looking statements ” in this annual report . unless otherwise indicated , references in this section to “ viewray , ” “ we , ” “ us , ” “ our , ” “ the company ” and “ our company ” refer to viewray , inc. and its consolidated subsidiary , viewray technologies , inc. the following discussion highlights our results of operations and the principal factors that have affected our financial condition as well as our liquidity and capital resources for the periods described , and provides information that management believes is relevant for an assessment and understanding of the statements of financial condition and results of operations presented herein . the following discussion and analysis are based on our consolidated financial statements contained in this annual report , which we have prepared in accordance with united states generally accepted accounting principles . you should read this discussion and analysis together with such consolidated financial statements and the related notes thereto . a comparison of the results for the year ended december 31 , 2020 and the results for the year ended december 31 , 2019 is provided below . our annual report on form 10-k for the year ended december 31 , 2019 includes a discussion and analysis of our financial condition and results of operations for the year ended december 31 , 2018 in part ii , item 7 “ management 's discussion and analysis of financial condition and results of operations. ” company overview we design , manufacture and market the viewray mridian® . the mridian is an innovative system that integrates high quality radiation therapy with simultaneous resonance imaging ( mri ) . there are two generations of the mridian : the first generation mridian with cobalt-60 based radiation beams and the second generation mridian linac , with more advanced linear accelerator or ‘ linac ' based radiation beams . both generations of the mridian have received 510 ( k ) marketing clearance from the fda and permission to affix the ce mark . mridian is the first radiation therapy system that enables simultaneous radiation treatment delivery and real-time mri imaging of a patient 's internal anatomy . it generates high-quality images that differentiate between the targeted tumor , surrounding soft tissue and nearby critical organs . mridian also records the level of radiation dose that the treatment area has received , enabling physicians to adapt the prescription between treatments , as needed . we believe this improved visualization and accurate dose recording will enable better treatment , improve patient outcomes and reduce side effects . key benefits to users and patients include : improved imaging and patient alignment ; the ability to adapt the patient 's radiation treatments to changes while the patient is still on the treatment table , or “ on-table adaptive treatment planning ” ; mri-based motion management ; and an accurate recording of the delivered radiation dose . physicians have already used mridian to treat a broad spectrum of radiation therapy patients with more than 45 different types of cancer , as well as patients for whom radiation therapy was previously not an option . at december 31 , 2020 , a total of 41 mridian systems , two mridian with cobalt-60 systems and 39 mridian linac systems , are in operation worldwide ( 18 in the united states and 23 outside the united states ) . in addition , six mridian linacs have been delivered to customers that are in varying stages of deployment . we currently market mridian through a direct sales force in the united states . in the rest of the world , we market mridian through a hybrid model of both a direct sales force and distribution network . we market mridian to a broad range of worldwide customers , including university research and teaching hospitals , community hospitals , private practices , government institutions and freestanding cancer centers . as with the traditional linac market , our sales and revenue cycles vary based on the particular customer and can be lengthy , sometimes lasting up to 18 to 24 months ( or more ) from initial customer contact to order contract execution . following execution of an order contract , it generally takes nine to 15 months for a customer to customize an existing facility or construct a new vault . upon the commencement of installation at a customer 's facility , it typically takes approximately 45 to 75 days for us to install mridian and perform on-site testing of the system , including the completion of acceptance test procedures . we generated product , service and distribution rights revenues of $ 57.0 million , $ 87.8 million and $ 81.0 million , and had net losses of $ 107.9 million , $ 120.2 million and $ 76.4 million during the years ended december 31 , 2020 , 2019 , and 2018 , respectively . 58 we expect to continue to incur significant expenses and operating losses for the foreseeable future . story_separator_special_tag in addition , upon repayment of the svb term loan in full , the company will make a final payment equal to 3.15 % of the original aggregate principal amount of the svb term loan . on december 31 , 2019 , we entered into the first amendment ( the “ first amendment ” ) to loan and security agreement by and among the company , viewray technologies , inc. and svb dated as of december 28 , 2018. the first amendment , among other things , amended the loan agreement to ( i ) suspend testing of the minimum revenue financial covenant for the fiscal quarter ending december 31 , 2019 , ( ii ) provide for the minimum trailing twelve-month revenue thresholds under the minimum revenue financial covenant for periods ending on the last day of fiscal quarters in fiscal years subsequent to 2020 to be determined annually at the greater of ( a ) a 25 % cushion to revenue forecasts provided by the company to svb and ( b ) 10 % year-over-year annual growth , unless otherwise agreed , ( iii ) increase the minimum liquidity ratio financial covenant from 1.50:1.00 to 1.75:1.00 and ( iv ) increase the prepayment premium from 1.00 % to 2.00 % for amounts prepaid under the svb term loan for prior to the maturity date thereof , subject to certain exceptions . on october 30 , 2020 , we entered into the second amendment ( the “ second amendment ” ) to the svb term loan . the second amendment , among other things , amended the svb term loan to ( i ) increase the term loan agreement principal amount from $ 56.0 million to $ 58.0 million , ( ii ) revise the thirty-six equal monthly payments of principal to begin on november 1 , 2022 , ( iii ) revise the maturity date to october 1 , 2025 , ( iv ) decrease the interest rate from a fixed rate of 6.3 % to a floating rate of 2.4 % above the prime rate , ( v ) increase the final payment from 3.15 % of the original aggregate principal amount to 3.7 % of the revised aggregate principal amount , ( vi ) revise the minimum trailing twelve-month revenue thresholds under the minimum revenue financial covenant for periods ending on the last day of fiscal quarters in fiscal years subsequent to 2020 , ( vii ) decrease the minimum liquidity ratio financial covenant from 1.75:1.00 to 1.70:1.00 , ( viii ) remove the minimum cash balance as a condition of the minimum revenue financial covenant and the minimum liquidity ratio financial covenant , and ( ix ) increase the prepayment premium from 2.00 % to 3.00 % for the first 30 months of the term for amounts prepaid under the svb term loan prior to the maturity date thereof , subject to certain exceptions . in connection with the execution of the second amendment , we agreed to pay the earned portion of the final payment , which equated to $ 0.8 million . the svb term loan is secured by substantially all our assets , except that the collateral does not include any intellectual property held by us ; provided , however , the collateral does include all accounts and proceeds from the sale or license of such intellectual property . additional details regarding the svb term loan are included in the section entitled “ notes to consolidated financial statements – note 5 – debt ” in the consolidated financial statements included elsewhere in this form 10-k. at-the-market offering of common stock in january and april 2017 , we agreed to sell up to a cumulative $ 50.0 million of our common stock in accordance with the terms of a sales agreement with fbr capital markets & co. , or fbr , pursuant to an at-the-market offering program in accordance with rule 415 ( a ) ( 4 ) under the securities act under our then-effective shelf registration statement . we sold 33,097 shares of our common stock at an average market price of $ 8.41 under the at-the-market offering program during fiscal year 2018 , resulting in aggregate gross proceeds of approximately $ 0.3 million . in january 2019 , we filed a registration statement with the sec which covers the offering , issuance and sale of up to a maximum aggregate offering price of $ 250.0 million of our common stock , preferred stock , debt securities , warrants , purchase contracts and or units , including up to $ 100.0 million of our common shares pursuant to an at-the-market offering program with fbr capital markets & co. , now known as b. riley securities . there were no sales of our common stock pursuant to our at-the-market offering program during fiscal year 2019 or fiscal year 2020. as of december 31 , 2020 , there was $ 100.0 million left of our common shares available under this at-the-market offering program . the consummation of the january 2021 public offering of common stock effectively reduced the common shares available for issuance under the at-the-market offering program to approximately $ 42.9 million . new orders and backlog new orders are defined as the sum of gross product orders , representing mridian contract price , recorded in backlog during the period . backlog is the accumulation of all orders for which revenue has not been recognized and which we consider valid . backlog includes customer deposits or letters of credit , except when the sale is to a customer where a deposit is not deemed necessary or customary . deposits received are recorded in a customer deposit liability account on the balance sheet . orders may be revised or 60 cancelled according to their terms or upon mutual agreement between the parties . therefore , it is difficult to predict with certainty the amount of backlog that will ultimately result in revenue . the determination of backlog includes objective and subjective judgment about the likelihood of an order contract becoming revenue .
| results of operations the following tables set forth our results of operations for the periods presented ( in thousands ) : replace_table_token_1_th comparison of the years ended december 31 , 2020 and 2019 revenue replace_table_token_2_th total revenue during the year ended december 31 , 2020 decreased by $ 30.8 million , or 35 % compared to the year ended december 31 , 2019. the decrease was primarily due to a decrease in product revenue of $ 36.8 million , slightly offset by an increase in service revenue of $ 6.0 million during the year ended december 31 , 2020 as compared to december 31 , 2019. product revenue . product revenue decreased by $ 36.8 million , or 46 % , in fiscal year 2020 compared to fiscal year 2019. the decrease was primarily attributable to six fewer mridian linac systems recognized as revenue in fiscal year 2020 as compared to fiscal year 2019. service revenue . service revenue increased by $ 6.0 million , or 77 % , in fiscal year 2020 compared to fiscal year 2019 primarily due to the increase in installed base . additionally , during 2020 the company recognized a $ 0.5 million release in deferred revenue related to a service contract , and $ 0.5 million in mridian linac software upgrades . cost of revenue replace_table_token_3_th 63 product cost of revenue . product cost of revenue decreased by $ 31.1 million , or 39 % , in fiscal year 2020 compared to fiscal year 2019. the decrease was primarily attributable to six fewer mridian linac systems recognized in fiscal year 2020 as compared to fiscal year 2019. the total cost of revenue in the year ended december 31 , 2019 was also impacted by approximately $ 9.3 million of charges , primarily driven by higher than anticipated installation costs related to historical upgrade commitments .
| 7,181 |
we charge consultants ' time at hourly rates , which vary from consultant to consultant depending on a consultant 's position , experience , expertise , and other factors . we derive a portion of our revenues from fixed-price contracts . revenues from fixed-price engagements are recognized using a proportional performance method based on the ratio of costs incurred , substantially all of which are labor-related , to the total estimated project costs . we derived approximately 15 % , 22 % , 26 % , and 21 % of our revenues from fixed-price engagements in fiscal 2012 , fiscal 2011 , the five-week transition period ended january 1 , 2011 , and fiscal 2010 , respectively . we generate substantially all of our professional services fees from the work of our own employee consultants and a portion from the work of our non-employee experts . factors that affect our professional services revenues include the number and scope of client engagements , the number of consultants we employ , the consultants ' billing rates , and the number of hours our consultants work . revenues also include reimbursements , which include travel and other out-of-pocket expenses , outside consultants , and other reimbursable expenses . our costs of services include the salaries , bonuses , share-based compensation expense , and benefits of our employee consultants . our bonus program awards discretionary bonuses based on our revenues and profitability and individual performance . costs of services also include out-of-pocket and other expenses , and the salaries of support staff whose time is billed directly to clients , such as librarians , editors , and programmers . selling , general , and administrative expenses include salaries , bonuses , share-based compensation expense , and benefits of our administrative and support staff , fees to non-employee experts for generating new business , office rent , marketing , and other costs . change in fiscal year on december 17 , 2010 , our board of directors approved a change in our fiscal year end from the last saturday in november to the saturday nearest december 31 of each year . the fiscal year change was effective beginning with our 2011 fiscal year , which began january 2 , 2011 and ended december 31 , 2011. as a result of the change , we had a five-week transition period which began november 28 , 2010 and ended january 1 , 2011. the audited results of the five-week transition period are presented herein . the fiscal year change was not effective until after the completion of our 2010 fiscal year . the fiscal year 2010 comparative financial and other information reported in the financial statements herein continues to be presented based on our prior fiscal year end calendar . for comparative analysis purposes , the `` management 's discussion and analysis of financial condition and results of operations '' presented herein compares the audited results for the five-week transition period ended january 1 , 2011 , to the unaudited results for the five-week comparative period ended january 2 , 2010. our fiscal years periodically contain 53 weeks rather than 52 weeks . fiscal 2012 , fiscal 2011 , and fiscal 2010 were 52-week years . utilization and seasonality we derive the majority of our revenues from the number of hours worked by our employee consultants . our utilization of those employee consultants is one key indicator that we use to measure our operating performance . we calculate utilization by dividing the total hours worked by our employee consultants on engagements during the measurement period by the total number of hours that our employee consultants were available to work during that period . utilization was 68 % for fiscal 2012 , 74 % for fiscal 2011 , and 67 % for fiscal 2010. utilization was 67 % for the five weeks ended january 1 , 2011 and 61 % for the five weeks ended january 2 , 2010. select underperforming practice areas , 28 including our chemicals practice and middle east operations , affected our overall performance in fiscal 2012. in connection with the restructuring plan we committed to in the third quarter of fiscal 2012 , we eliminated our chemicals practice , closed our middle east operations and repositioned other select underperforming practice areas , amongst other actions . the decrease in utilization in fiscal 2012 compared to fiscal 2011 reflects this underperformance and these restructuring actions . we experience certain seasonal effects that impact our revenue . concurrent vacations or holidays taken by a large number of consultants can adversely impact our revenue . for example , the third quarter typically experiences fewer billable hours as that is the summer vacation season for most of our offices . also , historically we have experienced fewer billable hours in our fiscal quarter that includes the holiday season , which was the fourth quarter in each of fiscal 2012 and fiscal 2011 and the first quarter for fiscal 2010. the five-week transition period ended january 1 , 2011 also included the holiday season . international operations revenues outside of the u.s. accounted for approximately 23 % , 26 % , 24 % , and 27 % of our total revenues in fiscal 2012 , fiscal 2011 , the five-week transition period ended january 1 , 2011 , and fiscal 2010 , respectively . revenue by country is detailed in note 13 to our notes to consolidated financial statements . noncontrolling interest during fiscal 2010 , neuco acquired $ 0.9 million of its outstanding shares . as a result of this transaction , our ownership interest in neuco increased from 49.15 % to 55.89 % . our ownership interest constitutes control under gaap ; therefore , neuco 's financial results have been consolidated with ours and the portion of neuco 's results allocable to its other owners is shown as `` noncontrolling interest . '' story_separator_special_tag reimbursable expenses are as follows ( in thousands ) : fiscal year ended fiscal year ended transition period fiscal year ended december 29 , 2012 ( 52 weeks ) december 31 , 2011 ( 52 weeks ) january 1 , 2011 ( 5 weeks ) november 27 , 2010 ( 52 weeks ) reimbursable expenses $ 33,530 $ 39,722 $ 2,936 $ 37,585 our normal payment terms are 30 days from invoice date . for fiscal 2012 , fiscal 2011 , the five-week transition period ended january 1 , 2011 , and fiscal 2010 , our average days sales outstanding 30 ( dsos ) at the end of the period were 98 days , 96 days , 93 days , and 101 days , respectively . we calculate dsos by dividing the sum of our accounts receivable and unbilled services balance , net of deferred revenue , at the end of the period by average daily revenues . average daily revenues are calculated by dividing period revenues by the number of days in the period . our project managers and finance personnel monitor payments from our clients and assess any collection issues . we maintain accounts receivable allowances for estimated losses resulting from disputed amounts or the inability of our clients to make required payments . we base our estimates on our historical collection experience , current trends , and credit policy . in determining these estimates , we examine historical write-offs of our receivables and review client accounts to identify any specific customer collection issues . if the financial condition of our customers were to deteriorate or disputes were to arise regarding the services provided , resulting in an impairment of their ability or intent to make payment , additional allowances may be required . a failure to estimate accurately the accounts receivable allowances and ensure that payments are received on a timely basis could have a material adverse effect on our business , financial condition , and results of operations . as of december 29 , 2012 and december 31 , 2011 , $ 9.5 million , and $ 6.5 million were provided for accounts receivable allowances , respectively . share-based compensation expense . share-based compensation cost is estimated at the grant date based on the fair value of the award and is recognized as expense over the requisite service period of the award . we use the black-scholes option-pricing model to estimate the fair value of stock options . option valuation models require the input of assumptions , including the expected life of the share-based awards , the expected stock price volatility , the risk-free interest rate , and the expected dividend yield . the expected volatility and expected life are based on our historical experience . the risk-free interest rate is based on u.s. treasury interest rates whose term is consistent with the expected life of the share-based award . expected dividend yield was not considered in the option pricing formula since we do not pay dividends and have no current plans to do so in the future . we will update these assumptions if changes are warranted . the forfeiture rate is based upon historical experience . we adjust the estimated forfeiture rate based upon our actual experience . in addition , we have performance-based awards that are valued at the fair value of shares as of the grant date and expense is recognized based on the number of shares expected to vest under the terms of the award under which they are granted . the fair value determination requires significant assumptions , including estimating future revenues and profits . valuation of goodwill and other intangible assets . we account for our acquisitions under the purchase method of accounting . goodwill represents the purchase price of acquired businesses in excess of the fair market value of net assets acquired . intangible assets consist of non-competition agreements , customer relationships , customer lists , developed technology , and trademarks , which are generally amortized on a straight-line basis over their estimated remaining useful lives ( four to ten years ) . in accordance with accounting standards codification ( `` asc '' ) topic 350 , `` intangiblesgoodwill and other '' ( `` asc topic 350 '' ) , goodwill and intangible assets with indefinite lives are not subject to amortization , but are monitored annually for impairment , or more frequently , as necessary , if events or circumstances exist that would more likely than not reduce the fair value of the reporting unit below its carrying amount . for our goodwill impairment analysis , we operate under one reporting unit . under asc topic 350 , in performing the first step of the goodwill impairment testing and measurement process , we compare our entity-wide estimated fair value to net book value to identify potential impairment . we estimate the entity-wide fair value utilizing our market capitalization , plus an appropriate control premium . market capitalization is determined by multiplying the shares outstanding on the test date by the market price of our common stock on that date . we have utilized a control premium which considers appropriate industry , market and other pertinent factors , including indications of such premiums from data on recent acquisition transactions . if our fair value is less than our net book value , the second step is performed to determine if goodwill is impaired . if we determine through the impairment evaluation process that goodwill has been impaired , we would record the impairment charge in our consolidated statement of operations . 31 late in the second quarter of fiscal 2012 , our stock price experienced a decline .
| results of operations the following table provides operating information as a percentage of revenues for the periods indicated : replace_table_token_6_th fiscal 2012 compared to fiscal 2011 revenues . revenues decreased by $ 34.8 million , or 11.4 % , to $ 270.4 million for fiscal 2012 from $ 305.2 million for fiscal 2011. our fiscal 2012 results were negatively impacted by select underperforming practice areas , including our chemicals practice and middle east operations , which affected our overall performance compared to fiscal 2011. in connection with the restructuring plan we committed to in the third quarter of fiscal 2012 , we eliminated our chemicals practice , closed our middle east operations and repositioned other select underperforming practice areas , amongst other actions . utilization decreased to 68 % for fiscal 2012 from 74 % for fiscal 2011 reflecting this underperformance and these restructuring actions . overall , revenues outside of the u.s. represented approximately 23 % of total revenues for fiscal 2012 , compared with approximately 26 % of total revenues for the fiscal 2011. this decrease was due primarily to our management consulting business , particularly to our chemicals practice and middle east operations , which were eliminated in the third quarter of fiscal 2012 , and our management consulting activity in europe where economic uncertainties affected our performance , primarily during the earlier part of fiscal 2012. revenues derived from fixed-price engagements decreased to 15 % of total revenues for fiscal 2012 compared with 22 % for fiscal 2011. this decrease was due primarily to the previously mentioned decrease in our management consulting business , as the management consulting business typically has a higher concentration of fixed-price service contracts . another factor contributing to our overall revenue decline was a decrease in client reimbursable expenses , which are pass-through expenses that carry little to no margin .
| 7,182 |
the largest source of such support is the federal programs of student financial assistance under title iv of the higher education act of 1965 , as amended , commonly referred to as the title iv programs , which are administered by the u.s. department of education ( the `` doe `` ) . during the years ended december 31 , 2014 , 2013 and 2012 , approximately 80 % , 80 % and 81 % , respectively , of story_separator_special_tag you should read the following discussion together with the “ selected financial data , ” “ forward looking statements ” and the consolidated financial statements and the related notes thereto included elsewhere in this annual report on form 10-k. this discussion contains forward-looking statements that are based on management 's current expectations , estimates and projections about our business and operations . our actual results may differ materially from those currently anticipated and expressed in such forward-looking statements as a result of a number of factors , including those we discuss under “ risk factors ” and “ forward looking statements ” and elsewhere in this annual report on form 10-k. story_separator_special_tag font-family : 'times new roman ' , times , serif ; font-size : 10pt '' > · educational services and facilities . major components of educational services and facilities expenses include faculty compensation and benefits , expenses of books and tools , facility rent , maintenance , utilities , depreciation and amortization of property and equipment used in the provision of education services and other costs directly associated with teaching our programs excluding student services which is included in selling , general and administrative expenses . · selling , general and administrative . selling , general and administrative expenses include compensation and benefits of employees who are not directly associated with the provision of educational services ( such as executive management and school management , finance and central accounting , legal , human resources and business development ) , marketing and student enrollment expenses ( including compensation and benefits of personnel employed in sales and marketing and student admissions ) , costs to develop curriculum , costs of professional services , bad debt expense , rent for our corporate headquarters , depreciation and amortization of property and equipment that is not used in the provision of educational services and other costs that are incidental to our operations . selling , general and administrative expenses also includes the cost of all student services including financial aid and career services . all marketing and student enrollment expenses are recognized in the period incurred . discontinued operations 2014 event on december 3 , 2014 , our board of directors approved a plan to cease operations at five training sites in florida . we performed a cost benefit analysis on several schools and concluded that the training sites contained a high fixed cost component and has had difficulty attracting enough students due to high competition to maintain a stable profit margin . accordingly , we ceased operations at these campuses as of december 31 , 2014. this was a strategic shift to close all of our training sites and all locations that do not accept title iv payments . the results of operations of these campuses are reflected as discontinued operations in the consolidated financial statements . the results of operations at these five training sites for the three year periods ended december 31 , 2014 were as follows ( in thousands ) : replace_table_token_6_th amounts include impairments of goodwill and long-lived assets for these campuses of $ 2.1 million for the year ended december 31 , 2014 . 2013 event on june 18 , 2013 , our board of directors approved a plan to cease operations at four campuses in ohio and one campus in kentucky consisting of our dayton institution and its branch campuses . federal legislation implemented on july 1 , 2012 that prohibits “ ability to benefit ” ( “ atb ” ) students from participating in federal student financial aid programs led to a dramatic decrease in the number of students attending these five campuses . accordingly , the company ceased operations at these campuses as of december 31 , 2013. the results of operations of these campuses are reflected as discontinued operations in the consolidated financial statements . 39 index the results of operations at these five campuses for the two year periods ended december 31 , 2013 were as follows ( in thousands ) : replace_table_token_7_th amounts include impairments of goodwill and long-lived assets for these campuses of $ 2.3 million and $ 8.7 million for the years ended december 31 , 2013 and 2012 , respectively . 2012 event on july 31 , 2012 , our board of directors approved a plan to cease operations at seven campuses . the adjustments made to our business model to better align with the doe 's increased emphasis on student outcomes and our efforts to comply with the 90/10 rule and cohort default rates greatly impacted the population at these campuses . in addition , the current economic environment and regulatory changes under the consolidated appropriations act , 2012 , which eliminated the ability to enroll atb students , have made these campuses no longer viable . accordingly , we ceased operations at these campuses as of december 31 , 2012. the results of operations are reflected as discontinued operations in the consolidated financial statements . story_separator_special_tag we test our goodwill for impairment annually , or whenever events or changes in circumstances indicate an impairment may have occurred , by comparing its fair value to its carrying value . impairment may result from , among other things , deterioration in the performance of the acquired business , adverse market conditions , adverse changes in applicable laws or regulations , including changes that restrict the activities of the acquired business , and a variety of other circumstances . if we determine that impairment has occurred , we are required to record a write-down of the carrying value and charge the impairment as an operating expense in the period the determination is made . in evaluating the recoverability of the carrying value of goodwill and other indefinite-lived intangible assets , we must make assumptions regarding estimated future cash flows and other factors to determine the fair value of the acquired assets . changes in strategy or market conditions could significantly impact these judgments in the future and require an adjustment to the recorded balances . goodwill represents a significant portion of our total assets . as of december 31 , 2014 , goodwill was approximately $ 22.2 million , or 10.4 % , of our total assets which decreased from approximately $ 62.5 million , or 20.4 % at december 31 , 2013. this decrease was due to the impairment of goodwill in the three months ended september 30 , 2014. we test our goodwill for impairment using a two-step approach . the first step is conducted utilizing the multiple of earnings and discounted cash flow approach and comparing the carrying value of our reporting units to their implied fair value . if necessary , the second step is conducted comparing the implied fair value of goodwill for our reporting units with the carrying amount of that goodwill . at december 31 , 2014 , we conducted our annual test for goodwill impairment and determined we did not have an impairment . the fair value of our reporting units were determined using level 3 inputs included in our multiple of earnings and discounted cash flow approach . we concluded that as of september 30 , 2014 there was an indicator of potential impairment as a result of a decrease in market capitalization and , accordingly , we tested goodwill for impairment . the test indicated that 10 of our reporting units were impaired , which resulted in a pre-tax non-cash charge of $ 39.0 million for the three months ended september 30 , 2014 ( $ 1.9 million of which is included in discontinued operations ) . at december 31 , 2013 , we conducted our annual test for goodwill impairment and determined we did not have an impairment . the fair value of our reporting units were determined using level 3 inputs included in our multiple of earnings and discounted cash flow approach . as of june 30 , 2013 , we concluded that current period losses at two reporting units , which resulted in a deterioration of current and projected cash flows , was an indicator of potential impairment and , accordingly , tested goodwill and long-lived assets for impairment . the tests indicated that these two reporting units were impaired , which resulted in a pre-tax non-cash charge of $ 3.1 million for the three months ended june 30 , 2013. at december 31 , 2012 , we tested goodwill for impairment and determined that an impairment of approximately $ 18.3 million ( $ 4.5 million included in discontinued operations ) existed for seven of our reporting units . we concluded that the decrease in our market capitalization as of june 30 , 2012 was an indicator of potential impairment and , accordingly , we tested goodwill for impairment . the tests indicated that five of our reporting units were impaired as a result of lower than expected student population , which resulted in a pre-tax charge of $ 15.4 million in the second quarter of 2012 ( $ 8.4 million included in discontinued operations ) . the fair values of these reporting units were estimated using the expected present value of future cash flows . no other reporting unit 's carrying goodwill amount exceeded or approximated its implied value . stock-based compensation . we currently account for stock-based employee compensation arrangements by using the black-scholes valuation model and utilize straight-line amortization of compensation expense over the requisite service period of the grant . we make an estimate of expected forfeitures at the time options are granted . 41 index the fair value of the stock options used to compute stock-based compensation is the estimated present value at the date of grant using the black-scholes option pricing model . during 2014 and 2013 , there were no new stock option grants . the weighted average fair values of options granted during 2012 was $ 2.52 using the following weighted average assumptions for grants : at december 31 , 2012 expected volatility 51.25 % expected dividend yield 4 % expected life ( term ) 4.65 years risk-free interest rate 0.87 % weighted-average exercise price during the year $ 7.79 the expected volatility considers the volatility of our common stock that has been traded for a period commensurate with the expected life . the expected term of options granted represents the period of time that options granted are expected to be outstanding based on historical experience . the risk-free rate used is based on the published u.s. treasury yield curve in effect at the time of grant for instruments with a similar life . the 2012 expected dividend yield presumes a set dividend rate based on the current dividend yield . income taxes . we account for income taxes in accordance with fasb asc topic 740 , “ income taxes ” ( “ asc 740 ” ) .
| general we are a leading provider of diversified career-oriented post-secondary education as measured by total enrollment . we offer recent high school graduates and working adults degree and diploma programs in five areas of study : automotive technology , health sciences , skilled trades , hospitality services and business and information technology . each area of study is specifically designed to appeal to and meet the educational objectives of our student population , while also satisfying the criteria established by industry and employers . the resulting diversification limits dependence on any one industry for enrollment growth or placement opportunities and broadens potential branches for introducing new programs . as of december 31 , 2014 , we enrolled 13,278 students at our 31 campuses across 15 states . of those schools , 15 are located in the states of new jersey , connecticut and pennsylvania . our campuses , a majority of which serve major metropolitan markets , are located throughout the united states . five of our campuses are destination schools , which attract students from across the united states and , in some cases , from abroad . our other campuses primarily attract students from their local communities and surrounding areas . all of our schools are either nationally or regionally accredited and are eligible to participate in federal financial aid programs . our revenues consist primarily of student tuition and fees derived from the programs we offer . our revenues are reduced by scholarships granted to our students . we recognize revenues from tuition and one-time fees , such as application fees , ratably over the length of a program , including internships or externships that take place prior to graduation . we also earn revenues from our bookstores , dormitories , cafeterias and contract training services . these non-tuition revenues are recognized upon delivery of goods or as services are performed and represent less than 10 % of our revenues .
| 7,183 |
we re-measure unit awards classified as liabilities at fair value on the close of business at each reporting period end until settlement date . fair value at each re-measurement date is the closing price of our limited partner units at each period end reduced by the present value of any projected per unit distributions during the remainder of the requisite service period that will not be paid to the participant . compensation expense for unit awards classified as liabilities is the number of unit awards classified as liabilities less estimated forfeitures , multiplied by the re-measured fair value of the awards , multiplied by the percentage of the requisite service period completed at each period end , multiplied by story_separator_special_tag introduction we are a publicly traded limited partnership formed to own , operate and acquire a diversified portfolio of complementary energy assets . we are principally engaged in the transportation , storage and distribution of petroleum products , such as gasoline , diesel fuel and crude oil . as of december 31 , 2011 , our three operating segments included : petroleum pipeline system , comprised of approximately 9,600 miles of pipeline and 50 terminals ; petroleum terminals , which includes storage terminal facilities ( consisting of six marine terminals located along coastal waterways and crude oil storage in cushing , oklahoma ) and 27 inland terminals ; and ammonia pipeline system , representing our 1,100-mile ammonia pipeline and six terminals . the following discussion provides an analysis of the results for each of our operating segments , an overview of our liquidity and capital resources and other items related to our partnership . the following discussion and analysis should be read in conjunction with our consolidated financial statements and related notes included in this annual report on form 10-k for the year ended december 31 , 2011. recent developments debt offering . in august 2011 , we issued an additional $ 250.0 million of our 4.25 % notes due 2021. we sold these notes at a price of 104.1 % of their face value , or $ 260.2 million . net proceeds from this offering , including accrued interest of $ 0.7 million , were $ 258.7 million after underwriting discounts of $ 1.6 million and other offering costs of $ 0.6 million . proceeds from this debt offering were used to repay all of the borrowings outstanding under our revolving credit facility , which totaled $ 193.0 million at the time , and for general partnership purposes , including investments in capital expenditures . pipeline conversion to crude service . in september 2011 , we announced that we are proceeding with the reversal and conversion of a large portion of our houston-to-el paso pipeline to crude oil service . the reversed pipeline system , which will transport crude oil from crane , texas to refiners or third-party pipelines in houston and texas city , texas , is expected to have an initial capacity of approximately 135,000 barrels per day . we have received long-term committed volumes for a portion of this capacity . the tariffs we expect to charge on crude oil movements on this pipeline after the reversal will be between $ 1.38 and $ 2.30 per barrel , depending upon volumes committed and ultimate destination . this project is expected to cost approximately $ 245.0 million , which we expect to finance through the cash and cash equivalents we have on hand and borrowings from our revolving credit facility . subject to receiving the necessary permits and regulatory approvals , we expect the reversed pipeline to be operational by early 2013. we expect this project will have a materially favorable impact on our results of operations beginning in 2013. prior to the completion of this pipeline reversal project , we expect to discontinue substantially all of the pipeline linefill activities that we currently conduct in connection with our operation of the houston-to-el paso pipeline and we expect to sell substantially all of the associated linefill inventory which , at december 31 , 2011 , was 0.7 million barrels of refined petroleum products with a carrying value of approximately $ 79.7 million . we will be able to shift the volumes of refined products we are currently transporting on the houston-to-el paso pipeline section to a nearby pipeline section which we own ; therefore , we do not expect a loss of revenues or operating margin from these movements as a result of the reversal . new revolving credit facility . in october 2011 , we terminated our existing revolving credit facility that would have matured in september 2012 and entered into a new revolving credit facility . the new facility has total borrowing capacity of $ 800 million and matures in october 2016. borrowings under the new facility are unsecured and bear interest at libor plus a spread ranging from 0.875 % to 1.75 % based on our credit ratings and amounts outstanding . additionally , a commitment fee is assessed on undrawn amounts at a rate between 0.125 % and 0.30 % , depending on our credit ratings , which was 0.2 % at december 31 , 2011. mf global holdings ltd. bankruptcy . in october 2011 , mf global holdings ltd. , the parent of mf global inc. ( “ mf global ” ) , filed for bankruptcy protection under chapter 11 of the u.s. bankruptcy laws , and a trustee was appointed to oversee the liquidation of mf global under the securities investor protection act ( `` sipa '' ) . at that time , mf global served as our sole 33 clearing agent for new york mercantile exchange ( `` nymex '' ) futures contracts . the chicago mercantile exchange ( “ cme ” ) requires us to maintain adequate margin against our nymex positions , which our clearing agent is required to hold on our behalf in a segregated account . in october 2011 , mf global disclosed to the cme that it had a “ significant shortfall ” in its segregated customer accounts . story_separator_special_tag although our petroleum products blending , fractionation and other commodity-related activities generate significant revenues from the sale of petroleum products and the associated gains/losses from the applicable associated derivative agreements , we believe the product margin from these activities , which takes into account the related product purchases , better represents its importance to our results of operations . petroleum terminals . our petroleum terminals segment is comprised of storage terminals and inland terminals , which store and distribute petroleum products throughout 13 states . our storage terminals are comprised of six facilities that have marine access and are located near major refining hubs along the u.s. gulf and east coasts . we also have a crude oil terminal in cushing , oklahoma , one of the largest crude oil trading hubs in the u.s. these storage terminals principally serve refiners , marketers and traders . we earn revenues at our storage terminals primarily from storage and throughput fees . our inland terminals are part of a distribution network located principally throughout the southeastern u.s. these inland terminals are connected to large , third-party interstate pipelines and are utilized by retail suppliers , wholesalers and marketers to transfer gasoline and other petroleum products from these pipelines to trucks , railcars or barges for delivery to their final destination . we earn revenues at our inland terminals primarily from fees we charge based on the volumes of refined petroleum products distributed from these locations and from ancillary services such as additive injections and ethanol blending . ammonia pipeline system . our ammonia pipeline system transports and distributes ammonia from production facilities in texas and oklahoma to various distribution points in the midwest for use as an agricultural fertilizer . we generate revenues principally from volume-based fees for the transportation of ammonia on our pipeline system . growth projects we remain focused on growth and have significantly increased our operations over the past several years through organic growth projects and acquisitions that expand or upgrade our existing facilities . our current expansion projects are driven by : demand for storage because of volatility of petroleum products prices , which has provided significant opportunity for us to build tankage along our petroleum pipeline system and at our storage terminals , backed by long-term customer commitments ; and demand for crude oil and condensate storage and transportation services , which has provided the opportunity for us to reverse a significant portion of our houston-to-el paso pipeline segment and significantly expand our crude oil and condensate storage and transportation infrastructure in the houston and corpus christi areas . we spent $ 198.9 million and $ 549.8 million on acquisitions and growth projects during 2011 and 2010 , respectively . further , we currently expect to spend approximately $ 430.0 million in 2012 on projects now underway , with additional spending of approximately $ 90.0 million in 2013 to complete these projects . these expansion capital estimates exclude potential acquisitions or spending on more than $ 500.0 million of other potential growth projects in earlier stages of development . results of operations we believe that investors benefit from having access to the same financial measures utilized by management . operating margin , which is presented in the following tables , is an important measure used by management to evaluate the economic performance of our core operations . operating margin is not a gaap measure , but the components of operating margin are computed using amounts that are determined in accordance with gaap . a reconciliation of operating margin to operating profit , which is its nearest comparable gaap financial measure , is included in the following tables . operating profit includes expense items , such as depreciation and amortization expense and g & a costs , which management does not consider when evaluating the core profitability of our operations . additionally , product margin , which management primarily uses to evaluate the profitability of our commodity-related activities , is provided in these tables . product margin is a non-gaap measure ; however , its components of product sales and product purchases are determined in accordance with gaap . 35 year ended december 31 , 2010 compared to year ended december 31 , 2011 replace_table_token_10_th ( a ) product margin does not include depreciation or amortization expense . ( b ) excludes capacity leases . 36 transportation and terminals revenues increased by $ 99.8 million , resulting from : an increase in petroleum pipeline system revenues of $ 53.8 million . revenues from the pipelines we acquired from bp pipelines ( north america ) , inc. ( `` bp '' ) in september 2010 contributed $ 16.8 million of this increase . otherwise , revenues increased $ 37.0 million primarily attributable to : ◦ a 4 % increase in the average per-barrel tariff rate , going from $ 1.276 to $ 1.321 , principally reflecting the 7 % tariff rate increase we implemented on july 1 , 2011 ; ◦ a 2 % increase in transportation volumes driven primarily by higher demand for diesel fuel ; and ◦ higher lease storage revenue primarily due to new tanks added to our system during 2010 and 2011 , higher capacity lease revenues due to increased demand and increased fees for terminal throughput , ethanol and other blending services ; an increase in petroleum terminals revenues of $ 38.3 million , of which approximately 40 % was contributed by the increase in revenues from our cushing , oklahoma storage assets acquired in september 2010. otherwise , storage terminal revenues increased principally due to leases of newly constructed tanks at cushing , oklahoma and galena park , texas that were placed in service over the last year . in addition , inland revenues increased primarily from higher ethanol and additive fees ; and an increase in ammonia pipeline system revenues of $ 8.7 million . hydrostatic testing performed on the ammonia pipeline during 2010 rendered the pipeline unavailable for shipments for much of that year , which resulted in lower revenues .
| results of operations above , the change in equity-based compensation is discussed in footnote ( 2 ) above and a discussion of our maintenance capital expenditures is provided in capital requirements below . a discussion of the other components of dcf are as follows : adjustments for asset retirements and impairments were lower in the 2010 period because of a $ 3.0 million insurance settlement , which we excluded from our distributable cash flow calculations . the amounts for 2011 include an impairment expense of $ 2.8 million ; and 41 the changes in distributable cash flows from commodity-related adjustments is primarily due to the impact of product price changes during each period on economic hedges that do not qualify for hedge accounting treatment . liquidity and capital resources cash flows and capital expenditures net cash provided by operating activities was $ 269.4 million , $ 424.7 million and $ 577.3 million for the years ended december 31 , 2009 , 2010 and 2011 , respectively . the $ 152.6 million increase from 2010 to 2011 was primarily attributable to : ◦ a $ 113.3 million increase in net income , excluding the increase in non-cash depreciation and amortization expense and equity-based incentive compensation expense ; ◦ a $ 28.8 million increase resulting from a $ 14.4 million increase in cash due to the elimination of restricted cash due to our purchase of a private group 's investment in a cushing , oklahoma storage project ( `` mco '' ) during 2011 versus a decrease in cash of the same amount associated with the formation of mco during 2010. mco 's cash on hand was unavailable to us for our partnership matters and was recorded as restricted cash on our consolidated balance sheet at december 31 , 2010 ; ◦ a $ 23.0 million increase resulting from a $ 5.8 million decrease in trade accounts receivable and other accounts receivable
| 7,184 |
for the fuller brands segment , selling , administrative , and engineering expenses for 2005 were 44.9 % of net sales , as compared to 45.3 % and 44.4 % for the years ended march 31 , 2004 and 2003 , respectively . the decrease in the percentage in 2005 over 2004 is a function of certain non-recurring selling and marketing expenses incurred in 2004 , prior to the company 's entry into the retail marketplace . as the company 's business through the home shopping network and retail industry increases , the segment 's selling , administrative , and engineering expenses may increase as a percentage of net sales , as these distribution channels have higher selling costs . the increase in the percentage in 2004 versus 2003 reflects additional expense related to increased sales and marketing management , packaging revisions , and other initiatives related to fuller 's expansion into the retail marketplace . the increase also reflects the reduction in revenues in all operations . during 2004 's fourth quarter , the segment undertook a comprehensive review of its fixed costs , which resulted in small reductions in personnel and other discretionary spending . in the imaging segment , selling , administrative , and engineering costs for 2005 , exclusive of the imaging restructuring charges , were 35.9 % of net sales , as compared to 35.2 % and 34.2 % for the years ended march 31 , 2004 and 2003 , respectively . the increase in 2005 versus 2004 , as a percentage of net sales reflects revenue declines exceeding expense containment efforts in the segment 's domestic and european operations . this was offset somewhat by increased revenues with minimal increases in expenses at cpac asia and cpac africa . the increase in 2004 versus 2003 is largely a result of revenues declining at a greater rate than expenses , especially in the segment 's domestic operations . while the imaging 15 restructuring plan helped eliminate duplicate costs in the domestic imaging operations , the segment also continued to reduce fixed costs in light of falling revenues , including headcount and other discretionary spending during the fourth quarter of 2004. the company continued to seek fixed cost reductions in its european operations , which were impacted by increasing digital imaging competition , as well as adverse currency pressures . research and development expenses research and development expenses , as a percentage of sales were approximately 1 % of net sales for 2005 , versus 0.8 % and 0.7 % of net sales for 2004 and 2003 , respectively . the level of expense reflects the company 's emphasis of focusing on improving existing products or developing complementary products , based on customer needs . for 2006 , the fuller brands segment will need to continue developing new products to accelerate its entry into the retail marketplace and sustain its growing television shopping business , stimulate recruitment efforts in its direct selling business , as well as continuing to enhance ctg 's commercial cleaning product offerings to compete in the highly-competitive janitorial sanitation business . in the imaging segment , continued effort will be placed on developing easy-to-use prepackaged , chemical formulations and innovative wrap-around-programs , involving chemistry , paper , and equipment for use in domestic and overseas imaging markets . these efforts are not expected to increase research and development expenses , as a percentage of sales , significantly from prior periods . net interest expense net interest expense ( interest expense less interest income ) decreased 15.2 % in 2005 versus 2004. lower foreign debt levels in 2005 versus 2004 contributed to the decline . net interest expense ( interest expense less interest income ) increased 3.2 % in 2004 versus 2003. while interest expense declined , due to lower debt levels , interest income declined even greater , due to lower levels of invested cash . income taxes the company 's consolidated income tax provision and resulting effective tax rate for 2005 were impacted significantly by the $ 3.2 million valuation reserve that was recorded in the fourth quarter against the company 's domestic net deferred tax assets . a `` soft '' fourth quarter for the fuller brands segment , coupled with higher than expected fourth quarter operating losses in the domestic imaging segment , increased the company 's year-to date loss , where , under criteria specified in sfas no . 109 , `` accounting for income taxes '' ( cumulative losses experienced over several years ) , the company is no longer able to assert that realization of its future tax benefits was `` more likely than not . '' the income tax provision also reflects a tax benefit from the carry-back of substantially all of the domestic net operating losses against previously remitted federal taxes . in fiscal 2006 and beyond , any future domestic net operating losses would only be available to offset future taxable income . in addition , the 2005 provision reflects the benefits of the cpac asia tax holiday in thailand ( computed to be approximately $ 371,000 or $ 0.08 per diluted share , under a seven-year tax holiday on manufacturing operation earnings , expiring in august 2006 ) , as well as the utilization of cpac africa 's net operating loss carryforward to offset taxable income . cpac europe and cpac italia 's tax provisions in 2005 were not material . the company 's provision also recognized a tax liability based on `` the american jobs creation act of 2004 '' ( the act ) , which became law in the united states on october 22 , 2004. included in the act was a provision that allowed for a one-time tax dividends received deduction of 85 % of the foreign earnings remitted by foreign subsidiaries to u.s. parent companies through december 31 , 2005. the earnings available for remittance were those earnings previously designated as reinvested indefinitely . the company evaluated the legislation and determined that certain previously unremitted earnings related only to its wholly-owned foreign subsidiary , cpac asia imaging products limited , would be repatriated . story_separator_special_tag ctg had been impacted by several factors , including continued , reduced operating performance ( see note 6 to the consolidated financial statements ) . foreign operations the results of operations for the company 's foreign subsidiaries , including the impact of currency exchange , are reported on a three-month lag . intercompany sales between foreign operations have been eliminated in discussions of year-over-year fluctuations on a u.s. dollar basis , as well as disclosures concerning amounts and percentages , with foreign currency impacts excluded . combined net sales for the company 's operations in thailand , south africa , belgium , and italy for fiscal 2005 as compared to 2004 decreased approximately $ 370,000 or 2.5 % ( or decreased approximately $ 1,489,000 or 10.0 % , excluding the impact of currency exchange ) . for fiscal 2005 cpac europe and cpac italia net sales combined decreased 15.9 % ( decreased 23.1 % , after removing currency impact ) . cpac asia 's sales decreased less than 1.0 % ( decreased 3.0 % , after 17 removing currency impact ) . cpac africa continued to demonstrate growth , as net sales increased approximately $ 1,083,000 or 95.7 % ( $ 727,000 or 64.3 % , after removing currency impact ) . combined net sales for the company 's operations in thailand , south africa , belgium , and italy for fiscal 2004 as compared to 2003 increased approximately $ 1,940,000 or 14.9 % ( or increased approximately $ 95,000 or 0.7 % , excluding the impact of currency exchange ) . for fiscal 2004 cpac europe and cpac italia net sales combined increased 10.5 % ( decreased 6.3 % , after removing currency impact ) . cpac asia 's sales increased 17.2 % ( increased 13.1 % , after removing currency impact ) . cpac africa 's net sales increased approximately $ 380,000 or 51 % ( $ 62,000 or 8.2 % , after removing currency impact ) . combined pretax profits for fiscal 2005 , prior to minority interests and equity in losses of tura , decreased approximately $ 215,000 ( approximately $ 318,000 , excluding impact of currency exchange ) , as compared to fiscal 2004. cpac europe and cpac italia 's pretax profits combined decreased approximately $ 664,000 ( approximately $ 687,000 , excluding impact of currency exchange ) . cpac africa 's fiscal 2005 pretax income increased approximately $ 233,000 ( approximately $ 182,000 , after removing currency impact ) , while cpac asia 's profits were up approximately $ 216,000 ( approximately $ 187,000 , after removing currency impact ) over fiscal 2004. combined pretax profits for fiscal 2004 , prior to minority interests and equity in losses of tura , increased approximately $ 412,000 ( approximately $ 286,000 , excluding impact of currency exchange ) , as compared to fiscal 2003. cpac europe and cpac italia 's pretax profits combined increased approximately 23 % ( approximately 3 % , excluding impact of currency exchange ) . cpac africa 's fiscal 2004 pretax income declined approximately $ 111,000 ( approximately $ 134,000 , after removing currency impact ) , while cpac asia 's profits were up approximately $ 446,000 ( approximately $ 410,000 , after removing currency impact ) over fiscal 2003. over $ 333,000 of this increase resulted from the fiscal 2003 cpac asia bad debt provision increase , due to a troubled distributor account . as disclosed in the consolidated financial statements , the company accounts for its 40 % investment in tura under the equity method . however , the company 's recognition of the 40 % share of the losses of tura during the first six months of fiscal 2005 effectively reduced the basis of its investment to zero . the company was not obligated to fund any losses or record its 40 % share of tura equity earnings or losses in future periods , unless tura became profitable . over the last six months , tura attempted to restructure its operations by reducing its workforce , replacing its former president , and terminating financial management in an effort to reduce operating losses and improve cash flows . however , tura was unsuccessful and is currently undergoing liquidation under german government supervision . during 2004 , the company increased the investment in tura to 40 % requiring the change in accounting for this investment to the equity method . commencing in the second quarter of fiscal 2004 , the company recorded its 40 % share of tura 's net loss , plus the amortization of the purchase price ( in fiscal 2003 and the first quarter of fiscal 2004 , the company recorded its 19 % of tura 's net loss , plus the amortization of the purchase price ) . tura 's results reflected the worldwide economic pressures on the traditional film markets , as well as the stronger euro against the dollar . in may 2004 the company met with the investee 's primary lending institution to discuss the financial condition of tura , who was experiencing significant cash flow difficulties , due to continuing operating losses . while tura was granted an extension until september 30 , 2004 on the maturity date of its working capital line of credit , the ability for tura to meet its normal day-to-day operating expenses was conditional on obtaining future , capital infusions . although the company had the option of increasing its ownership stake to 51 % by october 2004 , it declined to do so . after recognition of approximately $ 595,000 and $ 180,000 of equity losses , including $ 160,000 and $ 145,000 of excess purchase price amortization for the years ended march 31 , 2004 and 2003 , respectively , the company believed that the ability of tura to generate sufficient future cash flows was uncertain . tura 's financial statements showed current liabilities exceeding current assets , certain debt obligations having covenant violations , and operating losses continuing through tura 's first quarter .
| results of operations for purposes of financial reporting , the company operates in two industry segments : the fuller brands segment , which is involved in developing , manufacturing , distributing , and marketing branded consumer and commercial cleaning and personal care products in north america and internationally , and the cpac imaging segment , which includes the company 's color photographic , health care , and graphic arts imaging operations in the united states , belgium , italy , south africa , and thailand . the products of each segment are manufactured and marketed both in the u.s. and in other parts of the world . sales between segments are not material . the company 's financial results for the fiscal year ended march 31 , 2005 include : an after tax charge of $ 0.10 per diluted share for an impairment loss recognized on an investment it owned ; an after tax charge of $ 0.05 per diluted share for its 13 equity in losses of tura ( see note 2 to the consolidated financial statements ) ; and an after tax charge of $ 0.65 per diluted share for the recognition of a valuation reserve on its consolidated deferred tax assets ( see note 10 to the consolidated financial statements ) . the company 's financial results for the fiscal year ended march 31 , 2004 include : an after-tax charge of $ 0.15 per diluted share for the imaging restructuring initiative ( see note 9 to the consolidated financial statements ) ; an after-tax charge of $ 0.12 per diluted share for its 40 % equity in losses from tura , ag of duren , west germany ( now required to be recognized due to the change in accounting as a result of cpac 's increased ownership ) ; and an after-tax charge of $ 0.47 per diluted share related to the recognition of an impairment loss on the company 's investment in tura ( see note 2 to the consolidated financial statements regarding tura charges ) .
| 7,185 |
2017-12 , “ derivatives and hedging ( topic 815 ) : targeted improvements to accounting for hedging activities ” ( “ asu 2017-12 ” ) , which amends the hedge accounting recognition and presentation requirements . asu 2017-12 eliminates the concept of recognizing periodic hedge ineffectiveness for cash flow and net investment hedges and allows the entity to apply the shortcut method to partial-term fair value hedges of interest rate risk . we adopted asu 2017-12 in may 2019 upon entering into interest rate swap agreements , as described in note 14. the adoption of this story_separator_special_tag please read the following discussion and analysis of our financial condition and results of operations together with our consolidated financial statements and related notes included under item 8 . `` financial statements and supplementary data '' of this report . overview tivity health , inc. , a leading provider of fitness , nutrition , and social connection solutions , was founded and incorporated in delaware in 1981. on march 8 , 2019 , we completed our acquisition of nutrisystem , inc. , a provider of weight management products and services , including nutritionally balanced weight loss programs sold primarily through the internet and telephone and multi-day kits and single items ( a la carte ) available at select retail locations . the acquisition of nutrisystem enables us to offer , at scale , an integrated portfolio of solutions to help people live longer and be healthier , including our silversneakers senior fitness program , nutrisystem , south beach diet , prime fitness , wholehealth living , and wisely well ( launched in 2020 ) . following the acquisition of nutrisystem , we organize and manage our operations within two reportable segments , based on the types of products and services they offer : healthcare and nutrition . the healthcare segment is comprised of our legacy business and includes silversneakers , prime fitness and wholehealth living . the nutrition segment is comprised of nutrisystem 's legacy business and includes nutrisystem and the south beach diet . as part of our healthcare segment , silversneakers is offered to members of medicare advantage and medicare supplement plans . we also offer prime fitness , a fitness facility access program , through commercial health plans , employers , and other sponsoring organizations . our national network of fitness centers delivers both silversneakers and prime fitness . our fitness networks encompass approximately 17,000 partner locations and more than 1,000 alternative locations that provide classes outside of traditional fitness centers . through our wholehealth living program , which we sell primarily to health plans , we offer a continuum of services related to complementary , alternative , and physical medicine . our wholehealth living network includes relationships with approximately 80,000 complementary , alternative , and physical medicine practitioners to serve individuals through health plans and employers who seek health services such as chiropractic care , acupuncture , physical therapy , occupational therapy , massage therapy , and more . our nutrition segment includes nutrisystem and the south beach diet . typically , our nutrition segment customers purchase monthly food packages containing a four-week meal plan consisting of breakfasts , lunches , dinners , snacks and flex meals , which they supplement , depending on the program they are following , with items such as fresh fruits , fresh vegetables , lean protein and dairy . most nutrition segment customers order on auto-delivery , which means we send a four-week meal plan on an ongoing basis until notified of a customer 's cancellation . auto-delivery customers are offered savings off of our regular one-time rate with each order . monthly notifications are also sent to remind customers to update order preferences . we offer pre-selected favorites or customers may personalize their meal plan by selecting their entire menu or by customizing plans to their specific tastes or dietary preference . in total , our plans feature approximately 250 food options including frozen and unfrozen ready-to-go entrees , snacks , and shakes , at different price points . additionally , we offer unlimited counseling from our trained weight loss counselors , registered dietitians and certified diabetes educators at no cost . counselors are available as needed , seven days a week throughout an extended day , with further support provided through our digital tools . the nutrition segment also offers its products through select retailers and qvc , a television shopping network . the company is headquartered at 701 cool springs boulevard , franklin , tennessee 37067. forward-looking statements this report contains forward-looking statements , which are based upon current expectations , involve a number of risks and uncertainties , and are subject to the `` safe harbor '' provisions of the private securities litigation reform act of 1995. forward-looking statements include all statements that are not historical statements of fact and those regarding the intent , belief , or expectations of the company , including , without limitation , all statements regarding the company 's future earnings , revenues , and results of operations . readers are cautioned that any such forward-looking statements are not guarantees of future performance and involve significant risks and uncertainties , and 30 that actual results may vary from those in the forward-looking statements as a result of various factors , including , but not limited to : the market 's acceptance of our new products and services ; our ability to develop and implement effective strategi e s and t o a n ticipat e a n d re s po nd t o strate g i c cha n ges , o p portu n ities , a nd emer g in g tr e nd s i n o u r i n d u st r y a n d/o r bu s ines s , as well as t o accuratel y for e cas t th e rela t e d impac t o n ou r revenue s an d earnings ; the risk that expected benefits , synergies and growth opportunities from the acquisition of story_separator_special_tag f ou r agreements ; the impact of severe or adverse weather conditions and the potential emergence of a health pandemic or an infectious di s ea s e outbreak on member participation in our healthcare segment programs ; the impact of healthcare reform on our business ; the effectiveness of our marketing and advertising programs ; loss , or disruption in the business , of any of our food suppliers or our fulfillment provider , or disruptions in the shipping of our food products for our nutrition segment ; the impact of claims that our nutrition segment personnel are unqualified to provide proper weight loss advice ; the impact of health- or advertising-related claims by our nutrition segment customers ; competition from other weight management industry participants or the development of more effective or more favorably perceived weight management methods ; loss of any of our nutrition segment third-party retailer agreements and any obligations associated with such loss ; our ability to continue to develop innovative weight loss programs and enhance our existing programs , or the failure of our programs to continue to appeal to the market ; the impact of claims from our nutrition segment competitors regarding advertising or other marketing practices ; ou r a b ili t y t o d e vel op and commercially introduce n e w pro d uct s and services ; our ability to receive referrals from existing nutrition segment customers , a decline in which could adversely impact our customer acquisition costs ; failure to attract spokespersons or negative publicity with respect to any of our spokespersons ; our ability to antici p ate c h ange a nd r e spond to em e r ging tre n ds for customer preferences and the imp a ct of the sa m e on dem a nd for our s e rvices and products ; the seasonality of the business of our nutrition segment , particularly with respect to diet season ; negative publicity with respect to the weight loss industry ; 32 the impact of increased governmental regulation on our nutrition segment ; a significant portion of our nutrition segment revenue depends on our ability to sustain subscriptions of our nutrition segment 's programs , and cancellations could impact our future operating results ; claims arising from the sale of ingested products ; and other risks detailed in this report and our other filings with the securities and exchange commission . we undertake no obligation to update or revise any such forward-looking statements . critical accounting policies we describe our significant accounting policies in note 1 of the notes to the consolidated financial statements . we prepare the consolidated financial statements in conformity with generally accepted accounting principles in the united states ( “ u.s . gaap ” ) , which requires us to make estimates and judgments that affect the reported amounts of assets and liabilities and related disclosures at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period . actual results may differ from those estimates . we believe the following accounting policies are the most critical in understanding the estimates and judgments that are involved in preparing our financial statements and the uncertainties that could impact our results of operations , financial condition , and cash flows . the first two policies presented below were new critical accounting policies during the three months ended march 31 , 2019 , which were adopted due to the acquisition of nutrisystem . excess and obsolete inventory we continually assess the quantities of inventory on hand to identify excess or obsolete inventory and record a provision for any estimated loss . we estimate the reserve for excess and obsolete inventory based primarily on our forecasted demand and or our ability to sell the products , introduction of new products , future production requirements and changes in our customers ' behavior . the reserve for excess and obsolete inventory was $ 1.8 million and $ 0 at december 31 , 2019 and 2018 , respectively . acquisition accounting in connection with any acquisitions , we allocate the purchase price to the assets and liabilities we acquire , such as net tangible assets , deferred revenue , identifiable intangible assets such as trade names , customer lists , and customer relationships , and goodwill . we apply significant judgments and estimates in determining the fair market value of the assets acquired and their useful lives . for example , we estimated the fair value of existing definite-lived customer lists based on the multi-period excess earnings method under the income approach , which involved applying an attrition rate to the estimated net future cash flows from the customers that existed as of the acquisition date . we estimated the fair values of the tradenames using the relief-from-royalty method , which required significant assumptions such as the long-term growth rates of future revenues , the royalty rate for such revenue , the terminal growth rate of revenue , the tax rate , and a discount rate . different estimates and assumptions in valuing acquired assets could yield materially different results . revenue recognition beginning in 2018 , we account for revenue from contracts with customers in accordance with accounting standards codification ( “ asc ” ) topic 606 “ revenue from contracts with customers ” ( “ asc topic 606 ” ) . the unit of account in asc topic 606 is a performance obligation , which is a promise in a contract to transfer to a customer either a distinct good or service ( or bundle of goods or services ) or a series of distinct goods or services provided over a period of time .
| executive overview of results the key financial results for the year ended december 31 , 2019 are : revenues of $ 1,131.2 million for the year ended december 31 , 2019 , including $ 498.1 million attributable to the acquisition of nutrisystem on march 8 , 2019 , compared to $ 606.3 million for the year ended december 31 , 2018 ; and pre-tax income ( loss ) from continuing operations of $ ( 326.4 ) million for the year ended december 31 , 2019 compared to $ 124.9 million for the year ended december 31 , 2018. pre-tax loss for 2019 includes : o $ 377.1 million of impairment loss , all of which was attributable to the nutrition segment , compared to $ 0 for 2018 ; o $ 158.0 million of marketing expenses , including $ 140.3 million attributable to the nutrition segment , compared to $ 14.4 million for 2018 ; o $ 76.6 million of interest expense , compared to $ 8.7 million for 2018 ; o $ 37.1 million of acquisition , integration , and project costs compared to $ 3.7 million for 2018 ; o $ 32.4 million of amortization expense compared to $ 0 for 2018 ; and o $ 7.0 million of restructuring and related charges compared to $ 0.1 million for 2018 . 36 results of operations the following table sets forth the components of the consolidated statements of operations for the years ended december 31 , 2019 , 2018 , and 2017 expressed as a percentage of revenues from continuing operations . replace_table_token_4_th ( 1 ) figures may not add due to rounding .
| 7,186 |
the agreement provides for an annual base salary of $ 99,000 and an annual royalty fee of $ 99,000 payable as consideration for his assignment to the company of all of his rights , title and interest in certain patents . payment of the royalty continues for as long as the company is using the inventions underlying the patents . in the event the employment by the company ceases as a result of the ( i ) death , his estate shall be entitled to a lump sum payment of one times the combined base salary and bonus , and certain other accrued and unpaid amounts , or ( ii ) disability , story_separator_special_tag the following discussion should be read in conjunction with the consolidated financial statements of the company ( including the notes thereto ) included elsewhere in this report . dollar amounts are in thousands , except for per share amounts . the company generates revenues primarily from the sale , leasing , licensing , shipping and installation of precast concrete products for the construction , utility and farming industries . the company 's operating strategy has involved producing innovative and proprietary products , including slenderwall , a patent pending , lightweight , energy efficient concrete and steel exterior wall panel for use in building construction ; j-j hooks® barrier , a patented positive-connected highway safety barrier ; sierra wall , a patented sound barrier primarily for roadside use ; transportable concrete buildings ; and softsound , a highway sound attenuation system . in addition , the company produces utility vaults ; farm products such as cattleguards ; and custom order precast concrete products with various architectural surfaces . 12 as a part of the construction industry , the company 's sales and net income may vary greatly from quarter to quarter over a given year . because of the cyclical nature of the construction industry , many factors not under our control , such as weather and project delays , affect the company 's production schedule , possibly causing a momentary slowdown in sales and net income . as a result of these factors , the company is not always able to earn a profit for each period , therefore , please read management 's discussion and analysis of financial condition and results of operations and the accompanying financial statements with these factors in mind . overview overall , the company 's financial performance was slightly lower in 2018 when compared to 2017. the company had net income in 2018 in the amount of $ 1,687 compared to net income of $ 2,684 for 2017. the primary reason for the decrease in net profit was due to the deferred guaranteed buy-back agreement with a customer , which at december 31 , 2018 , had associated deferred revenues of $ 6,592 and deferred costs of $ 5,304 , which amounts will increase as more product is delivered . although barrier product sales are not being recognized , the company has begun recognizing barrier rental revenue which will continue through the life of the customer 's project . accordingly , once all product is delivered to this customer , the company will nonetheless continue to recognize the net profits from this project until the buy-back option is either exercised or expired . delivery of product commenced in the second quarter of 2018 and is expected to be completed during the second quarter of 2019. the buy-back option expires when the customer completes the project utilizing the barrier , which is expected to be in 2022. thus , whereas the company will likely have completed its obligations in 2019 , it will nonetheless continue to recognize net profits through 2022. it should be noted that the amount of the buy-back obligation is not amortized over this period , but as it is equal in the amount to revenue and expense , and the full amount of the net profit is recognized over this period . sales were particularly strong in the first quarter of 2017 due to one large short-term barrier rental project , which produced profits slightly higher than our normal rental projects because of the large amount of preparation , installation and removal , and follow through that was accomplished in a short period of time that impacted the year-over-year comparison . sales continue to look stable for 2019 , with the current backlog and bidding remaining strong . based on current market activity and the company 's backlog of $ 31.1 million as of march 5 , 2019 , management believes that 2019 will be another strong financial year for the company , although no assurance can be given . story_separator_special_tag underground placement of utilities , management believes that manhole sales should improve for 2019 . 14 miscellaneous product sales – miscellaneous products are products that are produced or sold that do not meet the criteria defined for other revenue categories . examples would include precast concrete slabs , waste blocks or small add-on items . for 2018 , miscellaneous product sales decreased by 15.7 % when compared to 2017. the decrease in sales was due to less demand for these types of products . management expects miscellaneous product sales to remain flat or decrease in 2019 , as these products are typically small in nature and the company focuses it 's priorities on larger , more profitable jobs . story_separator_special_tag the north carolina expansion is being financed primarily through borrowings , with expected completion in the third quarter of 2019 , and accordingly , interest expense is expected to increase in 2019. income tax expense – the company had income tax expense of $ 572 for the year ended december 31 , 2018 compared to income tax expense of $ 1,057 for the year ended december 31 , 2017. the company had an effective rate of 25.3 % for the year ended december 31 , 2018 compared to an effective rate of 28.3 % for the same period in 2017. net income – the company had net income of $ 1,687 for the year ended december 31 , 2018 , compared to net income of $ 2,684 for the same period in 2017. the basic and diluted income per share was $ 0.33 for 2018 , compared to basic and diluted income per share of $ 0.53 for the year ended december 31 , 2017. there were 5,080 basic and 5,096 diluted weighted average shares outstanding in 2018 and 5,042 basic and 5,079 diluted weighted average shares outstanding in the 2017. liquidity and capital resources the company financed its capital expenditures requirements for 2018 with cash flows from operations , cash balances on hand and notes payable to a bank . the company had $ 4,503 of debt obligations at december 31 , 2018 , of which $ 1,711 is scheduled to mature within twelve months . during the twelve months ended december 31 , 2018 , the company made repayments of outstanding debt in the amount $ 660. the company has a note payable to summit community bank ( the “ bank ” ) with a balance of $ 711 as of december 31 , 2018. the note has a remaining term of approximately three years and a fixed interest rate of 3.99 % annually with monthly payments of $ 26 and is secured by principally all of the assets of the company . under the terms of the note , the bank will permit chattel mortgages on purchased equipment not to exceed $ 250 for any one individual loan so long as the company is not in default . the company 's maintains a limit of $ 3,500 for annual capital expenditures , excluding acquisitions and plant expansions . at december 31 , 2018 , the company was in compliance with all covenants pursuant to the loan agreement . on march 27 , 2016 , the company executed an agreement to purchase the land , building and fixtures of a facility located in hopkins , south carolina ( `` smith-columbia '' ) for a purchase price of $ 1,550. the facility is located on 39 acres of land and has approximately 40,000 square feet of production space . the agreement was completed in july 2016 , and was financed by a new 15 year term facility from the bank . the note has a remaining term of approximately eleven and one-half years and a fixed interest rate of 5.29 % annually with monthly payments of $ 11 and is secured by all of the assets of smith-columbia and a guarantee by the company . the balance of the note payable at december 31 , 2018 was $ 1,169. in addition to the notes payable discussed above , the company also has a $ 4,000 line of credit with the bank that had a balance of $ 1,000 at december 31 , 2018 used to fund the construction of the north carolina expansion , which will be converted to long-term debt when the financing closes in 2019. the line of credit is evidenced by a commercial revolving promissory note which carries a variable interest rate of prime and matures on september 18 , 2019. the loan is collateralized by a first lien position on the company 's accounts receivable and inventory and a second lien position on all other business assets . key provisions of the line of credit require the company , ( i ) to obtain bank approval for capital expenditures in excess of $ 3,500 during the term of the loan ; and ( ii ) to obtain bank approval prior to its funding any acquisition . on september 18 , 2018 the company received a commitment letter from the bank to provide a guidance line of credit specifically to purchase business equipment in an amount up to $ 1,500. the commitment provides for the purchase of equipment with minimum advances of $ 50 for which a note payable will be executed with a term not to exceed five years with an interest rate at the wall street journal prime rate plus .5 % with a floor of 4.49 % per annum . the loan is collateralized by a first lien position on all equipment purchased under the line . the commitment for the guidance line of credit matures on september 17 , 2019. as of december 31 , 2018 , the company had not purchased any equipment pursuant to the $ 1,500 commitment . 16 at december 31 , 2018 , the company had cash totaling $ 1,946 and $ 1,107 of investment securities available for sale compared to cash totaling $ 3,390 and $ 1,098 of investment securities available for sale at december 31 , 2017. during 2018 , the company 's operating activities provided $ 8,472 of cash due mainly to the treatment of the deferred buy-back guarantee , which the company received payment as the product was produced . in 2018 , investing activities used $ 10,642 in cash primarily for the barrier associated with the guaranteed buy-back and for the purchase of property and capital equipment . financing activities provided $ 726 in cash in 2018 , resulting primarily from new loans for the north carolina expansion and the financing of capital expenditures .
| results of operations year ended december 31 , 2018 compared to the year ended december 31 , 2017 for the year ended december 31 , 2018 , the company had total revenue of $ 40,220 compared to total revenue of $ 41,717 for the year ended december 31 , 2017 , a decrease of $ 1,497 , or 3.6 % . sales include revenues from product sales , barrier rental income , royalty revenue , and shipping and installation income . product sales are further divided into soundwall , architectural and slenderwall panels , miscellaneous wall panels , highway barrier , easi-set®/easi-span® buildings , utility and farm products , and miscellaneous precast products . the following table summarizes the revenue by type and a comparison for the years ended december 31 , 2018 and 2017 ( in thousands ) : replace_table_token_0_th 13 soundwall sales – soundwall panel sales increased significantly by 30.3 % in 2018 compared to 2017 due primarily to the larger number of projects in production during 2018 at all three manufacturing facilities as compared to 2017. the company continued to have increasing soundwall sales out of reidsville , north carolina and columbia , south carolina to expand the customer base for highway soundwall panel production . soundwall sales were higher at each location , driving the increase for 2018. soundwall bid projects continue to remain strong in 2019 and management maintains a positive outlook with addtional projects being released on the east coast from maryland to georgia , although no assurance can be given on awards . architectural sales – architectural panel sales slightly increased by 5.7 % in 2018 compared to 2017 as the company was awarded more architectural wall panels to produce during 2018 , which coincided with slenderwall production ( see the slenderwall section below ) .
| 7,187 |
under the terms of the license agreement , if the company achieves certain clinical and regulatory events specified in the license agreement , the company will be obligated to pay milestone payments to bioline that could total , in the aggregate , up to $ 115.5 million , and if the company achieves certain commercialization targets specified in the license agreement , the story_separator_special_tag the following discussion and analysis of our financial condition and results of operations should be read together with our financial statements and related notes appearing elsewhere in this annual report on form 10-k. some of the information contained in this discussion and analysis or set forth elsewhere in this annual report on form 10-k , including information with respect to our plans and strategy for our business and related financing , includes forward-looking statements that involve risks and uncertainties and should be read together with the risk factors section of this annual report on form 10-k for a discussion of important factors that could cause actual results to differ materially from the results described in or implied by the forward-looking statements contained in the following discussion and analysis . overview business we are a clinical-stage therapeutics company focused on developing innovative products at the intersection of drugs and devices that address significant unmet medical needs in the treatment of cardiopulmonary and cardiac diseases . we have two programs in advanced clinical development . the first program , inopulse , is based on our proprietary pulsatile nitric oxide delivery device . we are currently developing two product candidates under our inopulse program : one for the treatment of pulmonary arterial hypertension , or pah , for which we intend to commence phase 3 clinical trials in the second half of 2015 , and the other for the treatment of pulmonary hypertension associated with chronic obstructive pulmonary disease , or ph-copd , which is in phase 2 development . our second program is bioabsorbable cardiac matrix , or bcm , which is currently in a placebo-controlled clinical trial designed to support ce mark registration in the european union . we completed enrollment of this trial in december 2014 , with 303 patients having completed the treatment procedure , and we expect to report top line results in mid-2015 . assuming positive results from this trial , we intend to conduct a pivotal pre-market approval trial of bcm beginning in the first half of 2016 , which will be designed to support registration in the united states . we are developing bcm for the prevention of cardiac remodeling , which often leads to congestive heart failure following an st-segment elevated myocardial infarction , or stemi . we have devoted substantially all of our resources to our drug discovery and development efforts , including conducting clinical trials for our product candidates , protecting our intellectual property and the general and administrative support of these operations . we have devoted significant time and resources to developing and optimizing our drug delivery system , inopulse , which operates through the administration of nitric oxide as brief , controlled pulses that are timed to occur at the beginning of a breath . in addition , we have incurred significant costs to scale up manufacturing for bcm from pre-clinical studies to clinical trials . to date , we have generated no revenue from product sales . we expect that it will be several years before we commercialize a product candidate , if ever . separation and spin-out from ikaria prior to february 2014 , we were a wholly-owned subsidiary of ikaria . as part of an internal reorganization of ikaria in october 2013 , ikaria transferred to us exclusive worldwide rights , with no royalty obligations , to develop and commercialize pulsed nitric oxide in pah , ph-copd and pulmonary hypertension associated with idiopathic pulmonary fibrosis , or ph-ipf . following the internal reorganization , in february 106 2014 , ikaria distributed all of our then outstanding units to its stockholders through the payment of a special dividend on a pro rata basis based on each stockholder 's ownership of ikaria capital stock , which we refer to as the spin-out , and as a result we became a stand-alone company . our inception date is august 26 , 2009 , which is the date that bcm was licensed to us by bioline . our operations since that date have included organization and staffing , business planning , in-licensing technology , developing product candidates in clinical programs , evaluating potential future product candidates , as well as undertaking pre-clinical studies and clinical trials of our product candidates . we are in the process of developing and implementing plans to replace services currently provided to us by ikaria under the tsa and the 2015 services agreement . these services include , among others , accounting and financial management support , human resources support , drug and device safety services , biometrics support , information technology services and manufacturing and device servicing support . we expect the costs related to replacing the services currently provided by ikaria under the tsa will be approximately the same as the $ 772,000 per month that we are currently paying under the tsa , and we expect the costs related to replacing the services currently provided by ikaria under the 2015 services agreement will be approximately the same as the amounts we are paying under the 2015 services agreement . however , although we believe our estimates are reasonable based on the information we have to date , certain significant components of our estimates are preliminary and subject to change . story_separator_special_tag if we fail to complete the development of any of our product candidates currently in clinical development or any future product candidates in a timely manner , or to obtain regulatory approval for such product candidates , our ability to generate future revenue , and our business , results of operations , financial condition and cash flows and future prospects would be materially adversely affected . research and development expenses research and development expenses consist of costs incurred in connection with the discovery and development of our product candidates , including upfront and development milestone payments , related to in-licensed product candidates and technologies . in order to fairly present our historical information for periods prior to the spin-out , certain departmental expenses from ikaria have been allocated to us . the allocations were applied to us for the purpose of presenting our company as a stand-alone entity . direct and indirect costs for periods prior to the spin-out related to the inopulse and bcm clinical programs have been allocated to us . all allocations were based on actual costs 108 incurred . for purposes of allocating non-project specific expenses , each ikaria department head provided information as to the percentage of employee time incurred on our behalf . research and development expenses primarily consist of : · employee-related expenses , including salary , benefits and stock-based compensation expense ; · expenses incurred under agreements with contract research organizations , investigative sites that conduct our clinical trials and consultants that conduct a portion of our pre-clinical studies ; · expenses relating to vendors in connection with research and development activities ; · the cost of acquiring and manufacturing clinical trial materials ; · facilities , depreciation of fixed assets and allocated expenses ; · lab supplies , reagents , active pharmaceutical ingredients and other direct and indirect costs in support of our pre-clinical and clinical activities ; · device development and drug manufacturing engineering ; · license fees related to in-licensed products and technology ; and · costs associated with non-clinical activities and regulatory approvals . we expense research and development costs as incurred . conducting a significant amount of research and development is central to our business model . 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 . we plan to increase our research and development expenses for the foreseeable future as we seek to continue multiple clinical trials for our inopulse and bcm programs , including to potentially advance inopulse for ph-ipf , and seek to identify additional early-stage product candidates . we track external research and development expenses and personnel expenses on a program-by-program basis . we use our employee and infrastructure resources , including regulatory affairs , quality , biometrics support and program management , across our two clinical development programs and have included these expenses in research and development infrastructure . research and development laboratory and depreciation expenses are also not allocated to a specific program and are included in research and development infrastructure . engineering activities related to inopulse and the manufacture of cylinders related to inopulse are included in inopulse engineering . inopulse for pah we completed a randomized , placebo-controlled , double-blind phase 2 clinical trial of inopulse for pah in october 2014. the goal of the trial is to determine the safety , tolerability and efficacy of two different doses of inopulse for pah . we believe the results of this trial provide sufficient indication of clinical benefit and safety to continue development of inopulse for pah in pivotal phase 3 clinical trials . we had an end of phase 2 meeting with the fda on january 8 , 2015. based on feedback from the fda at this meeting , we are moving forward with phase 3 development and plan to conduct two adequate and well-controlled confirmatory phase 3 clinical trials , either sequentially or in parallel . in march 2015 , we requested feedback on the proposed trial design from the scientific advice working party of the ema . we intend to finalize the clinical trial design following additional discussions with the fda as well as with other regulatory authorities , including with the ema . 109 inopulse for ph-copd we completed a randomized , placebo-controlled , double-blind , dose-confirmation phase 2 clinical trial of inopulse for ph-copd in july 2014. we have received results from this trial , and we are currently evaluating our trial design for a phase 2b clinical trial and plan to finalize our protocol following discussions with regulatory authorities in the united states and the european union . bcm we initiated a clinical trial of bcm , which we refer to as our preservation i trial , in december 2011 and enrolled the first patient in april 2012. this trial is a ce mark registration trial in the european union and , if the results are positive , we intend to conduct a pivotal trial designed to support registration in the united states . we completed enrollment of this trial in december 2014 , with 303 patients having completed the treatment procedure at almost 90 clinical sites in europe , australia , north america and israel . we expect to report top line results in mid-2015 . research and development infrastructure we invest in regulatory , quality , pharmacovigilance and program management activities , which are expensed as incurred . these activities primarily support our inopulse and bcm clinical development programs . inopulse engineering we have invested a significant amount of funds in inopulse , which is configured to be highly portable and compatible with available modes of long-term oxygen therapy via nasal cannula delivery . our phase 2 clinical trials of inopulse for pah and inopulse for ph-copd utilized the first generation inopulse ds device .
| results of operations comparison of years ended december 31 , 2014 and 2013 the following table summarizes our results of operations for the years ended december 31 , 2014 and 2013 , together with the changes in these items in dollars and as a percentage . replace_table_token_10_th 111 total operating expenses . total operating expenses for the year ended december 31 , 2014 were $ 59.8 million compared to $ 62.0 million for the year ended december 31 , 2013 , a decrease of $ 2.2 million , or 4 % . this decrease was primarily due to reductions in research and development expenses pertaining to our bcm and inopulse for ph-copd programs and to research and development infrastructure expenses , partially offset by increases in general and administrative expenses , research and development expenses pertaining to inopulse for pah and inopulse engineering expenses . research and development expenses . total research and development expenses for the year ended december 31 , 2014 were $ 46.0 million compared to $ 53.0 million for the year ended december 31 , 2013 , a decrease of $ 7.0 million , or 13 % . total research and development expenses consisted of the following : · bcm research and development expenses for the year ended december 31 , 2014 were $ 13.7 million compared to $ 17.3 million for the year ended december 31 , 2013 , a decrease of $ 3.6 million , or 21 % . the decrease primarily resulted from the effect of certain non-recurring manufacturing costs in the 2013 period , as well as a decrease in the pre-clinical activities that we conducted with respect to bcm during the year ended december 31 , 2014. this decrease was partially offset by an increase in clinical trial costs as a result of an increase in patient enrollments in the year ended december 31 , 2014 as compared to the prior year period .
| 7,188 |
the most significant impact of the new standard for verso was recording the right-of-use assets and related liabilities on the balance sheet for its operating leases . the new standard requires that fixed payments , probable amounts the lessee will owe under a residual value guarantee and certain other payments be included in the valuation of these right-of-use assets and related liabilities . variable payments are excluded from the calculation unless they are based on an index or rate . the adoption of this new standard resulted in an adjustment to recognize $ 24 million in right-of-use assets and related liabilities on story_separator_special_tag overview we are the leading north american producer of coated papers , which are used primarily in commercial print , magazines , catalogs , high-end advertising brochures and annual reports , among other media and marketing publications . we produce a wide range of products , ranging from coated freesheet and coated groundwood , to specialty papers , packaging papers , inkjet and digital papers , supercalendered papers and uncoated freesheet . we also produce and sell bleached and unbleached market kraft pulp , which is used to manufacture paper and packaging products . as of the date of this report , we operate seven paper machines at four mills located in michigan , minnesota and wisconsin . the mills have an aggregate annual production capacity of approximately 1,970,000 tons of paper . in 2019 , we shut down our paper mill in luke , maryland and agreed to sell our mills located in jay , maine and stevens point , wisconsin , which closed on february 10 , 2020. financial overview in 2019 , net sales decreased $ 238 million , or 9 % compared to 2018 , which was primarily attributable to a decrease in sales volume , partially offset by improved price and sales mix . total company sales volume was down from 2,927 thousand tons during the year ended december 31 , 2018 , to 2,647 thousand tons during the year ended december 31 , 2019 , driven by the closure of our luke mill , continued decline of graphic paper demand and increased pressure from imports . our gross margin , excluding depreciation and amortization expenses , was 13 % in both 2019 and 2018 . 24 recent developments sale of androscoggin mill and stevens point mill on november 11 , 2019 , we entered into a purchase agreement with pixelle , whereby we agreed to sell to pixelle all of the outstanding membership interests in verso androscoggin llc , an indirect wholly owned subsidiary of verso and the entity that , as of the closing date , held the assets primarily related to verso 's androscoggin mill located in jay , maine , and stevens point mill , located in stevens point , wisconsin . the transaction was approved by verso 's stockholders on january 31 , 2020 and closed on february 10 , 2020. as consideration for the pixelle sale , ( i ) we received approximately $ 346 million in cash , which reflects certain adjustments in respect of our estimates of cash , indebtedness and working capital of verso androscoggin , llc as of the closing date , and ( ii ) pixelle assumed approximately $ 35 million of verso 's unfunded pension liabilities . the consideration for the sale will be subject to final post-closing adjustments pursuant to the terms of the purchase agreement . the pixelle sale reduced the aggregate annual production capacity of our mills by approximately 660,000 tons . the androscoggin and stevens point mills together represented approximately 22 % of our revenues for the year ended december 31 , 2019 ( see note 19 to our consolidated financial statements ) . luke mill closure on april 30 , 2019 , we announced the permanent shutdown of our paper mill in luke , maryland in response to the continued decline in customer demand for the grades of coated freesheet paper produced at the luke mill , along with rising input costs , a significant influx of imports and rising compliance costs and infrastructure challenges associated with environmental regulations . as of june 30 , 2019 , verso has completed the shutdown and closure of the luke mill . the shutdown of the luke mill reduced our coated freesheet production capacity by approximately 450,000 tons and eliminated approximately 675 positions at the luke mill . changes to directors and officers on april 5 , 2019 , b. christopher disantis ceased being our chief executive officer and a member of the board of directors , and the board of directors appointed leslie t. lederer as our interim chief executive officer . effective november 11 , 2019 , mr. lederer resigned as interim chief executive officer and our board of directors appointed adam st. john to serve as our chief executive officer and a member of the board of directors . on january 30 , 2020 , we entered into a cooperation agreement with atlas and blue wolf and certain of their respective affiliates , which settled the proxy contest with respect to our 2019 annual meeting . pursuant to the cooperation agreement , verso , atlas and blue wolf agreed to take the necessary actions for verso 's board of directors to consist of the following individuals immediately subsequent to our annual meeting : dr. robert k. beckler , marvin cooper , sean t. erwin , jeffrey e. kirt , randy j. nebel , nancy m. taylor and adam st. john . immediately following the certification of voting result of the annual meeting on february 6 , 2020 , marvin cooper was appointed to fill a vacancy on the board . story_separator_special_tag in conjunction with our periodic maintenance shutdowns , we have incidental incremental costs that are primarily comprised of unabsorbed fixed costs from lower production volumes and other incremental costs for purchased materials and energy that would otherwise be produced as part of the normal operation of our mills . depreciation and amortization . depreciation and amortization expense represents the periodic charge to earnings through which the cost of tangible assets and intangible assets are recognized over the asset 's life . capital investments can increase our asset basis and produce year-to-year fluctuations in expense . selling , general and administrative expenses the principal components of our selling , general and administrative expenses are wages , salaries and benefits for our office personnel at our headquarters and our sales force , travel and entertainment expenses , advertising expenses , expenses relating to certain information technology systems and research and development expenses . effect of inflation while inflationary increases on certain raw materials such as energy , wood fiber and chemicals have an impact on our operating results , sales prices and volumes are more strongly influenced by supply and demand factors in specific markets and by exchange rate fluctuations than by inflationary factors . seasonality we are exposed to fluctuations in quarterly net sales volumes and expenses due to seasonal factors . these seasonal factors are common in the coated papers industry . our third and fourth quarters are generally our strongest quarters for volume and revenue , reflecting an increase in printing related to end-of-year magazines , increased end-of-year direct mailings , and holiday season catalogs . our working capital and accounts receivable generally peak in the third quarter , while inventory generally peaks in the second quarter in anticipation of the third quarter season . we expect our seasonality trends to continue for the foreseeable future . critical accounting policies our accounting policies are fundamental to understanding management 's discussion and analysis of financial condition and results of operations . our consolidated financial statements are prepared in conformity with gaap . the preparation of the financial statements requires management to make certain judgments and assumptions in determining accounting estimates . accounting estimates are considered critical if the estimate requires management to make assumptions about matters that were highly uncertain at the time the accounting estimate was made , and different estimates reasonably could have been used in the current period , or changes in the accounting estimate are reasonably likely to occur from period to period , that would have a material impact on the presentation of our financial condition , changes in financial condition or results of operations . management believes the following critical accounting policies are both important to the portrayal of our financial condition and results of operations and require subjective or complex judgments . these judgments about critical accounting estimates are based on information available to us as of the date of the financial statements . accounting standards whose application may have a significant effect on the reported results of operations and financial position , and that can require judgments by management that affect their application , include the following : asc topic 450 , contingencies , asc topic 360 , property , plant and equipment , asc topic 350 , intangibles – goodwill and other and asc topic 715 , compensation – retirement benefits . 27 impairment of long-lived assets long-lived assets are reviewed for impairment upon the occurrence of events or changes in circumstances that indicate that the carrying value of the assets may not be recoverable , as measured by comparing their net book value to the estimated undiscounted future cash flows generated by their use . management believes that the accounting estimates associated with determining fair value as part of an impairment analysis are critical accounting estimates because estimates and assumptions are made about our future performance and cash flows . the estimated fair value is generally determined on the basis of discounted future cash flows . we also consider a market-based approach and a combination of both . while management uses the best information available to estimate future performance and cash flows , future adjustments to management 's projections may be necessary if economic conditions differ substantially from the assumptions used in making the estimates . intangible assets are comprised of customer relationships with a useful life of 10 years and trademarks with a useful life of five years . during 2018 and 2019 , there were no indicators requiring evaluation of impairment for these definite-lived intangible assets . pension we offer various pension and retirement benefits to certain employees . as of december 31 , 2015 , all of our defined benefit pension plans were frozen to new entrants . the calculation of the obligations and related expenses under the plan requires the use of actuarial valuation methods and assumptions , including the expected long-term rate of return on plan assets , discount rates and changes in mortality rates . the table below shows assumptions used by us for the periods shown : replace_table_token_5_th after consultation with our actuaries , we determine these actuarial assumptions on december 31 of each year to calculate liability information as of that date and pension expense for the following year . the expected long-term rate of return on plan assets is based on projected rates of return for current and planned asset classes in the plan 's investment portfolio . the discount rate is generally based on the yield of high-quality corporate fixed-income investments . actuarial valuations and assumptions used in the determination of future values of plan assets and liabilities are subject to management judgment and may differ significantly if different assumptions are used . the following table highlights the sensitivity of our pension obligations and 2020 net periodic pension ( income ) expense to changes in these assumptions , assuming all other assumptions remain constant . replace_table_token_6_th 28 contingent liabilities a liability is contingent if the outcome or amount is not presently known , but may become known in the future as a result of the occurrence of some uncertain future event .
| results of operations the following table sets forth the historical results of operations of verso for the periods presented . the following discussion of our financial condition and results of operations should be read in conjunction with our consolidated financial statements and the related notes thereto included elsewhere in this annual report . replace_table_token_7_th 2019 compared to 2018 net sales . net sales for the year ended december 31 , 2019 declined by $ 238 million or 9 % compared to the prior year due to decreased sales volume , partially offset by improved price/mix . total company sales volume was down from 2,927 thousand tons during the year ended december 31 , 2018 , to 2,647 thousand tons during the year ended december 31 , 2019 , driven by the closure of our luke mill in 2019 , continued decline of graphic paper demand and increased pressure from imports . operating income ( loss ) . operating income ( loss ) was a loss of $ 37 million for the year ended december 31 , 2019 , a decrease of $ 189 million when compared to operating income of $ 152 million for the year ended december 31 , 2018 .
| 7,189 |
the company continues to focus on expanding its merchandising and marketing services business throughout the world . the company 's domestic division provides nationwide merchandising and other marketing services throughout the united states of america primarily on behalf of consumer product manufacturers and retailers at mass merchandisers , office supply , grocery , drug store , home improvement , independent , convenience and electronics stores . included in its clients are home entertainment , general merchandise , health and beauty care , consumer goods and food products companies . the company 's international business in each territory outside the united states is conducted through a foreign subsidiary incorporated in its primary territory . the primary territory establishment date ( which may include predecessors ) , the percentage of the company 's equity ownership , and the principal office location for its us ( domestic ) subsidiaries and each of its foreign ( international ) subsidiaries is as follows : replace_table_token_8_th 1 in august 2014 , the company , through its subsidiary in hong kong , spar china ltd. , in conjunction with its minority partner in spar shanghai , purchased certain business assets , fixed assets and merchandising teams of three companies in china ( collectively unilink ) . as consideration for the purchase , unilink was paid in cash and 20 % ownership in spar shanghai . sgrp 's ownership interest in spar shanghai remained at 51 % . f-6 spar group , inc. and subsidiaries notes to consolidated financial statements 2. summary of significant accounting policies principles of consolidation the company consolidates its 100 % -owned subsidiaries and all of its 51 % -owned joint venture subsidiaries in accordance with the provisions required by the consolidation topic 810 of the financial accounting standards board ( `` fasb `` ) accounting standards codification ( `` asc `` ) . all significant intercompany accounts and transactions have been eliminated . accounting for joint venture subsidiarie s for the company 's less than wholly owned subsidiaries , the company first analyzes to determine if a joint venture subsidiary is a variable interest entity ( a `` vie `` ) in accordance with asc 810 and if so , whether the company is the primary beneficiary requiring consolidation . a vie is an entity that has ( i ) insufficient equity to permit it to finance its activities without additional subordinated financial support or ( ii ) equity holders that lack the characteristics of a controlling financial interest . vies are consolidated by the primary beneficiary , which is the entity that has both the power to direct the activities that most significantly impact the entity 's economic performance and the obligation to absorb losses or the right to receive benefits from the entity that potentially could be significant to the entity . variable interests in a vie are contractual , ownership , or other financial interests in a vie that change with changes in the fair value of the vie 's net assets . the company continuously re-assesses at each level of the joint venture whether the entity is ( i ) a vie , and ( ii ) if the company is the primary beneficiary of the vie . if it was determined that an entity in which the company holds an interest qualified as a vie and the company was the primary beneficiary , it would be consolidated . based on the company 's analysis for each of its 51 % owned joint ventures , the company has determined that each is a vie and that company is the primary beneficiary . while the company owns 51 % of the equity interest in these subsidiaries while the other 49 % is owned by local unrelated third parties , the joint venture agreements with those third parties generally provide them with equal voting rights . accordingly , the company consolidates each joint venture under the vie rules and reflects the 49 % interests in the consolidated financial statements as non-controlling interests . the company records these non-controlling interests at their initial fair value , adjusting the basis prospectively for their share of the respective consolidated investments ' net income or loss or equity contributions and distributions . these non-controlling interests are not redeemable by the equity holders and are presented as part of permanent equity . income and losses are allocated to the non-controlling interest holder based on its economic ownership percentage . use of estimates the preparation of the consolidated financial statements in conformity with accounting principles generally accepted in the united states ( `` gaap `` ) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities , the amounts disclosed for contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses story_separator_special_tag this `` management 's discussion and analysis of financial condition and results of operations '' and other items in this annual report on form 10-k for the year ended december 31 , 2015 ( this `` annual report '' ) , contains `` forward-looking statements '' made by spar group , inc. ( `` sgrp '' , an d together with its subsidiaries , the `` spar group '' or the `` company '' ) and was filed on march 30 , 2016 , by sgrp with the securities and exchange commission ( the `` sec '' ) . story_separator_special_tag -26- overview spar group , inc. ( `` sgrp '' ) , and its subsidiaries ( together with sgrp , the `` spar group '' or the `` company '' ) , is a diversified international merchandising and marketing services company and provides a broad array of services worldwide to help companies improve their sales , operating efficiency and profits at retail locations . the company provides merchandising and other marketing services to manufacturers , distributors and retailers worldwide , primarily in mass merchandisers , office supply , grocery , drug store , home improvement , independent , convenience and electronics stores , as well as providing furniture and other product assembly services in stores , homes and offices . the company has supplied these services in the united states since certain of its predecessors were formed in 1979 and internationally since the company acquired its first international subsidiary in japan in may 2001. today the company operates in 9 countries that encompass approximately 50 % of the total world population through operations in the united states , canada , japan , south africa , india , china , australia , mexico and turkey . critical accounting policies & estimates the company 's critical accounting policies , including the assumptions and judgments underlying them , are disclosed in the note 2 to the consolidated financial statements - summary of significant accounting policies . these policies have been consistently applied in all material respects and address such matters as revenue recognition , depreciation methods , asset impairment recognition , consolidation of subsidiaries and other companies . while the estimates and judgments associated with the application of these policies may be affected by different assumptions or conditions , the company believes the estimates and judgments associated with the reported amounts are appropriate in the circumstances . five of the company 's critical accounting policies are impairment of long-lived assets , consolidation of subsidiaries , revenue recognition , allowance for doubtful accounts , and internal use software development costs . impairment of long-lived assets the company continually monitors events and changes in circumstances that could indicate that the carrying amounts of the company 's property and equipment and intangible assets subjected to amortization may not be recoverable . when indicators of potential impairment exist , the company assesses the recoverability of the assets by estimating whether the company will recover its carrying value through the undiscounted future cash flows generated by the use of the asset and its eventual disposition . based on this analysis , if the company does not believe that it will be able to recover the carrying value of the asset , the company records an impairment loss to the extent that the carrying value exceeds the estimated fair value of the asset . if any assumptions , projections or estimates regarding any asset change in the future , the company may have to record an impairment to reduce the net book value of such individual asset . accounting for joint venture subsidiaries for the company 's less than wholly owned joint venture subsidiaries , the company first analyzes to determine if a joint venture subsidiary is a variable interest entity ( a `` vie '' ) in accordance with asc 810 and if so , whether the company is the primary beneficiary requiring consolidation . a vie is an entity that has ( i ) insufficient equity to permit it to finance its activities without additional subordinated financial support or ( ii ) equity holders that lack the characteristics of a controlling financial interest . vies are consolidated by the primary beneficiary , which is the entity that has both the power to direct the activities that most significantly impact the vie 's economic performance and the obligation to absorb losses or the right to receive benefits from the vie that potentially could be significant to the owning entity . variable interests are contractual , ownership , or other financial interests in a vie that change with changes in the fair value of the vie 's net assets . the company continuously re-assesses at each level of the joint venture subsidiary whether the entity is ( i ) a vie , and ( ii ) if so , whether the company is the primary beneficiary of the vie . if it was determined that an entity in which the company holds an interest qualified as a vie and the company was the primary beneficiary , it would be consolidated . the company has analyzed each of its joint venture subsidiaries to determine whether it is a vie . the company owns 51 % of the equity interest in these subsidiaries , the other 49 % is owned by local unrelated third parties , and the joint venture agreements with those third parties generally provide each venturer with equal voting rights . based on these and other factors , the company has determined that each joint venture subsidiary is a vie and that company is the primary beneficiary . accordingly , the company consolidates each joint venture subsidiary under the vie rules and reflects the 49 % interests of the local third party owners in the consolidated financial statements as non-controlling interests . the company records these non-controlling interests at their initial fair value , adjusting the basis prospectively for their share of the respective consolidated investments ' net income or loss or equity contributions and distributions . these non-controlling interests are not redeemable by the equity holders and are presented as part of permanent equity . income and losses are allocated to the non-controlling interest holder based on its economic ownership percentage .
| results of operations the following table sets forth selected financial data and such data as a percentage of net revenues for the years indicated ( dollars in millions ) . replace_table_token_3_th -28- results of operations for the year ended december 31 , 2015 , compared to the year ended december 31 , 2014 net revenues net revenues for the year ended december 31 , 2015 , were $ 119.3 million compared to $ 122.0 million for the year ended december 31 , 2014 , a decrease of $ 2.7 million or 2.2 % . domestic net revenues totaled $ 43.6 million in the year ended december 31 , 2015 , compared to $ 46.4 million for the same period in 2014. domestic net revenues decreased by $ 2.8 million or 6.0 % primarily attributable to a decline in the growth from the company 's syndicated services and project work . international net revenues totaled $ 75.7 million for the year ended december 31 , 2015 , compared to $ 75.6 million for the year ended december 31 , 2014 , an increase of $ 0.1 million or 0.1 % . the increase in 2015 international net revenues was in china primarily due to the 2014 acquisition of unilink and increased volume in south africa partially offset by japan and turkey . foreign currency had a $ 10.3 million or 13.6 % negative impact .
| 7,190 |
our principal activities are : ( i ) private client services , including securities transaction and financial planning services ; ( ii ) institutional equity and fixed income sales , trading , and research , and municipal finance ; ( iii ) investment banking services , including mergers and acquisitions , public offerings , and private placements ; and ( iv ) retail and commercial banking , including personal and commercial lending programs . our core philosophy is based upon a tradition of trust , understanding , and studied advice . we attract and retain experienced professionals by fostering a culture of entrepreneurial , long-term thinking . we provide our private , institutional , and corporate clients quality , personalized service , with the theory that if we place clients ' needs first , both our clients and our company will prosper . our unwavering client and associate focus have earned us a reputation as one of the nation 's leading wealth management and investment banking firms . we have grown our business both organically and through opportunistic acquisitions . we plan to maintain our focus on revenue growth with a continued appreciation for the development of quality client relationships . within our private client business , our efforts will be focused on recruiting experienced financial advisors with established client relationships . within our capital markets business , our focus continues to be on providing quality client management and product diversification . in executing our growth strategy , we will continue to seek out opportunities that allow us to take advantage of the consolidation among middle-market firms , whereby allowing us to increase market share in our private client and institutional group businesses . stifel financial corp. , through its wholly owned subsidiaries , is principally engaged in retail brokerage ; securities trading ; investment banking ; investment advisory ; retail , consumer , and commercial banking ; and related financial services . our major geographic area of concentration is throughout the united states , with a growing presence in the united kingdom and europe . our principal customers are individual investors , corporations , municipalities , and institutions . our ability to attract and retain highly skilled and productive associates is critical to the success of our business . accordingly , compensation and benefits comprise the largest component of our expenses , and our performance is dependent upon our ability to attract , develop , and retain highly skilled associates who are motivated and committed to providing the highest quality of service and guidance to our clients . on january 2 , 2019 , the company completed the acquisition of first empire holding corp. and its subsidiaries ( “ first empire ” ) , including first empire securities , inc. , an institutional broker-dealer specializing in the fixed income markets . on february 28 , 2019 , the company completed an underwritten registered public offering of $ 150 million 6.25 % non-cumulative perpetual preferred stock , series b ( “ series b preferred ” ) . in march 2019 , we completed a public offering of an additional $ 10.0 million of series b preferred , pursuant to the over-allotment option . on july 1 , 2019 , the company completed the acquisition of mooreland partners , an independent m & a and private capital advisory firm serving the global technology industry . the acquisition was funded with cash from operations . on september 3 , 2019 , the company completed the acquisition of b & f capital markets , inc. ( “ b & f ” ) , a privately held firm focused on providing regional and community banks throughout the united states with interest rate derivative programs through a combination of experienced professionals and proprietary software . on september 27 , 2019 , the company completed the acquisition of certain assets of george k. baum & company ( “ gkb ” ) , a privately held investment banking firm focused on public finance and taxable fixed income sales and trading . on november 1 , 2019 , the company completed the acquisition of mainfirst , an independent european capital markets firm , specializing in equity brokerage and research , equity capital markets , and asset management . mainfirst operates out of offices in frankfurt , london , milan , munich , new york , paris , and zurich . on december 6 , 2019 , the company completed the acquisition of substantially all of the capital markets business of gmp capital inc. ( “ gmp ” ) , an independent investment banking franchise based in canada that offers investment banking services , including equity capital-raising , mergers and acquisitions , institutional sales and trading , and research services to corporate clients and institutional investors . 32 on december 9 , 2019 , the company announced that it reached an agreement to sell ziegler capital management , llc , a wholly owned asset management subsidiary . the sale is expected to be completed in the first quarter of 2020 . results for the year ended december 31 , 2019 for the year ended december 31 , 2019 , net revenues increased 10.3 % to a record $ 3.3 billion compared to $ 3.0 billion during the comparable period in 2018. this represents our 24 th consecutive year of record net revenues . net income available to common shareholders for the year ended december 31 , 2019 , increased 12.1 % to $ 431.1 million , or $ 5.49 per diluted common share , compared to $ 384.6 million , or $ 4.73 per diluted common share , in 2018. for the year ended december 31 , 2019 , our global wealth management segment posted record net revenues and pre-tax income . our revenue growth for the year ended december 31 , 2019 , was primarily attributable to an increase in investment banking revenues ; higher net interest income as a result of an increase in interest-earning assets at stifel bancorp ; an increase in brokerage revenues ; and the growth in asset management and service fees as a result of increased assets under management . story_separator_special_tag the average interest-earning assets of stifel bancorp increased to $ 16.5 billion during the year ended december 31 , 2019 , compared to $ 15.8 billion during 2018 at average interest rates of 3.78 % and 3.52 % , respectively . for the year ended december 31 , 2019 , interest expense increased 4.6 % to $ 177.9 million from $ 170.1 million in 2018. the increase is primarily attributable to an increase in interest-bearing liabilities ( deposits ) at stifel bancorp , partially offset by a decrease in fhlb advances . year ended december 31 , 2018 , compared with year ended december 31 , 2017 net interest income – for the year ended december 31 , 2018 , net interest income increased 23.9 % to $ 476.4 million from $ 384.4 million in 2017 . 37 for the year ended december 31 , 2018 , interest revenue increased 42.3 % to $ 646.4 million from $ 454.4 million in 2017 , principally as a result of a $ 1 60.0 million increase in interest revenue generated from the growth in interest-earning assets of stifel bancorp and higher margin interest income . the average interest-earning assets of stifel bancorp increased to $ 15.8 billion during the year ended december 31 , 2018 , compared to $ 13.6 billion in 2017 at average interest rates of 3.52 % and 2.93 % , respectively . for the year ended december 31 , 2018 , interest expense increased 142.9 % to $ 170.1 million from $ 70.0 million in 2017. the increase is primarily attributable to an increase in interest-bearing liabilities at stifel bancorp ( deposits and fhlb advances ) and the issuance of 5.20 % senior notes in october 2017. non-interest expenses the following table presents consolidated non-interest expenses for the periods indicated ( in thousands , except percentages ) : replace_table_token_9_th year ended december 31 , 2019 , compared with year ended december 31 , 2018 except as noted in the following discussion of variances , the underlying reasons for the increase in non-interest expenses can be attributed principally to our continued expansion , both organically and through our acquisitions , and increased administrative overhead to support the growth in our segments . compensation and benefits – compensation and benefits expenses , which are the largest component of our expenses , include salaries , bonuses , transition pay , benefits , amortization of stock-based compensation , employment taxes , and other associate-related costs . a significant portion of compensation expense is comprised of production-based variable compensation , including discretionary bonuses , which fluctuates in proportion to the level of business activity , increasing with higher revenues and operating profits . other compensation costs , including base salaries , stock-based compensation amortization , and benefits , are more fixed in nature . for the year ended december 31 , 2019 , compensation and benefits expense increased 11.7 % to $ 2.0 billion from $ 1.8 billion in 2018. compensation and benefits expense as a percentage of net revenues was 59.3 % for the year ended december 31 , 2019 , compared to 58.5 % for the year ended december 31 , 2018. the increase is primarily attributable to higher compensation costs associated with the current year acquisitions . occupancy and equipment rental – for the year ended december 31 , 2019 , occupancy and equipment rental expense increased 9.2 % to $ 242.9 million from $ 222.4 million in 2018. the increase is primarily attributable to an increase in depreciation expense as a result of the expansion of our aircraft engine leasing business , an increase in data processing costs associated with the growth of our business , and higher rent expense as a result of an increase in locations . communications and office supplies – communications expense includes costs for telecommunication and data transmission , primarily for obtaining third-party market data information . for the year ended december 31 , 2019 , communications and office supplies expense increased 5.1 % to $ 147.4 million from $ 140.3 million in 2018. the increase is primarily attributable to higher communication and quote equipment expenses associated with the continued growth of our business . commissions and floor brokerage – for the year ended december 31 , 2019 , commissions and floor brokerage expense increased 4.9 % to $ 44.0 million from $ 42.0 million in 2018. the increase is primarily attributable to an increase in institutional fixed income brokerage trading volumes . other operating expenses – other operating expenses primarily include license and registration fees , litigation-related expenses , which consist of amounts we reserve and or payout for legal and regulatory matters , travel and entertainment , promotional , investment banking deal costs , and professional service expenses . for the year ended december 31 , 2019 , other operating expenses increased 3.3 % to $ 325.4 million from $ 315.2 million in 2018. the increase is primarily attributable to higher investment banking deal costs , travel costs , litigation expense , dues and assessments , and subscription costs , partially offset by a decrease in the provision for loan losses . provision for income taxes – for the year ended december 31 , 2019 , our provision for income taxes was $ 149.2 million , representing an effective tax rate of 25.0 % , compared to $ 140.4 million in 2018 , representing an effective tax rate of 26.3 % . 38 year ended december 31 , 2018 , compared with year ended december 31 , 2017 except as noted in the following discussion of variances , the underlying reasons for the increase in non-interest expenses can be attributed principally to our continued expansion , both organically and through our acquisitions , and increased administrative overhead to support the growth in our segments . compensation and benefits – for the year ended december 31 , 2018 , compensation and benefits expense decreased 9.6 % to $ 1.8 billion from $ 2.0 billion in 2017. the decrease is primarily attributable to growth of our higher margin businesses and a decrease in deferred compensation expense from prior year .
| results of operations the following table presents consolidated financial information for the periods indicated ( in thousands , except percentages ) : replace_table_token_6_th net revenues the following table presents consolidated net revenues for the periods indicated ( in thousands , except percentages ) : replace_table_token_7_th year ended december 31 , 2019 , compared with year ended december 31 , 2018 for the year ended december 31 , 2019 , net revenues increased 10.3 % to a record $ 3.3 billion from $ 3.0 billion in 2018. this represents our 24 th consecutive year of record net revenues . the increase is primarily attributable to an increase in investment banking revenues , higher net interest income as a result of an increase in interest-earning assets at stifel bancorp , an increase in brokerage revenues , and the growth in asset management and service fees as a result of increased assets under management . 34 commissions – commission revenues are primarily generated from agency transactions in otc and listed equity securities , insurance products , and options . in addition , commission revenues also include distribution fees for promoting and distributing mutual funds . for the year ended december 31 , 2019 , commission revenues increased 1.5 % to $ 667.5 million from $ 657.7 million in 2018. the increase is primarily attributable to an increase in trading volumes . principal transactions – principal transaction revenues are gains and losses on secondary trading , principally fixed income brokerage revenues .
| 7,191 |
deposits for landscape services are recorded as a liability and story_separator_special_tag overview we operate two business segments : a leading lifestyle specialty retail segment and a wholesale apparel segment . our retail segment consists of our urban outfitters , anthropologie , free people , terrain and bhldn brands , whose merchandise is sold directly to our customers through retail stores , websites , mobile applications , catalogs and customer contact centers . our wholesale apparel segment consists of the free people wholesale division that , primarily , designs , develops and markets young women 's contemporary casual apparel . our comparable retail segment net sales data is equal to the sum of our comparable store plus comparable direct-to-consumer channels . a store is considered to be comparable if it has been open at least one full fiscal year , unless it was materially expanded or remodeled within that year or was not otherwise operating at its full capacity within that year . a direct-to-consumer channel is considered to be comparable if it has been operational for at least one full fiscal year . there is no overlap between comparable store net sales and comparable direct-to-consumer net sales . sales from stores and direct-to-consumer channels that do not fall within the definition of comparable store or channel are considered to be non-comparable . the effects of foreign currency translation are also considered non-comparable . although we have no precise empirical data as it relates to customer traffic or customer conversion rates in our stores , we believe that , based only on our observations , changes in transaction volume in our stores , as discussed in our results of operations , may correlate to changes in customer traffic . we are able to monitor customer visits , average order value and conversion rate on our websites . we believe that changes in any of these metrics may be caused by a response to our brands ' fashion offerings , our marketing campaigns , circulation of our catalogs and an overall growth in brand recognition as we expand our store base . our fiscal year ends on january 31. all references in this discussion to our fiscal years refer to the fiscal years ended on january 31 in those years . for example , our fiscal 2013 ended on january 31 , 2013. our omni-channel strategy allows customers to experience our brands , rather than a channel within the brand , by providing a seamless approach to the customer shopping experience . we try to deliver the best customer experience possible through an integration of all available shopping channels including stores , websites and catalogs ( online and through mobile devices ) . store sales are primarily fulfilled from that store 's inventory , but may also be shipped from any of our fulfillment centers or from a different store location if an item is out-of-stock at the original store . direct-to-consumer orders are primarily shipped to our customers through our fulfillment centers but may also be shipped from any store or a combination of fulfillment center and store depending on the availability of a particular item . these capabilities allow us to better serve customers and helps us to fill orders that otherwise may have been cancelled due to out-of-stock positions . retail store as of january 31 , 2013 , we operated 215 urban outfitters stores of which 167 were located in the united states , 13 were located in canada and 35 were located in europe . during fiscal 2013 , we 24 opened 18 new urban outfitters stores , of which 10 were located in the united states , three were located in canada and five were located in europe . urban outfitters targets young adults aged 18 to 28 through a unique merchandise mix and compelling store environment . urban outfitters ' product offering includes women 's and men 's fashion apparel , footwear and accessories , as well as an eclectic mix of apartment wares and gifts . we plan to open additional stores over the next several years , some of which may be outside the united states . urban outfitters ' north american and european store sales accounted for approximately 29.8 % and 6.6 % of consolidated net sales , respectively , for fiscal 2013. as of january 31 , 2013 , we operated 180 anthropologie stores , of which 169 were located in the united states , eight were located in canada and three were located in europe . during fiscal 2013 , we opened 14 new anthropologie stores , of which 11 were located in the united states and three were located in canada . during fiscal 2013 , we closed two anthropologie stores . anthropologie tailors its merchandise to sophisticated and contemporary women aged 28 to 45. anthropologie 's product assortment includes women 's casual apparel and accessories , shoes , home furnishings and a diverse array of gifts and decorative items . we plan to open additional stores over the next several years , some of which may be outside the united states . anthropologie 's north american and european store sales accounted for approximately 29.7 % and 0.8 % of consolidated net sales , respectively , for fiscal 2013. as of january 31 , 2013 , we operated 77 free people stores , of which 75 were located in the united states and two were located in canada . during fiscal 2013 we opened 15 new free people stores , of which 13 were located in the united states and two were located in canada . free people primarily offers private label branded merchandise targeted to young contemporary women aged 25 to 30. free people provides a unique merchandise mix of casual women 's apparel , intimates , shoes , accessories and gifts . we plan to open additional stores over the next several years some of which may be outside the united states . story_separator_special_tag we are not currently aware of any reasonably likely events or circumstances that would cause our actual results to be materially different from our estimates . revenue recognition revenue is recognized at the point-of-sale for retail store sales or when merchandise is shipped to customers for wholesale and direct-to-consumer sales , net of estimated customer returns . revenue is recognized at the completion of a job or service for landscape sales . revenue is presented on a net basis and does not include any tax assessed by a governmental or municipal authority . payment for merchandise at our stores and through our direct-to-consumer channel is tendered by cash , check , credit card , debit card or gift card . therefore , our need to collect outstanding accounts receivable for our retail segment is negligible and mainly results from returned checks or unauthorized credit card transactions . we maintain an allowance for doubtful accounts for our wholesale and landscape service accounts receivable , which management reviews on a regular basis and believes is sufficient to cover potential credit losses and billing adjustments . deposits for custom orders are recorded as a liability and recognized as a sale upon delivery of the merchandise to the customer . these custom orders , typically for upholstered furniture , are not material . deposits for landscape services are recorded as a liability and recognized as a sale upon completion of service . landscape services and related deposits are not material . we account for a gift card transaction by recording a liability at the time the gift card is issued to the customer in exchange for consideration from the customer . a liability is established and remains on our books until the card is redeemed by the customer , at which time we record the redemption of the card for merchandise as a sale , or when we determine the likelihood of redemption is remote . we determine the probability of the gift cards being redeemed to be remote based on historical redemption patterns . revenues attributable to gift card liabilities relieved after the likelihood of redemption becomes remote are included in sales and are not material . our gift cards do not expire . sales return reserve we record a reserve for estimated product returns where the sale has occurred during the period reported , but the return is likely to occur subsequent to the period reported . the reserve for estimated 27 product returns is based on our most recent historical return trends . if the actual return rate or experience is materially higher than our estimate , sales returns would be adjusted in the future . as of january 31 , 2013 and 2012 , reserves for estimated sales returns totaled $ 14.4 million and $ 11.0 million , representing 3.3 % and 2.6 % of total liabilities , respectively . marketable securities all of our marketable securities as of january 31 , 2013 and 2012 , are classified as available-for-sale and are carried at fair value , which approximates amortized cost . interest on these securities , as well as the amortization of discounts and premiums , is included in interest income in the consolidated statements of income . unrealized gains and losses on these securities are considered temporary and therefore are excluded from earnings and are reported as a component of other comprehensive income in the consolidated statements of comprehensive income and in accumulated other comprehensive loss in shareholders ' equity until realized . other than temporary impairment losses related to credit losses are considered to be realized losses . when available-for-sale securities are sold , the cost of the securities is specifically identified and is used to determine the realized gain or loss . securities classified as current assets have maturity dates of less than one year from the balance sheet date . securities classified as non-current assets have maturity dates greater than one year from the balance sheet date . available-for-sale securities such as auction rate securities that fail at auction and do not liquidate in the normal course are classified as non-current assets . inventories we value our inventories , which consist primarily of general consumer merchandise held for sale , at the lower of cost or market . cost is determined on the first-in , first-out method and includes the cost of merchandise and import related costs , including freight , import taxes and agent commissions . a periodic review of inventory is performed in order to determine if inventory is properly stated at the lower of cost or market . factors related to current inventories such as future expected consumer demand and fashion trends , current aging , current and anticipated retail markdowns or wholesale discounts and class or type of inventory are analyzed to determine estimated net realizable value . criteria that we utilize to quantify aging trends includes factors such as average selling cycle and seasonality of merchandise , the historical rate at which merchandise has sold below cost during the average selling cycle and the value and nature of merchandise currently priced below original cost . a provision is recorded to reduce the cost of inventories to the estimated net realizable values , if appropriate . the majority of inventory at january 31 , 2013 and 2012 consisted of finished goods . unfinished goods and work-in-process were not material to the overall net inventory value . net inventories as of january 31 , 2013 and january 31 , 2012 totaled $ 282.4 million and $ 250.1 million , representing 15.7 % and 16.9 % of total assets , respectively . any significant unanticipated changes in the risk factors noted within this report could have a significant impact on the value of our inventories and our reported operating results . adjustments to provisions related to the net realizable value of our inventories are primarily based on the market value of our annual physical inventories , cycle counts and recent historical trends . our estimates generally have been accurate and our reserve methods have been applied on a consistent basis .
| results of operations as a percentage of net sales the following tables set forth , for the periods indicated , the percentage of our net sales represented by certain income statement data and the change in certain income statement data from period to period . this table should be read in conjunction with the discussion that follows : replace_table_token_6_th fiscal 2013 compared to fiscal 2012 net sales in fiscal 2013 increased by 13.0 % to $ 2.79 billion , from $ 2.47 billion in the prior fiscal year . the $ 321 million increase was attributable to a $ 305 million , or 13.1 % , increase in retail segment net sales and a $ 16 million , or 11.8 % , increase in our wholesale segment net sales . the growth in our retail segment net sales during fiscal 2013 was driven by increases of $ 158 million in non-comparable and new store net sales and $ 158 million , or 31.4 % , in total direct-to-consumer net sales . these increases were partially offset by an $ 11 million , or 0.6 % , decrease in comparable store net sales . our total company comparable retail segment net sales increase of 6.9 % was comprised of increases of 21.8 % , 8.0 % and 3.6 % at free people , urban outfitters and anthropologie , respectively . the increase in net sales attributable to non-comparable and new stores 31 was primarily the result of opening 106 new stores in fiscal 2013 and 2012 that were not in operation for the full comparable periods . the comparable store net sales decrease for fiscal 2013 was primarily due to decreases in average units per transaction and average unit sales prices , partially offset by an increase in transactions . the direct-to-consumer net sales increase was driven by increased traffic to our web sites , which was partially offset by a decline in average order value and conversion rate .
| 7,192 |
the one remaining trust preferred security has no remaining book value as a result of otti of approximately $ 500,000 taken in 2009. certain losses recognized on investments certain debt securities have experienced fair value deterioration due to credit losses and other market story_separator_special_tag critical accounting policies generally accepted accounting principles require management to apply significant judgment to certain accounting , reporting and disclosure matters . management must use assumptions and estimates to apply those principles where actual measurement is not possible or practical . for a complete discussion of the corporation 's significant accounting policies , see note 1. nature of operations and summary of significant accounting policies in the notes to consolidated financial statements included as item 8 of this annual report on form 10-k for additional detail . results of operations – 2014 net income available to stockholders was $ 60.2 million , or $ 1.65 per fully diluted common share , an increase of $ 18.0 million compared to $ 42.2 million , or $ 1.41 per fully diluted common share in 2013. on november 12 , 2013 , the corporation acquired cfs bancorp , inc. ( `` cfs '' ) , and on november 7 , 2014 , the corporation acquired community bancshares , inc. ( `` community '' ) . details of both transactions are included in note 3. business combinations , included within the notes to consolidated condensed financial statements included as item 8 of this annual report on form 10-k. as of december 31 , 2014 , total assets equaled $ 5.8 billion , an increase of $ 386.9 million from december 31 , 2013. loans and investments , the corporation 's primary earning assets , totaled $ 5.1 billion , an increase of $ 379.4 million from the prior year 's total of $ 4.7 billion . investments increased $ 85.1 million and total loans increased $ 294.3 million . the corporation acquired $ 145.1 million in loans as a result of the community acquisition . the corporation 's allowance for loan losses totaled $ 64.0 million as of december 31 , 2014. the allowance provides 131.1 percent coverage of all non-accrual loans and 1.63 percent of total loans . details of the allowance for loan losses and non-performing loans are discussed within the “ loan quality ” and “ provision and allowance for loan losses ” sections of management 's discussion and analysis of financial condition and results of operations included as item 7 of this annual report on form 10-k. the corporation recognized increases in goodwill and core deposit intangible of $ 13.8 million and $ 4.7 million , respectively , as a result of the community acquisition . at december 31 , 2014 , other real estate owned totaled $ 19.3 million , a decrease of $ 2.9 million from the december 31 , 2013 balance of $ 22.2 million . included in the december 31 , 2014 balance was $ 6.7 million acquired in the community acquisition . taxes , both current and deferred , decreased in 2014 by $ 14.7 million . details related to the change in taxes are discussed within the “ income taxes ” section of the management 's discussion and analysis of financial condition and results of operations included as item 7 of this annual report on form 10-k and in note 22. income tax of the notes to consolidated financial statements included as item 8 of this annual report on form 10-k. other assets of $ 20.8 million at december 31 , 2014 , decreased $ 8.2 million from december 31 , 2013. included in the decrease was an $ 11.1 million decrease in prepaid pension expense . additional details related to the prepaid pension expense are discussed in note 21. pension and other post retirement benefit plans , of the notes to consolidated financial statements included as item 8 of this annual report on form 10-k. deposits increased $ 409.2 million from december 31 , 2013 , while borrowings decreased $ 111.3 million during the same period . as part of the community acquisition , the bank acquired deposits of $ 228.4 million . as part of the community acquisition , the corporation issued approximately 1.6 million shares of common stock valued at $ 35.0 million . additional details of this transaction are discussed in note 16. stockholders ' equity of the notes to consolidated financial statements included as item 8 of this annual report on form 10-k. the corporation was able to maintain all regulatory capital ratios in excess of the regulatory definition of “ well-capitalized ” as discussed in the “ capital ” section of management 's discussion and analysis of financial condition and results of operations included as item 7 of this annual report on form 10-k. 31 part ii : item 7. and item 7a . management 's discussion and analysis of financial condition and results of operations results of operations – 2013 net income available to stockholders was $ 42.2 million , or $ 1.41 per fully diluted common share , an increase of $ 1.6 million compared to $ 40.6 million , or $ 1.41 per fully diluted common share in 2012. included in the 2013 results were $ 5.4 million , or $ .12 per fully diluted common share , of non-recurring acquisition related expenses . on november 12 , 2013 , the corporation acquired 100 percent of cfs bancorp , inc. ( `` cfs '' ) in an all stock transaction as discussed in note 3. business combinations , included within the notes to consolidated condensed financial statements included as item 8 of this annual report on form 10-k. by contrast , 2012 results included a $ 9.1 million , or $ 0.21 per fully diluted common share after tax gain from the february 10 , 2012 , acquisition of certain assets and assumption of substantially all the deposits and certain other liabilities of scb bank , from the fdic as the receiver for scb bank . story_separator_special_tag management 's discussion and analysis of financial condition and results of operations in 2014 , asset yields decreased 5 basis points on a fully taxable equivalent basis ( fte ) and interest cost increased 3 basis points , resulting in an 8 basis points decrease in net interest margin compared to 2013. in 2013 , average earning assets only included approximately six weeks of averages related to assets acquired from cfs ; however , 2014 included an entire year of averages . average earning assets increased $ 968,091,000 and were a result of larger loan and investment portfolios , which has positive volume variances of $ 33,894,000 and $ 9,393,000 , respectively . in addition , a low interest rate environment produced a negative rate variance of $ 5,934,000 ( fte ) , resulting in a net increase of $ 32,772,000 ( fte ) in net interest income . in 2013 , asset yields decreased 34 basis points on fully taxable equivalent basis ( fte ) and interest cost decreased 21 basis points , resulting in a 13 basis point decrease in net interest margin compared to 2012. an increase in earnings assets , primarily due to a larger loan portfolio as a result of the cfs transaction , resulted in a positive volume variance of $ 10,087,000. in addition , a low interest rate environment produced a negative rate variance of $ 8,158,000 ( fte ) , resulting in a net increase of $ 1,929,000 in net interest income . average earning assets include the average balance of securities classified as available for sale , computed based on the average of the historical amortized cost balances without the effects of the fair value adjustment . in addition , annualized amounts are computed utilizing a 30/360 day basis . non-interest income non-interest income increased $ 10.9 million , or 19.8 percent , in 2014 compared to 2013. the november 12 , 2013 acquisition of cfs was the largest contributing factor to the year-over-year increase . significant increases realized during 2014 when compared to 2013 included service charge income , other customer fees ( primarily electronic card interchange fees and investment brokerage fees ) and other income , including gains on sale of other real estate owned , totaling $ 3.3 million , $ 3.8 million and $ 1.5 million , respectively . additionally , gains on the sale of investment securities increased $ 3.1 million from 2013 to 2014. additional details on investment securities can be found in note 5. investment securities , included within the notes to consolidated condensed financial statements of this form 10-k. finally , 2014 earnings on cash surrender value of life insurance increased $ 1.0 million from the previous year , primarily due to receipt of an $ 846,000 death benefit from bank owned life insurance during the period . partially offsetting the year-over-year increases was a $ 2.6 million decrease in net gains recognized on the sale of mortgage loans . mortgage origination and refinance volumes decreased from 2013 levels as a result of interest rate and economic factors . the november 7 , 2014 community acquisition resulted in $ 201,000 of non-interest income during the last seven weeks of 2014. in 2013 , non-interest income decreased $ 9.5 million , or 14.8 percent in comparison to 2012. the largest item contributing to the decrease was a gross purchase gain of $ 9.1 million recognized in 2012 from the purchase of certain assets and assumption of certain liabilities of scb bank . details of this transaction are included within note 2. purchase and assumption of the notes to consolidated financial statements included as item 8 of this annual report on form 10-k. additionally , earnings on cash surrender value of life insurance decreased by $ 805,000 compared to 2012. this decrease was primarily driven by a death benefit of $ 576,000 received from bank owned life insurance during 2012. finally , gains on the sale of mortgage loans , gains on the sale of investment securities and tax credit fund income declined by $ 3.1 million , $ 1.9 million and $ 1.0 million , respectively , in 2013 when compared to 2012. offsetting these declines were significant increases in gains on sale of oreo , insurance commissions , customer service charges , fiduciary activities , and investment service commissions of $ 3.0 million , $ 917,000 , $ 813,000 , $ 703,000 and $ 463,000 , respectively , in 2013 when compared to 2012. the november 12 , 2013 cfs acquisition resulted in $ 1.2 million of non-interest income during the last seven weeks of 2013. of this $ 1.2 million , the largest components were $ 581,000 of customer service charges and $ 325,000 of electronic interchange fees . non-interest expenses non-interest expenses increased $ 25.4 million , or 17.7 percent , in 2014 compared to 2013. as with non-interest income , the cfs acquisition was the most significant factor in the year-over-year increase . in 2014 , salaries and employee benefits increased $ 11.1 million , or 13.0 percent , over 2013 due to the addition of cfs employees since the acquisition . the corporation also experienced a $ 3.5 million increase in net occupancy expense , as 20 banking center locations were added to the bank 's footprint as a result of the cfs acquisition . in addition to the non-interest expense increases associated with operating a larger organization , 2014 included $ 1.5 million of non-recurring expenses associated with the cfs acquisition . additionally , the community acquisition resulted in $ 2.2 million of one-time expenses in 2014. furthermore , community added $ 646,000 of non-interest expense in the last seven weeks of 2014 . 34 part ii : item 7. and item 7a .
| income tax expense income tax expense in 2014 was $ 21,390,000 on pre-tax income of $ 81,552,000 , or 26.2 percent . for the same period in 2013 , income tax expense was $ 14,677,000 on pre-tax income of $ 59,207,000 , or 24.8 percent . additional details are discussed within the “ income taxes ” section of the management 's discussion and analysis of financial condition and results of operations included as item 7 of this annual report on form 10-k and in note 22. income tax of the notes to consolidated financial statements included as item 8 of this annual report on form 10-k. capital to be categorized as well capitalized , the bank must maintain a minimum total capital to risk-weighted assets , tier i capital to risk-weighted assets and tier i capital to average assets of 10 percent , 6 percent and 5 percent , respectively . the corporation 's regulatory capital exceeded the regulatory “ well capitalized ” standard at december 31 , 2014 . see additional information on the corporation 's and bank 's capital ratios in note 18. regulatory capital , in the notes to consolidated financial statements included as item 8 of this annual report on form 10-k. tier i regulatory capital consists primarily of total stockholders ' equity and subordinated debentures issued to business trusts categorized as qualifying borrowings , less non-qualifying intangible assets and unrealized net securities gains or losses . the corporation 's tier i capital to average assets ratio was 10.15 percent and 10.20 percent at december 31 , 2014 and 2013 , respectively . at december 31 , 2014 , the corporation had a tier i risk-based capital ratio of 12.63 percent and total risk-based capital ratio of 15.34 percent , compared to 11.71 percent and 14.54 percent , respectively , at december 31 , 2013 .
| 7,193 |
one right would also be distributed for each share of common stock issued after march 8 , 1999 until the distribution date , which would occur upon the earlier of ( i ) 10 business days following a public announcement that a person or group of affiliated or associated persons had acquired beneficial ownership of 20 % or more of the outstanding shares of the company 's common stock , or ( ii ) 10 business days following the commencement of a tender offer or exchange offer that would , if consummated , result in a person or group beneficially owning 20 % or more of such outstanding shares of the company 's common stock , subject to certain limitations . the rights would be exercisable only if a person or group acquires or announces a tender offer to acquire 20 % or more of the company 's common stock . if a person or group acquires 20 % or more of the company 's common stock , all shareholders except the purchaser would be entitled to acquire the company 's common stock at a 50 % discount . the rights would trade with the company 's common stock , unless and until they are separated upon the story_separator_special_tag the following discussion is intended to provide a better understanding of our consolidated financial statements , including a brief discussion of our business and products , key factors that impacted our performance , and a summary of our operating results . this information should be read in conjunction with item 1a , “ risk factors ” and our consolidated financial statements and the notes thereto included in item 8 , “ financial statements and supplementary data ” of this annual report on form 10-k. historical results and percentage relationships among any amounts in the consolidated financial statements are not necessarily indicative of trends in operating results for future periods . overview we manufacture , market , and distribute charles & colvard created moissanite ® jewels ( which we refer to as moissanite or moissanite jewels ) and finished jewelry featuring moissanite for sale in the worldwide jewelry market . moissanite , also known by its chemical name of silicon carbide , or sic , is a rare mineral first discovered in a meteor crater . because naturally occurring sic crystals are too small for commercial use , larger crystals must be grown in a laboratory . leveraging our advantage of being the sole source worldwide of created moissanite jewels , our strategy is to establish charles & colvard with reputable , high-quality , and sophisticated brands and to position moissanite as an affordable , luxurious alternative to other gemstones , such as diamond . we believe this is possible due to moissanite 's exceptional brilliance , fire , luster , durability , and rarity like no other jewel available on the market . we sell our loose moissanite jewels at wholesale to some of the largest distributors and manufacturers in the world , which mount them into fine jewelry to be sold at retail outlets and via the internet . we also sell loose moissanite jewels and finished jewelry at wholesale to retailers to be sold to end consumers and , in the third quarter of 2011 , we established a direct-to-consumer e-commerce sales channel through our wholly owned operating subsidiary moissanite.com , llc that sells both loose moissanite jewels and finished jewelry . additionally , in january 2012 we soft-launched a direct-to-consumer home party sales channel through our wholly owned operating subsidiary charles & colvard direct , llc that sells finished jewelry . we believe the expansion of our sales channels to the jewelry trade and the end consumer with branded finished moissanite jewelry creates a more compelling consumer value proposition to drive increased demand . we are continuing to focus on our core business of manufacturing and distributing the moissanite loose jewel and finished jewelry featuring moissanite through wholesale sales channels , because this is currently the primary way we reach consumers . we believe there is substantial opportunity to grow our wholesale business and to capture a larger share of the jewelry market as we execute our strategy to increase consumer awareness of moissanite . the wholesale finished jewelry business that we launched in 2010 is currently expanding through select retailers and television shopping networks , and we believe there is significant opportunity to expand these sales channels . we believe our finished jewelry business , including finished jewelry sold through our direct-to-consumer e-commerce and home party sales channels , allows us to have more control over the end product and enhance our relationships with consumers , as well as provide incremental sales and gross profit dollars due to the higher price points of finished jewelry containing moissanite relative to loose jewels . during 2011 , we focused on executing the following critical aspects of our strategic plan that are continuing into 2012 : 21 · developing brand strategies - our goal is to build multiple brands around the moissanite jewel and finished jewelry collections in attractive and desirable jewelry designs , especially those featuring larger center stones that leverage moissanite 's point of differentiation . we believe branding will allow us to increase consumer awareness , which we expect to help drive sales and develop consumer brand recognition and loyalty . in july 2011 , we received a notice of allowance from the uspto that approved our application for the trademark “ forever brilliant. ” in january 2012 , we entered into an exclusive partnership with serenity , one of the world 's notable laboratories for gemstone enhancements , to create moissanite jewels with optical properties that are significantly whiter than our standard vg grade jewels . we are marketing these enhanced jewels under the forever brilliant tm trademark as a premier brand to differentiate from other grades of our moissanite as well as moissanite sold by potential competitors in the future . story_separator_special_tag there can be no assurance that future results for each reporting period will exceed past results in sales , operating cash flow , and or net income due to the challenging business environment in which we operate , our changing business model , and our investment in various initiatives to support our growth strategies . however , we remain committed to our current priorities of generating positive cash flow and strengthening our financial position through cost-reduction initiatives and selling down our inventory while we execute and refine our strategy and messaging initiatives . we believe the results of these efforts will propel us to new heights of revenue growth and profitability and further enhance shareholder value in coming years , but we fully recognize the business and economic challenges in which we operate . 2011 summary the following is a summary of key financial results and certain non-financial results achieved for the year ended december 31 , 2011 : · we grew our total net sales by $ 3.35 million , or 26 % , to $ 16.03 million in 2011 from $ 12.69 million in 2010. the improvement in 2011 sales was primarily due to the ongoing execution of our strategy to grow sales through our existing customer relationships , the addition of several new domestic and international customers during the year , the expansion of our wholesale finished jewelry business , and the continuing improvement in the overall retail environment . · operating expenses increased by $ 1.60 million , or 24 % , to $ 8.22 million in 2011 primarily as a result of personnel additions and advertising and marketing initiatives incurred to position our company for future growth , especially with respect to our two operating subsidiaries formed in 2011 for our e-commerce and home party direct sales businesses . as we grow our business , we intend to continue to closely manage our operating expenses by seeking the most cost effective and efficient solutions to our operating requirements . · net income was $ 1.57 million in 2011 compared to $ 1.56 million in 2010 , as sales increases in 2011 were offset by higher operating expenses as we invest in our strategic initiatives . our earnings per share was $ 0.08 in each of the years ended december 31 , 2011 and 2010 . · we generated positive cash flows from operations of $ 3.45 million in 2011 compared to $ 1.48 million in 2010 . · cash and liquid long-term investments at december 31 , 2011 were $ 10.46 million compared to $ 8.75 million at december 31 , 2010. the primary reasons for this increase are a $ 3.45 million cash flow from operations comprised of net income of $ 1.57 million that included $ 1.58 million of net non-cash expenses , the receipt of an income tax receivable of $ 113,000 , a net decrease in inventory of $ 2.65 million , and an increase in trade accounts payable of $ 519,000 that more than offset a net increase in trade accounts receivable of $ 2.85 million , an increase in prepaid expenses and other assets of $ 88,000 , and a net decrease in accrued expenses and other liabilities of $ 24,000 . · total inventory , including long-term and consignment inventory , was $ 35.01 million as of december 31 , 2011 , down from approximately $ 37.38 million at the end of 2010. this decrease is primarily a result of sales , offset in part by purchases in 2011 of jewelry castings , findings , and other jewelry components ; fashion finished jewelry in support of our lulu avenue home party direct sales business ; and limited production of moissanite jewels . we believe we have a significant opportunity to build our cash position as we sell down our on-hand moissanite loose jewel inventory . 23 · we continue to carry no long-term debt and believe we can fund our growth strategies for the foreseeable future from operating cash flows . · we hired key personnel in 2011 to help drive our future growth initiatives , including a vice president , e-commerce & marketing to lead our direct-to-consumer e-commerce business and a general manager to lead our home party business . critical accounting policies and estimates our discussion and analysis of our financial condition and results of operations are based upon our consolidated financial statements , which we prepared in accordance with accounting principles generally accepted in the united states , or u.s. gaap . the preparation of these consolidated financial statements requires us to make estimates and judgments that affect the reported amounts of assets , liabilities , revenues , and expenses and related disclosures of contingent assets and liabilities . “ critical accounting policies and estimates ” are defined as those most important to the financial statement presentation and that require the most difficult , subjective , or complex judgments . we base our estimates on historical experience and on various other factors that we believe to be reasonable under the circumstances , the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources . under different assumptions and or conditions , actual results of operations may materially differ . the most significant estimates impacting our consolidated financial statements relate to valuation and classification of inventories , accounts receivable reserves , deferred tax assets , uncertain tax positions , cooperative advertising , and revenue recognition on transactions with extended payment terms . we also have other policies that we consider key accounting policies , but these policies typically do not require us to make estimates or judgments that are difficult or subjective . inventories - inventories are stated at the lower of cost or market on an average cost basis . our finished goods inventory consists primarily of near-colorless moissanite jewels that meet rigorous grading criteria and are of cuts and sizes most commonly used in the jewelry industry .
| results of operations the following table sets forth certain consolidated statements of operations data for the years ended december 31 , 2011 and 2010. replace_table_token_3_th net sales net sales for the years ended december 31 , 2011 and 2010 comprise the following : replace_table_token_4_th 26 net sales were $ 16.03 million for the year ended december 31 , 2011 compared to $ 12.69 million for the year ended december 31 , 2010 , an increase of $ 3.35 million , or 26 % . during 2011 , carat sales of loose moissanite jewels and moissanite jewels mounted in finished jewelry increased 38 % to approximately 123,000 carats from approximately 89,000 carats in 2010. the improvement in 2011 sales was primarily due to the ongoing execution of our growth strategies including initiatives to increase consumer awareness of moissanite through marketing support of our wholesale customer base ; expansion of existing customer relationships ; addition of new domestic and international customers ; and increased sales of finished jewelry featuring moissanite . we anticipate orders and related sales will continue to improve as we continue to execute these strategies . sales of loose jewels represented 75 % and 80 % of total net sales for the years ended december 31 , 2011 and 2010 , respectively . for the year ended december 31 , 2011 , loose jewel sales were $ 12.07 million compared to $ 10.16 million for the year ended december 31 , 2010 , an increase of $ 1.90 million , or 19 % . this increase was primarily attributable to orders from new wholesale customers and the timing of restocking orders from existing wholesale customers . in 2011 , the average selling price per carat for our sales of loose jewels decreased 8 % from 2010 primarily resulting from the sale of varying grades of loose jewels , some of which have lower wholesale selling prices , and special pricing that we extended during 2011 to support customers expanding their moissanite businesses .
| 7,194 |
volatility relating to these exposures is managed on a global basis by utilizing a number of techniques , including working capital management , sourcing strategies , selling price increases , selective borrowings in local currencies and entering into story_separator_special_tag executive overview and outlook colgate-palmolive company ( together with its subsidiaries , the “ company ” or “ colgate ” ) seeks to deliver strong , consistent business results and superior shareholder returns by providing consumers globally with products that make their lives healthier and more enjoyable . to this end , the company is tightly focused on two product segments : oral , personal and home care ; and pet nutrition . within these segments , the company follows a closely defined business strategy to develop and increase market leadership positions in key product categories . these product categories are prioritized based on their capacity to maximize the use of the organization 's core competencies and strong global equities and to deliver sustainable long-term growth . operationally , the company is organized along geographic lines with management teams having responsibility for the business and financial results in each region . the company competes in more than 200 countries and territories worldwide with established businesses in all regions contributing to the company 's sales and profitability . approximately 75 % of the company 's net sales are generated from markets outside the u.s. , with over 50 % of the company 's net sales coming from emerging markets ( which consist of latin america , asia ( excluding japan ) , africa/eurasia and central europe ) . this geographic diversity and balance help to reduce the company 's exposure to business and other risks in any one country or part of the world . the oral , personal and home care product segment is operated through five reportable operating segments : north america , latin america , europe/south pacific , asia and africa/eurasia , all of which sell to a variety of retail and wholesale customers and distributors . the company , through hill 's pet nutrition , also competes on a worldwide basis in the pet nutrition market , selling its products principally through authorized pet supply retailers and veterinarians . on an ongoing basis , management focuses on a variety of key indicators to monitor business health and performance . these indicators include market share , net sales ( including volume , pricing and foreign exchange components ) , organic sales growth ( net sales growth excluding the impact of foreign exchange , acquisitions and divestments ) , gross profit margin , operating profit , net income and earnings per share , as well as measures used to optimize the management of working capital , capital expenditures , cash flow and return on capital . the monitoring of these indicators and the company 's code of conduct and corporate governance practices help to maintain business health and strong internal controls . to achieve its business and financial objectives , the company focuses the organization on initiatives to drive and fund growth . the company seeks to capture significant opportunities for growth by identifying and meeting consumer needs within its core categories , through its focus on innovation and the deployment of valuable consumer and shopper insights in the development of successful new products regionally , which are then rolled out on a global basis . to enhance these efforts , the company has developed key initiatives to build strong relationships with consumers , dental and veterinary professionals and retail customers . growth opportunities are greater in those areas of the world in which economic development and rising consumer incomes expand the size and number of markets for the company 's products . the investments needed to support growth are developed through continuous , company-wide initiatives to lower costs and increase effective asset utilization . through these initiatives , which are referred to as the company 's funding-the-growth initiatives , the company seeks to become even more effective and efficient throughout its businesses . these initiatives are designed to reduce costs associated with direct materials , indirect expenses , distribution and logistics , and advertising and promotional materials , among other things , and encompass a wide range of projects , examples of which include raw material substitution , reduction of packaging materials , consolidating suppliers to leverage volumes and increasing manufacturing efficiency through sku reductions and formulation simplification . the company also continues to prioritize its investments toward its higher margin businesses , specifically oral care , personal care and pet nutrition . 17 ( dollars in millions except per share amounts ) as discussed in part i , item 1a “ risk factors , ” with approximately 75 % of its net sales generated outside the united states , the company is exposed to changes in economic conditions and foreign currency exchange rates , as well as political uncertainty in some countries , all of which could impact future operating results . for example , as discussed in detail below , the operating environment in venezuela is challenging , with economic uncertainty fueled by currency devaluations in 2010 and 2013 and effective devaluations in 2014 and 2015 , high inflation and a precipitous decline in the price of oil , and governmental restrictions in the form of import authorization controls , currency exchange and payment controls , price and profit controls and the possibility of expropriation of property or other resources . increasingly , the company 's venezuelan subsidiary ( “ cp venezuela ” ) has experienced various production interruptions due to material shortages caused by limited access to u.s. dollars for imported materials , delays in the importation process due to regulations and controls imposed by the venezuelan government , labor unrest and high costs due to inflation coupled with the inability to increase prices without government approval . story_separator_special_tag prior to the change in accounting for the company 's venezuelan operations , which was effective december 31 , 2015 , the company remeasured the financial statements of cp venezuela at the end of each month at the rate at which it expected to remit future dividends which , based on the advice of legal counsel , was the sicad rate . during the year ended december 31 , 2015 , the company incurred pretax losses of $ 34 ( $ 22 aftertax or $ 0.02 per diluted common share ) related to the remeasurement of cp venezuela 's local currency-denominated net monetary assets at the quarter-end sicad rate . the quarter-end sicad rate was 12.00 bolivares per dollar , 12.80 bolivares per dollar , 13.50 bolivares per dollar and 13.50 bolivares per dollar as of the end of the first , second , third and fourth quarters of 2015 , respectively . the remeasurement losses incurred in the second and third quarters of 2015 are referred to as the “ 2015 venezuela remeasurements. ” during the year ended december 31 , 2014 , the company incurred net pretax losses of $ 327 ( $ 214 aftertax or $ 0.23 per diluted common share ) related to the remeasurement of cp venezuela 's local currency-denominated net monetary assets at the quarter-end sicad i rate for each of the first three quarters of 2014 ( the “ 2014 venezuela remeasurements ” ) . the sicad i rate did not revalue during the fourth quarter of 2014 and remained at 12.00 bolivares per dollar as of december 31 , 2014. during the year ended december 31 , 2013 , the company incurred a pretax loss of $ 172 ( $ 111 aftertax or $ 0.12 per diluted common share ) related to the remeasurement of cp venezuela 's local currency-denominated net monetary assets at the date of the devaluation that changed the official exchange rate from 4.30 to 6.30 bolivares per dollar ( the “ 2013 venezuela remeasurement ” ) . the 2015 venezuela remeasurements , 2014 venezuela remeasurements and 2013 venezuela remeasurement are referred to together as the “ venezuela remeasurements. ” included in the remeasurement losses during 2015 and 2014 were charges related to the devaluation-protected bonds issued by the venezuelan government and held by cp venezuela . because the official exchange rate remained at 6.30 bolivares per dollar , the devaluation-protected bonds did not revalue at the sicad rate but remained at the official exchange rate which resulted in an impairment in the fair value of the bonds . 19 ( dollars in millions except per share amounts ) in the fourth quarter of 2012 , the company commenced a four-year global growth and efficiency program for sustained growth . the program 's initiatives are expected to help the company ensure sustained solid worldwide growth in unit volume , organic sales and earnings per share and enhance its global leadership positions in its core businesses . on october 23 , 2014 , the company 's board of directors ( the “ board ” ) approved an expansion of the global growth and efficiency program ( as expanded , the “ 2012 restructuring program ” ) . the initiatives under the 2012 restructuring program continue to be focused on the following areas : ▪ expanding commercial hubs ▪ extending shared business services and streamlining global functions ▪ optimizing global supply chain and facilities the board authorized the expansion of the 2012 restructuring program to take advantage of additional savings opportunities identified in all three areas . cumulative pretax charges related to the 2012 restructuring program , once all phases are approved and implemented , are estimated to be $ 1,285 to $ 1,435 ( $ 950 to $ 1,050 aftertax ) , exclusive of the expansion approved in october 2015 ( discussed below ) . savings from the 2012 restructuring program , substantially all of which are expected to increase future cash flows , are projected to be approximately $ 405 to $ 475 pretax ( $ 340 to $ 390 aftertax ) annually by the end of the fourth year of the program , exclusive of the expansion approved in october 2015. in 2015 , 2014 and 2013 , the company incurred aftertax costs of $ 183 , $ 208 and $ 278 , respectively , associated with the 2012 restructuring program . on october 29 , 2015 , recognizing the macroeconomic challenges around the world and the company 's successful implementation of the 2012 restructuring program to date , the company 's board approved the reinvestment of the funds from the sale of the company 's laundry detergent business in the south pacific ( discussed below ) to expand the 2012 restructuring program and extend it for one year through december 31 , 2017. initiatives under the expanded 2012 restructuring program will continue to fit within the program 's three focus areas of expanding commercial hubs , extending shared business services and streamlining global functions and optimizing the global supply chain and facilities . the company expects the initiatives under the expanded program to have a similar aftertax rate of return to the existing program , which on average has been 30 % . the company will update its disclosure to reflect the impact the expansion will have on the range of estimated charges and savings for the 2012 restructuring program when the additional initiatives under the expanded program are approved . for more information regarding the 2012 restructuring program , see “ restructuring and related implementation charges ” below . in august 2015 , the company completed the sale of its laundry detergent business in the south pacific to henkel ag & co. kgaa for an aggregate purchase price of approximately 310 australian dollars ( $ 221 ) and recorded a pretax gain of $ 187 ( $ 120 aftertax or $ 0.13 per diluted share ) in other ( income ) expense , net .
| segment results the company markets its products in over 200 countries and territories throughout the world in two product segments : oral , personal and home care ; and pet nutrition . the company evaluates segment performance based on several factors , including operating profit . the company uses operating profit as a measure of the operating segment performance because it excludes the impact of corporate-driven decisions related to interest expense and income taxes . oral , personal and home care north america replace_table_token_12_th net sales in north america increased 1.0 % in 2015 to $ 3,149 , driven by volume growth of 2.0 % , which was partially offset by negative foreign exchange of 1.0 % , while net selling prices were flat . organic sales in north america increased 2.0 % in 2015 . the increase in organic sales in north america in 2015 versus 2014 was driven by oral care with strong organic sales in the toothpaste and manual toothbrush categories . personal care and home care also contributed to organic sales growth . personal care organic sales growth was driven by gains in the shower gel category . home care organic sales growth was due to strong organic sales in the fabric softener category . net sales in north america increased 1.5 % in 2014 to $ 3,124 , driven by volume growth of 3.5 % , which was partially offset by net selling price decreases of 1.0 % due to increased promotional activities and negative foreign exchange of 1.0 % . organic sales in north america increased 2.5 % in 2014. operating profit in north america increased 5 % in 2015 to $ 974 , or 130 bps to 30.9 % of net sales . this increase in operating profit as a percentage of net sales was primarily due to an increase in gross profit ( 80 bps ) and a decrease in selling , general and administrative expenses ( 90 bps ) , both as a percentage of net sales .
| 7,195 |
this section should be read in conjunction with the consolidated financial statements and the accompanying notes included elsewhere in this annual report . statements in the following discussion may include forward-looking statements . these forward-looking statements involve risks and uncertainties . see “ item 1a . risk factors , ” for additional discussion of these factors and risks . 29 business overview during 2012 , we continued to pursue our strategy for growth in a market environment characterized by high oil prices , comparatively low domestic natural gas prices , recovering gulf of mexico activity levels , an emergence of attractive international contracts , and continuing overall economic uncertainty . in response to each of these market factors , we initiated or continued strategic efforts to capitalize on specific growth opportunities . the most significant of these market developments continues to be the strength of domestic onshore shale reservoir activity . while the growth levels of certain shale reservoir fields have crested , activity levels in the eagle ford , bakken , niobrara , and permian basin fields have remained robust . as part of our efforts to strategically expand the markets served by our production testing segment during 2012 , we acquired the assets and operations of eastern reservoir services ( ers ) , and greywolf production systems , inc. and gps ltd. ( together greywolf ) . these acquisitions contributed significant growth for our production testing segment and allow the segment to capture a greater share of the domestic and canadian markets . also , in response to continuing strong shale reservoir activity , our fluids division has organically expanded its domestic onshore operations to serve the demand for its frac water management services . the strength of domestic and canadian crude oil and liquids prices has also led our compressco segment to continue its focus on expanding its capacity to provide unconventional compression applications as a compliment to its significant dry gas production enhancement services . in the u.s. gulf of mexico , government restrictions and delays in obtaining regulatory permits have eased somewhat and have resulted in a return to pre-macondo activity levels . our fluids division has capitalized on this growth , resulting in significant increases in its deepwater offshore clear brine fluids ( cbf ) sales activity . however , the u.s. gulf of mexico well abandonment and decommissioning market remains challenging for our offshore services segment , and we have implemented cost reduction and asset rationalization efforts to improve the focus and efficiency of this segment . outside of the united states , we are exploiting unique opportunities for many of our businesses . our compressco segment continues to grow its latin america operations , while also continuing to pursue other international opportunities . our production testing segment expanded its scope of services and international presence with the acquisition of optima solutions holding limited ( optima ) , an aberdeen , scotland-based provider of offshore rig cooling services and associated products that suppress heat generated by high-rate flaring of hydrocarbons during well test operations . our production testing and fluids segments have each also expanded their eastern hemisphere operations through new service contracts and additional activity under existing service contracts , particularly in the middle east . our consolidated revenues and gross profit for the year ended december 31 , 2012 , reflect the growth of our production testing , compressco , and fluids segments , each of which achieved record revenue levels during 2012. in particular , the results of our production testing segment for 2012 include the impact of its acquisitions of optima , ers , and greywolf . during 2012 , these acquisitions contributed aggregate revenues of $ 62.2 million and income before taxes , net of $ 2.8 million of transaction costs , of $ 6.2 million . our compressco segment also reflected growth in revenues and profitability during 2012 compared to 2011 , primarily as a result of the increased latin america activity , but also due to the growth of its domestic unconventional application services . our fluids division also reported increased revenues and profitability compared to 2011 , primarily due to the increased cbf product sales from increased activity in the gulf of mexico and from increased services revenues and profits from its growing domestic frac water management operation . these increases in fluids division cbf and services revenues more than offset the decreased revenues from its manufactured products operation . partially offsetting the growth in these segments , our offshore services segment reported decreased revenues during 2012 compared to 2011 due to a number of factors , including weather disruptions , customer project delays , and pricing pressures . following the sales of its oil and gas producing properties , our maritech segment now generates minimal revenues . increased consolidated gross profit was partially offset by increased consolidated general and administrative expense , primarily due to the above mentioned acquisitions . despite spending an aggregate of approximately $ 163.3 million on acquisitions and an additional $ 107.5 million on capital expenditures during 2012 , our balance sheet remains strong . the majority of the funding for this growth was provided from available cash , and of the $ 88.4 million of cash that was borrowed during 2012 , $ 28.6 million was repaid by year-end . our asset review efforts contributed approximately $ 59.3 million in cash from the sale of certain assets , including the sale and leaseback of our corporate headquarters facility . cash provided from operations during 2012 was approximately $ 17.7 million , as our focus on cash generation during the fourth quarter , including improved accounts receivable collections , helped offset the significant expenditures to extinguish maritech 's remaining decommissioning liabilities during the year . despite the sale of the maritech properties in 2011 and 2012 , we continue to utilize a significant portion of our operating cash flows to extinguish maritech 's remaining decommissioning liabilities . story_separator_special_tag while there are uncertainties in latin america that could affect operations , including the renewal of certain customer contracts , as well as uncertainties 31 surrounding the domestic price of natural gas which drives demand for a portion of compressco 's domestic services , we expect revenues from the segment will continue to increase . our offshore division consists of two operating segments : offshore services and maritech . offshore services generates revenues and cash flows by performing ( 1 ) downhole and subsea oil and gas well plugging and abandonment services , ( 2 ) decommissioning and certain construction services utilizing heavy lift barges and various cutting technologies with regard to offshore oil and gas production platforms and pipelines , and ( 3 ) conventional and saturated air diving services . the services provided by the offshore services segment are marketed to offshore operators primarily in the u.s. gulf coast region . gulf of mexico platform decommissioning and well abandonment activity levels are driven primarily by bsee regulations ; the age of producing fields ; production platforms and other structures ; oil and natural gas commodity prices ; sales activity of mature oil and gas producing properties ; and overall oil and gas company activity levels . offshore services revenues decreased by $ 21.4 million during 2012 compared to 2011 , due to a number of factors including decreased work performed for maritech , decreased diving , abandonment , and cutting services activity , customer project delays , weather disruptions , pricing pressures , and the sales of certain operations during the past year . in addition , the profitability of our offshore services segment was affected by approximately $ 8.4 million of impairments , primarily related to the decision to sell one of its heavy lift derrick barges due to decreased demand in the shallow waters in which it has historically operated . however , the offshore services segment anticipates increased profitability going forward compared to 2012 as a result of cost reduction and asset rationalization initiatives which began during the latter part of 2012. the sales of substantially all of maritech 's oil and gas producing properties during 2011 and 2012 have essentially removed us from the oil and gas exploration and production business . as part of this strategic decision , beginning in 2011 , maritech began selling oil and gas property packages to industry participants and other thir d parties . maritech is continuing to seek the sale of its remaining oil and gas producing properties during 2013 . as a result of these sales of oil and gas properties , maritech 's revenues during 2012 decreased by $ 76.6 million compared to 2011 and are expected to continue to be minimal going forward . maritech 's current operations primarily consist of the ongoing plugging , abandonment , and decommissioning associated with its remaining offshore wells , facilities , and production platforms , and we expect to complete the majority of this remaining work during 2013 . critical accounting policies and estimates this discussion and analysis of our financial condition and results of operations is based upon our consolidated financial statements . we prepared these financial statements in conformity with united states generally accepted accounting principles . in preparing our consolidated financial statements , we make assumptions , estimates , and judgments that affect the amounts reported . we base these estimates on historical experience , available information , and various other assumptions that we believe are reasonable . we periodically evaluate these estimates and judgments , including those related to potential impairments of long-lived assets ( including goodwill ) , the collectability of accounts receivable , and the current cost of future abandonment and decommissioning obligations . “ note b – summary of significant accounting policies ” to the consolidated financial statements contains the accounting policies governing each of these matters . the fair values of portions of our total assets and liabilities are measured using significant unobservable inputs . the combination of these factors forms the basis for our judgments made about the carrying values of assets and liabilities that are not readily apparent from other sources . these judgments and estimates may change as new events occur , as new information is acquired , and as changes in our operating environment are encountered . actual results are likely to differ from our current estimates , and those differences may be material . the following critical accounting policies reflect the most significant judgments and estimates used in the preparation of our financial statements . impairment of long-lived assets the determination of impairment of long-lived assets is conducted periodically whenever indicators of impairment are present . if such indicators are present , the determination of the amount of impairment is based on our judgments as to the future operating cash flows to be generated from these assets throughout their estimated useful lives . if an impairment of a long-lived asset is warranted , we estimate the fair value of the asset based on a present value of these cash flows or the value that could be realized from disposing of the asset in a transaction between market participants . the oil and gas industry is cyclical , and our estimates of the amount of future cash flows , the period over which these estimated future cash flows will be generated , as well as the fair value of an impaired asset , are imprecise . our failure to accurately estimate these future operating cash flows or fair values could result in certain long-lived assets being overstated , which could result in impairment charges in periods 32 subsequent to the time in which the impairment indicators were first present . alternatively , if our estimates of future operating cash flows or fair values are understated , impairments might be recognized unnecessarily or in excess of the appropriate amounts . although the majority of our impairments of long-lived assets have typically related to oil and gas properties , during 2012 we recorded other long-lived asset impairments of $ 8.4 million .
| results of operations the following data should be read in conjunction with the consolidated financial statements and the associated notes contained elsewhere in this report . 201 2 compared to 201 1 consolidated comparisons replace_table_token_9_th consolidated revenues during 2012 in creased compared to 2011 due to the growth and increased activity for many of our businesses , including unprecedented revenue levels for our fluids , production testing , and compressco segments . in partic ular , the acquisitions of optima , ers , and greywo lf contributed $ 62.2 million of increased revenues for our production testing segment during 2012 , along with $ 20.7 million of increased gross profit . in addition , our production testing segment also reported increased revenues co mpared to the prior year due to increased domestic drilling activity , particularly in certain of the shale reservoir markets it serves . our fluids segment 's revenue and gross profit growth was also due to increased industry activity , which resulted in increased cbf product sales , and more than offset the decreased product sales by the segment 's manufactured products businesses . compressco also reported increased revenues and gross profit , primarily due to increased activity and demand in latin america . these increased revenues more than offset the $ 76.6 million decrease in maritech revenues due to the sale s of substantially all of its oil and gas producing properties during 2011 and ear ly 2012. in addition , offshore services revenues from third party customers as a result of the 2011 purchase of a heavy lift barge were largely offset by decreased diving and well abandonment services revenue , and the segment 's gross profit decreased prima rily due to decreased diving and cutting services profitability .
| 7,196 |
we generate revenue by developing , licensing , and supporting a wide range of software products , by offering an array of services , including cloud-based services to consumers and businesses , by designing , manufacturing , and selling devices that integrate with our cloud-based services , and by delivering relevant online advertising to a global audience . our most significant expenses are related to compensating employees , designing , manufacturing , marketing , and selling our products and services , datacenter costs in support of our cloud-based services , and income taxes . industry trends our industry is dynamic and highly competitive , with frequent changes in both technologies and business models . each industry shift is an opportunity to conceive new products , new technologies , or new ideas that can further transform the industry and our business . at microsoft , we push the boundaries of what is possible through a broad range of research and development activities that seek to identify and address the changing demands of customers , industry trends , and competitive forces . key opportunities and investments we see significant opportunities for growth by investing research and development resources in the following areas : digital work and life experiences our cloud operating system our devices operating system and hardware 26 part ii item 7 with investments in these areas , we work to fulfill the evolving needs of our customers in a mobile-first and cloud-first world . we view mobility broadly not just by devices , but by experiences . today , people move just as quickly into new contexts as to new locations . mobility goes beyond devices users carry with them as they move from place to place , to encompass the rich collection of data , applications , and services that accompany them as they move from setting to setting in their lives . many of our customers are dual users , employing technology for work or school and also deeply in their personal lives . digital work and life experiences we believe we can significantly enhance the digital lives of our customers using our broad portfolio of communication , productivity , and information services . we work to deliver digital work and life experiences that are reinvented for the mobile-first and cloud-first world . productivity will be the first and foremost objective , to enable people to meet and collaborate more easily , and to effectively express ideas in new ways . we will design applications as dual use with the intelligence to partition data between work and life while respecting each person 's privacy choices . the foundation for these efforts will rest on advancing our leading productivity , collaboration , and business process tools including skype , onedrive , onenote , outlook , word , excel , powerpoint , bing , and dynamics . we see opportunity in combining these services in new ways that are more contextual and personal , while ensuring people , rather than their devices , remain at the center of the digital experience . we will offer our services across ecosystems and devices outside our own . as people move from device to device , so will their content and the richness of their services . we will engineer applications so users can find , try , and buy them in friction-free ways . cloud operating system today , businesses face important opportunities and challenges . enterprises are asked to deploy technology that advances business strategy . they decide what solutions will make employees more productive , collaborative , and satisfied , or connect with customers in new and compelling ways . they work to unlock business insights from a world of data . they rely on our technology to manage employee corporate identity , and to manage and secure corporate information accessed and stored across a growing number of devices . to achieve these objectives increasingly businesses look to leverage the benefits of the cloud . helping businesses move to the cloud is one of our largest opportunities , and we believe we work from a position of strength . the shift to the cloud is driven by three important economies of scale : larger datacenters can deploy computational resources at significantly lower cost per unit than smaller ones ; larger datacenters can coordinate and aggregate diverse customer , geographic , and application demand patterns improving the utilization of computing , storage , and network resources ; and multi-tenancy lowers application maintenance labor costs for large public clouds . the cloud creates the opportunity for businesses to focus on innovation while leaving non-differentiating activities to reliable and cost-effective providers . with azure , we are one of very few cloud vendors that run at a scale that meets the needs of businesses of all sizes and complexities . we believe the combination of azure and windows server makes us the only company with a public , private , and hybrid cloud platform that can power modern business . we are working to enhance the return on it investment by enabling enterprises to combine their existing datacenters and our public cloud into a single cohesive infrastructure . businesses can deploy applications in their own datacenter , a partner 's datacenter , or in our datacenters with common security , management , and administration across all environments , with the flexibility and scale they desire . our cloud will also enable richer employee experiences . we enable organizations to securely adopt software-as-a-service applications ( both our own and third-party ) and integrate them with their existing security and management infrastructure . we will continue to innovate with higher level services including identity and directory services , rich data storage and analytics services , machine learning services , media services , web , and mobile backend services , and developer productivity services . to foster a rich developer ecosystem , our digital work 27 part ii item 7 and life experiences will also be extensible , enabling customers and partners to further customize and enhance our solutions , achieving even more value . story_separator_special_tag reportable segments the segment amounts included in md & a are presented on a basis consistent with our internal management reporting . segment information appearing in note 21 segment information and geographic data of the notes to financial statements ( part ii , item 8 of this form 10-k ) is also presented on this basis . all differences between our internal management reporting basis and accounting principles generally accepted in the u.s. ( u.s . gaap ) , along with certain corporate-level and other activity , are included in corporate and other . operating expenses are not allocated to our segments . during the first quarter of fiscal year 2014 , we changed our organizational structure as part of our transformation to a devices and services company . as a result , information that our chief operating decision maker regularly reviews for purposes of allocating resources and assessing performance changed . therefore , we have recast certain prior period amounts to conform to the way we internally managed and monitored segment performance during fiscal year 2014. our reportable segments are described below . on april 25 , 2014 , we acquired substantially all of nds for total consideration of $ 9.5 billion . this amount was greater than the $ 7.2 billion disclosed previously , primarily due to $ 1.5 billion of cash acquired , foreign currency movements of $ 330 million , working capital adjustments of $ 210 million , and other adjustments of $ 260 million . see note 9 business combinations of the notes to financial statements for additional details . nds has been included in our consolidated results of operations starting on the acquisition date . we report the financial performance of the acquired business in our new phone hardware segment . prior to the acquisition of nds , financial results associated with our joint strategic initiatives with nokia were reflected in our d & c licensing segment . the contractual relationship with nokia related to those initiatives terminated in conjunction with the acquisition . with the creation of the new phone hardware segment , the d & c hardware segment was renamed computing and gaming hardware in the fourth quarter of fiscal year 2014 . 29 part ii item 7 devices and consumer ( d & c ) our d & c segments develop , manufacture , market , and support products and services designed to entertain and connect people , increase personal productivity , help people simplify tasks and make more informed decisions online , and help advertisers connect with audiences . our d & c segments are : d & c licensing , comprising : windows , including all oem licensing ( windows oem ) and other non-volume licensing and academic volume licensing of the windows operating system and related software ; non-volume licensing of microsoft office , comprising the core office product set , for consumers ( office consumer ) ; windows phone operating system , including related patent licensing ; and certain other patent licensing revenue ; computing and gaming hardware , comprising : xbox gaming and entertainment consoles and accessories , second-party and third-party video game royalties , and xbox live subscriptions ( xbox platform ) ; surface devices and accessories ; and microsoft pc accessories ; phone hardware , comprising : lumia smartphones and other non-lumia phones , beginning with our acquisition of nds ; and d & c other , comprising : resale , including windows store , xbox live transactions , and windows phone store ; search advertising ; display advertising ; office 365 consumer , comprising office 365 home and office 365 personal ; studios , comprising first-party video games ; our retail stores ; and certain other consumer products and services not included in the categories above . commercial our commercial segments develop , market , and support software and services designed to increase individual , team , and organizational productivity and efficiency , including simplifying everyday tasks through seamless operations across the user 's hardware and software . our commercial segments are : commercial licensing , comprising : server products , including windows server , microsoft sql server , visual studio , system center , and related client access licenses ( cals ) ; windows embedded ; volume licensing of the windows operating system , excluding academic ( windows commercial ) ; microsoft office for business , including office , exchange , sharepoint , lync , and related cals ( office commercial ) ; microsoft dynamics business solutions , excluding dynamics crm online ; and skype ; and commercial other , comprising : enterprise services , including premier support services and microsoft consulting services ; commercial cloud , comprising office 365 commercial , other microsoft office online offerings , dynamics crm online , and microsoft azure ; and certain other commercial products and online services not included in the categories above . summary results of operations ( in millions , except percentages and per share amounts ) 2014 2013 2012 percentage change 2014 versus 2013 percentage change 2013 versus 2012 revenue $ 86,833 $ 77,849 $ 73,723 12 % 6 % gross margin $ 59,899 $ 57,600 $ 56,193 4 % 3 % operating income $ 27,759 $ 26,764 $ 21,763 4 % 23 % diluted earnings per share $ 2.63 $ 2.58 $ 2.00 2 % 29 % fiscal year 2014 compared with fiscal year 2013 revenue increased $ 9.0 billion or 12 % , demonstrating growth across our consumer and commercial businesses , primarily due to higher revenue from server products , xbox platform , commercial cloud , and surface . revenue also increased due to the acquisition of nds . commercial cloud revenue doubled , reflecting continued subscriber growth from our cloud-based offerings . 30 part ii item 7 gross margin increased $ 2.3 billion or 4 % , primarily due to higher revenue , offset in part by a $ 6.7 billion or 33 % increase in cost of revenue .
| segment results of operations devices and consumer replace_table_token_1_th * not meaningful fiscal year 2014 compared with fiscal year 2013 d & c revenue increased $ 5.6 billion or 17 % , primarily due to higher revenue from xbox platform , surface , and windows phone . revenue also increased $ 2.0 billion due to the acquisition of nds . d & c gross margin decreased slightly , reflecting higher cost of revenue , offset in part by higher revenue . cost of revenue increased $ 5.7 billion or 47 % , due mainly to xbox platform and surface . cost of revenue also increased $ 1.9 billion due to nds . d & c licensing d & c licensing revenue decreased $ 218 million or 1 % , due mainly to lower revenue from licenses of windows and office consumer , as well as a decrease in royalty revenue , offset in part by increased windows phone revenue . retail and non-oem sales of windows declined $ 304 million or 41 % , due mainly to the launch of windows 8 in the prior year . windows oem revenue declined $ 136 million or 1 % , due to continued softness in the consumer pc market , offset in part by a 12 % increase in oem pro revenue . office consumer revenue declined $ 243 million or 8 % , reflecting the transition of customers to office 365 consumer as well as continued softness in the consumer pc market . the declines in windows oem and office consumer revenue were partially offset by benefits realized from ending our support for windows xp in april 2014. windows phone revenue increased $ 822 million or 48 % , due mainly to the recognition of $ 382 million revenue under our joint strategic initiatives with nokia , which concluded in conjunction with the acquisition of nds , as well as an increase in phone patent licensing revenue .
| 7,197 |
unless otherwise provided in the accompanying footnotes , the information used in the table below was obtained from the referenced beneficial owner . replace_table_token_12_th * less than 1 % . ( 1 ) beneficial ownership is determined in accordance with the rules of the commission . shares of common stock subject to delivery , or subject to options or warrants currently exercisable or exercisable , within 60 days of march 15 , 2017 , are deemed outstanding for computing the percentage ownership of the stockholder holding the options or warrants , but are not deemed outstanding for computing the percentage ownership of any other stockholder . unless otherwise indicated in the footnotes to this table , we believe stockholders named in the table have sole voting and sole investment power with respect to the shares set forth opposite such stockholder 's name . unless otherwise indicated , the listed officers , directors and stockholders can be reached at our principal offices . percentage of ownership is based on 10,884,490 shares of common stock outstanding as of march 9 , 2017 . ( 2 ) includes 20,000 shares of common stock . does not include options to purchase up to 1,550,000 shares of common stock , which may vest more than 60 days after march 9 , 2017 . ( 3 ) includes vested options to purchase 12,500 shares of common stock . does not include options to purchase up to 87,500 shares of common stock , which may vest more than 60 days after march 9 , 2017 . ( 4 ) includes 1,352 shares of common stock and vested options to purchase 652,919 shares of common stock . does not include story_separator_special_tag the following financial data , in this narrative , are expressed in thousands , except for the earnings per share . the following discussion and analysis should be read in conjunction with the consolidated financial statements and related notes included elsewhere in this report . dollar amounts are reported in thousands , except per share and per treatment data . introduction , outlook and overview of business operations we are a medical technology company dedicated to developing and commercializing innovative products for the treatment of dermatological disorders . in june 2015 , we completed the acquisition of the xtrac system and the vtrac system businesses from photomedex , inc. the xtrac and vtrac products are fda cleared devices for the treatment of psoriasis , vitiligo and other skin disorders . the purchase price was $ 42,403 plus the assumption of certain business-related liabilities . management believes that these businesses acquired create a platform on which to transform strata into a leading medical dermatology company . management further believes that the cash flow generated by these businesses will be sufficient to finance our operations for the at least the next twelve months following the filing of this form 10-k. the xtrac device is utilized to treat psoriasis , vitiligo and other skin diseases . the xtrac device received fda clearance in 2000 and has since become a widely recognized treatment among dermatologists . the system delivers targeted 308um ultraviolet light to affected areas of skin , leading to psoriasis clearing and vitiligo repigmentation , following a series of treatments . as of december 31 , 2016 , there were 775 xtrac systems placed in dermatologists ' offices in the united states under our recurring revenue model , up from 718 at the end of december 2015. under the recurring revenue model , the xtrac system is placed in a physician 's office and revenue is recognized on a per procedure basis . the xtrac system 's use for psoriasis is covered by nearly all major insurance companies , including medicare . the vtrac excimer lamp system , offered internationally in addition to the xtrac system , provides targeted therapeutic efficacy demonstrated by excimer technology with the simplicity of design and reliability of a lamp system . there are approximately 7.5 million people in the united states and up to 125 million people worldwide suffering from psoriasis , and 1 % to 2 % of the world 's population suffers from vitiligo . in 2016 , over 351,000 xtrac laser treatments were performed on approximately 22,000 patients in the united states . the financial results of the xtrac and vtrac businesses have been included in the results of operations subsequent to june 22 , 2015 , the date of the acquisition . the assets of the acquired businesses and liabilities assumed have been consolidated as of june 22 , 2015. we are in the process of discontinuing our efforts to develop and commercialize the melafind system . melafind is a non-invasive , point-of-care ( i.e. , in the doctor 's office ) instrument designed to aid in the dermatologists ' decision to biopsy pigmented skin lesions , particularly melanoma . we have been unsuccessful in commercializing the melafind product in a way that would bring financial benefit to our shareholders . in march 2017 , we sent a notice to the 90 owners of melafind devices in the united states informing them that , effective september 30 , 2017 , we no longer had the resources to continue to support the device and that our inventory of spare parts was being offered for sale to them on a first-come , first-serve basis . key technology xtrac® excimer laser . xtrac received fda clearance in 2000 and has since become a widely recognized treatment among dermatologists for psoriasis and other skin diseases . the xtrac system delivers ultra-narrowband ultraviolet b ( `` uvb '' ) light to affected areas of skin . following a series of treatments typically performed twice weekly , psoriasis remission can be achieved and vitiligo patches can be re-pigmented . xtrac is endorsed by the national psoriasis foundation , and its use for psoriasis is covered by nearly all major insurance companies , including medicare . we estimate that more than half of all major insurance companies now offer reimbursement for vitiligo as well , a figure that is increasing . - 30 - vtrac® lamp . story_separator_special_tag when a laser is placed in a physician 's office , the cost is transferred from inventory to `` lasers in service '' within property and equipment . at times , units are shipped to distributors , but revenue is not recognized until all of the revenue recognition criteria have been met , and until that time , the unit is carried on our books as inventory . revenue is not recognized from these distributors until payment is either assured or paid in full . reserves for slow-moving , excess and obsolete inventories , reduce the historical carrying value of our inventories , and are provided based on historical experience and product demand . management evaluates the adequacy of these reserves periodically based on forecasted sales and market trends . allowance for doubtful accounts . accounts receivable are reduced by an allowance for amounts that may become uncollectible in the future . from time to time , our customers dispute the amounts due to us , and , in other cases , our customers experience financial difficulties and can not pay on a timely basis . in certain instances , these factors ultimately result in uncollectible accounts . the determination of the appropriate reserve needed for uncollectible accounts involves significant judgment . such factors include changes in the financial condition of our customers as a result of industry , economic or customer-specific factors . a change in the factors used to evaluate collectability could result in a significant change in the allowance needed . as of december 31 , 2016 and 2015 , allowance for doubtful accounts was $ 135 and $ 45 , respectively . property and equipment . as of december 31 , 2016 and 2015 , we had net property and equipment of $ 10,180 and $ 13,851 , respectively . the most significant component relates to the xtrac lasers placed by us in physicians ' offices . we own the equipment and charge the physician on a per-treatment basis for use of the equipment . the recoverability of the net carrying value of the lasers is predicated on continuing revenues from the physicians ' use of the lasers . if the physician does not generate sufficient treatments , then we may remove the laser from the physician 's office and redeploy it elsewhere . xtrac lasers placed in service are depreciated on a straight-line basis over the estimated useful life of five-years . for other property and equipment depreciation is calculated on a straight-line basis over the estimated useful lives of the assets , primarily three to seven years for computer hardware and software , furniture and fixtures , automobiles and machinery and equipment . leasehold improvements are amortized over the lesser of the useful lives or lease terms . useful lives are determined based upon an estimate of either physical or economic obsolescence , or both . - 32 - goodwill and intangibles assets . our balance sheet includes goodwill and other intangible assets which affect the amount of future period amortization expense and possible impairment expense that we will incur . management 's judgments regarding the existence of impairment indicators , on an interim or annual basis , are based on various factors , including market conditions and operational performance of our business . as of december 31 , 2016 and 2015 , we had $ 22,215 and $ 24,155 of goodwill and other intangibles , accounting for 51.4 % and 47.0 % of our total assets , respectively . the goodwill is not amortizable ; the other intangibles are . the determination of the value of such intangible assets requires management to make estimates and assumptions that affect our consolidated financial statements . we test our goodwill for impairment at least annually . the acquisition of the xtrac and vtrac businesses that gave rise to the recorded goodwill closed on june 22 , 2015. this test is conducted in december of each year in connection with the annual budgeting and forecast process . also , on a quarterly basis , we evaluate whether events or changes in circumstances have occurred that would negatively impact the realizable value of our intangibles or goodwill . we organized our business into three operating units and are defined as dermatology recurring procedures , dermatology procedures equipment and dermatology imaging . the balance of our goodwill for each of our segments as of december 31 , 2016 is as follows : dermatology recurring procedures $ 7,958 , dermatology procedures equipment $ 845 and dermatology imaging $ 0. we completed our annual goodwill impairment analysis as of december 31 , 2016 for our reporting units . our assessment concluded that there was not any impairment of goodwill . our analysis employed the use of both a market and income approach , with each method given equal weighting . significant assumptions used in the income approach include growth and discount rates , margins and our weighted average cost of capital . we used historical performance and management estimates of future performance to determine margins and growth rates . discount rates selected for each reporting unit varied . our weighted average cost of capital included a review and assessment of market and capital structure assumptions . of the two reporting units with goodwill , dermatology recurring procedures has a fair value that is in excess of its carrying value by approximately 16.7 % , while dermatology procedures equipment has a fair value that is approximately 48.8 % in excess of its carrying value . considerable management judgment is necessary to evaluate the impact of operating changes and to estimate future cash flows . changes in our actual results and or estimates or any of our other assumptions used in our analysis could result in a different conclusion . income taxes . as part of the process of preparing our consolidated financial statements , we are required to estimate our income taxes in each of the jurisdictions in which we operate .
| results of operations ( the following financial data , in this narrative , are expressed in thousands , except for the earnings per share . ) revenues the following table presents revenues from our three segments for the periods indicated below : replace_table_token_2_th we completed the asset purchase of the xtrac and vtrac businesses on june 22 , 2015 and as such , for the 2015 period , revenues were included only for the period of june 23 , 2015 through december 31 , 2015. dermatology recurring procedures recognized treatment revenue for the year ended december 31 , 2016 was $ 24,558 which approximates 351,000 treatments , with prices from $ 65 to $ 95 per treatment . recognized treatment revenue for the year ended december 31 , 2015 was $ 14,616 which approximates 194,000 treatments , with prices from $ 65 to $ 95 per treatment . increases in procedures are dependent upon building market acceptance through marketing programs with our physician partners and their patients to show that the xtrac procedures will be of clinical benefit and will be generally reimbursed by insurers . we believe that several factors have limited the growth of the use of xtrac treatments from those who suffer from psoriasis and vitiligo . specifically , we believe that awareness of the positive effects of xtrac treatments has not been understood well enough among both sufferers and providers ; and the treatment regimen requiring sometimes up to 12 or more treatments has limited xtrac use to certain patient populations . therefore , we have a direct to patient program for xtrac advertising in the united states targeted at psoriasis and vitiligo patients through a variety of media - 34 - including television and radio ; and through our use of social media such as facebook and twitter . we continue to increase our advertising expenditures in this area to reach the more than 10 million patients in the united states afflicted with these diseases .
| 7,198 |
this discussion should be read in conjunction with the financial statements and selected financial data included elsewhere in this document . overview we are a bank holding company within the meaning of the bank holding company act of 1956 headquartered in birmingham , alabama . through our wholly-owned subsidiary bank , we operate 18 full service banking offices located in jefferson , shelby , madison , montgomery , mobile and houston counties in alabama , escambia county in florida , cobb and douglas county in georgia , charleston county in south carolina and davidson county in tennessee . these offices operate in the birmingham-hoover , huntsville , montgomery , mobile and dothan , alabama msas , the pensacola-ferry pass-brent , florida msa , the atlanta-sandy springs-roswell , georgia msa , the charleston-north charleston , south carolina msa and the nashville-davidson-murfreesboro-franklin , tennessee msa . our principal business is to accept deposits from the public and to make loans and other investments . our principal source of funds for loans and investments are demand , time , savings , and other deposits and the amortization and prepayment of loans and borrowings . our principal sources of income are interest and fees collected on loans , interest and dividends collected on other investments and service charges . our principal expenses are interest paid on savings and other deposits , interest paid on our other borrowings , employee compensation , office expenses and other overhead expenses . critical accounting policies our consolidated financial statements are prepared based on the application of certain accounting policies , the most significant of which are described in the notes to the consolidated financial statements . certain of these policies require numerous estimates and strategic or economic assumptions that may prove inaccurate or subject to variation and may significantly affect our reported results and financial position for the current period or in future periods . the use of estimates , assumptions , and judgments are necessary when financial assets and liabilities are required to be recorded at , or adjusted to reflect , fair value . assets carried at fair value inherently result in more financial statement volatility . fair values and information used to record valuation adjustments for certain assets and liabilities are based on either quoted market prices or are provided by other independent third-party sources , when available . when such information is not available , management estimates valuation adjustments . changes in underlying factors , assumptions or estimates in any of these areas could have a material impact on our future financial condition and results of operations . allowance for loan losses the allowance for loan losses , sometimes referred to as the “ alll , ” is established through periodic charges to income . loan losses are charged against the alll when management believes that the future collection of principal is unlikely . subsequent recoveries , if any , are credited to the alll . if the alll is considered inadequate to absorb future loan losses on existing loans for any reason , including but not limited to , increases in the size of the loan portfolio , increases in charge-offs or changes in the risk characteristics of the loan portfolio , then the provision for loan losses is increased . 39 loans are considered impaired when , based on current information and events , it is probable that the bank will be unable to collect all amounts due according to the original terms of the loan agreement . the collection of all amounts due according to contractual terms means that both the contractual interest and principal payments of a loan will be collected as scheduled in the loan agreement . impaired loans are measured based on the present value of expected future cash flows discounted at the loan 's effective interest rate , or , as a practical expedient , at the loan 's observable market price , or the fair value of the underlying collateral . the fair value of collateral , reduced by costs to sell on a discounted basis , is used if a loan is collateral-dependent . investment securities impairment periodically , we may need to assess whether there have been any events or economic circumstances to indicate that a security on which there is an unrealized loss is impaired on an other-than-temporary basis . in any such instance , we would consider many factors , including the severity and duration of the impairment , our intent and ability to hold the security for a period of time sufficient for a recovery in value , recent events specific to the issuer or industry , and for debt securities , external credit ratings and recent downgrades . securities on which there is an unrealized loss that is deemed to be other-than-temporary are written down to fair value , with the write-down recorded as a realized loss in securities gains ( losses ) . other real estate owned other real estate owned ( “ oreo ” ) , consisting of assets that have been acquired through foreclosure , is recorded at the lower of cost or estimated fair value less the estimated cost of disposition . fair value is based on independent appraisals and other relevant factors . other real estate owned is revalued on an annual basis or more often if market conditions necessitate . valuation adjustments required at foreclosure are charged to the alll . subsequent to foreclosure , losses on the periodic revaluation of the property are charged to net income as oreo expense . significant judgments and complex estimates are required in estimating the fair value of other real estate , and the period of time within which such estimates can be considered current is significantly shortened during periods of market volatility , as experienced in recent years . as a result , the net proceeds realized from sales transactions could differ significantly from appraisals , comparable sales , and other estimates used to determine the fair value of other real estate . story_separator_special_tag our average interest-bearing liabilities increased $ 534.0 million , or 20.1 % , to $ 3.2 billion for the year ended december 31 , 2015 from $ 2.7 billion for the year ended december 31 , 2014. all of our markets in operation for the full year of 2015 showed an increase in total deposits , except atlanta , which had a 2 % decrease in total deposits during 2015. the ratio of our average interest-earning assets to average interest-bearing liabilities was 137.3 % and 135.2 % for the years ended december 31 , 2015 and 2014 , respectively , as average noninterest-bearing deposits grew by $ 220.7 million in 2015 . 44 our average interest-earning assets produced a taxable equivalent yield of 4.15 % for the year ended december 31 , 2015 , compared to 4.07 % for the year ended december 31 , 2014. the average rate paid on interest-bearing liabilities was 0.55 % for the year ended december 31 , 2015 , compared to 0.53 % for the year ended december 31 , 2014. our net interest spread and net interest margin were 3.54 % and 3.68 % , respectively , for the year ended december 31 , 2014 , compared to 3.66 % and 3.80 % , respectively , for the year ended december 31 , 2013. our average interest-earning assets for the year ended december 31 , 2014 increased $ 596.5 million , or 19.9 % , to $ 3.6 billion from $ 3.0 billion for the year ended december 31 , 2013. this increase in our average interest-earning assets was attributable to the metro acquisition , which included $ 182.4 million in earnings assets as of the closing date on january 31 , 2015 , continued core growth in all of our markets and increased loan production . our average interest-bearing liabilities increased $ 368.2 million , or 16.0 % , to $ 2.7 billion for the year ended december 31 , 2014 from $ 2.3 billion for the year ended december 31 , 2013. this increase in our average interest-bearing liabilities was primarily due to an increase in interest-bearing deposits in all our markets . the ratio of our average interest-earning assets to average interest-bearing liabilities was 135.2 % and 130.9 % for the years ended december 31 , 2014 and 2013 , respectively , as average noninterest-bearing deposits grew by $ 147.3 million in 2014. our average interest-earning assets produced a taxable equivalent yield of 4.07 % for the year ended december 31 , 2014 , compared to 4.25 % for the year ended december 31 , 2013. the average rate paid on interest-bearing liabilities was 0.53 % for the year ended december 31 , 2014 , compared to 0.59 % for the year ended december 31 , 2013. provision for loan losses the provision for loan losses represents the amount determined by management to be necessary to maintain the alll at a level capable of absorbing inherent losses in the loan portfolio . our management reviews the adequacy of the alll on a quarterly basis . the alll calculation is segregated into various segments that include classified loans , loans with specific allocations and pass rated loans . a pass rated loan is generally characterized by a very low to average risk of default and in which management perceives there is a minimal risk of loss . loans are rated using a nine-point risk grade scale with loan officers having the primary responsibility for assigning risk grades and for the timely reporting of changes in the risk grades . based on these processes , and the assigned risk grades , the criticized and classified loans in the portfolio are segregated into the following regulatory classifications : special mention , substandard , doubtful or loss , with some general allocation of reserve based on these grades . at december 31 , 2015 , total loans rated special mention , substandard , and doubtful were $ 117.0 million , or 2.8 % of total loans , compared to $ 77.6 million , or 2.3 % of total loans , at december 31 , 2014. impaired loans are reviewed specifically and separately under fasb asc 310-30-35 , subsequent measurement of impaired loans , to determine the appropriate reserve allocation . our management compares the investment in an impaired loan with the present value of expected future cash flow discounted at the loan 's effective interest rate , the loan 's observable market price or the fair value of the collateral , if the loan is collateral-dependent , to determine the specific reserve allowance . reserve percentages assigned to non-impaired loans are based on historical charge-off experience adjusted for other risk factors . to evaluate the overall adequacy of the allowance to absorb losses inherent in our loan portfolio , our management considers historical loss experience based on volume and types of loans , trends in classifications , volume and trends in delinquencies and nonaccruals , economic conditions and other pertinent information . based on future evaluations , additional provisions for loan losses may be necessary to maintain the allowance for loan losses at an appropriate level . the allowance for loan losses as a percentage of loans was diluted in 2015 by the acquisition of $ 149 million of loans of metro bank which were recorded at net fair value . the provision expense for loan losses was $ 12.8 million for the year ended december 31 , 2015 , an increase of $ 2.5 million from $ 10.3 million in 2014. this increase in provision expense for loan losses for 2015 is primarily attributable to loan growth . also , nonperforming loans decreased to $ 7.8 million , or 0.18 % of total loans , at december 31 , 2015 from $ 10.1 million , or 0.30 % of total loans , at december 31 , 2014. during 2015 , we had net charged-off loans totaling $ 5.1 million , compared to net charged-off loans of $ 5.3 million for 2014. the ratio of net charged-off loans to average loans was 0.13 % for 2015 compared to 0.17
| results of operations net income net income available to common stockholders was $ 63.3 million for the year ended december 31 , 2015 , compared to $ 51.9 million for the year ended december 31 , 2014. this increase in net income is primarily attributable to an increase in net interest income , which increased $ 31.7 million , or 24.3 % , to $ 162.3 million in 2015 from $ 130.6 million in 2014. noninterest income increased $ 2.8 million , or 25.0 % , to $ 14.0 million in 2015 from $ 11.2 million in 2014. noninterest expense increased by $ 16.8 million , or 29.2 % , to $ 74.4 million in 2015 from $ 57.6 million in 2014. basic and diluted net income per common share were $ 2.46 and $ 2.39 , respectively , for the year ended december 31 , 2015 , compared to $ 2.18 and $ 2.09 , respectively , for the year ended december 31 , 2014. return on average assets was 1.38 % in 2015 , compared to 1.39 % in 2014 , and return on average stockholders ' equity was 14.56 % in 2015 , compared to 14.43 % in 2014. net income available to common stockholders for the year ended december 31 , 2014 was $ 51.9 million , compared to $ 41.2 million for the year ended december 31 , 2013. this increase in net income is primarily attributable to an increase in net interest income , which increased $ 18.1 million , or 16.1 % , to $ 130.6 million in 2014 from $ 112.5 million in 2013. noninterest income increased $ 1.2 million , or 12.0 % , to $ 11.2 million in 2014 from $ 10.0 million in 2013. noninterest expense increased by $ 10.1 million , or 21.3 % , to $ 57.6 million in 2014 from $ 47.5 million in 2013. basic and diluted net income per common share were $ 2.18 and $ 2.09 , respectively , for the year ended december 31
| 7,199 |
Subsets and Splits
No community queries yet
The top public SQL queries from the community will appear here once available.